Amies v. Wesnofske

The defendants were the owners of seventy acres of farm land situated at Hicksville, Long Island, which they sold to de Riesthal and Crawford for $124,000, of which $40,000 was to be paid in cash, and the rest secured by bond and mortgage. Amies Hines were the real estate brokers putting through the deal, for which the usual commission of five per cent would have been $6,200. After some bickering, the brokers agreed to take $5,000 "as a flat commission." When the contract was signed and executed, the brokers took $2,500 in part payment, and agreed to wait for the balance until title was closed. The defendants, at the time of executing the contract with the purchaser, also signed the following memorandum:

"We, the undersigned, do hereby recognize Amies Hines, of 163-18 Jamaica Avenue, Jamaica, N.Y., as the agents who brought about the sale of our farm to de Riesthal and Crawford, with whom a contract is entered into this day, and we agree to pay for their services in bringing about such sale the sum of Five thousand ($5,000) Dollars, one-half of which is paid this date and the balance to be paid on the closing of title."

The purchasers procured adjournments from time to time, and finally entered into an agreement with the defendant owners to be relieved of their contract. One of the purchasers, de Riesthal, testified that although they were financially able to carry out the contract, they did not have the available cash to meet the required payment. He said that they had sufficient property at that time, but not sufficient cash, yet they did not want to be sued for specific performance. Under these circumstances, the defendants agreed, through their lawyer, to take $10,000 as liquidated damages, keep their property, and exchange releases with the purchasers. The release is in evidence and is mutual, signed by all parties. The purchaser releases the seller, and the seller terminates the contract. The brokers knew nothing about this release and were not consulted.

What liquidated damages did the defendants, sellers, suffer? Through the efforts of the brokers, they have received $10,000 cash in settlement of something. Did this include the commission to be paid to their brokers, or did it represent their profit on the transaction? Whatever it is, the defendants by a formal written agreement have substituted one contract for another, and in place of giving a deed and taking mortgages, have kept their property and taken cash. Under these circumstances, are the brokers entitled to their commission?

Brokerage to be paid on the closing of title does not as a matter of law create a condition precedent. Whether it merely fixes the time of payment of a sum admittedly due, or whether the commission is dependent upon the passing of title is generally a question of fact. (North SeaDevelopments, Inc., v. Burnett, 254 N.Y. 374.) Ordinarily, a broker is entitled to his commission when the parties have agreed upon terms and executed the contract of sale. His work is then done, and he is entitled to his pay. If the parties agree otherwise, it is an exception to this general rule. The fact that a purchaser may fail or refuse to carry out his contract is a risk which ordinarily the seller, and not the broker, assumes. The law furnishes protection to the seller, even beyond that which is ordinarily furnished vendors of securities or other personal property. (Colvin v. Post Mortgage Land Co.,225 N.Y. 510.) The assertion, therefore, that the postponement of the payment of an earned commission to the closing of title creates as a matter of law a condition precedent does not receive my acceptance. It is a question of fact, not a question of law, and was such in this case.

Passing this point, however, and assuming that the commission was not to be paid unless title closed, the action of the defendants estops them from making such a claim. They have received the benefit of the broker's services. Through his efforts they keep their property and $10,000 in cash, which they asserted paid all their damage. This sum was accepted as liquidated damages and the contract of sale canceled. Damages would ordinarily include the broker's commission, and there is nothing in this case to indicate that the $10,000 was not accepted with this in view. There is no evidence that the property was worth more or less than the purchasers agreed to pay for it, or to indicate what damages the defendants suffered. We must, therefore, assume that it included the one element we do know constituted a liability, to wit, the broker's commission. As before stated, the purchaser was not insolvent, but financially responsible; specific performance was to be avoided, and by the exchange of mutual releases the contract of purchase was canceled. The sellers participated in terminating the contract, and cannot now claim that the brokers did not earn their commission. The principle involved is clearly apparent when we change the incidents of the transaction and assume that the seller agreed with the purchaser to keep his property and accept $100,000 profit. Under such circumstances no one would insist that the broker lost his commission because title did not close. (Morgan v. Calvert, 126 App. Div. 327;Coughlan Co., Inc., v. Frankel, 216 App. Div. 565; Haber v. Goldberg, 92 N.J.L. 367; Neff v. Schrader, 49 N.D. 213;Myers v. Buell, 142 Ill. App. 467.) In Dermody v. NewJersey Realties, Inc. (101 N.J.L. 334) it is said: "Where a real estate agent produces a purchaser able to buy, who is accepted by the vendor, with whom he enters into a contract, but afterwards defaults and settles with the vendor by the payment of a sum of money as damages for his breach of the contract, the agent's commission under his contract with the vendor is earned, notwithstanding it was stipulated to be paid at the time of passing title, which did not pass, because the contract of settlement substitutes payment of damages to the vendor, in the place of the purchase-money stipulated in the contract of sale and purchase, which contract was brought about by the agent's services." (See, also, Pinkerton v. Hudson, 87 Ark. 506;Tarbell v. Bomes, 48 R.I. 86.)

At least it would be a question of fact whether the settlement with the purchaser was to the advantage and profit of the defendants or whether the purchaser being unable to perform, the defendants in good faith merely accepted payment of the damage they had sustained. (Boysen v. Frink, 80 Ark. 254.)

As to the record before us and the exceptions which raise these various points of law: The Appellate Division reversed as a matter of law and directed judgment for the plaintiff upon the theory that the words of the brokerage contract merely postponed time of payment and did not create a condition precedent. We are agreed, I think, that these words at least, for the circumstances of this case, created a question of fact, and the matter should have been submitted to the jury as such. The trial judge held just the contrary, and charged the jury as matter of law that "if the plaintiff stipulated that he was to be paid the other $2,500 when the title was closed, the title never having closed, that part of the commission was not earned and the verdict should be for the defendant." To this an exception was taken. This was error. As above stated, the use of the word "when" may create a condition precedent having the significance of "if," or it may merely refer to the time of payment, the payment itself not being dependent upon the happening of any event, such as the closing of title. The question as to the intention of the parties in using the word "when" is for the jury. The fact is that the contract says to be paid "on the closing of title," but I take it that the words "on" and "when" are here synonymous.

The Appellate Division, therefore, was justified in reversing the judgment for the defendant for this error in the charge, although a new trial should have been ordered instead of judgment for the plaintiffs directed.

This being so, the case should now go back for a new trial, and this matter of the settlement by the defendants submitted to a jury, under proper instructions, even though the point was not clearly raised in the trial record before us. The judgment should be reversed and a new trial granted, with costs to abide the event.

CARDOZO, Ch. J., POUND and O'BRIEN, JJ., concur with KELLOGG, J.; CRANE, J., dissents in opinion in which HUBBS, J., concurs; LEHMAN, J., dissents on the ground that the seller released the buyer from his obligation.

Judgment accordingly.