U.S. REALTY SALES, INC. v. KUHN

L.B. Melvin, for appellant.

This brief contains an elaborate treatment of the facts with applicable citations of and quotations from numerous cases and texts. Inasmuch as appellant's position is adequately disclosed in its reply brief, only the concluding paragraphs of its brief in chief are reproduced, as follows:

First. Appellant, having shown by its evidence and the pleadings of this case that it obtained a purchaser ready, willing and able to purchase the property of the appellees; that the appellees dealt with said purchaser, accepted said purchaser and entered into a valid, binding and enforceable contract with said purchaser, and profited therefrom in the sum of $15,000 and thereafter released the purchaser from the contract without the consent of the appellant or without the knowledge of the appellant at a time when appellees knew that the appellant was contending for broker's commission, and,

Second, appellant, not being a party to any crime or any wrong, if any, committed by purchaser or seller and not having any knowledge of the intentions of the purchaser to sell intoxicating liquors on the premises, if, in fact, the purchaser did not have intentions to sell intoxication liquors, the appellant most earnestly contends that this case should be reversed, and in view of the fact that the sworn answer of the appellees admits liability, this court should find or instruct the trial court to find for the appellant.

H.W. Gautier, and Mize, Thompson Mize, for appellees.

The question presented on this appeal goes to the correctness of the lower court in excluding the testimony of the appellant, and in finding for the appellees. The argument of the appellant is to the effect that when Berthelsen was introduced to the appellees and entered into a contract with appellees that Berthelsen was accepted as a purchaser, and that immediately the appellant was entitled to a broker's commission. Incidental to this proposition, the appellant's argument is further addressed to the proposition that the contract was not against public policy, even though it involved the sale of a bar where intoxicating liquors were sold and the sale of intoxicating liquors, all of which are against the law of the State of Mississippi. The general rule is set out in Edwards v. Cobb, (Miss.) 264 Fed. 488, wherein is found the following quotation: "This being a suit by an agent to recover commissions it was incumbent on him to prove that he had complied strictly, in ipsissimis verbis, with the contract with his principal, and that he had found a purchaser able, ready, and willing to buy at the price and on the terms which were strictly within the limits of his authority."

To the same effect is the case of Reynolds v. Alexander, 164 Miss. 860, 146 So. 305.

The alleged contract sued on by the appellant was signed only by the appellee, Odette Kuhn, and is found in the record at pages 116-117. This contract contains the following significant provision: "I hereby list with The U.S. Realty Sales, Inc., of Jackson, Miss., the property herein described and do (not) grant them an exclusive listing for a period of 60 days, and if the property herein described is sold during the period of time, or is sold through the efforts of the herein named company, inspection having been made by the company's client before the expiration date, and results in the sale of the property I promise to pay to the herein named company or their agents 5% commission on the sale price, due and payable at the time of the sale and transfer of the property."

This contract sued on has to be proven to have been performed in all respects by the appellant, and it provides that no commission is earned unless the actions of the realty company in procuring a purchaser results in the sale of the property, and that no commission would be due and payable until the time of the sale and transfer of the property. The facts and the evidence introduced show without dispute that the appellant did not sell the property and that the property was not transferred. The appellant failed to procure a purchaser who was ready, willing and able to purchase. The facts show that one of the appellees, Mrs. Odette Kuhn, listed the property with the appellant, and that appellant arranged for Mr. Berthelsen of Atlanta to meet Mr. and Mrs. Kuhn, and that a contract for the purchase of the property was entered into, signed by one of the appellees, and that subsequently, an extension under the contract was entered into, signed by the other appellee. The entire property of Del Castle, including furnishings, furniture, fixtures, and everything except furnishings in the living quarters of appellees, were to be sold. Included in the sale was the bar and the restaurant, and the stock of whiskey was not excluded from the proposed sale. It was apparent that Berthelsen was never able to purchase the property. When the contract to sell was entered into, Berthelsen gave two post-dated checks, and it was understood that he would have to raise the money for the purchase price in order to make the cash payment of Thirty-five Thousand ($35,000.00) Dollars. He could not raise the money and the time was extended by the appellees, by the payment of an additional Ten Thousand ($10,000.00) Dollars as earnest money. The testimony of the appellant showed throughout that Berthelsen was never able to buy the property. The strongest testimony in favor of appellant on this point is that Dr. Melvin, the President of the appellant corporation, telephoned Atlanta to an affiliate there and received information that Berthelsen had property worth approximately Forty Thousand ($40,000.00) Dollars. He did not get information as to whether or not the Atlanta property was encumbered. This testimony shows that Berthelsen was not able to buy the property. The testimony also showed that he was not ready and willing to buy the property for the reason that in September he filed suit in the Federal Court at Biloxi, Mississippi to cancel the contract alleging therein that misrepresentation had been made. One significant allegation of misrepresentation is found in the record at page 127, and is as follows "(b). That the restaurant and bar operated as a part of the business for the year past had grossed daily at least $50."

A real estate broker is not entitled to a commission unless the purchaser is ready, willing and able to purchase, and if there is a failure of any of the three requisites, no commission is earned and a failure of one of the requisites is as fatal as a failure of all three. This is not a case falling in the category of cases cited by the appellant; here there had been no sale, and the ability to buy on the part of Berthelsen was not shown but the contract was not performed by Berthelsen, as he filed a suit which resulted in placing the parties in pari delicto, as a part of the subject matter to be sold was whiskey and a bar for the dispensing of whiskey, all of which was against the laws of the State of Mississippi; furthermore, the contract provides that no commission is due and payable until the sale and transfer of the property, providing the efforts of the agent result in the sale of the property. The right of a broker to recover commissions for any services must be predicated on a contractual relation: Case v. Harrison, 192 Miss. 531, 6 So.2d 582. Where a contract is made, a party seeking to recover under the contract must bring himself within the terms of it. The contract expressly makes a commission earned only when the property is sold and transferred. The cases cited by the appellant to sustain his position are not in point here for several reasons. One is that we have a definite contract between the broker and his principals in which the terms are specified, and the broker cannot earn his commission until he produces a purchaser ready, willing and able to buy upon the specified terms: Stanley v. Grimes, 158 Miss. 1, 128 So. 324; Skrmetti Realty Co. v. Devitt, 145 Miss. 815, 111 So. 302.

Another reason is that the contract entered into and the property to be sold included a bar where whiskey was sold, which makes contract violate the public policy of the State of Mississippi. Chapter 3, Volume 2, Code 1942 definitely prohibits the sale of any article having to do with intoxicating liquors, and Section 2629 of the said chapter forbids any agent to assist therein. Contracts in violation of public policy are void: Whelchel v. Stennett, 192 Miss. 241, 5 So.2d 418; Independent Linen Service Co. v. Sennett, 194 Miss. 366, 12 So.2d 530.

The evidence shows without dispute that there was a bar in the place of business, and while the testimony of the witnesses of the appellant never definitely stated that whiskey was sold, it is quite interesting to read the testimony with reference thereto for the evasiveness and care used by each witness to try to avoid the import therefrom. Mississippi will not permit recovery on an illegal contract, and where there is a contract tainted with a subject matter which is against the established law and public policy of the State, the courts leave the parties to such contracts where they are found: Crosby v. Farose Trading Corporation, 200 Miss. 369, 27 So.2d 367; Capps v. Postal Telegraph Co., 197 Miss. 118, 19 So.2d 491; Skinner Manufacturing Co. v. Deposit Guaranty Bank, 160 Miss. 815, 133 So. 660; Elkin Henson Grain Co. v. White, 134 Miss. 203, 98 So. 531.

Another reason for sustaining the action of the court below is that the appellant here attempted to intervene in the Federal Court suit and was denied the right of intervention. This attempted intervening was for the same purpose and based on the same cause of action as the instant suit: Von Zondt v. Town of Braxton, 149 Miss. 461, 115 So. 557.

The appellant is therefore concluded by the denial of the intervention. The appellant cites the case of Hays v. Goodman-Leonard Realty Co., 146 Miss. 766, 111 So. 869. This case shows that the broker, in order to recover a commission, must show that the purchaser was "financially able" to purchase.

8 American Jurisprudence, Section 175, page 1091 defines what constitutes ability to perform a contract in dealing with this subject: "The proposed purchaser must have legal ability to purchase in addition to having sufficient financial ability not only to make the initial payment required to meet the terms of the seller, but also to complete the contract of purchase according to its terms, that is, to meet any deferred payments. To be able to pay does not simply mean that the purchaser have property upon which he could raise the amount of money necessary. A proposed purchaser is not able, when he is dependent upon third parties who are in no way bound to furnish the funds, to make the purchase."

The ability to perform the contract on the part of the purchaser was never shown, but it was shown that the proposed purchaser was never financially able to perform, and he did not perform. In fact, he repudiated his contract and withdrew entirely. He even secured an extension of time in which to perform. This extension was agreed to, but still Berthelsen was unable to perform and did not. The most that was done is that a contract to sell and an extension granted thereto was had, but there was never any deed or any transfer of the property. The agent's or broker's listing contract specifically provided that no commission would be due until the sale and transfer of the property. We are not concerned with the principle used so frequently in the cases cited by the appellant which are based on the procuring cause of a sale, and the case of Tupelo Hotel Co. v. Long, 156 Miss. 337, 126 So. 6, and like cases cited are not in point, as in those cases it was manifest that the broker would get a commission regardless of who made a sale, and in those cases, the evidence was in conflict. In the case at bar, the evidence is not conflicting. There was no sale; there was no purchaser ready, willing and able to buy. The appellant did not prove that it had performed its contract, as the contract provided that no commission would be due until the sale and transfer of the property. No sale was shown and no transfer was shown. All that was shown is that the appellant wanted a commission; furthermore, the contract was tainted with illegality as set out above, and while the contract itself did not by its terms show the illegality, still we have a case very similar to the case of Crosby v. Farose Trading Corporation, supra.

L.B. Melvin, for appellant in reply.

The appellees, in their brief under the heading, Argument, undertake to state the position of the appellant and so state therein that it is the contention of the appellant that when Berthelsen was introduced to the appellees and entered into a contract with the appellees, that Berthelsen was accepted as a purchaser. The appellant stands squarely upon the facts of this case. It will be clearly seen, from a reading of the brokers' contract that the appellant has lived up to the requirements placed upon it by the contract. Acting upon the contract, the appellant immediately went afield for a purchaser that would be acceptable to the appellees. This it did. The sale was made and the appellees profited therefrom in the sum of Fifteen Thousand ($15,000.00) Dollars and are still in possession of the property.

The record further shows that the appellees accepted the purchaser, accepted his money, placed him in possession of the property, kept him in possession until appellees were sued in Federal Court. They even went into court protesting their innocence, demanding specific performance of the contract, and were there ready to defend the sale as being valid, legal and binding upon the purchaser. The appellant would like to know just when the appellees came to the conclusion that this was not a binding contract. Appellees further state that the strongest evidence as to the ability of the purchaser to make the purchase was the testimony of Dr. Melvin as to his investigations made in regard to the financial ability of the purchaer. Appellants submits that the strongest evidence as to the ability of the purchaser is the fact that he was able to pay Fifteen Thousand ($15,000.00) Dollars earnest money or liquidated damages and was in possession of the property up until, as the purchaser alleged in his declaration in Federal Court, that he had been defrauded by the appellant. Can the appellees now be allowed by this court to blow cold in this court after blowing hot in Federal Court, or cold in Federal Court and hot in this court?

Appellees state the rule correctly when they say in their brief, "A real estate broker is not entitled to a commission, unless the purchaser is ready, willing and able to purchase." The further rule is that when a sale is prevented by the conduct of the seller, the seller is liable. 38 So. 167 and 74 So. 613, and other cases cited in original brief of appellant.

There is also another rule just as applicable as either of the two above rules and that is when a broker has introduced a seller to a prospective purchaser under a broker's contract and the purchaser and the seller contract for the sale and the purchaser pays earnest money or liquidated damages which is retained by the seller; the seller is liable for the broker's commission. 38 So. 19 and 127 So. 786, Long v. Griffin, 74 So. 613, and Lavecchia v. Reed, 163 So. 681.

The appellant is unable to find that this court has been called upon to pass upon this question as often as the courts of other states. The Supreme Court of Louisiana has passed upon this question often here of late. Among the more recent cases are, Howell v. Thompson, 38 So. 167; Jeter v. Monroe, 25 So.2d 911; White v. Havard, 25 So.2d 108.

The appellant feels that the answer of the appellees is material evidence in this case and evidence that should be considered by this court. This answer is sworn to by the appellees and will be found on pages 135 to 149 of the record. In the answer the appellees admit the employment of the appellant as a broker. They admit the execution of the sales contract, and admit that they accepted the purchaser and entered into purchase contracts with the purchaser. They admit the amount of the earnest money which they say was liquidated damages. They deny any fraud upon their part. They admit that they both became parties to the sale contract by subsequent handling. They admit the subsequent contract and admit that they, acting under said contract, put the purchaser in possession of the property. They admit that the purchaser operated said property after having been placed in possession by the appellees.

In the cross-bill filed by the appellees they allege that the purchaser remained on the property about two days negotiating the purchase thereof, and state that the negotiations were consummated in the execution by Chas. J. Kohn and Jorgen C. Berthelsen, memorandum of the sale and purchase of real estate. The appellees further allege that the contract was bona fide. The appellees further ask for specific performance and damages, and list therein as an item of damages, a broker's commission.

There can now be no doubt but that the appellees were, at the time of the filing of the answer, standing firmly upon the ground that there was a sale, and that they would be required to pay the broker's commission.

This case was settled between the seller and the purchaser without the consent or permission of the broker and at the time of the settlement the appellees knew the broker was seriously contending for his commission.

The record here discloses this undisputed fact. The appellees employed a broker in the person of the appellant, in discharging the duties imposed upon it in the contract, found an interested client. The appellant introduced the prospective purchaser and the seller. The record discloses that from there on the negotiations in regard to the sale was carried on between the seller and the purchaser. Any change in the contract was consented to by the seller. Hutto v. Stough Hornsby, (Ala.), 47 So. 1034.

In view of the sworn statements made by the appellees in the suit in Federal Court and the position that they there took to protect their interest, and in further view of the fact that the appellees there took the position that they were due the broker a commission, the appellant is now unable to see how this court can relieve the appellees of this responsibility.

The appellees cite the case of Case v. Harrison, 192 Miss. 31, 6 So.2d 582. The appellant fails to see how the appellees can take any comfort in the opinion in this case. After reviewing the evidence at length, and after comparing the facts with other cases, this court, on page 586 in its opinion, used the following language: ". . . The situation would have been different had Swain, the owner, reduced the price while negotiations were still pending through the real estate brokers to make a sale at $265,000, for the purpose of avoiding the payment of the commission contracted for; . . ."

The appellant submits that in the case before the court at this time, there was not a reduction of the sale price of the land. In the case of Case v. Harrison, supra, the court found, as a matter of fact, that there was a complete abandonment of the sale by the broker and a renewal of the sale negotiations by the seller and a friend at a reduced price and under condition of facts that this court then found to exist. This court said that the broker failed to produce a purchaser able, ready and willing to buy. This court then makes an explanation of its opinion in the case of Tupelo Hotel Co. v. Long, 126 So. 6, and in so doing, distinguishes between the Tupelo v. Long case, supra, and the case of Case v. Harrison, supra, and places the case now before the court squarely in the category of cases with the case of Tupelo v. Long, supra. The appellees overlook the fact that the contract of sale between the seller and purchaser was for Sixty-Five Thousand ($65,000) Dollars, just exactly what the brokers' contract called for. The appellees, in their brief, have failed to cite a single case in which the facts are similar to the case now before this court.

The appellees cite and rely upon Chapter 3, Mississippi Code of 1942, and they especially assign Section 2629 which reads as follows: "Acting as agent. — If any person shall act as agent or assistant of either the seller or purchaser, in effecting the sale of any liquor, bitters or drinks, the sale of which is forbidden under this chapter, he shall be guilty of a misdemeanor and on conviction shall be fined not less than one hundred dollars, or be imprisoned in the county jail not less than thirty days, or both."

The trouble with appellees' contention is that this section of the law does not apply to cases like the one before the court. The facts of the case now before the court fail to show that it was the intention of any of the parties to in any way violate the law. In other words, the record fails to show any knowledge of the broker or that the broker was a party to the crime, if any.

The appellees rely upon the cases of Welchel v. Stennett, 5 So.2d 418, and Independent Linen Service Co. v. Sennett, 12 So.2d 530. The case of Welchel v. Stennett, supra, involved a champerty contract and this court simply upheld the statute and held the contract illegal. This court, in its opinion, saying that where the parties participated in the violation of the law and a contract is executed, the courts will not interfere with the parties. This is a case in which both parties were guilty of violating the law.

The case of Independent Linen Service Co. v. Sennett, supra, was a suit by an employee of the State Tax Collector's Office against a tax payer. The employee in the tax collector's office had illegally agreed to assist the tax payer to recover overpaid taxes. The court held that the employee could not recover as it was his duty to collect taxes and not work for the tax payer.

Another case relied upon by the appellees is the case of Crosby v. Farose Trading Corp., 27 So.2d 367. This case involves the construction of Section 2612 and appellant submits, does not apply to the facts of the case now before the court.

The appellees rely upon a number of cases to sustain their contention on the point where this court has held that a debt for intoxicating liquors can not be collected in this state. The question before the court at this time is not a question of collecting a debt for intoxicating liquors.