Havens v. Irvine

DISSENTING OPINION I dissent. And I consider the main principle involved herein of such vital importance that I feel that I must not refrain from discussing this case, including the moral elements that appear herein, with an utmost candor and frankness, but I shall do so, I hope, with due deference to the legal ability and learning of my associates herein. Some of the facts are not adequately stated in the majority opinion, and I shall state them. The property involved herein was listed for sale with plaintiff, as agent or broker, in March, 1941. Defendant, the owner, wanted $20,000 cash, net to him. Upon suggestion of the agent, the price to the purchaser was fixed at $22,000, so that the agent could receive his commission of 5% out of the price over and above $20,000. Von Forell was found by the agent as a possible purchaser, and was introduced by him to the defendant. The price of $22,000 was satisfactory to Von Forell, but the terms of payment were not. Negotiations were continued between the agent and Von Forell, and a subagent of plaintiff at Torrington and Von Forell, during the spring and summer months. At least, the trial court had the right to so find. And the trial court had the further right to find that the plaintiff was the predominating cause of the sale ultimately effected. It is very doubtful that the defendant would ever have found Von Forell as a purchaser, for he was found near Torrington, far from defendant's land, by a subagent of plaintiff. On August 26, 1941, the defendant, through his friend Neeley, sent for Von Forell to continue the negotiations for the sale of the land. At least the court had the right to infer that defendant, before he attempted to revoke the agency, knew of the fact that Von Forell had been asked to come on his behalf and that he ratified Neeley's act. The effect would be the same, and so, for brevity's sake, I shall hereafter consider it as though defendant himself sent for Von Forell. On August 27, 1941, defendant served notice of termination of agency on the plaintiff. On August 28, 1941, defendant sold the property to Von Forell for the sum of $22,000 on easy terms.

The cases on the right of a broker to recover a commission are very numerous, and seemingly confusing, even in cases from the same state. Statements may be found in the authorities which seem to sustain almost any kind of contention which the owner, who seeks to evade the payment of a commission, might see fit to make. Hence, the facts in a particular case are important. Assuming that the rule of Owens v. Mountain States T. T. Co., hereinafter quoted, is not broad enough to permit the plaintiff to recover herein by reason of the fact that the element of revocation is in this case, then I think the controlling question in this case is as to whether or not the agency here involved was, under the circumstances of this case, revoked in good faith. It is a universal rule that, "in order that revocation of a broker's authority may defeat his right to commissions or other compensation, it must be made in good faith, and not as a mere device to appropriate the benefit of his services and efforts and at the same time escape the payment of commissions earned or about to be earned." 12 C.J.S. 151. If the agency was not revoked in good faith in this case, the revocation was void, and will be treated as though in force on August 28, 1941, just as plaintiff pleaded it was. 12 C.J.S. 152. I shall not enter into the discussion of any collateral questions, except as bearing on the controlling one herein. The trial court evidently held that the agency was not terminated in good faith. The judgment in favor of plaintiff implies that. The majority opinion herein holds that there was not sufficient evidence in this case to so hold. It is mentioned that the agency was revoked "for the present time," as though that might indicate good faith. But that is a strange conclusion. If it shows anything, it points directly at the intended negotiations with Von Forell, then in progress or about to occur soon, and to the intended evasion of payment of any commission if sale to Von Forell were made, and that is the very subject matter involved herein. The opinion cites Kellog v. Rhodes, 231 Iowa 1340, 4 N.W.2d 412, 415, as holding that bad faith could not be inferred as a matter of law. I agree with that. The court also refers to Brown v. Wintermute,54 Wyo. 254, 139 P.2d 435, that fraud must be established by clear and convincing evidence. I do not disagree with that rule. Fraud must be shown. But it would not be possible in one case out of a thousand to show bad faith in a case of this kind except by the circumstances themselves, and if the circumstances in this case are not sufficient from which the trial court could infer bad faith, then we might as well quit talking about such a rule. What possible inference could be drawn in this case, when defendant sent for Von Forell on August 26, 1941, terminated the agency the next day, and, on the day subsequent, made the sale to the purchaser found by agent, except the fact that the agency was terminated to evade the payment of a commission? It seems to me that the conclusion of bad faith is irresistible. In any event the trial court had the right to draw that inference, and we are not justified to reverse its holding when the facts warrant it, which they clearly did in this case. In fact, the circumstances in this case are much stronger than any which I have found to lead the trial court to the result which it reached. I have made as exhaustive investigation on this point as the short time in which to write this dissenting opinion permitted, and I think that I can say with a great deal of confidence that there is not a single case on record which sustains the holding of the majority herein in its holding on that point, under circumstances anywhere near to those in this case, and there are a number of cases which squarely hold, or indicate, the direct contrary.

In Kelly v. Marshall, 172 Pa. 488, 33 A. 690, a broker had not been able to get a purchaser for the property listed with him at the price asked by the owner. The owner cancelled the agency, but 11 days thereafter sold the property to the purchaser, found by the agent, for $2500 more than the purchaser had previously offered the agent. The court said: "Whether the revocation of the agency was made in good faith or was a mere subterfuge to relieve the defendant from the payment of a commission was an open question at the trial and was for the jury." In Henschel v. Sutton, 120 Kan. 260, 242 P. 1024, an agent had not effected the sale of property listed with him in June, 1923, at the price of $33,750. The property was withdrawn from the market on December 27, 1923. But in January, 1924, the owner himself sold the property for $27,000 to a purchaser sent to him by the agent, and which amount had previously been named by the agent. The court held that whether or not the agency was terminated was a question of fact, saying: "In view of the closeness of the time the offer was made and of the withdrawal of the property from sale by plaintiff and the time when the sale was effected by the other broker, for the price named by plaintiff, the matter of good faith was a most important, if not the controlling, question in the case." This case, of course, completely refutes the holding of the majority herein that the closeness of the time between the termination of the agency and the actual sale is not sufficient evidence of bad faith. In Smith v. Anderson, 2 Idaho 537,21 P. 412, it appears that property was listed with an agent in August, 1886, at $8000. The owner himself sold the property in May, 1887. The remaining facts appear in the opinion of the court as follows:

"The plaintiff was employed by the defendants to do a particular thing, namely, to procure a purchaser for the ranch, at the sum of $8,000, for which services he was to receive 10 per cent, upon the purchase money paid. It appears that in the month of March, 1887, the defendants revoked, or attempted to revoke, the agency of the plaintiff, and in their notice of revocation they used the following language: That the plaintiff was not to act any further as agent to procure a purchaser for said ranch, and discharged the plaintiff from their employment, and stated further that they did not desire to sell the ranch. Yet, in the face of this statement, and about a month thereafter, they consummated a sale with the very person with whom the plaintiff had negotiated, and to whom he had introduced the defendants as a purchaser. It is also fair to presume that some negotiations had preceded the actual consummation of the sale, so that it could not have been very far from the time of the revocation by the defendants of the plaintiff's agency that the negotiations were taken up by the defendants in person. Considering these facts, and considering the fact that the defendants stated in their letter of revocation that they did not desire to sell the ranch, yet, in the very teeth of that statement, proceeding to sell, and to the very person to whom the plaintiff had introduced them, it was a fair inference from the testimony that the object of the letter of revocation was an attempt to deprive the plaintiff of his commission."

In Wood v. Broderson, 12 Idaho 190, 85 P. 490, the case of Smith v. Anderson was quoted with approval, and the court said, among other things:

"Considering all the facts in this case, and the statement of the respondent that the power to sell was revoked on the 29th of September, yet in face of the statement, seven days thereafter he proceeds to sell the property to the very person whom the evidence shows was procurd by the appellant, is at least very significant."

In Warren v. Van Der Velde, 193 Mich. 164, 159 N.W. 137, it appears that property was listed with an agent in July, 1912, to be sold for $5700. No sale having been made, the agency was cancelled on October 15, 1912. On November 23, 1912, the owner sold the property for $5500 to one Boyland, who had been introduced to the owner by the agent as a possible purchaser. It was held that whether the agency was terminated in good faith was for the jury. No other circumstances appears in the case than the closeness of the time between the termination of the agency and the sale. The court said in part:

"The testimony for the defendant, if believed, would indicate her good faith in withdrawing the land from sale and cancelling the contract of agency. But from all of the testimony and the circumstances disclosed by it, I think the inference might be drawn that within the life of the agreement plaintiffs indirectly sold the farm, that defendant did not, in good faith withdraw the property from sale, but was ready and willing at all times to sell it for $5,500, and that the announcement that the place was not for sale and the cancellation of the contract were acts in an attempt to deprive plaintiffs of a commission. Upon the authority of Davis-Fisher Co. v. Hall, supra, and Smith v. Anderson, 2 Idaho (Hasb.) 537, 21 P. 412, the case should have gone to the jury."

In the case of Studt v. Leiweke (Mo.) 100 S.W.2d 30, the syllabus is as follows:

"Evidence disclosing that owner consummated sale within less than a week after revoking broker's authority sustained finding that owner's revocation of broker's authority pending sale treaty was not made in good faith."

The court said in part:

"It is obvious that the evidence amply warrants the finding that defendant's revocation of plaintiff's authority pending the sale treaty was not made in good faith. Such revocation, therefore, does not defeat plaintiff's right to his commission."

In Howard v. Street, 125 Md. 289, 93 A. 923, property was placed in the hands of an agent for sale on May 16, 1911. No sale having been effected, it was withdrawn from sale in October, 1911. Negotiations by the owner with the purchaser, originally furnished by the agent, were not reopened till July, 1912. I find no facts, at least important facts, other than the difference in the time between the termination of the agency and the sale, from which the jury could infer fraud. Still the court held that bad faith might be inferred by the jury. That case goes, perhaps to the extreme, but it illustrates how utterly wrong the majority opinion herein is when it holds that there was not sufficient evidence in the case to warrant the trial court in finding bad faith in terminating the agency. In a note to 88 A.L.R. 726, it is stated:

"The time element would seem to be an important matter bearing on the question of good faith. If a considerable time has elapsed after the revocation of the agency before the principal reopens negotiations with the broker's customer, the inference of bad faith in the revocation would, it seems, generally be correspondingly weakened."

The note clearly recognizes that the time element is important, and if it is only weakened, corresponding to the time which elapses, then the inference of bad faith must necessarily be strong when only a day's interval exists. See also Hill v. Patten (Tex.Civ.App.) 160 S.W. 1155. I shall mention the cases from Massachusetts later.

It is true that up to the time when the agency herein was revoked, the plaintiff had not been successful, but it is plain from the evidence that if defendant had given the agent the terms at which he finally sold, the agent would have been successful long before the sale was made by the owner himself. Of course, he was under no compulsion to do that. He had a right to fix his own terms and insist upon them. At the same time he had no right to appropriate the value of the services of another without compensation, and that he did appropriate it cannot be questioned. The two rules must be harmonized in some reasonable way. Not all the stress should be placed upon the right of the owner to insist upon his terms, as the majority opinion seems to do. While an owner cannot be deprived of his right to insist upon his terms of sale, he must act in good faith in aiding the consummation of the sale, when he places his property for sale in the hands of an agent. Note 88 A.L.R. 733. He has no moral right to cause the agent to chase a will o' the wisp. The claim that he has an absolute legal right to do so has long ago been exploded. 4 R.C.L. 322. And when an owner insists on terms of sale to an agent, which the prospective purchaser, found by the agent, cannot meet, when in fact the owner is willing to meet the terms of the prospective purchaser, as shown by the fact that he does meet them immediately after attempting to revoke the agency, then, having used the agent as a means to accomplish his purpose, it may well be said that the agent's failure — if such it can be called under such circumstances — is due to the fault of the owner, of which he ought not to be permitted to take advantage by depriving the agent of his commission. The owner in such case caused the broker to chase a will o' the wisp, as it were, which, as already stated, he had no moral right to do, and which could have been avoided by giving the agent the terms which in fact were acceptable. The failure of the agent in such case is more apparent than actual. Of course, no one can blame an owner for trying, as long as he wishes, to get better terms than he is utimately willing to accept and does accept, nor can any one question his right to do so, but that should not serve as a shield to take advantage of the broker in the long run. While couched in different language, the conclusions here stated are substantially what the court meant in Warren v. Van Der Velde, supra. The basis, of course, lies in the reasons stated in 4 R.C.L. 322, quoted in Owens v. Mountain States T. T. Co., infra. An owner's right to insist upon his terms of sale so far as the agent is concerned, should not be held so sacred as to exclude the correlative rights of the broker. The standard is that of fairness, and it is never one-sided. And in my humble opinion that standard has been wholly overlooked or disregarded in the majority opinion herein. I may add, if it is material, that defendant probably knew the terms that had been offered by Von Forell. Otherwise, the fact that he was sent for, and the fact that the sale price was $22,000, previously offered to the agent, are hard to explain.

I do not understand that the question of good faith or bad faith in terminating an agency is eliminated from a case by the mere fact that the negotiations have come to an impasse, and that the prospective purchaser has not met the exact terms fixed by the owner. That appears to be clear from Smith v. Anderson, supra, in which the price given to the agent was $8000, and the owner sold for $6000; from Warren v. Van Der Velde, supra, in which the price given to the agent was $5700, and the owner sold for $5500; from Henschel v. Sutton, supra, in which the price given to the agent was $33,750, and the owner sold for $27,000; from Studt v. Leiweke, supra, in which the price given to the agent was $75 per acre, and the owner sold for $40 per acre. I have found no cases which are to the contrary, at least directly to the contrary. If that were not the rule, it is clear that the question of bad faith of revocation of agency could never be made to appear in any case in which the owner himself completes a sale on terms different from those given to the agent. And it may be noted that in some of the cases cited, negotiations had been carried on by the agent for a longer period of time than in the case at bar.

The majority opinion completely ignores the foregoing cases. In it are cited Sherman v. Briggs Realty Company, 310 Mass. 408,38 N.E.2d 637; Kacavas v. Diamond, 303 Mass. 88, 20 N.E.2d 936. The facts in these cases are entirely different from the facts in the case at bar, and I see no reason to differ from the result reached therein. They are cited, however, because they contain the statement that bad faith in revoking an agency cannot be said to exist when the broker is not approaching success. Of course, that rule is doubtless perfectly sound under some circumstances, for instance, when the property is entirely taken off the market. In Sherman v. Briggs Realty Company, supra, however, the court makes an exception to the rule above mentioned, and states that the question of bad faith arises when "a sale is made behind the back of a broker." That rule was also announced in the previous case of Holton v. Shepard, 291 Mass. 513, 522, 197 N.E. 460, 464. It follows the rule of Burchell v. Gowrie and Blockhouse Collieries, A.C. (1910) 614. It is perfectly plain, of course, that the defendant in this case sold the property behind the back of the plaintiff. He secretly sent for the purchaser, found by the plaintiff, on August 26, 1941, cancelled the agency on the next day, and the following day concluded the sale. So the Massachusetts cases cited in the majority opinion are not any help in support of the majority opinion herein, although it may be mentioned, that many cases from Massachusetts are harsh, and apparently harsher than the rules adopted in most of the states. See Note 88 A.L.R. 729-732. But I doubt that even the Massachusetts Court, or the court of any other state would, under facts like those in the case at bar, hold that the owner should not as a matter of law be compelled to pay a commission. None of the cases cited in the majority opinion even tends to show that such might be the holding. The opinion, for instance, quotes from Westerman v. Peer Inv. Co., 197 Mo. App. 278, 195 S.W. 78. In that case there was a special contract that if the agent did not sell the property for a specified price within ten days the agreement should be null and void. It is needless to say that that case has no bearing herein, and is one of those cases decided under a special contract referred to in our prior decisions, and distinguished therein from other cases.

We stated in Owens v. Mountain States T. T. Co., 50 Wyo. 331,343, 63 P.2d 1006, as follows:

"But it must be observed that a material distinction must be drawn — applicable throughout — between cases in which no sale is made, and those in which one is actually made by the owner to the customer produced by the broker. Harris v. Owenby, 58 Okla. 667,160 P. 596. And a waiver of the condition as to terms is readily and generally implied, where the owner proceeds to negotiate with the customer furnished by the broker and concludes a sale satisfactory to him. Note 43 A.L.R. 1104; note 15 L.R.A.N.S. 273; 44 L.R.A. 350, note g. ``If this were not so,' states 4 R.C.L. 322, ``it would be very easy for an unscrupulous person having property for sale to get all the benefits of the broker's services in bringing the property under the notice of buyers and introducing them, by the simple method of fixing the price at a figure which he knows no person would give, and the reduction of which he is prepared to accept.' * * * Hence, as stated in other cases, a broker is entitled to his commission when he produces a purchaser who buys at a price satisfactory to the owner."

The rule so stated is well established, and to be of any value, should, of course, be carried to a reasonable conclusion. If I understand the majority opinion correctly, it would seem to be conceded that the foregoing rule would apply, and plaintiff would be entitled to recover, if the agency had not been revoked, but that, since that was done, it must further appear, in order that plaintiff may recover, that the revocation has been made in bad faith. It must, of course, be conceded, as already heretofore stated, that an owner is not required to accept terms not acceptable to him, and hence he has the right to break off and terminate the negotiations with the prospective purchaser, furnished by the broker, and take the property off the market. No one denies that. But if the subsequent negotiations carried on by the principal with such prospective purchaser is reasonably continuous with, naturally arises out of, and is the result of, the negotiations previously carried on by his agent, and culminates in a sale satisfactory to the owner, showing that the property was not in fact taken off the market — all of which is true in this case — why, in fairness, should the mere one-sided, formal revocation of the agency, or the intention with which it is made, have any effect on such a situation, assuming that the rights of the owner and the correlative rights of the broker should be reasonably harmonized, without laying too great a stress on the contract? It has been held that it has none. Heaton v. Edwards, 90 Mich. 500, 51 N.W. 544; McGovern v. Bennett,146 Mich. 558, 109 N.W. 1055. The syllabus in the Heaton case is as follows:

"Where the owner of real property which has been placed in the hands of an agent to sell on commission knows that the agent has called the attention to a prospective purchaser to the property, and is negotiating with him to effect a sale, such owner cannot cancel the agent's authority, effect the sale, and avoid the payment of the commission."

And it was further held that the owner, in such case, is not even entitled to have the question of good or bad faith in cancelling the agency submitted to the jury. The case is a strong case involving facts very similar to those in the case at bar. If that is the law we should arrive at the same result from two different angles. I refrain from expressing any opinion on the point at this time. But it is clear that it deserves thoughtful analysis and consideration, and perhaps differentiation.

It is not likely, as already stated, that evidence of bad faith in terminating an agency can ordinarily be found except in the circumstances under which the sale is made. And if it cannot be found in the fact that, under the suspicious circumstances herein appearing, the agency is revoked in one day, and the sale by the owner is made the next day, then it cannot ordinarily be found no matter how small the difference in these times may be. Hence, if the majority opinion is right, it necessarily follows that an owner of real estate who wants to sell, need only fix his terms which no one will want to meet, and which he himself thinks will not be met — as is true in most cases — then procure a broker to use all of his efforts in getting the best terms from a prospective purchaser obtainable, find out these terms, which in most cases is not difficult, and if these appear reasonable to him, revoke the agency one minute, and the next minute sell to the prospective purchaser brought by the broker and escape the payment of a commission. If the majority of the court would shrink from going to that extreme, it necessarily follows that they are wrong in holding that the trial court could not have inferred bad faith when the sale was made the day succeeding the revocation of the agency. The difference between a minute and a day is too small in practical affairs of men in such a matter, to make any difference in the right of the trial court to draw the inference mentioned. If they would not shrink from going to that extreme, then all that I can say is that a position is taken far too harsh to suit the conditions of life, and when that becomes known many real estate men might as well shut up shop and devote their time and attention to something else which would not leave them quite so empty-handed.

And, finally, the case at bar presents a factor peculiar to itself, which makes it ludicrous or pathetic, depending on how we look on the facts of life, that no commission should have been earned. Defendant sold the property in controversy for $2000 more than the price which he asked. That was brought about solely and exclusively through the plaintiff's agency. That cannot be and is not disputed. Yet defendant refuses to pay anything. If defendant keeps that amount, and pays nothing to plaintiff, who procured that amount for him, then I am unable to see how it can possibly escape from being an ill-gotten gain, which no court of justice should countenance.