Gilder v. . Davis , 137 N.Y. 504 ( 1893 )

The general rule is that when a broker, employed to negotiate a sale of real estate, brings to his employer a responsible purchaser willing to buy upon the terms prescribed he has earned his commissions. (Mooney v. Elder, 56 N.Y. 238; Sibbald v.Iron Co., 83 id. 378; Duclos v. Cunningham, 102 id. 678;Kalley v. Baker, 132 id. 1.) Where the contract of sale is executed between the employer and the purchaser, the right of the broker to his commissions does not depend upon the performance of the contract by the purchaser. If from a defect in the title of the vendor, or from a refusal to consummate the contract on the part of the purchaser for any reason in no way attributable to the broker, the sale falls through, nevertheless the broker is entitled to his commissions, for the simple reason that he has performed his contract. If he negotiates a contract different from that prescribed by his employer, and the employer subsequently ratifies it, and thus a contract is finally made which is satisfactory to him, then the broker has earned his commission. (Nesbitt v. Helser, 49 Mo. 383; Coleman's Exrs. v. Meade, 13 Bush. [Ky.] 358.) These rules apply where the broker has acted in good faith, and the contract made is either signed by the employer himself or is approved or ratified by him. The contract for the sale of real estate may provide for the payment of a sum of money as liquidated damages by the party failing to perform, and thus the contract may in a certain sense be optional with either party; yet if the employer signs or approves the contract, I see no reason to doubt that in such a case, although in the end the purchaser may not take a conveyance of the real estate, preferring to pay the liquidated damages, the broker has earned his commissions. If in such a case the employer wishes to be exempt from the payment of commissions, or to confine the commissions to the amount of the liquidated damages paid in lieu of performance, he should stipulate for such exemption in the contract with his broker. The commissions are the compensation for the services of the broker, and when the services stipulated for have been rendered he should be entitled to his commissions.

Now, what are the facts of this case? The plaintiff and other persons associated with him owned certain real estate in the state of Kansas which he desired to sell, and he addressed a letter to the defendants, who were real estate brokers in the city of New York, in which he authorized them to negotiate for the sale of the property for not less than $125,000, in cash, stating that he understood that they were to receive a commission on such sale of five per cent. In pursuance of that authority the defendants commenced their efforts to negotiate a sale of the property, and finally entered into a contract for the sale thereof to Gould Co. for the price of $125,000, cash upon the following terms:

"The terms of the purchase are ten thousand dollars ($10,000), to be paid to bind the transaction, and the remaining one hundred and fifteen thousand dollars ($115,000) to be paid as soon as a company, which Messrs. Gould, McGhee and associates are now forming, shall be incorporated, and a sufficient amount of the preferred stock of said company subscribed and paid for to meet said payment. Should the said Gilder and his associates be unable to give a good and sufficient title to the said Kansas City property, and to turn over the same free of all incumbrances, the said Gould and his associates shall be relieved of all obligation to purchase, and the said ten thousand dollars ($10,000) deposit shall be returned to them. Should the title to said property be found good and sufficient, but the said Gould and his associates fail to organize their company, and to make the one hundred and fifteen thousand dollars ($115,000) payment, hereinbefore referred to, by or within four months from this date — namely, the eighth day of May, 1890 — then the said deposit of ten thousand dollars ($10,000) shall be forfeited and paid over to the said Gilder, as the representative of the owners of the said Kansas City property; but no further liability of any kind whatsoever shall be incurred by the said Gould and his associates over and above the said ten thousand dollars ($10,000)."

Gould and Co. Immediately paid the $10,000 to the defendants, and on the same day they reported the contract to the plaintiff who at once approved of and confirmed the same. On the same day the plaintiff addressed a letter to the defendants in which he stated as follows: "Referring to my letter of confirmation of this date, I beg to express to you my understanding that there shall be no commission paid for the sale of the Kansas City property until the final purchase money has been paid over, inasmuch as otherwise I should be really granting a four months option upon this property for the sum of $3,750." To that the defendants answered by letter, as follows: "Replying to your favor of even date, we beg to say that the condition you make — that the $6,250 commission due us on sale of the Kansas City Slaughtering plant and property shall not be paid until the final purchase money is paid in — is entirely satisfactory and hereby agreed to by us." The purchasers, Gould Co., did not take the property and forfeited the $10,000. The plaintiff then demanded the whole of the $10,000 from the defendants, and they claimed that they were entitled to their commissions on that sum, and refused to pay him more than $9,500. He accepted that sum without prejudice to the rights of either party, and afterwards commenced this action to recover the balance, $500. The defendants, in their answer, claimed to retain the $500 as their commissions on the $10,000. At the trial term it was held that they were entitled to the $500, and the judge directed a verdict in their favor dismissing the complaint. Upon appeal by the plaintiff to the General Term, the judgment directed at the Special Term was reversed, and a new trial ordered.

We are now to determine upon the facts hereinbefore stated, about which there is no dispute, whether or not the defendants were entitled to commissions as claimed by them.

While it is not necessary to be determined upon this appeal, it is by no means clear that when the contract was closed between the plaintiff and Gould Co., the defendants were not entitled to their full commissions. They had then negotiated a contract of sale which was satisfactory to the plaintiff and which was approved and confirmed by him. If there had been no further agreement between the parties as to the commissions, it might be claimed, at least with some plausibility, by the defendants that they were entitled to their commissions as they would have been if they had negotiated a contract containing a stipulation for the payment of liquidated damages in case of failure of performance by either party. And so apparently the plaintiff understood his obligation to them, and, therefore, he exacted an agreement that they should not have their full commissions unless the property was finally taken and paid for by the purchasers. It is not a fair construction of the two letters embodying the agreement that the defendants were to have no commissions whatever, unless the purchasers took and paid for the property. It cannot be supposed that the parties meant to agree that the plaintiff should receive in consequence of the services of the defendants $10,000 without any payment or allowance for such services. We think the fair interpretation of the language of the two letters is simply that the full commissions were not to be paid unless the property was finally taken by the purchasers, leaving the defendants to whatever rights they had to commissions upon the $10,000. The letters will bear that construction, and, in furtherance of what seems to be fair dealing, they should be so construed. We think it is a just view to take of such a situation where a broker has obtained an optional contract sanctioned by his employer that he should at least receive his commissions upon the sum paid and forfeited by the purchaser. We have found no case where the precise point here involved was decided. A case nearest like this is Pierce v. Powell (57 Ill. 323).

We are, therefore, of opinion that the order of the General Term should be reversed and the judgment of the trial term affirmed, with costs.

All concur.

Order reversed.