Ellingson Agency Inc. v. Baltrusc ( 1987 )

No. 8 7 - 4 4
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
ELLINGSON AGENCY, INC.,
Plaintiff and Respondent,
OTTO BALTRUSCF, JR., and CARL
BALTRUSCH,
Defendants and Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Astle & Astle; David L. Astle, Kalispell, Montana
For Respondent:
Jeffrey D. Ellingson; Trieweiler Law Firm; Whitefish,
Montana
Warden, Christiansen, Johnson & Berg; Stephen C. Berg,
Kalispell, Montana
Submitted on Briefs: July 1, 1 9 8 7
Decided: September 15, 1987
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Defendants Carl and Otto Baltrusch appeal the judgment
of the Eleventh Judicial District Court, Flathead County,
which awarded to plaintiff Ellingson Agency, Inc., a broker's
commission, attorney fees and interest in the total amount of
$148,308.91 and dismissed defendants' counterclaim. Fe
7
affirm in part and reverse in part.
Three issues are presented for our review:
1. Did the District Court err when it granted summary
judgment in favor of Ellingson?
2. Did the District Court err when it granted
Ellingson's motion for summary judgment dismissing the
Baltrusches' counterclaim?
3. Did the District Court err when it compounded
interest in violation of S 25-9-205, MCA?
This is an action for a real estate commission based on
an exclusive listing agreement between Ellingson Agency, Inc.
(Ellingson), and Carl and Otto Baltrusch. Prior to November
6, 1979, the Baltrusch brothers had entered into a contract
for deed to purchase the Gibson Shopping Center in Kalispell
from Stephen and Patricia McAfee. On November 6, 1979, Carl
Baltrusch, representing himself and his brother, signed two
exclusive one-year listing agreements with Ellingson covering
the sale of the Gibson property. (The listing agreements
were identical but covered different portions of the Gibson
property; hereinafter, they will be referred to as a singular
document.) Marvin Bethea, who was to be the sales agent for
the sale, signed the agreement on behalf of Ellingson.
From November 1979 through June 1980, Bethea devoted
substantial time and expense attempting to locate buyers for
the Gibson property. On January 11, 1980, the Baltrusch
brothers received a notice of default from the McAfees
requesting the Baltrusch brothers bring current their taxes
and special improvement district assessments on the Gibson
property or face cancellation or specific performance. In
February 1980, the Baltrusch brothers informed Ellingson of
McAfees' notice of default. Ellingson was aware that the
Baltrusches were being pressured to transfer title in lieu of
foreclosure. However, Ellingson did not inform the Baltrusch
brothers that upon transfer in lieu of foreclosure, Ellingson
would seek a brokerage fee.
Prior to June 3, 1980, the Baltrusches informed
Ellingson that they planned to transfer the property in lieu
of foreclosure. Ellingson requested that the Baltrusches get
a ten-day extension before transferring the property. The
Baltrusches deeded the property contingent upon such a
ten-day extension. However, Ellingson failed to obtain a
buyer.
On June 3, 1980, the Baltrusch brothers by quitclaim
deed conveyed the Gibson property back to the McAfees in lieu
of cancellation or specific performance and the McAfees
released them of all further liability under the contract.
On May 4, 1982, Ellingson filed suit against the Baltrusch
brothers alleging it was entitled to a commission under the
exclusive listing agreement on the conveyance to the McAfees.
On September 20, 1983, Ellingson moved for summary judgment.
Seventeen months later, on March 25, 1985, the District Court
entered summary judgment in favor of Ellingson. The court
found the listing agreement to be clear and unambiguous and
that Ellingson was entitled to commission on the conveyance
of the Gibson property under the terms of the listing agree-
ment. The court awarded Ellingson a commission of $86,862.84
plus interest from June 3, 1980, and costs of suit.
Following summary judgment the District Court granted
the Baltrusches leave to amend and file a counterclaim. In
the counterclaim, the Baltrusch brothers alleged that
Ellingson had violated the Montana Real Estate Brokers and
Salesman Act and breached its duty of good faith and fair
dealing. The Baltrusches alleged Ellingson knew of the
impending return conveyance of the Gibson property but failed
in its duty to inform the Baltrusches it would demand a
commission on the conveyance. After further discovery, both
parties moved for summary judgment on the counterclaim. On
August 26, 1986, the court granted summary judgment in favor
of Ellingson and dismissed Baltrusches' counterclaim. Final
judgment was entered on October 9, 1986, in the total amount
of $148,308.91, which included interest at 10 percent on the
amount of judgment entered March 25, 1985. Baltrusches'
motion to alter or amend the judgment was deemed denied, and
this appeal followed.
Issue 1
Did the District Court err when it granted summary
judgment in favor of Ellingson?
The first issue is whether summary judgment in favor of
Ellingson on the issue of its entitlement to a commission was
proper. Pursuant to Rule 56 ( c ) , M.R.Civ.P., if there is no
genuine issue of material fact and the evidence before the
court shows the moving party is entitled to judgment as a
matter of law, summary judgment is proper. In this instance,
the District Court found the exclusive listing agreement to
be clear and unambiguous, that Ellingson was entitled to its
commission under the contract, and that the Baltrusches
raised no affirmative defenses to the contract. We disagree
with the District Court that there was no genuine issue of
material fact and that Ellingson was entitled to judgment as
a matter of law.
The exclusivity provision in the listing agreement
executed by the parties provides:
This listing is an exclusive listing and
you hereby are granted the absolute,
sole and exclusive right to sell or
exchange the said described property.
In the event of any sale, by me or any
other person, or of exchange or convey-
ance of said property, or any part
thereof, during the term of your exclu-
sive employment, or in the case I with-
draw the authority hereby given prior to
said expiration date, I agree to pay you
the same commission, just the same as if
a sale had actually been consummated by
you. [Emphasis added. ]
The listing agreement covered the period from November 6,
1979, to November 6, 1980.
On January 11, 1980, the Baltrusches received notice of
default from sellers, Stephen and Patricia McAfee. The
McAfees continued to pressure the Baltrusches to transfer the
property in lieu of foreclosure. The Baltrusch brothers
notified Ellingson in February 1980 that the McAfees had
served notice of default. The Baltrusches also notified
Ellingson that the McAfees were pressuring them to "give the
property back." On June 3, 1980, the Baltrusch brothers
transferred quitclaim title to the McAfees in lieu of fore-
closure. It appears from the partial transcript of Otto
Baltrusch, Jr.'s deposition that prior to June 3, 1980,
Ellingson requested that Baltrusches obtain a ten-day exten-
sion from McAfees to enable Ellingson to find a buyer for the
Baltrusch property. Additionally, it appears that the
McAfees by letter dated June 3, 1980, granted a ten-day
extension. However, Ellingson was unable to find a buyer.
The District Court found "the Baltrusches conveyed the
Gibson property thereby effectively withdrawing the authority
of the Ellingson agency to continue to try to sell the
property . . ." On review we are presented with the question
of whether the District Court erred when it held that a
transfer of title in lieu of foreclosure constitutes a sale,
exchange or conveyance within the intended meaning of the
listing agreement, thereby entitling Ellingson to a
commission.
This Court has previously examined exclusive listing
agreements identical to the agreement in the present case.
In Payne v. Buechler (Mont. 1981), 628 P.2d 646, 38 St.Rep.
799, the owner unilaterally terminated an exclusive listing
agreement, then twelve days later sold the property which had
been covered under the agreement. In finding the broker
entitled to his commission, we stated:
... once the broker began performance
under the written agreement by expendi-
ture of time, efforts and money to
attract a purchaser on the owner's
terms, the written agreement became
bilateral and binding on both parties.
It could not be unilaterally terminated
by the owner without payment of the
brokers' commission.
Payne, 628 P.2d at 650, 38 St.Rep. at 804.
In Nardi v. Smalley (1982), 197 Mont. 321, 643 P.2d
228, this Court held the owner bound by the terms of the
exclusive listing agreement and the broker entitled to his
commission. In Nardi, the owners executed documents for the
sale of the property seventy days after the listing agreement
expired but to a buyer found by the broker. The listing
agreement provided for the broker's commission on a sale to a
buyer found by the broker, at the agreed price, within ninety
days of the termination of the listing agreement. We held
the terms of the listing agreement entitled the broker to his
commission and that the broker had not breached his fiduciary
duty to disclose all material terms.
In John Whiteman & Co. v. Fidei (pa. 1954), 106 ~ . 2 d
644, 646, the Superior Court of Pennsylvania held a buyer's
receipt of $1,000 coupled with the transfer of title in lieu
of foreclosure constituted a "sale or exchange." Whiteman
was later distinguished by Felbinger and Co. v. Traitoros
(Ill. 1979), 34 N.E.2d 1283, 1288. In Felbinger, the Illi-
nois Appellate Court held that when an exclusive realtor's
listing contract does not state whether a transfer of title
in lieu of foreclosure constitutes a sale, the term sale is
susceptible to differing interpretations. Felbinger reversed
and remanded the case to the District Court and ordered the
court to admit par01 evidence of the parties' intent.
"Where an ambiguous term is used, the intent of the
parties will govern its construction and extrinsic evidence
can be used to discover that intent." Adams v. Chilcott
(1979), 182 Mont. 511, 517, 597 P.2d 1140, 1144. A court
should look at the whole contract and its purpose in deter-
mining intent and is not bound by any single provision or
expression. Gropp v. Lotton (1972), 160 Mont. 415, 421, 503
P.2d 661, 664-665. When uncertainty in a written instrument
exists, the provisions should properly be construed against
the party causing the uncertainty. St. Paul Fire & Marine
Ins. Co. v. Cumiskey (1983), 665 P.2d 223, 229, 40 St.Rep.
891.
Implicit in the District Court's findings of fact and
conclusions of law is the finding that it was the intention
of the parties to the contract that the terms sale, exchange
or conveyance would include a deed in lieu of foreclosure. A
sale is defined by 5 30-11-101, MCA, which provides:
Sale defined. Sale is a contract by
which, for a pecuniary consideration
called a price, one transfers to another
an interest in property.
In the case at hand, the Baltrusch brothers gave up
their entire interest in the Gibson property and forfeited
all payments made to the McAfees. Accordingly, we hold the
Baltrusches' transfer of title does not constitute a sale
pursuant to § 30-11-101, MCA.
Exchange has been defined as a "contract by the terms
of which specific property is given in consideration of the
receipt of property other than money." Capps v. Mines Ser-
vice (Or. 1944), 152 P.2d 414, 416; see also, $ 30-11-112,
MCA. Black's Law Dictionary defines conveyance as a "trans-
fer of title to land from one person, or class of persons, to
another by deed." The District Court found the Baltrusches
conveyed the Gibson property, thereby violating the exclusive
listing agreement. It is arguable that a technical convey-
ance occurred when the Baltrusches transferred the property
in lieu of foreclosure. However, the record is replete with
evidence that the term conveyance had different meanings to
respondent and appellants. Both testimony and actions of the
parties support this premise.
It follows that the term "conveyance" has no fixed or
invariable meaning, but is to be interpreted in accord with
the manifest intention of the parties. Parol evidence is
therefore necessarily admissible to demonstrate and explain
the ambiguity. We have held that "summary judgment is usual-
ly inappropriate where the intent of the contracting parties
is an important consideration." Twite v. First Bank (N.A.) ,
Western Montana (Mont. 1984), 692 P.2d 471, 472, 41 St.Rep.
2518, citing Fulton v. Clark (1975), 167 Mont. 399, 404, 538
P.2d 1371, 1374.
In the case at bar, the record reflects that the
Baltrusches were unaware that a transfer of title in lieu of
foreclosure would constitute a conveyance entitling Ellingson
to a commission. Respondent Ellingson did not inform the
Baltrusches of that fact despite its fiduciary duty to dis-
close, until the filing of this lawsuit. Lyle v. Moore
(1979), 183 Mont. 274, 277, 599 P.2d 336, 338. Therefore, a
latent ambiguity exists, and par01 evidence is necessary to
determine the intention of the parties. Section 28-3-301,
MCA. We reverse and remand this issue to the District Court
with instructions to vacate summary judgment granted in favor
of respondent Ellingson.
Issue 2
Did the District Court err when it granted summary
judgment dismissing the Baltrusches' counterclaim?
After granting respondent Ellingson's initial motion
for summary judgment, the District Court granted appellants
leave to amend and file a counterclaim. The Baltrusch broth-
ers alleged in their counterclaim that Ellingson violated its
fiduciary duty owed by a broker to a customer to disclose all
material facts. On August 26, 1986, the District Court
granted Ellingson's motion for summary judgment against the
Baltrusches' counterclaim.
A fiduciary relation exists between a real estate
broker and his client. Carnell v. Watson (19781, 176 Mont.
344, 350, 578 P.2d 308, 312; Lyle v. Moore ((1979), 183 Mont.
274, 277, 599 P.2d 336, 337. A real estate broker holds the
affirmative duty to disclose all material facts. Flemmer v.
Ming (Mont. 1980), 621 P.2d 1038, 1043, 37 St.Rep. 1916.
The District Court, in its August 26, 1986, findings of
fact and conclusions of law found that the contract was clear
and unambiguous and that Ellingson had "no duty to advise
[the Baltrusches]." Earlier, we held that the District Court
erred when it found the listing agreement was clear and
unambiguous. We conclude there may have been a genuine issue
of material fact as to whether Ellingson breached a fiduciary
duty to disclose. Rule 56(a), M.R.Civ.P.
The District Court erred when it granted respondent's
motion for summary judgment, thereby dismissing the
Baltrusches' counterclaim. We reverse and remand this issue
and instruct the District Court to deny Ellingson's motion
for summary judgment against the Baltrusches' counterclaim.
Issue 3
Did the District Court err when it compounded interest
in violation of § 25-9-205, MCA?
Although we are not required to review this issue, we
choose to address it for judicial economy and to assist the
parties in the event of further judicial proceedings involv-
ing this issue.
In its March 25, 1985, summary judgment order, the
court awarded Ellingson its commission of $86,862.84 plus
interest at 6 percent on that amount from the date of breach
to the date of judgment. The total judgment amount entered
on March 25, 1985, was $111,936.45. The second summary
judgment dismissing Baltrusches' counterclaim was entered
August 26, 1986. The court found Ellingson entitled to
judgment at 10 percent on the $111,936.45 judgment. The
Baltrusches contend the interest at 10 percent on the initial
judgment, which included a 6 percent interest award, is in
violation of § 25-9-205, MCA. Section 25-9-205, MCA,
provides :
(1) Except as provided in subsection
(2), interest is payable on judgments
recovered in the courts of this state at
the rate of 10 percent per annum and no
greater rate. Such interest must not be
compounded in any manner or form.
(2) Interest on a judgment recovered in
the courts of this state involving a
contractual obligation that specifies an
interest rate must be paid at the rate
specified in the contractual obligation.
In this case, Ellingson's damages were ascertainable on
the date of breach, and it was entitled to interest thereon
pursuant to 27-1-211, MCA. The legal interest rate was 6
percent pursuant to former S 31-1-106, MCA. The District
Court correctly included 6 percent interest from the date of
the breach to the March 25, 1985, judgment. Section
25-9-204, MCA; Gallatin Valley Elec. Ry. v. Neible (1919), 57
Mont. 27, 186 P. 689. On that date a judgment amount was
entered, and Ellingson was entitled to 10 percent interest on
the judgment under 5 25-9-205, MCA. This is not compound
interest; rather, it is interest on the judgment, and the
District Court did not err in making the award. See, Ehly v.
Cady (Mont. 1984), 687 P.2d 687, 696, 41 St.Rep. 1611, 1621.
The method used by the District Court in calculating
interest is correct. Summary judgment motions granted by the
District Court (1) in favor of respondent Ellingson's claim
and (2) denying appellant Baltrusches' counterclaim are
reversed and remanded with instructions to vacate.
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We concur:
I dissent to the majority's decision on Issues 1 and 2.
The terms of the listing agreement entitle Ellingson to a
commission upon exchange of the contract property. The
pertinent part of the agreement reads: "In the event ...
of exchange or conveyance of said property, ... during the
term of your exclusive employment . . . I agree to pay ..
.I1. Thus, the outcome of the commission issue depends on
whether or not an exchange has occurred. Section 30-11-112,
MCA, defines an exchange as follows:
Exchange is a contract by which the parties
mutually give or agree to give one thing for
another, neither thing nor both things being money
only.
Here the Baltrusches conveyed their vendee's or
equitable interest in the property to McAfees. In exchange
the McAfees released them from substantial monetary payments,
due currently and in the future, under the contract. McAfees
obtained the property back and Baltrusches obtained the
release. Under Montana law, an exchange occurred. They gave
one thing for another, neither thing being money. The
exchange triggered the commission provided for by the
agreement.
The terms of the listing agreement are clear. The
signed listing agreement was the final contract between the
parties. There is no ambiguity as to its terms. The
Baltrusches are experienced businessmen. The admission of
parol evidence to determine the intent of the parties
violates the parol evidence rule. Any agreement reduced to
writing is the final agreement of the parties and if not
ambiguous should stand.
As to the second issue, Baltrusche's counterclaim should
have been dismissed. Ellingson did not owe a fiduciary duty
as broker to affirmatively disclose to Baltrusches that a
commission would be due in event of an exchange or conveyance
back to McAfees. The listing agreement already provided for
the commission.
A fiduciary duty between broker and seller is breached
when the seller is fooled or deceived by the contract or does
not understand its content. Nardi v. Smalley (Mont. 1982),
643 P.2d 228, 39 St.Rep. 606. None of these elements appear
here. With the myriad of real estate transactions involving
pecuniary sales or exchanges including not only real property
but personal and mixed property, and all of the various
combinations thereof, an expansion of the fiduciary duty to
affirmatively disclose when it is clear in the parties'
written agreement, opens the door to extensive uncertainty of
the law. The District Court was correct in dismissing
Baltrusches' counterclaim.