Opinion
No. 8,114.
Submitted November 15, 1940.
Decided November 22, 1940.
Real Property — Brokers — Action to Recover Commissions — What Constitutes Sale, not Option — When Owner of Property not in Position to Question Prospective Purchaser's Financial Ability, Readiness and Willingness to Purchase — Contracts — Plain and Unambiguous Provisions not Open to Change by Parol Testimony.
Real Property — "Option" to Purchase — Definition. 1. An option to purchase real property is not a sale but the choice, right or privilege to buy.
Same — Brokers — Commissions — Circumstances Under Which Transaction One of Sale, not Option. 2. Where the owner of real property listed it with a broker under an agreement that if the latter found a party ready, able and willing to purchase it on terms acceptable to the owner he would pay the broker five per cent. of the price obtained, and a prospective purchaser agreed, inter alia, to forfeit a $200 down payment if by a certain date he should fail to meet the major portion of the purchase price, a deed to the property being left in the hands of the broker, and the owner unqualifiedly accepted the proposal, the purchaser thereupon putting padlocks on the property, the transaction held to have been a sale and not merely an option, and that therefore the broker was entitled to his commission. (MR. JUSTICE ANGSTMAN Dissenting on Motion for Rehearing.)
Same — Brokers — When Owner of Property not in Position to Question Prospective Purchaser's Financial Ability, Readiness and Willingness to Purchase not Open to Question. 3. Under an agreement of the above nature containing a provision that a prospective purchaser procured by the broker should be one ready, able and willing to purchase on terms proposed, where the owner accepts an offer of purchase and acknowledges receipt of a down payment, the question of the financial ability, readiness and willingness of the purchaser is no longer open to question; the transaction becomes a sale and obligates the seller to pay the broker's commission.
Contracts — When Stipulations Plain, Simple and Unambiguous, Contract may not be Changed by Parol Testimony. 4. Where a contract in writing is plain, simple and unambiguous, it cannot be altered by parol testimony of one of the parties that it meant something different from its plain recitals.
Appeal from District Court, Stillwater County; Guy C. Derry, Judge.
Mr. M.L. Parcells, for Appellant, submitted a brief, and argued the cause orally.
Mr. Neil D. Heily, for Respondent, submitted a brief, and argued the cause orally.
Appellant submits that under the express wording of the listing agreement contract between plaintiff and defendant, it was no part of the obligation of plaintiff to do anything more than to bring the minds of the parties to an agreement, or, in the language of the agreement, to find a party who was "ready, able and willing to purchase" on terms acceptable to defendant. ( Lingquist v. Seibold, 62 Mont. 162, 199 P. 709.)
The only excuse offered by defendant for his refusal to pay and the reason given by the court in its findings of fact for holding plaintiff was entitled to nothing for the services rendered pursuant to the listing agreement contract is that "plaintiff has not obtained a purchaser of defendant's property who was ready, able and willing to purchase said premises at a price and on terms agreeable to the defendant," notwithstanding the undisputed written statement of defendant and his wife in direct contradiction thereof, to say nothing of the estoppel of defendant to question the qualifications of the proposed purchaser after voluntary acceptance by him, as shown by the case of Everson v. Phelps, 104 Or. 288, 206 P. 306, 26 A.L.R. 784.
Where the principal accepts his customer and enters into a contract with him, the customer's ability, readiness and willingness are no longer open to question and the principal is estopped from alleging anything against the claim except fraud on the part of the broker in inducing acceptance. ( Matuszewski v. Grisius, 118 Pa. Super. 196, 180 A. 130; Miller v. Stevens, 23 Ind. App. 365, 55 N.E. 262; Owens v. Mt. States T. T. Co., 50 Wyo. 331, 63 P.2d 1006; Beougher v. Clark, 81 Kan. 250, 106 P. 39, 27 L.R.A. (n.s.) 198; Notkins v. Pashalinski, 83 Conn. 458, 76 A. 1104, 20 Ann. Cas. 1023; 4 R.C.L. 313, sec. 52 and cases cited.)
We do not believe under the contract in this case it is any part of the broker's duty to guarantee that the purchaser who is accepted by the principal will continue to remain solvent and carry out the terms of his contract to the last payment, or that such is a condition precedent to the earning of his commission. ( Caine v. Briscoe, 78 Cal.App. 660, 248 P. 774, on 778; Malmstedt v. Stillwell, 110 Cal.App. 393, 294 P. 41; Vickery v. Valdez, 113 Cal.App. 135, 298 P. 151; Sobaje v. Schubert, 37 Cal.App. 709, 174 P. 364; Johnson v. Krier, 59 Cal.App. 330, 210 P. 966; 4 Cal. Jur. 603, sec. 37; Grove v. Lewis, 125 Cal.App. 357, 13 P.2d 847. See 12 C.J.S. 187-189, sec. 85.)
It was contended by counsel in the court below and in all probability will be so contended here, that plaintiff is not entitled to any compensation whatever because he is unable to show a completed sale to the party found and produced by him. In answer we cite Laux v. Hogl, 45 Mont. 445, 123 P. 949; Shober v. Blackford, 46 Mont. 194, 127 P. 329; Apple v. Henry, 66 Mont. 244, 213 P. 444; Gantt v. Harper, 82 Mont. 393, 267 P. 296.
The listing agreement involved herein, under a logical interpretation on its face, and under further interpretation of the parties by their acts and intent, calls for a completed sale of property before the commissions claimed are earned. The offer and acceptance procured by plaintiff cannot be interpreted as binding upon Wegner to purchase the property. However, to further substantiate defendant's case, the following cases are set forth to show that plaintiff was required to procure at least a binding contract of purchase before his commissions were earned, there being no showing in the record that plaintiff brought the parties together so they could work out their own terms: Cone v. Keil, 18 Cal.App. 675, 124 P. 548; Cobb v. Warren, 64 Mont. 10, 208 P. 928; Shepherd-Teague Co. v. Hermann, 12 Cal.App. 394, 107 P. 622; Douglas v. Spangenberg, 23 Cal.App. 294, 137 P. 1103; Barrios v. Foley, 83 Cal.App. 105, 256 P. 573; Fritsch v. Hess, 49 Utah, 75, 162 P. 70; Reynolds v. Anderson, 37 Okla. 368, 132 P. 322, 46 L.R.A. (n.s.) 144.
Plaintiff having failed to produce even a binding contract of sale, he is entitled to no compensation whatsoever.
The most that can be said of the offer of Wegner and the acceptance by defendant is that, as a whole, it constitutes nothing more than an option to purchase. The following cases, applied to the facts of the instant case, show beyond doubt that the offer and acceptance constituted merely an option and, as such option, it was an insufficient compliance with the terms of the broker's contract: Stelson v. Haigler, 63 Colo. 200, 165 P. 265, 3 A.L.R. 550; Pehl v. Fanton, 17 Cal.App. 247, 119 P. 400, at 402; Dreyfus v. Richardson, 20 Cal.App. 800, 130 P. 161; Zurcher v. Booth, 80 Or. 335, 157 P. 147, at 148. The offer and acceptance constituting merely an option to purchase, no commissions are earned.
Broker must procure party "able" to perform. In Phelan v. Hilda Gravel Mining Co., 203 Cal. 264, 263 P. 520, 56 A.L.R. 476, it is stated: "To earn a commission on the sale of real estate, the agent is required in all cases to produce a purchaser who is able to perform." (See, also, Dyar v. Stone, 23 Cal.App. 143, 137 P. 269; Pellaton v. Brunski, 69 Cal.App. 301, 231 P. 583; Barrios v. Foley, 83 Cal.App. 105, 256 P. 573.)
All cases cited by plaintiff are not authority for his position here, and, if carefully examined, it will be found they support defendant's case instead — especially the Montana cases.
This appeal followed the judgment of the district court of Stillwater county dismissing a suit by a real estate broker for commissions claimed to have been earned in the sale of a tract of real estate in that county. The cause was tried by the court sitting without a jury.
The defendant Craig had signed a listing agreement with the plaintiff which provided, among other things, that "if during the term of this contract you find a party ready, able and willing to purchase on above or other price and terms acceptable to me * * * I agree to pay you for your services five per cent of above price."
Within the time limited by the listing agreement, the real estate broker produced a prospective purchaser who made the following proposal:
"Agreement.
"To Arthur C. Anderson, "Bonded Real Estate Dealer, "Columbus, Montana.
"I hereby make an offer for the property known as the Geo. W. Craig property, located in sections 20 and 21- twp. 2 S-20 E. Containing 100 acres more or less. $4,500.00 offered as follows:
"200.00 cash and $2,800.00 on or before March 1, 1939.
"I agree to assume a mortgage in the amount of $1,500.00 and paid the interest from Jan. 1, 1939, if offer is accepted.
"I agree to paid the last half of 1938 taxes if offer is accepted.
"If offer is accepted it is understood that I will have immediate possession, for the purpose of improving property.
"I agree to forfeit the down payment if I fail to meet the March 1, 1939, payment.
"I understand that my check will be returned to me or down payment refunded if this offer is rejected.
"CARL WEGNER. "Witness: "ARTHUR C. ANDERSON"
The defendant and his wife upon receipt of the proposal signed the following acceptance: "Above offer accepted and receipt of down payment of $200.00 acknowledged this 31st day of December A.D. 1938."
It is the contention of the defendant, which we gather from [1, 2] the brief and oral argument of his counsel, that the offer on the part of the prospective purchaser and acceptance thereof by the seller, constituted only an option by reason of the clause providing a forfeiture of the down payment on condition that the payment of March 1, 1939, was not met. We fail to see how such a clause would convert the agreement into an option. There is no provision in the offer indicating that the forfeiture was to be deemed liquidated damages for breach of the contract or the sole remedy for such breach, or as releasing the purchaser from further liability. There is no language in the contract limiting the defendant's remedy to such forfeiture for a breach. It is clear from the language in the offer and acceptance that the transaction was a sale. An option is the choice, right or privilege of buying or selling. ( Whorley v. Patton-Kjose Co., Inc., 90 Mont. 461, 5 P.2d 210.) It is not a sale of property but of a right to purchase. (30 Words and Phrases, Perm. Ed., p. 5.)
The written instruments involved in this cause show an offer to purchase property under certain terms and an unqualified acceptance of that offer, which make a binding contract. A deed had been prepared for the property to the purchaser and left in the hands of the plaintiff broker. The purchaser put his own padlocks on the property in question. While the evidence shows that the defendant kept the down payment of $200 and made no effort to enforce the contract as to its other terms, this does not support his view that the agreement was an option. There is no allegation or proof of any fraud or deceit in the production of the prospective purchaser.
Defendant also contends that the provision in the listing [3] agreement that the plaintiff should find a party ready, able and willing to purchase had not been met. It would seem that by signing the offer, the terms "readiness" and "willingness" had been met. In such contracts "ability" usually means financial ability. The law seems well established in the several jurisdictions that in the absence of fraud or deceit in producing a purchaser, if the seller actually enters into an agreement of sale with the prospective purchaser, the seller is thereupon foreclosed from questioning his readiness, willingness or ability to purchase. As stated in 12 C.J.S., Brokers, section 85, page 188, "* * * or where the broker acts in good faith, and the principal accepts his customer and enters into a contract with him, in which case the question of the customer's ability, readiness, and willingness is no longer open to question [citing numerous cases]." The seller under such conditions has the right to refuse to enter into such a contract if the terms are not satisfactory or if he doubts the ability of the prospective purchaser to carry out the agreement. Having accepted such an agreement, he is thereupon obligated to pay the broker his commissions as beyond doubt the broker had complied with the terms of his listing agreement and has done all that could be done by such intermediary. ( Apple v. Henry, 66 Mont. 244, 213 P. 444.)
It is obvious that the rule of law which we have followed, as announced supra, may in some instances mark a hardship upon a seller of property who sells through a broker — particularly in such instances where the down payment is less than the commission agreed upon. Nevertheless, the seller has it within his power to reject an offer of purchase if he doubts the prospective purchaser's ability. However, once he accepts such purchaser, he thereupon becomes obligated to pay the broker for his services.
The judgment of the district court is reversed with direction to enter judgment for plaintiff as prayed for in the complaint.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES MORRIS, ANGSTMAN and ERICKSON concur.
ON MOTION FOR REHEARING. (Filed December 20, 1940.)
On petition for rehearing, the respondent goes over the same questions presented at the original hearing. It must be remembered that this is not a suit to reform a contract, by reason of mutual mistake, neither is there allegation nor proof of fraud.
The suit involves a contract of several parts. First the listing agreement, signed by the defendant. Then the proposal to purchase signed by one Wegner, addressed to the broker. Finally the acceptance of the proposal by the defendant. Therefore the defendant is a party to the agreements, both the listing agreement and the selling agreement.
If a contract, plain, simple and unambiguous, can be altered [4] after dispute arises, by testimony that it was the witness' understanding that the contract meant something different from its plain recitals, then any contract could be similarly altered by parol, and no enforceable agreement could ever be entered into.
The petition for rehearing is denied.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES MORRIS and ERICKSON concur.
On motion for rehearing further consideration of this case impels me to the conclusion that the district court was correct and that the judgment should be affirmed. The court found that if Wegner should not pay the $2,800 on or before the first day of March, 1939, "he would forfeit the amount paid for failure to carry out the terms of said offer, but that he would not be obligated to complete the purchase of said property or to further complete the said contract."
If this finding was justified, then the contract gave Wegner the option to either pay the $2,800 on March 1, 1939, and carry out the contract, or to elect not to pay it and to forfeit the down payment and terminate the contract. There is evidence in the record supporting the court's finding above quoted. Wegner testified that Anderson told him at the time the contract was made that "if you can't make it [referring to the payment of $2,800] the first of March you just lose this two hundred dollars."
Wegner and Craig both considered the contract as an option giving Wegner the right to elect whether he would complete the contract of purchase or forfeit the payment of $200 and treat the contract as at an end. It is contended that such evidence is inadmissible as varying the terms of a written contract. The rule of excluding parol evidence offered to vary the terms of a written contract applies only to controversies between parties to the contract or their successors in interest. "It has no application in controversies between a party to the instrument on the one hand and a stranger to it on the other." (22 C.J. 1291 et seq.) And, hence, in a suit for broker's commission the seller may show that the contract even though in form a sale, was merely an option. ( Brown v. Wisner, 51 Wn. 509, 99 P. 581.)
It follows that plaintiff did not procure a purchaser ready, able and willing to buy, but only a purchaser who reserved the right not to be a purchaser if he saw fit to so elect. ( Simpson v. Eardley, (Tex.Civ.App.) 137 S.W. 378; Moss Raley v. Wren, 102 Tex. 567, 113 S.W. 739, 120 S.W. 847, and see cases cited in note in 43 L.R.A. (n.s.) 91.) The fact that defendant approved the contract is of no consequence if the contract was such as the court found it to be. This question was before the court in Warnekros v. Bowman, 14 Ariz. 348, 128 P. 49, 51, 43 L.R.A. (n.s.) 91, where the court said: "It is argued by appellee that Warnekros waived the requirement that an actual sale be made by Bowman before earning his commission when he accepted and entered into the optional agreement, procured by appellee, with C.H. Young. We are unable, however, to see wherein the mere act of entering into and accepting the optional contract of purchase by Warnekros of itself can be construed as a waiver by him of the requirement that Bowman make the sale, or secure a binding contract of sale, before earning his commission. It is a matter of common knowledge that sales of mining stock and mining property are frequently effected through options. If a real estate owner employs a broker to negotiate a sale of and find a purchaser for his property for which he agrees to give the broker a reasonable commission, and afterwards gives an option for the sale of his property to a person produced by the broker, he does not thereby waive the requirement that a sale must be effected before he is entitled to his commission. By granting the option the owner is merely helping to bring about the sale which he employed the broker to make. It is a step in that direction. It is not the end, but rather the means to an end. And such action on the part of the owner does not imply that he has made a new contract with the broker by which he agrees to pay for something different from the services he originally contracted for, but merely indicates a channel through which he is willing to go in order that the object aimed at from the beginning by both him and the broker might be accomplished. To hold that the mere acceptance of the option is a waiver of the requirement that an actual sale be made before the commission is earned would be against the decided weight of authority."
There being competent evidence supporting the court's judgment, I think it should be affirmed.