Ridgway v. Chase

Appeal by defendants from an adverse judgment in an action by a real estate broker to recover a commission.

Plaintiff was a licensed real estate broker and also was a salesman for Consolidated-Hill, Inc., a concern engaged in selling market fixtures.

On July 14, 1949, as a result of the negotiations, defendants and the partnership entered into a written contract by which they agreed to execute a lease of part of the property only, on specified terms and conditions. Among the terms and conditions were these :-l. By mutual agreement of the parties in writing, the property was to be divided later into

An attorney for defendant, who assisted in preparing the agreements, testified that after the July 14th agreement was executed and before the amendment of July 24th, the partnership insisted on changing the provision of the agreement of July 14th by which it agreed to purchase practically all of the refrigeration equipment and market fixtures from Consolidated-Hill, Inc.; that plaintiff agreed to $32,500; that plaintiff said he wanted to be protected in his compensation; and that nothing was said about real estate broker’s commission.

The matters agreed to in the agreement of July 14th were never consummated. The lease contemplated by the agreement was never entered into. No such instrument was ever prepared. The parties never agreed on a division of the property into a business area and a parking area. They never agreed as to the type of construction, or the size or location of the food market. They never came to an agreement as to whether the lease should be for 15 or 20 years. No time for the commencement of the lease was ever agreed upon. Preliminary plans for the market were drawn, but final plans were never drawn. No agreement was ever reached as to any date when the market building was to be constructed. No firm loan commitment was ever obtained. The parties never agreed on a figure as to what the minimum monthly rental would be. It was stipulated “that everything to be approved by the parties in a lease to be subsequently executed has never been done. ’ ’ Plaintiff did not procure a tenant on the terms specified in the contract of January 31, 1949, or on any other terms.

Cummings testified that he and his partners, on many occasions after July 14th, told defendant they were ready, willing, and able to enter into a lease in accordance with the terms of the agreement of that date. However, the members of the partnership changed their minds several times with respect to the size of the building. The estimated cost ran from $180,000 to $240,000. Defendant completed the construction of the multiple dwellings on the adjacent property prior to December 30, 1950. At the time the agreement of July 14th was executed, the property was encumbered with a $35,000 deed of trust. In connection with the construction of the dwellings on the adjacent property, defendant further encumbered the property to the extent of about

In December, 1950, plaintiff informed defendant that he was no longer connected with Consolidated-Hill, Inc.; that the sole consideration for his efforts was the purchase of the equipment from Consolidated-Hill; that he was still in the negotiations and should be protected, and asked for some sort of listing to protect himself. No listing was given.

Defendant testified that in December, 1950, he was ready to go ahead with the construction of the market building; that he then had a tentative commitment of $200,000. On February 2, 1951, he made application to the National Production Authority for permission to purchase materials to construct the food market. The application was denied.

On June 26, 1951, defendant advised the partnership that “due to practical and legal reasons it has been, and is impossible” to enter into such a lease as was contemplated by the partnership.

The court found: “ [P]Iaintiff broker had fully performed his contract and was entitled to its benefits.” “[T]he defendants waived the provisions of the broker’s contract of January 31, 1949, pertaining to the time within which the lease was to be executed.” The proposed lessees, at all times since July 14, 1949, have been ready, willing, and able to execute the lease. Defendants have refused, without cause, to enter into a lease in accordance with the agreement of July 14, 1949. The court concluded: “A broker employed to obtain a lessee upon terms of ‘percentage lease with guaranteed minimum rental to be approved by owners or any other terms accepted by owner’ has performed his agreement when he procures a lessee ready, willing and able to execute a lease in accordance with the terms required but is prevented from executing the lease by the refusal of the lessor. ... A principal who accepts a proposed lessee after the time fixed in the broker’s contract for the procurement or negotiation of lease, and himself negotiates with the proposed lessee and enters into an agreement with him, waives" the restriction of time fixed in the broker’s contract unless he informs the broker before he enters into negotiations that he will not accept the proposed lessee as the result of the broker’s procurement.” Judgment for plaintiff followed. Defendants appeal.

Plaintiff’s position is that the agreement to lease of July

Plaintiff’s contract was special, not general. He was employed as defendants’ “Leasing Agent” to procure a tenant for the exclusive business of operating a food market on the 20 acres under a percentage lease, with a guaranteed minimum rental to be approved by defendants. If he procured a tenant on any other terms, they were to be accepted by-defendants. His contract was not to procure a person ready, willing, and able to enter into a lease; it was to procure a lease. His compensation was dependent on his procuring a lease. (See Peterson v. Montgomery Holding Co., 89 Cal.App.2d 890 [ 202 P.2d 365 ].)

The right of a broker to recover a commission must be measured by the terms of his contract. (McGill v. Fleming, 32 Cal.App.2d 601 , 604 [ 90 P.2d 341 ]; Denbo v. Weston Inv. Co., 112 Cal.App.2d 153 , 157 [ 245 P.2d 650 ].) A broker may, by special agreement, make his commission dependent upon a contingency or the happening of a condition precedent, and unless such contingency occurs or such condition happens, he has no right of recovery. (Denbo v. Weston Inv. Co., 112 Cal.App.2d 153 , 157 [ 245 P.2d 650 ].) The general rule is that unless the failure to secure a lessee on terms proposed and within the time provided is due to negligence, fraud, or fault of the owner, a broker may not recover on his contract. (Ford v. Palisades Corp., 101 Cal.App.2d 491 , 497 [ 225 P.2d 545 ].) “Where the time for performance is definitely fixed by the contract, the transaction must be completed within that designated time to entitle the broker to his commissions. In 2 Mechem on Agency, page 2026, section 2439, it is said in that regard: ‘It is also indispensable that the purchaser should be found within the time limited, for if the broker’s exertions do not produce the buyer until after that time has expired, it is not enough, even though that buyer may subsequently become the purchaser, unless the principal has caused the delay, or unless he waives it.’ ” (Heffernan v. Merrill Estate Co., 77 Cal.App.2d 106 , 115 [ 174 P.2d 710 ].) If a broker does anything less than, or different from, what is designated in his contract, he is not entitled to a commission.

Howard v. Burrow, 77 Cal.App. 4 [ 245 P. 808 ], is determinative of the case. The contract in that case, dated March 28, 1944, was “to obtain a tenant on a five year lease. . . . This contract to remain in force for ten days from date.” Within the 10 days the broker introduced a prospective lessee to the principal. A discussion was had between the principal and the prospective lessee regarding the lease, but no agreement was reached at that time, nor on or prior to April 7, 1924, the end of the term of the broker’s contract. On April 9, 1924, the principal and the prospective lessee executed an unenforceable agreement to lease. The broker was present at the discussion leading to the execution of the unenforceable agreement. No lease was ever executed. The court held (p. 7): “If we assume, for the purpose of this case, that such is the fact and that said paper [of April 9, 1924] was an agreement, it will be noted that that paper was executed two days after the respondent’s contract had expired. Such being the fact the respondent could not recover under his contract. . . .

‘‘In what we have said above, we assumed that the writing dated April 9, 1924, was a valid enforceable contract. Under the settled law of this state and of many other states we went too far in making that assumption. The Campe Company was to make the alterations and improvements. The plans and specifications had not been prepared. When they were prepared it is manifest that they should be prepared by, and to the satisfaction of, the Campe Company. By the clear language of the written instrument dated April 9, 1924, they were also to be approved by Mr. Burrow. There was, therefore, a material element in the writing on which the minds of the parties had not met. However, it was of the very essence of the respondent’s contract that he should bring the parties to an agreement. (Ayres v. Thomas, 116 Cal. 140 , 144 [ 47 Pac. 1013 ].) There is a long line of cases in this state holding that writings in such form are incomplete and not enforceable as executory contracts to enter into a lease. (Morrison v. Rossignol, 5 Cal. 64 , 65; Stanton v. Singleton, 126 Cal. 657 , 664 [ 47 L.R.A. 334 , 59 Pac. 146 ]; Wineburgh v. Gay, 27 Cal.App. 603 , 605 [ 150 Pac. 1003 ];

In McGill v. Fleming, 32 Cal.App.2d 601 , this court stated (p. 604 [ 90 P.2d 341 ]): “The trial court properly concluded that the parties contemplated the payment of the brokers’ commissions only upon the effective consummation of the leases. We are not unmindful of the general rule that a broker earns his commission when he has secured an acceptable lessee for the lessor, one who is ready, able and willing to lease the property upon the terms on which the broker is authorized to negotiate the lease. The present case, however, is not the ordinary one in which a broker is employed to secure a lessee in the open market. In this case the prospective lessee was named in the form of lease which had been prepared and also in the agreement sued upon. In this agreement the lessor became bound to pay the commission ‘ for consummating’ the transaction. The right of the broker to recover commissions must of course depend upon the terms

“It will be noted that in the so-called leases the lessor purports to lease a building, one which was not then in existence. The floor plan and specifications were to be mutually agreed upon between the parties and approved in writing within thirty days, otherwise either party could be relieved from all obligations. The plans and specifications were naturally of great importance to defendant, since they might require a greater or lesser expenditure of funds in the erection of the building. Obviously they were also of importance to the company. Plaintiff’s contention that he became entitled to his commissions upon the signing of the forms of leases does violence to a reasonable construction of the language used in the agreement, particularly in view of the circumstances surrounding the transaction. If the commission became due upon the signing of the instruments in question there would have been no need for employing the language ‘for consummating’ the leases and for requiring that the payment of the commissions be made after the erection of the buildings.

“In Leventritt v. Cowell, 21 Cal.App. 597 [ 132 Pac. 627 ], the factual situation was very similar to that of the case under review. The litigation there involved ‘a contract for a lease to be executed in the future, and in which the lessees had not fully agreed to the terms of the lease, for the contract provided that the plans and specifications for the buildings were yet to be approved and “O.K.’d” by the lessees.’ It was held that the broker could not recover. (See also Ball v. California Conserving Co., 189 Cal. 326 [ 207 Pac. 1011 ]; Allison v. Chapman, 36 Cal.App. 759 , 760 [ 173 Pac. 389 ] ; Peak v. Jurgens, 5 Cal.App.2d 573 , 576 [ 43 Pac.2d 569 ].) ”

The cases which hold that where a broker produces a person who is ready, willing, and able to consummate a lease he has earned his commission, are not in point. That rule does not apply where the acceptance by the owner is

Plaintiff claims that defendants waived the limitation of time fixed by his contract. The rule of extension of a broker’s contract is dependent on a waiver. (Love v. Gulyas, 87 Cal.App.2d 608 , 615 [ 197 P.2d 405 ].) The time for performance specified in a broker’s contract may be waived by the principal where he, after the time limit has expired, urges and encourages the broker to continue his efforts, and the broker does so continue with the knowledge, approval, and encouragement of the principal; and, as a result of the broker’s efforts, the purpose of his employment is effected. (Baker v. Curtis, 105 Cal.App.2d 663 , 669 [ 234 P.2d 153 ].) The contract of January 31, 1949, by its very terms, terminated on April 1st. Plaintiff did not negotiate with anyone within that time. He claims that because he found the partnership and defendant permitted him to negotiate with its members until July 14th, when the so-called agreement to lease was executed, the contract period was extended until July 14th. The acts of the parties did not constitute an extension of the contract period. They merely constituted what might have been an extension of time by defendant had a lease with the partnership been executed. If defendants were waiving the time, they were doing so only on the condition that a lease with the partnership eventuated. (See, Love v. Gulyas, 87 Cal.App.2d 608 , 618 [ 197 P.2d 405 ].)

We should comment that the finding that defendants waived the provisions of the contract of January 31, 1949, pertaining to the time within which the lease was to be exe

We hold that the finding to the effect that the contract of employment as broker was fulfilled is not supported by the evidence. (Cf. Kritt v. Athens Hills Dev. Co., 109 Cal.App.2d 642 , 646 [ 241 P.2d 606 ].)

Reversed.

Shinn, P. J., and Wood (Parker), J., concurred.