Background
Three real estate brokers—Crowe Commercial Real Estate, LLC, William R. Crowe, and Richard M. Krystoff—sued Don Quijote entities seeking a brokerage commission for services allegedly rendered in connection with Don Quijote’s proposed acquisition of the Pan Am Building in Honolulu. The brokers claimed they were entitled to a two percent commission based on a Letter of Intent (LOI) signed in May 2015 by a Don Quijote senior managing director. The LOI expressed Don Quijote’s interest in negotiating the purchase of the building from Pacific Office Properties, Trust, Inc.
The brokers asserted two theories of recovery: (1) breach of an implied contract between themselves and Don Quijote, and (2) entitlement to commission as the “procuring cause” of the transaction in equity. The circuit court granted summary judgment in favor of Don Quijote on both claims, and awarded attorneys’ fees and costs to the defendants. The brokers appealed on three grounds: that genuine issues of material fact precluded summary judgment, and that the attorneys’ fees award was improper.
The Court’s Holding
The intermediate appellate court affirmed summary judgment on all fronts. The court held that the LOI was a non-binding negotiation document, not an enforceable contract between the brokers and Don Quijote. By its express terms, the LOI was explicitly non-binding except for provisions regarding due diligence, exclusive dealings, and confidentiality. The LOI included an expiration date (May 29, 2015, 5:00 p.m.) and stated that “neither Seller nor [DQ] shall be legally bound or obligated to perform with respect to the subject matter of this LOI, under any legal theory, prior to the execution and mutual delivery of the Definitive Agreement.” The seller rejected the LOI, causing it to become null and void by its own terms.
Critically, the court noted that the LOI was DQ’s offer to the seller, not an agreement between DQ and the brokers. For an enforceable brokerage agreement to exist, Hawaii law requires a “meeting of the minds” on essential terms and, under Hawaii Revised Statutes § 656-1(6), the agreement must be in writing. The court found no evidence of any agreement—written, oral, or implied—between the brokers and DQ. Although Hawaii recognizes a narrow exception to the statute of frauds for oral brokerage agreements where enforcement is necessary to avoid injustice (Hamilton v. Funk), that exception requires at least an oral or implied agreement to exist. Here, the court found no such agreement, so the exception did not apply.
On the attorneys’ fees issue, the court held that the circuit court properly awarded fees under Hawaii Revised Statutes § 607-14, which permits fee recovery in “actions in the nature of assumpsit” because the brokers had requested monetary damages. The court also held that apportionment of fees between assumpsit and non-assumpsit claims was not required because the breach of contract and procuring cause claims were “inextricably linked,” both seeking damages based on alleged contractual or quasi-contractual obligations.
Key Takeaways
- A Letter of Intent that is expressly non-binding creates no enforceable contract between the broker and the acquiring party, even if it references a commission obligation to the seller.
- Hawaii’s exception to the statute of frauds for brokerage agreements still requires proof of an actual agreement (even if oral or implied); a non-binding negotiation document cannot serve as a substitute.
- In commercial real estate transactions, the distinction between binding and non-binding documents is critical to determining whether a broker has enforceable rights to a commission.
- Attorneys’ fees awards under the assumpsit statute may be upheld without apportionment when related contract claims are inextricably linked in their legal theory and remedies.
Why It Matters
This decision provides important guidance on the limits of broker compensation claims in complex real estate transactions. It establishes that brokers cannot bootstrap themselves into a commission agreement through non-binding letters of intent, even when those letters reference commission percentages. The court’s emphasis on the express non-binding language and the parties’ contemporaneous understanding (evidenced by emails confirming the LOI’s non-binding nature) reinforces that intent and clarity matter in commercial real estate practice. Parties negotiating acquisitions should be explicit about whether commission discussions are binding or conditional on a final agreement.
For brokers, the decision narrows the pathway to recovery when initial offers or letters of intent are involved. While Hawaii does recognize equitable claims for procuring cause, those claims remain subject to the statute of frauds and require evidence of an actual agreement to pay commission, not merely involvement in preliminary negotiations. The decision underscores that preliminary LOIs, however detailed, do not substitute for a binding engagement letter or purchase agreement provision regarding broker compensation.