Shanklin v. Townsend

• Court: United States State Supreme Court (Kentucky)
• Writing for the Court: MONTGOMERY; OSBORNE; By OSBORNE
• Citation: 431 S.W.2d 874
• Parties: Shelby SHANKLIN, Jr., et al., Appellants, v. Jane W. TOWNSEND et al., Appellees.
• Decision Date: 22 March 1968

Page 874

431 S.W.2d 874 Shelby SHANKLIN, Jr., et al., Appellants,
v.
Jane W. TOWNSEND et al., Appellees. Court of Appeals of Kentucky. March 22, 1968.
As Modified on Denial of Rehearing Sept. 27, 1968.

Page 875

Alvin B. Trigg, Joe C. Savage, Wallace, Turner & Trigg, Lexington, for appellants.

Joseph L. Arnold, Nolan Carter, Jr., Allen, Duncan, Duncan & Arnold, Lexington, for appellees.

DAVIS, Commissioner.

The appellant real estate brokers brought this suit to recover a commission from the appellees in connection with certain transactions pertaining to real estate owned by appellees and listed for sale by them through appellants. The trial court used an advisory jury which answered an interrogatory upon which the judge found for the appellees and against appellants.

The real estate involved in the transactions is a tract of about 62 acres in Fayette County. The appellees, owners of the land, are four sisters, Jane Townsend, Lucy T. Reeves, Laura Toleman, and Martha Moore, to whom we shall refer by their Christian names. Appellants Shanklin and Clark are real estate brokers doing business as Clark and Shanklin, Realtors. Appellant Lutes is a realtor and proprietor of an interior decorating concern. In 1959 when the four sisters acquired title to the land by inheritance, Jane had been employed by Lutes in his interior decorating business for five or six years. Lucy also worked for Lutes in the interior decorating shop and later as a saleslady in his real estate operations from about 1959 until 1962, when she ceased her employment with Lutes and became employed as a saleslady in real estate for Shanklin and Clark.

The four appellees, with the husbands of the married ones, entered into a listing contract whereby appellants were employed as brokers with authority to undertake the sale of the tract at a price of $11,500 per acre. The listing contract provided that it was to be valid for one year or until industrial zoning could be obtained for the land. It provided also that if the property was sold before its expiration the standard real estate commission prescribed by the Lexington Real Estate Board should be paid irrespective of by whom the sale was effectuated. According to the complaint, the applicable commission was 5% of the sales price.

There is a conflict in the evidence concerning the details surrounding the drafting of the contract. However, it was prepared by Shanklin at his office on March 17, 1964, and was there signed by all the sisters except Martha, who later received and signed it in Arizona.

On October 13, 1964, the four sisters entered into an agreement with Hannah-Gardner Oldsmobile, Inc., giving it an option to purchase the land at $10,100 per acre. The option provided that upon its exercise the sum of $20,000 would be paid with the notice of acceptance and would be applied on the purchase price. It further provided that if the sellers were unable to convey title the $20,000 would be refunded, but 'should second party fail to carry out its obligations hereunder for any reason other than failure of first parties to convey said title, the said $20,000 shall be retained by first parties as liquidated damages.' Another provision of the agreement noted that any real estate commission due upon any listing of the property by sellers would be paid by sellers.

On October 29, 1964, Hannah-Gardner elected to exercise the option and paid the

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$20,000, but for reasons not pertinent to our decision Hannah-Gardner did not complete the purchase, and the $20,000 was retained by the appellees. It is not suggested that the appellants procured Hannah-Gardner as a purchaser, nor is it denied that the option agreement was consummated within the one year provided in the listing contract and prior to any re-zoning.

Appellants contend that upon Hannah-Gardner's election to exercise its option the property was 'sold' and that they are entitled as a matter of law to a judgment for the full amount of the commission called for in the agency contract, which they calculate to be $31,310.

A real estate broker may earn his commission 'either by producing a person who is not only then, but at all times, ready, able, and willing to purchase the property on the prescribed terms, or by obtaining from the customer a binding contract which the landowner himself may enforce, in case of a breach or default in its terms.' (Emphasis added.) Casey v. Hart Wallace & Co., 188 Ky. 441, 222 S.W. 111, 112; Ferguson v. Harris, 200 Ky. 146, 254 S.W. 329, 332. In such cases the word 'sale' is not construed as requiring consummation of the transaction. T. W. Sandford & Co. v. Waring, 201 Ky. 169, 256 S.W. 9, 10; Odem Realty Co. v. Dyer, 242 Ky. 58, 45 S.W.2d 838. 'The reason for the rule is that the owner is not bound to accept the purchaser until he has been given an opportunity to satisfy himself as to the purchaser's financial responsibility.' Swinebroad v. Foster, 196 Ky. 459, 244 S.W. 881, 882. In the case now before us the brokers did not procure the prospective buyer, but the brokerage contract having provided that the commission would be payable if the property was sold either with or without the services of the brokers, we think the word 'sold' must be given the same meaning in the one event as it would have been given in the other. That is to say, since a binding sales contract with a purchaser produced by the brokers would have been a 'sale,' a binding sales contract with a purchaser obtained by the owners independently of the brokers also must be regarded as a 'sale.'

There do not seem to by many reported cases dealing with the precise question of what constitutes a sale to a purchaser obtained by the owner independently of an agent to whom he has given the privilege (exclusive or otherwise) of selling the property. In Story v. Gibbs, Ky., 309 S.W.2d 334, on which the appellant brokers lay considerable emphasis, the broker procured the buyer, and the contract thereafter entered into by the parties contained an unconditional promise by the seller to pay the broker a commission of $880 'for services rendered in this transaction.' ¹ The facts of that case are not sufficiently analogous to help in this one. However, a reasonable degree of enlightenment may be found in two decisions holding that the owner's independent transaction did not amount to a sale.

In Lewis v. Dahl, 108 Utah 486, 161 P.2d 362, 160 A.L.R. 1040, and Hartig v. Scharder, 190 Ky. 511, 227 S.W. 815, oral commitments made by the owners were held not to constitute sales. In the Utah case it was said that the word 'sale' as used in such a contract 'means payment of the purchase price and the conveyance of title or the execution of a binding contract of sale * * *.' (Emphasis added.) 161 P.2d at page 365, 160 A.L.R. at page 1044.

In Hartig, a broker with whom property had been listed produced a good buyer after the owner had made an oral agreement to sell to someone else. In passing to its conclusion that the oral commitment was not a sale (hence the broker was entitled to his commission), this court said: 'The sale of land in this state means either the execution

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and delivery of a conveyance therefor * * * or entering into a binding, written contract which may be enforced in the courts.' (Emphasis added.) 227 S.W. at page 817.

In each of the two opinions just mentioned the court determined what was not a sale by the process of defining what was a sale, and they support our conclusion that a binding contract of purchase and sale procured entirely through the owner's efforts is a sale, cutting the broker off if his agency is nonexclusive but entitling him to a commission if he has been given an exclusive privilege to sell the property.

Should there remain a lingering doubt as to whether the word 'sale' in this case was intended to mean a completed transaction, surely it must be erased by the following provision of the...