Cochran v. Ellsworth

• Decision Date: 07 July 1954
• Court: California Court of Appeals Court of Appeals
• Parties: COCHRAN v. ELLSWORTH. Civ. 19951.

Page 904

272 P.2d 904

126 Cal.App.2d 429

COCHRAN v. ELLSWORTH.

Civ. 19951.

District Court of Appeal, Second District, Division 1, California.

July 7, 1954.

As Amended on Denial of Rehearing Aug. 4, 1954.

Demler & Eckert and Elizabeth Cochran, Long Beach, for appellant.

Best, Best & Krieger, Riverside, and Joseph A. Ball, Long Beach, for respondent.

MOSK, Justice pro tem.

Desiring to sell his real property, consisting of 480 acres, the entire town of Stanfield, Arizona, respondent Earle Ellsworth in January, 1950, listed the property with Hapeman-McDonald, real estate brokers, in Riverside, California. Shortly thereafter appellant, a real estate broker licensed in California, but not in Arizona, learned of the listing, advertised the property and made efforts to obtain a purchaser.

On March 5, 1950, respondent informed appellant that the agency of Hapeman-McDonald was being revoked but that appellant could continue his efforts to sell the property. About this time appellant interested one Charles Fitzgerald, a Long Beach medical doctor, in the property and on March 4, 1950, Dr. Fitzgerald and his wife inspected the property unaccompanied by appellant.

Within a few days thereafter, on or about March 8, 1950, respondent Dr. Fitzgerald and appellant met in the Fitzgerald home in Long Beach, California, and negotiated for the sale of the Arizona property. Pursuant to these negotiations escrow instructions were drafted by the Farmers and Merchants Bank of Long Beach. On March 14, 1950, appellant went to Arizona where he further conferred with respondent, who advised him that he desired to have his own attorney in Arizona prepare the escrow instructions. The attorney, Eugene K. Mangum, drafted new instructions and at the same time, pursuant to a request from appellant, prepared a separate memorandum by the terms of which appellant was to receive a broker's commission in the total sum of $8,200.

The latter agreement, executed by both respondent and appellant, provided in part as follows:

'Whereas, party of the second part has acted as broker in arranging for the sale of certain Arizona property owned by party of the first part and others, and

'Whereas, it is desired by this Agreement to establish the terms of payment of the commission for such services performed by party of the second part,

'Now, Therefore, it is mutually agreed:

'I.

'In the event of consummation of the sale of the property hereinabove referred to, party of second part is to be entitled to a commission in the amount of Eighty-two Hundred ($8200.00) Dollars, payable as follows: The sum of $1200.00 at the close of escrow, and the sum of $7,000.00 on or before November 15, 1950.'

The parties concede that the escrow instructions constituted a binding contract of purchase and sale of the property. The escrow was thereafter opened in the Farmers and Merchants Bank in Long Beach. The buyer, Dr. Fitzgerald, deposited in the escrow a deed to his Long Beach home, $10,000 in cash and his promissory note secured by a deed of trust on the Arizona property. He also paid the sum of $4,000 cash outside of escrow for the stock of goods in the store located in Stanfield. For this he received a bill of sale from the respondent. On or about April 15, 1950, Dr. Fitzgerald took possession of the Arizona property. Subsequent thereto, at some time undisclosed by the record, respondent met all conditions required of him by the escrow.

The escrow was never closed for on June 1, 1950, Dr. Fitzgerald served a notice of rescission upon respondent, claiming fraudulent misrepresentations concerning the property had been made to him. Respondent promptly instituted an action for specific performance against Dr. Fitzgerald in the court of Pinal County, Arizona.

This action was never brought to trial, for Fitzgerald and respondent, after negotiations through their attorneys, mutually rescinded the transaction and instructed the escrow holder to return the monies, deeds and other papers to the parties who had deposited same.

Not having received his commission, appellant brought this action for the purpose of collection. The trial court found that respondent made no false representations to Dr. Fitzgerald but that the latter desired 'to get out of the bargain from his own choice'. The trial court also found that the brokerage contract was executed in Arizona, that appellant was not a licensed real estate broker under the laws of the state of Arizona and that under those laws a broker cannot recover a commission upon a broker's contract unless so licensed. The court further found that it was the intention of the parties that the commission would be payable only if Dr. Fitzgerald completed the transaction of purchase, and that since he did not, no commission was due. From that determination, the broker has appealed.

In their settled statement, the parties have agreed there are two questions to be resolved on appeal: (1) when the owner of real property located in Arizona comes into California and lists such property with a California broker, does the fact that the written memorandum of his promise to pay broker's commission was signed in Arizona preclude the broker from collecting his fee; and (2) under the evidence was the sale of the real property involved 'consummated', so as to entitle the broker to his commission under a contract which called for payment of commission upon 'consummation' of sale?

1. Does lack of an Arizona license prevent recovery by appellant?

The first query of the parties on this appeal poses a perplexing problem involving the validity of the broker's contract, he having been licensed in California but not in Arizona. Both California and Arizona have a statute of frauds requirement that real estate brokers' contracts, to be enforceable, must be in writing. But beyond that, whether we here apply Arizona or California law is a unique dilemma in the conflicts of laws field. The following factual capsule will demonstrate the difficulty: there was one transaction; the property was in Arizona; the broker was in California; the seller was in Arizona; the buyer in California; the seller gave oral authorization to the broker in California; the written brokerage contract was executed in Arizona; the broker's services were rendered in California; the purchaser was obtained in California; the sale was negotiated in California; the escrow instructions were prepared in California but revised in Arizona; the escrow instructions were signed by the seller in Arizona but by the purchaser in California; the escrow was opened in California.

In many jurisdictions it has been held that an isolated transaction does not preclude recovery of a commission by a non-resident unlicensed real estate broker where he is not shown to be otherwise carrying on the business of a real estate broker in the state. Ressler v. Marks, 308 Pa. 205, 162 A. 666, 86 A.L.R. 638; Boggan v. Clark, 141 Miss. 849, 105 So. 760; Land Co. of Florida v. Fetty, 5 Cir., 15 F.2d 942; Vossler v. Earle, 273 Ill. 367, 112 N.E. 687. However the laws of Arizona specifically provide that 'the performance of one act * * * shall constitute the performer thereof a real estate broker.' Arizona Laws 1937, ch. 53, p. 177. If appellant is otherwise subject to the laws of Arizona by virtue of his contract, he is not exempt because only a single transaction was involved.

Three possible rules have been suggested for ascertaining the law governing the validity of a contract: (1) the intention of the parties; (2) the place of performance; (3) the place of making the contract. These are discussed at length by Beale in 23 Harv.L.R. 260 ff., and he concludes (p. 272) that 'the principle which is both sound theoretically and most practical in operation is the principle that contracts are in every case governed as to their nature and validity by the law of the place where they are made.'

The place of making the contract, and its equivalent, the place of contracting, properly mean the place in which the final act was done which made the promise or promises binding. Just what event is the final one necessary to make a contract is primarily a question to be determined by the law of contracts. 2 Beale, The Conflict of Laws, p. 1045. In contract law, the universal principle disposing of this, says Williston (Vol. I, p. 309), is 'that the place of the contract is the place where the last act necessary to the completion of the contract was done,--that is, where the contract first creates a legal obligation'. To the same effect is Fitzhugh v. University Realty Co., 46 Cal.App. 198, 199, 188 P. 1023. An example is this situation described in Michelin Tire Co. v. Coleman & Bentel Co., 179 Cal. 598, at page 604, 178 P. 507, 510: 'The contract in question was prepared in Los Angeles, signed by the defendant company there and forwarded to the Michelin Tire Company of the New Jersey at Milltown for acceptance. It contained a provision that it should not be binding until accepted by the Michelin Tire Company. Upon receipt of the contract at Milltown, the Michelin Tire Company, after making a substantial change in one of the provisions of the contract, signed the same and returned it to the defendant company with advices as to the change. Until this change had been approved, it was not the contract between the parties. The defendant company upon receipt of the contract as modified, by letter dated November 5, 1908, and mailed from Los Angeles, advised the Michelin Tire Company that it accepted the contract as modified. Under the authorities the contract was clearly executed in California, where the last act in its execution was performed. Ivey v. Kern County Land Co., 115 Cal. 196, 46 P. 926; Bank of Yolo v. Sperry Flour Co., 141 Cal. 314, 74 P. 855, 65 L.R.A. 90.'

Ordinarily the 'last act essential to the validity' of a brokerage contract is not the signing of authorization to act. The mere engagement of a broker to...