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Smith v. Johnston





APPEAL from the Circuit Court of Kane County; the Hon. PAUL W. SCHNAKE, Judge, presiding.


The defendant, James M. Johnston, Sr., a real estate broker (operating as Anchor Realty, Inc., and under its trademark "Johnston & Associates, Ltd.") appeals from a judgment which awarded the plaintiff, Linda L. Smith, a broker's commission in the amount of $6,752.25. The plaintiff cross-appeals from that portion of the judgment which denied her punitive damages. In issue is whether plaintiff's services as an independent contractor in defendant's office pursuant to a written agreement had been terminated, voluntarily or involuntarily, or whether she had agreed to be replaced by defendant as a "listing associate" before she became entitled to a commission on the "sale" of a particular property.

The resolution of the controversy turns upon the meaning of the terms of the contract and its application to the evidence which the trial court could find credible. Paragraph 5 of the contract entered into between the parties on October 1, 1973, states, as pertinent:

"The commission to be charged for any service performed hereunder shall be those determined by the Broker, and the Broker shall advise the Sales Associate of any special contract relating to any particular transaction which he undertakes to handle. When the Sales Associate shall perform any service hereunder, whereby a commission is earned, said commission shall, when collected, be divided between the Broker and Sales Associate, in which division the Sales Associate shall receive a proportionate share as set out in the rider attached headed `Commission Schedule' and the Broker shall receive the balance."

The "Commission Schedule" referred to, provides that where a commission is earned by the brokerage house by the sale of an "exclusive listing," the "Listing Sales Associate" shall receive 25% of the commission; the "Selling Sales Associate" shall receive 25% of the commission; and the brokerage house shall receive the balance, 50%.

Paragraph 13 of the agreement as pertinent states:

"This contract and the association created hereby, may be terminated by either party hereto, at any time upon written notice given to the other. Any listing acquired by Sales Associate and sold prior to, or any sale made by Sales Associate prior to, but closed out after termination of Sales Associate employment, will be paid on the basis of work needed to complete transaction. * * *"

While working in defendant's office, plaintiff contacted Gordon and Alice Mae Walters, husband and wife, of DeKalb and inquired as to whether they were interested in selling two houses (not here involved) which they owned in Elgin. At the time the Walters signed a listing agreement for the houses in defendant's office, the sale of a 135-acre farm in Kane County, owned one-half by an estate in which Mrs. Walters was the executor and one-half by Mrs. Walters was discussed. An exclusive listing agreement was signed on January 18, 1974. At the bottom of the agreement were the words, "listed by Linda L. Smith. Johnston & Associates, Ltd." The agreement by its terms was to run for 6 months. At the expiration of that time, July 18, 1974, the sellers indicated that they wished the Johnston firm to continue to be their exclusive brokers in the matter of the sale of the property. A second exclusive agreement was signed, effective July 19, 1974. On this second agreement, Linda L. Smith's name was deleted, and the name of Mr. Johnston appeared as the listing sales associate. Plaintiff testified that she was not present when this new agreement was signed and did not know about it until several days thereafter. She also testified that she had not agreed to being replaced as listing associate with respect to the firm. Defendant, however, testified that the change in listing associate was made because plaintiff had been unsuccessful in selling the farm. Defendant also testified that plaintiff had admitted her incompetence in handling the farm property and had been agreeable to being replaced by defendant as a listing associate. According to defendant, plaintiff was offered a referral fee of 20% instead of the listing commission, to be paid if plaintiff was still in defendant's office when the farm was sold.

The exclusive listing agreement was renewed in January 1975; and again in June 1975. On all of these occasions Mr. Johnston's name appears as the listing sales associate.

Plaintiff's association with the defendant firm was terminated on August 13, 1975. According to defendant, plaintiff's decision to leave had been made earlier in August and was based on her desire to return to college as a full-time student; but plaintiff testified that she planned to attend college only part-time, while continuing to work as a real estate sales associate. She testified further that defendant had told her on August 8, 1975, that her commission on the farm was going to pay for her education. According to plaintiff, defendant called her into his office on August 13, 1975, and told her that she was "fired." Defendant sent plaintiff formal notice of termination on August 19, 1975.

The farm was ultimately sold to the Kane County Forest Preserve District. Although plaintiff had contacted at least one prospective purchaser for the farm, the representative of the Forest Preserve District had dealt only with defendant. The conveyance of the property to the Forest Preserve District took place some time in November of 1975. Previously the seller and the Forest Preserve District had entered into a contract to convey the premises on or about September 12, 1975. The plaintiff testified that on the Friday preceding August 13, 1975 (which is the day Mr. Johnston "fired" her), she was in the Johnston office when the Walters' came in and went into Mr. Johnston's office, discussed the farm and a phone call was made which she believed was to the attorney for the Forest Preserve District. Plaintiff testified:

"After they made the phone call, the Walters left and Mr. Johnston went back into his office, very quickly; and he came out screaming, whoopee, the farm is going to be sold. He came out excited and he said to me that my commission on the farm was going to pay for my education, and he was very excited and very happy about it and just thrilled to death."

Mrs. Walters testified confirming the meeting although she was uncertain as to the date, and stated:

"Well, the sale, we were in his office — Mr. Walters and I were there — and he called Mr. Dunn and made ...

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