Case Title: LYLE v MOORE

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1979-07-23T00:00:00Z

Document:
No. 14461 IN THE SUPREME @ J U F ! ! l ' O F THE STATE O F KNIANA 1979 IlEAN LYLE, Plaintiff and Respondent, MAX S. M3OIIE and PEARL m R E , Defendants and Appellants. Appeal frm: D i s t r i c t Court of the Twelfth Judicial D i s t r i c t , Honorable B. W. Thcmas, Judge presiding. Counsel of Record: For Appellants: Jardine, Stephenson, B l e w e t t and Weaver, Great Falls, Mntana Ion Holden argued, G r e a t Falls, Mntana For Respondent: Bunn and Brown, Chester, Mntana Bruce Brawn argued and Gregory G. Parrott argued, Chester, Mntana S W t t e d : May 2, 1979 Decided: 3C)L 2 3 1979 Filed : m L " r 19'4 M r . Chief J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of t h e Court. This appeal i s from a judgment i n p l a i n t i f f ' s favor e n t e r e d i n t h e Twelfth J u d i c i a l D i s t r i c t Court, ~ i b e r t y County, t h e Honorable B. W. Thomas p r e s i d i n g without a jury. P l a i n t i f f , Dean Lyle, i s a real estate broker and one- t i m e c l o s e f r i e n d of defendants, Max and P e a r l Moore. I n e a r l y 1975, Lyle l e a r n e d through a t h i r d p a r t y t h a t t h e Moores w e r e considering s e l l i n g t h e p o r t i o n of t h e i r farm l o c a t e d i n t h e Province of Saskatchewan, Canada. Lyle c o n t a c t e d t h e Moores and t o l d them, among o t h e r t h i n g s , t h a t h e knew a p r o s p e c t i v e purchaser who would pay more f o r t h e farm than they were t h i n k i n g of asking. On March 3, 1975, t h e p a r t i e s signed a r e a l e s t a t e b r o k e r ' s c o n t r a c t f o r t h e s a l e of t h e farm. The c o n t r a c t was a one-page document which was t o e x p i r e A p r i l 1, 1975. The c o n t r a c t contained t h e following language: ". . . you hereby a r e granted t h e a b s o l u t e , s o l e and e x c l u s i v e r i g h t t o s e l l o r exchange t h e s a i d d e s c r i b e d property. I n t h e e v e n t of any s a l e , by m e o r any o t h e r person . . . during t h e t e r m of your e x c l u s i v e employment, o r i n case I withdraw t h e a u t h o r i t y hereby given p r i o r t o s a i d e x p i r a t i o n d a t e , I a g r e e t o pay you t h e s a i d commission j u s t t h e same as i f a s a l e had a c t u a l l y been consummated by you." The c o n t r a c t f u r t h e r provided t h a t Lyle would r e c e i v e 6 p e r c e n t of t h e $220,000 s e l l i n g p r i c e , o r $13,200 f o r h i s s e r v i c e s . Lyle then brought Gene Foulks, t h e p r o s p e c t i v e pur- c h a s e r , from Kansas t o Montana t o view t h e property. Lyle, Foulks and Max Moore i n s p e c t e d t h e p r o p e r t y on March 4 and v i s i t e d a Canadian a t t o r n e y . The a t t o r n e y advised t h e p a r t i e s t h a t a sale of t h e Moores' farm t o Foulks and h i s w i f e would n o t be l e g a l under t h e Saskatchewan Farm Owner- s h i p A c t of 1974. However, a f t e r some d i s c u s s i o n , it ap- peared t h a t a s a l e would be p o s s i b l e t o Foulks and h i s b r o t h e r o r f a t h e r . Foulks r e t u r n e d t o Kansas t o work o u t t h e d e t a i l s , and t h e Moores v i s i t e d t h e i r accountant t o d i s c u s s t h e t a x consequences of t h e i r s a l e . During t h e i r conversation, t h e accountant asked why t h e Moores were n o t s e l l i n g t h e farm t o t h e i r sons. They t o l d him they had thought such a sale would b e i l l e g a l b u t would now c o n t a c t t h e i r sons. On March 10, 1975, t h e Moores withdrew L y l e ' s a u t h o r i t y t o s e l l t h e property and subsequently s o l d t h e property t o t h e i r sons. Lyle brought t h i s a c t i o n recover t h e commission provided f o r i n t h e c o n t r a c t . Following a t r i a l i n t h e D i s t r i c t Court, judgment was e n t e r e d i n h i s favor i n t h e amount of $13,200 p l u s $7,500 a s a t t o r n e y ' s f e e s and $155 f o r o t h e r c o s t s . From t h i s judgment, t h e Moores appeal. One i s s u e presented by defendants i s determinative on appeal. That i s s u e i s whether t h e l i s t i n g agreement signed by defendants was i n v a l i d because p l a i n t i f f used it t o t a k e advantage of defendants without t h e i r consent o r knowledge. The D i s t r i c t Court made two p e r t i n e n t f i n d i n g s of f a c t w i t h r e s p e c t t o t h i s i s s u e : "10. P l a i n t i f f and defendants on March 3, 1975, had been long-time f r i e n d s and neigh- bors. Defendants had confidence i n p l a i n - t i f f ' s i n t e g r i t y and h i s p r o f e s s i o n a l a b i l i t y and when p l a i n t i f f asked them t o s i g n t h e employment c o n t r a c t they d i d s o without tak- i n g t i m e t o read it. They had no previous experience w i t h such agreements. They d i d n o t understand t h a t , under t h e withdrawal c l a u s e quoted i n Finding 3 , they would be l i a b l e t o p l a i n t i f f f o r t h e f u l l amount of h i s commission i f they withdrew h i s a u t h o r i t y before t h e e x p i r a t i o n d a t e . Nor d i d they understand t h a t they could n o t make a sale on t h e i r own during t h e t e r m of t h e agreement. Otherwise, they do n o t claim t h a t t h e t e r m s of t h e l i s t i n g agreement do n o t conform w i t h t h e i r understanding. "11. N o fraud, misrepresentation o r undue influence on t h e p a r t of p l a i n t i f f induced t h e execution of t h e employment c o n t r a c t by defendants. The circumstances a r e i n s u f f i - c i e n t t o excuse t h e f a i l u r e of defendants t o read t h e employment c o n t r a c t before signing i t . " I t i s t h i s l a t t e r finding with which w e t a k e i s s u e . I n Carnell v. Watson (1978), Mont. , 578 P.2d 308, 312, 35 St.Rep. 550, 555, we recognized a f i d u c i a r y r e l a t i o n s h i p between a r e a l estate broker and h i s c l i e n t . This f i d u c i a r y r e l a t i o n s h i p between a broker and h i s c l i e n t has been found t o encompass a "duty of f u l l d i s c l o s u r e " by a number of courts. I n Batson v. Strehlow (1968), 68 Cal.Rptr. 589, 4 4 1 P.2d 1 0 1 , 109-10, t h e C a l i f o r n i a Supreme Court found: "The law imposes on a r e a l e s t a t e agent ' t h e same o b l i g a t i o n of undivided s e r v i c e and loy- a l t y t h a t it imposes on a t r u s t e e i n favor of h i s beneficiary. ' [ C i t a t i o n s omitted. 1 This r e l a t i o n s h i p n o t only imposes upon him t h e duty of a c t i n g i n t h e h i g h e s t good f a i t h towards h i s p r i n c i p a l b u t precludes t h e agent from obtaining any advantage over t h e p r i n c i - p a l i n any t r a n s a c t i o n had by v i r t u e of h i s agency. [ C i t a t i o n omitted.] 'Such an agent i s charged with t h e duty of t h e f u l l e s t d i s - c l o s u r e of a l l material f a c t s concerning t h e t r a n s a c t i o n t h a t might a f f e c t t h e p r i n c i p a l ' s d e c i s i o n . ' [ C i t a t i o n s omitted.] "When t h e p r i n c i p a l questions t h e a c t s done by t h e agent i n t h e course of t h e agency t h e burden is cast upon t h e l a t t e r t o prove t h a t he acted with t h e utmost good f a i t h toward t h e p r i n c i p a l and t h a t p r i o r t o t h e transac- t i o n he made a f u l l d i s c l o s u r e of a l l t h e f a c t s r e l a t i n g t o t h e a c t s under a t t a c k . " A duty t o f u l l y d i s c l o s e p e r t i n e n t f a c t s has likewise been recognized i n Zwick v. United F a r m Agency, Inc. (Wyo. 19761, 556 P.2d 508, 511; MacDonald v. Dormaier (1975), 272 O r . 122, 535 P.2d 527, 529; Jennings v. L e e (1969), 105 Ariz. 167, 461 P.2d 161, 167; Holland Realty Investment Co. v. S t a t e Dept. of Commerce (1968), 84 Nev. 91, 436 P.2d 4 2 2 , The duty includes t h e duty t o r e v e a l t h e nature and e x t e n t of t h e b r o k e r ' s f e e s t o t h e c l i e n t . Rushing v. Stephanus (1964), 64 Wash.2d 607, 393 P. 2d 281, 284. Furthermore, because of t h e f i d u c i a r y r e l a t i o n s h i p between a broker and h i s c l i e n t , t h e broker "must make a f u l l and understandable explanation t o t h e c l i e n t before having him s i g n any c o n t r a c t s , p a r t i c u l a r l y when t h e c o n t r a c t s a r e with t h e broker himself." Starkweather v. Shaffer (1972), 262 O r . 198, 497 P.2d 358, 360. I n a d d i t i o n t o t h i s w e have recognized t h a t : "The provisions of t h e Real E s t a t e License A c t [ s e c t i o n 37-51-101 e t seq. M C A ] set a standard of conduct t o which licensed brokers and salesmen must conform. "While a breach of a duty may a l s o be a vio- l a t i o n of t h e l i c e n s i n g a c t , it may a l s o c o n s t i t u t e an independent reason t o deny a commission t o t h e broker o r agent--perhaps t h e most e f f e c t i v e d e t e r r e n t of a l l . " C a r - n e l l v. Watson, 578 P.2d a t 311-12, 35 St.Rep. a t 554-55. Along t h e s e l i n e s , two r e l e v a n t p o r t i o n s of p l a i n t i f f ' s own testimony i n d i c a t e t h a t he d i d n o t f u l l y d i s c l o s e t o defendants t h e f a c t t h a t he would be e n t i t l e d t o h i s com- mission i f they withdrew h i s a u t h o r i t y t o s e l l p r i o r t o t h e A p r i l 1st deadline. F i r s t , defendants' counsel had t h e following exchange with p l a i n t i f f : "Q. And d i d you t e l l them a t t h a t t i m e t h a t i f they s o l d t h e property during t h e l i s t i n g period t h a t you would be e n t i t l e d t o your f u l l commission? A. I d o n ' t r e c a l l t h a t I d i d , no. "Q. Did you inform them of t h e e x i s t e n c e of t h i s withdrawal c l a u s e t h a t says i f they would withdraw your a u t h o r i t y during t h e l i s t i n g period they would have t o pay you a f u l l commission j u s t a s i f you had s o l d t h e property f o r them? A. I d o n ' t r e c a l l i f I went i n t o it o t h e r than t o read through it. I w a s s u r e t h e r e w a s no problem with t h e s i t u a t i o n . The p a r t i e s w e r e going t o buy it o r n o t buy it and t h a t was i t . " L a t e r , p l a i n t i f f i n d i c a t e d he had reviewed t h e proposed t e r m s of t h e s a l e w i t h defendants b u t when asked s p e c i f i c a l l y about any d i s c u s s i o n r e l a t i n g t o t h e p r i n t e d language on t h e form, he could n o t r e c a l l any such d i s c u s s i o n . That p l a i n t i f f ' s f a i l u r e t o p o i n t o u t t h e p o t e n t i a l e f f e c t of defendants' e a r l y withdrawal of a u t h o r i t y might s e e m l i k e a small o v e r s i g h t i s n o t borne o u t by t h e amount of t h e judgment i n t h i s case. It was a s i g n i f i c a n t p a r t of t h e c o n t r a c t which defendants signed and should n o t have been overlooked. There i s f u r t h e r testimony which i n d i c a t e s t h a t p l a i n t i f f h u r r i e d defendants' s i g n i n g and even encour- aged them n o t t o r e a d t h e c o n t r a c t b e f o r e s i g n i n g it. Defendant Max Moore t e s t i f i e d on d i r e c t examination as follows : "Q. Did you and your w i f e and M r . Lyle d i s - c u s s whether t h a t agreement should be r e a d by you and your wife? A. W e l l , I d i d n ' t , and--but m y w i f e asked M r . Lyle, s h e s a i d a t t h a t t i m e , s h e s a i d , a f t e r I had a l r e a d y signed it, t h a t maybe s h e should read t h e f i n e p r i n t b e f o r e she signed h e r name t o something and t h a t ' s , M r . Lyle kind of laughed and he s a i d t h a t wasn't necessary. H e s a i d , I j u s t want t h i s t o show t h e Kansas man. So then she signed it. But she d i d n ' t r e a d any- t h i n g . "Q. Did M r . Lyle a t t h a t t i m e review t h e l i s t i n g agreement w i t h you? A . No. The only t h i n g he reviewed was t h e w r i t i n g he p u t on it. H e never d i d review any of t h e f i n e p r i n t typed on it. J u s t what he wrote on t h e r e , himself. "Q. Your testimony then i s t h e p r i n t e d lan- guage of t h e l i s t i n g agreement was n o t reviewed w i t h you a t t h a t t i m e , i s t h a t c o r r e c t ? A. T h a t ' s t r u e . "Q. Did M r . Lyle a t t h a t t i m e inform you t h a t by t h e agreement he had t h e e x c l u s i v e r i g h t t o sell t h e p r o p e r t y a t t h a t time? A. No. " Q . Did you a t t h a t t i m e b e l i e v e you s t i l l had t h e r i g h t t o sell t h a t property? A . Oh, I thought I d i d . "Q. Did h e a t t h a t t i m e inform you t h a t he could c o l l e c t h i s f u l l commission i f , i n f a c t , you made a s a l e of t h a t property, y o u r s e l f , d u r i n g t h e l i s t i n g period? A. No. "Q. Did h e inform you a t t h a t t i m e t h a t i f you withdrew h i s a u t h o r i t y d u r i n g t h e l i s t i n g p e r i o d t h a t he would be e n t i t l e d t o h i s f u l l commission i n t h e amount of t h i r t e e n thousand two hundred d o l l a r s ($13,200.00)? A. No. "Q. Were you given a n opportunity t o r e a d t h e c o n t r a c t a t t h a t time? A. No. "Q. Why not? A. W e l l , he was i n , seemed t o be i n a hurry. Wanted t o g e t it signed and then, of course, I d i d n ' t ask him t o r e a d it b u t m y wife had mentioned it and he s a i d it was, t h e r e was no reason t o read i t . " A s w e have noted, t h e r e a r e t i m e s when t h e l a w imposes a duty upon a p a r t y t o speak r a t h e r than t o remain s i l e n t and thereby t o d i s c l o s e information t o p l a c e t h e person w i t h whom he i s d e a l i n g on a n equal f o o t i n g w i t h him. The f a i l u r e t o speak i n such a c a s e amounts t o t h e suppression o f a f a c t which should have been d i s c l o s e d and c o n s t i t u t e s f r a u d . Wheeler v. Missouri P.R. Co. (1931), 328 Mo. 888, 42 S.W.2d 579, 583; Dirks T r u s t and T i t l e Co. v. Koch (1913), 32 S.D. 551, 143 N.W. 952, 953. Here t h e f i d u c i a r y r e l a t i o n s h i p which e x i s t s between a broker and h i s c l i e n t , imposed upon p l a i n t i f f a duty t o d i s - c l o s e a number of f a c t s which w e r e n o t d i s c l o s e d . These i n - cluded t h e f a c t t h a t defendants could n o t withdraw p l a i n - t i f f ' s a u t h o r i t y under t h e agreement without f o r f e i t i n g a s i z e a b l e commission, nor could they sell t h e p r o p e r t y on t h e i r own during t h e t e r m of t h e agreement. The D i s t r i c t Court e r r e d i n f i n d i n g t h e r e was no f r a u d involved i n t h e execution of t h e employment c o n t r a c t and t h e judgment of t h e D i s t r i c t Court must be reversed. With r e s p e c t t o a t t o r n e y f e e s , w e n o t e t h e following p r o v i s i o n i n t h e b r o k e r ' s c o n t r a c t : " I n case of s u i t o r a c t i o n on t h i s c o n t r a c t , I agree t o pay such a d d i t i o n a l s u m as t h e c o u r t may adjudge reasonable a s p l a i n t i f f ' s attorneys fees." By v i r t u e of s e c t i o n 28-3-704 MCA, t h i s contractual r i g h t t o attorney f e e s i s reciprocal. Therefore, t h e case i s remanded f o r determination of and an order awarding reasonable a t t o r - ney f e e s t o defendants. Reversed and remanded. 2 b - ~ ~ $ k d Chief J u s t i c e W e concur: Mr. Justice John C. Sheehy dissents: It is straining the theory of fiduciary relationships a bit to hold that between a realtor and a seller of real property, the relationship exists before the execution of an enforceable listing agreement or earnest money agreement. A fiduciary relationship was held to exist before the signing of an earnest money agreement in Starkweather v. Shaffer (Ore. 1972), 497 P.2d 358, 360, but that was a case involving intentional deceit on the part of the realtor. A fiduciary relationship applies when the parties are not on equal footing, which does not appear to me to be the case here. However, we have held that as between a realtor and the seller, a fiduciary relationship does arise, especially after the listing agreement has been signed. Carnell v. Watson (1978), Mont. , 578 P.2d 308, 35 St.Rep. 550. I would concede, for the sake of argument here, that prior to the execution of the listing agreement, a fiduciary relationship existed between the owners (Moore) and the real estate agent (Lyle), although this has not been specifically held to be true in Montana until now. Even so, the duty of the fiduciary (Lyle) to make full disclosure to his beneficiary (Moore) does not apply where the beneficiary has equal and full opportunity, or the means at hand, to acquire knowledge of the facts on his own. It is stated in Lee v. Stockmen's Nat. Bank (1922), 63 Mont. 262, 284, 207 P. 623, 630, that: "When it appears that a party, who claims to have been deceived to his prejudice, has investigated for himself, br that the means were at hand to ascertain ITietrutE . . ---- . . - . of anv re~resentations made to him, his - - -.-- A -- - - -- reliance upon such representations made to him, however false they may have been, affords no ground of complaint (citing cases)." See also, Lowe v. Root (1975), 166 Mont. 150, 156, 531 P.2d 674, 677. - 9- Here, the Moores, each of whom can read, and of whom the husband especially has a long experience in contractual matters, had before them in its entirety, the one-page listing agreement with its terms set out for their reading. In that situation they are in no different position than any other prospective contractor, absent fraud or coercion, in their duty to read and know the contents of any agreement they sign. It will not suffice for them to say later they never read the instrument before affixing their signatures, or did not under- stand the obligations imposed by the contract. Guthrie v. Halloran (19311, 90 Mont. 373, 380, 3 P.2d 406, 408. The exceptions to the rule, of course,xe fraud or coercion. It is injudicious to hold that the plaintiff here defrauded the Moores. The District Court did not find so, and under ordinary appellate rules, we are bound by fact determinations of the District Court. Rule 52(a), M0nt.R.Civ.P. The record does not show any act or representation by Lyle which led the husband Moore to sign without reading. The grounds relied on by the majority to show the wife was misled are paper-thin, and were rejected by the District Court. In fact, the husband testified he read over the listing agreement a few days later and understood it. It was with that knowledge that he withdrew from the contract before the time expired. He did not move to rescind the contract. Rather Moore testified emphatically that the reason he withdrew Lyle's authority was that Moore had reached the conclusion the sale to the Kansan was void under Canadian law. It should be made clear that the Moores were at all times aware of the size of the commission involved for a total selling price of $220,000 under their agreement. The husband Moore had in his possession defendant's exhibit 2, which he produced at trial, and which was given to him by Lyle prior to the execution of listirgac_i~ement, which shows on it "commission 6% of selling price $13,200.00." -10- The majority opinion that Lyle committed a fraud goes against the warp of the evidence. There is every indication that he acted fairly: He found a buyer who would pay $15 more per acre than the Moores could find on their own; the length of time of the listing agreement was 28 days, certainly not a long time for an exclusive listing; he procured an attorney to ascertain what the Canadian law required. The listing agreement which he presented to the Moores was a standard one, and its provisions respecting withdrawal are the common provisions one finds in the real estate business in Montana. For doing business in the ordinary way, he has been found fraudulent. Not only does he lose the commission, his attorney fees and costs, but he has now been subjected to attorney fees for the other side. I cannot agree with that result. I concur in the foregoing dissenting Opinion. A------ Justice