Rector-Phillips-Morse, Inc. v. Huntsman Farms, Inc.

Citations: 267 Ark. 767; 590 S.W.2d 317; 1979 Ark. App. LEXIS 447Docket: CA 79-132

Court: Court of Appeals of Arkansas; November 14, 1979; Arkansas; State Appellate Court

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The trial court's decision to deny the appellant's claim for a commission based on an alleged agreement to facilitate a real estate sale is under review. Key facts include: In July 1976, Robert Chowning of Rector-Phillips-Morse, Inc. learned that Sidney Weniger was interested in purchasing the Riviera Apartments from Harold Huntsman. Huntsman had acquired the property in 1973 and later mortgaged it for $584,000, due September 15, 1976. On August 4, 1976, Rector, Inc. communicated its expectation of a 6% commission if a sale to Weniger occurred. An offer and acceptance agreement was executed on September 16, 1976, stipulating that the total sales price would include the mortgage balance plus $150,000. The agreement required a satisfactory mortgage loan for closing and specified that the seller would pay Rector, Inc. a commission per their prior agreement.

While the agreement was on Rector, Inc.'s printed form, it was signed only by Weniger and Huntsman, with no representative from Rector present. A rider attached to this agreement allowed the seller to repurchase the property under specific conditions and included various financial arrangements. An addendum executed on September 24, 1976, provided an alternative for the seller to pay off the new mortgage instead of assuming it.

Seller must pay off the mortgage held by RPM Realty Fund in full before the closing date and provide the buyer with $45,000 plus all transaction-related costs to void the offer and acceptance agreement dated September 16, 1976, releasing the seller from all obligations. Mr. Weniger attempted to secure financing from First Federal Savings, but the bank refused due to a clause allowing Huntsman to repurchase the property. As a result, Weniger's financing fell through. On October 28, 1976, Huntsman transferred the apartments to Graceland College, which paid off the third mortgage on October 31, 1976. Subsequently, Weniger filed for specific performance against Huntsman and Graceland College, while Rector, Inc. sought a $75,000 commission. The trial court determined that Rector, Inc. did not have a general listing but was to receive a commission if the apartments sold to Weniger. Since the property was not sold to Weniger, the court dismissed Rector, Inc.'s complaint with prejudice. Appellant argued that they successfully connected Weniger and Huntsman, leading to an agreement on September 16, 1976, and that the final outcome should not negate their commission entitlement. The appellate court reviews the case de novo but will uphold the trial court's decision if supported by a preponderance of evidence. The general rule states that a broker is entitled to a commission when they produce a buyer willing to purchase, but exceptions exist, such as when the agreement specifies a designated buyer. Previous Arkansas cases indicate that a broker may be entitled to a commission without an enforceable contract if a buyer is ready, willing, and able to purchase, unless the seller-broker agreement requires an actual sale.

In Sarna v. Fairweather, the Arkansas Supreme Court reaffirmed that a broker earns a commission by bringing a buyer who is ready, willing, and able to purchase the property on the seller's terms, regardless of the enforceability of the contract, unless the seller-agent agreement specifies that the sale must be completed. An appellant’s letter dated August 4, 1976, informed Mr. Huntsman that the appellant expected a 6% commission if he sold the property to Mr. Weniger and urged that the appellant be involved in any negotiations. Testimony indicated that both Andy Agar, representing the appellant, and witnesses Mrs. Akers and Mr. Sisco believed there was an agreement for a commission if a sale occurred with Weniger. In contrast, Huntsman denied any obligation to pay a commission under any circumstances. The trial court concluded that Huntsman agreed to pay a commission if the property was sold to Weniger.

The appellant contended that Weniger did not have a chance to complete the sale because Huntsman terminated the agreement by transferring the property to Graceland College. The appellant argued that any failure of Weniger to close the sale was due to Huntsman's actions and that Weniger was not responsible for obtaining financing until Huntsman's right to terminate expired. Conversely, Huntsman argued that the requirement for a satisfactory mortgage loan from a specific lender was a condition of the sale, which had not been fulfilled, absolving him of the obligation to sell. Huntsman highlighted that he had financial difficulties and was negotiating with Weniger to refinance the apartments, which was complicated by Weniger's inability to secure financing due to First Federal Savings' refusal to allow Huntsman to assume the loan. The court found that Weniger's offer was conditional, meaning Huntsman had no obligation to sell until that condition was met. Although the trial judge considered whether Weniger could waive the financing condition, the decision was not based on waiver but on the established conditions of the agreement.

The court found that the filing of a Specific Performance suit and claims of being 'ready, willing and able' to perform are not sufficient to demonstrate a waiver of conditions or financial capability to complete a purchase. Evidence presented did not prove Mr. Weniger's financial ability based solely on his ownership of other properties. The agreement between Weniger and Huntsman was established through the contract and its riders, which both parties confirmed represented their agreement, with the second rider clarifying terms. Under the second rider, Huntsman had the right to pay off a mortgage and provide Weniger with $45,000, leading to the voiding of the original offer. The court upheld the trial court's ruling as supported by the evidence. Judge Hays dissented, arguing that despite the absence of a written listing agreement, the owner's actions implied consent for the broker to facilitate a sale, thus earning the commission upon acceptance of a buyer's offer. Hays noted the seller's argument regarding the requirement for a consummated sale was weakened by the seller's own actions preventing the closing. The management of the apartments by Rector, Inc. was under a five-year contract, and the second rider was executed after legal consultation and indicated necessary clarifications to the agreement.