Superior Court of Pennsylvania — Pratt Appeal (Nov. 19, 1945)
Factual and Procedural Background
The Real Estate Trust Company of Philadelphia, acting as trustee for the Fernwood Cemetery Lotholders Fund, sought to dispose of 51 parcels of real estate by a bulk, sealed-bid sale with bids to be opened on February 25, 1944. Appellant George H. Pratt, a real estate broker, procured Michael Lubin as a prospective purchaser and submitted on Lubin's behalf the highest bid opened ($90,150.00). The trustee sent an agreement of sale to Pratt for execution by his client; Lubin signed and returned the agreement, but the trustee never executed it. Eleven days later the trustee received substantially higher offers; Pratt increased his bid to $93,500.00, but the trustee accepted a still higher bid ($94,500.00) submitted by a client of Mr. Edelman and completed settlement with that purchaser.
Pratt claimed entitlement to one-half of a five percent commission on the gross purchase price. The Orphans' Court (Auditing Judge) disallowed the claim, concluding the claim could not succeed unless Pratt fell within the protection of the Act of July 2, 1941, P.L. 227, which the court interpreted as protecting only brokers who had procured an agreement of sale actually entered into by a fiduciary. Pratt filed exceptions, which were dismissed by the Orphans' Court. On appeal to the Superior Court, the decree of the Orphans' Court dismissing Pratt's claim was affirmed per curiam. Appellant was ordered to pay costs.
Legal Issues Presented
- Whether a real estate broker who procures a purchaser (and secures a signed agreement by the purchaser) but who was not formally employed by the owner or fiduciary, is entitled to a commission.
- Whether an invitation to submit bids constitutes an employment of brokers that entitles a broker to recover commissions.
- Whether the Act of July 2, 1941, P.L. 227, protects a broker in circumstances where a trustee accepted a bid but did not execute the written agreement of sale prior to receiving a higher offer.
Arguments of the Parties
Appellant's Arguments
- Counsel for Mr. Pratt argued that under established law a broker who procures a purchaser ready, able and willing to contract on terms satisfactory to the owner has earned the commission. The argument emphasized that the broker's task is complete upon procuring such a purchaser even if settlement never occurs (absent a contrary special contract).
- Counsel acknowledged, however, that the general rule does not apply unless the broker can show he was actually employed to act as broker.
Appellee's Arguments
The opinion does not contain a detailed account of the parties' legal arguments on behalf of the appellee (the trustee). The court's recitation focuses on the Auditing Judge's ruling and statutory and case-law authorities rather than a point-by-point statement of appellee counsel's litigation positions.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Lanard Axilbund v. Thomson Printing Company, 84 Pa. Super. 199 (1924) |
Sending notice or invitation to many brokers is merely a notice and does not constitute an employment of a particular broker. |
The court relied on this case to hold that the trustee's invitation to submit bids did not create an employment contract that would entitle Pratt to a commission. |
| Lamb v. Elder, 56 Pa. Super. 522 (1914) |
No commissions are recoverable unless the broker has been employed; employment is prerequisite to agency. |
Used to support the foundational proposition that a broker must first be employed to recover commissions. |
| Earp v. Cummins, 54 Pa. 394 (1867) |
Affirms the principle that a broker must be employed to earn commissions. |
Reinforced the court's statement that a broker who is merely a volunteer bringing parties together is not entitled to commissions. |
| Zellner v. Murdoch, 298 Pa. 208 (1929) |
A broker must show employment either by prior authority or by acceptance and adoption of his act. |
Cited to explain the burden on a broker to prove the existence of employment or adoption of his acts by the owner/fiduciary. |
| Lehan v. Integrity Trust Company, 303 Pa. 357 (1931) |
When a broker claims employment by a corporation, the broker bears the burden of showing the corporate official with whom he dealt had authority to employ him. |
Applied to emphasize the plaintiff-broker's burden to show the trustee (or its official) had authority to employ the broker. |
| Kelly, Murray, Inc. v. Lansdowne Bank and Trust Company, 299 Pa. 236 (1930) |
Corporate officer's authority to employ a broker may be implied if the transaction is within the ordinary duties of that officer. |
Cited to note that implied authority can exist, but the broker still bears the burden of proving authority when claiming employment by a corporation or fiduciary. |
| Clark v. Provident Trust Company (Trustee), 329 Pa. 426 (1938) |
General commission rules in ordinary real estate transactions do not apply in dealings with executors, trustees or fiduciaries; fiduciaries may reject a procured purchaser if a better offer is received before title passes. |
The court used Clark to explain that a trustee's fiduciary duty allows rejection of a purchaser if a higher offer arrives before title passes, thereby limiting a broker's rights absent a binding agreement executed by the fiduciary. |
Court's Reasoning and Analysis
The court's analysis proceeded from the principle — anchored in cited Pennsylvania authority — that a broker cannot recover commissions unless he has been employed. The court emphasized the distinction between merely bringing parties together and being an authorized agent: a "mere volunteer" who brings the parties together is not entitled to commissions (citing Earp, Lamb and Lanard Axilbund).
Applying those principles to the facts, the court found no express employment of Pratt. The trustee's general invitation to submit sealed bids was characterized as a notice, not an employment contract (Lanard Axilbund). Although the trustee had, after opening bids, sent an agreement of sale to Pratt to be signed by his client and the client returned a signed agreement, the trustee never executed the agreement. The court explained that dealings with fiduciaries differ from ordinary real estate transactions because fiduciaries retain the duty to accept a better offer received before title has passed; Clark v. Provident Trust Company was cited for that limitation.
Given these principles and the facts (no executed agreement by the trustee and no proven employment authority), the court concluded Pratt could only recover if he fell within the protection of the Act of July 2, 1941, P.L. 227. The court accepted the Auditing Judge's interpretation of that statute as protecting a broker only when executors, administrators or trustees have "entered into an agreement of sale" and then, prior to settlement under that agreement, receive a higher offer. Because in this case the trustee had not entered into an agreement of sale (it never executed the written agreement), the Act did not apply to protect Pratt's claim.
For these reasons, the court found the Auditing Judge's ruling correct and dismissed Pratt's exceptions, confirming the adjudication dismissing the claim.
Holding and Implications
Holding: The Superior Court affirmed the decree of the Orphans' Court dismissing the broker's claim. In the court's language, the decree was affirmed and appellant was ordered to pay costs. The core ruling may be stated as: Appellant's claim for brokerage commissions was disallowed because he had not been employed and the trustee had not entered into an agreement of sale as required for protection under the Act of July 2, 1941, P.L. 227.
Implications: The direct effect is that George H. Pratt was denied recovery of the claimed commission. The court applied established Pennsylvania precedent and a statutory construction of the 1941 Act to conclude that a trustee's failure to execute the sale agreement leaves a broker unprotected by the statute and without entitlement to commissions absent proof of employment. The opinion does not announce a novel rule beyond the application of existing cases and the court's statutory interpretation; it enforces the rule that, particularly in transactions involving fiduciaries, a broker's protection under the 1941 Act requires an agreement of sale entered into by the fiduciary.
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