White v. Jouett

• Decision Date: 28 February 1912
• Citation: 144 S.W. 55,147 Ky. 197
• Parties: WHITE v. JOUETT. [d]
• Court: Kentucky Court of Appeals

144 S.W. 55

147 Ky. 197

WHITE v. JOUETT. ^[d]

Court of Appeals of Kentucky.

February 28, 1912

Appeal from Circuit Court, Clark County.

Action by Edward S. Jouett against John G. White. From a judgment for plaintiff, defendant appeals. Reversed for new trial.

O'Rear & Williams, John M. Stevenson, S. M. Wilson, and James F Winn, for appellant.

Pendleton Bush & Bush, Allen & Duncan, and Hazelrigg & Hazelrigg, for appellee.

MILLER J.

This is an action by Edward S. Jouett against John G. White to recover one-third of the commissions received by White as compensation for selling 14,589 acres of coal and timber land in Leslie, Harlan, and Letcher counties, for the Burt & Brabb Lumber Company. For many years prior to 1909, Jouett had been the attorney at Winchester, Ky. for the Burt & Brabb Lumber Company. He was also a nominal stockholder and director in that company. The Burt & Brabb Lumber Company of Kentucky had bought the Kentucky lands of the Burt & Brabb Lumber Company of Michigan; and, in order to finance the deal quickly, the Kentucky corporation undertook to make a quick sale of those lands. Jouett desiring to make the sale and earn the fee, the company agreed to give him as compensation for making a sale whatever he might secure above the price of $10 an acre, and to further assist him in making a sale at an advanced figure, the company agreed to announce and adopt whatever prices he might quote to his purchasers, and keep, as confidential, the price of $10. For reasons satisfactory to himself, Jouett thought it advisable, in July, 1909, to associate with him in finding a purchaser the appellant, John G. White, and H. C. Thompson and H. G. Garrett, all of whom were more or less familiar with Kentucky lands and prospective purchasers therefor.

Jouett was a lawyer, busily engaged in the practice of his profession at Winchester, and was willing to divide the fee rather than take too much of his time from his practice. By the agreement between Jouett and his three associates above named, any excess over $10 an acre should be divided between them in the proportions of three-ninths to Jouett, and two-ninths to each of his three associates. This agreement, however, did not take from Jouett his right to make a sale and thereby earn the entire commission; it only gave his associates jointly two-thirds of the commission in case they produced the purchaser. Several negotiations were started between July and December, 1909, with various prospective purchasers--M. S. Barker of Louisville being one of these prospective purchasers, who was introduced by White. On December 1, 1909, Barker was given a 90-day option, which was extended 30 days longer, to buy the land at $12.50 per acre. This option was to expire April 1, 1910. After the Barker option had been given, the negotiations with Barker were carried on by White in person, he reporting, from time to time, to Jouett. It was understood by all parties concerned that Barker and his associates did not really intend to buy the land for themselves, but that Barker was acting as a promoter, with the hope of organizing a company that would take over the lands at a price in excess of his option price of $12.50 per acre. It became apparent in March, 1910, that Barker had failed in carrying out his plan, and that he and his associates were not to be further considered as possible purchasers. White went to Louisville on March 14, 1910, and it then became known beyond any further question that Barker and his associates were no longer to be so considered. White returned to Winchester on the next night--March 15th--and reported to Jouett, in a conversation at the hotel, that Barker would not be able to complete the purchase of the land; and, in the same conversation, White stated to Jouett, for the first time, that he had interested another purchaser, not giving his name, however, but that this purchaser would not pay more than the minimum price of $10 an acre. White thereupon asked Jouett to secure from the Burt & Brabb Lumber Company an option at $10 per acre for the new purchaser, whose name he had not yet given. Jouett was somewhat astonished and irritated at what he conceived to be a breach of confidence upon the part of White in disclosing the minimum confidential price of $10 an acre to this new purchaser, and he declined to speak to Burt upon the subject. White, however, immediately went to the telephone, and, having called up Burt, informed him of his proposed new purchaser of the lands at $10 an acre. White then returned to Jouett in the hotel lobby and told him that Burt wished to speak to him over the telephone. Jouett thereupon talked with Burt over the telephone; and, as a result of these conferences, a meeting was arranged for the next day--the 16th of March--at Jouett's offices. While they were still in the hotel, however, Jouett reminded White that a sale at $10 an acre would not give either of them any compensation whatever for making the sale, since that was the lowest net price for which the Burt & Brabb Lumber Company would sell the lands. White conceded that to be true, whereupon Jouett asked him the direct question whether or not he (White) would receive any profit or commission from this new sale. According to Jouett's testimony, White responded that he would not receive any profit or commission on this sale, except indirectly, but that he might receive some indirect benefit by reason of the fact that he had blocked up some other lands in the neighborhood of these lands, which he could probably sell at a profit if this sale was made. According to White's testimony, he answered Jouett's question by saying there would be no commission to him (White) only in case of a resale of the lands. Jouett denies that White said anything about a resale of the land, or that he expected to get a commission or compensation in any event out of this sale. On the next day--the morning of March 16th--and before going to Jouett's office. White met Burt at the hotel in Winchester and talked over the proposed new sale with him. In the subsequent conference at Jouett's office, Burt showed some hesitation in proceeding with the proposed new sale and remarked that the sale of the property had been left in Jouett's hands, and at this price there would be no compensation for Jouett out of the sale. Gibbens says Burt asked White whether there was to be any compensation to him in the new sale, and White again said there was none directly, although he might work something out of it in the future. This answer seemed satisfactory to all concerned, in the light of the explanation given by White, and the fact that was generally known to all of them that White either had already gotten control, or expected to get control, of some adjacent lands, which he could sell at a profit in case the Burt & Brabb Lumber Company's lands changed hands. Burt and Gibbens, who was an officer of the Burt & Brabb Lumber Company, and Jouett then retired to another room, where Jouett stated to Burt that he would not undertake to stop the sale, and that Burt could go ahead with it at the new price of $10 per acre, so far as he (Jouett) was concerned. They then returned to the other room, and Burt agreed to give the new option at $10 per acre, as desired by White. Burt then said to Jouett that since he had worked a long time trying to make a sale, but without success, and they would need his services in closing it, the Burt & Brabb Lumber Company had decided to give him $2,000 as an honorarium; whereupon Jouett said that while he was not claiming anything, and would not stand in the way of his friends making a sale, he would accept the $2,000 in the same spirit in which it had been offered him. The option was then drawn by Jouett, acting as attorney for the Burt & Brabb Lumber Company.

In preparing this option, White disclosed for the first time that Robert Carnahan, of Louisville, was the new purchaser. As the Barker option extended to and included April 1st, and Barker had not surrendered his option although it was well known that he would do nothing under it, it became necessary to make Carnahan's option operative on or after April 2d. Accordingly, that option required Carnahan to pay $40,000 to the Burt & Brabb Lumber Company between 8 o'clock a. m. and noon of April 2, 1910, as an exhibition of his good faith and intention to buy the lands within 30 days. The second paragraph of section 4 of the option, however, further provided as follows: "If, however, within the aforesaid 30 days, to wit, on or before May 2, 1910, second party decides that he does not care to go on with said purchase, or if within said period the parties hereto cannot agree upon what tracts be embraced within this sale, then, and in that event, this contract shall be null and void, without liability upon the part of either party to the other, and thereupon first party shall forthwith return the full amount of said forty thousand dollars ($40,000.00)." In substance, this was an option to Carnahan for 30 days from April 2, 1910, to May 2, 1910, with a deposit of $40,000 earnest money which was to be returned to Carnahan at any time before May 2d, if he should conclude not to buy the lands. All he could lose would be one month's interest, or $200, which might be considered as a fair price for the option.

Before leaving Winchester on March 16th, White dictated and carried with him to Pineville a contract between himself and Carnahan, which was executed on March 16th, or 17th, by both parties, and which reads as follows: "This agreement made and entered into this 16th day of March, 1910, by and between Robert Carnahan, of Louisville, Kentucky, and John G. White, of Winchester, Kentucky, parties of the first and second part, witnesseth: That for and in...