Young v. Rose – 9/25/2012

October 1, 2012

Arizona Court of Appeals Division One A Real Estate Agent May Not Sue To Enforce An Agreement For A Real Estate Sales Commission Unless “All Parties” Have Signed the Agreement, Even Though the Statute of Frauds Requires Only That “The Parties To Be Charged” Have Signed.

Young worked for Jordan and Jason Rose as a real estate in the past.  In 2009, Young e-mailed Jordan Rose about some properties, even though they were priced higher than the Roses wanted.  In response, Jordan wrote that Young should update them “if the prices drop.”  Young responded that the price had dropped on one of the properties.  In the same e-mail, Young attached a new Buyer-Broker Agreement making Young the Roses’ exclusive agent for a term of six months.  Jordan’s assistant sent an e-mail back to Young, attaching “the signed agreement.”  Young responded by saying “Thank you.”

Both Roses hand-signed the document that was scanned and e-mailed to Young; Young did not hand sign the document.  During the term of the agreement, the Roses bought a home using a different agent.

Young sued for breach to recover the commission on the sale.  The Roses moved to dismiss, arguing that Young did not sign the agreement as required by A.R.S. § 32-2151.02(A)(4), and that Young’s “thank you” e-mail was not an electronic signature.  The superior court dismissed Young’s claim and she appealed.

A.R.S. § 32-2151.02(A) requires “real estate employment agreements” to “[b]e signed by all parties to the agreement.”  Young admitted that if her electronic “thank you” e-mail did not qualify as a signature, then the contract was “unlawful” under the terms of the statute. 

Young made two arguments on appeal.  First, Young contended that the contract would be enforceable “even if unlawful” because it complied with the statute of frauds, A.R.S. § 44-101(7).  The agreement satisfied the statute of frauds because the “parties to be charged” – the Roses – signed the agreement.  Second, Young argued that her “thank you” e-mail qualified as an electronic signature under the Arizona Electronic Transactions Act (the “Act”), A.R.S. §§ 44-7001 to -7052.

First, the Court rejected that compliance with the statute of frauds alone is enough.  The Court reasoned that the requirements in A.R.S. § 32-2151.02(A) were not merely used to regulate licenses of agents.  In so holding, the Court relied on earlier cases which had applied the rules of the Real Estate Commission to dismiss an agent’s lawsuit seeking to recover a commission.  See Red Carpet-Barry & Associates v. Apex Associates, 130 Ariz. 302, 635 P.2d 1224 (App. 1981).  Since those earlier cases, the legislature codified the Commission’s rules into A.R.S. § 32-2151.02(A).  Consequently, for an agent to sue for a commission, there must be “a written agreement that complies with both A.R.S. §§ 44-101(7) and 32-2151.02(A).”

Second, the Court held that the superior court should not have dismissed the case with respect to the question whether Young had electronically signed the agreement.  In Arizona, an electronic signature “satisfies any law that requires a signature.”  A.R.S. § 44-7007(D).  In her response to the motion to dismiss, Young attached “copies of numerous e-mail messages.”  Both parties considered the e-mail messages in depth in briefing before the superior court, and the court “relied on them as well” in reaching its ruling to dismiss the case. 

A motion to dismiss under Rule 12(b)(6) that requires consideration of “matters outside the pleadings” will be converted into a motion for summary judgment.  Young’s various e-mail messages were “matters outside the pleading” and thus the court should have converted the motion.  In such cases, a court will delay ruling until all parties have had a “reasonable opportunity to present all material made pertinent to such a motion by Rule 56.”  Because the parties did not have a chance to submit evidence relevant to the electronic signature issue, the Court remanded the case back to the trial court for further proceedings.

Judge Downie authored the unanimous opinion; Judges Swann and Kessler concurred.