McDonald Co. v. Fishtail Creek Ra

No. 13654

I N THE SUPREME COURT OF THE STATE OF MONTANA

1977

McDONALD & CO. a ,
Montana Corporation,

P l a i n t i f f and R e s p o n d e n t ,

F I S H T A I L CREEK RANCH L I M I T E D
PARTNERSHIP, A M o n t a n a L i m i t e d
P a r t n e r s h i p , and JAMES R. REGER,

D e f e n d a n t s and A p p e l l a n t s .

Appeal from: D i s t r i c t C o u r t of t h e T h i r t e e n t h J u d i c i a l
District,
H o n o r a b l e C h a r l e s L u e d k e , Judge p r e s i d i n g .

C o u n s e l of R e c o r d :

For A p p e l l a n t s :

M o s e s , T o l l i v e r and W r i g h t , B i l l i n g s , Montana
K e n n e t h D. T o l l i v e r argued, B i l l i n g s , Montana

For R e s p o n d e n t :

H i b b s , S w e e n e y and C o l b u r g , B i l l i n g s , M o n t a n a
M a u r i c e R. C o l b e r g , Jr. argued, B i l l i n g s , M o n t a n a

Submitted: September 23, 1977

Decided: goy ; 9
, yf!
-.
4.

Filed:
M r . J u s t i c e Gene B. Daly delivered the Opinion of t h e Court.

P l a i n t i f f McDonald & Co. i n i t i a t e d t h i s a c t i o n i n the

D i s t r i c t Court, Yellowstone County, t o recover damages f o r

defendants' alleged breach of a r e a l e s t a t e l i s t i n g agreement.

Defendants counterclaimed t o recover damages purportedly caused

by p l a i n t i f f ' s breach of a broker's f i d u c i a r y duty. The jury

returned a v e r d i c t and judgment was entered awarding p l a i n t i f f

damages i n t h e sum of $11,830 and awarding defendants damages

on t h e i r counterclaim i n the sum of $10,000. Plaintiff filed

an a l t e r n a t i v e motion t o a l t e r o r amend t h e judgment. The

D i s t r i c t Court granted t h e motion and an amended judgment on

the v e r d i c t was entered awarding p l a i n t i f f damages i n the s m
u

of $11,830 and awarding defendants damages on t h e i r counterclaim

i n t h e sum of $2,500.

Defendants appeal from the D i s t r i c t Court's amended judgment

allowing p l a i n t i f f t o recover $11,830 i n d a m a ~ s
and granting

p l a i n t i f f ' s a l t e r n a t i v e motion t o amend the judgment by reducing

defendants' amount of recovery on t h e i r counterclaim from

$10,000 t o $2,500. P l a i n t i f f appeals from the D i s t r i c t Court

judgment allowing defendants t o recover on t h e i r counterclaim.

The i s s u e s presented on appeal a r e :

1. Whether p l a i n t i f f McDonald & Co. should be e n t i t l e d

t o recover a commission under the l i s t i n g agreement?

2. Whether the w r i t t e n l i s t i n g c o n s t i t u t e d merely a w r i t t e n

confirmation of j u s t one p a r t of t h e o v e r a l l o r a l c o n t r a c t

between the p a r t i e s which could be repudiated and thereby allow

defendants t o deem a l l agreements a t an end?

3. Whether the D i s t r i c t Court erred i n reducing the j u r y ' s

v e r d i c t t o defendants on t h e i r counterclaim?
 McDonald & Co. i s a Montana corporation located i n

B i l l i n g s , Montana, engaged i n the business of s e l l i n g r e a l

estate. Sam E. McDonald, J r . , i s t h e president and majority

stockholder of McDonald & Co. F i s h t a i l Creek Ranch i s a limited

partnership organized under the laws of Montana and q u a l i f i e d

t o do business i n Montana. I t s o r i g i n a l a r t i c l e s of limited

partnership were executed on M y 1, 1973.
a James R. Reger i s

l i s t e d a s t h e general partner with limited partners Russell

C. Clark, Sam E. McDonald, Jr., John 0 . Odegaard, James R.

Reger, S. C. Sande, C. B. Sand, and S.J. Sande. M r . Reger

t e s t i f i e d he received a monthly s a l a r y of $250 a s compensation

f o r h i s d u t i e s a s general partner.

I n t h e spring of 1973, Reger became associated with

McDonald & Co. a s a r e a l e s t a t e salesman. H received h i s
e

r e a l e s t a t e l i c e n s e i n June 1973. Reger and McDonald pur-

portedly formed an o r a l agreement a s t o t h e d i v i s i o n of com-

missions between the broker and salesman upon the s a l e of

property. Reger remained associated with McDonald & Co. u n t i l

mid-January 1974. During h i s employment with McDonald Reger's

major e f f o r t s were devoted t o negotiating the s a l e of F i s h t a i l

Creek Ranch, a cow ranch, formerly known a s t h e Partington Ranch

located i n S t i l l w a t e r County, Montana. The ranch was purchased

by F i s h t a i l Creek Ranch Limited Partnership a s an investment

property.

A instrument e n t i t l e d "EXCLUSIVE RIGHT TO SELL RANCH
n

AND ACREAGE LISTING F R " was executed by Sam E. McDonald, J r . ,
OM

and James R. Reger, i n h i s capacity a s general partner of

F i s h t a i l Creek Ranch Limited Partnership. The instrument i s

dated June 20, 1973; however, the testimony of the s i g n a t o r s
i n d i c a k s t h e instrument was n o t executed u n t i l sometime i n

November 1973. The instrument i n d i c a t e s t h e l i s t i n g was

n o t t o e x p i r e u n t i l June 19, 1974. The apparent motive f o r

predating t h e instrument was t o guarantee McDonald & Co. a

commission from any s a l e of F i s h t a i l Creek Ranch which might

have been p r e c i p i t a t e d a f t e r June 20, 1973.

During Reger's employment with McDonald & Co. t h e r e were

s e v e r a l attempts t o consummate a s a l e of F i s h t a i l Creek Ranch.

I n J u l y 1973, J i m 0 . Mayo executed an agreement t o purchase

F i s h t a i l Creek Ranch f o r $235,000. Mayo deposited $1,000 with

McDonald & Co. a s c o n s i d e r a t i o n f o r an option t o purchase, t h e

o p t i o n t o e x p i r e August 31, 1973. Mayo was unable t o o b t a i n

financing f o r t h e purchase and requested a refund of h i s $1,000.

McDonald & Co. returned $800 t o Mayo, $200 was f o r f e i t e d t o t h e

limited partnership.

I n October 1973 McDonald & Co. i n an a l l e g e d attempt t o

p r e c i p i t a t e s a l e of t h e F i s h t a i l Creek Ranch, contracted w i t h

Mueller Engineering f o r t h e subdivision and p l o t t i n g of some

t e n a c r e t r a c t s on t h e property. McDonald & Co. paid t h e

c o s t s f o r t h e subdivision work and was purportedly reimbursed

by F i s h t a i l Creek Limited P a r t n e r s h i p f o r a l l c o s t s incurred

i n l i s t i n g t h e property.

On November 9, 1973, an agreement f o r t h e purchase of

F i s h t a i l Creek Ranch (exclusive of t h e a r e a being subdivided)

was executed by Reger, i n h i s c a p a c i t y a s g e n e r a l p a r t n e r f o r

F i s h t a i l Creek Ranch Limited P a r t n e r s h i p , and t h e purchasers,

Jack D. Shanstrom, Morris P. Blakely, and Arnold Huppert, Jr.

The agreement incorporated a c o n t r a c t f o r deed which provided
f o r the deposit of earnest money. The typed c o n t r a c t s p e c i f i e d

an earnest money deposit i n t h e amount of $5,000. However, the

p r i n t i n g on the instrument had been s t r u c k out by a pen and

the f i g u r e $15,000 w r i t t e n i n a s a s u b s t i t u t i o n . The f a c t s

reveal t h a t only $5,000 was ever received by Sam E. McDonald,Jr.

Checks t o t a l i n g an a d d i t i o n a l $10,000 were retained by the

attorney f o r the buyers and these checks were eventually

returned t o the buyers when the prospective purchase f e l l

through.

O January 11, 1974, the p a r t i e s t o t h e purchase agreement
n

executed a "MUTUAL RELEASEt' providing t h a t F i s h t a i l Creek Ranch

Limited Partnership " r e t a i n the $5,000 e a r n e s t money which i s

presently deposited i n the escrow account of McDonald & Company."

F u r t h e r , t h a t the purchasers be released from a l l claims o r

demands a r i s i n g out of the agreements executed by the p a r t i e s

f o r t h e purchase of F i s h t a i l Creek Ranch. The $5,000 was

delivered t o F i s h t a i l Creek Ranch Limited Partnership.

Reger's a s s o c i a t i o n with McDonald & Co. was terminated

i n January 1974. The purported b a s i s f o r termination of t h e

employment r e l a t i o n s h i p was Reger's r e f u s a l t o accept McDonald's

contractual conditions f o r the 1974 employment year. By l e t t e r

of February 1, 1974, counsel f o r Reger informed McDonald t h a t the

l i s t i n g agreement f o r F i s h t a i l Creek Ranch was terminated

a s of January 28, 1974, the d a t e when the p a r t i e s a l l e g e d l y

severed t h e i r association.

Reger subsequently went t o work f o r Northwest Real E s t a t e ,

a r e a l e s t a t e brokerage firm located i n B i l l i n g s . By May 1,

1974, Reger had sold e i g h t of the previously subdivided t r a c t s

f o r a t o t a l amount of $123,000. Six of the e i g h t t r a c t s were
sold to or through representatives of Mueller Engineering.
On April 19, 1974, James E. Edwards entered an option contract
to purchase Fishtail Creek Ranch for $215,000. Edwards

eventually exercised the option.

Issue 1. It is necessary to decide whether or not the

listing agreement between McDonald & Co. and Fishtail was

exclusive or nonexclusive. The pertinent parts of the listing

agreement are:

The title reads:"EXCLUSIVE RIGHT TO SELL RANCH AND ACREAGE

The body sets forth: "Agreed Commission Seven percent ( %
7)
of Sales price

"Exclusive Listing McDonald & Co.
II
- -
Exclusive Agency No Non-Exc. no
"Commences June 20, 1973 Expires June
19, 1974."
The agreement is on a printed form. The items inserted in
the blanks are typed into the printed form. It is obvious there
can be no other reasonable construction of this agreement than

that it grants an exclusive listing to the broker whose name

is typed in the appropriate blank, "McDonald & Co." . The

exclusive listing agreement to that broker has a one year period
of duration commencing June 20, 1973 and expiring June 19, 1974.
The word "no" is inserted in the blank after the form provision

of "Non-Exc.". Certainly that means the agreement is not a
nonexclusive agreement and therefore, the nonexclusive reference
contained in the last paragraph of the portion of the agreement
quoted above does not control. The agreement as a whole speaks

of an exclusive listing agreement.
 The form provides t h a t a commission must be paid upon any

a c t u a l s a l e s p r i o r t o t h e "termination of such r i g h t ." Defendants

argue the February 1, 1974, l e t t e r giving n o t i c e the l i s t i n g

agreement was terminated, u n i l a t e r a l l y terminated the l i s t i n g

agreement. Plaintiff axtends defendants could not u n i l a t e r a l l y

terminate t h e l i s t i n g agreement. I n Kester v. Nelson, 92 Mont.

69, 73, 10 P.2d 379 (1932), t h i s Court s t a t e d :
II 8
Persons competent t o contract can a s v a l i d l y agree
t o rescind a c o n t r a c t already made a s they could
agree t o make i t o r i g i n a l l y . However, a s a contract
i s made by the j o i n t w i l l of two p a r t i e s , i t can be rescinded
only by t h e j o i n t w i l l of the two p a r t i e s . I t i s
obvious t h a t one of the p a r t i e s can no more rescind the
c o n t r a c t without the o t h e r ' s express o r implied a s s e n t ,
than he alone can make i t . "'

I n the i n s t a n t case, there was no mutual assent. In fact,

a f t e r Sani McDonald received t h e termination l e t t e r of February 1,

1974, he personally t o l d James Reger t h a t t h e exclusive l i s t i n g

agreement was s t i l l i n e f f e c t u n t i l i t s termination date. In

Cloe v. Rogers, 31 Okl. 255, 1 2 1 P. 201 (1912), t h e c o u r t , relying

on s i m i l a r f a c t s a s a r e found i n t h e i n s t a n t case, s t a t e d a

general r u l e t h a t :

'I* * * where an agency i s uncoupled with an i n t e r e s t ,
i t may be revoked by t h e p r i n c i p a l a t w i l l , without
l i a b i l i t y f o r damages; but where i t i s f o r a fixed
time, and contemplates on the p a r t of the agent t h e
expenditure of time and money t o c a r r y i t o u t , and i s
accepted, and t h e d u t i e s imposed a r e entered upon by
t h e agent, and money and time a r e expanded i n pursuance
of the object of t h e agency, t h a t , although the p r i n c i p a l
has the power t o revoke and bring t o a termination t h e
c o n t r a c t , yet he lacks the r i g h t of so doing, except upon
the burden o f responding t o the agent f o r such damages
a s he may s u f f e r by reason thereof." 121 P. 203.

Issue 2. Defendants i n t h e i r second i s s u e r a i s e an ingenious

but unmeritorious argument. They a l l e g e McDonald & Co. breached

i t s employer-employee r e l a t i o n s h i p with James Reger and t h i s

breach a l s o breached t h e exclusive l i s t i n g agreement between
McDonald & Co, and F i s h t a i l on the premise t h a t the general

partner signing t h a t agreement f o r F i s h t a i l was a l s o James Reger.

Defendants c i t e s e c t i o n 13-708, R.C.M. 1947, a s a u t h o r i t y . That

s t a t u t e requires t h a t c o n t r a c t s t o be considered a s one trans-

a c t i o n must (1) r e l a t e t o the same matter; (2) be between the

same p a r t i e s , It i s obvious t h a t any employer-employee agreement

between McDonald & Co. and Reger personally, has no connection

with the exclusive l i s t i n g agreement f o r the s a l e of the F i s h t a i l

properties. The two agreements were between d i f f e r e n t p a r t i e s .

The employer-employee agreement was between McDonald & Co. and

Reger personally. The exclusive l i s t i n g agreement i s between

McDonald & Co. and F i s h t a i l .

Again, i n Cloe v. Rogers, supra, i t i s s t a t e d :

'"Where an agent has an agreement with h i s p r i n c i p a l
t o s e l l c e r t a i n lands, which have been placed i n h i s
hands t o be disposed of within a time l i m i t e d , and t h e
agent i s t o receive no pay o r compensation f o r adver-
t i s i n g , putting t h e same upon the market, o r f o r h i s
s e r v i c e s , excepting a share of the p r o f i t s a r i s i n g from
the s a l e s of the lands, and i n the performance of such
agreement he renders services f o r several months, and
expends time and money, and then, without any reason o r
excuse, the p r i n c i p a l revokes the c o n t r a c t , the agent
i s e n t i t l e d t o recover from t h e p r i n c i p a l such compensa-
t i o n i n damages a s w i l l be equal i n amount t o h i s share
of the p r o f i t s which would have r e s u l t e d had t h e lands
been sold by him." 121 P. 207.

I n the i n s t a n t case, McDonald & Co. not only advertised

t h i s land i n major newspapers throughout t h e country, i t a l s o

arranged f o r p a r t of these lands t o be surveyed and p l a t t e d

so i t could be subdivided. Robert Sanderson, president of

Mueller Engineering, t e s t i f i e d :

"Q. W o f i r s t contacted you concerning t h i s work? A.
h
Our records i n d i c a t e t h a t Randy Reger was our f i r s t
contact on the p r o j e c t .

Q One of the defendants i n t h i s case i s James R.
Reger. I s t h a t t h e person you r e f e r t o a s Randy Reger?
A. That's c o r r e c t .
 "Q. Did you understand t h a t he represented another
firm a t t h a t time? A. Yes. Again, our f i l e i n d i c a t e s
t h a t Randy Reger was t h e contact on the p r o j e c t and our
c l i e n t was a c t u a l l y McDonald & Company, of which we
understood t h a t he was an employee.

"Q. You mention your l a s t b i l l of January 28, 1974.
To whom was t h a t d i r e c t e d , t h e b i l l ? A. The statement
was directed t o the c l i e n t , McDonald & Company."

A s a r e s u l t of contact with Mueller Engineering which was

i n i t i a t e d by McDonald & Co., s i x of the subdivision t r a c t s were

sold t o people associated with Mueller Engineering.

"It i s a generally accepted law t h a t a r e a l e s t a t e
broker i s e n t i t l e d t o commissions when he has, i n
pursuance of h i s employment and within t h e time
s p e c i f i e d i n the contract of employment, procured a
purchaser a b l e , ready and w i l l i n g t o purchase the
s e l l e r ' s property on the terms and conditions s p e c i f i e d
i n t h e contract of employment. Roscow v. Baia, 114
Mont. 246. 135 P.2d 364. ** Diehl and Associates, Inc.
.
*I1

v. Houtchens, Mont , 567 P.2d 930, 34 ~ t . ~ e p .
814, 817 (1977).

When, a s i n the instane case, t h e r e i s a revocation and

a subsequent s a l e within the period of the exclusive l i s t i n g

agreement, i t w i l l be presumed t h a t the broker with the exclusive

l i s t i n g would have made t h e s a l e .

"'Where *** a r e a l e s t a t e broker has an exclusive
l i s t i n g and has established t h a t t h e property described
i n t h e l i s t i n g agreement has been s o l d , a prima f a c i e
case i s established f o r a c o d s s i o n upon the e n t i r e
sales p r i c e . ' ' I S e a t t l e Investment Company v, Kilburn,
5 Wash,App. 137, 485 P.2d 1005, 1007 (1971), quoting
from Fleetham v. Schneekloth, 52 Wash.2d 176, 179, 324
P. 2d 429, 431 (1958).

I n the i n s t a n t case the e n t i r e Partington ranch was sold within

t h e time t h e exclusive l i s t i n g agreement was i n e f f e c t . Therefore,

the D i s t r i c t Court was c o r r e c t i n i t s award of commissions

t o t a l i n g $11,830 t o McDonald & Co.

Issue 3. The f i n a l consideration on appeal i s whether

t h e D i s t r i c t Court erred i n reducing the j u r y ' s v e r d i c t t o t h e

defendants' counterclaim? Reger and F i s h t a i l claim t h a t McDonald
& Co. failed to collect an additional $10,000 earnest money
in connection with the proposed Shanstrom, Blakely and Huppert

sale. The agreement on this sale called for $15,000 earnest

money. Of this $15,000 only $5,000 was ever received. The

reason why the other $10,000 was not received is not clear from
the record, however, James Murphy, attorney for the three buyers,

testified:

"Q. Did you ever get authority from your clients
to release those checks, totaling $10,000.00 to the
seller of the property or the broker? A. NO."

Whatever the reason for withholding the authority to
deliver those checks, nowhere in the record does it disclose
that McDonald & Co. was negligent in not collecting this
$10,000. The Shanstrom, Blakely and Huppert agreement was

terminated by all parties including Reger and Fishtail. A mutual

release agreement was signed and dated January 11, 1974. This
agreement was signed by Reger as general partner of Fishtail.

It was also signed by the three buyers. All parties agreed that

any contracts to purchase and sell the property were terminated.

The buyers agreed that $5,000 earnest money could be forfeited to

Fishtail and matters were in fact terminated. There is no

question that there was a recognition in the execution of this

agreement that $5,000 was the total amount of earnest money to

be forfeited on behalf of the buyers.
Here, the record not only fails to substantiate damages but
it is devoid of any wrongdoing by McDonald in collecting the
earnest money. Therefore, Fishtail on its counterclaim is entitled
to nothing and the District Court is affirmed with respect to the
judgment of $11,830 awarded to plaintiff-respondent. The

judgment awarding the sum of $2,500 to defendants-appellants

is vacated.

Austice