Kinney v. Eckenberger

Mr. Justice Bean delivered the opinion of the court. 1, 2. There is but little controversy in regard to the facts in the case. It appears from the evidence that Kinney expended a large sum of money in cruising the timber on the land and endeavored to make a sale of the property; that negotiations were had with several responsible persons, among the last of whom was a Mr. Woods of San Francisco who examined the land carefully; that when Kinney was called to San Francisco and went there expecting to close the deal with Mr. Woods, thinking the negotiations for a sale of the property were about completed, a telegram published in a newspaper came from Coos Bay reading that 100 — 449 — persons had made application to the government for the land. Mr. Woods said that he did not want to buy a lawsuit, and that the deal was all off. It appears that Kinney was unable to make any sale on account of litigation questioning the title to the land. The plaintiff asserts and is uncontradicted that the defects referred to in the second agreement made with Crapo and Smith had reference to about 70 minor defects in the title to a small portion of the property near Coos Bay and did not refer to the timber land. From a careful examination of the three option contracts above alluded to, it appears that Kinney obtained only an option to purchase nearly all the shares of stock of the S. O. Company. It was considered that by obtaining all this stock the title to the land would be obtained. By subsequent developments it was proved otherwise. The agreement between Kinney and Eckenberger based the payment of commission to Eckenberger upon a condition precedent. Kinney thereby agreed that if he purchased the property, or if it was purchased by other parties through him, he would pay the stipulated commission. Kinney never purchased the property, nor did any other parties. Therefore, according to the agreement, he did not become liable for the commission: Barney v. Giles, 120 Ill. 154 (11 N. E. 206); Hill v. Dakin, 162 Iowa, 103 (143 N. W. 821); Allen v. Philips, 2 Litt. (12 Ky.) 1; Atlantic Avenue R .R. Co. v. Johnson, 134 N. Y. 375 (31 N. E. 903). It was well known and understood by Eckenberger that Kinney’s object in obtaining an option on the land was to make a sale thereof to some other party at a profit. It was not expected or contemplated that Kinney would purchase the land for himself. In order for him to make such a sale or — 450 — for an option to purchase to be of any value to him, it was necessary that it should give him the privilege of purchasing a good marketable title to the land. "Whatever the outcome of the litigation relative to the title to the land may he, it is certain that neither Crapo -nor Smith, nor the other stockholders of the S. O. Company, nor the company itself, could give Kinney a valid option to purchase the land described or convey a good marketable title thereto. Under these circumstances, Kinney could not make a deal or sale so as to realize a profit. The agreement between Kinney and Eckenberger, the terms of which are very general, was, in effect, as explained by the evidence, an agreement to divide commissions or profits on the contemplated deal. Hoberg, with whom Eckenberger was to work in order to obtain an option on the land, had held an option on the land a short time prior thereto, and the matter was well understood by both. Under the authority of Roche v. Smith, 176 Mass. 595 (58 N. E. 152, 79 Am. St. Rep. 345, 51 L. R. A. 511), and other like cases, it is urged by counsel for defendant that where a broker finds a person from whom the broker’s principal desires to purchase property, and such principal makes a valid agreement with the persons produced by the broker, the latter has earned his commission, even if it turns out that the customer or seller cannot make a good title and the land is not conveyed, provided the broker acted in good faith in the transaction. The only difficulty with this proposition of law is in its application to the facts in the case at bar. For some reason, and apparently a wise one, Messrs. Crapo and Smith cautiously avoided executing a contract giving Kinney an option to purchase the land desired. They simply gave an option on the capital stock of the S. O. Company, or the — 451 — property, retaining to themselves the right to elect which should be transferred, and in the subsequent contracts with Kinney extending the time of the option it was plainly provided that the shares of stock were all they proposed to sell. As to the contracts between Kinney, Crapo and Smith, the first and third were plainly option agreements. "While the second recites that the time for making payment is extended and somewhat indicates that Kinney had elected to purchase the property, we think the effect of the contract was simply to extend the time of the option contract, by extending the time of the payment. This conclusion is confirmed by the language of the third agreement, which purports to continue the former stipulations in force and does not appear to be of any more or less scope than those. This third contract is certainly no more than an option, and recites that Kinney had forfeited his right to purchase the shares of stock. The most that appears from the whole transaction is an intention to purchase a portion of the shares of the stock. Therefore Kinney, the principal, never made a valid agreement to purchase the property referred to in his contract with Eckenberger, and the latter, the broker, never earned his stipulated commission. 3. The word “purchase,” as used in the written agreement between the plaintiff and the defendant, is unqualified by the context, and means, as there used, the acquisition of title or interest in property, an executed and not an executory contract: 4 Kent (14 ed.), 441; 23 Am. & Eng. Ency. Law (2 ed.), 462; Eessell v. Johnson, 70 Wis. 538, 539 (36 N. W. 417). An option to buy on condition of making specified payments at specified dates is not an actual purchase nor an executed contract of purchase; Darr v. Mum — 452 — mert, 57 Neb. 378 (17 N. W. 767); Heimberger v. Rudd, 30 S. D. 289 (138 N. W. 374, 377); Dwyer v. Raborn, 6 Wash. 213 (33 Pac. 350). A marketable title in fee simple to property desired to be purchased by a principal is necessary in order to sustain a claim for commissions by a broker when the purchaser has not entered into a binding contract to purchase with the seller: Beach v. Steele, 12 N. H. 82; Lockwood v. Halsey, 41 Kan. 166 ( 21 Pac. 98). At the time of the contract in suit, both parties thereto believed, as did people in general, that the S. O. Company had a good title to the 95,345.12 acres of land, the main part of the timber tract for which plaintiff was anxious to negotiate. There was a mutual mistake made by the parties as to the subject matter of the contract of March 1, 1902. There was in reality no meeting of the minds of the parties in regard to the property as it really existed. It would be unjust and inequitable to permit the defendant to enforce the contract and compel the plaintiff to pay commissions for assisting to do a thing that was impossible. The circumstances under which the agreement was made and the object in view must be considered in giving meaning to the ambiguous terms. The plaintiff should be relieved from the obligation of the contract, and the same should be canceled: Nordyke & M. Co. v. Kehlor, 155 Mo. 643 (78 Am. St. Rep. 600, 607, 56 S. W. 287. It is said in 20 Am. & Eng. Ency. Law, page 812: “Contracts are daily made upon the assumption of certain facts, and the parties give their assent, not absolutely, but upon the implied condition that the reality conforms to the assumption. If it should prove otherwise, the condition is broken and équity relieves from the apparent agreement because there is no real assent.” — 453 — At page 813 of the same work it is said: “The existence of a subject matter being essential to every contract, it follows that the mistake of the parties in supposing something to exist which does not exist invalidates any contract in respect thereto, except, of course, where the uncertainty of the existence of the thing is the very essence of the agreement. Thus, if after an agreement for the collection of a claim it appears that the claim had been allowed before the contract was made, or if, after a contract for the sale of real property, it turns out that by the operation of some settled principle of law of which both parties were alike ignorant the party who contracted to sell had in fact no title to the land. * * In all these cases the contract is voidable.” At page 818, supra, we read: “A mistake of fact is no less such for having been induced by a mistake of law, * * and equity will relieve against a mistake in respect thereto as against other mistakes of fact.” In so far as the contract between the plaintiff and the defendant bears thereon at the time of the making thereof, all the property of the S. O. Company might as well have been washed away or destroyed by an earthquake. It would then have been just as properly a subject matter of the contract as it was under the conditions shown in the record. The equities are with the plaintiff. The decree of the lower court is therefore affirmed. Affirmed. Mr. Chief Justice Moore, Mr. Justice Burnett and Mr. Justice Benson, concur.