Hershon v. Hellman Co., Inc., 88-464.

• Decision Date: 08 September 1989
• Docket Number: No. 88-464.,No. 88-955.,88-464.,88-955.
• Citation: 565 A.2d 282
• Parties: Simon A. HERSHON, Appellant, v. The HELLMAN COMPANY, INC., et al., Appellees.
• Court: D.C. Court of Appeals

Page 282

565 A.2d 282

Simon A. HERSHON, Appellant, v. The HELLMAN COMPANY, INC., et al., Appellees.

No. 88-464.

No. 88-955.

District of Columbia Court of Appeals.

Argued September 7, 1989.

Decided September 8, 1989.^*

Christopher Sanger, Washington, D.C., for appellant.

Dennis F. Nee for appellee.

Before FERREN and FARRELL, Associate Judges, and GALLAGHER, Senior Judge.

PER CURIAM:

Simon A. Hershon (Hershon) appeals from a judgment in favor of the Hellman Company, Inc. (Hellman), the plaintiff in a breach of contract action in Superior Court.¹ The case arises from a dispute over the commission due under a brokerage agreement, and a later supplement to that agreement, for the sale of the historic Central National Bank Building on the Pennsylvania avenue corridor (the "property"). Due to a change in the structure of the sale after the execution of the brokerage agreement, the parties entered into a new agreement altering the method for computing the commission. Following a bench trial the trial court ruled, inter alia, that the new agreement abrogated a paragraph in the original contract which set a 37, cap on the total amount of commissions Hershon would have to pay. We affirm.²

Prior to February 22, 1983, the property was owned by a District of Columbia limited partnership known as Historic Central National Bank Redevelopment Group ("HCNBRG"), of which Hershon was general partner. On July 1, 1982, HCNBRG, desiring to renovate and sell the property, entered into a written brokerage agreement with Hellman. This agreement provided for a 3% commission on the contract price payable in full within 10 days after the sale was closed. Hellman was required to share this commission with cooperating brokers representing potential buyers. The commission would then be divided as agreed between the two brokers, or, in the absence of an agreement, one half would be paid to each. Under no circumstances, however, would the total amount of the commission owned by Hershon exceed 3% of the fair market value of the property.³

After execution of the brokerage agreement, Sears, Roebuck & Co. (Sears) and Hershon entered into a two-part agreement of sale. First, Sears requested that the deal be structured as a sale of the HCNBRG partnership interest rather than of the property. This interest was sold to Sears for $5.5 million.⁴ Second, Sears entered into a contract with 633 Joint Venture ("633 JV")⁵ to develop the property for another $5.25 million in deferred payments. The deal also required that Sears' agent during the negotiations, Coldwell Banker,⁶ be considered a "cooperating broker" and receive $100,000 directly from Hershon. This payment was made when the deal was closed on February 22, 1983.

Since the original brokerage agreement between Hellman and Hershon had not contemplated the structure of the deal with Sears, the parties executed a supplement to this agreement. In a February 22, 1983 letter, Hellman and Hershon agreed to set the amount of the commission due Hellman at $300,000 with $150,000 payable immediately and another $150,000 in deferred payments. These payments were tied to the development contract with Sears and were to be made by Hershon as he received payment from Sears. Hershon made the initial payment and another $116,400 in eleven separate payments. Hellman brought suit for the balance. Hershon argued that pursuant to the original brokerage agreement, he was liable for a maximum of 3% of the sale price in commissions. He contended that Hellman had already been paid $43,900 more than he was due under the agreement, and counterclaimed for that amount.⁷

The trial court concluded that the parties intended to be bound by the February 22, 1983 letter, and that the letter modified the earlier brokerage agreement by abrogating those sections fixing the amount of the commission and setting a 3% cap on Hershon's liability. The court therefore awarded Hellman $33,600 and denied Hershon's counterclaim.

The parties to a contract are free to modify that contract by mutual consent. Nyhus v. Travel Management Corporation, 151 U.S. App.D.C. 269, 275, 466 F.2d 440, 445 (1972) (power to contract is power to modify); see also Egan v. McNamara, 467 A.2d 733 (D.C. 1983); 15 S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 1826 (3d ed. 1972). In order to be valid, however, the modification must possess the same elements of consideration as necessary for normal contract formation. Nyhus, supra, 151 U.S. App.D.C. at 275, 466 F.2d at 445; WILLISTON, supra, at § 1826. The February 22, 1983 agreement altered the existing brokerage contract so that Hershon was now obligated to pay a total of $400,000⁸ in commissions rather than the $322,500 required by the 3% provision in the original contract. Hellman, on the other hand, agreed to accept less than the full amount at the closing and to receive the balance in deferred payments only as Hershon received them from Sears.⁹ Thus, valid consideration existed on both sides. The trial court properly concluded, therefore, that the February 22, 1983 letter constituted an enforceable contract which modified the original agreement.

The trial court was also correct in concluding that the new agreement nullified the 3% cap on Hershon's liability for commissions. This court has held that a contract "containing a term inconsistent with a term of an earlier contract between the same parties, regarding the same subject matter, should be interpreted to rescind the inconsistent term in the earlier contract." Egan, supra, 467 A.2d at 740; see also WILLISTON, supra, at § 1826. The new agreement to pay Hellman a $300,000 commission was clearly inconsistent with the original method for determining the commission, i.e. 3% of the fair market value. Further, since Hershon, at the time the modification was signed, was already obligated to pay the $100,000 commission to Coldwell,¹⁰ the additional $300,000 obligation to Hellman was inconsistent with the 3%...