Blank v. Borden

• Decision Date: 08 July 1974
• Citation: 115 Cal.Rptr. 31,11 Cal.3d 963,524 P.2d 127
• Court: California Supreme Court
• Parties: , 524 P.2d 127 Ben BLANK, Plaintiff and Respondent, v. Erica BORDEN, Defendant and Appellant. L.A. 30159. In Bank

Page 31

115 Cal.Rptr. 31

11 Cal.3d 963, 524 P.2d 127

Ben BLANK, Plaintiff and Respondent, v. Erica BORDEN, Defendant and Appellant.

L.A. 30159.

Supreme Court of California,

In Bank.

July 8, 1974.

[11 Cal.3d 965] Minsky, Garber & Rudof and Albert C. Garber, Los Angeles, for defendant and appellant.

[524 P.2d 128] James Hollowell, Palm Springs, for plaintiff and respondent

Moses Lasky, Howard N. Ellman and Brobeck, Phleger & Harrison, San Francisco, amici curiae for plaintiff and respondent.

SULLIVAN, Justice.

In the instant case we confront the question whether the familiar withdrawl-from-sale provision in an exclusive-right-to-sell contract between an owner of real property and a real estate broker exacts an unlawful penalty within the meaning of sections 1670 and 1671 of the Civil Code. We conclude that it does not. In so holding, we decline defendant-owner's invitation to extend into this area the rule of Fracasse v. Brent (1972) 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9, which limited to Quantum meruit the recovery of an attorney discharged without cause in spite of a valid contingent fee contract. Pointing out basic differences between the type of contract there involved and that before us, we affirm the judgment of the trial court granting full recovery under the withdrawal-from-sale provision according to its express terms.

On April 26, 1970, defendant Erica Borden and plaintiff Ben Blank, a real estate broker, entered into a written agreement for the purpose of securing a purchaser for defendant's weekend home in Palm Springs. The agreement, a printed form contract drafted by the California Real Estate Association, was entitled 'Exclusive Authorization and Right to Sell' and by its terms granted Blank the exclusive and irrevocable right to sell the property for the seven-month period extending from the date of the agreement to November 25, 1970. It further provided that if the property were sold during the said period the agent would receive 6 percent of the selling price, and that 'if said property is Withdrawn from sale, transferred, conveyed, leased without the consent of Agent, or made unmarketable by (the owner's) voluntary act during the term hereof or any extension thereof,' the agent would receive 6 percent of the 'price for the property' stated elsewhere in the agreement. (Italics added.) Relevant portions of the agreement are set forth in the margin. ¹

The findings of the trial court describe subsequent events in the following terms Determining that the foregoing constituted a withdrawal from sale within the terms of the agreement, ² the trial court concluded that plaintiff Blank was entitled to compensation according to the agreement's provisions. Accordingly it rendered judgment in favor of plaintiff Blank in the amount of $5,100 (6 percent of $85,000) plus interest. Defendant has appealed.

'5. Plaintiff at once began a diligent effort to 'obtain a purchaser for said property, including but not limited to the expenditures of monies for advertisements in the newspaper, but on or about June 26, 1970, while said exclusive sales contract was still in effect and while plaintiff was making a diligent effort to obtain a purchaser, defendant, without reason or justification, orally notified plaintiff that the property was no longer for sale and that he had no further right to make efforts to sell same or collect a commission, all in direct violation of said exclusive sales contract.'

At the outset we quickly dispose of two contentions relating to the substantiality of the evidence in support of the findings of the trial court which we have quoted above.

First, it is contended that there was no support for the finding that plaintiff was making a diligent effort to find a purchaser for the property when it was withdrawn from the market; this, it is urged, resulted in a failure of consideration. Suffice it to say that although the record contains evidence which might support a contrary finding, it also contains substantial evidence in support of the finding made by the trial court concerning plaintiff's diligence. There is evidence in the record that plaintiff contacted several parties--members of the country club on whose golf course the property fronted as well as other persons--with respect to the property, and that he ran newspaper advertisements concerning the property during the two months which preceded defendant's withdrawal of the property. The fact that plaintiff had produced no Offers prior to the withdrawal of the property from the market of course does not in itself compel a finding that he was not making diligent efforts to find a purchaser.

Second, it is contended that the finding concerning defendant's withdrawal of the property from the market lacks substantial support. Again, however, our examination of the record discloses ample evidence to support the finding. The withdrawal occurred in the course of an argument which took place at the property between plaintiff and defendant's then fiance, Dr. Archer Michael. ³ Defendant was also present at the time. When Dr. Michael, after making statements which might reasonably be construed as threats of physical violence, told plaintiff to take his sign off the property and leave because his services were no longer wanted, plaintiff asked defendant whether she concurred. She replied that she did, and plaintiff departed. It was only after receiving a letter from plaintiff's attorney demanding payment pursuant to the contract that she attempted to soften her position and requested that plaintiff continue his efforts to sell the property. It was wholly within the province of the trial court, as finder of fact, to determine that the withdrawal was complete and unequivocal when made and that defendant's subsequent efforts through counsel to recant were ineffective and irrelevant.

We are thus brought to the single significant issue in this case, namely, the extent of recovery to which plaintiff is entitled under the contract.

It has long been the law of this state that any right to compensation asserted by a real estate broker must be found It is equally well settled in this state that a withdrawal-from-sale clause in an exclusive-right-to-sell contract is lawful and enforceable, a claim for compensation under such a clause being not a claim for damages for breach of that contract but a claim of indebtedness under its specific terms. (Maze v. Gordon (1892) 96 Cal. 61, 66--67, 30 P. 962; Baumgartner v. Meek (1954) 126 Cal.App.2d 505, 510--511, 272 P.2d 552; cf. Kimmell v. Skelly, Supra, 130 Cal. 555, 559--561, 62 P. 1067; Rankin v. Miller (1960) 179 Cal.App.2d 133, 135, 3 Cal.Rptr. 496; see generally, 1 Miller & Starr, Current Law of Cal. Real Estate, Supra, pp. 215, 245.)

[524 P.2d 130] within the four corners of his employment contract. (Crane v. McCormick (1891) 92 Cal. 176, 182, 28 P. 222; see also Kimmell v. Skelly (1900) 130 Cal. 555, 560, 62 P. 1067; see generally, 1 Miller & Starr, Current Law of Cal. Real Estate (1965) pp. 228--247.) By the same token, however, '(t)he parties to a broker's contract for the sale of real property are at liberty to make the compensation depend upon any lawful conditions they see fit to place therein. (Citations.)' (Leonard v. Fallas (1959) 51 Cal.2d 649, 652, 335 P.2d 665, 668.) In short it is the Contract which governs the agent's compensation, and that contract is strictly enforced according to its lawful terms.

Defendant contends, however, albeit somewhat obliquely, that such clauses should be denied enforcement as an unlawful penalty ⁴ under the terms of Civil Code sections 1670 and 1671. The same argument was urged upon the court in Baumgartner v. Meek, Supra, 126 Cal.App.2d 505, 272 P.2d 552, and was rejected in the following language: 'We think this contention cannot be sustained in view of the contrary holdings in the cases referred to (i.e., Kimmell v. Skelly, Supra, 130 Cal. 555, 62 P. 1067; Walter v. Libby (1945) 72 Cal.App.2d 138, 164 P.2d 21; Fleming v. Dolfin (1931) 214 Cal. 269, 4 P.2d 776; Mills v. Hunter (1951) 103 Cal.App.2d 352, 229 P.2d 456.) The distinction between an action for breach of the promise by the owner not to revoke or deal through others or sell himself during the stipulated term, wherein damages are sought for such breach, and a contractual provision whereby, in consideration of the services of the broker to be and being rendered, the owner directly promises that if he sells through others or by himself or revokes he will pay a sum certain, is made clear in the cited cases, particularly in the quotations we have taken from the opinion in Kimmell v. Skelly. The action is for money owed, an action in debt (Maze v. Gordon, Supra), and the only breach involved is the failure to pay the promised sum.' (126 Cal.App.2d at p. 512, 272 P.2d at p. 556.)

We agree with the Baumgartner court that the withdrawal-from-sale clause in an exclusive-right-to-sell contract does not constitute a void penalty provision. In reaching this conclusion we are not unmindful of the teaching of our recent decision in Garrett v. Coast & Southern Fed. Sav. & Loan Assn., Supra, 9 Cal.3d 731, 108 Cal.Rptr. 845, 511 P.2d 1197, wherein we emphasized that we look to substance rather than form in determining the 'true function and character' of arrangements which are challenged on this ground. (Id. at pp. 735--737, 108 Cal.Rptr. at p. 847, 511 P.2d at p. 1199.) As we there stated, 'when it is manifest that a contract expressed to be performed in the alternative is in fact a contract contemplating but a single, definite performance with an additional charge contingent on the breach of that performance, the provision cannot escape examination in light of pertinent rules relative to the liquidation of damages.' (Id. at p. 738, 108 Cal.Rptr. at p. 849, 511 P.2d at p. 1201.) Here, however, we We do not see in this arrangement the invidious qualities characteristic of a penalty or...