Humphrey v. Knobel

• Decision Date: 20 March 1962
• Docket Number: No. 4462,4462
• Citation: 369 P.2d 872,78 Nev. 137
• Parties: Frank HUMPHREY, Appellant, v. John T. KNOBEL and Marie E. Knobel, Respondents.
• Court: Nevada Supreme Court

Page 872

369 P.2d 872

78 Nev. 137

Frank HUMPHREY, Appellant, v. John T. KNOBEL and Marie E. Knobel, Respondents.

No. 4462.

Supreme Court of Nevada.

March 20, 1962.

R. P. Wait & E. J. Wait, Jr., Reno, for appellant.

Vargas, Dillon & Bartlett and Alexander A. Garroway, Reno, for respondents.

BADT, Chief Justice.

The parties will be referred to by their abbreviated names. Humphrey, a real estate broker, entered into a written contract with Knobel whereunder the former was given an exclusive listing for a period of 60 days from June 30, 1957, in which to sell a home owned by Knobel in Reno, Nevada, the listing price being $31,500. The contract describes the property, then recites: 'Price: 31,500 Down: _____ Enc: _____ Committ: _____.' It then proceeds as follows: 'Date: June 30, 1957, Listing: Exclusive By FEH. In consideration of Frank Humphrey, Broker, advertising or otherwise undertaking to find a purchaser for the property described above, and on the terms and conditions stated herein, I/we hereby grant and give to Frank Humphrey an exclusive right * * * to sell said property for a period of Sixty days from date and authorize him to accept a deposit thereon. If a sale is effected during period of above agency, I agree to pay Frank Humphrey Five % of the gross selling price as commission for Agent's services and to furnish buyer at my expense a standard owner's policy of Title Insurance. Receipt of a copy of this listing is hereby acknowledged.

'Owner: J. T. Knobel

'Above agency is hereby accepted and Agent agrees to use diligence in procuring a buyer.

'Frank Humphrey

'By s/ Frank Humphrey

'Agent

'This Agreement excludes Dr. Callister as possible Buyer as he has already been approached by Mr. Knobel.

'U.F. loan between

14-1500 U.F. Payment around $131.00'

Humphrey posted a sign on the property showing that it was for sale through him as the real estate agent. On August 3, 1957 one Larson and his wife examined the property, made contact with Humphrey at the latter's office and offered $30,000 for the property, $3,000 down, $7,000 to be paid upon sale of Larson's home in Winnemucca, Nevada, and the balance represented by note secured by deed of trust. Humphrey advised the Larsons that he did not believe Knobel would accept their offer but that he would take it up with Knobel. Humphrey communicated the offer to Knobel, who refused to accept it. Humphrey so advised the Larsons but gave them Knobel's name, address, and telephone number and suggested that they contact him. He told them: 'This type of offer I'm sure is something that Mr. Knobel is not particularly interested in. However, there is the possibility that he might. You may go and see him if you wish.' Mrs. Larson subsequently called Humphrey, indicating her desire to purchase the property and to work something out so as to be able to buy it. Thereafter Larson contacted Knobel and made the same offer he had made to Humphrey. Knobel said to him: 'I have a real estate agent at this point who is negotiating for a deal. You're not offering the total amount of my request,' or 'my indication of the total price to him.' 'It's pretty much up to him to make a decision.' Such is the conversation as reported by Larson. However, Larson continued to negotiate directly with Knobel in August and early September.

On September 14, 1957, the fourteenth day after expiration of the 60-day exclusive listing, the Larsons and Knobel met and a contract of sale and escrow instructions were executed for the sale of the property for a total purchase price of $30,000, being $3,000 down, $7,000 in cash upon the sale of the Larsons' Winnemucca property, and the remainder by assumption of a bank loan and deed of trust. This was the same offer as had been made by Larson to Humphrey on August 3, 1957.

Upon Knobel's refusal to pay Humphrey a commission, Humphrey commenced this action, alleging in his first cause of action a breach of the contract, a second cause of action on quantum meruit, a third cause of action based on fraud, and a fourth cause of action against the Larsons for alleged interference with Humphrey's contractual rights under the contract. We are concerned here only with the action for breach of the contract to pay Humphrey's commission in the sum of $1,500. The trial court denied Humphrey any relief and found for the defendants. The Larsons are not concerned with this appeal, which is taken only from the judgment in favor of Knobel.

In Palmtag v. Danielson, 30 Cal.2d 517, 183 P.2d 265, the case to which we shall make considerable reference later, the court said: 'The question presented on this appeal is whether the agreement between the parties was a general contract merely stating an asking price or a special contract calling for a purchaser willing to pay a net minimum price.'

We consider that the question presented to us is precisely the same. Appellant so considers it, although both the trial court and respondent consider the question in much simpler terms. The learned trial judge quoted the rule stated in Ramezzano v. Avansino, 44 Nev. 72, 189 P. 681, 'that before a broker can be said to have earned his commission he must produce a buyer within the terms of the agency, when the time is limited, ready, willing, and able to purchase at the price designated by the principal.' He then stated: 'Admittedly this rule is qualified by the principle that if fraud defeats the broker's efforts the general rule does not apply. It was therefore incumbent upon the plaintiff to procure a purchaser ready, able and willing to buy the premises upon the terms set forth and within the exclusive time limit unless evidence shows that the defendants fraudulently conspired to prevent the broker from accomplishing his purpose.' ¹

After distinguishing Ramezzano v. Avansino, supra, in which case fraud was shown, the learned trial judge concluded: 'This case can be decided on one of two theories, first that the broker did not procure a buyer ready, able and willing to buy within the terms of the contract; or (2) that there is no evidence to show a fraudulent scheme or design to show the defendants purposely defeated plaintiff's right to a commission.' The court then concluded that there was no proof that the defendants acted fraudulently and that the plaintiff had failed to meet the burden of proof sufficient 'to take this case out of the general rule.'

The respondents analyze the case even more simply. Counsel for respondents in his oral argument stated: 'I don't care whether this is a general or special contract. We are dealing with a contract. That contract was to get $31,500. The broker didn't get it. To earn his commission the broker must succeed, not fail.'

The issue cannot be disposed of as simply as analyzed by either the court or by respondents. There has grown up over the years a large body of law having to do with brokers' contracts for the sale of real property. Although the application of the facts to the hundreds of cases decided under this special branch of the law of contracts cannot be said to be in agreement, one controlling principle has come to be generally recognized. This principle is expressed in Palmtag v. Danielson, supra, as follows: 'Ordinarily, ² the price at which a broker is authorized to sell property is considered merely an asking price to guide the broker in his negotiations with prospective purchasers. See Rest. Agency, § 447, Comment b. If the broker procures a purchaser willing to pay a lower price, the owner cannot deprive the broker of his commission by conducting the final negotiations himself and selling at a lower figure to the purchaser procured by the broker. See 128 A.L.R. 430; Leicht-Benson Realty Const. Corp. v. J. D. Stone & Co., 138 Va. 511, 121 S.E. 883, 43 A.L.R. [1100] 1103.

'An owner is entitled, however, to make a special contract with the broker whereby the latter is required to procure a purchaser willing to pay a particular price or meet specific conditions imposed by the owner. In such cases, if the owner sells the property to a purchaser procured by the broker, but on different terms from those stated in the contract, the broker is not entitled to a commission in the absence of bad faith. Backman v. Guadalupe Realty Co., 78 Cal.App. 347, 353, 248 P. 296. In brokers' net contracts, a fixed net amount must be paid to the owner and the broker's compensation is limited to the excess of the payment by the purchaser over the net amount specified. Haigler v. Donnelly, 18 Cal.2d 674, 678, 117 P.2d 331.'

The A.L.R. note cited by the California Supreme Court is but a continuation and extension of a number of extended A.L.R. and L.R.A. annotations giving many examples in which the various courts concluded in effect that the contract in question was either a general contract or a special contract.

It must be said in justice to the learned trial judge that his opinion and judgment denying the broker a recovery when he had failed to produce a ready, able, and willing buyer for the price set and within the time provided in the brokerage contract, in the absence of fraud or bad faith, finds support in a great many cases. On the other hand, where the broker has been the procuring cause (a term apparently used interchangeably with 'efficient cause' and 'proximate cause'), although the transaction was actually closed by the owner directly with the buyer at a price less (sometimes the same, sometimes more) than the sum indicated in the brokerage contract and within a reasonable time after the expiration term of the contract, although without fraud or bad faith, recovery by the broker has been permitted. We have concluded that the latter rule is best supported on reason and the great weight of authority.

This conclusion on our part is, we think, based upon a better appreciation of those principles which many cases have placed foremost as resulting in a fair and just determination under the facts of each case. That the...