Dworak v. Michals
| Decision Date | 04 June 1982 |
| Docket Number | No. 43880,43880 |
| Citation | 320 N.W.2d 485,211 Neb. 716 |
| Parties | Douglas J. DWORAK, Appellant, v. F. R. MICHALS, Sr., and Nebraska Real Estate Corporation, a Nebraska corporation, Appellees. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. Brokers. When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (1) he produces a purchaser ready, willing, and able to buy on the terms fixed by the owner, (2) the purchaser enters into a binding contract with the owner to do so, and (3) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract.
2. Brokers. In the absence of default, refusal, or interference of the seller, the broker's right to commission against the seller comes into existence only when his buyer performs in accordance with the contract of sale.
3. Fraud. In an action at law, the essential elements of false representation are the making of a false representation, knowing it was false, or making it recklessly without any knowledge of its truth and as a positive assertion, with the intention that it be acted on, that it was acted on, and that the injury resulted.
4. Judgments: Appeal and Error. The judgment of a trial court in an action at law where the jury has been waived has the effect of a verdict of a jury and should not be set aside unless clearly wrong.
5. Contracts. The beneficiaries of a contract may recover thereon, though not named as parties, when it appears by express stipulation, or by reasonable intendment, that the rights and interests of such beneficiaries were contemplated and being provided for therein.
Mark A. Hunzeker of Pierson, Ackerman, Fitchett & Akin, Lincoln, for appellant.
Bren L. Buckley of Cline, Williams, Wright, Johnson & Oldfather, Lincoln, for appellees.
Heard before BOSLAUGH, CLINTON, and WHITE, JJ., and BUCKLEY and CANIGLIA, District Judges.
This is an action brought by plaintiff, Douglas J. Dworak, a licensed real estate broker, against defendants, F. R. Michals, Sr., and Nebraska Real Estate Corporation, for the sum of $5,376, the same representing the amount of commission plaintiff claimed he was entitled to for having produced ready, willing, and able buyers to purchase an apartment complex owned by Michals and listed for sale with defendant Nebraska Real Estate Corporation, of which he was president.
The action was tried to the court, which determined that plaintiff was not entitled to a commission but was entitled to $250, which was one-half of the earnest money deposit, and entered judgment for that amount against both defendants. From this judgment plaintiff appeals.
The material facts are not disputed. The listing contract between Michals and Nebraska Real Estate Corporation was executed on April 6, 1977. It provided for a 6 percent commission in the event a purchaser was found "who is ready, willing and able to purchase the property before the expiration of this listing." It was a Multiple Listing Service contract, which meant that the listing was promulgated to all member realtors of the Multiple Listing Service in the Lincoln, Nebraska, area. This was accomplished by distribution of a Multiple Listing "sheet" or "ticket" which contained a photograph of the building and information concerning the property, which included an "income estimate" and "expense estimate." The income estimate specified 12 five-room apartments at $215 per month rent and 10 garages renting for $15 monthly.
Plaintiff, at that time a self-employed realtor and a member of the Lincoln Multiple Listing Service, received the listing on April 12, 1977. He contacted Michael Johanns and A. J. Swanson, whom he knew were interested in buying an apartment building for investment purposes. He gave them a copy of the listing sheet and took them through the property. Johanns and Swanson used the income and expense information on the listing sheet to calculate the cash flow, i.e., whether or not the rental income would be sufficient to cover all expenses, including the projected mortgage payment. They relied on the information on the listing sheet in making their cash flow calculations, which they determined would meet their requirements.
They then submitted an offer to purchase the property for $256,000 on April 14, 1977, which offer was accepted by Michals on the same day. The offer was accompanied by a $500 deposit, which was held by defendant Nebraska Real Estate Corporation.
While the buyers were in the process of securing a mortgage loan, the appraiser for the mortgage lender called Johanns on May 3 and told him that while he was at the property many tenants expressed extreme concern over the increase in rents planned for June 1, and that many of them threatened to move. Johanns relayed this to Swanson. Since both buyers were totally unaware of any planned increase in rents, Swanson immediately called Michals, who admitted that at about the same time the property was listed for sale the tenants were sent notices of an increase in rent, averaging about $15 per unit, effective June 1. He also admitted that the rents as shown on the listing sheet were not the rents currently in effect but in fact were the rents to be charged on June 1. When Swanson demanded that some form of action be taken over the situation, Michals immediately agreed to release the buyers from the purchase contract, which they elected to do, and the release was executed on the following day, with the $500 deposit returned to the buyers. The plaintiff Dworak first learned of the release later and, after his demand for a commission was refused, brought this suit.
The parties agree that if plaintiff is entitled to a commission it would be in the sum of $5,376, which is 2.1 percent of the sales price and his share as a nonlisting broker of the total commission due. Plaintiff contends he is entitled to the commission because he produced buyers who were ready, willing, and able to purchase the property when the contract to purchase was signed, notwithstanding that the sale was never closed. Defendants contend that plaintiff's commission would not be earned until the sale is consummated, unless the failure to consummate is the fault of the seller. They then contend that in fact the sale did not close because the buyers became unwilling and backed out of the agreement.
As to the applicable law, the defendants are correct. In the case of Cornett v. Nathan, 196 Neb. 277, 242 N.W.2d 855 (1976), we analyzed the law in this area. First, we noted that "[t]his court has consistently held that a broker has not earned his commission unless he produces a buyer who is ready, able, and willing to buy on terms satisfactory to the seller." Id. at 279, 242 N.W.2d at 857. In Wisnieski v. Coufal, 188 Neb. 200, 204, 195 N.W.2d 750, 753 (1972), we said: "A broker earns his commission and becomes entitled thereto when he produces a purchaser who is ready, able, and willing to purchase at a price and upon terms specified by the principal or satisfactory to him." In Huston Co. v. Mooney, 190 Neb. 242, 245, 207 N.W.2d 525, 527 (1973), this court said: "Ordinarily a real estate broker, who for a commission undertakes to sell land on certain terms and within a specified period, is not entitled to compensation for his services unless he produces a purchaser within the time limited who is ready, able, and willing to buy upon the terms prescribed."
In Cornett, however, the buyer was financially unable to consummate the sale. It is not clear whether this condition existed when he signed the agreement to purchase. We recognized that the intent of the parties in the usual listing agreement is that the seller expects to pay a commission only if the sale is completed, because, in most cases, the only source capable of paying the commission is the proceeds from the sale of the property. We...
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