Coyle's Estate , 1944 Pa. Dist. & Cnty. Dec. LEXIS 85 ( 1944 )

Hunter, J.,

Petitioner, substituted trustee under the will of the testator, presented a petition for confirmation of private sale of real estate under the Revised Price Act. An answer having been filed by the life tenant, averring that the price obtained, $15,000, was not fair and adequate, the matter was referred to a master. During the proceedings before the master, a higher offer of $16,500 was made by Rose Walker, whereupon the trustee entered into an agreement of sale with the new purchaser, subject to the approval of the court. Subsequently, the original purchaser, Louis Schwom, increased his offer to $17,100, and, no higher offer having been made by Rose Walker and the price being satisfactory to the life tenant and to the other parties in interest, the master reported his approval of the sale, and by decree of this court the sale was confirmed to Louis Schwom, the original purchaser.

The master dismissed the claim of James J. Grady, real estate agent for the unsuccessful bidder, for a division of commissions between him and Louis Schwartz, cooperating with Max Schermer, Inc., agent for Louis Schwom, the successful purchaser. To this conclusion James J. Grady excepts.

The trustee signed commission agreements with both brokers, that with Mr. Grady being to pay him commissions in accordance with the Act of 1941 and as might be approved by the orphans’ court.

The Act of July 2, 1941, P. L. 227, 20 PS §2254, is in part as follows:

“Provided, however, That nothing . . . shall be construed to relieve executors, administrators or trustees who have entered into an agreement of sale of real estate of a decedent or any other real estate held in trust in good faith, and who prior to the time fixed for settlement thereunder have received a higher offer for such real estate, from the payment of real estate broker or broker’s commissions to the broker who had procured such agreement of sale, and in the event that more than one real estate broker is entitled to commissions for said agreements of sale, then such commissions shall be equally divided between or among such real estate brokers: Provided, further, That the total aggregate commissions paid shall in no event exceed five per cent of the gross consideration of the final sale.”

It was decided in Orr’s Estate, 283 Pa. 476, and McCullough’s Estate, 292 Pa. 177, that it is not only the power but the duty of the court to see that a fair value is received in a sale by a fiduciary. A fiduciary who has entered into an agreement of sale is required to cancel the agreement if he receives a higher offer prior to the time fixed for settlement: Kargiatly v. Provident Trust Company of Philadelphia et al., 338 Pa. 358; Bolen v. Spahr, 154 Pa. Superior Ct. 193; Costello’s Estate, 39 D. & C. 596; Ladner’s Real Estate Conveyancing, p. 95. In Clark et al. v. Provident Trust Co., 329 Pa. 421, it was held that a real estate broker’s right to commissions for procuring a purchaser was defeated by the fiduciary’s duty to reject such an agreement, and that persons dealing with an executor or other trustee are bound to be cognizant of the extent of his powers when he acts in a fiduciary capacity.

The purpose of the Act of 1941 was to correct the injustice done by these decisions to a broker who had earned his commissions.

The act was construed in Neely v. The Pennsylvania Co., etc., et al., 152 Pa. Superior Ct. 70, where a broker in a canceled agreement was awarded a share of commissions, although the canceled agreement provided that no commission was to be paid if settlement under the agreement was not actually completed. It was held that this release from liability was to operate only if the deal fell through for any one of a number of reasons other than a sale through another broker at a higher price.

Hirt, J., said (pp. 73-74):

“This is remedial legislation to be liberally construed in the light of the occasion for the law, the mischief to be remedied and the object to be attained. Statutory Construction Act of May 28, 1937, P. L. 1019, §§51, 58. . . .

“The purpose of the amendment was to place brokers who have earned commissions in positions of equality by a division between them of the amount of a single commission. It was enacted also in the best interests of the trust. A broker is more likely to exert himself to secure a purchaser on acceptable terms by the assurance that he will not be wholly barred from compensation by the chance that another broker may offer more. The 1941 amendment is applicable to the situation here presented.”

The statute should present little difficulty where there is a division of commissions between a broker whose agreement is canceled and a broker for a later and successful bidder. The difficulty is where there are intermediate and unsuccessful bidders. If, as has occurred at the bar of this court, a bidder appears in competition with others, and his bid is rejected because another has bid a higher price, or for other good reason, then we would without hesitation deny him a share in the commissions, because he is a mere volunteer, without contract of employment, or acceptance or adoption of his acts by the trust estate: Ladner’s Real Estate Conveyancing, p. 55, and see section 194 thereof, pp. 515-516. It would be absurd to give the representative of every bidder a share in the commissions merely because he submitted a bid.

In the instant case the facts vary from the above because the trustee did enter into an agreement with the second bidder and his broker, but we call attention to the fact that proceedings were then pending before the master because of the life tenant’s objection to a sale. Under the circumstances, the second agreement was but an offer to the court.

When, therefore, the second offer was rejected by the master and by the court, because the first purchaser increased his bid, the intending purchaser became an unsuccessful bidder, and she and her representative acquired no rights against the trust estate.

We believe that the first broker has justly earned his commissions. His work and time in the ordinary case are greater than that of a second broker. In addition to finding a purchaser he must negotiate with the seller and bring the parties together, whereas the second need but submit a higher offer.

The exceptant earnestly contends that the act contemplates unsuccessful bidders, because it provides that commissions shall be “equally” divided “between or among” real estate brokers, indicating that a series of brokers may be entitled to share therein. It so happens in the instant case that two brokers cooperated in representing the successful purchaser, and it may be that the act was intended to cover such a situation.

In the case entitled Re Straight Mortgage Pool, 45 D. & C. 695, 90 Pitts. 603, the Orphans’ Court of Allegheny County held that a broker who represented a second unsuccessful bidder, whose competition forced the original bidder to increase her offer, was not entitled to a division of the commissions.

We conclude, therefore, that there is no right in the representative of the unsuccessful bidder to share in commissions under the Act of 1941.

The exception of James J. Grady is dismissed, the conclusions and recommendations of the master are approved, and his report is confirmed absolutely.