Campbell-Leonard Realtors v. El Matador Apartment Co., CAMPBELL-LEONARD

• Decision Date: 06 November 1976
• Docket Number: CAMPBELL-LEONARD,No. 48070,48070
• Citation: 556 P.2d 459,220 Kan. 659
• Parties: REALTORS, Appellee, v. EL MATADOR APARTMENT COMPANY, a Missouri Limited Partnership, et al., Appellants.
• Court: Kansas Supreme Court

Page 459

556 P.2d 459

220 Kan. 659

CAMPBELL-LEONARD REALTORS, Appellee, v. EL MATADOR APARTMENT COMPANY, a Missouri Limited Partnership, et al., Appellants.

No. 48070.

Supreme Court of Kansas.

Nov. 6, 1976.

Syllabus by the Court

1. A real estate broker is normally entitled to a commission if he is the efficient and procuring cause of a consummated sale.

2. Where the minds of the parties did not meet as to some of the essential terms of a contract, a party thereto who furnishes material or renders services to the other party, relying on the terms as he understood them and thinking there was an express contract, is entilted to recover with the labor furnished was reasonably worth.

3. Where a seller voluntarily accepts substantial cash and other consideration for his property it cannot be said that he derived no benefit from the sale, even though he might have secured more elsewhere .

4. The fact that a party chooses to close a contract of sale rather than litigate its validity does not render the sale 'involuntary' so as to excuse the seller from paying the reasonable value of the services of the broker who negotiated it.

5. A broker who delivers a partially executed contract of sale to the buyer in accordance with his reasonable understanding of the seller's expectations does not thereby breach a duty to the seller so as to forfiet his commission when the sale is later completed.

6. Where the time and method of payment of a broker's commission are not agreed upon and the parties attach a good deal of importance to those terms of their contract, there is no express contract which can be enforced and the broker's recovery must be in quantum meruit.

Robert J. Campbell of Brown, Koralchik, Fingersh & Sildon, Kansas City, Mo., argued the cause, Ray L. Borth, Prairie Village, and James F. Davis of Brown, Koralchik, Fingersh & Sildon, Kansas City, Mo., were with him on the brief for appellants.

Ronald L. Bodinson of Payne & Jones, Chartered, Olathe, argued the cause and was on the brief for appellee.

FOTH, Commissioner:

This is an action by a real estate broker for a commission for selling an apartment complex. The trial court gave the plaintiff judgment on a theory of quantum meruit, and defendants have appealed. Since the property was sold to purchasers admittedly produced by the plaintiff broker, the primary issue is whether the broker has somehow forfeited its commission.

The apartments were owned by the defendant El Matador Apartment Company, a Missouri limited partnership. The defendant Patrick T. Hayes is a general and limited partner of El Matador, and is a resident of Johnson County, Kansas. The other general and limited partner is C. Frederick Brave, a resident of Louisiana, who was not served with process.

Hayes and Brave formed El Matador in December, 1972, to take title to the apartments. Their plan was to buy the complex, lease it to full occupancy, and then sell it. Hayes, the man on the scene in Kansas City, took charge of the partnership's operations. He was a Missouri licensed real estate broker, and a self-employed real estate investor and mortgage broker. His experience included putting together four limited partnerships (including this one) for investing in commercial real estate in Texas and Missouri. Brave, the other partner in El Matador, was an architect and developer in New Orleans. He took no active role in the management of the property or in the negotiations for its sale.

Beginning in March, 1973, Hayes attempted to sell the complex. His first efforts consisted merely of placing ads in the Kansas City Star and talking to prospects. As the year wore on his efforts intensified, and he listed the property with at least two brokers. In the fall of 1973 a contract of sale was signed with a potential purchaser, but the deal fell through for reasons not disclosed in the record.

In January, 1974, Hayes was approached by Bill Fitzsimmons, a salesman for the plaintiff corporation, Campbell-Leonard Realtors of Prairie Village. The result was a written listing agreement calling for a 6% commission on a sales price of $355,000. Hayes signed the letter agreement as 'Seller.'

Hayes testified that the $355,000 selling price in the written agreement was 'unrealistic' and 'inflated,' as he had learned from his own efforts to sell at that figure in early 1973. What was important to Hayes was to secure an assumption of first and second mortgages totalling $272,000, to pay the broker's commission, and to realize net cash for himself and Brave. According to Hayes he told Fitzsimmons in January, when the listing agreement was signed, that his net cash requirement was $55,000. According to Fitzsimmons, Hayes' figure was $35,000. (That is essentially the only disputed fact in the record, and is not regarded as material by the parties or the court.)

On this basis Fitzsimmons set out to sell the property. He advertised it and showed it to a number of prospects over the next two and a half months, devoting by his account more than 100 hours to promoting the property and negotiating the slae. On March 21, 1974, he showed the property to the eventual buyers, Mr. and Mrs. Robert P. Schwermann.

On April 3, 1974, Fitzsimmons presented to Hayes an unsigned contract prepared by the Schwermanns' attorney calling for a purchase price of $340,000. Hayes interlineated some changes in the contract and then signed it as a general partner of El Matador Apartment Company. The contract was returned to the Schwermanns' attorney, who redrafted it, secured Mr. Schwermann's signature, and gave it back to Fitzsimmons for resubmission to Hayes.

On April 11, 1974, the revised contract was submitted to Hayes. He made two additional changes at that time and returned it to Fitzsimmons unsigned. At this meeting Hayes and Fitzsimmons discussed the broker's commission and at least tacitly agreed to a flat $15,000, rather than the 6% called for in the listing agreement. Hayes was unwilling to pay the full $15,000 in cash on closing, and there was an inconclusive discussion as to how much of it the broker should carry and on what terms.

On April 15, 1974, the contract with Hayes' latest amendments was signed by the Schwermanns and given to Fitzsimmons for resubmission to Hayes. This was done the same day. Hayes at that time signed the final version of the contract as a general partner. During the conversation he mentioned to Fitzsimmons that he had another prospective buyer interested in the property, and also that he would need to obtain Brave's signature on the contract.

Hayes signed the contract of April 15 in either three or four counterparts. Despite saying he needed Brave's signature he delivered at least two signed contracts to Fitzsimmons. Fitzsimmons testified there were at least three:

'Q. One for the Defendant Hayes, one for the Schwermanns, and one for yourself?

'A. Right.'

Fitzsimmons thereupon delivered a signed copy to the purchasers. He testified:

'Q. Did Defendant Hayes understand your going to take this contract to the Schwermanns?

'A. Oh, yes.'

Hayes did not deny this in his testimony, nor is there any claim that he instructed Fitzsimmons not to deliver the signed contract.

Between April 15 and April 24 Fitzsimmons made several attempts to meet with Hayes to settle the matter of the brokerage fee. An appointment on the 18th was broken by Hayes because of another appointment.

On April 24 Hayes informed Fitzsimmons that the Schwermann deal was off-that he had signed a contract to sell to another purchaser. Fitzsimmons relayed this information to the Schwermanns, who promptly recorded their contract.

The end result was that Hayes and his partner Brave, on the advice of counsel, decided to close the contract with the Schwermanns rather than litigate its validity. This they did on May 28, 1974, giving the Schwermanns a warranty deed signed by both Hayes and Brave. In return they received from the Schwermanns: an assumption of the first and second mortgages totalling $272,000; a note for $18,000 secured by a third mortgage; cash of $45,000; and an assignment of $5,000 earnest money previously paid by the Schwermanns and held in escrow by the broker.

When Hayes and Brave refused to pay the broker's commission this suit followed. At trial plaintiff relied on both express contract and quantum meruit theories. The trial court made findings of fact which included those recited above; it rejected plaintiff's express contract theory but found an implied contract to pay the reasonable value of the services rendered. This it fixed at $15,000, including the $5,000 held in the broker's escrow account, and rendered judgment accordingly.

The general rule of quantum meruit is set forth in Brakensiek v. Shaffer, 203 Kan. 817, 457 P.2d 511:

'Where the minds of the parties did not meet as to some of the essential terms of a contract, a party thereto who furnishes material or renders services to the other party, relying on the terms as he understood them and thinking there was an express contract, is entitled to recover what the labor furnished was reasonably worth.'

'Where parties agree for the performance of certain work, and the work is done and accepted, and it appears that there was a misunderstanding as to the price to be paid for it, the law rejects the understanding of each and awards reasonable compensation.' (Syl. 1, 2.)

That was a case in which the seller agreed that the broker would be paid for his services if he obtained a buyer, but no agreement was ever reached as to the amount of the broker's fee. This court held that when a sale was completed to a buyer produced by the broker, the broker was entitled to the reasonable value of his services under a theory of quantum meruit. In the course of the opinion the court observed, '(w)here there is no evidence showing that the services were to be gratuitous the law implies a promise to pay for services performed by one person for another which are...