Riggs v. Turnbull , 105 Md. 135 ( 1907 )

This action was brought by Edwin L. Turnbull for the recovery of commissions as a broker for the sale of a house and lot, No. 903 North Charles street, the property of Clinton L. Riggs. Sometime in March, 1905, the plaintiff was employed by William B. Ehlen to purchase for him the adjoining property, No. 901 North Charles street, to be converted into an apartment house, and while this negotiation was pending the plaintiff urged Ehlen to purchase the defendant's adjoining property and convert the two into one large apartment house. Ehlen authorized plaintiff to negotiate for him for the purchase of this property also, but upon the distinct understanding that he would not pay any commissions upon that purchase, though he had agreed to pay commissions upon the purchase of No. 901, because the owner refused to pay them. After three interviews with Riggs, plaintiff negotiated a sale to Ehlen for $38,000, Riggs agreeing to pay the usual commissions of 2 1/2 per cent. on the purchase price, the commissions to be paid when Riggs received his money, and at that time plaintiff informed Riggs that the two properties were to be used as an apartment house, but did not disclose to him that he was acting for Ehlen in the purchase of the property. On the date of the last interview, March 29, 1905, a written agreement was entered into between Riggs and his wife, and Ehlen for the purchase by the latter of the property No. 903 North Charles street for the sum of $38,000 of which $500 had been paid before the signing of the agreement, and the balance was to be paid as follows; "$4,500. on the 1st of June 1905, at which time a deed for the property shall be executed, and a mortgage for the unpaid price shall be given, with a satisfactory bond for improvements to be erected. Said mortgage to bear 5 per cent interest and to be payable as follows: $5,000 in 6 months from date of mortgage, $3,000 in 12 months, balance payable within 5 years at option of vendee." The plaintiff explained that the bond for improvements mentioned in this agreement was to protect Riggs in event that the existing improvements were torn down to make way for the new and to secure him until the new improvements were erected, and Riggs testified that when Ehlen was disclosed as the purchaser he questioned his financial responsibility, and at the suggestion of Riggs brother, who was his counsel, it was stipulated in the agreement that a satisfactory bond should be given for the erection of the apartment house which was to cover the property, so that he might be protected.

On June 1st, 1905, Riggs had moved out of the house and was ready to deliver it to Ehlen, but Ehlen told him he was unable to carry out the terms of the contract, but he then paid $3,000. and asked indulgence until he could get his clients together and put the deal through. This indulgence was given and Riggs testified that he repeatedly urged Ehlen to comply with the contract and did everything in his power to aid him, personally offering to take $50,000 of the bonds to carry out the scheme of the apartment house. This condition of affairs continued until the month of October. In the meantime, Riggs had placed the matter in the hands of his brother Alfred R. Riggs, as his attorney, who testified that he told Ehlen he was instructed to enforce the contract, and Ehlen assured him he had not a dollar in the world; that the men who had agreed to go in the deal with him had all backed out, and if he was sued, it would simply put him out of business, and Riggs would get nothing. The result of this was that on Oct. 11th, 1905, Ehlen gave his note for $2,000 payable four months after date, and the contract was cancelled by Alfred R. Riggs, attorney for Clinton L. Riggs by endorsement thereon. No part of this note has ever been paid. The adjoining property, No. 901 North Charles St., was not converted into an apartment house at all, and is now occupied as a furniture store, and Mr. Riggs has since endeavored to sell his property at $5,000 less than Ehlen contracted to pay, but has been unable to find a purchaser at any price because the adjoining property is in the hands of real estate speculators.

The bond for improvements stipulated for in the contract was never given, and it is clear from Ehlen's statement to Alfred R. Riggs that he was utterly unable to comply with that stipulation.

In 23 Amer. and Eng. Enc. of Law, 917, the general rule is said to be that "Where the purchaser presented by the broker is accepted by his employer, and they enter into a valid, binding, and enforceable contract of sale, the broker is entitled to his commissions, whether or not the contract is actually carried into effect, and the sale made." And substantially the same rule is announced in Mechem on Agency, sec. 966, and in Clark andSkyles on Agency, sec. 773. An examination of the cases shows that this rule prevails in most of the States of this country where the question has been clearly raised and decided. The ground upon which most of these cases proceed may be illustrated by the case of Ormsby v. Graham, 123 Iowa 202, in which a consummated sale is defined as "one consummated by such a contract as will be enforced by the Courts if enforcement be demanded." And by the case of Brennan v. Perry, 7 Phil. 243, where it was held that "In order to entitle a broker to commissions there must be an actual sale vesting the right to the purchase money in the vendor, and transferring the right of property to the purchaser." But this is not the rule prevailing in England, or in this State.

In Keener v. Harrod, 2 Md. 70, the Court said, "The legal import of an agreement to procure a purchaser, binds the party to name a person who ultimately buys the property," as was held inMurray v. Currie, 32 Eng. Com. Law, 641, cited by the Court in support of its language. In Kimberley v. Henderson andLupton, 29 Md. 515, the Court said, "To be entitled to their commissions as brokers they should have completed the sale, that is they should have found a purchaser in a situation, and ready and willing to complete the purchase according to the terms agreed upon. The undertaking to procure a purchaser requires of the party so undertaking, to produce a party capable and who ultimately becomes the purchaser. These propositions are settled in Keener v. Harrod and Brooke,2 Md. 63, and McGavock v. Woodlief, 20 How. 221." In Kimberly v. Henderson and Lupton, supra, there was a written agreement for sale with a stipulation that in case either party should fail to comply with the contract, a forfeit of $1,000 should be paid by the party in default to the other party. The vendee was unable to comply, being disappointed in the receipt of funds which he expected to receive, and he paid the forfeit accordingly.

In a suit for brokers' commissions, the Court below granted a prayer of the plaintiff that if the agreement for the sale of the property offered in evidence was made through the plaintiffs as brokers of defendant, the plaintiffs were entitled to their commissions as brokers, "for their services in effecting the negotiations which terminated in said agreement, as fully as if a deed had been executed for said property, and the purchase money had been paid," and refused a prayer of defendant that plaintiffs were not entitled to recover, "even if the jury found that the parties entered into the contract offered in evidence, if the jury further found that the contract of sale was put an end to by the payment by the purchaser of the forfeit of $1,000."

On appeal this Court reversed a judgment in favor of the plaintiffs, saying that the prayer of the plaintiffs should have been refused, and that of the defendant should have been granted, and it will be seen that this prayer of the plaintiffs presented the theory that the broker is entitled where the parties enter into a contract of sale, whether the contract is actually carried into effect or not, while that of the defendant made the right of recovery to depend upon the carrying of the contract into execution.

In delivering the opinion in that case JUDGE ALVEY said, "A party was produced, it is true, and a contract entered into through the agency of the appellees, but of such a character that the party contracting, by the exercise of an option given him, relieved himself of the obligation to complete the purchase, anddtd not in fact become the purchaser." The appellee's counsel in the case before us sought to avoid the effect of this decision, because of the option given the purchaser to relieve himself of his obligation by payment of the forfeit. But this cannot avail the plaintiff. The distinct ground upon which the plaintiff's right of recovery was denied in the case referred to, was that he "did not in fact become the purchaser," and it is immaterial whether this was because he was literally unable to comply with the contract, or because the terms of the contract negotiated by the broker permitted him to substitute the payment of a forfeit for performance. The forfeit was provided for the exclusive benefit and protection of the vendor, and not for that of the broker, whose right of recovery depends absolutely upon the carrying of the contract into execution, except in the single case where the vendor by his own fault prevents its execution. The commissions are recoverable for a sale made and executed, not for the receipt of a forfeit provided to indemnify the vendor for non performance by the vendee.

In McGavock v. Woodlief, 20 How. 229, cited in 29 Md.supra, the Supreme Court said: "The broker must complete the sale; that is he must find a purchaser in a situation, and readyand willing to complete the purchase on the terms agreed on, before he is entitled to his commissions. Then he will be entitled to them, though the vendor refuse to go on and perfect the sale." Mr. Benjamin argued that case for the defendant, the plaintiff in error, and one of his propositions, apparently approved by the Court, was that it was necessary for the broker to show "that the sale was actually made, and the pricereceived, or at all events, that it was his employer's own fault that the sale was not effected." The view thus expressed by Mr. Benjamin was distinctly announced in Chapman v. Winson, 91 Law Times Rep. N.S. 17. In that case, the broker introduced a person who signed a formal contract for the purchase of a hotel for £ 2000, of which £ 200 was paid at once, and the balance was to be paid upon completion of the purchase. The purchaser was unable to carry out this contract, and communicated this fact to the broker, who informed the vendor, but also claimed full commissions. The vendor subsequently agreed with the purchaser that the vendor should retain the £ 200, and that the purchaser should be released from the contract, and the broker sued for his commissions and was denied the right to recover. The Master of the Rolls said: "It seems to me the primafacie meaning of this contract is that the condition precedent is to be that the purchase is to be completed, in the legal sense, by payment of the purchase money. * * * In my opinion she would become the purchaser when the purchase was completed by payment of the purchase money."

In complete accord with the earlier Maryland cases, and with the above recent English case, is the case of Richards v.Jackson, 31 Md. 250, where there was a written agreement for the purchase, and the purchaser refused to comply because he was advised the title to the property was defective, though in a subsequent proceeding it was pronounced by the Court to be a good title. The broker then sued for his commissions and recovered judgment, which this Court reversed, saying, "it is not sufficient that he (the purchaser) should enter into an agreementto purchase, but he must actually purchase by complying with the terms agreed on, unless his failure to do so is occassioned by the fault of the vendor."

This case and the case in 29 Md. supra, were approved inMelvin v. Aldridge, 81 Md. 658, in which, in an equity case, it was held that where purchase money, in an executed sale was payable in installments, that the broker was only entitled to commissions on the installments as paid from time to time, because, in the language of the Court, "until they are actually paid, the terms of sale have not been complied with."

In the very recent case of Coates v. Locust Point Company,102 Md. 291, there was an agreement between the parties that if the lessee of property who had been procured by the real estate broker exercised an option given him in the lease to buy the same, that the broker should be entitled to commissions on the sale also. The option was exercised but a part only of the purchase money was paid when the broker sued for his commissions. It did not appear from the record in that case just how much of the purchase money had then been paid, or whether the circumstances were such as to require the broker to wait until the purchase money was paid, but it was very strongly intimated that there could be no recovery for the amount unpaid.

In the present case, as we have already said, an important term in the contract of sale, was that a satisfactory bond for improvements to be erected should be given by the purchaser, which improvements contemplated the tearing down of the dwelling then on the premises. There was not only not a particle of evidence to show that such a bond was ever given or tendered, but the undisputed evidence shows that the purchaser stated to the defendants attorney that "he had not a dollar in the world; that all the money he had put into the transaction was borrowed money, and he was unable to borrow any more; that the men who had agreed to go into the deal with him had all backed out, and he wasunable to do anything." The giving of this bond was the only thing, which under the scheme of improvement, would afford any rational protection to Riggs, and without such bond there could be no pretence of compliance with the terms of the contract.

If any authority were needed to show how vital to this contract is that provision, it is found in the case of Inge v.McCreery, 60 N.Y. App. Div. 557. In that case, one of the terms required by the defendant was the production of a bond of a Surety Company for $25,000, conditioned for the completion of a building on the premises. The Court said: "The undertaking (of the broker) was not to get a purchaser to take the property and pay the purchase money. It was more than that. He was to getsome one to erect a large building, and the defendant was to make a builders loan for that purpose, when protected by the stipulated bond."

In harmony with this case it was held in Hale v. Kumler, 85 Fed. Rep. 161, that "where the (any) condition upon which a broker is to be entitled to his commissions has not been fulfilled but performance has not been prevented by the wrongful conduct of the principal, the latter is entitled, in an action by the broker for compensation, to rely upon the fact of non performance."

In the light of these principles, sound and satisfactory in themselves, and illustrated by the cases which we have cited from the Courts of this State, the Federal Court and the English Courts, there was error in the rejection of the defendant's first prayer offered at the close of the defendant's testimony, which is as follows: "The defendants pray the Court to instruct the jury that there is no legally sufficient evidence that William B. Ehlen, who signed the agreement to purchase the property referred to in the evidence, was ready and willing to complete the purchase according to the terms agreed upon, and as a matter of fact did complete the purchase, and that by the undisputed evidence in this case, the defendants were ready and willing to comply with the terms of agreement of sale, and that their verdict must be for the defendants."

In view of this conclusion it is unnecessary for us to consider any of the other prayers in the case, those offered by the defendants at the close of the plaintiff's case seeking to withdraw the case from the jury, being waived by proceeding to offer their own testimony, after the rejection of these prayers and as there can be no recovery in this state of the case, no new trial will be awarded.

Judgment reversed with costs above and below.