State Realty Co. v. Wood

• Citation: 57 S.E.2d 102,190 Va. 321
• Decision Date: 16 January 1950
• Docket Number: No. 3552,3552
• Court: Supreme Court of Virginia
• Parties: STATE REALTY CO., INC. v. HENRY WOOD, JR., AND BERENICE W. WOOD. Record

Page 102

57 S.E.2d 102

190 Va. 321

STATE REALTY CO., INC. v. HENRY WOOD, JR., AND BERENICE W. WOOD.

Record No. 3552.

Supreme Court of Appeals of Virginia

January 16, 1950.

Nathan L. Silberberg, for the plaintiff in error.

James H. Simmonds and Robert C. Coleburn, for the defendants in error.

JUDGE: HUDGINS

HUDGINS, C.J., delivered the opinion of the court.

The Tyler Corporation owned and developed a subdivision known as 'Tyler Park,' in Fairfax County. On August 2, 1947, it executed a written contract with Henry Wood, Jr. and Berenice W. Wood to sell them for $10,000 one of the houses constructed by it in Tyler Park. This contract, as well as other contracts of sale of lots in Section 4 of Tyler Park, contained the following provision: 'In the event the Purchaser desires to resell said premises within five years of this date, he hereby grants to the Seller and/or its assigns the exclusive right to obtain a new purchaser, at the brokerage rates which may then be in effect. The purpose of this provision is to maintain the character of the Tyler Park development.'

The Tyler Corporation, upon receipt of the purchase price of the property, conveyed the fee simple title, without reservation, restriction or condition, to the purchaser, and thereafter assigned its rights in the foregoing provision in the contract of purchase to State Realty Co., Inc., a licensed real estate broker.

In May, 1948, Mr. and Mrs. Wood, without notice to, or consulting the Tyler Corporation, or its assignee, sold and conveyed the premises for $13,000 to a third party. Immediately thereafter the State Realty Co., Inc., instituted this action against them, alleging that the brokerage rate then in effect was 5%, and that defendants were indebted to it in the sum of $650.

The action was defended on the ground that The Tyler Corporation, assignor of the plaintiff, was not, and never had been, a licensed real estate broker. When this fact was conceded, the trial court dismissed the action on the ground that the contract made with an unlicensed real estate broker was void in its inception, and that the assignee acquired no rights under the assignment.

Plaintiff states its contention thus: 'The Circuit Court erred in holding a real estate sales contract illegal because the seller, whose affiliate-assignee seeks damages for breach of a resale provision, was not a licensed broker, when, in fact, the assignee was so licensed.'

Plaintiff cites numerous cases from other jurisdictions in support of its contention. However, these authorities are not persuasive, because the question must be determined by the Virginia statutes governing the licensing and regulating the business of real estate brokers. See Acts 1924, Chap. 461, p. 691; Code (Michie's), sec. 4359(77), etc.

The provision in question does not purport to be a reservation, restriction, or condition imposed by the seller for its benefit as the owner of land adjoining the lot in question, or for the mutual benefit of other parties acquiring lots in the subdivision. The last line reading 'the purpose of this provision is to maintain the character of the Tyler development,' squints at such a purpose, but it is too indefinite to be effective or enforceable.

No attempt is made to define 'the character of the Tyler Park development.' The purchaser is not informed whether such development is designed for restricted residential lots or for a business district. There is no limitation or restriction upon the seller to select a purchaser from any racial, social or religious group. He is free to sell to any one -- to an Eskimo, Chinaman, Buddhist, Mohammedan or Communist.

The plaintiff does not contend that the phrase 'to maintain the character of the Tyler development' has any bearing upon the construction of the provision. It rests its contention squarely on the point that it was a licensed real estate broker and that the assignment gave it the exclusive right to sell the property for defendants if they desired to dispose of it within the five-year period.

The first question to be determined is whether the Tyler Corporation acquired an enforceable right to resell the property for defendants in the event it was sold within the time stated.

Code (Michie's), sec. 4359(77), makes it unlawful for any person to act, or offer to act, as a real estate broker without first obtaining a license. Subsection (88) of the same statute, provides that upon conviction of any person for violating any provision of the act, he shall be fined not more than $500, or imprisoned for not more than six months, or by both fine and imprisonment. Subsection (78) provides that any person who, for compensation, sells, or offers to sell, real estate for another, is a real estate broker within the meaning of the statute.

This statute was construed, and many cases from this and other jurisdictions, were reviewed, in Massie v. Dudley, 173 Va. 42, 3 S.E. (2d) 176. In that case the owner promised two unlicensed parties that he would pay them the usual brokerage if they consummated a sale of his land. The sale was consummated and the two unlicensed parties sought to recover the sum the land owner had promised to pay them. Mr. Justice Spratley, speaking for the court, said:

'We find nothing in the language of the statute, or the subject matter of the regulation, which indicates the slightest intention to treat the contract as valid and enforceable between the parties, and simply to provide for the exaction of a penalty. There is nothing by which we can presume that it was intended that a violator should escape the ordinary consequences of his illegal acts.

'The agreement upon which the plaintiffs in error rely is illegal, not merely invalid. It is void as being contrary to a positive statute and to public policy. Not merely the mode of its performance, but its substance is unlawful. The imposition of the penalty emphasizes the illegality.'

This principle was reaffirmed in Hancock Co. v. Stephens, 177 Va. 349, 14 S.E. (2d) 332, where this was added: 'although we recognize the apparent hardship sometimes resulting, we have consistently held that the courts will not aid a party to enforce an agreement made in furtherance of acts expressly made illegal by the statute.'

If the Tyler Corporation, acting at the request of defendants, had obtained a purchaser for the property, and defendants had refused to pay them the 5% brokerage, no recovery could have been had against them, because the contract itself is illegal, 'not merely invalid.'

The Tyler Corporation having acquired no enforceable rights under the provision, it had none to assign. When plaintiff cannot establish his cause of action without relying upon an illegal contract, he cannot recover. The basis of the action here is the illegal contract. Miller v. Ammon, 145 U.S. 421, 12 S.Ct. 884, 886, 36 L.ed. 759.

The assignment of a brokerage contract does not serve to enable the assignee to collect commissions which the assignor could not have collected because he was not licensed to act as a broker.' Annotation 169 A.L.R. 776.

The question whether or not all stipulations...