McDonald v. Humphries, 72875

• Court: Supreme Court of Oklahoma
• Writing for the Court: KAUGER; HARGRAVE; SIMMS; OPALA
• Citation: 810 P.2d 1262
• Parties: Kenneth McDONALD, Trustee in Bankruptcy for William C. Robertson, and Bill R. Campbell, Appellees, v. Gilbert HUMPHRIES, Jr., Appellant.
• Docket Number: No. 72875,72875
• Decision Date: 19 June 1990

Page 1262

810 P.2d 1262 1990 OK 51 Kenneth McDONALD, Trustee in Bankruptcy for William C.
Robertson, and Bill R. Campbell, Appellees,
v.
Gilbert HUMPHRIES, Jr., Appellant. No. 72875. Supreme Court of Oklahoma. June 19, 1990.
As Corrected on Denial of Rehearing April 23, 1991.

Page 1263

Appeal from the District Court of Kay County; Lowell Doggett, Trial Judge.

On remand, the trial court entered judgment in favor of the appellee, William C. Robertson (Robertson/owner), in the amount of $146,250.80. The judgment was reduced by $50,000.00, which represented a commission based on quantum meruit awarded to the appellant, Gilbert Humphries, Jr. (Humphries/broker). We find that: 1) the cause is governed by the holding in Robertson v. Humphries, 708 P.2d 1058, 1060 (Okla.1985), that, in the absence of an express agreement regarding the commission in a net list sale agreement, a broker is entitled to no more than a reasonable commission not to exceed the difference between the gross and the net sale price; 2) testimony that a party would have chosen the true terms of a contract is unnecessary to show damages in an action based on fraud if it is unreasonable to conclude that the party, advised of the facts, would have accepted materially less favorable terms; and 3) the broker's acquiesence in inequitable conduct bars his invocation of the "clean hands doctrine" as a defense.

AFFIRMED.

J.E. Burns, Ponca City and Delmar L. Stagner, Oklahoma City, for appellant.

Richard James, Stroud, for appellees.

KAUGER, Justice.

The issues presented are: 1) whether this cause is governed by the law of the case in Robertson v. Humphries, 708 P.2d 1058, 1060 (Okla.1985) which held that, if there is not an express agreement regarding the commission in a net list sale agreement, a broker is entitled to no more than a reasonable commission which cannot exceed the difference between the gross and the net sale price; 2) whether a party, unaware of the true terms of a contract, must testify that he/she would have accepted the more favorable terms in order to demonstrate damage resulting from fraudulent representations; and 3) whether a sellor, who makes false representations to a broker and potential purchasers concerning the state of oil and gas leases, is barred from seeking equitable relief. We find that: 1) the cause is governed by the holding in Robertson v. Humphries, 708 P.2d 1058, 1060 (Okla.1985) (Robertson I ), that, in the absence of an express agreement regarding the commission in a net list sale agreement, a broker is entitled to no more than a reasonable commission not to exceed the difference between the gross and the net

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sale price; ¹ 2) testimony that a party would have chosen the true terms of a contract is unnecessary to show damages in an action based on fraud if it is unreasonable to conclude that the party, advised of the facts, would have accepted materially less favorable terms; and 3) the broker's acquiesence in inequitable conduct bars his invocation of the "clean hands doctrine" as a defense.

Because the appellee's, ² William C. Robertson's (Robertson/sellor), claim was unliquidated, the issue of ministerial additure of interest to the judgment is not addressed. ³ The appellant's, Gilbert Humphries', Jr. (Humphries/broker), unsupported argument that the trial court erred in refusing to consider the value of a 1/16 override retained by the sellor in determining a reasonable commission is not considered. ⁴

FACTS

This is the second appeal arising from the same set of facts. ⁵ Robertson owned leases in Stephens, Jefferson, and Cotton counties, Oklahoma, covering over nine thousand surface acres, and approximately five thousand mineral acres. Late in 1974, Robertson asked Humphries, a banker and real estate agent in Tonkawa, Oklahoma, to sell the leases. The parties disagree over whether a net sale agreement existed. However, both parties agree that under the original agreement, Robertson was to receive at least $100,000.00, and to retain a 1/8 override ⁶ with a 1/4 back-in ⁷ after payout.

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They also agree that Humphries was not to share in the retained overrides.

Humphries found prospective purchasers; and on January 17, 1975, the purchasers asked to inspect the leases. On January 18, 1975, Robertson and Humphries met the potential purchasers at the lease site. At that time, Robertson opened the valve on a shut-in gas well. Although Robertson told the purchasers that the well held the lease, the well was not located on the lease property. While Robertson was with the purchasers, Humphries met with the owner of the property who indicated that the leases had expired. Humphries obtained a ratification of the leases in Robertson's name.

On January 23, 1975, Humphries met with the purchasers. The purchasers offered $250,000.00 plus a 1/16 override to purchase the lease. Humphries informed Robertson that he could get him $100,000.00 and a 1/16 override. He did not disclose that the actual offer was for $250,000.00 with a 1/16 override, and Robertson did not inquire. Humphries requested confirmation of his authority to sell. Robertson sent a telegram, stating that Humphries had authority to accept a " 1/16 override plus $100,000.00 payable on delivery of assignment for leases in Stephen's, Jefferson and Cotton counties Oklahoma." Later that afternoon, Humphries signed the contract for sale on behalf of Robertson, and the purchasers placed $50,000.00 in escrow.

Robertson delivered a completed assignment to Humphries on January 24, and demanded $100,000.00. Robertson threatened to withdraw the leases unless he received his money within ten days. Because of this threat, Humphries borrowed $100,000.00 on the strength of one of the purchaser's credit. Robertson and Humphries met at the First National Bank of Ponca City on February 3rd. When Humphries gave Robertson a $100,000.00 cashiers check, Robertson asked that the check be broken down into smaller denominations. This was done, and Robertson offered Humphries a $10,000.00 check as commission on the sale. Humphries refused, informing Robertson that he would make his money from the purchasers. As Humphries and Robertson were leaving the bank, Humphries told Robertson that he had purchased the leases. Robertson replied that he hoped he was going to make some money on the deal, and Humphries assured him that he was. Humphries closed the sale with the purchasers on March 7. The individual purchasers made their checks, totalling $200,000.00, out to the financial institution housing the escrow account.

When Robertson listed the properties, he told Humphries that the leases were held by production. He made the same representation to the purchasers. Robertson provided Humphries with a map, and an unsigned engineering report covering the leases. Upon investigation, Humphries realized that the leases were not held by production, and that their primary terms had expired. However, Humphries obtained ratification of the leases in Robertson's name. When the purchasers attempted to borrow money on the leases, they discovered that the engineering report provided by Robertson was misleading. The report was unsigned and stapled to stationery of an engineering firm. When the purchasers were unable to get a signed copy from Robertson, they called the engineering firm. They were informed that the geologist who had prepared the report was not their employee.

On discovery that the leases were sold for $250,000.00 rather than $100,000.00, Robertson initiated an action alleging that Humphries had fraudulently concealed the terms of the sale, and had retained a "secret profit." The trial court found that there was an implied agreement between Humphries and Robertson for a net sale listing agreement. It also found that, because there was no duty to disclose the actual sale price under a net sale listing agreement, that no fraud had occurred. On appeal, we held in Robertson I, that in the absence of an express agreement regarding the commission in a net list sale

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agreement, a broker is entitled to no more than a reasonable commission not to exceed the difference between the gross and the net sale price. The cause was remanded for determination of a reasonable commission, and to consider the allegations of fraudulent misrepresentation.

On remand, the parties waived a jury trial, and the case was bifurcated on the issues of liability and damages. After hearing the liability portion of the cause, the trial court filed its journal entry on December 4, 1987. The trial court confirmed its previous finding of the existence of an implied net sale agreement, and found that Humphries breached his duty to his principal, Robertson, by failing to disclose the terms of the sale. The trial court characterized the failure to disclose as constructive fraud. The damages phase of the cause was heard on July 18, 1988. On November 20, 1988, the trial court entered judgment in favor of Robertson for $146,250.80, less a quantum meruit commission for Humphries of $50,000.00. The trial court found that Robertson's claim was unliquidated, and denied a claim for prejudgment interest under 23 O.S.1981 § 6. ⁸

I

THE CAUSE IS GOVERNED BY THE HOLDING IN Robertson v. Humphries, 708 P.2d 1058, 1060 (Okla.1985), THAT, IN THE ABSENCE OF AN EXPRESS AGREEMENT REGARDING THE COMMISSION IN A NET LIST SALE AGREEMENT, A BROKER IS ENTITLED TO NO MORE THAN A REASONABLE COMMISSION NOT TO EXCEED THE DIFFERENCE BETWEEN THE GROSS AND THE NET SALE PRICE.

Although Humphries recognizes that "the trial court correctly based its determination of a reasonable commission on quantum meruit," he asserts that there was an express net list sale agreement entitling him to retain all profits over the $100,000.00 paid to Robertson. He also argues that Robertson had actual knowledge that Humphries had purchased the leases for resale, and had constructive notice of the $250,000.00 sale price. Robertson...