Who Owes the Commission – A Trust or its Trustee?

In a recently reported Arizona Court of Appeals decision, a listing agreement expressly provided that the parties to the agreement were the owner and the broker. A trust owned the property. In the signature block of the agreement, the name of the trust and the trustee were typed above the printed words “Print Name of Owner.” The trustee signed below that designation and above the printed designation “Owner’s Signature.” The signature did not set forth the capacity in which the trustee signed. An addendum to the agreement had a printed signature block designating the trust BY the trustee. The trustee signed the addendum only with her name and no handwritten designation of capacity. The trustee and the trust were both sued for the commission. The trial judge let the jury decide the issue which returned a verdict against BOTH the trust and trustee. The trial court refused to alter the jury’s verdict.

On appeal, the court reversed the judgment against the trustee and found that there was no ambiguity in the capacity under which the contract was signed. It was clear to the appellate court that the only reason the trustee’s signature was on the contract was to establish the basis for liability of the trust. There was no conscious choice on the part of the trustee to sign in an individual, as opposed to a representative capacity.

PRACTICE POINTER:  After expending tens of thousands of dollars in attorneys’ fees to get a determination of this issue, the lesson to be learned is quite simple. Pay careful attention to the signature blocks AND the handwritten signatures to make sure there is no question regarding the capacity of the person signing the contract. Make sure all signatures replace the printed portion of the signature blocks. When a trustee signs, make sure the word “trustee” is contained in the signature. An ounce of prevention in this matter would have saved thousands of dollars in appealing a faulty jury verdict.

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