





CITATION: PKF Hotel Realty Inc. v. 3414574 Canada
      Inc., 2011 ONCA 77



DATE: 20110128



DOCKET: C52448



COURT OF APPEAL FOR ONTARIO



Laskin, Lang and LaForme JJ.A.



BETWEEN



PKF Hotel Realty Inc.



Applicant (Appellant)



and



3414574 Canada Inc. and Jack Lee



Respondents (Respondents)



Glenn R. Solomon, for the appellant



Wendy J. Earle, for the respondents



Heard: January 17, 2011



On appeal from the order of Justice
          Beth A. Allen of the Superior Court of Justice, dated June 28, 2010.



ENDORSEMENT



[1]

The appellant, a real estate brokerage
    firm, claimed a commission from the respondents arising out of the respondents
    lease and sale of a hotel property to a third party.  The success of the appellants
    claim turned on the interpretation of the exclusive listing agreement.
The
    application judge rejected the appellants interpretation and dismissed the
    application.  For the reasons that follow, the appeal is dismissed.

[2]

Section 11 of the listing agreement, entitled SALES COMMISSION,
provided that the respondents (the corporate owner of
    the property and its directing mind) would pay the appellant commission
if
    a transaction is completed
during the 180-day
    extended period following the termination of the listing agreements Term.
The listing agreement defined neither transaction nor completed.

[3]

The appellant argued that the transaction entered into by the
    respondents during the extended Term amounted to the respondents sale of the
    property as a result of which commission became payable.

[4]

The actual transaction between the respondents and the third parties consisted
    of two related documents:  a lease agreement and an agreement of purchase and
    sale.  The lease agreement provided for the proposed purchaser to occupy the
    premises immediately and to pay rent pending closing of the purchase
    transaction.  The agreement of purchase and sale provided for immediate payment
    by the third party of a $3 million deposit, a $1 million payment six months
    later, and the balance of $9 million payable on closing of the purchase one year
    later.

[5]

The appellant argues that the combined terms of the two agreements,
    including terms such as the one calling for requisitions on title by the date
    of occupancy, evidenced a transaction that amounted to a virtual sale of the
    property, with the lease merely serving as a financing arrangement akin to a
    vendor take-back mortgage.

[6]

We do not agree.  On their plain terms, the agreements provided for the
    lease of the lands until the proposed purchaser was obliged to buy the property
    a year later.  Indeed, the appellant agrees that the structure of the
    transaction appeared to relate to the inability of the proposed purchaser to
    obtain financing at the time, and concedes there was no evidence that the owner
    structured the transaction in a particular way to change the substance of the
    transaction to avoid payment of any commission.

[7]

The respondents argue that nothing short of the closing of a sale fits
    within the listing agreements transaction to be completed in the extended
    period, so as to attract an obligation to pay sales commission.  There is some
    support for the respondents position from other terms of the agreement.  For
    example, s. 11(b) provided commission would be paid at the closing of the
    transaction or on the day set for closing where the sale is not consummated by
    reason of the failure of Owner to close. This language could suggest that the
    transaction targeted is a sale of the property and the relevant time is the
    date set for the closing or completion of the sale.

[8]

In any event, in the context of the listing agreement as a whole, the meaning
    of transaction is completed is ambiguous at most. Since the wording of the
    listing agreement was imposed by the real estate broker, such an ambiguity must
    be resolved in favour of the respondents.

[9]

The appellant raises a secondary ground of appeal.

[10]

Under the terms of the listing agreement, sale was defined to
    include both an exchange of the property as well as an option to purchase the
    property.  The appellant argues that the two agreements were tantamount to an
    option completed within the extended Term and amounted to a transaction that
    attracted commission. In our view, the agreement of purchase and sale and
    agreement to lease, both of which we have described above, are quite different
    in nature and character from the option to purchase contemplated by the listing
    agreement. We also would not accept this ground of appeal.

[11]

Accordingly, the appeal must be dismissed.  Costs are awarded to the
    successful respondent in the agreed-upon amount of $10,000, inclusive of
    disbursements and all applicable taxes.

John Laskin
    J.A.

S.E. Lang
    J.A.

H.S. LaForme J.A.


