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DOLLAR PROPERTIES, INC. v. MYERS FIN. GROUP

September 5, 1989

DOLLAR PROPERTIES, INC., d/b/a JAMES DOLLAR COMPANY, and JAMES DOLLAR, Plaintiffs,
v.
MYERS FINANCIAL GROUP, INC., d/b/a THE MYERS GROUP, MICHAEL H. MYERS, and CHICAGO TITLE AND TRUST COMPANY, Defendants


Paul E. Plunkett, United States District Judge.


The opinion of the court was delivered by: PLUNKETT

PAUL E. PLUNKETT, UNITED STATES DISTRICT JUDGE.

 This is an action to collect a real estate broker's finder's fee. Defendants have moved to dismiss on the basis of Ill. Rev. Stat. ch. 111, para. 5807 because plaintiffs are not real estate brokers licensed by the state of Illinois. We deny the motion to dismiss and grant plaintiffs' motion for a finding of relatedness to McKenzie v. Myers, No. 89 C 1167, pending in this district before the Honorable Charles R. Norgle, Sr.

 Facts

 According to the complaint, the plaintiff, Dollar Properties, is a Texas corporation with its principal place of business in Dallas, Texas. Dollar Properties is a real estate brokerage firm and James Dollar is a licensed broker in Texas. Plaintiffs (collectively "Dollar") have no office in the state of Illinois. Defendant Myers Financial Group is a Delaware corporation with its principal place of business in Tucson, Arizona. Defendant Michael Myers resides in Arizona and is Myers Financial Group's sole shareholder. (These defendants are collectively referred to as "Myers.") Chicago Title is an Illinois corporation with its principal place of business in Chicago, Illinois. It holds in escrow funds subject to this dispute.

 In 1987, Myers sought to sell some land in Illinois and hired James McKenzie ("McKenzie"), an Illinois-licensed real estate broker, to help. It also hired Dollar to assist in finding a buyer. Dollar talked with Trammell Crow about the property. Myers agreed in writing to pay Dollar a three percent commission if Trammell Crow purchased the property at a certain price, and two and a half percent if a lower purchase price was obtained from Trammell Crow. McKenzie was also to receive a commission on the sale. An offer was made, negotiations occurred, but a sale was never consummated.

 Myers then obtained an interest in a different parcel of Illinois land in order to sell it to Trammell Crow. Dollar and McKenzie continued to be involved in the transaction. An agreement of sale was reached on this property. Myers offered to pay Dollar only $ 50,000 as finder on this transaction, less than Dollar would have received based upon the percentage commission previously agreed to for the first property. Dollar agreed to accept the $ 50,000. The sale closed. However, Dollar has never been paid. Dollar brought this action to recover its brokerage fee.

 Defendants have moved for judgment on the pleadings, noting that plaintiffs are not licensed by Illinois as real estate brokers and that Illinois law prohibits parties not licensed by Illinois from collecting real estate brokerage fees. The parties dispute which state's law applies and the precise application of the Illinois Real Estate License Act, Ill. Rev. Stat. ch. 111, para. 5801 et seq. We find Illinois law applicable but deny defendants' motion for judgment on the pleadings based upon our interpretation of the Illinois Real Estate License Act, Ill. Rev. Stat. ch. 111, paras. 5803, 5807.

 Analysis

 1. Choice of Law

 To determine whether the defendants are entitled to judgment based upon the pleadings, this court must first determine which state's law applies to this case. The Seventh Circuit has provided us with some guidance recently on precisely this question in Gold v. Wolpert, 876 F.2d 1327, 1329-30 (7th Cir. 1989):

 
In a diversity action, federal courts must follow the forum's -- Illinois -- choice-of-law rules. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Real estate brokerage contracts are interpreted according to contract law principles. Coldwell Banker & Co. v. Karlock, 686 F.2d 596, 599 (7th Cir. 1982). We have determined that, in choice-of-law disputes involving contracts, Illinois courts would apply the law of the jurisdiction with the most significant contacts. See, e.g., Palmer v. Beverly Enterprises, 823 F.2d 1105, 1107 (7th Cir. 1987). Contacts to be considered include the place of contracting, negotiation, performance, location of the subject matter of the contract, and the domicile, residence, place of incorporation, and business of the parties. Id. at 1109-10. . . . In finders' fee cases specifically, where both the place of contracting and the place of performance arguably occurred in several states, some courts have identified the most significant contacts as: (1) the location of the acquired company (here, property); (2) the state where the closing or acquisition occurred; (3) the state where the benefits accrue; and (4) the state where the offer to perform the finder's services was sent. Zlotnick v. MacArthur, 550 F. Supp. 371, 374 (N.D. Ill. 1982); Ehrman v. Cook Elec. Co., 468 F. Supp. 98, 99-101 (N.D. Ill. 1979), aff'd in relevant part, 630 F.2d 529, 530 n.1 (7th Cir. 1980) (per curiam).
 
The place of contract . . . in Illinois . . . is where the offer was accepted . . . .

 In order to apply the most significant contacts test and consider the appropriate factors, we must go beyond the complaint, which fails to allege where certain pertinent events occurred. The parties have provided affidavits which present the missing information and do not contain any factual conflicts. The property involved is located in Illinois. Complaint, para. 14. The closing also took place in Illinois. Complaint, para. 21. These factors strongly favor the application of Illinois law. The benefits of the transaction accrued in Illinois, where the property was located, in Arizona and Delaware, where Myers is located, and in Texas, where the Trammell Crow partnership involved in the transaction is located. Complaint, paras. 14, 3, 4, Exhibit B at 1. Several states received the benefits and therefore this factor does not favor any one state strongly. Finally, while the original brokerage agreement for the property that was not sold appears to have been agreed to in Texas, James Dollar Affidavit, paras. 2, 3, the commission agreement ...


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