Kincaid v. Black Angus Motel, Inc.

• Decision Date: 01 June 1999
• Docket Number: No. 90,890.,90,890.
• Citation: 983 P.2d 1016,1999 OK 54
• Parties: Bonnie M. KINCAID d/b/a Kincaid and Associates, Appellant, v. BLACK ANGUS MOTEL, INC., Appellee.
• Court: Oklahoma Supreme Court

983 P.2d 1016

1999 OK 54

Bonnie M. KINCAID d/b/a Kincaid and Associates, Appellant, v. BLACK ANGUS MOTEL, INC., Appellee.

No. 90,890.

Supreme Court of Oklahoma.

June 1, 1999.

Douglas L. Boyd, Tulsa, Oklahoma, For Appellant.

Lawrence A.G. Johnson, Tulsa, Oklahoma, For Appellee.

HARGRAVE, V.C.J.

¶ 1 Plaintiff broker and Defendant seller ("Seller") entered into a one-year exclusive listing agreement, dated September 25, 1996, for the sale of the Black Angus Motel in Poteau. Aubrey Kincaid, plaintiff's agent and sales associate, executed the agreement on behalf of plaintiff /appellant (collectively, "Realtor"). By letter dated June 2, 1997 the Seller notified the plaintiff that the motel was no longer for sale and that Seller would not be entering any contracts to sell the motel. Realtor sued for breach of contract, seeking to recover a commission of $37,500, which was 5% of the $750,000 listing price. Seller denied that Realtor was entitled to any commission because of Realtor's failure to perform and because the listing agreement was void because the Realtor's agent acquired an interest in the property he was bound to sell, thereby violating his fiduciary duty to Seller. Realtor claims that Seller knew of and agreed to his acquiring an interest in the property, or that his actions after learning of Realtor's participation constituted waiver.

¶ 2 The listing agreement gave Kincaid and Associates the exclusive right to sell the Black Angus Motel for one year and provided that in the event an offer was obtained whereby the price, terms and conditions were acceptable to the seller, the realtor was to be paid at the closing of the sale. Realtor Aubrey Kincaid obtained buyer Richard A. Weis, who entered into a real estate purchase contract with Seller on February 26, 1997. On March 1, 1997, Realtor entered into a side agreement with Richard A. Weis to co-purchase the property. The sale was set to close on May 15, 1997, but did not close due to Weis and Realtor's failure to obtain financing. Seller terminated the listing agreement by letter dated June 2, 1997.

¶ 3 Seller moved for summary judgment, asserting that Realtor's acquiring an interest in the purchase of the motel rendered the contract void as in violation of public policy. Seller stated that Realtor's acquisition of an interest in the motel was without the consent, acquiescence, ratification or knowledge of Seller at the time it entered into the contract to sell the property to Weis. Realtor asserted that the contract was merely voidable and that Seller had expressly agreed to Realtor's acquiring an interest in the motel, or had waived any objection thereto by its actions after learning of Realtor's interest.

¶ 4 The trial court granted summary judgment to defendant/Seller Black Angus Motel, Inc. and awarded an attorney fee. The trial judge did not make findings of fact in the order, but held that the plaintiff's acquisition of an interest in the subject matter of the listing agreement between the parties gave the Seller the right to terminate the listing agreement. The trial court apparently determined that the contract was void and therefore incapable of being ratified. The trial court denied plaintiff's motion for new trial.

¶ 5 Realtor argued on appeal that the trial court erred in holding that his participation in the purchase of the property voided the listing agreement. Realtor argued that the contract was voidable and capable of being ratified. The Court of Civil Appeals affirmed the trial court on different grounds, which Realtor asserts were not presented to the trial court. We granted certiorari. We find that the trial court erred in determining as a matter of law that the contract was void and incapable of being ratified. A disputed fact question is presented whether Seller knew of and agreed to Realtor's participation, or whether by his conduct he acquiesced in or ratified the contract.

¶ 6 The sole issues raised by Realtor on appeal were: 1) whether the trial court erred in granting summary judgment to Seller when the evidence showed a genuine dispute as to whether the Seller expressly consented to plaintiff's participation in the purchase of the property subject to the listing agreement; and 2) whether the trial court erred in granting summary judgment to Seller where there was evidence showing that defendant, by its actions, waived any objection to plaintiff's participation in purchase of the property.

¶ 7 A void contract is one that is illegal or contrary to public policy. If the consideration for a contract is illegal by reason of being contrary to public policy, the contract is void and not susceptible to ratification. Maryland Casualty Co. v. De Armon, 179 Okla. 60, 64 P.2d 719 (1937). A contract made in violation of a statute is void and when a plaintiff cannot establish his cause of action without relying upon an illegal contract, he cannot recover. Missouri Fidelity & Cas. Co. v. Scott & Scott, 72 Okla. 59, 178 P. 122, 124 (1918). We said, in Worley v. Carroll, 110 Okla. 199, 237 P. 120, 124 (1925):

"One of these rules is that an act declared to be void by statute which is malum in se or against public policy is utterly void and incapable of ratification, but an act or contract so declared void, which is neither wrong in itself nor against public policy, but which has been declared void for the protection or benefit of a certain party, or class of parties, is voidable only and is capable of ratification by the acts or silence of the beneficiary or beneficiaries * * * such an act or contract is valid until voided, not void until validated, and it is subject to ratification and estoppel."

¶ 8 Although agreements tending to cause a breach of trust or duty of a fiduciary have been deemed to be void,¹ we have recognized that such agreements are voidable and that knowledge of the contract and acquiescence in it by the party injuriously affected removes the invalidity. L.S. Cogswell Lumber Co. v. Manahan, 135 Okla. 174, 274 P. 871, 872 (1929). In Cogswell, a building contractor's employee sought bids from various lumber companies. When the employee informed Cogswell Lumber Company that another company had offered a five percent discount, Cogswell offered to pay the contractor's employee a commission of two and one-half percent. The contractor was informed of the agreement and agreed to it. We said that where the contract was not void in its inception and the evidence showed that the contract was entered into with the knowledge and consent of the plaintiff's employer, the employer's approval foreclosed any objections against it. We explained that although such contracts have been called void, such contracts are in fact voidable:

"It is thus to be observed that, while this court has characterized this class of contracts as illegal and void for that they were contrary to public policy, nevertheless the principle to be applied thereto is that they are voidable and without judicial recognition where they are entered into without the knowledge and consent of the party whose interests would thereby be injuriously affected, and, being voidable, ratification thereof by such party removes the element of invalidity. Application of this principle in this jurisdiction is not without precedent. (citation omitted)." (emphasis added) 274 P. at 872.

¶ 9 The power of the courts to declare a contract void as being in contravention of public policy is a very delicate and undefined power, and should be exercised only in cases free from doubt. Warren v. Dodrill, 173 Okla. 634, 49 P.2d 137, 140 (1935). When the petition shows on its face that it is based upon a void contract, the courts will not enforce it. McLain v. Okla. Cotton Growers Assn., 125 Okla. 264, 258 P. 269 (1927). The listing agreement in the case at bar was not void on its face, nor was the contract itself illegal or contrary to public policy when entered into. The actions of Realtor during the course of the contract are the reasons asserted by Seller for rendering the contract "void." The contract in the case at bar was not void, but voidable.

¶ 10 A voidable contract continues in existence until its repudiation or rescission by a party entitled to avoid the obligation. Great American Insurance Co. v. Strain, 377 P.2d 583, 587 (Okla.1962). In Strain, we explained the distinction between void and voidable contracts:

"... The word "void" admits of more than one meaning. A contract may be void in the sense of being illegal; if so, the obligation, being prohibited at law, is a nullity in its contemplation; hence incapable of affirmance, ratification and enforcement. In some context the word void may be construed as meaning merely voidable; that is, the contract continues in force and effect until its timely repudiation or rescission by an affirmative act of the party entitled to avoid the obligation. It is the latter meaning of the term void that the law attaches to a policy clause such as that under consideration."

In Strain, a group insurance policy provided that the policy was void if issued to an employee who was not actually at work on the date of issuance. The employee was in the hospital when the policy was issued and, at his death, the insurance company claimed that the contract was void. The court held that the policy was voidable, not void.

¶ 11 Whether a contract has been ratified presents a question of fact. Ratification or adoption has been found in cases where a party: 1) has accepted the benefits of the contract, whether void or voidable 2) with full knowledge of the facts 3) at a time when the accepting party was fully competent and capable of contracting for himself. Carlisle v. National Oil & Dev. Co., 108 Okla. 18, 234 P. 629, 631 (1924). See also, Burke Aviation Corp. v. Alton Jennings Co., 377 P.2d 578, 583 (Okla.1963)

and Bd. Of Education of Bartlesville v. Montgomery, 177 Okla. 423, 60 P.2d 752, 753 (1936).

¶ 12 An agent may not become interested in the...