Opinion
Decided November 23, 1932.
Real estate brokers — Surety on bond liable to purchaser depositing binder retained by broker — Binder deposited before bond effective, but sale contract rescinded thereafter — Section 6373-35, General Code.
1. Deposit of binder with broker by purchaser of real estate is within statute prescribing liability of broker's surety, and renders bond liable for proper application of binder (Section 6373-35, General Code).
2. Broker's conduct in failing to return $500 binder deposited by real estate purchaser when vendor and purchaser rescinded contract for sale was within statute giving person damaged by fraud of broker cause of action against broker and surety (Section 6373-35, General Code).
3. Broker's failure to apply $500 binder deposited by purchaser on contract for sale of land, negotiated August 31, 1930, to be consummated by delivery of deed and possession March 1, 1931, did not constitute defalcation until March 1, 1931, and broker's bond in effect at latter date was liable (Section 6373-35, General Code).
ERROR: Court of Appeals for Greene county.
Messrs. Knepper, White, Smith Dempsey, for plaintiff in error.
Messrs. Marshall Marshall, for defendant in error.
This case was submitted to the lower court upon the pleadings and the evidence, without the intervention of a jury.
The lower court found in favor of defendant in error, Ruth H. Kirkpatrick, who was plaintiff in the lower court, in the sum of $437.50.
Motion for a new trial having been filed and overruled, error is prosecuted to this court.
In brief, it appears from the record that T.C. Long was a real estate broker in the city of Xenia, and was on August 21, 1930, a licensed broker, pursuant to the provisions of Sections 6373-25 to 6373-51 of the General Code of Ohio; his broker's license being executed for the calendar year 1931, with the Glens Falls Indemnity Company as surety.
The Glens Falls Indemnity Company was not surety for the said Long as a real estate broker in the year 1930.
It further appears from the record that in August, 1930, A.M. Linkhart listed for sale with T.C. Long as such real estate broker a tract of some 39 acres belonging to the said Linkhart; that on August 21, 1930, the said Long negotiated a contract for the sale of said real estate between the said Linkharts and the defendant in error, Ruth H. Kirkpatrick; that upon the execution of said contract of sale said Ruth H. Kirkpatrick, as provided in the contract, deposited $500 with said Long, the real estate broker, as a binder; that final settlement, as provided in the contract, was to be made by delivery of the deed, and possession was to be given on or before March 1, 1931; that the said contract was not carried out on March 1, 1931, as it was agreed the same should be, but that subsequently, in 1932, the said Linkharts and Ruth H. Kirkpatrick entered into an agreement mutually releasing each other from the said contract, and the Linkharts also released any interest they might have in the $500 deposited as a binder.
It further appears from the record that on April 30, 1931, subsequent to the time that the contract should have been completed, and prior to the time that the said Kirkpatrick and Linkhart mutually released each other from the obligations of the contract, the said Long paid to Mrs. Kirkpatrick $12.50 in cash, and Mrs. Kirkpatrick agreed to allow him $50 for his services in the deal; Long further agreeing to send her the next day a check for the balance. Said Long at this time gave Mrs. Kirkpatrick a memorandum showing that he was indebted to her in the sum of $437.50, but no part of said sum of $437.50 has been paid by the said Long to Mrs. Kirkpatrick. It further appears from the record that, several days after this $500 was paid to Long by Mrs. Kirkpatrick, the said Long deposited $350 of this amount to his personal account at the Citizens National Bank in Xenia, and retained from the said check $150.
It clearly appears from the record that the plaintiff in error, the Glens Falls Indemnity Company, was not surety upon the bond of Long as such real estate broker in August of 1930 when the contract was executed between the Linkharts and Mrs. Kirkpatrick and when the $500 as provided in the contract was deposited with Long by Mrs. Kirkpatrick as a binder. It also clearly appears that on March 1, 1931, when this contract was to be completed, and possession was to be given, the Glens Falls Indemnity Company was surety of T.C. Long upon his bond as such real estate broker.
Under the circumstances above narrated, is the plaintiff in error liable upon the bond so given?
Counsel agree substantially upon the facts in the case, but differ as to the legal propositions governing such facts.
We have considered the very helpful briefs of counsel with care, but shall not attempt to review the various authorities discussed therein. It will not be necessary, for these authorities were largely cited during the oral argument of the case and are reviewed in the briefs of counsel. Neither shall we attempt to quote at length from the sections of the Code involved in this controversy. These sections were read and discussed at length in the oral argument, and are reviewed in the briefs.
We shall merely announce the conclusion at which we have arrived after a consideration of the authorities cited and the section of the Code involved in the controversy.
Section 6373-35, General Code, provides: "Such bond shall be conditioned upon the faithful observance of all the provisions of this act and shall also indemnify any person who may be damaged by a failure on the part of the applicant for a real estate broker's license to conduct his business in accordance with the requirements of this act. Any person claiming to have been damaged by any misrepresentation or fraud on the part of a real estate broker or by reason of the violation of the terms of this act, may maintain an action at law against the broker making such representations or perpetrating such fraud or violating the provisions of this act, and may join as parties defendant the sureties on the bonds herein provided for."
From a consideration of these provisions of the Code, and the authorities cited, we are of opinion that the deposit of a binder with a real estate broker as provided in the contract of sale entered into between the parties herein falls within the provisions of the Code referred to, and renders the real estate broker's bond liable for the proper application of the money so deposited with him as such binder for the performance of the contract entered into. From our consideration of the various sections of the Code relating to this subject, we cannot escape the conclusion that the misconduct of Long as such real estate broker falls within the provisions of Section 6373-35, and kindred sections, of the Code.
We are also of opinion that Long's defalcation did not occur until March 1, 1931. That is the date fixed by the parties for the completion of the contract. The $500 in question was not to be applied until that time, and neither of the parties to the contract could have required the payment of this sum until that date. That was the date fixed by the contract for his accounting. Upon that date the bond of the plaintiff in error was in full force and effect, and we think the bond is liable for the defalcation of the said Long.
We have considered all of the errors urged by counsel for plaintiff in error in their brief, but, finding no error in the record which we consider prejudicial to plaintiff in error, the judgment of the lower court will be affirmed.
Judgment affirmed.
ALLREAD, P.J., and HORNBECK, J., concur.