Drake v. Hosley, S-759
| Decision Date | 31 January 1986 |
| Docket Number | No. S-759,S-759 |
| Citation | 713 P.2d 1203 |
| Parties | Paul E. DRAKE, Appellant, v. Charles F. HOSLEY, d/b/a the Charles Hosley Company, Realtors, Appellee. |
| Court | Alaska Supreme Court |
Thomas R. Wickwire, Fairbanks, for appellant.
Woody Brooks, Aschenbrenner & Brooks, Fairbanks, for appellee.
Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.
This is an appeal from a summary judgment granted in favor of Charles Hosley, entitling him to a real estate broker's commission under a contract with the seller. The superior court concluded that Hosley had fulfilled the terms of a written agreement with the seller by finding a buyer who entered into a contract to purchase in accord with the seller's terms. We affirm.
On March 5, 1984, Paul Drake signed an exclusive listing agreement with The Charles Hosley Company, Realtors (hereafter "Hosley"). The agreement authorized Hosley to act as Drake's agent until March 30, 1984, to sell some land Drake owned in North Pole, Alaska. The agreement provided for payment of a ten percent commission if, during the period of the listing agreement, 1) Hosley located a buyer "willing and able to purchase at the terms set by the seller," or 2) the seller entered into a "binding sale" during the term set by the seller.
Hosley found a group of three buyers, Robert Goldsmith, Dwayne Hofschulte and David Nystrom (hereafter "buyers"), who were interested in the property. On March 23, 1984, Drake signed a purchase and sale agreement, entitled "earnest money receipt," in which he agreed to sell the land to the buyers at a specified price and terms. The buyers also signed the agreement. It provided that closing would occur "within 10 days of clear title" and "ASAP, 1984." A typed addendum stated that Drake agreed to pay Hosley a commission of ten percent of the price paid for the property. Both Drake and Hosley signed the addendum.
On April 3, 1984, Hosley received a preliminary commitment for title insurance. The title report listed a judgment in favor of Drake's ex-wife as the sole encumbrance on the title. The next day Hosley called Drake's attorney, Tom Wickwire, to ask about the judgment. Wickwire stated that the judgment would be paid with the cash received at closing.
Two or three days later, attorney Wickwire called Hosley and stated that his client (Drake) wanted the sale closed by April 11. Wickwire explained that he had negotiated a discounted settlement with Drake's ex-wife that required payment by April 11. Wickwire claims that Hosley agreed to close by April 11. Hosley disagrees, and claims that he merely stated that he would try to close as quickly as possible.
When Hosley became concerned that the buyers would not be able to close on April 11, he telephoned the attorney for Drake's ex-wife and learned that the April 11 deadline for payment of the judgment had been extended until the end of the month.
On April 11, Wickwire called Hosley to set up the closing. Hosley told Wickwire that the buyers could not close that day because they did not have the money and would not have it before May 1. Wickwire indicated that he would advise Drake to call off the sale because the buyers had refused to perform. 1 Wickwire mailed a letter to Hosley, dated April 11, stating that Drake's offer to sell was withdrawn. Hosley received the letter on approximately April 18. On April 12, Drake sold his property through another broker to different buyers.
On April 12, Hosley went to Wickwire's office to close the sale and submitted checks from the buyers totaling $33,000 for the down payment. Wickwire refused the checks, stating that another buyer already had purchased the property.
Hosley filed a complaint, alleging he had fulfilled the terms of the exclusive listing agreement and was entitled to payment of a commission. The parties filed cross-motions for summary judgment. The trial court granted Hosley's motion and denied Drake's. Drake appeals.
I.
Drake contends he does not owe a commission to Hosley and that entry of judgment in favor of Hosley was improper. In reviewing a summary judgment, we must determine whether there are any genuine issues of material fact, and whether the moving party is entitled to judgment as a matter of law. Moore v. State, 553 P.2d 8, 15 (Alaska 1976). See Alaska R.Civ.P. 56(c).
AS 08.88.361 provides that "[a] commission is earned when the real estate broker fulfills the terms of a written personal services contract." The exclusive listing agreement between Drake, as seller, and Hosley, as broker, provided that a ten percent commission would be paid to Hosley if one of three conditions occurred:
a) if a property is sold or a binding sale or lease agreement is entered into by Seller during the term set by seller; or
b) if during the term of this Agreement [Hosley] finds a buyer willing and able to purchase at the terms set by Seller; or
c) if a buyer located by [Hosley] enters into a binding sale or lease agreement within 120 days after the expiration of this Agreement.
(Emphasis added.)
It is undisputed that during the term of the agreement, Hosley found a group of three buyers, and that Drake entered into a purchase and sale agreement ("earnest money receipt") with the buyers. The earnest money agreement signed by Drake stated: "I hereby approve and accept the above sale for said price and on said terms and conditions and agree to consummate the same as stated." A typed addendum to the earnest money agreement provided: "Seller agrees to pay a Realtors' commission in the amount of 10% of price to be paid by partial assignment of the deed of trust at the rate of $1,000/month."
On the basis of these facts, the trial court concluded that Hosley had performed the terms of his agreement with Drake. The court found that, within the terms of the listing agreement, Hosley located a group of buyers who entered into a binding sale agreement with Drake. The court ruled that Hosley therefore was entitled to his commission.
Drake invites this court to adopt the reasoning of Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843 (1967), and hold that a real estate broker does not earn a commission unless the contract of sale is performed.
The traditional rule followed by a majority of jurisdictions is that a broker is entitled to a commission when he produces a buyer ready, willing and able to purchase the property on the seller's terms, even if the sale is not completed. Sowash v. Garrett, 630 P.2d 8, 12 (Alaska 1981). See generally Annot., 12 A.L.R. 4th 1083 (1982). The rationale for concluding that a potential purchaser is deemed "willing and able" the instant the purchaser signs a contract with the seller is explained in Kopf v. Milam, 60 Cal.2d 600, 35 Cal.Rptr. 614, 617, 387 P.2d 390, 393 (1963):
When a vendor enters a valid unconditional contract of sale with a purchaser procured by a broker, the purchaser's acceptability is conclusively presumed because the vendor is estopped to deny the qualifications of a purchaser with whom he is willing to contract.
Drake suggests that the rule of Dobbs is better reasoned because it emphasizes that a broker has not produced a ready, willing and able buyer if the buyer refuses or is unable to perform at closing. Dobbs, 236 A.2d at 853. In a practical world the true test of a willing buyer is not met at the time a purchase agreement is signed, but at the time of closing of title. Id. Since the broker's duty to the owner is to produce a buyer who is financially able to pay the purchase price, it is reasonable to allow the owner to accept the buyer and enter into a sales contract without becoming liable for a broker's commission unless the sale is consummated. Id.
The Dobbs court also noted that when an owner of property lists it for sale with a broker, the owner usually expects that money for payment of a commission will come from the sale proceeds. Id. at 854. For these reasons, the Dobbs court concluded that "public policy requires the courts to read into every brokerage agreement or contract of sale a requirement that barring default by the seller, commissions shall not be deemed earned against him unless the contract of sale is performed." Id. at 857.
We find such reasoning persuasive. We also note that several jurisdictions recently have adopted the Dobbs rule, or modified versions of it. See Annot., 12 A.L.R. 4th 1083, 1088, 1094-1103 (1982). However, adoption of the rule does not assist Drake in this case. The Dobbs court specifically held...
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