Mansfield v. Smith
| Decision Date | 01 May 1979 |
| Docket Number | No. 76-316,76-316 |
| Citation | 88 Wis.2d 575,277 N.W.2d 740 |
| Parties | , 12 A.L.R.4th 1069 Clark E. MANSFIELD, Plaintiff-Respondent, v. John F. SMITH, Defendant-Appellant. |
| Court | Wisconsin Supreme Court |
This is an action to collect a real estate broker's commission under the terms of a written real estate listing contract between the plaintiff-respondent Clark Mansfield, the broker, and defendant-appellant John F. Smith, the owner. On November 8, 1976, the trial court awarded the plaintiff-broker a commission of $15,000 plus interest and costs. The defendant-owner appeals.
James F. Bakken and Bakken, Feifarek & Taylor, Madison, on brief, for defendant-appellant.
M. W. Bieber and Johnson, Bieber & Swingen, Madison, on brief, for plaintiff-respondent.
On August 7, 1973, Clark Mansfield, a licensed real estate broker, and John Smith, a building contractor and owner-seller, entered into a written real estate listing contract for the sale of a 24-unit apartment building located at 1911 Pike Drive in the Town of Fitchburg, Dane county, Wisconsin. Under the terms of the agreement the broker was to procure a purchaser for the property at a cash price of $430,000 or at any other price or upon any other terms accepted by the seller during the term of the contract. Smith, the seller, agreed to pay a broker's commission which amounted to five percent of the sales price. This figure was subsequently reduced to a flat commission of $15,000. Originally for a term of three months, the contract was extended by the parties to February 7, 1974 in a separate written agreement dated October 31, 1973.
The listing contract, supplied and prepared by the plaintiff-broker, was a standard form contract employed by Wisconsin real estate brokers. The contract also contained a provision for liquidated damages at the seller's option in the event of a default by the buyer. 1 This clause read in full as follows:
"If buyer of said property should fail to carry out his agreement, and SELLER elects to take as liquidated damages all money paid by buyer, then such money shall be applied first to reimburse BROKER for cash advances made by him and one half of the balance, but not in excess of the agreed commission shall be paid to the BROKER as his full commission in connection with said transaction and the balance shall belong to the SELLER; said payment to BROKER shall not, however, terminate this listing contract."
Mansfield's efforts to procure a purchaser for the property took place over the period from early November to the end of December in 1973. On November 2, 1973, Mansfield received an oral offer of $412,000 for the apartment complex, the construction of which was 75 to 80 percent completed at the time. The offer to purchase was made by Clarence McFadden, a resident of Sun City, California. It was communicated to Mansfield by the prospective buyer's son Neil McFadden, a Madison resident. This offer was reduced to writing by Mansfield on the following day; however, Smith rejected the offer as too low and refused to sign the document. Mansfield was not able to persuade McFadden to raise the offering price.
On December 17, 1973, Smith asked Mansfield to contact McFadden in California. Smith stated he would accept the original offer of $412,000 if Mansfield agreed to a reduction of his broker's commission to a flat $15,000. Mansfield agreed and later set forth the commission modification in a writing signed by the parties on December 26, 1973.
Mansfield telephoned McFadden on the evening of December 17, 1973. McFadden agreed to reinstate the offer and, as Mansfield later testified, told the broker to write up the offer and send it to him. 2 McFadden stated if everything was satisfactory he would sign the offer and return it along with an earnest money check. The new document was drafted. On December 18, 1973, it was signed by Smith as seller and Mansfield as broker, and sent on to McFadden in California as the buyer. The seller signed the agreement before the buyer McFadden, contrary to usual practice, because the time for closing which was to be before December 31, 1973 was short. The offer to purchase was duly signed by Clarence McFadden and his wife. It was then returned to Mansfield, together with an earnest money check for $1,000, in an envelope postmarked December 21, 1973, Sun City, California. Under the terms of the agreement signed, the property was to be sold for a price of $412,000. This agreement included the additional special condition that "Seller shall at his expense lease 20 apartments for purchaser."
On December 24, 1973, several incidents occurred, the exact sequence of which was never fully resolved. Sometime during the morning Mansfield received the offer to purchase and earnest money check sent to him by the McFaddens. Also sometime during the morning Clarence McFadden stopped payment on his earnest money check and telegraphed Smith and Mansfield not to proceed with the closing. Mansfield received a telephone call from Western Union advising him of the telegram. Although the sender had requested that the telegram be delivered to the broker personally, it was read to Mansfield over the telephone. The message was as follows:
Mansfield told the Western Union operator he did not understand the telegram and requested clarification. Western Union business records put in evidence at the trial indicated that McFadden was notified that clarification had been requested, but never responded. No clarification of the message was received by Western Union and the telegram was never delivered. In a deposition taken shortly before his death and admitted into evidence pursuant to stipulation, McFadden denied cancelling the telegram and gave the following explanation for his failure to correct the text:
"I didn't do nothing about it because I thought he didn't want to understand it. . . If they put another line on that last word there, it would say "buy," and he didn't want to understand it."
On December 24, 1973, Mansfield was also contacted by Neil McFadden who instructed the broker to telephone Clarence McFadden, which he did. In their telephone conversation McFadden explained that he was concerned that there would not be enough income to cover expenses and mortgage payments if 20 units were not rented by the seller as per the terms of the agreement. Mansfield informed McFadden that the agreement contemplated Smith's paying any cash deficiency if he failed to rent all 20 units. According to Mansfield's testimony, this reassured McFadden. He agreed to reinstate the earnest money check and cancel the telegram. A letter making explicit the fact that the seller Smith in signing the agreement undertook to guarantee the rental payments of 20 units was drafted by Mansfield. This addendum to the offer to purchase was signed by Smith and, pursuant to Clarence McFadden's instructions, delivered to Neil McFadden.
A few days later Mansfield was contacted by and met with Attorney Trayton Lathrop of Madison, Wisconsin, who stated he was representing Clarence McFadden in the matter of the sale of the property. On January 4, 1974, Attorney Lathrop sent a letter to both Mansfield and Smith confirming the fact that McFadden no longer intended to purchase the property and advising them that the McFaddens did not consider that any binding contract had been entered into.
On January 25, 1974, Mansfield sent Smith a statement in the amount of $15,000 for services rendered as per the listing contract. Mansfield received a reply, dated January 28, 1974, from Smith's attorney John Harrington. The letter suggested that Mansfield attempt to renegotiate a deal with McFadden at a sale price of $405,000. The letter also indicated that Smith, like McFadden, thought there was no binding contract of sale in existence.
In February, 1974, Mansfield commenced this action against Smith for the collection of the $15,000 broker's commission allegedly due him under the listing contract. Summons and complaint were filed in the circuit court for Dane county on March 20, 1974. Defendant Smith in an answer dated March 16, 1974, denied that an enforceable contract of sale had been created and further denied that the broker had procured a ready and willing purchaser for the property.
In 1976, several months prior to trial, the defendant moved for leave to amend the answer in order to assert as an affirmative defense the seller's election right under the liquidated damages clause in the listing contract. On stipulation of the parties, this permission was granted by the court in an order dated February 9, 1976. Also on stipulation and pursuant to an order of the court, leave to file an amended complaint was similarly given the plaintiff. The defendant Smith's amended answer, dated January 30, 1976, affirmatively alleged that Smith as seller had elected to take as liquidated damages the money paid by the buyer and that under the terms of the listing agreement the broker's commission was therefore limited to one-half the balance of the earnest money after deduction of the broker's actual disbursements. This would amount to nothing at all in the present case in view of the fact that the earnest money check was returned to the broker unpaid because buyer McFadden stopped payment on it. In an amended complaint dated May 25, 1976, the broker disputed Smith's right to rely on the contract's liquidated damages provision and asserted that Smith was either estopped, was guilty of laches or had waived his right to raise the defense by reason of his failure to exercise his option within a reasonable period of time. The defendant's answer to the amended compliant was dated June 11, 1976, and filed on November 5, 1976.
Trial was held to the court on June 14, 1976. A memorandum decision containing trial court's findings...
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