NO. 95-481
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
E. T. AASHEIM and ETTABEL AASHEIM,
d/b/a MONTANA REAL ESTATE EXCHANGE,
Plaintiffs and Appellants,
LeROY REUM and CLIFF REUM, d/b/a ROY'S
READY MIX and LAKE COUNTY ABSTRACT CO.,
Defendants and Respondents.
APPEAL FROM: District Court of the Twentieth Judicial District,
In and for the County of Lake,
The Honorable C. B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Bryan Charles Tipp and Raymond P. Tipp;
Tipp and Buley, Missoula, Montana
For Respondent:
James A. Manley; Manley, O'Rourke-Mullins,
Polson, Montana
Submitted on Briefs: June 27, 1996
Decided: August 20, 1996
Filed:
Justice Charles E. Erdmann delivered the opinion of the Court.
This is an appeal from the Findings of Fact and Conclusions of
Law and Judgment by the Twentieth Judicial District Court, Lake
County, holding that the plaintiffs/real estate brokers were not
entitled to a commission for an aborted sale as a ready and willing
buyer was not procured. We affirm.
The issue on appeal is as follows:
Did the District Court err when it concluded that Aasheim was
not entitled to recover his commission for the aborted sale?
FACTS
LeRoy Reum operated a concrete business and owned the real
property upon which the business was located. Reum entered into a
listing agreement with real estate brokers E. T. Aasheim and
Ettabel Aasheim for the purpose of completing a sale to Larry L.
Smith. In October 1988, Reum and Smith entered into a buy/sell
agreement for Reum's business and property for $200,000. This
agreement required Reum to carry fire insurance on the real
property, fixtures, and equipment. Smith paid $2,000 earnest money
upon signing the agreement and the closing date was set for
December 15, 1988.
On November 28, 1988, a fire destroyed the main building on
the property, a vehicle, and some miscellaneous tools. Reum did
not have fire insurance on the real property, although he did have
insurance for the personal property. Reum offered to rebuild the
main structure, replace the personal property, and go through with
the deal. Smith declined this offer and negotiations continued
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between the parties' attorneys over the next two months. Smith and
Reum agreed to new terms and a reduction of the purchase price to
$140,000 in early February 1989. A modified agreement was drafted
but was never executed by the parties.
During the next three months there was continued
correspondence between the parties; however, a closing date was
never set. By late April 1989, Reum was informed by his bank that
he was at risk of losing his property unless he concluded the sale
and paid his debt. Reum wrote Smith on April 21 that the sale must
close no later than April 25, 1989. In May, Reum notified Smith
that the sale was terminated because of Smith's financial inability
to close. Reum entered into another buy/sell agreement at this
time.
The attorney for the new buyer contacted Aasheim and Smith
seeking liability releases. Smith provided the new buyer with a
release but Aasheim refused to release Reum from his alleged
obligation to pay a brokerage fee. Aasheim faxed a letter to the
closing agent claiming a $10,000 commission on the closing
proceeds. The new buyer insisted that $10,365 out of the total
sale amount to be disbursed to Reum be withheld due to Aasheim's
claim. This money was placed in an interest bearing trust account
which was subsequently paid over to the Clerk of District Court,
Lake County. Smith's $2,000 earnest money was returned by the
title company to Aasheim who placed it in his own noninterest
bearing account.
The District Court determined that a modified agreement was
reached between Reum and Smith and that Smith was not a financially
able buyer in the spring of 1989. The District Court therefore
held that Aasheim was not entitled to the commission. Aasheim
appeals.
ISSUE
Did the District Court err when it concluded that Aasheim was
not entitled to recover his commission for the aborted sale?
We review a district court's findings of fact to determine
whether they are clearly erroneous. Daines v. Knight (1995), 269
Mont. 320, 324, 888 P.2d 904, 906. This Court has adopted a
three-part test to determine whether the findings are clearly
erroneous. Interstate Prod. Credit Ass'n v. DeSaye (1991), 250
Mont. 320, 323, 820 P.2d 1285, 1287. The test provides that:
(1) the Court will determine whether the findings are supported by
substantial evidence; (2) if the findings are supported by
substantial evidence the Court will determine if the trial court
has misapprehended the evidence; and (3) if the findings are
supported by substantial evidence and that evidence has not been
misapprehended, this Court may still find that a finding is clearly
erroneous when, although there is evidence to support it, a review
of the record leaves the Court with the definite and firm
conviction that a mistake has been committed. DeSave, 820 P.2d at
1287.
The standard of review for a district court's conclusions of
law is whether the court's interpretation of the law is correct.
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Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459, 469,
898 P.2d 680, 686; Steer, Inc. v. Dep't of Revenue (1990), 245
Mont. 470, 474-75, 803 P.2d 601, 603-04.
This Court, in Ehly v. Cady (1984), 212 Mont. 82, 687 P.2d
687, has previously held that:
[Al broker employed to 'sell or effect a sale' and
exchange (as is the case here) does not earn his
commission until the purchase price is paid, title is
conveyed and the sale is completed. See Diehl and Associates,
Inc.v.Houtchens (1977), 173 Mont. 372, 567 P.2d 930. In an
expansion of this holding, however, we must also conclude
that a broker is still entitled to his commission even if
the sale is not completed if a ready, willing and able
buyer is procured and the failure to consummate was
solely due to the wrongful acts or interference of the
seller.
Ehly, 687 P.2d at 698 (quoting Associated Agency of Bozeman, Inc.
v. Pasha (1981), 191 Mont. 407, 414, 625 P.2d 38, 43).
The District Court found that there was no wrongful act or
interference by Reum which caused the sale to fail and that it was
Smith's financial inability which actually prevented the completed
sale. It held that there was a modified contract which acted as an
accord and satisfaction discharging any previous claims of breach
of contract from the initial sales agreement and therefore, based
its determination of Smith's financial ability during the later
negotiation period.
Aasheim argues that the District Court erred in finding that
Smith was not a ready, willing, and able buyer in the spring of
1989. He asserts that at the time of the initial closing date
Smith was willing and able to purchase the business and that the
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cause of the sale's failure was Reum's wrongful act of failing to
procure fire insurance on the property.
Reum responds that the District Court's findings that the
failure to close was not the result of any wrongful act or
interference by Reum and that Smith was not financially able to
close the transaction are supported by substantial evidence and are
not clearly erroneous.
After the fire occurred, Reum was willing to complete the sale
and offered to reconstruct the building and replace the property
destroyed in the fire, in effect self-insuring the property. Smith
chose to decline Reum's offer and instead offered to negotiate new
terms for the sales contract, including a lower price. The
District Court's finding of fact, albeit mislabeled as a conclusion
of law, that the cause of the failure to close was not Reum's
failure to procure insurance, is supported by substantial evidence.
The District Court's finding, again mislabeled as a conclusion
of law, that the failure of the sale to close was actually the
result of the lack of a ready, willing, and able buyer was also
supported by substantial evidence. Smith was not willing to
purchase the property at the time of the initial closing, nor was
he ready, willing, and able to purchase the property in the period
of negotiations over the next few months as a result of his
precarious financial position.
There is also substantial evidence to support the District
Court's finding that the negotiations produced a modified version
of the original sales agreement. Whether or not this agreement was
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fully executed is irrelevant, as the record establishes that there
was no wrongdoing or interference by Reum which caused the sale to
fail, as Smith was unwilling to complete the sale at the time of
the initial closing, and that he was clearly financially unable to
perform as the negotiations continued. The District Court's
finding that the failure to set a specific date for closing was not
a result of failed negotiations, but rather was the result of Smith
being financially unable to perform, is also supported by
substantial evidence. The District Court did not misapprehend any
of this evidence and we have no firm conviction that a mistake has
been made. DeSave, 820 P.2d at 1287. We therefore determine that
the District Court's findings are not clearly erroneous.
We hold that based upon these findings the District Court did
not err in its interpretation of the law. Having found that the
failure to consummate the sale was not a result of any wrongful
acts or interference by Reum and that Aasheim's buyer, Smith, was
not financially able to close the transaction, the court correctly
concluded that Aasheim was not entitled to a commission under the
terms of the agreement. Ehly, 687 P.2d at 698.
Affirmed.
We concur: