Eastburn v. Joseph Espalla, Jr., & Co.

The suit is by a real estate broker to recover commissions due as per contract with the owner. The broker obtained a purchaser able and willing to buy, who submitted a proposition in writing which was accepted in writing by the owner.

The defense was that the plaintiff firm forfeited all claim to commissions because of bad faith in promoting the offer and acceptance at a price known by the broker to be greatly less than the true value of the property.

The broker occupies a fiduciary relation to the owner he represents in the sale of the property, owes full fidelity in the service he undertakes, and upon his faithfulness depends his right to compensation. The rule has been stated in strong terms and vigorously applied in numerous cases in this court. Alexander v. Smith, 180 Ala. 541, 61 So. 68; Berry v. Marx,206 Ala. 619, 91 So. 583; Clay v. Cummins, 201 Ala. 34, 77 So. 328; Dean v. Roberts, 182 Ala. 221, 62 So. 44; Jackson v. Berry-Snellings Realty Co., 211 Ala. 174, 100 So. 111; Clifford v. Armstrong, 176 Ala. 441, 58 So. 430; Alford v. Creagh,7 Ala. App. 358, 62 So. 254; Henderson v. Vincent, 84 Ala. 99,4 So. 180.

When the broker contracts to sell the property at not less than a price named, and thereafter the property has enhanced in value to a point greatly in excess of such minimum, a fact known to the broker and known by him to be unknown to the owner, the broker owes the duty to inform the owner of the increased value. This applies to enhancement due to general causes, or to special conditions, such as discovery of valuable minerals thereon, or proximity to recently discovered oil fields, etc. Hall v. Gambrill (C.C.A.) 92 F. 32; Hegenmyer v. Marks, 37 Minn. 6, 32 N.W. 785, 5 Am. St. Rep. 808; Wadsworth v. Adams, 138 U.S. 380, 11 S.Ct. 303, 34 L.Ed. 984; Snell v. Goodlander, 90 Minn. 533, 97 N.W. 421.

The general rule is that, where the owner, dealing at arm's length in entering into the relation, has fixed a stated price and terms of sale, when the broker finds and presents a purchaser ready, able, and willing to take the property at such price and on such terms, the commissions are due. In the absence of special circumstances, he need not seek a purchaser at a higher price.

In the case before us, the price was fixed in the contract at $2,000, terms, cash. More than a year thereafter, while the contract was in force, plaintiff obtained and submitted to defendant an offer of $1,350, which was accepted.

There was evidence that the broker advised the owner to accept the offer, that it was well sold at the price, and evidence that in fact there was a real estate boom in that vicinity, and the actual value at the time was about $3,500. For the purpose of showing the broker knew of the enhanced value, Mr. Crabtree, member of plaintiff firm, was asked, on cross-examination, this question:

"Just a little while before you submitted this offer of Mr. Kilborn's, did you go down to Mr. Eastburn's home and see Mrs. Eastburn and tell her you could sell this place for $2,000, and for Mr. Eastburn to come by the office?"

The court, on objection, rejected this evidence. In this there was error. It went directly to the question of good faith in presenting an offer and recommending the sale at a reduced price. Like evidence from Mrs. Eastburn, the wife of defendant, was erroneously refused.

Further error intervened in refusal to admit defendant's testimony that he did not know of the enhanced value at the time.

Another phase of the evidence tended to show that, on calling at plaintiff's office in response to the message of Mr. Crabtree, Mr. Espalla, another member of the firm, after ascertaining defendant had not seen his place in possibly a year and a half, represented that the improvements thereon had been greatly abused, and were in a dilapidated condition, giving details, and recommending acceptance of $1,350; that such representations were found to be untrue after the offer was accepted. This evidence, not controverted in the record, supported a defense of fraud by misrepresentation. The rejected evidence tended to support this view of the case.

Charge 6, refused to defendant, was a correct statement of the law as applied to the evidence. Its refusal was error.

Refused charge No. 2 should have been given. The oral charge of the court failed to cover the real issues in the case, but limited the issue to fraud inducing defendant to put the property in plaintiff's hands for sale.

Reversed and remanded.

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