Magnolia Federal Sav. and Loan Ass'n v. Randal Craft Realty Co., Inc.

• Decision Date: 02 March 1977
• Docket Number: No. 48663,48663
• Court: Mississippi Supreme Court
• Parties: MAGNOLIA FEDERAL SAVINGS & LOAN ASSOCIATION v. RANDAL CRAFT REALTY COMPANY, INC.

Page 1308

342 So.2d 1308

MAGNOLIA FEDERAL SAVINGS & LOAN ASSOCIATION v. RANDAL CRAFT REALTY COMPANY, INC.

No. 48663.

Supreme Court of Mississippi.

March 2, 1977.

Watkins, Pyle, Ludlam, Winter & Stennis, Robert H. Weaver, Luther S. Ott, Jackson, for appellant.

M. Curtiss McKee, Jackson, for appellee.

Before INZER, PATTERSON and WALKER, JJ.

INZER, Presiding Justice, for the Court:

This is an appeal by Magnolia Federal Savings & Loan Association from a decree of the Chancery Court of the First Judicial District of Hinds County awarding appellee Randal Craft Realty Co., Inc., $11,500 as a real estate commission. Appellee cross appeals contending that it was entitled to a larger sum.

The record reveals that in 1972 Magnolia Federal Savings & Loan Association, hereinafter referred to as Magnolia, was the owner of a building and lot in north Jackson under lease to Franchise Realty Interstate Corporation and occupied by McDonald's, a nationally known hamburger chain. This lease provided, among other things, that in the event the lessor had an offer from someone to purchase the premises, which it desired to accept, notice of such offer would be submitted to the lessee, and that the lessee would have the first option to purchase the property 'by giving notice to the lessor of its intention to purchase within the thirty day period at the same price and the same terms of any such offer.' This lease had been arranged by Terry Hairston, a real estate agent, and he was to receive as his commission six percent of the lease payments each year until the expiration of the lease. However, there was nothing in writing relative to these payments until after this controversy arose.

In the early part of 1972, Magnolia was advised by the Federal Home Loan Bank that its investment in this property was unauthorized and it would have to dispose of the property. Magnolia then tried to sell the property to its lessee, Franchise, but Franchise did not display an interest in buying the property. Magnolia then contacted some real estate agents in an attempt to sell the property. On or about August 10, 1972, Craft learned that the property was for sale and acquired listing information from Magnolia. The listing information given to Craft was a gross price of $307,000, with a real estate broker's commission of six percent on the first $50,000 and five percent on the balance. Craft was also instructed that a prospective purchaser would have to assume the payments of the lease commission to Hairston. The listing with Craft was not an exclusive listing.

Craft set about to try to find a buyer for the property. One of the people contacted was David E. Crawley of Kosciusko, who expressed an interest in buying the property as agent for his son and daughter. Craft then prepared certain analysis and appraisal of the property for the prospective purchasers in an attempt to show the Crawleys that the property was a good investment. This required considerable time and effort on the part of Craft.

On August 21, 1972, Craft was advised by Magnolia that it had reduced its purchase price and would sell the property for $275,000 net to Magnolia. Craft then contacted Crawley who agreed to purchase the property at a price of $292,500. This price included a $17,500 broker's fee.

As soon as the agreement was reached, Craft prepared a contract on the standard form for the sale and purchase of real estate. The contract was immediately carried to Magnolia where it was signed by Crawley, Craft and Phillip H. Payment, president of Magnolia. This contract had the following special provisions:

Purchasers and sellers recognize that Franchise Realty Interstate Corporation has an option to purchase herein described property within thirty days from date of notice upon the same terms and conditions set forth herein. If this option is not exercised by Franchise Realty Interstate Corporation, then the contract will then be in full force and effect and this sale shall be closed within 45 days from date of this contract. (Emphasis added).

The contract did not mention the fact that Crawley was assuming the payment of the lease commissions to Hairston, but Crawley understood that he was to assume this payment.

On August 23, Magnolia notified Franchise by letter that it had sold its McDonald's location. The letter stated, 'We are enclosing herewith a copy of the contract, so that all of the terms and conditions of the sale will be known to you.' The purpose of the letter was to comply with the terms of the lease with reference to the option of Franchise to purchase the property. Nothing was stated in the letter relative to the fact that Hairston was entitled to a commission under the lease. Two days later Magnolia acknowledged by letter to Hairston that he was entitled to a commission under the lease.

On September 4, 1972, Franchise, much to the surprise of all parties, by letter advised Magnolia of its intention to purchase the property in accordance with the purchase and sale agreement. Apparently, there was some discussion between Franchise and Magnolia relative to whether Franchise was required to pay the real estate commission as part of the purchase price. The minutes of Magnolia reflect that the gross price of the property was $292,500 with the association to pay the fee necessary. Thereafter, Payment advised Franchise that the $292,500 was the purchase price that it was obligated to pay under the terms of the lease and contract for sale and that the broker's commission was a matter of contract between the association and Randal Craft and the association would be responsible for any obligation to that broker only. Thereafter, the sale to Franchise was finally closed on December 13, 1972. The minutes of Magnolia of December 13 reflect the following:

President Payment next reported that the sale of McDonald's had been consummated and we had received a gross check in the amount of $288,000, and that the Association should net approximately $275,000 from the sale proceeds. President Payment was instructed to settle the transaction on McDonald's to Terry Hairston, who was the leasing agent, and with Randal Craft, who was a realtor involved in the sale transaction. President Payment was instructed to report back to the Executive Committee as to his transactions in dealing with Mr. Hairston and Mr. Craft.

It seems clear at this point that Magnolia recognized that the sale of the property was due to the efforts of Craft and it recognized its obligation to pay Craft. However, Mr. Payment made no attempt to settle with Craft but did settle with Hairston. On December 27, 1972, Payment reported to the Board of Directors that he had settled with Hairston and paid him $12,000 but that Craft was not due any commission.

Thereafter, Craft filed this suit. A general demurrer was sustained to the original bill of complaint. Craft then filed an amended bill of complaint which sought recovery on the theory of the resulting or constructive trust. Magnolia answered and incorporated a general demurrer in this answer. This demurrer was overruled. The answer denied that Craft was entitled to recover any amount as a real estate commission.

The chancellor found from the evidence that Craft was entitled to a commission of $17,500, less $6,000 being one-half of the amount paid to Hairston by Magnolia. It was the opinion of the chancellor that Craft was at fault in failing to include in the purchase and sales contract the condition that the purchaser was required to assume the lease commission payable to Hairston. He also found that Magnolia apparently did not carefully examine the contract for sale and purchase before sending it to Franchise and was at fault in failing to see that Franchise was fully advised of the terms that it was required to meet. It was the chancellor's opinion that the disagreement and litigation was...