No. 13586
IN THE SUPREME COURT OF THE STATE OF MONTANA
1977
DIEHL AND ASSOCIATES, INC.,
A Montana Corporation,
Plaintiff and Respondent,
-vs-
L. R. HOUTCHENS,
Defendant and Appellant.
Appeal from: District Court of the First Judicial District,
Honorable Gordon R. Bennett, Judge presiding.
Counsel of Record:
For Appellant:
Smith and Harper, Helena, Montana
Charles A. Smith argued, Helena, Montana
For Respondent :
Kline and Niklas, Helena, Montana
John R. Kline argued, Helena, Montana
Submitted: April 27, 1977
Decided: RlfG
- - $ 5977
Filed:
Mr. Justice Gene B. Daly delivered the Opinion of the Court.
Defendant appeals from the judgment of the district
court, Lewis and Clark County, sitting without a jury. The
district court entered judgment for plaintiff and decreed
that plaintiff recover from defendant the sum of $5,450 in
real estate broker's commissions plus reasonable attorney fees
in the amount of $400.
Plaintiff initiated this action to recover real estate
broker's commissions purportedly due and owing from the sale
of two parcels of real property owned by defendant. On March
19, 1975, plaintiff and defendant entered into two listing
agreements entitled REAL ESTATE BROKER'S EMPLOYMENT CONTRACT.
One of the contracts was for the sale of 80 acres of agricultural
land in the vicinity of Applegate Road (the Applegate property).
The employment contract specified a purchase price of $50,000
cash or possible contract for deed with a sizeable down payment.
The rate of brokerage commission was to be 10% of the stated
selling price and the agreement was to expire on June 1, 1975.
The second listing agreement was for the sale of a trailer
park referred to as the Broadwater Trailer Court. This employ-
ment contract specified a purchase price of $55,000 cash or terms
of $15,000 down payment with the buyer assuming defendant's
outstanding contract for deed, the balance to be financed by
defendant on a contract for deed at 8% interest. The rate of
brokerage commission was to be 6% of the stated selling price
and the agreement was to expire on June 1, 1975.
On April 18, 1975, plaintiff obtained the signatures of
Courtney B. Atlas and defendant on a buy/sell agreement entitled
EARNESTMONEY RECEIPT AND AGREEMENT TO SELL AND PURCHASE. Atlas
deposited $500 as earnest money toward the purchase of the
Applegate property. The buy/sell agreement provided for a purchase
price of $35,000 with Atlas to pay $5,000 to defendant, assume
defendant's existing contract for deed at existing terms, the
balance of the purchase price to be financed by defendant on a
contract for deed at 7-1/2% interest for 15 years. The buy/sell
agreement specified the sale was to be closed on or before May
30, 1975, with a 30 day grace period allowed for the completion
of financing, if necessary. The buy/sell agreement further pro-
vided that the earnest money was to be returned if the purchaser
was unable to assume defendant's existing contract for deed at
the existing terms; plaintiff was to receive a brokerage conmis-
sion in the amount of 7% of the stated selling price; in the event
of a forfeiture of the deposit, the deposit was to be used to
pay the agent's incurred expenses related to the sale and the
balance was to be apportioned to the seller and agent equally,
provided the amount to the agent would not exceed the agreed
commission.
Courtney B. Atlas failed to complete the purchase o f the
Applegate property by May 30, 1975. Atlas attempted to substitute
his wife, Donna Jean Atlas, as the purchaser and upon defendant's
refusal to accept Ms. Atlas as a purchaser the negotiations
terminated.
On April 25, 1975, plaintiff obtained the signatures of
Ray R. Buck and defendant on a similar buy/sell agreement en-
titled EAIFJESTMONEY RECEIPT AND AGREEMENT TO SELL AND PURCHASE.
Buck deposited $200 as earnest money toward the purchase of the
Broadwater Trailer Court. The buy/sell agreement provided for
a purchase price of $50,000 with Buck to pay $10,000 as down
payment, assume defendant's existing contract for deed, the bal-
ance of the purchase price to be financed by defendant on a con-
tract for deed at 8% interest for 10 years. The buy/sell agree-
ment further provided for the return of any earnest money in the
same manner as in the previous buy/sell agreement; plaintiff
was to receive a brokerage commission in the amount of 6% of
the stated selling price; and the earnest money was accepted
''subject to the easement being granted and recorded for the
disputed western boundary line of the above property".
The sale of the Broadwater Trailer Court was not con-
pleted by June 1, 1975. Defendant's reason for failing to
consumate the sale to Buck was the failure to reconcile the
boundary dispute, the condition precedent contained in the buy/
sell agreement. No easement was granted or recorded, nor was
the lawsuit settled prior to the June 1, 1975, termination date
of the buy/sell agreement.
On July 3, 1975, plaintiff filed his original complaint
which was subsequently amended on September 12, 1975. In the
amended complaint plaintiff sought to recover $3,000 as the
brokerage commission for procuring a purchaser for defendant's
Broadwater Trailer Court, $2,450 as the brokerage commission
for procuring a purchaser for defendant's Applegate property,
plus reasonable attorney fees and costs. Defendant filed an
answer and counterc~aim seeking the $500 earnest money deposit
made by Courtney B. Atlas and held by plaintiff, plus attorney
fees and costs. Plaintiff and defendant instituted discovery
and both parties filed motions for summary judgment. On May 20,
1976, the district court issued its order vacating the June 1,
1976, date for trial and ordered:
"The matter will be submitted to the Court
for decision on the basis of the record, in-
cluding all written discovery, as of June 1,
1976, by stipulation of counsel, the Court
reserving the right to hold a hearing on
factual issues, if necessary."
On August 13, 1976, the district court issued its find-
ings of fact and conclusions of law holding the defendant, by
virtue of his acceptance and execution of the contracts entitled
EARNEST MONEY RECEIPT AND AGREEMENT TO SELL AND PURCHASE
" * * * is thereupon obligated to pay the plaintiff broker
its commissions, as beyond doubt the plaintiff broker had
complied with the terms of its listing agreement and has done
all that could be done by it." Judgment was accordingly entered
in plaintiff's favor on August 19, 1976, and defendant appealed
to this Court.
In defendant's brief on appeal and on oral argument
before this Court defendant's counsel contends the sole issue
for review is whether the district court erred "in granting
Plaintiff's motion for summary judgment and not Defendant's."
Apparently defendant's counsel overlooked the effect of the
pretrial conference held with the district court on May 20, 1976,
and the district court order which provided the matter to be
submitted to the district court for decision on the basis of
the record, pursuant to the oral stipulations of both parties.
For purposes of our discussion, we characterize the district
court's judgment as a final judgment on the merits and view
defendant's arguments as challenging the sufficiency of the
evidence relied on by the district court in its findings of
fact, conclusions of law and judgment.
Our resolution of this matter is simplified by a brief
summation of the law in the area of a real estate broker's right
to compensation for commissions.
It is a generally accepted law that a real estate
broker is entitled to commissions when he has, in pursuance
of his employment and within the time specified in the contract
of employment, procured a purchaser able, ready and willing to
purchase the seller's property on the terms and conditions
specified in the contract of employment. Roscow V. Bara, 114
Mont. 246, 135 P.2d 364; 12 Am Jur 2d 921, Brokers S182. When
the broker procures a buyer who makes a counteroffer or agrees
to terms at variance to the terms specified in the employment
contract, the seller has the option of accepting or rejecting
the counteroffer. If the seller accepts the counteroffer of
the procured buyer, the seller is legally obligated to pay com-
missions to the broker, either under the terms of the contract
of employment or the mutually agreed terms of a contract for
sale.
The broker's ability to recover commissions is premised
on the broker's ability to accomplish what he undertook to do
in his contract of employment. 32 ALR3d 321, section 2. The
broker is not entitled to compensation for unsuccessful efforts
under his contract of employment, irrespective of how great his
efforts were or how meritorious his services. Roscow v. Bara,
supra. It is generally necessary to refer to the specific terms
of the particular employment contract in order to determine
whether or not the broker's duties have been performed.
Plaintiff contends it completed performance under the
employment contract when it obtained the signatures of Courtney
B. Atlas and Ray R. Buck on the buy/sell agreements, the terms
of which were agreed to by defendant. Plaintiff insists that
any failure to complete the sale transaction is due to the de-
fault or refusal of defendant and is not attributable to the
actions of the buyers. In order to resolve what the broker's
duties were under the enployment contract, we look to the list-
ing agreements which provide:
"FOR VALUE RECEIVED, you hereby are employed to
sell or exchange the property described hereon
at the selling price and on the terms noted.
You hereby are authorized to accept a deposit on
the purchase price. You may, if desired, secure
the cooperation of any other broker, or group of
brokers, in procuring a sale of said property.
In the event-that you, or any other brokers
cooperating with you, shall find a buyer ready
and willing to enter into a deal for said price
and terms, or such other terms and price as I
may accept, or that durinq your employment you
place me in contact with a buyer to or throuqh
whom at any time within 90 days after the
termination of said employment I may sell or
convey said property, I hereby aqree to pay
you in cash for your services a commission equal
in amount to % of the above stated selling
price. I agree to convey said real estate to
the purchaser by a good and sufficient deed, to
transfer and deliver said personal property, if
any, by good and sufficient bill of sale and to
furnish title insurance insuring marketable
title to said real estate and good right to con-
vey. I hereby warrant that the information shown
hereon below is true, that I am the owner of said
property, that my title thereto is a good and
marketable title, that the same is free of en-
cumbrances except as shown hereafter under "Finan-
cial Details" and except taxes levied on said
property for the current tax year which are to be
pro rated between the seller and buyer. In case
of an exchange, I have no objection to your rep-
resenting and accepting compensation from the other
party to the exchange as well as myself. I hereby
authorize you and your customers to enter any part
of said property at any reasonable time to show
same. Also, I authorize you, at any time, to fill
in and complete all or any part of the "Informative
Data" below, except financial details. This agree-
ment expires at midnight on , 19 I
but I further allow you a reasonable time there-
after to close any deal on which earnest money is
then deposited. In case of suit or action on this
contract, I agree to pay such additional sum as
the court, both trial and appellate, may adjudge
reasonable as plaintiff's attorneys fees. It is
further agreed that my signature affixed to the
renewal clause below shall have the effect of re-
newing and extending your employment to a new date
to be fixed by me on the same terms and all with
the same effect as if the said new date had been
fixed above as the expiration date of your employ-
ment.
"THIS LISTING IS AN EXCLUSIVE LISTING and you hereby
are granted the absolute, sole and exclusive right
to sell or exchanqe the said described property. In
the event of any sale, by me or any other person, or
of exchanqe or conveyance of said property, or any
part thereof, durinq the term of your exclusive employ-
ment, or in case I withdraw the authority hereby
given prior to said expiration date, I agree to pay
you the said commission just the same as if a sale
had actually been consummated by you." (Emphasis
added. )
We note the distinction between a brokerage contract which
requires a broker to merely find a purchaser and a brokerage
contract which requires a broker to sell, make or effect a sale.
In the first case the broker earns his commission when he
procures a buyer able, ready and willing to purchase on the
seller's terms. A broker employed to sell or effect a sale
does not earn his commission until he completes the sale.
Completion of the sale, where real property is involved,
amounts to payment of the purchase price and conveyance of title.
OtNeill v. Wall, 103 Mont. 388, 62 P.2d 672.
The employment contract or listing agreement in the
present case provides for the broker's employment to "sell or
exchange the property described hereon * * * THIS LISTING IS AN
EXCLUSIVE LISTING and you hereby are granted the absolute, sole
and exclusive right to sell or exchange the property." The
plain and clear meaning of the language in the listing agree-
ment specifies a contract to sell or effect a sale, not a con-
tract merely requiring the broker to find a purchaser. In order
for plaintiff to recover commissions in the present case it must
have completed the sale of the properties owned by defendant.
In determining whether the sales were completed we must
look to the provisions of the buy/sell agreements and the actions
of the parties. The buy/sell agreement for the Applegate prop-
erty specified Courtney B. Atlas as the purchaser and depositer
of $500 earnest money. On May 30, 1975, Atlas refused to sign
a sale contract or otherwise complete the sale in accordance
with the buy/sell agreement. In lieu of Courtney B. ~ t l a s '
performance under the buy/sell agreement, Ms. Atlas was offered
as a signatory to all closing papers and the contract for deed.
We fail to find merit in plaintiff's argument that the sub-
stitution of Ms. Atlas benefited defendant in that defendant
gained "an additional signatory to the obligation". Courtney
B. Atlas was the contracted purchaser and no party except
Courtney B. Atlas was entitled to perform under the buy/sell
agreement, absent the assignment of Courtney B. Atlas' rights
under the contract with the written permission of defendant.
We fail to find any legal compulsion which would compel de-
fendant to accept a substituted purchaser. The failure of
Courtney B. Atlas to perform under the buy/sell agreement
amounted to a material breach of contract and plaintiff's
attempt to perform under the listing agreement was defeated.
The buy/sell agreement for the Broadwater Trailer Court
was a conditional contract, i.e., the buy/sell agreement con-
tained the condition precedent of "the easement being granted
and recorded for the disputed western boundary line". The
conditional contract became binding only in the event the ease-
ment was granted and recorded. Cochran v. Ellsworth, 272 P.2d
904, 126 C.A.2d 429; Blaine v. Stinger, 290 P.2d 732, 79 Ariz.
376; Diamond v. Haydis, 356 P.2d 643, 88 Ariz. 326. Since
no evidence was ever presented that the easement was granted
and recorded, the legal effect is that no binding contract was
ever consummated between defendant and Ray R. Buck. Plaintiff's
attempt to perform under the listing agreement failed.
The plaintiff failed to accomplish what he undertook
to do as set forth in his contracts of employment with defendant
and plaintiff is neither entitled to brokerage commissions for
his unsuccessful efforts nor reasonable attorney fees for
plaintiff's prosecution of the two actions.
Lastly, we consider the subject of the $500 earnest money
deposit made by Courtney B. Atlas. Atlas' failure to perform
under the terms of the buy/sell agreement amounted to a material
breach of contract and pursuant to the terms of the buy/sell
agreement "said earnest money shall be forfeited to the seller
as liquidated damages * * *". The buy/sell agreement further
provides :
"In the event of a forfeiture of the deposit
as above provided, the said deposit shall be
used to pay the agents incurred expenses
related to this sale and the balance shall be
apportioned to the seller and agent equally,
provided the amount to the agent shall not
exceed the agreed commission."
Therefore, we remand this matter to the district court
for determination of any "agents incurred expense related to
this sale", the balance of the deposit to be equally apportioned
between plaintiff and defendant.
The judgment of the district court is reversed and the
cause is remanded to the district court for further consideration
consistent with this opinion.
Justice
We concur,: P
Chief Justice
(1
Justices
6
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