Krause v. Boraks

341 Mich. 149 (1954) 67 N.W.2d 202

KRAUSE
v.
BORAKS.

Docket No. 50, Calendar No. 46,208.

Supreme Court of Michigan.

Decided November 29, 1954.

Stanley S. Krause, in propria persona.

Nelson S. Shapero, for defendant.

BUSHNELL, J.

Plaintiff Stanley S. Krause, an attorney authorized to practice in this State, brought an action in assumpsit in the common pleas court for the city of Detroit upon an oral agreement for fees with a count in quantum meruit, against defendants Ludwig Boraks and Lawrence I. Yaffa, individually and doing business as Boraks Realty Investment Company.

The principal defendant, Boraks, a licensed real-estate broker, had listed with him for sale at a cash price of $37,000, property in the city of Detroit, used and occupied by a Danish Lutheran Church. A cooperating broker, the Trasher-Thomas Company, was to receive 40% of the brokerage fee of 5% of the sales price, and Boraks was to have 60%. A prospective purchaser made 2 offers, one for cash and the other on terms, the cash offer being accepted by the owners. This purchaser, however, was unable to raise the necessary money and Boraks arranged a land contract transaction in which the purchase price was raised to $50,000, the down payment increased to $10,000, and the balance of $40,000 to be paid on land contract terms. It was proposed that in this manner the transaction could be consummated, provided the vendor's interest in the land contract could be held by the seller or sold for $25,000. Boraks sought to interest various persons in the purchase of this contract, and also attempted to form a syndicate for such purpose. While negotiations were progressing, Boraks talked to one Samuel Polozker, an attorney, in the presence of Krause, with regard to selling the vendor's interest. Polozker testified that he said to Boraks during this 3-cornered conversation: "Now, what's in it as a fee for Stanley Krause?" and Boraks replied: "Why, he will get half of what I get out of it. Whatever I get out of it he will get half."

Later Krause succeeded in interesting 2 of his clients in purchasing the vendor's interest, and a signed offer to purchase was prepared. The transaction was closed about 6 weeks later at the office of Boraks. The Danish Church as seller and the Sweet Home Baptist Church as purchaser were represented by individual counsel, and Krause represented his clients, the land-contract purchasers. A sales commission of $2,500 was divided between the 2 brokers on the 60-40 basis and, after the transaction was closed, a settlement with Krause was attempted through an offer by Boraks of $200, half of which was contributed by the other broker. Krause, claiming that $1,250 was due him, refused the offer and began an action for this amount.

After the trial of that cause in the common pleas court without a jury, the judge found for Krause in the sum of $850. Defendants appealed to the circuit court and plaintiff Krause filed a cross appeal. The matter was reviewed on the record and transcript of the testimony, resulting in a judgment of no cause for action in favor of Boraks.

On appeal here, the controlling question is whether the prohibitory effects of the statute of frauds and the brokers' license law are applicable. (CL 1948, § 566.132 [Stat Ann 1953 Rev § 26.922]; CL 1948, § 451.201 et seq. [Stat Ann 1953 Cum Supp § 19.791 et seq.].)

The trial judge concluded that the transaction was "not an agreement for payment of a commission on the sale of real estate," that plaintiff "was employed in another capacity entirely, and that was to secure somebody that would be able to produce money so that this deal could be consummated."

Neither niceties of language nor fanciful designations can change the substance of the transaction. There can be no doubt about the proposition that the procurement for another, for compensation, of the sale of a vendor's interest in a land contract is controlled by the so-called brokers' licensing act. (PA 1919, No 306, as amended.) Among the provisions of this act (see citations, supra) are the following:

"Sec. 1. It shall be unlawful for any person, firm, partnership association, copartnership or corporation, whether operating under an assumed name or otherwise, from and after January first, 1920, to engage in the business or capacity, either directly or indirectly, of a real-estate broker or real-estate salesman within this State without first obtaining a license under the provisions of this act. * * *

"Sec. 3. One acting for a compensation or valuable consideration of [in?] buying or selling real estate of or for another, or offering for another to buy or sell or exchange or mortgage or appraise real estate, or to negotiate for the construction of buildings thereon, or leasing or renting or offering to rent real estate, or selling or offering for sale, or buying or offering to buy, or leasing or offering to lease, or negotiating the purchase or sale or exchange of a business, business opportunity, or the good will of an existing business for others, or one who, as owner or otherwise, engages in the sale of real estate as a principal vocation, except as herein specifically excepted, shall constitute the person, firm, partnership association, copartnership or corporation performing, offering or attempting to perform any of the acts enumerated herein, a real-estate broker or a real-estate salesman within the meaning of this act. The commission of a single act prohibited hereunder shall constitute a violation."

Exemption from the provision of the act is provided by section 2 thereof and provides in part:

"Nor shall this act be construed to include in any way the services rendered by an attorney at law in the performance of his duties as such attorney at law."

The trial judge in the common pleas court held that the statutes did not bar plaintiff's action, and that "his employment was that of an attorney or in another capacity." The circuit judge, on review, held that the trial court was in error in holding that the brokers' licensing act did not apply to the facts in the case.

In this law action, heard without a jury, this Court will not reverse on issues of fact unless the evidence clearly preponderates in the opposite direction. Nagy v. Balogh, 337 Mich. 691; and Allen v. Currier Lumber Co., 337 Mich. 696. However, the finding by the trial judge that plaintiff was employed as an attorney is obviously erroneous on its face. No exact definition has been framed as to what constitutes the practice of law, and this is because of the numerous and varied tasks which the legal profession is called upon to perform in a complex society. Here, Krause occupied an attorney-client relationship with the purchasers of the vendor's interest in the land contract. There is nothing to indicate a like relationship between Krause and Boraks. Under no interpretation of the facts could Krause be said to have performed legal services for Boraks.

There is no doubt that the legal aspects of real-estate transactions may constitute a large portion of an average attorney's practice, and thus are inseparably connected with the practice of law. But an attorney engaging solely in the function of obtaining a prospective purchaser for an interest in realty, in conjunction with a broker, is clearly invading another scope of activity which, in the absence of being licensed so to do, is prohibited by statute. That an attorney is well qualified to engage in such endeavor cannot be denied. However, the legislature has clearly intended that one engaging in that field of activity must be licensed. Plaintiff's services were not within the exemption provision of the statute hereinbefore quoted. As between Krause and Boraks the claimed contract must, as a matter of law, be held void under the rules stated in Jaenicke v. Davidson, 290 Mich. 298, where it is said:

"All contracts which are founded on an act prohibited by a statute under a penalty are void although not expressly declared to be so and neither law nor equity will enforce a contract made in violation of such a statute or one that is in violation of public policy." (Syllabus.)

Krause relies upon the argument of an isolated transaction and cites Morris v. O'Neill, 239 Mich. 663, as controlling. It is sufficient to point out that the Morris Case was decided in 1927, prior to the effect of the amendment to the brokers' license statute which, in CL 1948, § 451.203 (Stat Ann 1953 Cum Supp § 19.793), says in section 3:

"The commission of a single act prohibited hereunder shall constitute a violation."

The claimed oral agreement to pay a commission on the sale of real estate is void under the statute of frauds. CL 1948, § 566.132 (Stat Ann 1953 Rev § 26.922) provides:

"In the following cases specified in this section, every agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized, that is to say: * * *

"5. Every agreement, promise or contract to pay any commission for or upon the sale of any interest in real estate."

Where one who was instrumental in procuring a purchaser for certain real estate for a broker who had the listing, the Court, in denying recovery, said in Smith v. Starke, 196 Mich. 311 (pp 313, 314):

"We have held, in construing the act in question, that contracts coming within its provisions are absolutely void. McGavock v. Ducharme, 192 Mich. 98. Therefore, if the contract in question comes within the purview of this act, it is void and of no force or effect. The services to be performed and contemplated by the arrangement between the plaintiff and defendant were the services usually performed by a real-estate broker, those of procuring, or aiding in procuring, a purchaser of the Blowers farm; that plaintiff was not to perform all the functions of a dealer in real estate does not preclude from characterizing the services performed as those usually performed by a real-estate broker. Indeed the services to be performed by plaintiff were of the very essence of brokerage services, viz., procuring a purchaser of another's property. Compensation to real-estate brokers is known, not only to the layman, but also to the law as `commission.' The word `commission' implies a compensation to a factor or other agent for services rendered in making a sale."

See, also, Fleming v. James S. Holden Co., 200 Mich. 519, and Renaud v. Moon, 227 Mich. 547.

Plaintiff's attempt to recover under a quantum meruit count is clearly precluded by what was said in Smith v. Starke, supra (p 315):

"But it is urged by the plaintiff that, even if the statute does render the contract void, he may recover upon the quantum meruit, upon the theory that performance takes the case out of the statute. This question is foreclosed by the recent case of Paul v. Graham, 193 Mich. 447, where we had this statute under consideration and held that no recovery could be had upon the quantum meruit for services performed under an agreement that was within the provisions of this statute and therefore void."

The rule in Smith v. Starke, supra, was supported in Mead v. Rehm, 256 Mich. 488, as follows (p 490):

"A verbal agreement to pay the commission is rendered absolutely void by the statute, and there can be no recovery on quantum meruit, even though the service was rendered and accepted."

See, also, Jaynes v. Petoskey, 309 Mich. 32.

Other questions do not merit discussion because, as a matter of law, plaintiff is not entitled to recover under any theory advanced by him.

The judgment of the circuit court is affirmed, with costs to defendants.

BUTZEL, C.J., and CARR, SHARPE, BOYLES, REID, DETHMERS, and KELLY, JJ., concurred.