Ellis v. Hollis , 398 P.2d 832 ( 1965 )

HALLEY, Chief Justice.

The parties will be referred to as they appeared in the trial court.

Plaintiff’s petition alleged he was a licensed real estate broker; that defendant orally employed him to secure discounts on mortgages covering defendant’s farm in Logan County, Oklahoma; and as a direct result of plaintiff’s services, the mortgage holders agreed to release their mortgages for discounted sums thereby effecting a $3,-400 savings for defendant. The petition further alleged that the reasonable and customary commission charged by real estate brokers for the type of services rendered defendant was $850, but defendant refused to pay same. Plaintiff prayed for judgment in said sum.

Defendant’s amended answer, in addition to a general denial, alleged defendant orally employed plaintiff to sell five acres of defendant’s farm (the exact legal description to be fixed at a later date) in Logan County, Oklahoma, which was subject to certain real estate mortgages, for $7,200 ($7,200 in cash or $1,500 in cash and a note and mortgage for the balance). That it was agreed plaintiff would receive a commission of 7% of the sale. Defendant alleged plaintiff, without defendant’s knowledge or direction, negotiated the discounted cash payment to the mortgagees for the release of their mortgages, which defendant paid, to free the five acre tract from liens. That plaintiff then secured a purchaser who agreed to pay $7,200 for the property, $4,000 in cash when she disposed of her property and a note and mortgage for the balance. Plaintiff informed defendant of the prospective purchaser’s offer and completed a form sales contract, which both defendant and prospective purchaser signed. Defendant’s amended answer further alleged that the sales contract did not contain the provisions agreed upon, but was indefinite, uncertain and ambiguous. The defendant confronted the prospective purchaser and plaintiff with the fact that the written contract did not comply with the oral agreements and the written contract was then canceled and rescinded.

Defendant’s cross-petition and counterclaim adopted all the allegations of defendant’s amended answer and further alleged that' plaintiff negligently and improperly drafted a contract upon indefinite, uncertain and damaging terms. That defendant’s five acre tract could have been sold to said prospective purchaser for $7,200 had it not been for the negligent acts of plaintiff. That defendant has been unable to sell and has not sold said five acre tract of land for $7,200 and that a sale of said property cannot be made for more than $5,200. Defendant prays for judgment against plaintiff on the cross-petition and counterclaim: for $2,000.

A copy of said Uniform Purchase Contract was attached as an exhibit to defendant’s cross-petition and counterclaim. It provided in part:

“I, or we, the undersigned hereby agree to purchase the property hereinafter described, to-wit: HOUSE and 5 ACRES- of land, Approx. 16 Mile East of Gnthrey, Okl. 1 ½ Mile North. Owner Marvin Ellis * * *. On the following.terms: The total price to be SEVEN,-THOUSAND TWO-HUNDRED’ Dollars of which Equity in House 508. N Bath valued at Four- . Thousand Dollars ($4,000.00) is to be paid in cash at the time of closing, the balance to be paid on the following terms, to-wit: the Balance to be a Mortgage in the Amount of THREE-THOUSAND TWO-HUNDRED DOLLARS ($3,200.00) * * * ”

Plaintiff filed a motion to -strike and a demurrer tó the cross-petition and counterclaim. The demurrer was subsequently sustained and the cross-petition and counterclaim dismissed by the trial court. Defendant appeals from this order. Six propositions are urged for reversal, as follows:

“Proposition I. A demurrer admits the truth of all facts well pleaded together with all inferences that may be reasonably drawn therefrom and the petition should be liberally construed in favor of the plaintiff.

“Proposition II. When a pleading ■ states any facts upon which the pleader is entitled to any relief, sustaining a demurrer thereto constitutes reversible error.

“Proposition III. When a realty broker undertakes to practice law, he is liable for any negligence.

“Proposition IV. If a realty broker fails to exercise reasonable care and skill, he is liable to his client for the damages resulting from such failure.

“Proposition V. An agent is under a duty to obey the proper instructions of his principal and is liable for losses resulting from violations thereof.

“Proposition VI. An agent is a fiduciary and has the duties of good faith, loyalty and honesty to his principal.”

We find it unnecessary to determine the correctness of the above propositions as the sole issue presented is whether defendant’s cross-petition and counterclaim state a cause of action against the plaintiff.

3 C.J.S. Agency § 162, p. 46, states:

“An agent is liable on the ground of negligence only for such damages as are the natural and proximate result of his negligence, * *

In 62 A.L.R. 1357, p. 1361, this language is found:

“The damages to a principal which flow naturally from the negligence of his real estate broker, and which are a direct consequence of his negligence, are recoverable by the principal, (citations)”

It is elemental that a party will not be permitted to recover from another whose alleged acts, however wrongful, are not the proximate cause of the injury suffered. Defendant’s inability to sell the five acre tract to the prospective purchaser under the form contract was not the natural and proximate result of its negligent preparation by plaintiff. The contract was canceled and rescinded by apparent agreement between defendant and the prospective purchaser.

We think Smith v. Howard, 158 Cal.App.2d 343, 322 P.2d 1034, is in point. Here, in substance, a real estate broker was authorized to purchase certain property for his principal, but the property was sold to the broker’s mother because of the alleged negligent performance of his duties as an agent. The Court, at page 1037, said:

“ * * * It appears that there was no causal relationship between defendants’ alleged acts (or omissions) and the injury of which plaintiffs complain. The alleged damage sustained by each plaintiff is based upon the fact that the property in question was sold to Howard’s mother instead of Smith * * *. However, it appears conclusively from the testimony of Mrs. Richardson, the owner of the property, that defendants’ alleged acts had no connection with her decision to sell the property to Mrs. Howard. * * * It is thus clear that Mrs. Richardson would not have accepted Smith’s offer in any event since it involved a second trust deed. The alleged acts of defendants were therefore not the proximate cause of plaintiff’s failure to successfully negotiate a purchase of the property. * * * ”

The cross-petition and counterclaim does not show on its face that defendant suffered damages caused by the alleged negligent preparation of the form contract by plaintiff. Since it did not state a cause of action, the demurrer to defendant’s cross-petition and counterclaim was properly sustained by the trial court.

Judgment affirmed.

JOHNSON, WILLIAMS, BLACKBIRD and BERRY, JJ., concur. DAVISON and IRWIN, JJ., concur in result. JACKSON, V. C. J., dissents.