912 N.W.2d 35
Wis.2018Background
- Mary and Rolyn Hermanson owned Capital Cartage (a moving/storage business) and signed a WB-6 listing contract with broker Mark McNally to sell the business with real estate for $1.2 million; commission 6% if an offer is procured at the price and on substantially the terms of the listing.
- Buyer Steven Erickson submitted a WB-16 offer for $1.2 million that included Addendum A (part of a prior letter of intent) with three contested conditions: (1) split/credit of lender deposit, (2) noncompete covenants by the Hermansons, and (3) Mary Hermanson to stay on full-time without pay for a period referenced to a "proposed structure."
- The Hermansons rejected the offer (their counsel later stated shareholders voted not to sell); they did not explicitly tell McNally the reasons when rejecting the offer.
- McNally sued for a $72,000 commission, claiming he procured an offer at the price and on substantially the terms of the listing; Capital Cartage defended that the offer contained substantial variances excusing payment.
- The circuit court instructed the jury that the three conditions were not substantial variances; the jury awarded McNally the commission. The court of appeals affirmed, construing "substantial variance" as limited to direct conflicts with express listing terms.
- The Wisconsin Supreme Court reversed, holding Kleven remains the governing standard and that, as a matter of law in this factual context, the unpaid-labor condition was a substantial variance relieving the seller of liability for the commission.
Issues
| Issue | Plaintiff's Argument (McNally) | Defendant's Argument (Capital Cartage) | Held |
|---|---|---|---|
| Whether Kleven or Libowitz defines "substantial variance" | Kleven standard allows non-direct conflicts to be substantial; McNally argued the offer met the listing's price and substantial terms. | Capital Cartage argued Libowitz narrowed the test to only direct conflicts, so alleged variances were substantial. | Kleven remains the law; direct conflict is an example, not the exclusive test. |
| Whether Addendum conditions (deposit split, noncompete, unpaid labor) are "substantial variances" | McNally: these conditions were not substantial variances and did not defeat his procurement of an offer. | Capital Cartage: the conditions materially altered the deal; at least unpaid labor substantially varied the listing. | The unpaid-labor condition (Mary to stay on full time without pay for an undefined period) is a substantial variance as a matter of law; dispositive. |
| Whether a broker is entitled to commission when seller rejects an offer without stating objections | McNally: broker performed by procuring an offer meeting price; seller waived unspecified objections by not alerting broker. | Capital Cartage: under Kleven, seller need not point out substantial variances; substantial variances excuse commission. | Seller need not point out substantial variances; broker is chargeable with knowledge of substantial variances when submitted. |
| Whether the question of substantial variance was for the jury or decidable as matter of law | McNally: factual question for jury was appropriate; jury found for broker. | Capital Cartage: unpaid-labor condition so extraordinary it can be decided as law; no reasonable jury could find otherwise. | Court: unpaid-labor term so extreme it constituted a substantial variance as a matter of law in this factual context; judgment on the pleadings should have been granted. |
Key Cases Cited
- Kleven v. Cities Serv. Oil Co., 22 Wis. 2d 437 (1964) (defines substantial variance rule and notes direct conflict with material provision is a substantial variance)
- Libowitz v. Lake Nursing Home, Inc., 35 Wis. 2d 74 (1967) (discusses application of substantial/insubstantial variance distinctions; court here treats its phrasing as non-revisory of Kleven)
- Peter M. Chalik & Assocs. v. Hermes, 56 Wis. 2d 151 (1972) (applies Kleven standard and treats certain price/term discrepancies as substantial variances)
- Moss v. Warns, 245 Wis. 587 (1944) (earlier rule that seller who rejects offer without stating objections waives later discrepancies; later narrowed by Kleven)
- Garstka v. Russo, 37 Wis. 2d 146 (1967) (recognizes that labor has monetary value)