Mellos v. Silverman

• Citation: 367 So.2d 1369
• Parties: Thomas P. MELLOS and Anthi C. Mellos v. Joel SILVERMAN, d/b/a Silverman Realty Company, and Associates Realty, Inc., a Corporation. 77-444.
• Decision Date: 26 January 1979
• Court: Alabama Supreme Court

Page 1369

367 So.2d 1369

Thomas P. MELLOS and Anthi C. Mellos v. Joel SILVERMAN, d/b/a Silverman Realty Company, and Associates Realty, Inc., a Corporation.

77-444.

Supreme Court of Alabama.

Jan. 26, 1979.

Rehearing Denied March 2, 1979.

George B. Azar, Montgomery, for appellants.

Philip H. Butler, Montgomery, for appellees.

TORBERT, Chief Justice.

Appellants, Thomas and Anthi Mellos, appeal the trial court's order awarding a broker's commission to appellees, Joel Silverman and Associates Realty, Inc., pursuant to an exclusive listing contract for the sale of certain realty and improvements owned by appellants.

On November 15, 1976, appellants entered into an agreement with appellee Associates Realty, Inc. (Associates) whereby Associates was given the exclusive right to sell the Embers Restaurant and Bamboo Lounge owned by appellants. The period covered by the agreement extended to March 1, 1977. The agreement gave Associates an exclusive right to sell the property and provided for a ten percent commission in the event the property was sold at the price authorized in the listing agreement or at any other price agreed to by Mellos. The agreement authorized a sales price of $450,000 with $100,000 down and the balance at 9% Simple interest over a 10-year term. The agreement also contained an extension clause which provided:

In the event of said premises being sold or leased by me or any other person during the term of this agency or a sale or lease is later consummated with prospect introduced or interested in said property during such term by The Associates Realty, Inc., the commission above specified shall be considered earned.

During the term of the listing agreement, Nikola Nikolic became interested in purchasing the property. On Friday night, February 4, 1977, he went to the Embers and inquired of Thomas Mellos if the property was for sale and expressed an interest in purchasing the property. Mellos replied that he was too busy to discuss the matter at that time and to come back the next day. The following day Nikolic went instead to see Joel Silverman with whom the Embers had been listed prior to the agreement with Associates. Nikolic testified he had previously learned from Silverman that the property was for sale and consulted Silverman to get his opinion of the property and its value.

Silverman assisted Nikolic in preparing a written offer for the property, and since his listing had expired, obtained permission from Associates to present the offer to appellants. Silverman presented the offer to Mellos in the presence of his attorney at the Embers on February 9, 1977. The terms of the offer included a sales price of $300,000 with $100,000 down and the balance over a 20-year term at 7%. Appellants rejected the offer and made a counter-offer of $350,000 with $95,000 down and the balance over 20 years at 7%. The counter-offer was rejected. Nikolic then informed Silverman that he was no longer interested in the property. Both the offer and counter-offer provided that Silverman and Associates would split the commission.

The testimony is conflicting as to further contact between Nikolic and Silverman. Silverman asserts that he continued to contact Nikolic until the end of February, a period of about three weeks, hoping to convince him to talk to Mellos again. Silverman testified that he finally concluded that Nikolic was simply not a prospect and did not contact him further. Nikolic, however, testified that he only talked with Silverman once or twice and within a couple of days after his rejection of Mellos' counter-offer. Nikolic stated that he told Silverman he was no longer interested in the property and had made plans for a trip to Europe.

On March 1, 1977, the listing agreement with Associates expired, and Mellos listed the Embers with the Jim Broxton Agency. Nikolic and Mellos talked to each other again on March 22. At that time Nikolic's wife offered $275,000 for the Embers with $50,000 down and the balance over a 15-year term at 71/2%. The offer was accepted. Mellos testified that he accepted less money than that originally offered by Nikolic because he was ill and tired and needed to immediately sell the property for health and financial reasons. Nikolic testified that Mellos called him explaining that he needed to sell the property and Nikolic's wife then got on the phone and offered $275,000 stating that he (Mellos) would never get $300,000.

Mellos called Jim Broxton advising him of the sale and inquiring whether he owed him any commission. Broxton replied that he did not. No commission was paid to either Silverman or Associates.

Silverman and Associates filed suit against appellants and Nikolic for the commission provided in the listing agreement and for punitive damages for fraud. The trial court, hearing the evidence ore tenus, granted a directed verdict in Nikolic's favor at the close of plaintiff's evidence and ruled that Silverman and Associates were entitled to the commission by virtue of the extension clause. The court further found that appellants were not guilty of any fraud.

Under an exclusive right to sell agreement, the parties contract that the broker is entitled to a commission if within the time specified in the agreement he produces a person ready, willing, and able to purchase the property on terms authorized or agreeable to the owner. Extension clauses provide that the broker is entitled to a commission notwithstanding the expiration of the term of the listing agreement if the property is sold to one with whom the broker, prior to such expiration, negotiated or had some other form of dealing described in the agreement. Shorten v. Mueller, 206 Okl. 62, 241 P.2d 187 (1952). The purpose of such a clause is to protect the broker by preventing the owner from postponing acceptance until the listing agreement has expired and thereby circumvent the broker's right to compensation for locating a purchaser. Harkey v. Gahagan, 338 So.2d 133 (La.App.1976). The validity and enforceability of extension clauses have been universally upheld. See, e. g., Beck v. Neal, 228 Ark. 186, 306 S.W.2d 875 (1957); Whiting v. Johnson, 64 Wash.2d 135, 390 P.2d 985 (1964).

The owner and broker are free to frame their agreement as they see fit and may make the broker's commission dependent upon whatever conditions they agree upon so long as such conditions are not unlawful or contrary to public policy. Fischer v. Patterson, 97 N.H. 318, 86 A.2d 851 (1952). Under the language typically employed in extension clauses, it is not necessary that the actions of the broker be the "procuring" cause ¹ of the sale although the broker must show some minimal causal connection between his efforts and the eventual sale. See, e. g., E. A. Strout Co. v. Hubbard, 104 Me. 366, 71 A. 1020 (1908); Kaye v. Coughlin, 443 S.W.2d 612 (Tex.Civ.App.1969); Lloyd Hammerstad, Inc. v. Saunders, 6 Wash.App. 633, 495 P.2d 349 (Wash.App.1972). The courts have not formulated any precise rule or standard by which to determine the sufficiency of the broker's efforts. This result is largely attributable to the wide range of terms and expressions used in extension clauses to describe the obligation of the broker. Therefore, the nature and extent of the broker's efforts contemplated by the agreement must be determined in each case by a construction of the particular language involved. Englemann v. Auderer, 10 La.App. 136, 121 So. 194 (1929).

The expression used most frequently in extension clauses is that the broker must have "negotiated" with the buyer which has been construed as requiring that the broker interest the prospect to the extent that he becomes a likely purchaser, or, coming to terms or arranging the terms and conditions of a sale. See Clarke v. Blackfoot Water Works, 39 Idaho 304, 228 P. 326 (1942). Other expressions include to "offer," or "quote," or "submit" the property to the purchaser. These expressions have been construed to require less activity by the broker than the term "negotiate." Bullis & Thomas v. Calvert, 162 La. 378, 110 So. 621 (1926). Compare Werner v. Hendricks, 121 Pa.Super. 46, 182 A. 748 (1936) With Coppage v. Woodward, 105 So.2d 306 (La.App.1958) and Whiting v. Johnson, 64 Wash.2d 135, 390 P.2d 985 (1964).

In the instant case, the extension clause provided for a sale consummated with a prospect "introduced or interested" in said property. This expression seems to require even less effort still by the broker. See Wachtel v. Harkless, 112 Ind.App. 279, 44 N.E.2d 510 (1942). In Wachtel, the court construed "introduced" as equivalent to "found" or "procured" and stated that the sale must be traced to the introduction of the purchaser to the owner. A face to face introduction is not contemplated, rather it is sufficient if the parties are brought into communication with each other. In that case, the broker's agent took the two prospective purchasers to the property, a tavern, and introduced them to the bartender. The owner was not present. They stated to the agent that they were interested in a place like this. Subsequently, without any further communication with the broker or the agent, they purchased the property. The court held the broker's efforts were sufficient to entitle him to the commission for there was no evidence that the prospect would have become a purchaser without the information from the broker.

The court in Carter v. Hayes, 337 So.2d 295 (La.App.1976), upheld the trial court's award of a commission to a broker under an extension...