Mader v. James

• Decision Date: 12 February 1976
• Docket Number: Nos. 4517,4519 and 4537,s. 4517
• Citation: 546 P.2d 190
• Parties: R. A. 'Dick' MADER, Appellant (Defendant and Third-Party Plaintiff below), v. Michael D. JAMES, a/k/a Mick James (Third-Party Defendant below), v. Joel R. FANNING, a/k/a Dick Fanning, Appellee (Plaintiff below). Michael D. JAMES, a/k/a Mick James, Appellant (Third-Party Defendant below), v. R. A. 'Dick' MADER (Defendant and Third-Party Plaintiff below), v. Joel R. FANNING, a/k/a Dick Fanning, Appellee (Plaintiff below). Joel R. FANNING, a/k/a Dick Fanning, Appellant (Plaintiff below), v. R. A. 'Dick' MADER, Appellee (Defendant and Third-Party Plaintiff below), v. Michael D. JAMES, a/k/a Mick James, Appellee (Third-Party Defendant below).
• Court: Wyoming Supreme Court

Page 190

546 P.2d 190

R. A. 'Dick' MADER, Appellant (Defendant and Third-Party Plaintiff below), v. Michael D. JAMES, a/k/a Mick James (Third-Party Defendant below), v. Joel R. FANNING, a/k/a Dick Fanning, Appellee (Plaintiff below).

Michael D. JAMES, a/k/a Mick James, Appellant (Third-Party Defendant below), v. R. A. 'Dick' MADER (Defendant and Third-Party Plaintiff below), v. Joel R. FANNING, a/k/a Dick Fanning, Appellee (Plaintiff below).

Joel R. FANNING, a/k/a Dick Fanning, Appellant (Plaintiff below), v. R. A. 'Dick' MADER, Appellee (Defendant and Third-Party Plaintiff below), v. Michael D. JAMES, a/k/a Mick James, Appellee (Third-Party Defendant below).

Nos. 4517, 4519 and 4537.

Supreme Court of Wyoming.

Feb. 12, 1976.

Rehearing Denied March 10, 1976.

Cecil K. Hughes, Sundance, signed the briefs and appeared in oral argument on behalf of the appellant-appellee, Joel R. Fanning a/k/a Dick Fanning.

Bruce P. Badley and Micheal K. Shoumaker, Badley & Shoumaker, Sheridan, signed the briefs and Micheal K. Shoumaker appeared in oral argument for the appellant-appellee, R. A. 'Dick' Mader.

Thomas Lubnau, Gillette, signed the briefs and appeared in oral argument on behalf of the appellant-appellee, Michael D. James, a/k/a Mick James.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

RAPER, Justice.

James, appellant and third-party defendant, owned a ranch which he listed for sale with realtor Mader, appellant-defendant and third-party plaintiff. Mader found a buyer, Fanning, cross-appellant plaintiff. Fanning paid a $15,000.00 deposit on a sale price of $275,400.00 to Mader 'as part payment to be held by Agent pending exchange of final papers.' The purchase offer, acceptance and receipt, of which the just-quoted words were a part, went on to provide:

'In event of Buyer's failure to seasonably complete the terms and conditions of this offer, the Buyer agrees that the Seller may elect to either retain the deposit made herewith as fixed and liquidated damages for Buyer's failure to complete the sale as herein provided, or enforce specific performance of this Agreement. Time is of the essence of this Agreement.'

The agreement also specified that:

'Undersigned SELLER accepts the foregoing offer this 22 day of August, 1973, and has been advised of and will pay to Agent commission as proposed by Schedule of WYOMING REAL ESTATE BOARD, and that in event sale is not completed by Buyer's failure or refusal to do so and Seller elects to accept the deposit made herewith, as above provided, as fixed and liquidated damages, that such deposit, but not exceeding rigular commission, shall be divided equally between the Seller and Agent.

'Witness

/s/ R. A. Dick Mader

/s/ Michael D. James

Seller'

The sale fell through. The trial court held that the seller was at fault and gave judgment in favor of Fanning against Mader for $15,000.00, without interest, the amount of the deposit, and in favor of Mader against James for $7,500.00, one-half of the deposit, without interest. The issues on this appeal will be developed as we move along.

As repeatedly is our practice, we must assume that evidence in favor of the successful party is true, leave out of consideration entirely evidence of the unsuccessful party in conflict therewith, and give to the evidence of the successful party every favorable inference which may be reasonably and fairly drawn from it. Tavares v. Horstman, Wyo.1975, 542 P.2d 1275, 1277, and references there footnoted. The evidence was in conflict as to whether James or Fanning caused contract failure. Taking the view most favorable to Fanning, we see that on the date set for closing, James got into a squabble with his former wife over what he expected would be a $35,000.00 settlement with her $50,000.00 divorce claim. He walked away from the closing after a colloquy with Fanning, as shown by the following testimony:

'A Mick James said, 'That God dam (sic) ex-wife of mine. Don't ever get involved in a business deal where you have to rely on any help from an ex-wife.'

'And I said, 'What's the problem?'

'And he said, 'I have a letter stating she will settle for thirty-five thousand, and now she wants fifteen thousand.'

'Q Fifteen thousand?

'A An additional fifteen thousand.

'Q All right.

'A 'She wants her full fifty thousand, and unless you can come up with fifteen thousand or I can talk her down to thirty-five thousand as her letter agrees, why, the deal is off.''

Fanning appeared at the closing ready and prepared to perform. James thereafter made no serious effort to perform according to the terms of the contract, and sold his ranch to another. Fanning bought another ranch, relying upon the conduct and words of James as a revocation.

That being the case, the most that exists is a revocation of the contract by the seller and the least these facts represent is a mutual rescission of the contract of sale. No one argues that James can appropriate the $15,000.00 to the use of himself and his agent when he alone is the sole cause of contract breach; the result would be so patently unjust. The rule is that the depositor of earnest money with a real estate broker is entitled to recover the full amount of the deposit if it is shown that the conveyance failed either because of the seller's breach or because of mutual rescission. Cline v. Colorado Real Estate Commission, Colo.App.1973, 513 P.2d 1072; Schroeder v. Krushevski, La.App.1966, 186 So.2d 640; Eckhoff v. Morgan, 1964, 64 Wash.2d 851, 394 P.2d 898; Perino v. Jarvis, 1957, 135 Colo. 393, 312 P.2d 108.

As said in Lapke v. Hunt, 1968, 151 Mont. 450, 443 P.2d 493, 498, the barebones rule, without reference to contract terms and exceptions, is:

'It is a well established rule relating to the law on the payment of earnest money that the broker is acting as agent for the vendor. If the sale is completed, the money must be turned over to the vendor. If the sale is not completed, the money must be returned to the vendee. * * *'

In Stafford v. Love, 1968, 151 Mont. 270, 442 P.2d 190, it was held that the rule has some basis in and is related to a statute regulating real estate brokers where by § 66-1937(5), Revised Codes of Montana, 1947, it is declared an improper practice in 'Failing to account for or to remit any money coming into his possession belonging to others.'

Section 33-355.11(e), W.S.1957, 1975 Cum.Supp., Laws, 1971, Ch. 251, § 11, similarly provides it to be a violation of the Real Estate License Act of 1971, for 'Failing within a reasonable time to account for or remit any monies coming into his possession which belong to others, commingling funds of others with his own or failing to keep such funds of others in an escrow or trustee account, * * *.' Impeccable handling of such accounts is required in this regulated business. It is not inferred that Mader mishandled the account, in the light of the dispute between buyer and the seller and he, in fact, told Fanning, 'There is no way that I can refund your money in absence of a written agreement between you and Mr. James, because that's not my money.' He may have been mistaken about the necessity of a written agreement but the statement was expressive of the fiduciary position he had and recognized.

In Medak v. DePrez, 1963, 236 Or. 31, 386 P.2d 805, it was held that the purchaser is entitled to return of the deposit if the sale fails through no fault of his and earnest money is, in effect, held by the broker as an escrow for both parties, interpreting an Oregon real estate rule like § 33-355.11(e).

Where a party to a contract (like James) has prevented performance by the plaintiff, it is not necessary for the plaintiff to prove his own readiness and ability to perform. Sturgeon v. Phifer, Wyo.1964, 390 P.2d 727, 730. There is no violation of the statute of frauds involved. A written contract for the sale, while still executory, may be rescinded by an oral agreement or by acts and conduct constituting abandonment of the written bargain. Such a rescision requires a restoration to status quo, so far as possible. Gaido v. Tysdal, 1951, 68 Wyo. 490, 235 P.2d 741. There is no lack of evidence that the parties treated the contract at an end. In order to restore the parties to their status before the contract of sale, Fanning is entitled to a repayment of his $15,000.00 deposit, but by whom?

The question brings the case to that issue. The deposit was paid to Mader. He held it. None of the fund was paid in cash to James but James was given credit for $7,500.00 by Mader on the subsequent sale of the ranch, they having taken the position that Fanning, as the buyer, was the defaulting party. As we conceive the evidence to be in the light most favorable to the prevailing party, there is no question but what plaintiff, as an innocent party, is entitled to at least $7,500.00 from Mader. But what about the other $7,500.00 credited to James? He never parted with that but kept it as a credit to James on account of his second sale of the ranch, under his interpretation of the agreement with James and the facts as he saw them. Since it was the failure of James, the seller, to perform that resulted in a rescission, the real issue at this particular point in this opinion revolves around the $7,500.00 credited to the account of James. Generally, an agent to whom money is paid for his principal under circumstances that would entitle the payer to recover it back from the principal is individually liable to the payer so long as it remains in his hands and he has not changed his position. Pixton v. Silva, 1975, 13 Wash.App. 205, 534 P.2d 135; Andersen v. Burns, 1974, 96 Idaho 336, 528 P.2d 680; Rhodes v. Tomlin, 1958, 267 Ala. 491, 102 So.2d 904; Gust v. Wilson, 1953, 79 N.D. 865, 60 N.W.2d 202, 38 A.L.R.2d 1371. The fact that the agent credits the principal with the amount received does not release the agent from his obligation to make restitution so long as he continues to hold the money on behalf of the...