Nature of Contract: PEMS entered a handshake agreement with Rupp Industries chief executive, Rick Estergren in 2005 to allocate a buyer for Rupp Industries. PEMS was the only outsider helping Rupp Industries find a buyer and facilitate the purchases. The agreement was that PEMS would be paid 2% commission by the buyer upon the purchase. The discussion was underway until Rupp Industries Acquisition, Inc. (RIA) gathered enough information from PEMS to conclude the transaction under a new name Temp-Air. The company declined to pay TEMPS the 2% commission.
FACTS: PEMS Co. International, Inc., agreed to locate a buyer for Rupp Industries, Inc., for a commission of 2% on the purchase price, the payment was to be made by the buyer. Using PEMS’s services, an investment group purchased Rupp for 20 million United States dollars and altered its name to Temp-Air, Inc. PEMS asked Temp-Air to pay the stipulated charge on the sale. Temp-Air refused, arguing that PEMS had acted as a broker in the deal unlicensed. The applicable statute defines a broker as any person who deals with the sale of a business.
Delegate your assignment to our experts and they will do the rest.
ISSUE: If the statute was made with the goal of protecting the public, can PEMS collect its charge? Explain. ( PEMS Co. International,……..(incomplete citation). At what point is brokerage services become inadmissible.
DECISION: PEMS Co. International, Inc., cannot, nor could or should anyone else succeed in collecting commission while acting as an unlicensed real estate broker because such an argument contravenes the provisions of the Real Estate Brokers and Salespersons Act .
PEMS challenged the district court entry of summary judgment made against it. The judgment is effective when the admissible and pleading evidence shows that no factual issue of material evidence is present and that one of the parties is entitles for judgment before the law. During appeal, the evidence looked upon are those favorable to the nonmoving party, and assessment of whether genuine exist and whether the district attorney applied the legal precedents properly are established. This can be reflected in Pawn Am. Minn., LLC v. City of St. Louis Park, 787 N.W.2d 565, 570 (Minn. 2010).
PEMS had four premises of argument. It argued on the nature of the sale. The sale regarded the stock and not the business itself, which renders the statutes regulating real estate and business brokerage inapplicable. Alternatively, it argues that the nature of its activities, which are asserted as those of the ‘finder’ and not a ‘broker,’ makes it not liable to licensing procedures. PEMS argued that the disputed facts prevent summary judgments, which dismiss the fraud claim against Korn, see Minn. Stat. § 645.16 (2010) . Finally, PEMS contends that the claim of international interference with economic advantage prospect is illustrated in Minnesota tort and the claim cannot be subjected to the bar section 82.85, since it was intended to seek damages rather than commission payment.
LEGAL REASONS: The law on licensing as covered under the Real Estate Brokers and Salespersons Act requires that all persons undertaking sale, transfers, or brokerage must be duly licensed for their acts to be protected under law. Facilitating transactions as the one envisioned does not guarantee one payment as the deal is voidable. The respondent party can go back on their word without any legal consequences. In this case, Temp-air refused to pay a 2 percent commission to PEMS Incorporated. The strict law on licensure applies to situations where a party is claiming a benefit under a transaction in which another party contests.
First, the nature of the transactions entered into must be determined. A party must be acting as a broker who deals with the sale of a business or interest therein, as envisaged in s. 82.55 of the Minnesota Securities Act . The broker must be distinguished from a ‘finder’ whose work simply entails establishing business connections. In this case, the party was ideally acting as a broker and his role involved striking a deal with the respondent company for a favorable sale. Secondly, the nature of sale was a business sale and not a securities sale. The argument by the applicant that the sale constituted a security is erroneous. From the facts, it is clear that the parties intended to transfer the whole business to another entity, not merely a part of the ownership. Indeed, after the complete transfer, the new owners changed the business name from Rupp Industries, Inc., to Temp-Air Inc, see Minn. Stat. §82.55, subd. 19(d)(2010) . The total control over the business is a clear demonstration that the nature of the transaction entered into between the parties involved a sale and not a securities transfer. By dint of this qualification, the transaction ought to have been concluded by a licensed agent.
Rationale
The rationale behind licensure is to ensure that only the most qualified persons undertake the sale of businesses. There is need for due diligence before the transaction is concluded. If the transaction is concluded improperly, the injured party may have recourse against the broker. Besides, licensure regulates the brokerage business and ensures that parties are adequately insured, see Krummenacher v. City of Minnetonka, 783 N.W.2d 721, 726 (Minn. 2010).
. The law reform was to protect the unsuspecting public from inexperienced or incompetent persons who may lead to huge business losses. At the same time, brokers are expected to operate within the law by appropriately outlining their terms of operation and filling all the legal mandate required of them.
As far as the present case is concerned, I find that the applicant was in error. The law clearly required him to be licensed before transacting. Since this requirement was not fulfilled, the claim for 2 percent compensation must fail. It worked outside the tort provisions and as result liable to the loses.
The Verdict
The district court effectively dismissed PEMS’s claim of claiming unpaid and unlicensed brokerage fees against Temp-Air. The argument was that they barred the 82.85 section. PEMS’s fraud claim was also properly dismissed against Korn since there was no factual support. PEMS’s intentional- interference claim filed against Korn also failed because it was a recast of PEMS’s claim for unpaid commission.
References
Krummenacher v. City of Minnetonka, 783 N.W.2d 721, 726 (Minn. 2010).
Minn. Stat. § 645.16 (2010)
Minn. Stat. §82.55, subd. 19(d)(2010)
PEMS Co. International, Inc. vs. Temp-Air, Inc . 2011, Hennepin
County District Court File No. 27-CV-09-4174
