Malone v. Dillard , 212 Ala. 361 ( 1925 )

Appellants, real estate brokers, sued appellee for the recovery of their commissions alleged to be due under the contract for the sale of certain real estate situated in Chilton county, Ala. The cause was tried upon an agreed statement of facts, upon which the court gave the affirmative charge in favor of the defendant. From the judgment following, the plaintiffs have prosecuted this appeal.

While there appears to have been considerable pleading, we are of the opinion that a consideration of the action of the court in giving the affirmative charge will suffice for a disposition of the cause without reference to a detailed consideration of the assignments of error.

The agreed statement of facts discloses that the entire contractual relation between the parties to this cause is to be found in two contracts, one Exhibit B to counts 14 and 15, and the other is set forth in plea 2. The one set out in plea 2 is an agreement between the plaintiffs and the defendant with reference to the sale of this particular property and their compensation therefor. The other, Exhibit B, above noted, is a contract entered into between the defendant and the purchaser, one Dr. Gresham. These two contracts were entered into on the same day, related to one and the same transaction, and it is not questioned that, for a proper interpretation of the intention of the parties and a construction of their agreement these two contracts may be considered together.

Counsel for plaintiffs relies for recovery upon the proposition generally supported by the authorities, and recognized in this state, to the effect that —

"in the absence of a stipulation in the contract between the broker and his principal to the contrary, the former is entitled to his commission, if, acting in good faith, he procures a purchaser willing, able, and ready to take the property upon the terms offered by the principal, although the sale fails because of the defect in the principal's title, of which the broker had no notice." 4 R. C. L. 312; Birmingham, L. L. Co. v. Thompson, 86 Ala. 146, 5 So. 473; Little v. Fleishman, 35 Utah, 566, 101 P. 984, 24 L.R.A. (N.S.) 1182; Reasoner v. Yates, 90 Neb. 757, 134 N.W. 651; Empire Co. v. Webb, 202 Ala. 549, 81 So. 51.

In the instant case, the agreed statement of facts discloses that the purchaser submitted to the defendant by the plaintiffs was ready, willing, and able to purchase the property on the terms set forth in his agreement of purchase, but he thereafter declined and refused to consummate the same or to make the payment of the first installment therein provided, and to execute the notes therein agreed upon, for the sole reason that the defendant could not deliver a good and merchantable title to said property. It is therefore earnestly insisted by counsel for appellants that the general rule of law above noted is here directly applicable, and that the plaintiffs are not to be deprived of their commissions because of a failure of the consummation of the sale, resulting from an inability on the defendant's part to deliver a good and merchantable title.

The general rule of law thus insisted upon, is not questioned by counsel for appellee, but it is urged that this rule is without application to this particular contract. The contract is in writing, and a decision here must rest upon a proper construction thereof.

"It is, of course, a familiar proposition that a contract must be construed in the light of the facts surrounding the parties when it was made, and that courts will consider the occasion which gave rise to the contract, the relation of the parties, and the objects to be accomplished." Roach v. McDonald, 187 Ala. 64, 65 So. 823.

If the parties to this contract intended that commissions should be paid the broker only in the event of an actual consummation of the sale, then, confessedly, plaintiffs would not be entitled to recover. As was said by the Missouri court in Reiger v. Merrill, 125 Mo. App. 541, 102 S.W. 1072:

"Where a principal, at the time of the employment, is not invested with the full title to the property, and in the contract of employment provides, either in express terms or by necessary implication, against the contingency of not being able to perform, there is no reason in law or morals to justify the recovery by the agent of the agreed commission on the production of a purchaser who is ready, able and willing to buy on the terms proposed. Unquestionably parties to such contracts have the right to agree that the agent shall receive no compensation in the event the principal finds himself unable to perform, and, as long as the latter acts in good faith and honestly endeavors to acquire the title, the agreement of the parties should be enforced."

In the instant case there is no question presented of the bad faith on the part of the defendant or any capricious action on his part, but solely the question of a failure of consummation of the sale on account of defective title.

The contract between these parties discloses an agreement on the part of the defendant to sell the land for a stipulated sum to a purchaser who had evidently been previously procured by the plaintiffs, the purchaser being named in the contract. Referring to the amount of compensation which the plaintiffs would receive, the defendant agreed to give "one-fourth of all moneys received on the sale of said properties to the parties of the first part." There was paid $100 "earnest money." The next clause of the contract discloses the conditions upon which the sale was to be made to Dr. Gresham, the purchaser. It was expressly conditioned upon the title being shown to be good and merchantable, and "clear by abstract"; that the balance of $32,000, over and above the $100 "earnest money," was to be paid to the defendant through the plaintiffs as his agents, as follows: $2,500 when title is proven and passed on, and $7,350 each year, with 4 per cent. per annum on deferred payments until the $32,000 has been paid. It is next expressly provided that "if the title cannot be made a merchantable title, the $100 of earnest money is to be returned to Dr. A. B. Gresham." The concluding paragraph of the contract shows that the plaintiffs were to receive their entire commissions out of the purchase money when paid; first, they were to be paid $650 out of the $2,500 cash payment to be made by the purchaser, and for the remainder of their compensation the second note of $7,350, to be executed by the purchaser, was to be transferred to them by the defendant. The contract expressly provided that such payment in cash and transfer of said note should be "done as soon as sale is consummated or papers signed and delivered."

The contract between the proposed purchaser and the defendant, executed on the same day, expressly states that the condition of the contract of this sale is based upon the good and merchantable title. It is further provided in that contract, as in the other, for the return of the "earnest money" in case the defendant is unable to deliver the property by good and merchantable title, and to show the same by abstract acceptable to the purchaser's attorney. The payment of the purchase money and the execution of the note is expressly conditioned upon the approval of the title by the purchaser's attorney. The plaintiffs are expressly referred to in the contract as the agents for the defendant, and as having attached to the contract a full description of the property.

It is thus seen that the parties were very careful to rest this sale and their obligations in reference thereto upon the ability of the defendant to satisfy the proposed purchaser that he had a good and merchantable title to the land, and if such title were not acceptable to the purchaser's attorney, no further obligation rested upon the parties, except the express stipulation that the defendant was to return the "earnest money" which had been paid.

But it is argued by counsel for appellants that, upon the seller's title proving defective, the proposed purchaser had a right to rescind the contract and under the law the right to recover the "earnest money," and therefore the parties in the contract had but stipulated what the law itself would demand. Counsel then reasons that, as a consequence, these provisions may be treated as surplusage. To this we cannot agree. True, the law might give the right of rescission as well as recovery of the "earnest money" in the event of a defective title, but that argues no good reason why the language stated in the contract should be ignored. It is put there for a definite purpose, both in the contract between the purchaser and the defendant, as well as in the defendant's contract with the plaintiffs. The language expressly guarded the defendant against a defect in his title, guarded him against liability to plaintiffs, except in the event of a consummation of the sale. The contracts expressly show that the parties had in mind the possibility or probability of the title not proving acceptable to the purchaser's attorney; and in construing this contract so as to determine the intent of the parties the language as to these conditions cannot be ignored. The compensation of the plaintiffs was to be "one-fourth of all moneys received on sale of the properties," and was expressly payable out of the purchase money so received. The contract further expressly provided that this compensation should be paid "as soon as the sale was consummated or the papers signed and delivered."

In Cremer v. Miller, 56 Minn. 52, 57 N.W. 318, the Supreme Court of Minnesota, speaking to a somewhat similar situation, said:

"If the contract required the sale to be consummated, and the plaintiff's compensation depended upon the payment of the purchase money, the plaintiff could not recover unless these conditions should exist, or unless the plaintiff was defeated by the fraud, bad faith, or wrongful acts of the defendant. And it is clear that inability to make title within the time specified would not subject the defendant to liability if the contract was not carried out for that cause."

See, also, in this connection, Ormsby v. Graham,123 Iowa, 202, 98 N.W. 724; Norris v. Walsh, 71 Colo. 185, 205 P. 276; Lee v. Greenwood Agency, 123 Miss. 823, 86 So. 449.

In Hale v. Brown, 211 Ala. 106, 99 So. 645, it was held by this court that upon one phase of the evidence the plaintiff was not to be compensated unless the sale was consummated, and the purchase money received, and that, therefore, an instruction that the plaintiff could recover if he produced a purchaser who was ready, willing, and able to buy was erroneous; or to state it differently, the holding in that case was to the effect that under the part of the evidence therein quoted, a consummation of the sale was a condition precedent to a recovery by the plaintiff.

We have carefully examined the authorities cited by counsel for appellants, a larger portion of which have been herein previously cited, and do not find that they militate against the conclusion here reached, as the agreements therein sought to be enforced differ materially from that here under consideration. As an illustration in one of the authorities cited — that of Little v. Fleishman, supra — the opinion expressly states that the plaintiffs "were employed to effect, not consummate, a sale, and were entitled to a commission in the event of a sale at any price agreed upon."

Here the contract was expressly conditioned upon the ability of the defendant to furnish a satisfactory title, and the compensation of the plaintiffs was to be out of the proceeds of the money received by the defendant, and was not to be paid until the consummation of this sale. Such was the express agreement of the parties.

The quotation from Cremer v. Miller, supra, shows that the inability to make title would not, under a contract of this character, constitute "fraud, bad faith or wrongful acts," subjecting the defendant to liability.

In the instant case, the contingency of a defective title was provided for, anticipated by the language of the parties as expressed in the contract. We are clear to the view, therefore, that, under the agreed statement of facts, the defendant is not liable to the plaintiffs for these commissions, and the trial court correctly ruled in giving the affirmative charge in his favor.

Let the judgment therefore be affirmed.

Affirmed.

ANDERSON, C. J., and SAYRE and MILLER, JJ., concur.