Nardi v. Smalley

No. 81-176

IN THE SUPREME COURT OF THE STATE OF MONTANA

MIKE NARDI, d/b/a MIKE NARDI REALTY,
Plaintiff and Respondent,

LAWRENCE H. SMALLEY AND CAROL C. SMALLEY,
husband and wife,
Defendants and Appellants,

and

LAWRENCE H. SMALLEY and CAROL C. SMALLEY,
husband and wife,
Defendants and Cross-Plaintiffs and
Appellants,

JOSEPH ALTMAYER and VICTORIA ALTMAYER,
husband and wife,
Third Party Defendants and Appellants.

Appeal from: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone, The Honorable
William J. Speare, Judge presiding.
Counsel of Record:
For Appellant:
Gary E. Wilcox, Billings, Montana
Paul G. Olsen, Billings, llontana
For Respondent:
Donald ern don; Herndon, Harper & Munro,
Billings, Montana

- - -

Submitted on Briefs: December 30, 1981

Decided: April 1, 1982

Filed: -
APR 11982
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion
of the Court.

Plaintiff brought this action to collect a real estate
commission against defendants, Smalleys. Smalleys, the sellers,
impleaded third party defendants Altmayers, the buyers.
Judgment was entered in favor of plaintiff against Smalleys
and judgment was entered for Smalleys on their cross claim
against Altmayers. Both Smalleys and Altmayers appeal.
On May 20, 1977, appellants, Sma1l.eys and respondent,
Nardi entered into a real estate broker's employment contract
whereby Nardi agreed to attempt to sell "Smalley's Garden
and Floral Center." The extent of the discussion and negotia-
tions prior to the signing of the contract are disputed.
Nardi claims that at least three hours were spent discussing
the contract while Smalleys assert that only one-half hour
was devoted to those conversations. No specific finding of
fact regarding this issue was made by the District Court;
however, the court did conclude that no act or omission by Nardi
constituted any valid defense to his claim for the commission
and that the contract was valid and enforceable.
The contract provided that the selling price would be
"$220,000 + inventory" and that the broker was to receive
10 percent of the selling price as a commission. Other
relevant sections of the contract state:
"FOR VALUE RECEIVED, you hereby are employed
to sell or exchange the property described
hereon at the selling price and on the terms
noted. 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 during your
employment you place me in contact with a buyer
to or through whom at any time within 90 days
after the termination of said employment I may
sell or convey said property, I hereby agree to
 pay you in cash for your services a commission
equal in amount to 10% of the above stated
selling price. ($220,000 + inventory.)

"This agreement expires at midnight on November
20, 1977 but I further allow you a reasonable
time thereafter 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.

"THIS LISTING IS AN EXCLUSIVE LISTING and you
hereby are granted the absolute, sole and
exclusive right to sell or exchange the said
described property. In the event of any sale,
by me or any other person, or of exchange or
conveyance of said property, or any part
thereof, during the term of your exclusive
employment, or in case I withdraw the author-
ity 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 con-
summated by you."
Pursuant to this agreement, Nardi advertised the property
in the Billings Gazette as well as in the Minot and Fargo,
North Dakota newspapers and PreVue Magazine. In addition,
Nardi showed the property to approximately ten prospective
buyers and talked to several others on the telephone.
The Altmayers contacted Nardi in mid-September 1977,
and expressed an interest in purchasing the floral shop.
After several meetings between Nardi, Smalleys and Altmayers,
a final buy/sell agreement was accepted on October 8, 1977.
At that point, Nardi ceased advertising the property.
The buy/sell agreement quoted the total purchase price
as $220,000 and also provided for an earnest money payment
of $1,000, which was paid. The agreement stated that the
offer to purchase was contingent upon Altmayers selling
their property in Ohio prior to January 5, 197%. Another
special provision stated that the sale was to include
inventory of merchandise in the amount of $20,000 and that
the selling price would be adjusted to reflect any dis-
crepancy in the estimated value of the inventory. Finally,
the agreement had a closing date of January 5, 1978, or
thirty days thereafter, February 4, 1978, for completion of
financing arrangements.
In mid-November, it became apparent that the Ohio
property was not going to be sold prior to January 5, 1978.
Therefore, Smalleys requested Nardi to once again advertise
their property, but denied Nardi's request for an extension
of the employment contract. Nardi kept in contact with both
parties to the agreement and frequently contacted an Ohio
broker regarding the progress of the sale of the Ohio property.
Altmayers did not sell their Ohio property prior to
January 5, 1978. In mid-January, Smalleys and Altmayers
reentered negotiations between themselves. They did not
request assistance from Nardi, who claims to have made his
assistance available to them. The District Court found that
"[alfter the contingency in the original ~uy/Sell failed,
the parties entered into direct negotiations to the exclusion of
the broker, Mike Nardi, who was not notified or asked for
assistance."
As a result of these negotiations, Smalleys and Altmayers
executed, on January 31, 1978, the following documents for
sale of Smalleys' shop: (1) a contract for deed; (2) a
modification of the contract for deed; (3) an abstract of
the agreement between the parties; and (4) a warranty deed
for the property.
The contract for deed contained several pertinent
clauses :
 "(1) The purchase price of all the real and
personal property was $200,000.
"(2) Part of the purchase price was to be paid
by Altmayers' assumption of Mike Nardi's real
estate fees incurred by Smalleys as a result
of the sale of the property.
"(3) Once the State of Montana's condemnation
proceedings regarding the highway in front of the
store were final, the proceeds were to be used
to pay $20,000 of the purchase price. If no
proceeds were paid, $20,000 was to be added to
the end of the contract.
" (4) On February 1, 1978, Altmayers were to:
"(a) determine the value of the store's inven-
tory;
"(b) commence paying interest to Smalleys;
and
"(c) be given possession of the store.
"(5) The Warranty Deed, Bill of Sale and other
necessary documents were placed in escrow to be
delivered to Altmayers upon full performance
of the agreement."
The only terms missing from this contract were the
value of the merchandise within the store and the value of
the proceeds to be received as a result of the highway
condemnation proceedings. Nevertheless, Smalleys and Altmayers
claim that their contract for deed was unenforceable until
the condemnation proceedings were final, August 17, 1978.
Smalleys claim to have turned possession of the store over to
Altmayers solely for convenience as Mrs. Smalley was ill and
Mr. Smalley frequently was out-of-town.
If the contract was enforceable on January 31, 1978,
neither the 90 day extension period of the real estate
broker's employment contract, nor the 30 day extension for
financing of the original buy/sell agreement had expired.
Therefore, Nardi would arguably be entitled to his commission.
If the contract was not enforceable until August 17, 1978,
Nardi arguably would not be entitled to a commission.
 The issues presented to this Court for review are
numerous.
(1) Whether Altmayers have standing to proceed as
appellants?
(2) Whether the District Court had jurisdiction over
this case since plaintiff Nardi did not "first allege" that
he was a duly licensed real estate broker in the State of
Montana pursuant to section 37-51-401, MCA?
(3) Whether Nardi, in his capacity as a real estate
broker, breached his fiduciary duty to Smalleys, the listing
owners, by failing to completely disclose the terms and
conditions of the real estate broker's employment contract?
(4) Whether Nardi, in his capacity as a real estate
broker, abandoned his employment under the real estate
broker's employment contract with Smalleys, thereby freeing
Smalleys to sell the property free from commission liability
to Nardi?
(5) Whether the buyers and sellers entered into an

enforceable contract within 90 days after the expiration of
the real estate broker's employment contract, thus entitling
Nardi to his commission?
(6) If Nardi is entitled to a commission, should the
commission be on the sale of the inventory also?
(7) Is Nardi entitled to attorney fees?
The first two issues presented to this Court are without
merit. Joseph and Victoria Altmayer were properly joined as
parties to the District Court proceedings as they signed a
contract to pay all real estate fees owed Nardi by Smalleys.
The judgment of the District Court included an order directing
Altmayers to pay Smalleys $21,520. The Altmayers are entitled

to appeal that judgment pursuant to Rule 1, M.~.~pp.civ.P.
 Section 37-51-401, MCA, requires a real estate broker
who brings an action in a court for collection of compensation
to first allege and prove himself to be a licensed real
estate broker in the State of Montana. Although Nardi did
not allege himself to be a licensed broker in his initial
complaint, the court's pretrial order contained an amendment
to the complaint stating that Nardi was at all material
times a licensed real estate broker in Montana. In addition,
at the start of the trial, Nardi introduced his broker's
license as plaintiff's exhibit number one. None of the appellants
objected to the pretrial order or plaintiff's exhibit number
one. The order and the exhibit adequately prove Nardi to be
licensed pursuant to the statute. Therefore, Nardi had standing.
Issues three and four relate to the duties owed by a
real estate broker to his employer, the potential seller.
In Carnell v. Watson (1978), 176 Mont. 344, 578 P.2d 308,
312, this Court recognized a fiduciary relationship between
a real estate broker and the seller. Appellants claim that
Nardi breached that fiduciary duty by failing to fully
disclose the terms of the real estate broker's employment con-
tract. The District Court held:
"No act or omission by the plaintiff, Mike
Nardi d/b/a Mike Nardi Realty, shown by the
evidence constituted any valid defense, either
in whole or in part, to the claim for a real
estate brokerage commission on the sale of
Smalley's Floral and Garden Center."
We uphold the District Court's determination. Although
neither the exact length nor the exact content of the initial
meeting were ever completely established, both parties did
agree that they met for at least one-half hour to discuss
the employment contract.
Montana case law indicates that the fiduciary duty
between a broker and a seller is breached when the seller is
fooled or deceived by the contract or does not understand
the contract. Flernmer v. Ming (1980), Mont . -, 621
P.2d 1038, 37 St.Rep. 1916; First Trust Company of Montana

v. McKenna (1980), - Mont . -, 614 P.2d 1027, 37 St.Rep.
1026. Mr. Smalley testified on cross-examination that he
was familiar with standard broker employment contracts such
as the one used by Nardi, that he was not fooled or deceived
by the contract and that he understood the contract and knew
what he was signing. Furthermore, there is no evidence that
Nardi, in breach of the fiduciary relationship, gained an
advantage which could result in constructive fraud under section
28-2-406, I C A .
The instant case is distinguishable from Lyle v. Moore

(1979), Mont . -, 599 P.2d 336, 36 St.Rep. 1307. In
Lyle, this Court found a breach of the fiduciary duty when
the broker failed to disclose to the seller that should the
seller withdraw the broker's authority to sell the property
or sell the property himself, the seller would be liable to
the brcker for his coritmission. In the instant case, the
breach of the fiduciary duty is based on the broker's failure
to disclose whether or not his 10 percent commission included
10 percent of the inventory price. The contract called for

a commission to be paid equal to 10 percent of the "selling
price." The selling price here was $200,000. The trial
court applied the clear terms of the contract.
Appellants contend Nardi abandoned his listing. Abandon-
ment is a question of fact. In its findings of fact, the
District Court stated: "After the contingency in the original
Buy/Sell failed, the parties entered into direct negotiations

to the exclusion of the broker, Mike Nardi." The court went
on to conclude, "[tlhe plaintiff, Mike ~ a r d i ,did not abandon
his agency agreement." There is substantial credible
evidence to support this conclusion of the District Court.
Mr. Nardi testified that he remained in contact with the
parties both prior and subsequent to January 5, 1981, the
date established for fulfillment of the contingency. After
January 5, 1981, Nardi was told by all appellants that there
was nothing he could do as they were awaiting finalization
of the highway condemnation proceedings and/or valuation of
the inventory. We uphold the District Court's conclusion
that no abandonment occurred.
Since Nardi did not abandon his duties under the employ-
ment contract or breach any fiduciary duty owed by him to
the seller, he is entitled to receive his commission if the
contract by which Altmayers purchased the floral shop was
final within the time stipulated in Nardi's employment
contract. The employment contract provided for payment of
the commission should Nardi, during his employment, place
Smalleys "in contact with a buyer to or through whom at
anytime within 90 days after the termination of said employment
I (Smalleys) may sell or convey such property." The contract
terminated on November 20, 1977. Ninety days thereafter was
February 18, 1978.
A contract for deed was executed by Smalleys and Altmayers
on January 31, 1978. Two financial terms within the contract
were left blank. The District Court found that they "were
left blank to be determined after the inventory value had
been determined and the condemnation payment from the State
of Montana had been received and credited as agreed." heref fore,
the only missing terms involved the method of payment, a
collateral issue to this contract. The amount of payment
was set, $200,000. "Matters which are subsidiary, collateral,
or which do not go to the performance of the contract, are
not essential and do not have to be expressed in the contract."
Van Atta v. Schillinger (1981), - Mont . -, 625 P.2d 73,

38 St-Rep. 426. Even without the missing "method of payment"
terms, the contract for deed was valid and enforceable as of
January 31, 1978.
The employment contract between Nardi and Smalleys
stated that Nardi would be paid a commission upon completion
of a sale of Smalleys' shop to an individual with whom Nardi
had established contact, if the sale occurred within 90 days
of November 20, 1977. A sale is defined in section 30-11-
101, MCA, as:
"Sale defined. Sale is a contract by which,
for a pecuniary consideration called a price,
one transfers to another an interest in
property."
The contract for deed is a sale as the buyer receives an
equitable interest in the shop in return for an obligation
to pay seller $200,000. The contract for deed was valid
and enforceable well within the 90 day period. The broker,
Nardi, is entitled to his commission.
The original employment contract stated that the broker
would be entitled to a commission of 10 percent of the
selling price. The selling price was stated to be "$220,000
+ inventory." The final contract for deed had a selling
price of "$200,000 including inventory." In both instances,
the inventory was included under the term "selling price."
In the first contract, the value of the inventory was unknown
so no figure was attached to it. However, since "inventory"
was initially included under the selling price, it was
reasonable for the trial court to determine the broker's com-
mission on the basis of the final selling price of $200,000,
which included the purchase price of both the real property
and inventory involved.
Finally, the employment contract states that the seller

will be liable for reasonable plaintiff's attorney's fees
should an action be brought on the contract. An action was

brought, the District Court properly determined plaintiff's

attorney's fees and we uphold its determination.
Judgment of the District Court is affirmed.

We Concur:

,$hief Justice