Goetz v. Anderson, 9490

• Decision Date: 30 November 1978
• Docket Number: No. 9490,9490
• Parties: Edmer A. GOETZ d/b/a Edmer A. Goetz Realty Co., Plaintiff and Appellant, v. C. D. ANDERSON and Pauline E. Anderson, Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 175

274 N.W.2d 175

Edmer A. GOETZ d/b/a Edmer A. Goetz Realty Co., Plaintiff and Appellant, v. C. D. ANDERSON and Pauline E. Anderson, Defendants and Appellees.

Civ. No. 9490.

Supreme Court of North Dakota.

Nov. 30, 1978.

Garaas Law Firm, Fargo, for plaintiff and appellant; argued by Jonathan T. Garaas.

E. J. Rose, Bismarck, for defendants and appellees.

SAND, Justice.

This is an appeal by Edmer A. Goetz, d. b. a. Edmer A. Goetz Realty Co. (Goetz Realty), from a judgment dismissing its complaint against C. D. Anderson and Pauline Anderson for a realtor's commission arising out of property listed for sale under an exclusive listing agreement.

In 1976, C. D. Anderson contacted Goetz Realty concerning the appraisal of property located in Bismarck, known as the Anderson Distributing Co. building. After some preliminary negotiations, an exclusive listing agreement was entered into between the Andersons and Goetz Realty to sell the Anderson property for $165,000 or any other price agreed upon by the seller, for which Goetz Realty was to receive a ten percent commission.

Goetz Realty placed advertisements in the Bismarck Tribune for approximately 40 days, and made phone calls to clients in an effort to locate a buyer for the property.

Presumably as a result of the realtor's efforts, Jack Clairmont contacted Goetz Realty and expressed a desire to purchase the Anderson property on behalf of Arrow Contractors, Inc. (Arrow). Clairmont indicated the terms on which Arrow would be willing to buy the property and an earnest money receipt and agreement, was drafted and dated 3 December 1976, incorporating those terms. The draft agreement, in part, stated:

"RECEIVED FROM Jack Clairmont the sum of $5,000 . . . as earnest money and in part payment for the purchase of the . . . (Anderson Distributing Co. property) . . ."

The draft agreement provided for an earnest money receipt of $5,000 with an additional $10,000 to be paid on the date of closing with the remaining $150,000 purchase price, plus interest, to be paid through installment payments. The agreement provided that the conveyance would be by a contract for deed. Because the draft agreement listed Jack Clairmont as purchaser of the property rather than Arrow, it was never signed by a representative of that company.

A new earnest money receipt and agreement, listing Arrow as the purchaser, was subsequently drafted and dated 6 December 1976. Similar to the first agreement, it also provided for a $5,000 earnest money amount, however, it did not provide for the additional $10,000 to be paid on the date of closing. Rather, the $10,000 payment was to be made on July 1, 1977, six months after the date of closing. A conflict in the testimony exists concerning if the $10,000 payment was changed at the suggestion of Anderson or Clairmont. Goetz Realty offered testimony that Anderson requested the $10,000 payment be deferred until after 1 January 1977 to avoid taxable gain on the amount of the payment for the year 1976. Anderson testified the change was at the request of Clairmont. The evidence is undisputed, however, that on 6 December 1976, Arrow was no longer willing to make the additional $10,000 payment on the date of closing because the company needed the money for bid bonds on contracts in which it was interested.

The agreement containing the changes was signed by Mr. and Mrs. Anderson and by Jack Clairmont as general manager for Arrow.

Also, on 6 December 1976, Anderson received a promissory note due 1 July 1977, signed by Jack Clairmont as general manager for Arrow. The purpose of this note is also disputed. Goetz Realty offered testimony that the note was given to provide additional security to Anderson, as he was somewhat reluctant to sign an earnest money agreement under which he would receive only a $5,000 down payment. Goetz Realty also offered testimony that no money was to be received for the note until its due date of 1 July 1977. Anderson testified the note was given to him so he could obtain funds additional to the $5,000 earnest money amount from which he could pay the ten percent realtor's commission.

Anderson testified that at the direction of Goetz Realty he took the promissory note to the Mandan Security Bank which refused to negotiate the note, questioning Clairmont's authority to execute it. Anderson thereupon returned to Goetz Realty and requested a financial statement for Arrow. He was informed no financial statement was in existence as the corporation was newly formed. Anderson then requested a financial statement for Jack Clairmont. He was told no financial statement for Clairmont would be provided because Arrow was the purchaser of the property and Clairmont was only the general manager of the company. Anderson then obtained a copy of the articles of incorporation of Arrow which were filed with the Secretary of State on 2 December 1976 and which listed as incorporators Clairmont's college-age son and two other persons. Anderson also learned through his own investigation that there were a number of substantial outstanding judgments against Jack Clairmont and a corporation with which he was formerly associated.

In preparation of the 30 December 1976 closing date, Goetz Realty contacted its attorney to prepare the contract for deed called for in the earnest money agreement. Goetz Realty, through its agent, also informed the attorney that Anderson was hesitant about the sale because of the uncertain financial status of Arrow, whereupon the attorney suggested a lease coupled with an option to purchase as an alternative. Anderson and Clairmont apparently agreed to the suggested arrangement and directed Goetz Realty to proceed with the preparation of a lease with option to purchase agreement providing for a six-month lease with an option to purchase and incorporating basically the same installment payments as set forth in the earnest money agreement dated 6 December 1976. A meeting was set for the closing of the lease with option to purchase agreement, but Anderson did not appear, stating later that a number of provisions in the agreement were not acceptable to him.

Clairmont later delivered a letter dated 13 January 1977 to Goetz Realty stating the company would be willing to purchase the Anderson property under the terms of the original earnest money agreement until 1 March 1977. The letter also contained a request for the return of the $5,000 earnest money, with which Goetz Realty complied.

Goetz Realty filed a complaint in Burleigh County district court against the Andersons seeking a judgment for the ten percent realtor's commission. The complaint was dismissed following a bench trial on 8 February 1978 and Goetz Realty appealed.

The basic issue presented is whether or not Goetz Realty earned the realtor's commission provided for in the exclusive listing agreement with the Andersons dated 2 August 1978.

The exclusive listing agreement entered into between the Andersons and Goetz Realty provided, in part:

"I (we) hereby agree to pay you, or any other broker working in cooperation with you, in cash for your services a commission of 10% Of the total selling price, in the event you shall find a buyer, ready and willing to purchase, exchange, option, or lease, with an option to purchase where such option is exercised, said property for the price and terms stated, for such terms as I may accept, . . ."

The district court, in dismissing the complaint, made the following pertinent findings of fact:

"(5)

"Despite the terms of the earnest money agreement, both parties subsequently agreed that a lease coupled with a contract for deed would be the manner in which to proceed. These documents were then prepared by an attorney for the plaintiff and copies furnished to the defendants. A closing date to execute the same was set up by the plaintiff to be held on December 31, 1976, but the defendants did not attend such meeting due to their dissatisfaction with the proposed lease. As a result negotiations ceased and the transaction was never consummated.

"(6)

"The earnest money agreement between the parties referred to above was abandoned and there was never an offer and acceptance to which the parties agreed and no binding contract was ever formed.

"(7)

"The plaintiffs have failed to show any arbitrary action on the part of the defendants in refusing to accept the terms and conditions tendered to them by the prospective purchaser."

The court's memorandum opinion, which in part stated as follows, further clarifies the court's decision:

"The plaintiffs have failed to show any arbitrary action on the part of the Defendant in refusing to accept the terms and conditions tendered to him by the prospective purchaser. Accordingly, the plaintiffs have failed to establish the prerequisites to their collecting under the listing agreement, and the earnest money contract, having been abandoned, can constitute no authority for allowing such payment."

Goetz Realty contended the trial court erred in requiring proof of either an arbitrary refusal to sell or a completed transaction as a prerequisite to establishing its right to a commission. It argued the correct test to determine if a commission has been earned is one of substantial performance as set forth by this court in Kruger v. Soreide, 246 N.W.2d 764 (N.D.1976). We stated in Kruger at page 773:

"The broker must show substantial performance of the duties imposed on him by the contract, even if he does not produce a buyer to be eligible for a commission. (Citation omitted.)"

In that case we held a listing agreement is basically a unilateral contract until it is converted into a bilateral contract by substantial performance. We held that a broker was not entitled to a commission if the owner sold property through his own efforts during the term of an exclusive listing agreement with the broker and if there was no evidence of an expenditure of time, effort, or money (substantial performance) on the...