Opinion
Decided October 24, 1927.
Brokers — Sale of real estate held under land contract — Broker's commission to be retained out of purchase money — Broker must tender sum due owner and recover commission from purchaser, when — Consideration insufficient when based upon work thereafter to be done — Broker agreed to buy property, subject to original owner's approval of purchaser — Upon disapproval, contract terminated and broker not entitled to commission — Action for commission based upon collusive sale to relative of broker.
1. Under contract for sale of real estate on commission providing for retention of commission out of purchase money, thereby contemplating that there would be no commission, unless there was a sale, agent, in order to recover commission after owner's termination of contract, was under duty of tendering amount that owner was to receive, thereby giving agent a claim against purchaser for commission specified in contract.
2. Agreement for sale of real estate, reciting that commission was to be paid agent in consideration of work thereafter to be done, held not based on valuable consideration, since, an option being a gratuity, contract must be based on a valuable consideration, and not merely on promise to do something thereafter, even though connected with subject of transaction.
3. Where agent for sale of real estate on commission subsequently entered into escrow agreement with principal for purchase of property, in case original vendor was satisfied with purchaser, and principal, after original vendor's refusal to accept agent as purchaser, terminated the contract, agent was not entitled to recover commissions under original agreement in action against principal, based on a collusive sale to relative of agent.
ERROR: Court of Appeals for Cuyahoga county.
Messrs. White, Cannon Spieth, for plaintiff in error.
Mr. Jerome M. Friedlander, for defendant in error.
This cause comes into this court on a petition in error to the municipal court of the city of Cleveland.
In the court below defendant in error, E. Gutentag Son, was plaintiff, and brought its action to recover something over $1,000 upon what it alleges to be a contract for services for selling a piece of real estate. In said action a judgment was rendered for the plaintiff against the defendant, Raymond Eberly, now plaintiff in error, for the sum of $1,030, and it is to reverse that judgment that error is prosecuted here.
It seems that the plaintiff in error was the owner of a piece of real property, which he held by virtue of a land contract, in one of the Van Sweringen allotments in Cuyahoga county, and that, prior to the events herein mentioned, a contract in writing had been entered into, whereby the plaintiff in error, defendant below, gave an option to plaintiff for a period of 20 days authorizing him to sell the property for and in consideration of $100 commission and whatever sum was obtained over and above the sum of $2,100 for said land. The plaintiff below elected to take said land himself, and an escrow agreement was entered into which provided that, in case the Van Sweringens would not be satisfied with the purchaser, the whole transaction would become null and void, and there would be no further liability upon the part of the defendant below, plaintiff in error here. After the escrow instructions had been filed, the Van Sweringens were notified, and they refused to accept the proposed purchaser, whereupon defendant below, plaintiff in error here, notified the plaintiff in writing that the sale was off, and terminated its right to further negotiate. Notwithstanding this notification, plaintiff below seems to have got a man by the name of Freeman to agree to take this property, and so notified the defendant below, the plaintiff in error here, whereupon the defendant below refused to go forward with the deal, and an action was brought, as already stated, to recover the sum of $1,000, claiming that the plaintiff had a contract to sell this land to Freeman for the sum of $3,000, and upon that basis plaintiff was permitted to recover.
It is rather singular that for land that the owner was willing to sell for $2,100 the real estate agent would get an offer of $3,000, and that the commission for that offer would be $1,000, and the owner only get $2,000 out of it. In other words, the commission amounted to 33 1/3 per cent. This, of course, would not vitiate the sale, but, in the light of the circumstances of this lawsuit, inasmuch as the proposed purchaser Freeman was a relative, a cousin, I believe, of one of the members of this real estate firm, it looks very much as if it were for the purpose of getting this fee that Freeman was brought in as a purchaser, and the transaction does not savor of good faith or of good business dealing.
Aside from this it must be noted that this contract provided that out of the purchase money, and it was to be a cash sale, the agent was to retain his commission, plainly contemplating that, unless there had been a sale, there would be no commission, because the commission was payable out of the sum received, and the only way that the plaintiff would be entitled to recover would be, not from the defendant below, because he was to get only $2,000 in any event, but from the purchaser, and the money was to be paid by the purchaser to the agent, and he (the agent) was to retain his commission of $100 and all sums over $2,100 in addition. Now manifestly, before the plaintiff would be entitled to recover, he must tender, or offer to tender, the $2,000 that would be coming to the owner of the real estate, and then he would have a claim against the purchaser for the commission, and for the sum over and above $2,100. By this proposition it would mean that the owner of the property would get $2,000, being compelled to pay out of the purchase price of $2,100 the $100 commission.
There is nothing in this record except a mere statement that a purchaser was ready, able, and willing to go forward with his contract. It looks very much as if the sale were a collusive sale to get a commission where none had been earned. Now it will be argued that none had been earned because of the unlawful termination of this contract by plaintiff in error. But was it a wrongful termination? This so-called option was based upon a gratuity. The agreement recites "in consideration of work thereafter to be done," but that is not a consideration for that contract. An option is a unilateral contract, and it prevents the party who signs that contract from disposing of the property under consideration until the expiration thereof, but, in order to have this effect, it must be based upon a valuable consideration, and not merely upon the promise to do something thereafter, even though that something is connected with the subject of the transaction. There was no consideration for this signing, and consequently it was nothing more than a continuing offer. Of course, if the offer had been made, and was continuing, and had not been withdrawn, and a purchaser had been obtained in good faith, even without a consideration, the contract having been executed and the work having been done, and the purchaser procured, it would be too late for the seller of the property to then cancel the contract, because it would have been executed, and then the consideration would be unimportant.
That was not true in the instant case. Here the escrow agreement became part of the sales contract, and that provided that, if the Van Sweringen Company should not be satisfied with the purchaser, the whole matter should be terminated. When such situation was brought to the knowledge of the seller, plaintiff in error here, the relationship between the plaintiff and the defendant was terminated by a letter, and after that time the so-called purchaser or agent had no right or title in the property, or to act in relation to it.
If the plaintiff below had a valid contract and the defendant below, plaintiff in error here, breached that contract, a suit could not be predicated upon the commission earned, but upon damages for breach of the contract. That was not the suit presented here, but we do not think, under the circumstances of the case, that even that sort of a suit would be tenable.
Under these circumstances, and under the facts of this record, we do not see how the court below could have entered a judgment against the defendant below. We think it was clearly erroneous and contrary to law, and for that reason the judgment will be reversed, and a final judgment entered for plaintiff in error.
Judgment reversed and judgment for plaintiff in error.
SULLIVAN, P.J., and LEVINE, J., concur.