Peter M. Chalik & Associates v. Hermes

• Decision Date: 31 October 1972
• Docket Number: No. 158,158
• Citation: 201 N.W.2d 514,56 Wis.2d 151
• Parties: PETER M. CHALIK & ASSOCIATES, Appellant, v. Edward HERMES, alias, Respondent.
• Court: Wisconsin Supreme Court

Page 514

201 N.W.2d 514

56 Wis.2d 151

PETER M. CHALIK & ASSOCIATES, Appellant, v. Edward HERMES, alias, Respondent.

No. 158.

Supreme Court of Wisconsin.

Oct. 31, 1972.

Walter R. Nicolai, Milwaukee, for appellant.

Marshall E. Fredrich, Milwaukee, for respondent.

CONNOR T. HANSEN, Justice.

This appeal is from a judgment entered pursuant to motion for a directed verdict in favor of defendant. On review, this court must examine the evidence most favorable to the party against whom the motion is directed and if there is any evidence which will sustain his cause of action, the motion should have been denied. ¹ This court, in Low v. Siewert (1972), 54 Wis.2d 251, 252, 195 N.W.2d 451, 452 recently stated:

'The procedure of reserving the disposition of a motion to direct a verdict until after the jury returns its verdict is the preferred procedure. Although such procedure allows some hindsight with a jury's verdict and while an appeal is almost inevitable when the court differs with the verdict, at least a retrial is avoided if there is a reversal. In reviewing the granting of a motion to direct a verdict, this court must examine the evidence most favorable to the party against whom the motion is directed and if there is any evidence which will sustain his cause of action, the motion should have been denied. . . .'

To a great extent, the difficulties presented in this case arise out of two situations, both attributable to the plaintiff.

The first is plaintiff's performance, or attempted performance, under the terms of an exclusive real estate sales agreement drafted by an agent of the plaintiff.

The second arises out of the manner in which the plaintiff set forth its cause of action for damages in its complaint.

(1) It is undisputed that on October 20, 1965, the parties entered into a real estate listing contract whereby the plaintiff was given the exclusive right to procure a purchaser for certain business property owned by the defendant and consisting of 'Tavern business, building, license and all attached equipment.' for the sum of $95,000, payable upon terms which provided for a down payment of $28,000, and the balance to be paid 'on terms to be determined by the sellers.' It was agreed that the commission was to be $5,000. The listing contract was for a term of October 20, 1965, to November 15, 1965; however, it provided that no sale was to be closed until after January 10, 1966.

It is also undisputed that a written offer was executed October 23, 1965, wherein Stair, a prospective purchaser, submitted an offer of purchase for $95,000, with earnest money of $5,000 and an additional down payment of $17,000 upon closing, and the balance to be paid pursuant to a land contract having a five-year term and providing for interest at the rate of 5 3/4 percent.

A substantial variance existed between the listing contract and the offer. The listing contract required a down payment of $28,000; the offerer's total down payment was $22,000. The offer also included items of substantial value in the purchase price which were not included in the listing contract, namely, stools, two bar tables and chairs, and a cash register. The offer also included terms for the payment of the balance of the purchase price, whereas the listing contract provided that the balance was to be paid 'on terms to be determined by the sellers.'

The evidence most favorable to the plaintiff indicates that the defendant, in rejecting the offer, did not state a reason except that he was not interested in selling any more.

(2) This case was tried on a theory of substantial performance under the contract in that plaintiff sought to recover its commission of $5,000, plus interest. However, the language of the complaint setting forth the cause of action is ambiguous. The complaint states:

'5. That plaintiff has complied with all terms of said contract entered into between the parties for the sale of defendant's property located at 4730 N. 76th Street, Milwaukee, Wisconsin, but that defendant refused to carry forth his portion of said contract and terminated said contract by refusing to comply with any of the terms of the contract as set forth in writing.'

Alleging full compliance under the contract and seeking its commission of $5,000, as called for in the contract, plaintiff seeks relief on the contract. However, when it alleges termination of the contract and argues that defendant 'refused to allow the plaintiff to perform his contract,' it is seeking relief for defendant's alleged breach of contract. Plaintiff also states in its brief that it is basing its cause of action on a breach of contract. On the one hand, it argues that it performed all of its duties under the contract, and on the other it claims that it failed to perform its contract due to the fault of the defendant.

The trial court determined that plaintiff was proceeding on the contract and submitted questions to the jury upon that basis. We agree with this determination.

If plaintiff's agency was revoked, without cause, defendant is liable to it for damages but not its commission. In Sinden v. Laabs (1966), 30 Wis.2d 618, 621, 141 N.W.2d 865, 866, this court cited with approval Schoenmann v. Whitt (1908), 136 Wis. 332, 334, 117 N.W. 851, stating:

"Although the principal may revoke the broker's agency notwithstanding the employment is to continue for a definite time, he renders himself liable, unless such revocation is for cause, for such damages as are the proximate result of his termination of the employment contract. This assumes, of course, that the contract is supported by consideration and is otherwise binding." ²

The court, in Sinden v. Laabs, supra, p. 622, 141 N.W.2d p. 867, went further to state:

'Sinden's remedy was either to bring action for damages for breach of the contract or to disaffirm the contract and seek recovery of the reasonable value of the services he had rendered. . . .'

If plaintiff is contending that defendant, in bad faith, prevented it from performing under the contract, or terminated the contract before the expiration date, its remedy lies in an action for breach of contract or quantum meruit not an action on the contract.

However, plaintiff has failed to allege any damages, and sues for its commission. The plaintiff did not raise the issue of damages for breach of contract or quantum meruit in the trial court and did not argue them on appeal. Therefore, these issues are not before us on this appeal.

This court has held that a broker, employed 'to procure a purchaser' for real estate, is entitled to his commission when he produces a person ready, willing and able to purchase upon the terms specified by the owner in the brokerage contract. ³

It has often been held that where a material and substantial variance exists between the listing contract and the offer, the seller is free to reject the offer without incurring liability to the broker. ⁴ This defense to a broker's action for his commission is not waived when the seller rejects the incongruent offer without stating the variance or any other ground for his reason. ⁵ In Kleven v. Cities Service Oil Co. (1964), 22 Wis.2d 437, 444, 126 N.W.2d 64, 68, it was stated:

'. . . (W)here the variance is a substantial one, such as one that is directly in conflict with a material provision of the listing contract, there has been no substantial performance by the broker which would entitle him to his commission, absent acceptance of the offer by the owner. The broker is chargeable with knowledge that such substantial variance exists when he submits the offer, and, therefore, the owner should be under no duty to point this variance out to the broker in rejecting the offer.'

The record indicates a substantial variance. Plaintiff cannot support its contentions of full compliance with the listing contract by offering proof of the offer of Stair, who was the sole prospective purchaser.

Plaintiff then argues that testimony offered at trial would support its contentions that Stair was willing to offer a $28,000 down payment. The jury was asked whether the facts of purchaser's readiness, willingness and financial ability were communicated to the seller. The jury answered this question in the affirmative. However, on motions after verdict, the trial court properly found that it had erred in submitting the question because there was no evidence offered to support such an answer.

Where the listing contemplates negotiation of terms, as in the instant case, a commission is not earned until an agreement is reached upon the terms between buyer and seller. ⁶ This court, in Nordale Realty Co. v. Hanel (1947), 251 Wis. 136, 138, 28 N.W.2d 245, stated:

'. . . It is also settled that when the principal has furnished the broker with only part of the terms with an understanding that further details are subject to negotiation between the principal and the prospective buyer the principal may terminate such negotiations without liability to the broker. See Restatement, 2 Agency, sec. 445; Henschell v. J. L. Gates Land Co. 146 Wis. 140, 131 N.W. 423; Grinde v. Chipman, 175 Wis. 376, 185 N.W. 288. . . .'

Plaintiff insists that it should still be allowed to recover its commission because defendant refused to allow plaintiff to perform its contract. Plaintiff alleges bad faith on the part of defendant.

In Dean v. Wendeberg (1921), 175 Wis. 513, 515, 516, 185 N.W. 514, this court recognizes this exception of bad faith to the rule which was also later recognized in Nordale, when it stated:

'. . . (I)t would be manifestly unjust that the principal could avoid paying a commission fairly earned if by his own fault or misconduct or wrongful neglect he has prevented the consummation of his contract with the buyer, and the courts will not sanction such injustice. . . .'

This exception was again noted in Libowitz v. Lake Nursing Home, Inc., supra.

The exception is stated in 12 Am.Jur.2d, Brokers, pp. 907--908, sec. 167, as:

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