E. O. Bailey & Co. v. Union Planters Title Guaranty Co.

• Decision Date: 23 March 1949
• Parties: E. O. BAILEY & CO., Inc., v. UNION PLANTERS TITLE GUARANTY CO. 33 Tenn.App. 439, 232 S.W.2d 309
• Court: Tennessee Court of Appeals

Page 309

232 S.W.2d 309

E. O. BAILEY & CO., Inc., v. UNION PLANTERS TITLE GUARANTY CO.

33 Tenn.App. 439, 232 S.W.2d 309

Court of Appeals of Tennessee, Western Section.

March 23, 1949 Certiorari Denied by Supreme Court Oct. 7, 1949.

[33 TENNAPP 443] Armstrong, McCadden, Allen, Braden & Goodman, Memphis, for complainant.

Canada, Russell & Turner, of Memphis, for defendant.

ANDERSON, Presiding Judge.

This suit presents a controversy over the right of the complainant, a real estate broker, to a commission on the price obtained by the defendant in the sale of a building owned by it and sold to a third party. From a decree for the complainant, holding it entitled to the commission and awarding a recovery accordingly, the defendant appealed.

Complainant's claim is based upon a provision in a written lease negotiated by it, whereby the defendant leased for a term of years a business house to two partners operating under the name of Thomas Bros. Candy Co. This provision is as follows: "28. Agency and Commission Agreement--This lease was negotiated by E. O. Bailey & Co., Inc., acting as Agent for the Lessor, and Lessor agrees to pay E. O. Bailey & Co., Inc., the usual commission (in accordance with the rules of the Real Estate Board of Memphis) for services in negotiating this lease; also to pay E. O. Bailey & Co., Inc., the usual commission for any subsequent lease that may be entered into by Lessor with the Lessee, covering the within leased premises, or additions thereto for which an additional rental is paid by the Lessee. The Lessor also agrees to pay to E. O. Bailey & Co., Inc., the usual sales commission in the event the within leased premises are sold to Lessee herein."

The principal contentions are (1) that this provision was 'a mistake as to both parties and an unauthorized inclusion by the draftsman of the instrument' and that [33 TENNAPP 444] therefore this Court in the exercise of its equitable jurisprudence should 'reform the instrument to conform to the intention of the parties by striking Clause 28 from the instrument'; (2) that the agreement contained in the Clause is unenforcible for lack of a consideration; (3) that if this be not true, then, properly interpreted, the provision means that the broker would be entitled to a commission only in the event his efforts were instrumental in bringing about a sale of the property to the lessee; that this was not the case, and hence the complainant was entitled to no commission; (4) that the complainant cannot maintain this suit because it was not actually a party to the contracts; (5) that notwithstanding the contract recites that the complainant was the agent of the defendant, he was in fact acting for the benefit of the lessees and hence a recovery should be denied under the general rule that an agent for one party cannot make a contract for compensation with the other party to the transaction; and (6) that the property was not sold to the partnership named as lessees in the contract but to the Thomas Wiener Company, a Tennessee corporation, and hence the condition for the payment of the commission was not fulfilled.

Chancellor Creson filed an outstanding opinion containing a comprehensive and discriminating analysis of the issues presented and the authorities deemed controlling. His statement of the case and the controlling facts is not controverted and we adopt it. It is as follows:

'In this case complainant, a licensed real estate agent or broker, sues the defendant, Union Planters Title Guaranty Company, for a real estate commission in the amount of $2,780.00, alleged to be due and owing by [33 TENNAPP 445] reason of the sale by defendant of a plot of ground containing a three-story brick building, known in the record as Belmont Candy Company Building, located in Memphis, Shelby County, Tennessee, for the sum of $86,000.00 to Thomas-Wiener Company, a Tennessee corporation.

'The background of the present controversy is that Thomas and Wiener, confection manufacturers, were in business as equal partners, operating under the name of Thomas Bros. Candy Company, for a period of many years prior to February 1, 1946. Sometime prior to September 1, 1936 these partners began negotiations with defendant Title Guaranty Company for lease of the ground and building involved. The two partners especially desired the premises because the building contained certain facilities, characteristics and equipment adapted to confection manufacture. After negotiations had proceeded inconclusively for sometime between Clyde Denton, representing defendant on the one hand, and Wiener on behalf of the partnership, primarily over the amount of rental, the partners secured the assistance of E. O. Bailey of the complainant Company.

'A lease of the premises for the period of September 1, 1936 through August 31, 1941 was finally concluded, with Bailey acting for the partners. This lease provided for a commission to Bailey on the agreed rental; but the amount necessary to defray this commission was added to the agreed rental for the premises. Through the term of this lease the rent was collected by Bailey, commission deducted and balance remitted to the defendant Title Guaranty Company. At the outset the attitude of Clyde Denton toward E. O. Bailey & Company entering the transactions between Thomas-Wiener Company and the defendant Title Guaranty Company became immediately [33 TENNAPP 446] evident. Denton was opposed to E. O. Bailey & Company participating and vocally so. As stated, the rent previously agreed to Thomas and Wiener, partners, was raised to the extent of the commission.

'At the expiration of the aforementioned leased on August 31, 1941, the partnership, Thomas Bros. Candy Company, continued to occupy the premises on a month to month rental basis while sporadic discussions for a new long-term lease went on. The defendant Title Guaranty Company desired a very substantial increase in rental as part of any new lease for a period of years; more than the partnership was inclined to pay. However, early in 1943 another prospective tenant became interested in the premises and this factor served to materially increase the tempo of negotiations between the partnership and defendant Title Guaranty Company. The partners importuned Denton to not lease the premises to others while the discussion of a new five-year lease continued. With matters in this state the partners again sought the intervention of E. O. Bailey & Company in the negotiations and were advised by Bailey of their need for a long-term lease or outright purchase of the property. The Title Guaranty Company was not then interested in a sale of the property and Bailey pursued discussions with Denton on the terms of lease. Denton was adamant in his position that the monthly rental should be $700.00. Bailey was unable to obtain any reduction. Upon Bailey's appearance in this transaction, Denton again evidenced his opposition and superimposed upon the $700.00 monthly rental an additional $50.00 monthly to satisfy Bailey's commission. This new lease was finally closed as of March 1, 1943 to expire on February 28, 1948; but for reasons serving and [33 TENNAPP 447] at the instance of the partners, the monthly rental was fixed in the written agreement at $1200.00 per month for the first year, $1000.00 per month for the second year, $550.00 per month for the third year and $500 per month for the remaining two years. The complainant realtors continued collection of the monthly rental, deduction of commission and remittance of the balance to the defendant Title Guaranty Company, lessor.

'Matters continued on between the parties as above outlined until June, 1946, the defendant Title Guaranty Company decided that market conditions were favorable to a sale of the leased premises and through Denton brought this change of attitude to the notice of the lessees. Though unknown to the defendant, Title Guaranty Company until sometime later, the former partnership business, Thomas Bros. Candy Company had been incorporated as of February 1, 1946. From that time on the corporation had been the occupant of the leased premises in the place and stead of the former partnership and had regularly paid the stipulated monthly rental. This corporation, Thomas-Wiener Company, took over all of the assets, except some cash in bank, and assumed all liabilities of the former partnership, carried on identically the same business and the ownership of the corporation continued in Thomas and Wiener in the same proportion as their previous partnership interests. The change from partnership operation to the corporate form was made for tax purposes, as was so common at the time.

'Intermittent conferences between Denton on behalf of the defendant Title Guaranty Company and Thomas with respect to purchase and sale continued. Thomas and Wiener were discussing advisibility of their Company's[33 TENNAPP 448] purchase of the property at the defendant's proposed figure of $85,000.00 with E. O. Bailey. Thomas and Wiener entertained doubt that the property was worth in excess of $65,000.00 and were much concerned as to what course to pursue. Bailey advised them that, under all the circumstances, the property should be bought at the Title Guaranty Company's figure. This participation of E. O. Bailey was unknown to the defendant Title Guaranty Company until very near the conclusion of the trade.

'Upon final agreement as to the purchase price of $85,000.00, Denton set about to prepare the contract papers; and it was then ascertained by him for the first time that the lease agreement contained the clause around which the present litigation revolves.

* * *

'Denton promptly contacted Thomas and Wiener and advised them of the above-quoted provision coming to his notice. He further advised that the Title Guaranty Company felt no obligation to complainant realtors and that if any such commission was to be paid to complainant E. O. Bailey & Co., agent, the sale...