Baker v. Leight
| Decision Date | 28 March 1962 |
| Docket Number | No. 7074,7074 |
| Citation | 370 P.2d 268,91 Ariz. 112 |
| Parties | Pete L. BAKER and Ethel Baker, husband and wife, Appellants, v. Samuel LEIGHT, bda Leight Realty, and Orland Fiandaca, Appellees. |
| Court | Arizona Supreme Court |
Warren R. Brock, Tucson, for appellants.
William Gordon, Tucson, for appellee Leight.
Silver, Silver & Ettinger, by Jack A. Ettinger, Tucson, for appellee Fiandaca.
This cause was tried in Pima County and resulted in a directed verdict for the defendants at the close of plaintiffs' evidence. Mr. and Mrs. Baker (appellants) were the plaintiffs below and the buyers in the real estate transaction in question. They believe that they are not required to complete the purchase contract and they elected to rescind.
Appellee Fiandaca, a defendant below, is the owner and seller of the real estate in controversy. Appellee Leight, the other defendant, is a duly licensed real estate broker who negotiated the transaction in question.
On October 21, 1958, the buyers turned over to the broker a $6,000 good faith deposit and signed a document partly printed and partly in longhand, which document carries the title, 'Deposit receipt and agreement.' On the face of the document the printed portion recites that the broker 'as agent of the seller, * * * has this day sold to the above named purchaser, subject to acceptance by the seller and to marketable title as evidenced by a standard form of Owner's Title Insurance Policy issued by a qualified Title Insurance Company * * *.'
The document further provides: 'In the event title to said property as herein agreed to be conveyed is found by Title Insurance Company to be unmarketable as shown above, at time of closing sale, the earnest money shall be returned to purchaser.'
With reference to the good faith deposit it is provided, '* * * after delivery of preliminary report of title insurance to this agent or if an escrow agent be designated herein, then to such escrow agent * * * all funds and instruments necessary to such closing * * *.' The name of the Tucson Title Insurance Company was written in in the blank space in relation to that particular company which was to be employed as the escrow agent.
In longhand on the face of the agreement the following words were inserted:
After the broker and the buyers signed, the matter was presented to the seller who made the following modification, among others:
This and other modifications were accepted by the buyers.
The evidence established that up to this point none of the parties, including the broker, had personal knowledge of the actual language contained in the mortgage referred to. An escrow was opened. Tucson Title made a preliminary search and advised the parties. At that time they first became personally aware of the fact that the mortgage contained the following clause:
This mortgage was a matter of record in the County Recorder's office for some months prior to the execution of the aforesaid deposit receipt and agreement.
When the buyers learned of this clause, they declined to go ahead with the transaction, it being the opinion of the buyers that this clause was incompatible with the longhand language of the contract which authorized payment at $518.39, more or less, per month.
The sellers urge among other matters that since the parties contemplate an agreement for the sale of real estate as distinguished from a deed with a note and mortgage back for the deferred balance that as a matter of law Clause No. 16 does not apply.
The seller desiring to go ahead with the contract and the realtor not refunding the good faith deposit, the buyer brought action specifying several claims for relief:
The first claim for relief was in relation to a mutual mistake of fact in that both parties assumed that the buyers had the right to pay the first mortgage in installments as per the agreement signed by the parties.
The second claim alleges false and fraudulent representations by the broker and seeks punitive damages.
The third claim alleges that the agreement was vague and ambiguous and is, therefore, not enforceable.
The fourth claim urges that Tucson Title found that the title was unmarketable and,
The fifth claim is for unjust enrichment.
The evidence discloses that Baker had bought and sold several properties through Leight. In some instances Leight represented Baker as the seller and in other instances Leight represented Baker as the buyer. At the time of the transaction in question an escrow was in the process of being closed in connection with the sale of a piece of property. In connection with that sale Baker was the seller and Leight was his broker. Leight knew that there was approximately $8,000 in escrow which would presently be paid to Baker. Leight then attempted to interest Baker in the purchase of the property which is now in litigation.
The trial court ruled that the agreement was plain and unambiguous; that Baker was charged with knowledge of the terms of the mortgage; that as a matter of law Baker assumed and agreed to pay the mortgage with all of its terms and conditions; and that Baker had no right to rescind. In the event that the conclusions of the trial judge are correct, then his decision to direct a verdict is correct and there is no need to review other aspects of this case.
This court agrees that the agreement of the parties is clear and unambiguous. This court does not agree with the trial court as to the legal effect. Had the agreement merely said, 'The buyer buys subject to the mortgage,' or 'The buyer assumes and agrees to pay the mortgage,' then the buyer as between the buyer and seller would be charged with full knowledge of the terms and conditions of the mortgage. However, when the seller expressly contracts that the buyer shall be privileged to pay the mortgage at approximately $518.39 per month, then the buyer is entitled to rely on that contract in so far as the seller is concerned. The same is not true is so far as the mortgagee is concerned, the mortgagee not being a party to the sale contract. The seller having contracted that the buyer could pay in monthly installments and being silent in relation to an acceleration clause, it then became the seller's obligation to secure from the mortgagee a valid waiver of clauses which differ from and which are more onerous than the agreement.
The seller urges that an agreement for the sale of real estate is not a present conveyance. This is a technically correct statement. However, the language in Clause 16, 'or if the title thereto shall become vested in any other person * * * in any manner whatsoever' includes a contract of sale which contract vests in the buyer the right to acquire the title subject to the default of the buyer. The above-quoted mortgage language gives to the mortgagee the apparent right to accelerate. The court need not determine in this cause whether or not this right is in all events enforceable. It is sufficient to say that a buyer is not required to take with such a clause in view of the language of the contract and thereby assume the real risk of being required to defend a mortgage foreclosure with the questionable defense of an absence in the right of the mortgagee to accelerate.
It was the seller's obligation to procure the waiver of Clause 16 from the mortgagee and to come forward immediately upon being informed that the buyer elected to rescind because of the fact that Clause 16 constituted a material breach of the contract. This the seller did not do. The buyer made out a prima facie case. It was reversible error to direct a verdict for the defendants. The case must be retried as the defendants have not had the opportunity of defense. It, therefore, becomes appropriate to consider other aspects of the case.
It is clearly the law of this state that there is a fiduciary relationship between a broker and his seller. Hassenpflug v. Jones, 84 Ariz. 33, 323 P.2d 296. This was recognized by the trial court. The trial court ruled in substance that there is no duty from the broker to the buyer. The court ruled out the plaintiffs' offer of proof as to statements made by the broker at the time of and prior to the execution of the deposit receipt and agreement. It will be recalled that this was at a time when Baker had yet to receive some $8,000 from an escrow wherein the broker had represented Baker as a seller's broker.
The offer of proof was to establish by Baker and by an escrow officer of the Tucson Title...
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