Featherman v. Kennedy ( 1948 )

This is an action to recover a commission for services rendered in effecting a sale of real estate. A general demurrer to the complaint was sustained and the action dismissed. Hence the only question before us is whether the complaint states facts sufficient to constitute a cause of action.

Briefly summarized, the complaint alleges that defendant owned a ranch in Granite county consisting of approximately 1,840 acres; that defendant "orally entered into an agreement with plaintiff whereby the defendant agreed that if plaintiff could find anyone interested in the purchase of said ranch" upon certain alleged terms and "with whom the defendant would be able to negotiate a sale for said land" or "would introduce to defendant anyone to whom the defendant would be able to negotiate a sale" defendant would pay to plaintiff 5% of the sale price; that plaintiff accepted the offer and "did procure, produce and introduce to defendant a prospective purchaser for said party" with whom defendant negotiated a sale for $25,000; that pursuant thereto defendant and his wife executed a deed to the property and delivered it to such purchaser and took a mortgage to secure the unpaid purchase price; that the purchaser has met the requirement of the mortgage and at the time of the commencement of this action had paid $7,000 of the purchaser price of the property besides interest on deferred payments; that there became due to plaintiff the sum of $1,250, which defendant has refused to pay.

For a second cause of action plaintiff alleges the same facts contained in the first cause of action except that instead of pleading an express oral agreement he seeks recovery on a quantum meruit.

While other questions are presented in the briefs of counsel, the only point we need consider, since it is determinative of the case, is that of the applicability of the Statute of Frauds. While the general Statute of Frauds does not apply to an agent employed to sell real estate (8 Am. Jur., p. 1001, sec. 22); many jurisdictions including Montana, have enacted statutes requiring such agreements to be in writing. 8 Am. Jur., p. 1002, sec. 24. The statute, section 7519, Revised Codes of Montana 1935, reads:

"The following contracts are invalid, unless the same, or some note or memorandum thereof, be in writing and subscribed by the party to be charged, or his agent: * * *

"6. An agreement authorizing or employing an agent or broker to purchase or sell real estate for compensation or commission."

Plaintiff contends that this section does not apply to a situation as here where all that he agreed to do was to find a purchaser but where he had no authority to make a conveyance. He contends that the statute, as to sales of real estate as distinguished from a purchase, applies only to those cases where the agent has authority to convey the property. The statute is not open to that interpretation. Section 7519 must be read as a whole. Subdivision 5 thereof specifically requires the authority of the agent to lease or sell real estate or any interest therein to be in writing and this regardless of the question of compensation or a commission. Subdivision 6 specifically requires a written agreement when the agent is employed for compensation or a commission. That subdivision applies when the subject matter of the agency is real estate as distinguished from personal property and where compensation or a commission is claimed. O'Neill v. Wall, 103 Mont. 388, 62 P.2d 672; Kramer v. Schmidt, 62 Mont. 568, 206 P. 620; Dabney v. Edwards, 5 Cal.2d 1,53 P.2d 962, 103 A.L.R. 822; Silvertooth v. Kelley,162 Or. 381, 91 P.2d 1112, 122 A.L.R. 1329; Myers v. Arthur,135 Wn. 583, 238 P. 899.

In applying our statute to facts very similar to those here[1] pleaded, this court in Skinner v. Red Lodge Brewing Co.,79 Mont. 292, 256 P. 173, 175, said: "* * * the law is settled by repeated decisions that a brokerage contract for the sale of real estate in this state must be in writing and subscribed by the party to be charged, or his authorized agent, in order to permit a broker to recover compensation or a commission on the sale of real estate by the owner." (Citing a number of Montana cases.)

In King v. Benson, 22 Mont. 256, 56 P. 280, 281, this court said: "No matter what services were rendered to defendant by Langhorne, and accepted by defendant, no recovery can be had for them, under the proof in this record, because there was no note or memorandum of any contract for such services in writing."

In Newman v. Dunleavy, 51 Mont. 149, 149 P. 970, 972, this court said: "Plaintiff relied upon the letter of September 25, 1911, and the correspondence which preceded it, to constitute his contract of employment. He does not contend that any other agreement in writing was ever in force between him and the defendants; and since that contract was revoked on November 1, 1911, any understanding which he may have had with defendants thereafter would not furnish a basis for the present action. Plaintiff had to assume the burden of showing that, at the time he produced a purchaser ready, able, and willing to buy upon defendants' terms, there was then an existing contract of employment between himself and the defendants, such as would be valid under the statute of frauds above. Brophy v. Idaho Produce Provision Co., 31 Mont. 279, 78 P. 493. This he failed to do, and the nonsuit followed as of course." To the same effect is Dick v. King, 73 Mont. 456, 236 P. 1093.

California has an identical statute and construes it as we do[2] ours. Marks v. Walter G. McCarty Corp., Cal.App. 194 P.2d 816, 821. The purpose of the statute was well expressed by the court in the Marks case where it said: "The purpose of this statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses by requiring that enumerated transactions be evidenced by a writing signed by the party to be charged. The salutary effect of such a statute which is clear, unambiguous, and which has been widely publicized among persons engaged in real estate transactions, should not be limited or restricted by strained judicial construction to defeat the purpose of the people as expressed through their legislature."

May the plaintiff recover on a quantum meruit? The applicable rule is stated in 8 Am. Jur., page 1080, section 161, as follows: "In many jurisdictions statutes have been enacted requiring contracts for the employment of real-estate brokers to be reduced to writing which preclude recovery for services rendered by the latter pursuant to an oral agreement, even upon the basis of a quantum meruit."

The reason for denying recovery on a quantum meruit was well stated by the Supreme Court of Wisconsin in Hale v. Kreisel,194 Wis. 271, 215 N.W. 227, 228, 56 A.L.R. 780, where it quoted from a prior case as follows:

"``The statute was doubtless enacted for reasons similar to those which led to the enactment of the statute of frauds. It was to prevent frauds and perjuries. Its enforcement will sometimes protect brokers who have rendered valuable services too little appreciated. More often it will protect owners from unfounded claims. It will tend to prevent the flood of litigation arising out of misunderstandings between well meaning persons. We believe that in order to carry out the legislative intent we should hold contracts void which do not substantially comply with the statute. In other words, that the statute means what it says.' Gifford v. Straub, 172 Wis. 396, 399, 400, 179 N.W. 600. (Citing cases.)

"To hold that there can be recovery upon quantum meruit is ``to open the door to the very abuses the statute was enacted to prevent, and defeat its manifest purpose.' Barney v. Lasbury,76 Neb. 701, 107 N.W. 989, 991."

In summing up the holding of the courts generally, the Supreme Court of Wisconsin in the Hale case further said: "Every other adjudicated case that the court has found that has passed upon the question has held that the rule permitting recovery on quantum meruit for services rendered under contracts void under the statute of frauds does not warrant a recovery upon quantum meruit for commissions which measure the reasonable value of the services performed in buying and selling real estate. The obvious reasons for these decisions is that the application of the rule which permits recovery upon quantum meruit to the case of real estate brokers absolutely nullifies these statutes which declare every such contract to be void if not in writing. These statutes leave no opportunity for the law to imply a contract."

Nor can recovery be had on the theory that the oral agreement has been performed by the agent. Such contention was made in Weatherhead v. Cooney, 32 Idaho 127, 180 P. 760, 761, where the court said:

"We think the construction contended for by appellant would absolutely nullify the statute. From its very nature a claim for commission cannot be made until earned. The sale is made, or the agent procures the purchaser ready and able to buy, and not until then does the right to the commission accrue. It accrues by virtue of a contract express or implied. But the statute says that no such contract shall be valid unless in writing. To hold that performance takes a claim of this character out of the operation of the statute would, in our opinion, leave nothing for the statute to operate on. Such construction would render the statute useless and meaningless, and would be tantamount to saying that any contract for a commission or reward for the finding or procuring of a purchaser of the real estate of another is valid, though not in writing and not signed by the owner of such real estate, which is directly opposite to the expressed will of the Legislature. The causes, theory, and necessity of such legislation are discussed in some of the following cases, which support the conclusion we have reached: (Citing cases).

"Some of the statutes construed in the cases cited by appellant provide that no such contract shall be valid unless in writing; other statutes make such contract void unless in unless in writing; others provide that no action shall be brought on such contract unless it is in writing. Though we recognize the distinction between void and voidable contracts, we are, nevertheless, unable to see why recognition of the right to recover under the oral contract alleged herein, or under a quantum meruit for the reasonable value of services rendered by the appellant herein, would not completely abrogate the statute."

The Supreme Court of Wisconsin reached the same result in the Hale case, supra. And to the same effect are: Case v. Ralph,56 Utah 243, 188 P. 640; Laker Land Loans v. Nye, 40 Idaho 793,237 P. 630; Keith v. Smith, 46 Wn. 131, 89 P. 473, 13 Ann. Cas. 975 and note on page 977.

The fact that the contract between the buyer and seller of the real estate has been fully performed has nothing to do with the contract between the seller and the agent claiming a commission. Nor does the case of Besse v. McHenry, 89 Mont. 520,300 P. 199, militate against this holding. In that case subdivision 5 of section 7519 and section 10613 were involved. It affected a lease of land for a two-year period. The lessee took possession of the land and held it for two years. He paid part of the rental. Obviously under those circumstances he would not be permitted to use the statute of frauds as a defense to an action for the payment of the balance due. In that case the thing that was required to be in writing, viz. the lease, was fully executed. That is not true here. Defendant has done nothing that can be said to be referable to the oral agreement to pay a commission. The case of Cobb v. Warren, 64 Mont. 10, 208 P. 928, so far as it treats of the effect of an executed oral agreement had to do with an oral agreement modifying a written agreement, which is expressly authorized by statute, section 7569, Revised Codes of 1935. It has nothing to do with the question here involved.

Since plaintiff pleads that he has no written agreement but[3] that it rests in parol, the complaint shows on its face that he cannot recover under any theory. The court properly sustained the demurrer and properly dismissed the action.

The judgment is affirmed.

Mr. Chief Justice Adair and Associate Justice Metcalf concur.