Strout Realty, Inc. v. Milhous

• Decision Date: 05 October 1984
• Docket Number: No. 14997,14997
• Citation: 689 P.2d 222,107 Idaho 330
• Parties: STROUT REALTY, INC., a corporation, Plaintiff-Respondent-Cross Appellant, v. William MILHOUS and Dorothy May Milhous, husband and wife, and Gary Milhous and Shelley Milhous, husband and wife, Defendants-Appellants-Cross-Respondents.
• Court: Idaho Court of Appeals

Page 222

689 P.2d 222

107 Idaho 330

STROUT REALTY, INC., a corporation, Plaintiff-Respondent-Cross Appellant, v.William MILHOUS and Dorothy May Milhous, husband and wife, and Gary Milhous and Shelley Milhous, husband and wife, Defendants-Appellants-Cross-Respondents.

No. 14997.

Court of Appeals of Idaho.

Oct. 5, 1984.

Robert E. Williams, III, Jerome (Rettig, Frederickson & Williams, Jerome), for defendants-appellants-cross-respondents.

J. Walter Sinclair, Twin Falls (Benoit, Alexander & Sinclair, Twin Falls), for plaintiff-respondent-cross-appellant.

WALTERS, Chief Judge.

We are asked in this case to determine the liability of a real estate vendor for payment of a broker's commission when the purchaser produced by the broker defaults on the land sale contract after the transaction is closed.The broker brought the purchasers and sellers together, and they entered into an agreement by which the purchasers obligated themselves to pay for the property over a period of two years.The purchasers later defaulted on the contract before the broker had received all of his commission, and the sellers refused to pay the broker.The broker brought suit for recovery of his commission.The case was submitted on the pleadings to the trial court, which entered judgment for the broker for less than the balance due under the broker's employment contract.The sellers urge on appeal that they are not liable for a selling commission, even though the transaction closed, because the purchasers defaulted.We disagree, but because we hold the broker was entitled to his entire commission, we set aside the judgment entered below and remand for entry of judgment consistent with this opinion.

The facts in this case are not disputed.Strout Realty, Inc.(Strout) produced and the Milhouses executed, a listing agreement authorizing Strout to seek a buyer for the Milhouse farm.The agreement stated that the Milhouses would pay a broker's commission in the event Strout procured a ready, willing and able buyer.Sometime later, the Bossermans presented through Strout an offer to purchase the farm.An earnest money agreement was signed on August 19, 1976 in which the Bossermans agreed to pay $255,000 for the property, and the Milhouses obligated themselves to pay Strout a $15,300 sales commission, part of which was paid with hay.¹A land sale contract was signed pursuant to the earnest money agreement on December 15, 1976 and the Bossermans took possession of the farm.Although they were not obligated to pay the Milhouses any money until April 1, 1977, the Bossermans became responsible as of October 1, 1976 for payment of three mortgages existing against the property.In two years of possession, the Bossermans only paid $5500, which was placed in escrow, to the Milhouses.On March 16, 1977, the Milhouses signed a promissory note evidencing an obligation to pay Strout $13,050, the balance of the commission owed, and assigned their right to receive payment from the Bossermans as security for the note.When the Bossermans defaulted on the April 1, 1977 payment, the Milhouses did not pay the balance of Strout's commission.In an effort to aid performance of the land sale contract, Strout delayed pursuing its claim for the balance of the commission until March 20, 1979, when it filed suit against both the Milhouses and the Bossermans.Upon motion, summary judgment was entered on behalf of Strout against the Bossermans for $13,050; summary judgment against the Milhouses was denied.²

The trial court entered judgment for Strout, but only for an amount equal to the $5500 paid to the Milhouses by the Bossermans.The Milhouses on appeal argue that they are not liable for any commission because the Bossermans defaulted on the land sale agreement.In their view, when the Bossermans defaulted the promise to pay Strout a commission became unsupported by consideration because Strout had failed to procure an "able" buyer.We disagree, and remand to the trial court for entry of judgment for Strout on its cross-appeal.

In a multitude of cases involving recovery of a real estate broker's commission, the recurring rule of law is that a broker earns his commission when he procures a buyer who is ready, willing and able to purchase on terms acceptable to the seller.See, e.g., Rogers v. Hendrix, 92 Idaho 141, 438 P.2d 653(1968);Arthen v. Chilleen, 103 Ariz 133, 437 P.2d 925(1968);Pasley v. Barber, 368 P.2d 549(Alaska1962);Allen v. Sherrelwood, Inc., 541 P.2d 1257(Colo.Ct.App.1975).Whether a ready, willing and able buyer has been produced is a question of fact, Martin v. Clinton, 239 Or. 541, 398 P.2d 742(1965);Taylor v. Gaudry, 46 Or.App. 235, 611 P.2d 336(1980), on which the broker has the burden of proof.De Harpport v. Green, 215 Or. 281, 333 P.2d 900(1959);Herring v. Fisher, 110 Cal.App.2d 322, 242 P.2d 963(1952).Although few cases specify the time at which the readiness, willingness, and ability of the purchaser is to be examined, case authority long has held that a seller who accepts a buyer by signing an earnest money agreement is estopped to deny the buyer was then ready, willing and able.SeeMansfield v. Smith, 88 Wis.2d 575, 277 N.W.2d 740(1979);MacNamara v. Steckman, 202 Cal. 569, 262 P. 297(1927);Wray v. Carpenter, 16 Colo. 271, 27 P. 248(1891).We will refer to this rule as the traditional estoppel rule.

Idaho seemingly has adopted this rule.In Rogers v. Hendrix, supra, our Supreme Court said:

[I]f a broker who has contracted with a prospective seller to procure a ready, willing and able purchaser for the sellers' real property presents a buyer ready, willing and able to buy on terms listed by the seller with the broker or on other terms which the seller accepts, in the absence of special conditions in the broker's employment contract, the broker is entitled to his commission.

92 Idaho at 144, 438 P.2d at 656.The Rogers court did not decide whether the seller must still pay a commission if the buyer becomes unable to carry out the agreement before it is closed.The rule announced in Rogers is still the law in this state.SeeMarshall Brothers, Inc. v. Geisler, 99 Idaho 734, 588 P.2d 933(1978)("Upon presentation of an appropriate offer, the brokers performed the contract and were due their commission, regardless of whether an actual sale was concluded with the purchaser they had provided, unless the contract between the parties provided otherwise."99 Idaho at 738, 588 P.2d at 937);Garfield v. Tindall, 98 Idaho 841, 573 P.2d 966(1978)(the broker satisfied his obligations under the contract by producing a ready, willing, and able buyer who offered to purchase the property for cash or on any other terms specified by the seller at the closing).See alsoCentury 21 Quality Properties v. Chandler, 103 Idaho 193, 646 P.2d 435(Ct.App.1982)(quoting Rogers).

In both Garfield and Marshall Brothers, the broker produced a buyer who offered to purchase on terms identical to or better than the terms specified in the listing agreements, although no earnest money agreements were signed.The buyers and sellers in Rogers entered into an earnest money agreement, but the transaction never closed because the parties could not subsequently come to terms on the required land sale contract.The Supreme Court held in Garfield and Marshall Brothers that the broker had earned his commission.The court in Rogers reversed the trial court and remanded for a new trial, and held that the broker was entitled to a commission if the fact finder concluded that the broker had produced a ready, willing and able buyer.

The ability of the prospective buyer to conclude the transaction was not at issue in Garfield, Marshall Brothers or Rogers.None of the parties in those cases argued that the buyer produced was not an able buyer.This is underscored in Marshall Brothers where the court frequently characterized the duty of the broker as one of finding a ready and willing buyer, apparently because the buyer's ability to perform was not at issue.Since the individual brokers were entitled to a commission even though no closing occurred, it is apparent from these cases that the readiness and willingness tests can be determined sometime prior to closing, or even before an earnest money agreement is signed.Thus, the rule of those cases seems to be that, absent a special condition in the broker's employment agreement and absent any misrepresentation or other circumstance giving rise to an equitable right to relief from the obligation to pay a commission, when a broker produces a ready and willing buyer and the buyer's ability to perform is not disputed, the broker has earned his commission.

The sellers in this case have not shown any ground for equitable relief.As explained more fully below, the record discloses no special condition in the broker's agreement.However, the sellers do dispute that the buyer procured by Strout was an able buyer.Therefore, this case involves an issue not actually addressed by the prior Idaho cases: What is the relevant point in time for evaluating a buyer's ability to perform?Neither party has urged us to adopt the traditional estoppel rule, which would fix the relevant time as the signing of the earnest money agreement.Rather, Strout maintains that the buyer's ability to perform must be determined at or before the time of closing.The Milhouses believe the ability of the buyer can be examined even after the transaction is closed, and rely on Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843(1967) to support their...