Larson-Hegstrom & Associates, Inc. v. Jeffries

• Decision Date: 11 January 1985
• Docket Number: CA-CIV,No. 2,LARSON-HEGSTROM,2
• Citation: 701 P.2d 587,145 Ariz. 329
• Parties: & ASSOCIATES, INC., d/b/a Indevco Realtors, an Arizona corporation, Plaintiff/Appellant, v. James B. JEFFRIES and Norma Jane Jeffries, husband and wife, Defendants/Appellees. 5015.
• Court: Arizona Court of Appeals

Page 587

701 P.2d 587

145 Ariz. 329

LARSON-HEGSTROM & ASSOCIATES, INC., d/b/a Indevco Realtors, an Arizona corporation, Plaintiff/Appellant, v. James B. JEFFRIES and Norma Jane Jeffries, husband and wife, Defendants/Appellees.

No. 2 CA-CIV 5015.

Court of Appeals of Arizona Division 2.

Jan. 11, 1985.

Reconsideration Denied March 28, 1985.

Review Denied June 4, 1985.

Dennis A. Rosen, Tucson, for plaintiff/appellant

DeConcini, McDonald, Brammer, Yetwin & Lacy, P.C. by David C. Anson and Michael R. Urman, Tucson, for defendants/appellees.

OPINION

HATHAWAY, Judge.

Are appellees (Jeffries) obligated to pay a 6% brokerage commission under an exclusive listing of a shopping center after they transferred the property to a church for $10 "and other valuable considerations." Under the facts of this case, we find that they are.

Appellant (Indevco), an Arizona corporation engaged in selling real estate, entered a real estate agreement with appellees, exclusively authorizing Indevco to list for sale and to sell the Groves Shopping Center in Tucson for $2.5 million dollars. The property was encumbered to Great Southern Life Insurance Company for $1.5 million dollars. The term of the listing agreement was from November 24, 1978, to October 1, 1979, during which time Indevco had the exclusive right to sell the subject property. Paragraph 3 of the agreement details the conditions for payment of the commission to Indevco.

"3. This contract is to remain in full force and effect and be irrevocable by me or us to and including the 1st day of October of 1979, and I or We agree to pay you a brokerage fee of 6% of the above gross sales price, or any other consideration agreed to by me or us, (1) in the event you procure a bona fide offer from a purchaser ready, willing and able to purchase said property at the price and upon the terms above set forth, or (2) in the event a sale or exchange is made by me or us directly or through any other source or whether said property is transferred, conveyed, leased, or withdrawn from sale without your written approval...." (Emphasis added)

Viewing the evidence adduced at the bench trial most favorably to appellees, the evidence discloses that on December 27, 1978, the Jeffries quitclaimed the property to the Progressive Baptist Church (Church) of Los Angeles. The deed, recorded February 23, 1979, during the listing term, recited "for the consideration of Ten and 0/100 Dollars, and other valuable consideration." After the transfer, the Jeffries remained liable on the $1.5 million dollar mortgage payable to the Great Southern Life Insurance Company. Both before and after the transfer, Indevco attempted to find a buyer for the property at $2.5 million dollars, although they conceded that the likelihood of finding a buyer at that price was remote. Indevco testified that three separate offers of $2.4 and $2.0 million were presented to the Jeffries in the course of the listing agreement. The court admitted testimony concerning the $2.4 million offer "for the limited purposes of showing that the plaintiffs attempted to use its best efforts in effectuating a sale."

After the trial, the court made findings of fact and conclusions of law. It found that $10 was the only consideration for the transfer to the church and accordingly, determined that Indevco was entitled to 6% of the $10 as a commission, i.e., $.60. It also found that Indevco was not entitled to a commission on the amount of the mortgage to Great Southern Life Insurance Company, since the Jeffries remained liable on the debt. The court concluded alternatively that "[t]he contract clause providing for full commission of six percent (6%) of the listing price if the owner withdraws the property from sale is an unenforceable penalty clause under the facts in this case."

Indevco questions on appeal (1) whether the listing agreement was ambiguous, (2) whether it was unenforceable as a penalty, and (3) whether there were other considerations upon which to base a 6% commission as provided in the listing agreement.

IS THE AGREEMENT AMBIGUOUS?

The agreement states clearly that the Jeffries agree to pay 6% of the above gross sales price or 6% of any other consideration agreed to by the Jeffries should Indevco provide a bona fide offer at the listed price ($2.5 million), should the Jeffries sell or exchange it, or should the property be conveyed or withdrawn from sale. While there is conflicting testimony concerning the relationship between the Jeffries and Indevco, there is no ambiguity in determining what triggers the sellers' obligation to pay the brokerage fee. Withdrawal of the property from sale within the period of the listing agreement triggers the obligation to pay the 6% commission. Geyler v. Dailey, 70 Ariz. 135, 217 P.2d 583 (1950). What is ambiguous in this case is the exact value of the consideration on which the 6% commission was to be based. The trial court's conclusion of law, that the agreement is ambiguous as to what triggers that portion of the contract which states 6% of any consideration, is in error. The Jeffries clearly withdrew the subject property from the agency agreement with Indevco when they sold or gave it to the Progressive Baptist Church on December 27, 1978.

WAS THE $10 THE SOLE CONSIDERATION?

If the triggering mechanisms are unambiguous as well as the 6% figure, then the only question remaining is the meaning of "consideration" in the listing agreement on which the 6% commission is to be based. The trial court found, as a matter of law, that $10 was the only consideration received by the Jeffries for the transfer of the property to the church. We agree with appellant that the trial court erred in not considering the "other valuable considerations" accompanying the $10 in the quitclaim deed of December 27, 1978, and the quitclaim deed of February 23, 1979.

In general, "valuable consideration" implies a benefit to the promisor or detriment to the promisee. Sapp v. Lifrand, 44 Ariz. 321, 36 P.2d 794 (1934). Monetary consideration is not required; any benefit or detriment is sufficient, Mack v. Coker, 22 Ariz.App. 105, 523 P.2d 1342 (1974). Black's Law Dictionary (5th ed.) defines consideration as "[s]ome right, interest, profit, or benefit accruing to the party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other." Id. at 277. When the church agreed to take the Groves Shopping Center, encumbered by a $1.5 million loan and thousands in back taxes for which it became directly liable as title holder, and when the church assumed the multiple headaches of a landlord of a deteriorating property, it undertook a legal problem of enormous proportions.

At the same time, the Jeffries received the benefit of an additional entity, the Church, having an interest in seeing that mortgage payments were made to the lienholder. The finding of fact in the trial court, that defendants Jeffries remained liable on the $1.5 million debt, in no way eliminates the valuable consideration which flowed to the Jeffries from the Church in the form of an interested party (upon transfer of title to the church). Even if the church had no legal liability to Great Southern, having taken the property subject to the underlying lien, the Church certainly had an interest in seeing that its shopping center would not be lost by foreclosure. We hold, as a matter of law, that the involvement of the Church in the fortunes of the shopping center upon assumption of the status of an interested party through conveyance of the deed constituted valuable consideration in the amount of the lien, $1.5 million.

The value of the interested party in possession of title but not liable on the underlying lien was recognized in Patton v. First Federal Savings and Loan Association, 118 Ariz.App. 473, 578 P.2d 152 (1978). The supreme court found in that case that with a transfer of title and possession, without transferring liability on the underlying loan, "[t]here are now two persons motivated to protect the property and to make payments on the First Federal loan; before the transfer, First Federal could look only to Mrs. Patton to take care of the property and repay the loan." 118 Ariz. at 478, 578 P.2d at 157. (Since this is a commercial property, occupancy is not a factor as in Patton.) The principle of the interested party enunciated in Patton remains.

This court declines appellant's invitation to consider the tax benefit, if any, to the Jeffries upon the transfer to the church four days before the end of the 1978 tax year. A remand to the trial court for proceedings to determine if the value listed in the Jeffries' income tax returns varied from the affidavit of value signed by Mrs. Jeffries accompanying her quitclaim deed would launch the question of consideration into the Never Never Land of incidental benefits. Neither appellant nor appellee has cited any cases which support such an inquiry. Undoubtedly the Jeffries experienced a tax benefit through a charitable deduction, if they experienced any taxable income in that tax year. But such an...