Era Real Estate Home & Ranch Properties v. Big Horn Game Ranch, Inc.

No. 84-243
IN THE SUPRES4.E COURT OF THE STATE OF MONTANA
1984
ERA REAL ESTATE HOME & RANCH
PROPERTIES, a Montana corp. ,
Plaintiff and Appellant,
BIG HOWJ GAME W C H , INC. ,
a Montana corp.,
Defendant and Respondent.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Diane G. Barz, Judge presiding.
COUXSEL OF RECORD:
For Appellant:
Parker, Sweeney, Healow & Lee; Mark D. Parker argued,
Billings, Montana
For Respondent :
Davidson, Beeder, Baugh, Broeder, Poppler and
Michelottir G. Todd Baugh argued, Billings, Montana
Submitted: September 21, 1984
Decided: October 18, 1984
-
, .-
Clerk
Mr. Chief Justice Frank I. Haswell delivered the Opinion of
the Court.
ERA Real Estate appeals a summary judgment dismissiilg
its claim for a commission in the Yellowstone County District
Court.
The plaintiff real estate broker (ERA) brought this
action to recover a real estate commission it believed had
been earned on a large ranch sale. The defendant, Bighorn
Game Ranch, Inc. (Bighorn), was the owner and seller of the
16,000-acre ranch located near Hardin, Montana. ~ighorngave
Michael Murphy, an agent for ERA, a nonexclusive listing to
sell the ranch in March 1982. There was no formal listing
agreement executed, but the understanding between Bighorn and
Murphy was that Murphy would earn a 5 percent sales commis-
sion upon making or effecting a sa1.e.
At the time the listing was given to Murphy, Bighorn
was in a Chapter XI bankruptcy proceeding. Murphy was given
authority by the trustee to sell the ranch and told to take
directions from Larry Feldman, the president of Bighorn.
Feldman directed Murphy to sell 100 percent of Biqhorn's
stock, which would include the ranch asset and a substantial
tax loss carry-over which Bighorn had accrued.
Acting for ERA, Murphy found a potential buyer in
September 1982. Dennis Haden of Dallas, Texas, was eager to
buy the ranch for its tax advantages and proposed a tax-free
exchange of a building he owned in Dallas for the ranch.
Feldman was amenable to the deal and signed a buy-sell agree-
ment with the buyer on Septemher 10, 1982. Closing was set
for December 9, 1982.
The buy-sell agreement contains several provisions
pertinent to this appeal. One page entitled "Special
Provisi.ons" contained the following language in normal--sized
type :
"THIS SALE JS SUBJECT TO THE FOLLOWTNG:
"E. Concurrent execution of an agreement
between the holders of 100% of the common
stock in Big Horn Game Ranch, Inc.,
wherein they agree to sell all of their
stock in said corporation free and clear
of all encumbrances to PURCHASER, and
PURCHASER agrees to purchase same for the
sum of $300,000.00
"J. $142,300.00 shall be paid at closing
to ERA Home & Ranch Properties, Bill-ings,
Montana.
"L. This offer is made to the share-
holders of Big Horn Game Ranch, Inc., but
- -and approved by - - - sharehold-
must be all of the
-
ers the trustee of the Big Horn
Fanch, Inc. bankruptcy." (Emphasis
.
supplied )
The contract to make a sale was therefore conditional
upon approval by the shareholders of Bighorn.
The shareholders of Bighorn were a group of oriental
businessmen. The exact ownership of the common stock changed
during the course of these dealings. The president Feldman
negotiated with the buyer Haden under the belief he had
authority to enter into a sales contract for Bighorn. Haden
recalled in a deposition that Feldman told him before the
buy-sell agreement was signed that he had the authority to
speak for the shareholders of Bighorn Game Ranch.
The shareholders of Bighorn never unconditionally
approved the proposed ranch sale and the deal never closed.
On October 2, 1982, a combined meeting of the shareholders
and directors was held in San Francisco. The meeting was
conducted in various Eastern dialects. Feldman followed the
business of the meeting through interpreters and afterwards
drafted his impressions into proposed minutes. These minutes
were never signed by the Secretary of Bighorn or the majority
shareholder, Supasit Mahaguna. They state in relevant part:
"In principal [sic] the Shareholders and
board approved the sale and exchange [of
the ranch] subject to an inspection of
the building in Dallas, the approval of
title insurance on the Dallas building,
and the approval of the net lease on the
building in Dallas."
Supasit Maha-guna visited and inspected the Dallas
building owned by Dennis Haden the day following the share-
holder meeting. Mahaguna speaks a little English and Haden
asked him if he was satisfied with the deal. Mahaguna nodded
affirmatively and shook hands with Haden.
Feldman learned indirectly in December that Mahaguna
had rejected Haden's purchase offer. The closing date had
previously been extended to February 28, 1983. Prior to
February Feldman attempted to resurrect and keep the deal
alive by writing Mahaguna and requesting him to reconsider.
llahaguna did not respond. Feldman informed Haden in
mid-February of these events and wrote, ". . . it currently
appears as if I am not going to be able to deliver on my
promise to se1.l you the Bighorn Game Ranch." In late Febru-
ary, Haden traveled to Colorado and was prepared to close hut
Feldman was unable to proceed without the shareholders'
approval or stock certificates.
ERA brought this action to recover the real estate
commission from Bighorn. The District Court granted summary
judgment in favor of defendant Bighorn on April 20, 1984.
The District Court noted that the buy-sell agreement
contains conditions precedent--specifically, full shareholder
approval. Only upon such approval would the contract become
bindinq. The court accepted the authenticity of the minutes
prepared by Peldman and stated in its order that the share-
holders at the meeting had ratified the transaction "subject
to an inspection of the building in Dallas." However, the
trial court found the shareholders never outright approved
the contract. Hence, the condition precedent was not per-
formed, a valid contract did not result, and ERA did not
effect a sale. The court concluded ERA was not entitled to a
broker's commission. We affirm.
The arguments appellant ERA presents on appeal can be
summarized as one issue:
Did the failure of the seller to close the sale consti-
tute wrongful conduct entitling ERA to its broker's
commission?
The parties agree that the controlling Plontana cases
are Diehl & Associates, Inc. v. Houtchens (1377), 173 Mont.
372, 567 P.2d 930, and Associated Agency of Bozeman, Inc. v.
Pasha (Mont. 1981), 625 P.2d 38, 38 St.Rep. 344. ERA was
required to effect a sale and under Diehl we have interpreted
this language to mean the broker must complete the sale to
earn his commission. Completing the sale involves payment of
the purchase price and conveyance of title. In Pasha, the
genera1 rule was modified: a broker is entitled to his
commission even if the sale is not completed, providing a
ready, willing and able buyer is procured and the failure to
close was due to the wrongful conduct of the seller. See
also, Ehly v. Cady (Mont. 19841, P.2d , 41 St.Rep.
1611.
The broker ERA has failed to produce evidence of wrong-
ful conduct on the part of Bighorn. The buy-sell agreement
was clearly conditioned on full shareholder approval.
Tndeed, this clause was added to the contract at the request
of the buyer Haden. Haden undoubtedly recognized the impor-
tance of shareholder approval in a deal where the entire
assets of a corporation would be purchased.
Bighorn's shareholders never unconditionally approved
the sale. The "minutes" of the October shareholder meeting,
even if elevated in authenticity to a signed, executed and
accurate representation of the meeting, do not indicate
ratification of the sale. The sale was only approved in
principle and subject to the approval of the Dallas building.
One shareholder did apparently inspect and approve the ex-
change building. However, there were several other share-
holders in Bighorn and the record does not disclose their
opinions.
The District Court correctly reasoned that the buy-sell
agreement was a conditional contract containing the condition
precedent of full shareholder approval. The condition prece-
dent was never performed and therefore the legal obligations
under the contract--i.e., payment of the broker's commission
--never became enforceable. Section 28-1-403, MCA. Under
these circumstances, the seller's failure to close did not
constitute wrongful conduct within the meaning of our Pasha
decision. Consequently, the broker ERA was not entitled to
its commission on the uncompleted sale.
ERA further argues that the corporation Bighorn should
he held liable for the representation by its president,
Feldman, that he had authority to speak for the shareholders.
This matter is addressed by the principles of the law
of agency. The third party broker would like to hold the
principal, Bighorn, liable for the contract executed by the
agent, Feldman. Here, where the disclosed principal did
nothing to indicate to the broker that the agent had authori-
ty to bind all. shareholders, there is no liability. There
was no apparent authority whereby the principal could be held
liable. .
Restatement (Second) of Agency, 5 159 (1958)
This is a case where the agent possibly exceeded hi^
authority. Even where the agent was reasonably mistaken and
believed in good faith that he acted with authorization, the
Restatement, supra, would absolve the principal and hold the
agent liable. See, S 329, comment b. Cf., Losinski v.
American Dry Cleaning Co. (Minn. 1979), 281 N F . d
.!2 884; Husky
Industries, Inc. v. Craig Industries (KO. App. 1981), 618
S.W.2d 458.
In this case we have an express provision in the under-
lying contract that indicated additional approval from the
shareholders was required. The provision should have given
the broker Murphy notice that the president had no authority
to bind Bighorn. See, Hansen v. Power (1977), 279 Or. 589,
569 P . 2 d 573 (where it appears that a person dealing with an
agent knew that approval by another person was required,
there can be no claim of the agent's apparent authority) ;
Mid-State Homes, Inc. v. Berry (Ala.Civ.App. 1978), 359 So. 2d
401 (where the contract for sale of real estzte indicated
that written approval was required, the agent's assurance
that the contract would be approved did not negate the ex-
press restriction known to the buyer).
Appellant ERA cites Acmer Corporation v. State Trans-
port Company (1976), 275 Or. 51, 549 P.2d 1114, for the
proposition that a person who fails to deliver at closing is
still liable for a commission.
Respondent Bighorn justifiabl-y distinguishes this case.
In Acmer the corporation was found liable, but there was an
express grant of authority to its president to sell the
corporation. The president was a board member who owned
two-thirds of the stock and the board of directors in a duly
authorized meeting specifically granted him the authority to
sell the corporation subject to approval by the owners of
two-thirds of the stock of the corporation. When the presi-
dent who had authorized the sale as a board member later
rejected the transfer as a shareholder, the Oregon Supreme
Court held the corporation liable for the broker's commis-
sion. There was no analogous grant of authority in this
case. Feldman was not expressly authorized by Righorn to
sell, and Bighorn did nothing to indicate to the broker that
he was. The corporation is not liable for representations by
its agent that he acted with full shareholder approval,
particularly when the underlying contract was expressly
conditioned on such approval.
The judgment of the District Court is affirmed.
~ L D A A J .&*
Chief Justfce
We concur: