Facts

On Aug. 18, 2004, plaintiff Jean Marlowe learned that the historic Hyatt Ricky's in downtown Palo Alto had gone on the market. Marlowe was a real estate broker whose clientele consisted of large scale residential builders and developers. Marlowe contacted Fred Musser, who was defendants' land acquisition manager, and notified him of the availability of the project.

After Musser expressed an interested in the project, he and Marlowe executed a confidentiality agreement which indicated that Marlowe was being hired as Horton's broker, and that Horton would be responsible for the payment of Marlowe's commissions. Musser also provided a separate document saying Marlowe would be paid a commission pursuant to separate agreement. Musser and Marlowe verbally agreed that Marlowe's commission would be two percent of the acquisition price.

PLAINTIFF CONTENTIONS:
Plaintiff contended that the documentation that she and Musser signed was sufficient to satisfy the statute of frauds, and that it created a binding and enforceable contract for defendants to pay Marlowe a two percent commission on the price they paid to acquire the property.

DEFENDANT CONTENTIONS:
Defendants contended that the documentation did not satisfy the statute of frauds because Musser lacked the requisite authority to sign a contract which bound the defendants to payment of a commission. Defendants also contended that Marlowe was not the procuring cause of this transaction. Finally, Defendants contended that even if there was a basis for the payment of a commission, she was only entitled to a reasonable commission, and that a reasonable commission was in the range of $100,000 to $300,000.

Result

The Court determined that Musser possessed the requisite authority, both on the principles of ostensible authority and ratification. Thus, Musser had the authority to bind the defendants. The Court concluded that the documentation satisfied the statute of frauds, and that plaintiff had proved that there was an oral agreement for a two percent commission. In light of the finding of an oral agreement for two percent, the court did not have to decide what a reasonable commission would have been.

Other Information

Plaintiff's expert, Jim Sullivan, a principal with Braddock and Logan Homes, testified that a reasonable commission for the type of transaction procured by Marlowe was in the range of 1.5 percent to two percent. Based upon a $65 million purchase price, this put the reasonable commission in the range of $975,000 to $1.3 million. Defendant's expert, Michael Cobb of Colliers International, testified that a reasonable commission for the type of transaction procured by Marlowe was in the range of $100,000 to $300,000. At a mediation before the Honorable Richard Hodge in January, 2007, defendants' highest offer was $325,000 and plaintiff's lowest demand was $750,000. A week before trial, defendants increased their offer to $330,000. After the evidence was in and the matter was submitted, and just before the Judge rendered his ruling, Marlowe offered to settle for $850,000.

Length

four days