Stoll v. Mallory

• Citation: 343 P.2d 970,173 Cal.App.2d 694
• Decision Date: 16 September 1959
• Docket Number: No. 18258,18258
• Court: California Court of Appeals
• Parties: , Blue Sky L. Rep. P 70,434 Jack L. STOLL, dba Jack L. Stoll & Associates, Plaintiff and Respondent, v. Charles F. MALLORY et al., Defendants, Patrick H. Peabody, Santa Clara Broadcasting Company, a California corporation, Defendants and Appellants.

Page 970

343 P.2d 970

173 Cal.App.2d 694, Blue Sky L. Rep. P 70,434

Jack L. STOLL, dba Jack L. Stoll & Associates, Plaintiff and Respondent, v. Charles F. MALLORY et al., Defendants, Patrick H. Peabody, Santa Clara Broadcasting Company, a California corporation, Defendants and Appellants.

No. 18258.

District Court of Appeal, First District, Division 1, California.

Sept. 16, 1959.

Timothy A. O'Connor, San Jose, for appellants.

Rankin, Oneal, Luckhardt & Center, J. E. Longinotti, San Jose, for respondent.

BRAY, Presiding Justice.

Defendants appeal from a judgment of $6,750 in favor of plaintiff for services in the sale of radio station K.S.J.O.

Questions Presented.

Was nonpayment of commission excused (1) because agreement of sale was unenforceable under federal law; (2) because plaintiff was not licensed under the Corporate Securities Act?

Facts.

Plaintiff is a licensed real estate and business opportunity broker. In September, 1953, he sent a form letter to K.S.J.O. requesting a listing. Mallory, ¹ manager of the station and vice president of the Santa Clara Broadcasting Company, a corporation, its owner, called plaintiff and requested that plaintiff attempt to procure a purchaser for the radio station. Mallory inquired of plaintiff if he worked on the 'usual commission basis' and plaintiff said that he did. (This was 5 per cent of the sale price.) Thereafter there was correspondence between Mallory and plaintiff regarding the price and terms of sale, and the interest expressed by a prospective purchaser. Defendant Peabody, who owned all but about 150 shares of the 7,000 outstanding shares of the company, was aware of and approved the negotiations between plaintiff and Mallory. Plaintiff brought Mallory and Peabody together with prospective purchasers Pett and Allen. At that meeting Peabody told plaintiff that he would get his commission. ² A memorandum of agreement was then entered into between Peabody as seller and Allen and Pett as buyers for the sale to the latter (subject to the approval of the Federal Communications Commission) of 'all of his right, title and interest in and to Santa Clara Broadcasting Company and its radio station K.S.J.O., together with all equipment, land, buildings, supplies and other assets. * * * Incident to this sale, seller guarantees to deliver 100% of the corporate stock of Santa Clara Broadcasting Company.' Later, a formal agreement of sale was entered into in which Peabody was the first party, Allen and Pett were second parties, and the broadcasting company was third party. This agreement did not refer to the memorandum, and described the property sold as Peabody's interest in all outstanding shares of the broadcasting company stock 'One Hundred Per Cent (100%) of' the stock; also his interest in certain real property. The agreement was not to become effective until it was approved by the commission. The shares of stock were to be pledged with a named attorney until the balance of the purchase price (which was to be paid in installments) was paid. Second parties agreed to vote Peabody onto the broadcasting company's board of directors for a period of at least three years.

Thereafter an application was filed with the commission for approval of the transfer of the station. About 30 days later Pett met Peabody who said that he now did not want to dispose of the station and would like to return the deposit money and have the application withdrawn. Peabody said his reason was that he had been checking on Allen and did not want to have any business relationship with him. On April 2 the commission wrote the broadcasting company to the effect that the provision in the agreement (copy of which had been filed with the application) to the effect that Peabody was to be voted in as a director of the company for three years appeared to be inconsistent with certain of the commission's policies, and stated: 'You are requested to submit a verified statement setting forth your views in the above matter.' Pett contacted an attorney in Washington, D. C. who discussed the situation with the commission counsel and advised Pett that his information was that there was a 50-50 chance of the commission approving the application without any change in the agreement. Pett's attorney thought that there was 'a fair possibility' of the application being granted without the removal of the directorship provision in the agreement. He then suggested another way of protecting Peabody's rights if ultimately the commission should require the removal. He also suggested that if Peabody was not willing to remove the provision, a verified letter be sent the commission, stating why the provision should not be objectionable. Pett reported this to Peabody and two or three conversations were had with Peabody and as Peabody had said he did not want to go through with the agreement, and Peabody offered and paid to Allen and Pett $1,000 each and a return of their deposit money, an agreement rescinding the sale agreement was entered into.

The court found that defendant Peabody engaged plaintiff's services. The evidence that Peabody approved Mallory's negotiations with plaintiff and by directly promising plaintiff that he would pay the commission ratified the arrangement, fully supports this finding. Because of such ratification no written authorization of agency by Peabody to Mallory was required.

The court further found that it was not true that as claimed by defendants the agreement of sale had to be abandoned because the Federal Communications Commission refused to approve the agreement.

1. Federal Communications Commission Approval.

This is purely and simply a fact case, in which the court found, in effect, that after the seller and buyers had been brought together by a broker employed for that purpose, and the buyers and seller had entered into an agreement of sale, the seller changed his mind about selling and paid the buyers $2,000 to rescind the agreement. While there is considerable conflict in the evidence, ³ it is clear that while the provision which Peabody required in the final agreement concerning directorship (it was not a condition of the original agreement) was contrary to a rule of the commission, there is no evidence that the commission would not have waived the rule as the Washington attorney said it had in another case. Instead of complying with the commission's request and the instructions of the Washington attorney that the views of the seller and buyers concerning the directorship provision be given the commission, Peabody obtained for a consideration a rescission of the sales agreement, not because of the attitude of the commission, but, as he expressed it to Pett, because he did not want to do business with Allen.

A broker has fulfilled the terms of his agreement by procuring a purchaser who is ready, able and willing to buy, and is entitled to his commission even though the seller refuses to consummate the sale. Austin v. Richards, 146 Cal.App.2d 436, 304 P.2d 132; Cochran v. Ellsworth, 126 Cal.App.2d 429, 436, 272 P.2d 904; see 9 Cal.Jur.2d § 95, p. 265.

As heretofore stated, the court on conflicting evidence found that the agreement as to compensation was not dependent upon completion of the sale. Assuming, however, that the agreement was as contended by defendants, nevertheless plaintiff would be entitled to his commission because of the arbitrary rescinding of the agreement of sale by defendants. Even where a broker is not to receive his commission until consummation of a final agreement between the seller and buyer, the agent who has done everything required of him in bringing them together is entitled to his commission where the failure to consummate the sale is due to the seller's arbitrary refusal to proceed with the sale. Collins v. Vickter Manor, Inc., 1957, 47 Cal.2d 875, 881, 306 P.2d 783; see also Clark v. Dulien Steel Products, Inc., 1942, 54 Cal.App.2d 92, 128 P.2d 608, where the agreement of sale was voluntarily abandoned by the parties.

2. Corporate...