Waters v. W. O. Wood Realty Co., 6 Div. 320

• Decision Date: 21 January 1954
• Docket Number: 6 Div. 320
• Citation: 260 Ala. 527,71 So.2d 1
• Parties: WATERS et al. v. W. O. WOOD REALTY CO.
• Court: Alabama Supreme Court

Page 1

71 So.2d 1

260 Ala. 527

WATERS et al. v. W. O. WOOD REALTY CO.

6 Div. 320.

Supreme Court of Alabama.

Jan. 21, 1954.

Rehearing Denied March 25, 1954.

Wm. S. Pritchard, A. W. Jones, Victor H. Smith, Pritchard & McCall, Birmingham, for appellants.

Berkowitz, Fleisher & Miller, Birmingham, for appellee.

PER CURIAM.

This is an appeal from a judgment rendered for the plaintiff by the court without a jury for the amount of a broker's commission for the sale of certain described real estate.

Appellee, as such broker, claimed and obtained a judgment for his fee in negotiating a contract for the exchange by appellant of some Birmingham property with Max Weintraub: the property being a certain brickmaking industry, consisting of the necessary appliances together with a lease of the land on which it is situated. The contract, dated April 17, 1948, provides that Weintraub is to pay appellant $27,250, of which $1,000 was paid as earnest money, and on closing the sale $10,417 was to be paid in cash, and Weintraub was to assume a mortgage on the property of appellant for $15,833. The contract provides that appellant, to whom we will refer as Waters, is to take over the brickmaking plant Monday, April 19, 1948, and all income at the plant is to be held in escrow until satisfactory title is passed on appellant's property. The contract to be closed and deed delivered on or before '20-25 (* * * [?]) days from the date hereof'. The $1,000 earnest money was paid to appellee, the broker, to whom we will refer as Wood, and Waters went into possession of the brickmaking business and conducted it until May 4, 1948 when he wrote to Weintraub, with a copy to Wood, as follows:

'Birmingham, Alabama

'May 4, 1948

'Mr. Max Weintroub

'Birmingham, Alabama.

'W. O. Wood Realty Company

'Agent for Max Weintroub

'506 North 21st Street

'Birmingham, Alabama

'Gentlemen:

'This is to advise you that the undersigned, Waters Theatre Company, by N. H. Waters, has had its agent Mr. J. F. Ford, Jr., check over the figures which you gave to him; also the representations which you made to me, reference the property located at 1617 2nd Avenue South, known as Dunbrik Products Company, and said business. Mr. Ford reports, and the undersigned has verified the fact that the figures given to Mr. Ford, referred to in the contract entered into with you on April 17, 1948, are incorrect. The representations which you made to the undersigned about the said property and business conducted thereon, have also been found to be incorrect.

'Material representations were made to Mr. J. F. Ford, Jr., and also to the undersigned, reference said property and business. The fact that said representations made by you, and the figures given by you were incorrect has now been learned by the undersigned.

'For the reasons stated, this is to advise you of the cancellation by the undersigned of the said contract entered into with you on said date for the exchange of properties as therein provided for.

'The property known as 1617 2nd Avenue South, Dunbrik Products Company and said business is your property. The keys have heretofore been tendered to you by Mr. J. F. Ford, Jr.

'Requested that your agent, W. O. Wood Realty Company, return to you forthwith the earnest money shown by the said contract in the amount of $1,000.00, stated to have been deposited by you with your broker.

'We have heretofore tendered the keys back to you to your property and business, and you are responsible for your property and business.

'We hereby again tender back to you all things of value which belong to you referred to in said contract. The contract is cancelled insofar as the undersigned is concerned on account of said misrepresentations as herein stated, and the failure of the figures given by you to Mr. Ford, Jr., to stand up. Said figures were found to be inaccurate and untrue.

'Very truly yours,

'Waters Theatre Co.

'By N. H. Waters (s).'

Weintraub received a return of the brickmaking business and finally disposed of it to another. The letter to Weintraub discloses the claim Waters made, on which he based his right to rescind the contract, which is the basis of his contention in this suit that he is not liable to Wood for his brokerage fee for negotiating the contract of sale with Weintraub.

The contract of April 17, 1948, between Waters and Weintraub, contains a provision, apparently on a form used by Wood, by which 'the undersigned owners' (doubtless meaning both parties to it) agree to pay Wood, who did not sign the contract, as compensation for negotiating it, the amount of the sales commission provided for by the Birmingham Realty Board. Mr. Camtrell, representing Wood in the transaction, undertook to testify that an agreement to pay $2,000 as the fee was verbally made. But that testimony was excluded by the court.

In and about the negotiations between Waters and Weintraub, Waters was largely represented by one Ford who was dead at the time of the trial and could not testify. The contract had a clause in it that the 'agreement to exchange these properties based on figures given to Mr. J. F. Ford, Jr.,' the one referred to above. Those figures seem to have been with reference to the cost of manufacturing the brick, the condition of the machinery, the amount of business done by the brick plant, orders on hand and other details. Ford made a memorandum of some of those representations, but having died he could not testify and the court excluded his memoranda as evidence. Whether that was error is one of the serious controversies on this appeal. But Waters testified that Weintraub represented to him that the plant then and there had orders on hand for a million or more brick: that while orders had been given for 1,300,000 brick, at least half of that order had been filled, and it was subject to cancellation by the customer for any balance not delivered, and this purchaser cancelled the order after Waters had delivered 50,000 brick and after some 650,000 brick had been delivered by Weintraub.

It is contended by Waters that the inference in the letter of May 4, 1948 was with reference to such details, where it is assigned as a reason for cancelling the contract for the falsity of representations to Waters. Waters contends that by reason of the misrepresentations made by Weintraub to him and to Ford, he had a right to rescind the contract which he did by that letter. He did not thereafter have possession or control of the plant. And while Weintraub did retake possession of it, he did not agree to a rescission but sued appellant (Waters) for a breach of the contract. He recovered a judgment over substantially the same defense here made to Wood's suit, when judgment was reversed Waters v. Weintraub, 255 Ala. 530, 52 So.2d 510. What has afterwards occurred with reference to that suit does not appear. The reversal of the judgment in that suit and such final judgment as may be rendered in it are not controlling in the instant suit, although the same defense was interposed. It is between different parties.

The contention of Waters is that if the contract between him and Weintraub was subject to rescission by Waters for fraud perpetrated by him either actually or constructively, and was so rescinded by him on that ground within a reasonable time, of which Wood, the broker, had notice before his commission was paid, he cannot recover of Waters the amount of such claim.

It is our view that the principle of law as thus contended for by Waters, being well supported by authority and reason, is sound and should be given effect when applicable. McCarthy v. Reid, 237 Mass. 371, 129 N.E. 675, 12 A.L.R. 1000; Lundeen Corp. v. Barlow, 120 Cal.App. 391, 7 P.2d 1102; Webb v. Durrett, Tex.Civ.App., 136 S.W. 1189: contra, Deweese v. Brown, 55 Colo. 430, 135 P. 800.

The McCarthy case, supra [237 Mass. 371, 129 N.E. 676], refused to follow the Deweese case as being unsound, and observed: 'The plaintiff cannot recover on the ground that he produced a customer to exchange property with the defendants because the latter and O'Brien did not make any valid and binding agreement for such exchange; the agreement entered into, having been procured by the fraud of O'Brien, could have been and was repudiated by the defendants.' It was also observed that this was true although the broker acted in good faith and was not a party to the fraud, but was 'not entitled to a commission as he failed to accomplish what he was employed to do'.

This is a situation where Wood's right to a commission depends upon the validity of the contract between Waters and Weintraub. The parties to that contract, if it is valid, cannot by any arrangement between themselves defeat the claim of the broker for compensation.

If there was a misrepresentation by Weintraub to Waters or to his agent Ford of a material fact which influenced the transaction, it is of no consequence that it was made in good faith since it was by a seller to the purchaser, which status requires the material representations to be truthful. Shahan v. Brown, 167 Ala. 534, 52 So. 737; Harton v. Belcher, 195 Ala. 186, 70 So....