Crabtree v. Board of Trustees

STEINFELD, Justice. Appellant R. W. Crabtree, a licensed real estate broker, sued appellees and cross-appellant Board of Trustees of Immanuel Baptist Church (Immanuel) to recover a broker’s commission. Crabtree contends that he is entitled to $10,500 as a commission on the contract of sale of the church’s property at $210,000, or if it is held that he does not prevail on this claim he is entitled to a commission on a subsequent sale. Im-manuel claimed $21,000 in damages from Crabtree and cross-appellee E. C. Johns, a sales representative of Crabtree, the trial court entered judgment denying all claims, from which judgment Crabtree appeals and Immanuel cross-appeals. We affirm. On July 19, 1961, Immanuel, as seller, Felix Martin, as purchaser, and Crabtree, as realtor, entered into a contract for the sale of the property. Immanuel agreed to execute and deliver to Martin “ * * * a good, fee simple title to said property by a deed * * *” 60 days after execution of the contract upon payment of the balance of the purchase price. Pertinent parts of the contract are as follows: “2. The purchase price to be paid Seller by Purchaser shall be Two Hundred Ten Thousand ($210,000.00) Dollars, to be paid as follows: (a) Twenty-one Thousand ($21,000.-00) Dollars shall be paid R. W. Crabtree, real estate agent, upon the execution of this agreement and said sum shall be paid to Seller by said real estate agent upon the occasion when the Seller delivers a deed to the Purchaser. In the event the Purchaser violates any provision of this agreement and the Seller is able to transfer a good, fee simple title to said property by a deed, and the Purchaser fails to pay the balance of the purchase price as required of him in this agreement, then said Realtor shall deliver said Twenty-one Thousand ($21,000.-00) Dollars to the Seller and said sum shall be liquidated damages for the breach of the contract. 6. The Seller hereby agrees to pay R. W. Crabtree, Realtor, five (5%) per cent real estate commission at the time the entire purchase price is paid Seller.” The $21,000 deposit was delivered to Johns, who deposited it in Crabtree’s escrow account. On July 25, 1961, Martin, with Crabtree’s aid, made a contract to sell the same property to Woodland Avenue Baptist Church (Woodland) for $220,000, of which a deposit of $22,000 was paid to Crabtree to be turned over to Martin when the deed was delivered to Woodland. This contract provided no commission for Crab-tree. The deposit was held in Crabtree’s escrow account. Without Immanuel’s knowledge or consent, Johns returned to Martin his deposit of $21,000, it being understood by Johns (as agent for Crabtree) and by Martin that the second deposit would be held by Crabtree for both contracts of sale. On September 19, 1961, Immanuel tendered a general warranty deed to Martin. The deed stated that the conveyance was “subject to all easements and restrictions (appearing) of record * * Martin declined to accept the deed and to pay the balance of the purchase price because of alleged defects and encumbrances in the title. Martin’s attorney proposed an extension of time to cure the defects; there was no absolute rejection of the tendered deed. The trial court found that all defects affecting the marketability of the title were subsequently cured. Crabtree attacks this finding, however, we find it unnecessary to discuss this contention. On October 17, 1961, Immanuel wrote to Martin that it would request payment of the $21,000 deposit as damages if the sale was not completed by November 6, 1961. Immanuel, on November 7, 1961, sent a letter to Martin informing him that because he had not closed the deal Immanuel had cancelled it. At that time it did not know that the deposit had been returned. It learned of its return the latter part of De [313] cember 1961, or the first part of January, 1962. On January 17, 1962, Woodland released Martin from all claims under the contract dated July 25, 1961, and Martin released Immanuel from the contract dated July 19, 1961. Immanuel signed an agreement on January 18, 1962, releasing Martin from all claims arising from the contract dated July 19, 1961. On January 23, 1962, Immanuel contracted to sell a portion of the same property to Woodland for $125,000. Immanuel assumed full responsibility for all claims of Crabtree for a commission arising from the contract of sale between Martin and Immanuel. The trial court concluded, and we agree, that the return of the $21,000 deposit to Martin, without the authorization of Immanuel, constituted a breach of trust. Because of the contractual relations between a real estate broker and his principal, “(a)n obligation of mutual good faith and fair dealing is imposed by law * * Odem Realty Co. v. Dyer, 242 Ky. 58, 45 S.W.2d 838 (1932). It should be remembered that the contract between Immanuel and Martin provided that the deposit would constitute liquidated damages recoverable by Immanuel in the event of Martin’s default. Later Immanuel insisted that Martin defaulted, but Martin denied that. By returning the deposit, Crabtree put Immanuel into an entirely different position than it was in when Crabtree was holding the $21,000. As we have pointed out, Immanuel later released Martin from the sale and purchase contract. Crabtree “ * * * exceeded his authority. His agency was limited and he thus had no implied or apparent authority * * * ” to change the arrangement between Immanuel and Martin. Lake Company v. Molan, 269 Minn. 490, 131 N.W.2d 734 (1964). It is stated in 12 Am.Jur.2d, Brokers, Sec. 209, that “ * * * where an agreement of purchase and sale gives the seller the right to declare a forfeiture of the purchaser’s deposit upon the purchaser’s failure to consummate the sale, a broker who returns such deposit to a defaulting purchaser without the seller’s authorization * * * may not recover a commission from the seller.” Cases stating this rule are collected in Annotation, 69 A.L.R.2d 1244 and in A.L.R.2d Later Case Service. We believe this rule should apply in the circumstances of this case even though Martin may not have been a defaulting purchaser. Crabtree further argues that he procured the purchaser Woodland and if he is not entitled to a fee on the Martin transaction he is entitled to a commission of 5% of $125,000 ($6,250), which was the price of the property sold by Immanuel to Woodland. The trial court found that Im-manuel did not employ Crabtree to sell the property to Woodland and did not accept the Woodland offer through Crabtree or his sales agent but that Immanuel was contacted directly by Woodland. Crabtree’s claim is without merit. The cross-appellant Immanuel argues that Crabtree, by his return to Martin of the escrowed $21,000, breached his contract and thereby damaged Immanuel to that extent. It is our opinion that the release of Martin by Immanuel waived its right to claim damages from Crabtree. The judgment is affirmed on the appeal and on the cross-appeal. All concur. JONES, J., files a separate concurring opinion.