Shopen v. Bone

• Decision Date: 09 March 1964
• Docket Number: No. 17369.,17369.
• Parties: Cecil F. SHOPEN, Appellant, v. Joseph M. BONE, Jr., Trustee in Bankruptcy of John D. Schindler, Bankrupt, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

328 F.2d 655 (1964)

Cecil F. SHOPEN, Appellant, v. Joseph M. BONE, Jr., Trustee in Bankruptcy of John D. Schindler, Bankrupt, Appellee.

No. 17369.

United States Court of Appeals Eighth Circuit.

March 9, 1964.

George J. Winger, Kansas City, Mo., Samuel H. Liberman, St. Louis, Mo., for appellant.

Everett S. Van Matre, Mexico, Mo., for appellee.

Before VAN OOSTERHOUT, MATTHES and MEHAFFY, Circuit Judges.

MEHAFFY, Circuit Judge.

This is an appeal from the District Court's decision affirming the Referee in Bankruptcy's disallowance of a claim against Joseph M. Bone, Jr., Trustee in Bankruptcy for John D. Schindler, bankrupt.

Claimant, Cecil F. Shopen, a real estate broker and auctioneer with offices in St. Louis, Missouri, urges that the Referee and District Court erred as a matter of law in refusing to recognize an unsecured claim against the bankrupt's estate emanating from a valid contract of employment between Shopen Realty Auction Company and the bankrupt.

The facts in main are uncontroverted.

Schindler and his wife owned a farm consisting of 2,015 acres located in Audrain County, Missouri. There was a first deed of trust against this land held by The Equitable Life Assurance Society of the United States. Schindler became in default under this loan and he and his attorney, Ralph Alexander of Columbia, Missouri, advised Equitable that arrangements would be made to pay the delinquencies on the loan or the property would be sold by February 1, 1961.

Sometime prior to January, 1961, the bankrupt and his wife made contact with the claimant, and on January 5, 1961, Shopen went to Columbia, Missouri and to the Schindler farm for an inspection and met with the Schindlers and their attorney. A contract for employment of claimant as auctioneer for sale of the Schindler farm was prepared and signed by the parties in the office of Attorney Alexander. The first parties in the contract were Schindler and his wife, and second party was Shopen Realty Auction Company. It provided in part:

"Parties of the first part do by this contract employ and authorize Shopen Realty Auction Company to arrange for and conduct a public auction on the following described real estate, to-wit:

"2015 acres improved in Audrain County, Missouri.

"* * * (T)he parties of the first part agree to pay Shopen Realty Auction Company for their services in conducting said auction of the above described real estate as follows:

"Five Percent of the last bid made or received plus cost of advertising, said sum not to exceed the sum of $2,500.00, and said commission and advertising due and payable on day of auction."

In addition to providing that first parties agree to furnish merchantable abstract of title and deliver premises by warranty deed, the contract's disputed paragraph stated:

"First parties hereby authorize second party to accept the proceeds of the sale of above property and to insert the name or names of the purchasers of said property in the warranty deed as grantees, said deed being signed and left in the hands of Ralph L. Alexander * * * as part of the consideration for their services rendered herein; and to completely close the transaction, remitting the proceeds from sale price, less expense as set out above, plus abstracting fees, revenue stamps and any delinquent taxes." (Emphasis supplied.)

The contract contained no stipulation requiring claimant to obtain a fixed price for the realty to be auctioned. Furthermore, claimant made no oral guarantees to the owners to this effect. After the employment contract was executed, claimant prepared an illustrated brochure advertising the farm and setting forth details of the sale which was mailed to over three thousand people. The mailing list included all Missouri banks, the South Central Business Association and other selected groups. The brochure described the terms of the sale as follows:

"This splendid farm is selling for cash over the existing balance on an original $300,000.00 loan — said balance being $250,000.00. Favorable rate — 5½ per cent — long-term loan. Buyer deposits day of sale — 15 per cent of the purchase price, with balance above existing indebtedness payable on or before 30 days. All 1960 taxes paid. Possession on March 1, 1961. Buyer gets half of 230 acres of wheat now growing on farm, and seller will apply liquid nitrogen needed and combine wheat, each taking one-half. If desired, splendid manager of entire operation can be furnished. Farm selling as a total of 2015 acres. Abstract of title and warranty deed furnished purchaser."

Total advertising expense paid out by claimant amounted to the sum of $2,188.93.

On January 27, 1961, an auction was conducted by claimant at the City Hall in Centralia, Missouri, at which three hundred and fifty people were present. Prior to the auction sale a deed had been executed in blank by the grantors, Mr. and Mrs. Schindler, and left with their attorney, Alexander. At the conclusion of the auction, a written contract was executed in Alexander's office between the Schindlers and three vendees whose joint bid of $359,000.00 was high. The contract called for a down payment of $53,850.00 which was made and deposited with Alexander.

The real estate contract provided that the sellers furnish the buyers a complete abstract of title within twenty days of the sale. The buyers had ten days thereafter to examine the abstract. If the title was found to be good, the deed conveying the property free and clear of encumbrances and liens was to be delivered forthwith, but if the title proved defective, the buyers were required to specify their objection in writing within ten days after delivery of the abstract. The sellers had thirty days thereafter to rectify any defects. If the defects could not be rectified within such time, it was provided, "this contract shall be null and void, and the money deposited" returned to the buyers. The contract stipulated all such tenders pertinent to closing of the title were to be performed at the office of the vendors' attorney.

It subsequently developed that the sellers could not give clear title, because the $359,000.00 sale price was insufficient to pay off existing liens. In addition to the loan mentioned in the brochure of sale, which was the deed of trust held by Equitable, there was, unbeknown to claimant at the time of the auction, a second deed of trust securing notes held by two banks. This latter deed of trust had a balance due of approximately $52,000.00 and the Equitable mortgage had a balance due of $318,666.11 at the time trustee in bankruptcy subsequently sold the property under order.

Due to the combination of the defective title and Schindler's subsequently filing a petition in bankruptcy on March 13, 1961, the auction sale was never consummated. The real estate contract was subsequently rejected by the trustee in bankruptcy as an executory contract, the purchasers were returned their deposit of $53,850.00, and the trustee in bankrupty, by private negotiation, sold the realty to other parties for $425,000.00. One of the purchasers at the private sale was one of the unsuccessful bidders at the auction. According to appellant, the trustee subsequently allowed the first purchasers' claim against the bankrupt's estate for breach of the real estate contract for an amount equal to the difference between their bid and the $425,000.00 received by private sale.¹

Based upon five per cent of $359,000.00, the highest bid at the auction, the commission allegedly due Shopen was $17,950.00 plus $2,188.93 for advertising expense, or a total of $20,138.93.

The Referee found that the claim for advertising expenses in the amount of $2,188.93 was allowable but denied the claim for commission. The District Court confirmed the Referee's order finding that the employment contract precluded claimant from earning his commission in the event the sale was not consummated because the property failed to bring an amount sufficient to pay off all existent liens thereon.

This appeal turns upon two decisive questions: (1) Did the employment contract expressly condition the real estate broker's commission upon his consummation of the conveyance of title to the property previously sold at auction? (2) Was the real estate broker chargeable with advance knowledge of the property's defective title which prevented consummation of the sale so as to estop him from recovery of his commission?

An employment contract for the sale of realty is to be construed from the intent to be gathered from the language within the four corners of the instrument, Spears v. Carter, 224 Mo. App. 726, 24 S.W.2d 717 (1930), and an auctioneer, in selling property for another, is the vendor's agent, with rights and liabilities governed by the general principles of the law of agency. Pasley v. Ropp, 334 S.W.2d 254, 80 A.L.R.2d 1231 (Mo.App.1960).

While Missouri recognizes the general principle entitling an agent or broker to his commission once he has produced a purchaser ready, willing and able to buy on the terms proposed by the vendor, such a right, by express stipulation, may be contingent to vesting upon the occurrence or performance of other conditions or duties set forth in the contract of employment. Tant v. Gee, 348 Mo. 633, 154 S.W.2d 745 (1941); Bowman v. Rahmoeller, 331 Mo. 868, 55 S.W.2d 453 (1932); Pratt v. Irwin, 189 S.W. 398 (Mo.App.1961). And so it has been held that a broker had not earned his commission where he did not procure a purchaser ready, willing and able to pay a fixed price for the property as provided in the contract. Tant v. Gee, supra, Rosenblatt v. Multin, 222 S.W.2d 587 (Mo.App.1949); Proctor v. Gentry, 214 S.W.2d 746...