A. G. CARVER
v.
Norman R. LYKES.
No. 100.
Supreme Court of North Carolina.
July 10, 1964.*144 Harold K. Bennett and Don C. Young, Asheville, for plaintiff.
Redden, Redden & Redden, Hendersonville, for defendant.
SHARP, Justice.
(1) Plaintiff's Action
The common law action for malicious prosecution was originated as a remedy for unjustifiable criminal prosecutions. However, in North Carolina and many other states, the right of action has been extended to include the malicious institution of civil proceedings which involve an arrest of the person or seizure of property or which result in some special damage. Ely v. Davis, 111 N.C. 24, 15 S.E. 878; Jerome v. Shaw, 172 N.C. 862, 90 S.E. 764; Chatham *145 Estates v. American Nat. Bank, 171 N.C. 579, 88 S.E. 783 (lis pendens); Nassif v. Goodman, 203 N.C. 451, 166 S.E. 308, 86 A.L.R. 215 (Involuntary bankruptcy); Brown v. Guaranty Estates Corp., 239 N.C. 595, 80 S.E.2d 645, 40 A.L.R. 2d 1094 (Malicious and wrongful attachment); 3 Strong, N. C. Index, Malicious Prosecution § 2.
The weight of authority in this country now supports the view that, under certain circumstances, an action for malicious prosecution may be predicated upon the prosecution, institution, or instigation of an administrative proceeding where such proceeding is adjudicatory in nature and may adversely affect a legally protected interest. National Surety Co. v. Page, 58 F.2d 145 (4th Cir.1932); Melvin v. Pence, 76 U.S.App.D.C. 154, 130 F.2d 423, 143 A.L.R. 149; Restatement, Torts § 680 (1938); 34 Am.Jur., Malicious Prosecution § 19.1 (Supp.1963); Prosser, Torts § 99 (1955); See also Toft v. Ketchum, 18 N.J. 280, 113 A.2d 671, 673, 52 A.L.R. 2d 1208.
In Melvin v. Pence, supra, Rutledge, J., pointed out:
"* * * Much of the jurisdiction formerly residing in the courts has been transferred to administrative tribunals, and much new jurisdiction involving private rights and penal consequences has been vested in them. In a broad sense their creation involves the emergence of a new system of courts, not less significant than the evolution of chancery. The same harmful consequences may flow from the groundless and malicious institution of proceedings in them as does from judicial proceedings similarly begun. When one's livelihood depends upon a public license, it makes little difference to him whether it is taken away by a court or by an administrative body or official. Nor should his right to redress the injury depend upon the technical form of the proceeding by which it is inflicted. The administrative process is also a legal process, and its abuse in the same way with the same injury should receive the same penalty."
It follows that one who instigates or procures investigatory proceedings against another before an administrative board which has the power to suspend or revoke that other's license to do business or practice his profession, is liable for the resulting damage if (1) the proceeding was instituted maliciously; (2) without probable cause; and (3) has terminated in favor of the person against whom it was initiated. In such a suit for malicious prosecution the plaintiff may recover for any resulting loss of business, injury to reputation, mental suffering, expenses reasonably necessary to defend himself against the charge, and any other loss which proximately resulted from the defendant's wrongful action. If actual malice is established the jury may allow punitive damages. Brown v. Guaranty Estates Corp., supra; Pressley v. Audette, 206 N.C. 352, 173 S.E. 905; Newton v. McGowan, 256 N.C. 421, 124 S.E.2d 142.
G.S. 93A makes it unlawful for any person to act as a real estate salesman or broker without first obtaining a license from the North Carolina Real Estate Licensing Board. G.S. § 93A-6 empowers the Board to suspend or revoke such license for such misconduct as therein specified. It also provides that upon the filing of a written, verified complaint which makes out a prima facie case of such misconduct, the Board shall, after due notice, hold a hearing and investigate the actions of the realtor whose conduct has been called into question.
Of course, before a defendant can be held liable in any action for malicious prosecution it must appear that he prosecuted, instituted, or instigated the administrative proceeding of which the plaintiff complains. This fact, unless admitted, must be established by the first issue. In the trial below the jury disposed of plaintiff's action by a negative answer to the first issue *146 which was stated: "Did the defendant institute and prosecute an action before the North Carolina Real Estate Licensing Board against the plaintiff to revoke or suspend his Broker's Real Estate License, as alleged in the Complaint?" With reference to this issue the court charged the jury as follows:
"So the Court instructs you, members of the jury, that if you find from this evidence and by its greater weight, that the defendant did file with the Board the complaints in question, and that at the time he did so that he did so for the purpose of revoking the license, revoke or suspend the broker's or real estate license of the plaintiff, Mr. Carver, then it would be your duty to answer this first issue YES. If you do not so find, you will answer it NO, or, if upon a fair and impartial consideration of all the facts and circumstances in the case, if you find the evidence of equal weight, you will answer it NO." (Italics ours).
The plaintiff's assignment of error to the foregoing portion of the charge must be sustained. The defendant testified that in filing the charges it was never his purpose to cause a revocation of plaintiff's license; that he was merely "bringing to the attention of the Board what Mr. Carver had done" to him. However, the charges filed by defendant required the Board to investigate the plaintiff's conduct and, if found to be true, they constituted grounds for the revocation of his license under G.S. § 93A-6. Having thus invoked the statute, the defendant may no more say that in filing the complaint it was not his purpose to jeopardize the plaintiff's license than a defendant in any ordinary malicious prosecution action would be heard to say that in swearing out a warrant it was not his purpose to convict the person he had charged with crime. "The instigation of an administrative proceeding is sufficient where the institution of the proceeding actually follows from it." 34 Am.Jur., Malicious Prosecution § 19.1 (Supp.1963). Moreover, the defendant's motive or purpose in instituting the proceedings in question is not material on the first issue. The defendant admitted in his answer that he filed with the Board the written, verified charges against the plaintiff which are set out in paragraphs 6 and 7 of the plaintiff's complaint. The only question rightly involved on the first issue was whether defendant instituted the proceedings of which plaintiff complainednot whether he intended to cause the revocation or suspension of plaintiff's license by so doing. In this case plaintiff's instigation of the proceedings is not an issue. His admission in the answer established that he had done so. G.S. § 1-159; Davis v. Rigsby, 261 N.C. 684, 136 S.E.2d 33; Fairmont School v. Bevis, 210 N.C. 50, 185 S.E. 463. The first issue in this case, if submitted, should have been answered YES by the court. For the error in the charge with reference to it there must be a new trial.
(2) Defendant's First Counterclaim
Plaintiff's thirtieth assignment of error is to the failure of the court to sustain his motion for judgment as of nonsuit as to defendant's first counterclaim. In defendant's words at the trial, the basis of his first counterclaim was that plaintiff "was grossly negligent because he didn't go around to the neighbors and find out either what was offered by the Carolina Power and Light Company for the property or what transactions had taken place and actually what prices" neighboring property brought.
"A real estate agent with whom property is listed for sale or exchange acts in a fiduciary capacity, if he accepts the proffered employment. It is his duty to obtain for his principal the largest price possible, or in case of an exchange the most advantageous trade." Devine v. Hudgins, 131 Me. 353, 163 A. 83.
The duty which a real estate broker engaged to sell land owes to his principal is *147 stated in 12 Am.Jur.2d, Brokers § 96 as follows:
"As a general rule, a broker who is not a mere middleman, but is employed by a principal to act as his agent in a transaction, is bound to exercise reasonable care and skill, or the care and skill ordinarily possessed and used by other persons employed in a similar undertaking. He must exert himself with reasonable diligence in his principal's behalf, and is bound to obtain for the latter the most advantageous bargain possible under the circumstances of the particular situation. Thus, a broker employed to sell property has the specific duty of exercising reasonabe care and diligence to effect a sale to the best advantage of the principalthat is, on the best terms and at the best price possible." See also Annot., Liability of real-estate broker to principal for negligence in carrying out agency, 94 A.L.R. 2d 468; 12 C.J.S. Brokers § 26.
It was, as defendant contends, the plaintiff's duty to determine the reasonable market value of defendant's property before attempting to effect a sale of it and, under the circumstances, he had the right to rely upon plaintiff's knowledge and advice without making an independent investigation himself. In cases involving real estate brokers, where the negligence of the broker in obtaining an adequate price is set up, either as the basis for a cause of action in tort against him or as a defense to his action to recover a commission, courts have ruled in favor of the property owners where there was evidence of a substantial variation in the real value of the property and that obtained by the broker. Smith v. Carroll Realty Co., 8 Utah 2d 356, 335 P.2d 67; Russell Grain Co. v. Bainter, Kan., 223 S.W. 769; Stuart v. Stumph, 126 Ind. 580, 26 N.E. 553; Myers v. Adler, 188 Mo.App. 607, 176 S.W. 538.
To show a substantial variation in the real market value of defendant's 13.2 acres and the price obtained by the plaintiff, plaintiff was asked on cross-examination, over the objection and exception of his counsel and without any foundation whatever having been laid for the questions, if he did not know that the Power Company had paid Dan Moody $1,375.00 an acre for property in the vicinity of defendant's; Meece, Buckner, Swicegood, and Butler, $1,200.00 an acre; and Austin, $800.00 for one-half an acre. Plaintiff replied that he had no such knowledge. Thereafter, on the direct examination of other witnesses for defendant, evidence that the aforementioned individuals had received the stated sums per acre was admitted without objection along with evidence as to the price paid by the Power Company to a number of other individuals for tracts, or parts of tracts in the project area, ranging in size from one-half an acre to four hundred acres. The prices per acre varied from less than $500.00 to more than $4,000.00. Some of the tracts contained one or more dwellings or improvements of various kinds. Some fronted on the public highway. All apparently were substantially dissimilar in either size, condition, location, or improvements to the defendant's property which had no frontage on a public road and no buildings of any kind on it. It was subject to rights of way for both telephone and electric power lines running north and south across the middle of the property.
Under the rule laid down in Barnes v. North Carolina State Highway Commission, 250 N.C. 378, 394, 109 S.E.2d 219, and most recently restated in North Carolina State Highway Commission v. Coggins, 262 N.C. 25, 136 S.E.2d 265, this evidence was clearly incompetent to establish the value of defendant's land. In the first place, all of the sales to the Power Company were made under the threat of condemnation and were forced rather than voluntary sales. North Carolina State Highway Commission v. Pearce, 261 N.C. 760, 762, 136 S.E.2d 71. Their sales prices were not, therefore, a fair indication of market value.
*148 "* * * (E)vidence of amounts paid by the condemnor for property similarly situated, in the absence of extraordinary circumstances, (is) inadmissible, because such sales are involuntary and therefore, under the substantive law, run counter to the essential ingredient of fair market value. * * *" II Wigmore on Evidence, (3d ed.) § 463 (Supp.1962)
Secondly, the judge heard no evidence in the absence of the jury or otherwise made any attempt to determine whether there was a sufficient similarity between the properties to render such evidence competent. So far as the record discloses, proximity of location and the Power Company's requirement of the properties constituted the only similarity between defendant's land and those with which he attempted to compare its value. Furthermore, it was also error to permit the cross-examination of plaintiff by such questions as "Do you know he (Moody) sold two acres to Carolina Power and Light Company for $1,375.00 an acre?" The "utmost freedom of cross-examination" to test a witness' knowledge of values, mentioned in Barnes v. North Carolina State Highway Commission, supra, does not mean that counsel may ask the witness if he doesn't know that a certain individual sold his property for a stated sum with no proof of the actual sales price other than the implication in his question. Bennett v. Winston-Salem Southbound R. R., 170 N.C. 389, 87 S.E. 133, L.R.A. 1916D, 1074. Where such information is material it is easy enough to establish by the witness himself, whether a certain property has been sold to his knowledge and, if so, whether he knows the price. If he says he does not know, his lack of knowledge is thus established by his own testimony and doubt is cast on the value of his opinion. North Carolina State Highway and Public Works Commission v. Privett, 246 N.C. 501, 506, 99 S.E.2d 61. If he asserts his knowledge of the sale and, in response to the cross-examiner's question, states a totally erroneous sales price, is the adverse party bound by the answer or may he call witnesses to establish the true purchase price? Unless per chance the purchase price of the particular property was competent as substantive evidence of the value of the property involved in the action, it would seem that the party asking the question should be bound by the answer. To hold otherwise would open a Pandora's box of collateral issues.
However, in this case substantially all the evidence tending to establish the purchase price of the other properties went into the record at one time or another without objection. "The admission of this evidence without objection, rendered harmless the previously admitted evidence of similar import over objection." Price v. Whisnant, 232 N.C. 653, 62 S.E.2d 56. Nevertheless, this evidence as to the purchase price of property, sold under threat of condemnation and not shown to be similar to the defendant's, was without probative value on the question whether plaintiff had obtained an adequate price for the land or the best bargain possible for defendant. This being true, defendant's evidence that plaintiff had told him "he did not bother to find out" at what price the Power Company had obtained other property in the community likewise does not bear upon the question.
The testimony of defendant and Mr. Gooch both tended to show that the price which plaintiff obtained for defendant's property was inadequate. Notwithstanding, all the evidence was that plaintiff obtained the "top dollar" which could have been obtained from the Power Company without resorting to condemnation proceedings. Plaintiff concedes that he strongly advised the defendant to accept the Power Company's offer rather than risk the delay, uncertainties, and expense incident to a condemnation proceeding. Whether, in advising settlement in preference to litigation plaintiff erred in judgment, we can never know. In any event, defendant concurred *149 in his judgment albeit, he says, reluctantly. We must assume that as an intelligent, forty-five year old citizen with several sizeable business interests, and experience as a free-lance writer, plaintiff had some familiarity with jury trials and the hazards of litigation.
The record discloses no evidence that plaintiff had at any time ever represented the Power Company or owned any stock in it. Defendant failed to prove that plaintiff had any "conflict of interest," that he acted in bad faith, or that he was guilty of any negligence which was the proximate cause of loss to him. If the evidence could be held to justify an inference that plaintiff made an error of judgment which, under the circumstances, it cannot, it still would not constitute actionable negligence.
"* * * A broker is not liable for a mere mistake of judgment that did not result from a failure to know or do that which a person of ordinary prudence, under similar circumstances would know or do. * * * So long as the agent acts honestly, in good faith, according to his best skill and judgment, and without negligence in ascertaining and reporting actual facts and conditions available to him at the time, he may not be held liable for an alleged mistake of judgment merely because some one is willing afterwards to swear that a prolongation of the chaffering would have achieved greater results. The law imposes no such responsibility upon an agent." Smith v. Fidelity & C. Trust Co., 227 Ky. 120, 12 S.W.2d 276, 62 A.L.R. 1353.
The plaintiff's motion to nonsuit defendant's first counterclaim should have been allowed, and plaintiff's assignment No. 30 is sustained.
(3) Defendant's Second Counterclaim
Neither the pleadings, evidence, nor the issues brought the contentions which the parties now make with reference to the second counterclaim into sharp focus at the trial. Defendant alleged that he agreed to purchase approximately 12.5 acres of land which the plaintiff represented to him as an entire "little mountain"; that he deposited $500.00 with plaintiff to show his good faith and to bind the trade, and instructed him that it should be applied on the purchase price if the title to the property was good; that the title to a portion of the land was not good and the 12.5 acres did not include the entire "little mountain"; that he demanded the return of his deposit which the plaintiff refused.
Defendant contends, and his evidence tended to show, that when a survey revealed the true size and location of the 12.5 acres, which plaintiff had thought contained the entire mountain of seventy-five to one hundred acres, he still agreed to buy it provided he could also obtain the land shown on the map as an encircling road which contained approximately two acres. This brought the amount of land which defendant agreed to purchase to 14.6 acres. He contends that after it was discovered Morgan could not convey a good title to the road, he no longer wanted the "misrepresented" hilltop without it. Thereupon, he demanded and became entitled to the return of his deposit.
The document which plaintiff mailed defendant on October 25, 1960 with the request that he sign it as the contract between the parties, was clearly competent to corroborate the defendant's testimony that he was not to pay for the survey and to contradict the plaintiff even though it was never executed.
In defense of this counterclaim, the plaintiff contends, and his evidence tended to show, (1) that it was understood between all the parties that defendant was to pay for the survey in any event but, if he bought the property, his entire deposit of $500.00 would be credited on the purchase price; and (2) that the deposit was made to bind defendant's contract to purchase the original 12.5 acre tract, to which the title *150 is unquestionably good and which defendant had obligated himself to take before he attempted to buy the road, and that he forfeited the deposit when he changed his mind and reneged on the agreement. Plaintiff makes this second contention in spite of the fact that he remitted to the defendant the difference between the cost of the survey and the amount of the deposit, $49.00.
As determinative of the second counterclaim, the court, without objection from either party, submitted the following two issues, both of which the jury answered YES.
"9. Did the plaintiff and defendant enter into a contract of purchase and sale for the Morgan land, as alleged in the answer?
"10. If so, did the plaintiff wrongfully withhold and refuse to turn over to the defendant the $500.00 deposit, as alleged in the answer?"
In his charge the court treated the defendant's contract to purchase the 12.5 acre tract and the contract to buy the two acres included in the encircling road as one and indivisible. He charged the jury that if it found that the agreement between the plaintiff and defendant was that defendant would purchase "the Morgan lands" if the title was good, and if it were not, that he would receive back his deposit of $500.00, it would answer the ninth issue YES; otherwise NO. The judge then instructed the jury that if it answered the ninth issue YES it would answer the tenth issue YES. The last instruction was clearly both erroneous and prejudicial. It completely ignored the plaintiff's two defenses to the counterclaim. Furthermore, under the theory on which his Honor submitted the ninth issue to the jury, the instruction assumed that the title to the Morgan property was defective. Plaintiff had made no such admission and the burden was on the defendant to satisfy the jury by the greater weight of the evidence that the title to the land he had agreed to buy was defective. See Durham Consolidated Land & Improvement Co. v. Guthrie, 116 N.C. 381, 21 S.E. 952; Annot., 169 A.L.R. 87. The credibility of defendant's evidence bearing upon this point was for the jury. There must be a new trial on the second counterclaim. This disposition of the case makes it unnecessary to consider the other numerous assignments of error.
On plaintiff's cause of actionNew Trial.
On defendant's first counterclaimReversed.
On defendant's second counterclaim New Trial.