MacGregor v. Labute

• Citation: 437 N.E.2d 574,14 Mass.App.Ct. 203
• Parties: Forbes MacGREGOR v. Henry C. LABUTE. (and a companion case).
• Decision Date: 20 July 1982
• Court: Appeals Court of Massachusetts

Page 574

437 N.E.2d 574

14 Mass.App.Ct. 203

Forbes MacGREGOR v. Henry C. LABUTE. (and a companion case).

Appeals Court of Massachusetts Barnstable.

Argued March 9, 1982.

Decided July 20, 1982.

Gerald W. Motejunas, Boston (William Tick, Boston, with him), for plaintiff.

David W. Pyne, Hyannis, for defendant.

Before GRANT, GREANEY and DREBEN, JJ.

DREBEN, Justice.

The primary issue on this appeal is whether the Statute of Frauds bars an action by a real estate broker against the owner of real estate for damages for the breach of an oral contract which provides that the buyer, rather than the defendant seller, is to pay the broker's commission. The promise which the defendant allegedly failed to honor was that he would consummate the transaction if the broker should produce a buyer meeting the defendant's terms. We hold that the statute is not a bar.

A judge of the Superior Court entered summary judgment for the defendant. ¹ Drawing the inferences from the underlying facts contained in the materials "in the light most favorable" to the plaintiff, as we must on review of a summary judgment, Hub Associates, Inc. v. Goode, 357 Mass. 449, 451, 258 N.E.2d 733 (1970), the plaintiff may be able to prove the following facts. ² The plaintiff, upon learning that the defendant intended to sell the land, obtained his consent to list the property for sale. The terms of the listing were that the defendant was to receive $1,000,000, that he was not to be obligated to pay a commission, and that the buyer was to pay the commission. The defendant agreed that if the broker should find a purchaser meeting these terms, he would convey the land. There was evidence that the broker found such a purchaser, that the prospective buyer and the defendant orally agreed on the terms of sale, but that the seller refused to convey.

On the foregoing evidence, it could be found that the defendant's offer was accepted by the broker "by fulfilling its terms." Elliott v. Kazajian, 255 Mass. 459, 461, 152 N.E. 351 (1926). Thereafter, the defendant was no longer free to withdraw his offer. Laidlaw v. Vose, 265 Mass. 500, 503, 164 N.E. 388 (1929). If the broker can prove that the failure to complete the transaction between the buyer and the seller resulted from the "wrongful act or interference of the seller," the broker would in the usual circumstance be entitled to payment from the seller. Tristram's Landing, Inc. v. Wait, 367 Mass. 622, 629, 327 N.E.2d 727 (1975). Kinchla v. Welsh, 8 Mass.App. 367, 371, 394 N.E.2d 978 (1979).

Pointing out that this is not the usual brokerage contract, the defendant argues that he made no promise to pay any commission. To the contrary, he expressly provided that he was not to be liable for a commission and that one of the terms of the arrangement required the broker to look to the purchaser for his commission. This argument ignores the fact that there were two distinct oral contracts. One was between the defendant and the prospective buyer for the purchase and sale of the property, and the other was the defendant's agreement with the broker that if the latter should find a suitable purchaser, the seller would consummate the transaction, on the understanding that the plaintiff would receive his commission from the buyer. The present action is for breach of the second contract.

Apart from the question of the Statute of Frauds, the second contract, if proved, ³ would entitle the broker to recover damages from the seller for his refusing "without cause, to comply with his contract with [the] plaintiff[ ] to sell the land ... with the distinct understanding that the plaintiff[ ] [was] to be compensated by the purchaser." Atkinson v. Pack, 114 N.C. 597, 605, 19 S.E. 628 (1894). T. C. Henry & Sons v. Colorado Farm & Live Stock Co., 164 F. 986, 988 (8th Cir. 1908). Kaercher v. Schee, 189 Minn. 272, 274, 276-277, 24 N.W. 180 (1933). Aronson v. Carobine, 129 Misc. 800, 801-802, 222 N.Y.S. 721 (N.Y.Mun.Ct.1927). See Eells Bros. v. Parsons, 132 Iowa 543, 546, 109 N.W. 1098 (1906); Cavender v. Waddingham, 2 Mo.App. 551, 554 (1876); Danciger Oil & Ref. Co. v. Wayman, 169 Okla. 534, 536-537, 37 P.2d 976 (1934); Livermore v. Crane, 26 Wash. 529, 529-530, 533, 67 P. 221 (1901), cases brought by a broker against a buyer for breach of a contract to purchase land where the seller was to pay the commission. See also Chutkow v. Wagman Realty & Ins. Co., 80 Colo. 11, 13-14, 248 P. 1014 (1926), and Brawner v. Cumbie, 264 S.W. 497, 499-500 (Tex.Civ.App.1924), where a broker who had arranged an exchange of properties between two persons was held entitled to collect from the defendant as damages not only the commission which the defendant had agreed to pay but also the commission to which the other party had agreed but did not pay because of the defendant's wrongful action. Contrast Allan Fox Co. v. Wohl, 255 N.Y. 268, 273-274, 174 N.E. 650 (1931), where the defendant was held not liable for the commission of the other party on principles of Hadley v. Baxendale, 9 Ex. 341, 354-355, 156 Eng.Rep. 144, 150-151 (1854).

We turn next to the question of the Statute of Frauds. Had the oral arrangement been for the defendant to pay the commission, the contract would not be "within the statute of frauds. G.L. c. 259, § 1(4)." Palmer v. Wadsworth, 264 Mass. 18, 22, 161 N.E. 621 (1928). The court reached its conclusion because "[t]he plaintiffs did not agree to purchase, nor did they acquire any interest in the land." Ibid.

The difference between Palmer and the present case is that "the plaintiff's compensation or commission for [his] services, as ... broker, [was to] be paid by the purchaser as part of the purchase price ...." T. C. Henry & Sons v. Colorado Farm & Live Stock Co., 164 F. at 987. The defendant asks us to hold that that difference is crucial and that the Statute of Frauds relieves him of any liability for his wrongful refusal (if a contract be found) to complete the sale.

The authorities are not in accord on this question. Corbin suggests that the Statute of Frauds should not be applied, as there is here little danger of the mischief to which it is directed. ⁴ He states that in "practically all such cases, the broker has been held to have a right to damages for the owner's breach.... The contract with the broker is not made for the benefit of the hoped-for purchaser; it is regarded by the parties as a contract for brokerage service, not for the sale of land. Conceivably, a broker might commit perjury in order to collect a commission ... but successful consummation of such a fraud would generally require participation by the purchaser." 2 Corbin, Contracts § 399, at 364-365 (1950 & Supp.1971).

While Corbin perhaps overstates the extent of the authorities, we are in accord and hold that the Statute of Frauds does not bar the broker's action. See Woolley v. Bishop, 180 F.2d 188, 189, 192 (10th Cir. 1950) (contract viewed as one of employment, buyer to pay commission). See also Morgan v. Whatley & Whatley, 205 Ala. 170, 172, 87 So. 846 (1920) (broker who had arranged for an exchange of properties could collect damages including the fee due to the broker from the other party for the breach of the defendant's promise to convey, the Statute of Frauds being no defense to an action by a broker for compensation as long as the purchaser takes no advantage of the statute); Vaughan v. McCarthy, 59 Minn. 199, 200-201, 60 N.W. 1075 (1894) (owner held liable for refusing to sell under an oral agreement with a broker providing that broker was to be paid all the seller should receive over a certain price; "action is one for services rendered" and therefore the Statute of Frauds "has no application"); Bird v. Blackwell, 135 Mo.App. 23, 27, 115 S.W. 487 (1909) (owner held liable for damages for refusing to sell; Statute of Frauds not applicable to seller's promise to broker where latter arranged for...