Summary
In Roscow a broker sued on a written contract whereby he was to secure a purchaser for defendant's real estate for a commission; instead the broker produced a lessee who entered into a lease agreement with option to purchase with defendant, which was later terminated by mutual consent and a straight lease substituted.
Summary of this case from Hart v. Billings Public StockyardsOpinion
No. 8285.
Submitted January 7, 1943.
Decided March 5, 1943.
Brokers — Recovery of Commission — Procuring of Purchaser for Placer Mining Ground — Prospective Purchaser entering into Contract of Lease with Owner — Broker not Entitled to Commission under Facts — Statute of Frauds. Brokers — Real Property — When Broker not Entitled to Commission. 1. Where a broker contracts with the owner of real property to procure a purchaser therefor at a named amount, the owner agreeing that the broker shall be entitled to a stipulated commission if he shall sell the land to such purchaser, the words "procure a purchaser" must be held to mean a person who will buy the property, and if he (the broker) fails in that respect he, as a general rule, is not entitled to the commission, irrespective of how great his efforts were or how meritorious his services. Same — Placer Mining Property — Prospective Purchaser Entering into Leasing Agreement with Owner — Facts under which Broker not Entitled to Commission. 2. Where an attorney, acting in the capacity of a real estate broker, undertook to procure a purchaser of placer mining property embracing some 2,100 acres of land for not less than $100,000 on a 10% per cent. commission basis, but his efforts resulted only in finding a prospective purchaser — a dredging company, which entered into a ten-year lease and option to purchase, which however, was terminated after two years by mutual consent, a straight lease taking its place, the lessee working the ground and paying royalties to the owner, the broker properly held by the trial court not entitled to recover the commission, as he would have been if the option to purchase had been exercised. Same — Statute of Frauds — Broker's contract and Subsequent Modification Required to be in Writing. 3. Under section 7519, Revised Codes, mandatory in character, a broker's contract for the sale of real property, as well as any subsequent modification thereof, must be in writing; hence a claim that the written contract was modified by parol may not be sustained. Same — Sale of Part of Property — Broker not Entitled to Commission on Part Sold. 4. A broker, authorized to sell an entire tract of land, who procures a purchaser for a part of it, is not entitled, either on the contract or on a quantum meruit, to compensation for the part sold. Same — Prospective Purchaser Entering into Lease for Dredging Operations Instead of Contract of Sale — Reasons why Broker's Contract not Fulfilled. 5. Contention of plaintiff broker that mineral in place (placer gold) is land, that the right to extract and dispose of it under a lease amounts to its sale as land, and that therefore when he procured a prospective purchaser under the facts set forth in paragraph 2, supra, who obtained a lease from the owner and commenced dredging operations, his obligation to procure a purchaser was fulfilled, may not be held meritorious, when viewed in the light of the recital in the broker's contract that the owner was delirious of selling the "Washington Bar Placer Ranch" consisting of 2100 acres, or as consonant with the idea that all the parties intended to accomplish by the contract was to sell the mineral in the ground under the lease agreement.
ON MOTION FOR REHEARING.
Same — When Rule that Owner, Entering into Contract Satisfactory to him with Prospective Purchaser on Conditions Different from Brokerage Contract, Liable for Commission, does not Apply. 6. The rule that when a broker procures a prospective purchaser of real property which the owner is desirous of selling, and the owner enters into a sale agreement with such person satisfactory to the former though on terms different from those stipulated for in the brokerage contract, the broker is entitled to his commission, applies only where a sale was consummated, not, as in the instant case, where the result of the negotiations was a lease of the property.
Appeal from District Court, Silver Bow County; Jeremiah J. Lynch, Judge.
Mr. Harlow Pease, and Roscow Roscow, for Appellant, submitted an original and a reply brief; Mr. Pease argued the cause orally.
Messrs. Bennett Bennett and Mr. Frank J. Roe, for Respondent, submitted a brief; Mr. Lyman H. Bennett, Jr., argued the cause orally.
Plaintiff's action is for a broker's commission claimed to have been earned by the procuring of a purchaser for placer mining property owned by defendant. Though she has not claimed that there was an express modification of her broker contract with Bara, yet there is ample evidence in the record to support the theory that if the procuring by her of parties who took only a lease and option was not in accordance with the strict letter of her contract (which we do not admit), yet it was accepted and acquiesced in by defendant as being a performance by her of the services he expected and required of her under the contract. Her claim is that she complied with all the provisions of her broker's contract on her part to be performed, and that on the date on which defendant entered into a contract, satisfactory to himself, with the parties brought to him by appellant, on that date her commission became fixed, due and payable. ( Shober v. Blackford, 46 Mont. 194, 127 P. 329; Gantt v. Harper, 82 Mont. 393, 402; 267 P. 296; Apple v. Henry, 66 Mont. 244, 249; 213 P. 444; Nichols v. McClure (Ariz.) 201 P. 95, 97.)
Lease is sale of minerals: The court will no doubt take judicial cognizance of the common custom of selling mining property by the lease and option method, and of the fact that when the so-called lessee begins operating under his so-called lease he is permanently destroying real estate. (See Lindley on Mines, 3d ed., sec. 859B, p. 2128; sec. 861, pp. 2135-36). Particularly is a "lease" of placer property different from the usual lease of farm land. When a lease of placer property is given, it carries with it, expressly or by necessary implication, the right to absolutely destroy the surface of the ground, and to make it unfit for any profitable use in future. In this respect a "lease" is an absolute grant of the ground worked, and the "rents" or "royalties" reserved are in no proper sense rent for use, but price paid for the ground destroyed and the minerals recovered. (Id., sec. 861, pp. 2135, 2136); see, also, Williamson v. Berry, 12 L.Ed. 1170; Apple v. Henry, supra.) In this connection we call the court's attention to these provisions of the two contracts between Bara and the Gold Creek Mining Company: That the use of his lands by Bara was to be subordinate to the use for mining operations by Gold Creek Company and not to interfere therewith, and that the company could operate as it saw fit regardless of the existence of or damage to water, water ditches, and that buildings and farming operations should not interfere with dredging operations; in the lease and option the cash payment is called "down payment" to "apply on purchase price."
Appellant has earned her commission: The courts hold that when the owner accepts parties brought to him by the broker and deals with them and enters into a contract satisfactory to himself, although at a different price or on different terms than suggested to the broker, the broker is then entitled to his commissions and that is true even if the deal falls through. The fact that the owner may have received nothing from the prospective purchaser is held to be of no consequence. It is entirely a question as to whether or not the broker has performed the services required of him by the contract. ( Laux v. Hogl, Shober v. Blackford, Nichols v. McClure, supra.) As stated above, these cases hold that even if the owner receives nothing from the prospective purchaser, the broker is still entitled to his commission. In the instant case, however, the evidence clearly shows that defendant has received money and benefits from the party brought by appellant, and that the same party has continued and still continues to operate the property and benefits are still accruing to defendant because of the services performed by appellant.
After the execution of the broker's agreement, a contract of lease and option to purchase was entered into between respondent and a concern known as Gold Creek Mining Company. No showing was made to the effect that the option was ever exercised, and the trial court specifically found that it was not exercised. There is no evidence of any purchase or agreement to purchase the property in question. The contract between respondent and the Gold Creek Mining Company specifically provided that it was not a contract of sale, and the trial court so found. There was no evidence to the effect that appellant procured a purchaser ready, willing and able to purchase the property in question, and the president of the Gold Creek Mining Company positively testified that that company was not ready, willing or able so to purchase. Contrary to appellant's statement, the contract of lease and option was forfeited for nonperformance. Appellant offered no evidence of any other contract or of any purchase claimed to have been procured by her. After the termination of the contract of lease and option, an agreement of lease without option was entered into between respondent and the Gold Creek Mining Company.
It is a general rule that a broker employed to find a purchaser for, or to sell, property is not entitled to compensation where he merely produces a third party to take an option on the property, and the option is not exercised. The fact that the employer consents to entering into a conditional or optional contract to purchase cannot be construed as a waiver by him of the original terms of employment and an acceptance of such services as a complete performance on the part of the broker. By granting the option the owner is merely helping to bring about the sale which he employed the broker to make. Such action does not imply that he has made a new contract with the broker by which he agrees to pay for something different from the services he originally contracted for, but only indicates a desire upon his part to aid the broker in the performance of the original agreement. (See 8 American Jurisprudence, 1093 and 1094, Sec. 177, Brokers, and cases there cited.) (See, also, Scott v. Kennedy, Okla., 3 P.2d 907; Warnekros v. Bowman, Ariz., 128 P. 49, and Brown v. Keegan, Colo., 76 P. 1056.)
It is well settled by numerous decisions of this Court that in order for a broker to recover a commission under such a contract as is admitted to have been entered into in writing between appellant and respondent, it must be alleged and proved that the broker procured a purchaser ready, willing and able to purchase. (See Laux v. Hogl, 45 Mont. 445, 123 P. 949; Shober v. Blackford, 46 Mont. 194, 137 P. 329; Wright Land Investment Co. v. Even, 57 Mont. 1, 186 P. 681; Wright v. Bowlus, 62 Mont. 322, 205 P. 210; Apple v. Henry, 66 Mont. 244, 213 P. 444; and Gantt v. Harper, 82 Mont. 393, 267 P. 296.)
We now give attention to plaintiff's contention that a lease for mining purposes is a sale of minerals and, therefore a sale of a portion of the property concerning which she was employed to procure a purchaser. Even granting that such a lease is a sale of a portion of the property, appellant is not entitled to commission for that reason, as stated in 8 Am. Jur., 1094, par. 178, Brokers: "Thus, according to the weight of authority, a broker who is authorized to sell an entire tract of land and who secures a purchase for a part of the tract only, is not entitled to compensation on the part sold either on the contract or on a quantum meruit." To the same effect, see Bentley v. Edwards, 125 Minn. 179, 146 N.W. 347, 51 L.R.A. (n.s.) 254, Ann. Cas. 1915C, 882, and annotations; also the Oklahoma case of Kennedy v. Hart, 101 P.2d 808, 810.
This appeal is from a judgment in favor of the defendant in an action where the plaintiff sought to recover a broker's commission under a contract for a sale of real property.
The following statement of facts is summarized from the court's findings: The plaintiff, an attorney, and the defendant, a rancher, entered into the following written agreement in May, 1935:
"That the said Dan Bara is desirous of selling that certain property known as the Washington Bar Placer or Ranch, situate in Madison County, Montana, consisting of twenty-one hundred acres, more or less, for not less than the sum of One Hundred Thousand ($100,000.00) Dollars, and has hired and by these presents does hire said Jessie Roscow to procure a purchaser for said property at not less than the said sum of One Hundred Thousand ($100,000.00) Dollars; and
"That the said Jessie Roscow has agreed to put forth her best efforts to procure a purchaser for said property at said price; and
"That the said Dan Bara, in consideration of the efforts of said Jessie Roscow to procure a purchaser for said property, has agreed and does hereby agree to pay to said Jessie Roscow the sum of ten per centum (10%) of the said sum of One Hundred Thousand ($100,000.00) Dollars, or of any other or greater sum for which said Dan Bara shall sell said property to the purchaser or purchasers whom said Jessie Roscow shall procure."
During the summer of 1935 the plaintiff introduced the defendant to the officers of the Gold Creek Mining Company. As a result of this introduction, on the 19th day of August, 1935, the defendant and the mining company entered into a contract known as a "lease and an option to purchase." By the terms of this agreement the mining company could use the property for mining purposes and at any time within ten years could exercise an exclusive option to purchase the property for $100,000. The mining company was required to do certain testing and developing work within a certain time and make certain royalty payments to the defendant. Some two years later, after a failure upon the part of the mining company to comply with the lease and option agreement, the contract was terminated by mutual consent and a straight lease was substituted. Since that time the mining company has worked the ground and paid royalties to the defendant.
The cause was tried to the court without a jury, and the court found for the defendant and ordered the action dismissed. The primary basis for the decision of the court is found in the finding No. 19, as follows: "That at no time did said company purchase or agree to purchase from the defendant the property described in said `Exhibit A' * * * for the sum of one hundred thousand dollars or any other sum."
It is evident that the court has predicated its decision upon this finding and upon the terms of the written contract which requires the plaintiff to "procure a purchaser" in order to entitle her to her commission.
The plaintiff has grouped her specifications of error in her argument and they are as follows:
"1. That defendant was satisfied with performance of plaintiff of her contract.
"2. That defendant was satisfied with a lease and option.
"3. Modification by parol.
"4. Lease is a sale of mineral.
"5. That appellant has earned her commission."
The first two arguments are so related that we shall discuss them together. To give force to them it must be said that the contract is not specific enough to restrict performance to "purchase" and that procuring of a lease and option was performance, or that the plaintiff was entitled to her commission because of her services even though she did not carry out the terms of the contract.
With regard to the first position we are compelled by the [1, 2] plain wording of the contract, which the plaintiff herself prepared, and upon which she relies for recovery in this suit, to hold that the words, "procure a purchaser" can mean but one thing — procuring a person who will buy the property. Likewise, the written contract being clear, we cannot say that the plaintiff's services, when the terms of the contract were not met, entitle her to a commission.
The general rule as expressed by this court is found in Wright v. Bowlus, 62 Mont. 322, 205 P. 210, 211. It is there said: "As a general rule a broker is not entitled to compensation until he has performed the undertaking assumed by him; and, in the absence of any contrary provision in his contract, it matters not how great have been his efforts nor how meritorious his services; if he is unsuccessful in accomplishing the object of his employment, he is not entitled to compensation." The Gold Creek Company was not ready, willing and able to purchase the property and the agreement made by it and Bara was only a lease and an option, and it specifically provided that it was "not a contract of sale." By no stretch of the imagination could it be said that the broker's contract as originally made was complied with by appellant. But, she argues, the making of any agreement between Bara and the Gold Creek Mining Company amounted to an acceptance by Bara of her services as a performance of her obligation under the contract. This position, too, is untenable. Appellant relies on Laux v. Hogl, 45 Mont. 445, 123 P. 949, 951, where it is said: "In our opinion, however, the broker is entitled to his commissions if he produces a purchaser ready to accept, and who does accept, the offer made by the seller according to its terms." This statement does not support her position but is to the contrary. She did not produce a purchaser. The most that can be said is that she produced a prospective purchaser and the giving of the option to the mining company, and the subsequent straight lease does not bring this case within the Laux Case, or any other cited by appellant. Had the option been exercised of course the commissions would have been earned. The rule applying to this case is found in 12 C.J.S., Brokers, section 86, p. 199.
The next argument made by the plaintiff is that there is [3] sufficient evidence to show that the written contract was modified by parol. This argument is not tenable by virtue of the fact that section 7519, Revised Codes, requires a broker's contract for the sale of real estate to be in writing. This court has ruled directly upon this question. ( Gantt v. Harper, 82 Mont. 393, 267 P. 296, 297.) In that case it is held: "Our statute of frauds requires a note or memorandum in writing, subscribed by the party to be charged, or his agent, as a condition precedent to recovery of a broker's commission upon an agreement authorizing or employing an agent or broker to purchase or sell real estate. (Section 7519, Rev. Codes 1921.) This statute has frequently been considered and applied by this court and its provisions are held to be mandatory ( Skinner v. Red Lodge Brewing Co., 79 Mont. 292, 256 P. 173) as to the original agreement, as well as any subsequent modification in the terms thereof." While appellant argues that certain letters constituted a modification, standing alone they clearly did not do so. She relies chiefly on parol evidence to show modification and even if that evidence did show modification, it would avail her nothing because of section 7519, Revised Codes.
The next argument is that a lease and option or straight [4, 5] lease, when involving mining property, is in effect a sale of minerals and thus would come under the "purchase" provisions of the written contract. The reasoning upon which this argument is based is that there has been a severance of part of the corpus of the real estate which has actually been the subject of changed property interests. The plaintiff cites 3 Lindley on Mines, 3rd Ed., sec. 861, page 2135. Therein the reason is given as follows: "That doctrine, as we have seen, is based upon the principles that mineral in place is land, that a grant of the right to extract and dispose of it, and thus destroy its character as real estate, amounts to its sale as land * * *." (See, also, 40 C.J. 992.)
Whether or not there is a sale of part of the real estate is not important here. The general rule in such case is stated in 8 Am. Jur. 1094 as follows: "Thus according to the weight of authority, a broker who is authorized to sell an entire tract of land and who secures a purchaser for a part of the tract only, is not entitled to compensation on the part sold either on the contract or on a quantum meruit." (See, also, Bentley v. Edwards, 125 Minn. 179, 146 N.W. 347, 51 L.R.A. (n.s.), 254, Ann. Cas. 1915C, 882; Kennedy v. Hart, 187 Okla. 169, 101 P.2d 808.)
The above rule is particularly applicable here where we are dealing with a special contract rather than a general broker's agency. (See annotation, 73 A.L.R. 929.)
In any case we cannot say, in the face of the specific language in the contract, that "Dan Bara is desirous of selling that certain property known as the Washington Bar Placer Ranch * * * consisting of twenty-one hundred acres," that it was intended by the parties that all that was to be sold was the mineral in the ground under a lease agreement.
Some argument is made that the cancellation of the lease and option and the making of the straight lease to the mining company was for the purpose of defrauding plaintiff of her commission. The record does not support this charge and the court's finding is correct.
The plaintiff has urged error in the findings of fact not conforming to the evidence and that certain testimony had been erroneously excluded. We have examined these contentions and find them to be untenable.
The judgment is affirmed.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES MORRIS, ANDERSON and ADAIR concur.
On Motion for Rehearing.
In her petition for a rehearing, plaintiff says: "This entire [6] case is based upon the theory that when a broker brings to the owner a prospective purchaser, and the owner deals with the prospective purchaser and enters into an agreement with him satisfactory to the owner, the broker is entitled to his compensation for the services rendered. Everything else depends upon that theory, which has been overlooked by the Court." This theory of the plaintiff was considered by the court on the original hearing and it is discussed in the opinion. As we said in the original opinion, that theory can only be sustained where the person or corporation produced by the broker is actually a prospective purchaser, ready, willing and able to enter into a purchase and sale agreement satisfactory to the seller. While the seller did enter into an agreement with the corporation produced by the broker, it was not an agreement for the purchase and sale of the property and thus does not come within the cases cited by plaintiff both in her original brief and on rehearing. We did not hold, as a general rule, as plaintiff in her petition assumes, that before the broker is entitled to his commission he must produce a person who actually purchases the property and the purchase and sale agreement is fully performed. The contract between these parties provides specifically that plaintiff's right to recover the commission depends upon her finding a purchaser of the property in question. She did not produce either a purchaser or someone ready, willing and able to purchase or anyone with whom the seller dealt on terms different from those provided in the brokerage contract within the cases cited by plaintiff. In all of the cases cited by plaintiff the agreement entered into between the seller and the purchaser was an agreement of purchase and sale, which is not the case here.
The petition is denied. Remittitur forthwith.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES MORRIS, ANDERSON and ADAIR concur.