Foster v. Peterson, No. 21842

• Court: Court of Appeals of Oregon
• Writing for the Court: Before SCHWAB, C. J., TANZER, RICHARDSON and ROBERTS, JJ., and PETERSON; PETERSON; Lent; As to this observation of Justice Lent
• Citation: 600 P.2d 490,42 Or.App. 249
• Parties: William A. FOSTER, Jr., dba Century 21, Mr. Real Estate, Appellant, v. Dwayne E. PETERSON, Respondent. ; CA 12449.
• Decision Date: 17 September 1979
• Docket Number: No. 21842

Page 490

600 P.2d 490 42 Or.App. 249 William A. FOSTER, Jr., dba Century 21, Mr. Real Estate, Appellant,
v.
Dwayne E. PETERSON, Respondent. No. 21842; CA 12449. Court of Appeals of Oregon. Argued and Submitted May 18, 1979.
Decided Sept. 17, 1979.

[42 Or.App. 250] Vernon W. Robinson, Bend, argued the cause and filed a brief for appellant.

Paul R. Unger, Redmond, argued the cause for respondent. With him on the brief was Bryant, Erickson, Jaqua & Bischof, Redmond.

Before SCHWAB, C. J., TANZER, RICHARDSON and ROBERTS, JJ., and PETERSON, J. Pro Tem.

[42 Or.App. 251] PETERSON, Judge Pro Tem.

Plaintiff, a licensed real estate broker, brought this action to recover a broker's fee allegedly owing under an exclusive listing agreement covering the period July 23, 1976, through January 24, 1977. The listing

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price was $89,950, and defendant agreed to pay plaintiff 10% Of the selling price as a commission for his services. The agreement contained this clause:

"THIS IS AN EXCLUSIVE LISTING and you hereby are granted the absolute, sole and exclusive right to sell or exchange the said described property. In the event of any sale, by me or any other person, or of exchange or conveyance or lease of said property, or any part thereof, during the term of your exclusive employment, or in case I withdraw the authority hereby given prior to expiration date, I agree to pay you the said commission just the same as if a sale had actually been consummated by you."

Plaintiff established a file, advertised the property, listed the property with a multiple listing service, and presented a prospective purchaser whose offer was too low to interest defendant. During November, 1976, defendant sold the property on his own to a third party for the sum of $81,000. Plaintiff's complaint demanded payment of $8,995 as a commission.

The trial court, sitting without a jury, found that defendant had breached the employment contract by selling the tavern during the period of exclusive listing. However, the trial court refused to enforce the provision for payment of a full commission on sale by defendant because the court viewed it as a penalty rather than a valid liquidated damages provision, citing Wright v. Schutt Construction, 262 Or. 619, 500 P.2d 1045 (1972). The trial court awarded plaintiff judgment against defendant in the sum of $338, apparently as compensation for the amounts plaintiff actually expended in attempting to sell the property, and costs and disbursements.

Plaintiff appeals, contending that the trial court erred in holding the stipulated sum to be a penalty [42 Or.App. 252] rather than a valid liquidated damages provision. Plaintiff relies primarily on Dean Vincent v. Chef Joe's, 273 Or. 814, 541 P.2d 469 (1975).

In Wright v. Schutt Construction, supra, plaintiff broker had an exclusive listing agreement to sell the property in question at a price which would net defendant owner $200,000. Plaintiff was to receive a 10% Commission. The agreement provided that if the owner withdrew the authority to sell during the term of the contract the owner would pay plaintiff the same commission plaintiff was to receive if he sold the property. Defendant terminated the agreement prior to its expiration date. Plaintiff's complaint requested payment of $20,000 as a commission. The trial court held that plaintiff could not recover the stipulated commission because plaintiff did not prove that he would have been able to sell the property for the asking price so as to earn his commission, and, therefore, use of the prospective commission as a measure of damages was speculative. The trial court awarded nominal damages because of the breach of the agreement.

On appeal, the Supreme Court affirmed on the ground that the provision for payment of a full commission constituted a penalty. The Supreme Court cited 1 Restatement 552, Contracts § 339(1) as the rule which must be met before a contract provision will amount to a valid and enforceable provision for liquidated damages. That section states:

"An agreement, made in advance of breach, fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless

"(a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and

"(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation."

[42 Or.App. 253] Applying these rules to the facts of the case before it, the court concluded that the trial judge did not err in finding that the payment of a commission of 10% Of a purchase price of $200,000 net to defendant was not a reasonable forecast of just compensation for the harm caused by the breach because there was evidence (1) that the property was priced too high for the market and that no prospective purchaser had come forward offering anything near

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the asking price, and (2) that in all probability plaintiff would have suffered no damages in any amount from the wrongful termination of the listing agreement since he could never have made the required sale. Id. at 631, 632, 500 P.2d 1045.

Wright v. Schutt Construction, supra, must be read in light of a later decision, Dean Vincent v. Chef Joe's, supra. In Chef Joe's defendant had entered into a 90-day exclusive listing agreement with plaintiff on May 15 which contained similar provisions to these in the case at bar. Defendant set $110,000 as the minimum acceptable price and promised plaintiff a commission of $10,000. Plaintiff advertised and made other attempts to make a sale. On June 21 defendant entered into an earnest money agreement with a buyer procured by another broker in which defendant agreed to sell for $125,000. After the 90-day period had expired, defendant entered into a contract of sale with the other party pursuant to the earnest money agreement. Defendant paid the...