Richland Development Company v. Staples
| Decision Date | 11 October 1961 |
| Docket Number | No. 17980.,17980. |
| Parties | RICHLAND DEVELOPMENT COMPANY, Inc. and National Pool Equipment Company, Appellants, v. George STAPLES, Jr., Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
J. Andy Zenge, Jr., Canton, Mo., Jesse A. Keller, Florence, Ala., for appellants.
Norman W. Harris, Julian Harris, Decatur, Ala., for appellee.
Before RIVES and WISDOM, Circuit Judges, and WRIGHT, District Judge.
This is an action by a real estate agent against two Alabama corporations for the recovery of a commission agreed to in a valid Missouri brokerage contract covering the sale of the defendants' land in Alabama. The principal defense is that the broker, a licensed real estate agent in Missouri, performed certain acts in Alabama related to the sale of the land in Alabama without having been licensed locally as a real estate agent. We affirm the district court's decision in favor of the Missouri broker.
In 1958 George Staples, Jr., the plaintiff-appellee, was a licensed real estate broker in Charleston, Missouri. He had never had an Alabama broker's license, had no office in Alabama, and had never had anything to do with any real estate transaction in Alabama other than the one that produced this litigation. E. L. Culver was president of Richland Development Corporation and National Pool Equipment Company, the defendants, Alabama corporations having their place of business in Florence, Alabama.
Early in 1958 Staples traveled to Florence for the purpose of negotiating with Culver for a distributorship of National Pool's products in Missouri, a matter entirely dissociated from Staple's real estate business. During the negotiations Culver, learning that Staples was a real estate agent in Missouri, told Staples that he would like to obtain a loan of $400,000, for which he would pay a commission of five per cent. Staples was unable to obtain the loan. There were further discussions in Cairo, Illinois, in February 1958, in the course of which Staples suggested to Culver that the funds be raised by selling the land to an investor under a lease back arrangement for use of the land as a site for a manufacturing plant. Staples also discussed several other business ideas with Culver and together they made a number of trips investigating the possibility of extending National Pool's operations into the manufacture of an agricultural grain dryer. September 4 on a trip in Culver's plane from Cairo, Illinois, to Kansas City, Missouri, while over Missouri, Culver employed Staples to sell the land for $420,000 with a commission to Staples of $20,000. At this time Staples discussed with Culver the possibility of selling the property to Noel Smith, a Missourian, with a lease back for twenty years. On this same trip Staples told Dale Alcorn, another Missouri real estate broker, that he would pay Alcorn $5,000 for his help in consummating the sale of the property to Smith. On September 11 Staples met Smith in Jefferson City, Missouri, and drove with him to Sikeston, Missouri. During the ride Staples succeeded in interesting Smith in making the purchase. Staples then arranged to have Culver send his plane to Missouri for Smith and Alcorn to inspect the property in Florence. Smith made the trip without Staples, who had other business in Memphis. On his return, Smith met with Staples September 13 at Charleston, Missouri. Smith said that he would buy a half interest in the land, and that he would try to persuade his partner, Ben Ginter, to buy the other half. The next day Smith went to Staple's home, and the two talked at length about the property. That night Smith called Staples from Fairfield, Illinois to say that he had talked with Ginter, who was in Canada, and that Ginter agreed to join in the purchase, subject to his seeing the property. On September 18 Staples and an accountant from Memphis discussed with officials of one of the banks in St. Louis arrangements for a mortgage loan from the bank to Smith and Ginter of $250,000. at Smith's request Staples arranged with Culver to have the latter send his plane to Charleston for Smith who wished to work out the details personally with Culver.
September 22 Staples, Smith, and Alcorn flew to Florence and reached an agreement with Culver on the terms of the sale. The price was $420,000, to be paid in cash, with a lease back for twenty years subject to certain options. This agreement was subject to Ginter's approval after seeing the property. Later that week Staples, Smith, and Ginter drove to Memphis, Tennessee, to discuss the transaction with the accountant there, and at that time Smith disclosed that there was a large federal tax lien outstanding against him. The accountant suggested that a mortgage loan be arranged, indorsed by Culver and National, and sold to the bank financing the transaction. Culver agreed to pay Staples $10,000 of his commission out of the down payment and to give him a note, payable in four months, for the remaining $10,000. The following day, in Florence, the parties agreed that a mortgage would be issued to Richland Development Company for $250,000 and, after indorsement by Culver, would be sold by Staples to raise that portion of the purchase price, with the remainder, $170,000, to be paid in cash by Smith and Ginter. The parties stayed in Florence until September 30 while the details of the transaction were worked out. Smith's lawyer drew a draft of the agreement and all parties, expressing satisfaction with the draft, shook hands on the deal. Since the agreement called for the immediate payment of $170,000 and Culver was unwilling to accept a check drawn by Ginter on a Canadian bank, Staples went to Canton, Mississippi, to obtain a cashier's check for Ginter to give to defendants. Staples returned to Florence October 4 with a cashier's check and with the contract signed by Smith, individually and as vice-president of Midwest Construction Ltd. A disagreement developed between Staples and Culver on the payment of the commission and on the mortgage feature of the land transaction. Staples went back to Missouri and obtained an agreement from Smith that he would pay the entire purchase price in cash if the mortgage could not be sold.
October 20 Smith and Alcorn, who had become active after October 6, went to Florence, and there Smith's lawyer drew up a second agreement. This, like the first, was in the form of an option and in other details was in substantial conformity with the first agreement. This agreement was executed that day. The option was exercised and the sellers conveyed the property by deed to the buyers December 17, 1958. By this time there was a dispute between Staples and Alcorn. Culver refused to pay the commission for the sale to Staples. Instead, he paid the $20,000 to Alcorn who executed an indemnity agreement to protect the defendants against any liabilities and cost arising from Staples's conflicting claim to the commission.
Staples sued in the federal district court for the Northern District of Alabama to recover the commission. The defendants asserted that the plaintiff could not recover because he had not obtained an Alabama license to act as a real estate broker in Alabama and because he had not performed his obligations under the contract. The district judge, trying the case without a jury, rejected both defenses and granted recovery for the plaintiff. The defendants appealed on both counts.
A real estate brokerage contract is a contract of employment, not a sale or other contract conveying an interest in land. Its validity is governed, therefore, by the law of the place where the agreement is made, rather than by the law of the situs of the land or the law of the forum. We have found no Alabama decision on this choice of law point, but the principle stated is about as well established as most so-called "settled" principles are established.1 We accept it — in the circumstances of this case.2 In this case equity and common sense go hand in hand with doctrine. Not only the making of the contract but the center of gravity of the significant acts of the parties touching the performance of the employment contract is in Missouri.3
It is undisputed that if tested by Missouri law the contract is valid and binding. The appellant contends, however, that even though the contract may be valid and enforceable elsewhere, Staples cannot enforce it in Alabama since to do so would contravene Alabama public policy as embodied in its Real Estate License Law. It is undeniable that a state may refuse to enforce a contract valid in the state where made, if the contract conflicts with the public policy of the state.4 The application of this doctrine, however, is limited to cases where strong reasons of public policy support it.5 Of course, a state has a certain latitude in declaring what foreign contracts violate its public policy, but if the asserted policy is nothing more than the fact that the forum state has prescribed a different law to govern a particular transaction, the foreign law will usually be enforced.6 In any event we sit as an Alabama court. Under Erie, if the courts of a state would close their doors to the enforcement of a contract contrary to the state's public policy, a federal court sitting in that state must follow suit.7
The Alabama Real Estate License Law, Code of Ala., Tit. 46, § 311, in relevant part, provides:
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