Charlotte Aircraft Corp. v. Purdue Airlines, Inc.

• Decision Date: 07 June 1974
• Docket Number: No. 73-1831.,73-1831.
• Citation: 498 F.2d 152
• Parties: CHARLOTTE AIRCRAFT CORPORATION, a corporation, Appellee, v. PURDUE AIRLINES, INC., a corporation, and Stephens, Inc., a corporation, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

498 F.2d 152 (1974)

CHARLOTTE AIRCRAFT CORPORATION, a corporation, Appellee, v. PURDUE AIRLINES, INC., a corporation, and Stephens, Inc., a corporation, Appellants.

No. 73-1831.

United States Court of Appeals, Eighth Circuit.

Submitted March 12, 1974.

Decided June 7, 1974.

Rehearing Denied July 2, 1974.

John C. Calhoun, Jr., Little Rock, Ark., for appellants.

Thomas E. Downie, Little Rock, Ark., for appellee.

Before VOGEL, Senior Circuit Judge, and LAY and ROSS, Circuit Judges.

LAY, Circuit Judge.

Charlotte Aircraft Corporation brought suit against Purdue Airlines, Inc., and its principal stockholder, Stephens, Inc., to recover a commission allegedly due for its efforts in arranging the sale of a DC-9 jet aircraft from Purdue Airlines to Inex Adria, a Yugoslavian airline. The trial court awarded plaintiff a commission of 33/4% on the sale price resulting in a judgment of $160,683.27, with prejudgment interest at the rate of 6% per annum. The defendants appeal. We affirm the judgment of the district court.

A brief analysis of the facts set forth in the district court is necessary.

Purdue Airlines was a private supplemental air carrier associated with Purdue University in Lafayette, Indiana. In 1969, Purdue purchased and placed in use two DC-9 jet aircraft. It was unable to realize a profit on the operation of these aircraft, however, and by early 1971, it had decided to dispose of them.

Charlotte Aircraft Corporation is a North Carolina corporation specializing in the purchase and sale of aircraft and aircraft parts. When it became known in the airline industry that Purdue had placed its planes on the market, Harold Caldwell, the principal shareholder of Charlotte and its president, began a series of contacts with Purdue through the Stephens company which was handling the sale of the planes. On February 19, 1971, Caldwell wrote Purdue that he wanted his company to act as agent in the sale of the aircraft, and quoted a commission of 21/2%. On April 21, 1971, Caldwell sent a telegram to Purdue quoting specific prices for the planes of $3,900,000 and $4,000,000 and asking any sums in excess of these prices as his commission. This telegram named Inex Adria as the potential buyer. On April 23, Stephens responded by agreeing to those terms.

Thomas Braun and Badr Halwany, joint venturers with Charlotte Aircraft, had been responsible for the initial contact with Inex Adria and, while in Yugoslavia in late April of 1971, they had entered into two tentative, alternate contracts with Inex. One of the contracts was a long-term lease agreement and the other provided for the purchase of a single aircraft, an extra engine and spare parts for $4,445,000. Prior to the execution of these agreements, Braun had received a letter from Inex expressing interest in arranging a purchase of one aircraft alone for $4,200,000. On April 25, Caldwell arranged a meeting in Miami, Florida, between officials of Stephens, Braun and Halwany, and himself to discuss the Inex proposals. After arriving in Miami but before the meeting with Braun and Halwany, Stephens, Inc., executed an agreement appointing Charlotte Aircraft its exclusive agent in any dealings with Inex. This agreement contained no mention of compensation.

After the meeting in Miami, relations between the personnel from Stephens and Caldwell and his partners became increasingly strained. Stephens was not attracted by the possibility of a sale to a foreign airline on credit terms and Inex Adria could not afford a cash transaction. Nonetheless, Caldwell flew to New York to attempt to arrange some form of independent financing. These negotiations were begun with two alternatives in mind: (1) a purchase by Inex financed independently from Purdue, or (2) a purchase by Charlotte for resale to Inex. Toward this latter possibility, Caldwell had secured a short-term option to purchase both planes at a very reasonable price before leaving Miami.

On May 6, one of the principals of Inex Adria contacted Mr. Millwee of Stephens, Inc., directly and asked for a meeting apart from the Charlotte group. At this meeting, it was agreed to arrange the sale without the further assistance of Charlotte. Charlotte was thereafter denied participation in the negotiations. The plane was eventually sold to Inex for the sum of $3,900,000. An extra engine and a quantity of spare parts were also sold. On January 7, 1972, Charlotte made formal demand upon the plaintiff for 5% of the total purchase price of $4,322,189.00 (Purdue's agreed price with Inex on the plane and parts) or $216,109.45. When this demand was refused this action was filed.

In the course of its memorandum opinion, the district court made the following specific factual findings:

That a valid, binding exclusive agency contract was in existence; that there had been no express agreement as to commission but that the defendants impliedly agreed to pay a reasonable sum; that no attempt was made to revoke this exclusive agency; that Stephens agreed with Inex to bypass Charlotte as its agent; that Purdue was unaware of the terms arranged by Braun and Halwany for the sale of the aircraft but that Charlotte was under no obligation to reveal those terms since it was also interested as a potential buyer; and that a reasonable commission would be 33/4% of the actual price realized by Purdue in the sale of the plane.

The defendants urge on appeal:

(1) That if a commission is due, it must be figured in accordance with the "net price" arrangement of the original agreement formed by the telegrams of April 21 and April 23, 1971;

(2) That plaintiff violated its fiduciary duty by acting as both seller and purchaser;

(3) That there was no factual basis for placing the commission at 33/4%; and

(4) That prejudgment interest should be denied since the debt was not liquidated.

The Net Price Listing

On appeal the defendants argue that the district court erred in awarding any commission on the sale since the listing was a "net price" listing at a price of $3,900,000.¹ Since the plane was ultimately sold for exactly that price, Purdue reasons, no commission was due. The defendants' insistence that a net price listing had been made was based upon an exchange of telegrams between the parties in April, 1971.²

The exclusive agency agreement was executed by the parties on April 25, 1971, two days after this exchange. It contained no mention of the amount of commission which would be earned upon sale. The district court found, in the absence of any specific terms relating to a commission, that there existed an implied agreement "that the plaintiff would be paid a reasonable fee based upon the work and services performed by the plaintiff in accordance with the customs and standards prevailing in the industry of buying and selling transport-type aircraft." The court additionally noted: "The results reached by the Court, however, would not be different had the Court found no exclusive agency agreement but was proceeding simply upon a quantum meruit theory."

It is urged by the defendants that the net price agreement accepted by Purdue on April 23, 1971, became a part of the exclusive agency agreement of April 25, 1971. Even if this be true, however, the defendants conveniently ignore the fact that they excluded Charlotte's interests when they agreed upon the final sale price of the plane. The defendants would argue that a seller may place property for sale with an agent on a net price basis, thereafter exclude the agent from the negotiations leading to a sale, and then sell at net or below net price and avoid the obligation to pay a commission. We agree with the plaintiff that this would be a harsh and unjust rule to invoke. It is the law in Arkansas as elsewhere that when property that is subject to an exclusive agency agreement is sold, the broker is entitled to a commission even though the sale is made without his assistance. See Halbert v. Block-Meeks Realty Co., 227 Ark. 246, 297 S.W.2d 924 (1957). Dealing with a similar "net price contract," a California appeals court observed in Hall v. Douglas Aircraft Co., 23 Cal.App.2d 498, 73 P.2d 668 (1937):

The more just and reasonable rule is that, if the seller changes the fixed price so that the agreement can no longer operate, the seller is obligated to pay the reasonable value of the services rendered by the agent in furthering the consummation of the sale.

Id. at 673.

We agree.

The Commission

The defendants also assert that the commission awarded by the district court is excessive. In the early stages of their dealings together, Charlotte had indicated that it would accept a commission of 21/2% upon the sale of the plane in question. The defendants argue that this is the best evidence of a reasonable commission since the plaintiff actually offered to work for that amount. Charlotte answers that the figure of 21/2% was mentioned in contemplation of a relatively simple sale to a domestic American or Canadian airline and that the sale to Inex required substantially more effort on its part, justifying a higher commission. The evidence received by the court consisted of the following:

(1) The contents of a letter from Harold Caldwell to Purdue officials dated February 19, 1971. The body of the letter said simply:

We have quoted your DC9-32 aircraft to Air Canada and Delta Airlines and, in accordance with our past discussions, would expect a commission of 2.5% of the gross dollar volume in event of sale or trade.

(2) The testimony of Harold Caldwell to the effect that:

(a) His firm had gross sales of 25 million dollars in 1971 and earned commissions of 1 million dollars.

(b) That when financing is not involved and there are no subagents, a 21/2% commission is customary.

(c) That more expense is involved in a foreign deal.

(3) The testimony of Jordan Greene, an attorney specializing in aviation sales, who said:

(a) That in a sale involving subagents, the normal commission would be

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