Rouda Co. v. Springtime Co. , 49 Ohio App. 2d 49 ( 1975 )

This is an appeal by defendant Springtime Company, from a judgment rendered by the Franklin County Municipal Court awarding plaintiff, Harley E. Rouda Co., $4,200 as a real estate commission for a sale of commercial property situated at 1852-1858 Summit Street, Columbus, Ohio.

The case was tried to the court without a jury. Subsequently, the court made the following findings of fact and conclusions of law:

"On March 24, 1972, the defendant, Alumni Fund, Inc., and the third party defendant, Jeffrey Heckman, entered into an agreement for Mr. Heckman to purchase property owned by Alumni Fund, Inc., for the sum of $70,000.00 This contract was arranged through the services of plaintiff, Harley E. Rouda Co., Realtors. In the real estate purchase Contract, signed by all the parties, Alumni Fund, Inc., agreed to pay plaintiff its regular commission of six percent, for securing the purchaser for the property, `when and if property is closed and seller receives cash'. The quoted words were added to the purchase contract at the insistence of Alumni Fund. Heckman deposited with plaintiff the sum of $3,000.00 at the time of the signing of the contract. The plaintiff was not present at the closing of the transaction.

"The contract was later assigned by Alumni Fund, Inc., to the Springtime Company. Mike Karr is the President and managing officer of both Alumni Fund, Inc., and the Springtime Company.

"Problems developed in closing the transaction and Springtime Company filed suit against Heckman in the Common Pleas Court of Franklin County, Ohio, asking for specific performance of the contract. The $3,000.00 deposited by Heckman with plaintiff was ordered paid into the Common Pleas Court, and was later dispersed to Springtime Company, to be credited to the contract price, after Heckman was ordered to specifically perform the contract.

"The contract was finally closed on November 17, 1972, at which time Heckman made an additional cash payment to Springtime Company of $8,043.00.

"The real estate purchase contract provided seller was to make available financing to buyer, which would make the total amount owed seller by buyer $127,000.00. The contract further provided that buyer agreed to pay the real estate brokers commission if he failed to fulfill his obligations under the contract within a reasonable time.

"The buyer did fail to fulfill his obligations under the contract within a reasonable time. Seller elected to sue for specific performance of the contract rather than sue for breach of the contract.

"Conclusions Of Law

"Plaintiff is entitled to its real estate commission.

"Defendant Springtime Company by forcing defendant Heckman to specifically perform the contract, relieved defendant Heckman of his obligations to plaintiff. Defendant Heckman's Motion to Dismiss him as a third party defendant should therefore be sustained.

"The provision for payment of the real estate commission `when and if property is closed and seller receives cash', is an ambiguous one. The only reasonable construction which can be given to the provision, considering the facts existing at the time the contract was signed, is that seller agreed to pay plaintiff its brokers commission whenever the contract was closed and seller received sufficient cash from the buyer to pay the commission.

"The seller having received more than enough cash to pay the brokers commission, it is therefore liable therefore (sic).

"Plaintiff is entitled to a judgment against the defendant, Springtime Company, in the sum of $4,200.00 plus its costs herein.

"Counsel for plaintiff will prepare a judgment entry consistent with this conclusion of law."

Whereupon, this appeal was perfected. The following are assigned as errors:

"1. In rendering judgment in favor of plaintiff-appellee, Harley E. Rouda Co., against defendant and third-party plaintiff-appellant, Springtime Company, the trial court erred in holding that Harley E. Rouda Co. is entitled to a real estate commission because by the terms of the real estate purchase agreement in question the seller changed the usual nature of a broker's duties under such an agreement and imposed upon the broker herein a duty to secure a ready, willing and able purchaser at the time of closing, as opposed to the time of signing an agreement to purchase, which duty the broker herein failed to perform.

"2. The trial court erred in sustaining the motion to dismiss of the third-party defendant-appellee, Jeffrey Heckman, because if the broker is entitled to recovery of a commission herein against the seller, which seller denies, the seller has a contractual right to recovery over against the buyer, in the amount of seller's damages, the real estate commission.

"3. In the alternative, the trial court erred in entering final judgment for the full amount of the commission against the seller, defendant and third-party plaintiff-appellant, Springtime Company, because if the broker is entitled to a commission herein, which the seller denies, and if the seller is not entitled to recover over against the buyer, which it claims, such commission is the joint obligation of the seller and the buyer and the seller is entitled to contribution from the buyer, third-party defendant-appellee, Jeffrey Heckman.

"4. The trial court erred in overruling appellant's motion in the trial court for dismissal of the plaintiff's claim due to the plaintiff's failure to assert its claim as a compulsory counterclaim in the previous litigation between the parties in the Common Pleas Court of Franklin County."

In support of defendant's first assignment of error, it argues that by the addition of the words "when and if property is closed and seller receives cash" the defendant changed the nature of the plaintiff's duties under the contract and imposed upon the broker the duty to not only secure a ready, willing and able purchaser, but a ready, willing and able purchaser at the time of closing, who would close without being forced to do so and who would pay the seller the cash called for by the agreement. Defendant asserts that, since the buyer closed the transaction only after being ordered to do so by the Franklin County Court of Common Pleas, pursuant to the defendant's suit in specific performance, the plaintiff failed in its obligation to procure a ready, willing and able purchaser at the time of closing and, thus, is not entitled to a broker's commission.

Fundamentally, a real estate broker earns his commission when he procures a buyer ready, willing and able to purchase the subject property on the terms specified by the owner. See Bauman v. Worley (1957), 166 Ohio St. 471. The courts of Ohio have consistently held that a broker is entitled to his commission after the seller enters into an enforceable written contract with the buyer, even though the transaction is never consummated. The syllabus in Lohr v. Ford (1952), 94 Ohio App. 17, reads as follows:

"1. Where a real estate broker employed by a seller procures a purchaser who enters into an enforceable contract with the seller, such broker is entitled to his commission.

"2. Under such circumstances, the fact that the transaction failed of consummation for a reason unrelated to the binding quality of the contract does not affect the broker's right to his commission.

"3. In an action by such broker for recovery of his commission, whether the buyer was ready, willing and able to purchase the property is not a proper issue."

Note, also, Carey, Admr., v. Conn. (1923), 107 Ohio St. 113;Scudder v. Wallace (1946), 79 Ohio App. 48; Richards v.Glaser (1946), 49 Ohio Law Abs. 457; and Harden v. Bowling (1971), 27 Ohio App.2d 163.

Moreover, the foregoing rule, of course, may be varied by agreement of the parties. They may make payment of the commission dependent upon an agreement that no commission shall be paid unless the purchase price has been paid and the title transferred. Hersh v. Kelman (1951), 61 Ohio Law Abs. 363. In this case, the trial court found that the addition of the clause "when and if property is closed and seller receives cash" was ambiguous. In determining the meaning of an ambiguous clause, a reasonable meaning, governed by the intention of the parties in light of the particular facts and circumstances surrounding the making of the contract, must be given to the clause. We find that the trial court's construction of the clause, that the defendant agreed to pay the commission when ever the contract closed and the seller received sufficient cash from the buyer to pay the commission, is a reasonable interpretation.

It is reiterated that "a real estate broker is entitled to a commission for his services under an employment contract when he produces a purchaser and the purchaser and seller enter into a written enforceable contract for sale." A. A. Realty Co. v.Warner Albright Town Country, Inc., (1961), 115 Ohio App. 545. See Rosenthal v. City Savings Loan Co. (1940), 31 Ohio Law Abs. 236; Scudder v. Wallace (1946), 79 Ohio App. 48;Lohr v. Ford (1952), 94 Ohio App. 17; cf. Patton v. Alessi (1931), 42 Ohio App. 91; Pfanz v. Humberg (1910), 82 Ohio St. 1. Also see Lawler v. Armstrong (1909), 53 Wn. 664, 102 P. 775;Haynes v. John Davis Co. (1945), 22 Wn. 474, 156 P.2d 659. In our case, the defendant, while not giving plaintiff an exclusive agency to sell its property, did tell plaintiff that it would pay a commission if the plaintiff found a purchaser. Therefore, plaintiff earned his commission when the defendant entered into an enforceable contract with the buyer, but the defendant's obligation to pay the commission was conditioned upon the actual closing of the deal and the transfer to him from the buyer of sufficient cash to pay the real estate commission. In other words, the risk of the buyer's default was placed upon the plaintiff. When the transaction was closed, and the defendant received cash, the condition was met. The defendant's duty to pay the commission was determined. Therefore, defendant's first assignment of error is not well taken and is overruled.

The second and third assignments of error involve defendant's right to sue the buyer, Jeffrey Heckman, for either all or part of the real estate commission. Thus, they are considered together. Defendant claims it has a right of action against the buyer for all of the commission or, in the alternative, a right of contribution from the buyer for one-half of the commission due on the following clause of the purchase contract:

"I hereby deposit with your firm $3,000.00 by check to be held in trust by you, until this proposition, or any modification thereof, is accepted and conditions fulfilled. If this proposition or any modification thereof is not accepted, you are to return to me the above named deposit. If I fail within reasonable time to fulfill my above named proposition, or any modification thereof, after the same has been accepted, by both parties hereto, I agree to pay your firm your regular commission of 6%."

In defendant's second assignment of error, it argues that the buyer's promise to pay the commission if he failed to perform within a reasonable time runs directly to defendant, and since the buyer did not complete the transaction within a reasonable time, he is liable to the defendant for the full commission. In the third assignment of error, defendant contends that the buyer bound himself as a joint obligor with respect to paying the commission if he failed to perform within a reasonable time. Based upon this joint obligation, defendant asserts the right to receive contribution from the buyer in the amount of one-half of the commission owed. Such arguments are based upon the buyer's promise to pay the real estate commission if he failed to perform within a reasonable time.

Defendant's successful action in specific performance, however, relieved buyer of the obligation to pay the commission. A suit in specific performance connotes "performance specifically as agreed." The purpose of the remedy is to give the one who seeks it the benefit of his contract in specie by compelling the other party to the contract to do that which he has agreed to do; in the instant case, to purchase the land upon the terms as set out in the contract. Note, 71 American Jurisprudence 2d 10, Specific Performance, Section 1. When a party sues for specific performance, he, in substance, admits that the contract remains in effect and seeks performance. The trial court may award compensation for expenses suffered because of delay. Notwithstanding, compensation shall not be granted for an injury that an existing decree is designed to prevent. (Annotation 7 A.L.R. 2d 1204; Restatement, Contracts, Section 348[2].) Hence, by defendant's prevailing suit for specific performance, the buyer's alleged breach of contract was nullified. The contract cannot be both performed and breached. The contract, rather than the breach, is the basis for the specific performance remedy.

As an additional argument against the applicability of the doctrine of election of remedies, defendant argues that it is a general principle of law that the doctrine is inapplicable where there are two distinct wrongful acts, or where the transaction gives rise to distinct and independent grounds of action which may be concurrently or consecutively pursued to satisfaction. While the foregoing proposition of law may be valid, it is not applicable to the factual situation in this case. Defendant asserts that the buyer, in the purchase contract, promised to purchase the property within sixty days and, in addition, to pay the real estate commission if he failed to perform within a reasonable time. While the contract could be construed to include two promises, both are based upon the same obligation: to purchase the property within a reasonable time, defined as sixty days. Therefore, we do not find that there were two distinct wrongful acts, but only one, that being buyer's failure to consummate, or purchase, the property within sixty days.

As an additional argument, defendant also contends that the doctrine of election of remedies is not applicable because the buyer failed to keep two promises in the purchase contract. Defendant also asserts that the buyer promised to purchase the property within sixty days, as well as pay the real estate commission if he failed, within a reasonable time, to perform. The contract could be construed to include two promises, but both are based upon the same obligation: to purchase the property within a reasonable time, defined as sixty days.

The syllabus of Lee v. Thoma (1913), 1 Ohio App. 384, reads as follows:

"An action for specific performance is a bar to a subsequent action for damages alleged to have been sustained through failure of the defendant to carry out the contract which forms the basis of the first suit."

Therefore, defendant's successful action in specific performance, in effect, nullified the buyer's alleged breach of contract — that being his failure to purchase the real estate within a reasonable time. Since the buyer's action to pay the broker's commission was based upon the same contract, or rooted in the same promise, the cure of defendant's breach thereof relieved him of any liability to pay the commission. Consequently, the second and third assignments of error are overruled.

Finally, the fourth assignment of error is also overruled. One requirement of a compulsory counterclaim is that it exist at the time the pleading is served. Civ. R. 13(A) reads, in pertinent part:

"A pleading shall state as a counterclaim any claim whichat the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. * * *" (Emphasis added.)

Plaintiff earned its commission at the time an enforceable contract was executed; however, its right to receive the commission from defendant, and defendant's corresponding obligation to pay the commission, was contingent upon the actual closing, or consummation of the contract, and the receipt by defendant from the buyer of sufficient cash to pay the commission. This event had not occurred at the time the plaintiff served his answer on the defendant in defendant's specific performance suit. At any rate, defendant's failure to oppose plaintiff's motion for relief pursuant to Civ. R. 60, from the specific performance judgment, waived any rights which defendant had to raise the compulsory-counterclaim issue in the present ligitation. Consequently, the trial court did not err in overruling defendant's motion to dismiss the plaintiff's claim for failure to assert a compulsory counterclaim in the prior specific performance action.

For the foregoing reasons, the judgment of the trial court is affirmed.

Judgment affirmed.

STRAUSBAUGH, P. J., concurs.

WHITESIDE, J., dissents.