Nily Realty, Inc. v. Wood

Eldridge, J., delivered the opinion of the Court. This is another case where a real estate broker, employed to sell a parcel of real estate for a commission, claims entitlement to that commission even though the property was not in fact sold. Robert L. Wood and his wife Sally A. Wood, the defendants-appellees, owned a farm in Talbot County, Maryland. The farm was subject to a purchase money mortgage in the amount of $117,150.00, repayable in five equal annual installments of $23,430.00, plus interest on the unpaid balance.

In the fall of 1972 the Woods did not believe that they would be able to make the next annual payment which was due on May 3, 1973, and they decided that they had to sell the farm. On December 6, 1972, the Woods signed what was called a ⁵⁹¹ “General Listing Agreement” with the plaintiff-appellant Nily Realty, Inc. The agreement “authorized” Nily Realty to offer the farm for sale at a price of $215,000.00. The document went on to provide: “This agreement shall continue for 12 months from date hereof. In the event NILY REALTY, INC. sells said property, I hereby agree to pay said Realtor a commission of 6%. “The commission is due and payable upon the signing of the Contract of Sale, but payment may be delayed until completion of contract by transfer of deed.” The “agreement” did not require Nily Realty, Inc. to do anything.

The broker did not promise to advertise the property at its expense or to perform any other service toward selling the property. Moreover, there was nothing in the written document or in conversations between the Woods and personnel of Nily Realty concerning the terms of the sale, whether the $215,000.00 was to be paid' in cash, whether there was to be financing, how long a buyer might have to pay the purchase price, etc. In addition, the “agreement” did not give Nily Realty an exclusive authorization to sell the property, and the Woods at about the same time entered into similar “General Listing Agreements” with eight other realtors. On April 5, 1973, Mrs. Alice B. Nily, the principal officer of Nily Realty, Inc., telephoned Mrs. Wood and informed her that on the next day she was going to show the farm to a prospective buyer. Mrs. Nily on April 6, and again on April 8, showed the farm to a Mr. Norman G. Fischer.

The testimony at the trial was somewhat in dispute as to what happened over the next several days. According to the testimony of Mr. and Mrs. Wood, the following occurred. During the weekend of April 7-8, the Woods arranged to obtain money from Mrs. Wood’s mother in order to make the annual mortgage payment due on May 3, and, therefore, they decided not to sell the farm. According to the testimony of both of them, Mr. Wood ⁵⁹² telephoned Mrs. Nily on the morning of April 9, 1973, told her that they had decided not to sell the farm, and instructed her to “take it off the market.” The next day, April 10, Mrs. Wood telephoned the other eight realtors and cancelled the listings with them.

The Woods testified that they next heard from Mrs. Nily on the evening of April 13, 1973, when she telephoned them, informed them that Mr. Fischer had signed a contract to buy the farm for $215,000.00, and asked if she could come to their home that evening. Mr. Wood told her again that the farm was not for. sale. Mrs. Nily replied, “I am sure you will change your mind.” Mrs. Nily further told him: “I can’t force you to sell the property. I can force you to pay my commission.” Mrs. Wood testified that the next morning, April 14, 1973, she telephoned Mrs. Nily because she “didn’t realize that you could be forced to pay a commission . . . and I just wanted to know if she was trying to scare us or if she really could do it.” Mrs. Nily replied: “Please let me show you the contract.

I know you will accept it.” Mrs. Nily then came to the Woods’ home on the morning of April 14, 1973. Mrs. Wood testified that at that time she suggested to Mrs. Nily that if Mr. Fischer, instead of paying the full purchase price in cash, would pay twenty percent of the $215,000.00, and execute a mortgage for the balance, payable in ten annual payments at an interest rate of 8 percent, she and Mr. Wood would sign the contract. The Woods wanted to take back a mortgage instead of receiving the full price because they believed that this arrangement would result in tax savings. Mrs. Wood further testified that Mrs. Nily said that “she would offer it to Mr. Fischer and she was sure there would be no problem.” In the afternoon of April 14, Mrs. Nily telephoned Mrs. Wood, said that she had spoken to Mr. Fischer, and informed Mrs. Wood that the proposed financing terms “didn’t suit” Mr. Fischer.

Mrs. Wood went on to testify that on the afternoon of April 14, Mrs. Nily “said she was sure we could work something out, and I never heard from her any more.” Mrs. Nily’s testimony differed from that of the Woods .chiefly with respect to the matter of rescinding Nily Realty’s authority to sell the property. Mrs. Nily acknowledged that ⁵⁹³ Mr. Wood telephoned her on April 9, 1973, but she denied that he said anything about not wanting to sell or about taking the property off the market. According to Mrs. Nily, Mr. Wood merely wanted to know whether the prospective buyer had walked around the farm the day before. Mrs. Nily testified that she met with Mr. Fischer, the prospective buyer, early in the evening of April 13, 1973, that Mr. Fischer then was “considering making an offer of $190,000.00 for this farm,” that she told Mr. Fischer that if he really wanted the farm he should offer the full listing price of $215,000.00, and that, after “three hours in negotiating,” Mr. Fischer signed a proposed contract to buy the farm for $215,000.00.

The proposed contract provided for $21,500.00 to be paid at the time of signing and the balance of $193,500.00 to be paid on January 2, 1974. This provision was at Mr. Fischer’s insistence because he “had no use for the farm until the year 1974.” Mrs. Nily further testified that, after Mr. Fischer signed the proposed contract on the evening of April 13, she telephoned Mr. Wood and told him that she would bring the contract to him. It was at this time, according to Mrs. Nily, that Mr. Wood first told her that the farm was not for sale. As to the meeting with the Woods on April 14, and the Woods’ proposal that they would change their minds and sell the farm if they could hold a mortgage for 80 percent of the purchase price, Mrs. Nily’s testimony was in accord with that of the Woods.

Shortly thereafter, Nily Realty brought this action against the Woods in the Circuit Court for Talbot County, seeking a full commission of $12,900.00, based upon six percent of the $215,000.00 listed purchase price. Following the trial, the court (Clark, J.) rendered judgment in'favor of the Woods. The trial judge found as a fact that on April 9, 1973, the Woods cancelled the “General Listing Agreement” and revoked Nily Realty’s authority to find a purchaser for the property. It was further found that at the time of the cancellation on April 9, Nily Realty had not procured a purchaser ready and willing to buy the property on the terms listed.

Finally, the trial judge found that since the ⁵⁹⁴ “General Listing Agreement” here involved did not require the broker to do anything, it was therefore not a bilateral contract, but was a unilateral agreement which would only become binding upon performance by the broker. The trial judge held that under Maryland law a principal may, without incurring liability, revoke a broker’s authority to sell property, under an agreement like this, at any time before the broker produces a purchaser ready, willing and able to buy the property upon terms satisfactory to the principal. On this appeal, Nily Realty argues that the cancellation of the “General Listing Agreement” was wrongful, that Nily had fully performed its part of the agreement, and that it is entitled to a commission. (a) Before dealing with Nily Realty’s arguments as to why the cancellation of the “General Listing Agreement” was wrongful, one preliminary matter warrants discussion.

Throughout these proceedings, the appellant Nily Realty’s theory has been that, under the terms of the “General Listing Agreement,” it earned and is entitled to a commission based upon six percent of the listing price of $215,000.00. At no time has Nily Realty sought, or offered evidence to prove, damages resulting from an alleged wrongful cancellation of the “General Listing Agreement.” However, a real estate broker’s recoverable damages for a wrongful revocation of the brokerage agreement may be different from his earned commissions under the terms of the agreement. Piper v. Wells, 175 Md. 326, 332-333 , 2 A. 2d 28 (1938); Restatement (Second) of Agency §§ 445, 455; 1 Corbin, Contracts § 50 at 209 (1963). In this case, it is clear that Nily Realty was not entitled to its commission under the “General Listing Agreement.” A real estate broker, employed by a landowner to sell property, is not ordinarily entitled to his commission, absent a special agreement to the contrary, until the broker procures a purchaser ready, willing and able to buy upon the owner’s terms, with the arrangement culminating in the ⁵⁹⁵ purchaser and owner entering into a valid, binding and enforceable contract for the sale of the property.

The contract of sale must be signed by the broker’s employer. Maryland Code (1973 Repl. Vol.), Art. 21, § 14-105. 1 And, with respect to transactions occurring prior to that statute or otherwise not covered by the statute, the cases have held that the broker must have procured one who “ultimately becomes the purchaser,” with “the contract [being carried] into execution.” Wyand v. Patterson Agency, 271 Md. 617, 621-624 , 319 A. 2d 308 (1974); Carrington v. Graves, 121 Md. 567, 572-573 , 89 A. 237 (1913); Riggs v. Turnbull, 105 Md. 135 , 66 A. 13 (1907); Richards v. Jackson, 31 Md. 250, 253 (1869); Kimberly v. Henderson and Lupton, 29 Md. 512, 515 (1868). In this case, there was no “special agreement to the contrary” within the meaning of Art. 21, § 14-105.

Instead, the terms of the “General Listing Agreement” confirmed that the broker’s right to a commission would not accrue until a valid and binding contract of sale was signed, as the agreement provided: “The commission is due and payable upon the signing of the Contract of Sale, but payment may be delayed until completion of contract by transfer of deed.” The Woods did not sign a valid and binding contract of sale, and the property was never sold. As far as the record in this case shows, the Woods still own the farm. The Woods’ refusal to sign the contract of sale was not a bad faith effort to deprive Nily Realty of its commission; instead, the Woods changed their minds about selling the farm. Moreover, ⁵⁹⁶ despite their change of mind, they would have sold the farm anyway if the prospective buyer had agreed to the financing terms desired by the Woods.

However, the prospective buyer was not agreeable to the owners’ terms. Instead, the buyer desired terms whereby most of the purchase price would not be paid until the following year. In light of these circumstances, it is clear that at no time did the broker produce a purchaser ready, willing and able to buy upon the owners’ terms, with the arrangement culminating in an executed contract of sale. Thus, Nily Realty did not at any time become entitled to a commission under the terms of the listing agreement.

In Piper v. Wells, supra, this Court held that the real estate broker, employed by a property owner, was not entitled to his commission under the facts of that case, but that the broker was entitled to damages because the property owner’s revocation of the broker’s authority was improper and constituted a breach of the listing agreement between the two. However, since the real estate broker in Piper had sought only the specified commission, and had not asked for damages for revocation of the employment contract, our predecessors affirmed a judgment in favor of the property owner. In oral argument before us, Nily Realty urges that Piper v. Wells was based upon pleading principles of a “different time” and that if we were to conclude, as we do, that Nily had not earned its commission, we should remand the case in order for Nily to establish its damages based upon a wrongful revocation of the listing agreement. However, because we are of the view that the revocation of the “General Listing Agreement” was not legally improper, we need not, and do not, reach this question.

(b) As previously discussed, the trial judge held that the Woods cancelled the “General Listing Agreement” before Nily Realty produced a ready, willing and able pruchaser, and that under Maryland law, a real estate brokerage listing such as the one here involved may be cancelled without ⁵⁹⁷ liability at any time up until the broker produces such a purchaser. Nily Realty challenges the trial judge’s decision on both factual and legal grounds. The appellant argues that the trial judge’s finding of fact, that the Woods rescinded the listing agreement on April 9, 1973, was “clearly erroneous.” Instead, the argument continues, the rescission occurred after Nily Realty produced a ready, willing and able buyer on April 13,1973. Alternatively, Nily Realty contends that even if the “General Listing Agreement” was revoked on April 9, 1973, the Woods had no legal right to revoke it at that time.

Nily Realty insists that the “agreement” was initially supported by consideration because it should be “implied” that Nily promised to show the farm to its clients and to use its best efforts to sell the farm. Nily goes on to argue that even if the “agreement” was not initially supported by consideration, Nily’s expenditure of time and effort, beginning April 5, 1973, when it first showed the farm, supplied the necessary consideration. Since, under Nily’s theory, the “General Listing Agreement” was supported by consideration, the Woods had no right to revoke the “agreement” until the expiration of the twelve month term. Maryland Rule 886 requires rejection of appellant’s factual argument.

The trial judge found that the Woods cancelled the “General Listing Agreement” and revoked Nily Realty’s authority on April 9, 1973, prior to the time that Nily Realty produced a ready, willing and able purchaser. The testimony of both Robert Wood and Sally Wood was that Mrs. Nily was informed on April 9 that the Woods had decided not to sell the farm and that Mrs. Nily should “take it off the market.” Mrs. Nily did not produce a purchaser ready and willing to buy upon the terms listed until at least April 13, 1973, if then. According to the testimony, on April 13 Mr. Fischer intended at first to make a counter-offer of $190,000.00 for the farm. It was only after three hours of negotiation with Mrs. Nily that he signed a proposed contract offering $215,000.00, with most of the money to be paid the following year.

All of this evidence supports the trial judge’s finding that the broker’s authority was revoked ⁵⁹⁸ prior to the time the broker produced a purchaser ready and willing to buy upon the terms listed. The finding certainly cannot be deemed “clearly erroneous” within the meaning of Rule 886. Real estate brokerage listings unsupported by specified valuable consideration moving from the broker or agent to the employer, have generally been considered unilateral agreements which, in the absence of fraud or bad faith, are revocable by the employer, without his incurring liability, until some degree of performance by the broker. 12 Am.Jur.2d, Brokers § 32 at 796. In so.me jurisdictions it is held that a principal’s authorization for a broker to offer property for sale becomes a bilateral agreement supported by consideration upon the broker’s expenditure of time oi\ money.

Under this view, as soon as the broker expends any time or money toward finding a purchaser, even though he may not actually produce one, the contract becomes enforceable and, the principal may not without liability revoke the broker’s authority. See, e.g., Harris v. McPherson, 97 Conn. 164 , 115 A. 723, 724 (1922); Braniff v. Baier, 101 Kan. 117 , 165 P. 816, 817 (1917); Chamberlain v. Grisham, 360 Mo. 655 , 230 S.W.2d 721, 723-724 (1950); 12 Am.Jur.2d, Brokers § 32 at 796-797. In other jurisdictions, however, including Maryland, it has consistently been held that the broker must do more before the principal loses his right, without incurring liability, to revoke the real estate broker’s authority. Under the view taken by this Court, a property owner acting in good faith may without liability terminate a listing with a real estate broker at least up until the time when the