No. 81-176 IN THE SUPREME COURT OF THE STATE OF MONTANA

MIKE NARDI, d/b/a MIKE NARDI REALTY, Plaintiff and Respondent,

LAWRENCE H. SMALLEYAND CAROL C. SMALLEY, husband and wife, Defendantsand Appellants, and LAWRENCE H. SMALLEY and CAROL C. SMALLEY, husband and wife, Defendants and Cross-Plaintiffs and Appellants,

JOSEPHALTMAYER and VICTORIA ALTMAYER, husband and wife, Third Party Defendants and Appellants.

Appeal from: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone,The Honorable William J. Speare, Judge presiding. Counsel of Record: For Appellant: Gary E. Wilcox, Billings, Montana Paul G. Olsen, Billings, llontana For Respondent: Donald

## ern don; Herndon, Harper & Munro, Billings, Montana

Filed: - -- Submitted on Briefs: December 30, 1981 Decided: April 1, 1982 

## APR

# -1

## 1982Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of theCourt.

Plaintiff brought this action to collect a real estate commission against defendants, Smalleys. Smalleys, the sellers, impleaded third party defendantsAltmayers, the buyers. Judgmentwas entered in favor of plaintiff against Smalleys and judgmentwas entered for Smalleys on their cross claim againstAltmayers. Both Smalleys and Altmayers appeal. On May 20, 1977,appellants, Sma1l.eysand respondent, Nardi entered into a real estate broker's employment contract whereby Nardi agreed to attempt to sell "Smalley'sGarden and Floral Center." The extent of the discussion and negotiations prior to the signing of the contract are disputed. Nardi claims that at least three hourswere spent discussing the contract while Smalleys assert that only one-half hour

was devoted to those conversations. No specific finding of fact regarding this issuewas made by the DistrictCourt; however, the court did conclude that no act or omission by Nardi constituted any valid defense to his claim for the commission and that the contractwas valid and enforceable. The contractprovided that the selling price would be "$220,000

### + inventory" and that the broker was to receive 10 percent of the selling price as a commission. Other relevant sections of the contract state: "FORVALUE RECEIVED,you hereby are employed to sell or exchange the property described hereon at the selling price and on the terms noted. In the event thatyou, or any other brokers cooperating with you, shall find a buyer ready and willing to enter into a deal for said price and terms, or such other terms and price as Imay accept, or that during your employmentyouplace me in contactwith a buyer to or throughwhom at any time within 90 days after the termination of said employment Imay sellor convey said property, I hereby agree topay you in cash foryour services a commission equal in amount to 10% of the above stated sellingprice. ($220,000

### + inventory.)

"Thisagreement expires atmidnight onNovember 20, 1977but I further allowyou a reasonable time thereafter to close any deal onwhich earnest money is then deposited.

"Incase of suit or action on this contract, I agree to pay such additional sum as the court,both trial and appellate,may adjudge reasonable as plaintiff's attorneys fees.

"THISLISTING ISAN EXCLUSIVE LISTING and you hereby are granted the absolute, sole and exclusive right to sell or exchange the said described property. In the event of any sale, by me or any other person, or of exchange or conveyance of said property, or any part thereof,during the term of your exclusive employment, or in case Iwithdraw the authority hereby given prior to said expiration date, I agree to pay you the said commission just the same as if a salehad actually been consummatedby you." Pursuant to this agreement, Nardi advertised the property in the Billings Gazette as well as in the Minot and Fargo, North Dakota newspapers and PreVueMagazine. In addition, Nardi showed the property to approximately ten prospective buyers and talked to several others on the telephone. TheAltmayers contacted Nardi inmid-September 1977, and expressed an interest in purchasing the floral shop. After several meetings between Nardi, Smalleys and Altmayers, a finalbuy/sell agreementwas accepted on October 8, 1977. At thatpoint, Nardi ceased advertising the property. Thebuy/sell agreement quoted the total purchase price

as $220,000 and also provided for an earnestmoney payment of $1,000, which was paid. The agreement stated that the offer to purchasewas contingent upon Altmayers selling their property in Ohio prior to January 5, 197%. Anotherspecial provision stated that the salewas to include inventory ofmerchandise in the amount of $20,000 and that the selling price would be adjusted to reflect any discrepancy in the estimated value of the inventory. Finally, the agreement had a closing date of January 5, 1978,or thirty days thereafter, February 4, 1978, for completion of financing arrangements. Inmid-November, it became apparent that the Ohio property was not going to be sold prior to January 5, 1978. Therefore, Smalleys requested Nardi to once again advertise their property, but denied Nardi's request for an extension of the employment contract. Nardi kept in contactwith both parties to the agreement and frequently contacted an Ohio broker regarding the progress of the sale of the Ohio property. Altmayers did not sell their Ohio property prior to January 5, 1978. In mid-January, Smalleys and Altmayers reentered negotiations between themselves. They did not request assistance from Nardi, who claims to have made his assistance available to them. The District Court found that "[alfter the contingency in the original ~uy/Sellfailed, the parties entered into directnegotiations to the exclusion of the broker,Mike Nardi, who was not notified or asked for assistance." As a result of these negotiations, Smalleys andAltmayers executed, on January 31, 1978, the following documents for sale of Smalleys' shop: (1)a contract for deed; (2)a modification of the contract for deed; (3)an abstract of the agreementbetween theparties; and (4)a warranty deed for theproperty. The contract for deed contained several pertinent clauses:"(1)The purchase price of all the real and personal property was $200,000. "(2) Part of the purchase price was to be paid by Altmayers' assumption of Mike Nardi's real estate fees incurred by Smalleys as a result of the sale of the property. "(3) Once the State of Montana's condemnation proceedings regarding the highway in front of the storewere final, the proceeds were to be used to pay $20,000 of thepurchase price. If no proceeds were paid, $20,000was to be added to the end of the contract. 

### "(4) On February 1, 1978,Altmayers were to: "(a) determine the value of the store's inventory; "(b) commencepaying interest to Smalleys; and "(c) be given possession of the store. "(5) TheWarranty Deed, Bill of Sale and other necessary documents were placed in escrow to be delivered to Altmayers upon fullperformance of the agreement." The only terms missing from this contract were the value of themerchandise within the store and the value of the proceeds to be received as a result of the highway condemnationproceedings. Nevertheless, Smalleys and Altmayers claim that their contract for deed was unenforceable until the condemnation proceedings were final, August 17, 1978. Smalleys claim to have turned possession of the store over to Altmayers solely for convenience as Mrs. Smalleywas ill and Mr. Smalley frequentlywas out-of-town. If the contractwas enforceable on January 31, 1978, neither the 90day extension period of the real estate broker's employment contract, nor the 30 day extension for financingof the originalbuy/sell agreementhad expired. Therefore,Nardi would arguably be entitled to his commission. If the contractwas not enforceable until August 17, 1978, Nardi arguably would not be entitled to a commission.The issues presented to this Court for review are
numerous. (1) Whether Altmayers have standing to proceed as appellants? (2) Whether the District Court had jurisdiction over this case sinceplaintiff Nardi did not "first allege" that hewas a duly licensed real estate broker in the State of Montana pursuant to section 37-51-401, MCA? (3) Whether Nardi, in his capacity as a real estate broker, breached his fiduciaryduty to Smalleys,the listing owners,by failing to completely disclose the terms and conditions of the real estate broker's employment contract? (4) Whether Nardi, in his capacity as a real estate broker, abandoned his employment under the real estate broker's employment contractwith Smalleys, thereby freeing Smalleys to sell the property free from commission liability to Nardi? (5) Whether the buyers and sellers entered into an enforceable contractwithin 90days after the expiration of the real estatebroker's employment contract, thus entitling Nardi to his commission? (6) If Nardi is entitled to a commission, should the commissionbe on the sale of the inventory also? (7) IsNardi entitled to attorney fees? The first two issues presented to this Court are without merit. Joseph and Victoria Altmayer were properly joined as parties to the District Court proceedings as they signed a contract to pay all real estate fees owed Nardi by Smalleys. The judgment of the District Court included an order directing Altmayers to pay Smalleys $21,520. TheAltmayers are entitled to appeal that judgment pursuant to Rule 1,M.~.~pp.civ.P.Section 37-51-401, MCA, requires a real estate broker who brings an action in a court for collectionof compensation to first allege and prove himself to be a licensed real estate broker in the State of Montana. Although Nardi did not allege himself to be a licensed broker in his initial complaint, the court's pretrial order contained an amendment to the complaint stating thatNardi was at allmaterial times a licensed real estate broker inMontana. In addition, at the start of the trial, Nardi introduced his broker's license as plaintiff's exhibit number one. None of the appellants objected to thepretrial order or plaintiff's exhibit number

one. The order and the exhibit adequately prove Nardi to be licensed pursuant to the statute. Therefore, Nardi had standing. Issues three and four relate to the duties owed by a real estate broker to his employer, the potential seller. InCarnell v. Watson (1978), 176 Mont. 344, 578 P.2d 308, 312, this Court recognized a fiduciary relationship between

a real estatebroker and the seller. Appellants claim that Nardi breached that fiduciaryduty by failing to fully disclose the terms of the real estate broker's employment contract. The District Courtheld: "Noact or omissionby the plaintiff,Mike Nardi d/b/a Mike Nardi Realty, shownby the evidence constituted any valid defense, either inwhole or inpart, to the claim for a real estate brokerage commission on the sale of Smalley's Floral and Garden Center." We uphold the District Court's determination. Although neither the exact length nor the exact content of the initial meeting were ever completely established,both parties did agree that they met for at least one-half hour to discuss the employment contract. Montana case law indicates that the fiduciary duty between a broker and a seller isbreached when the seller isfooled or deceived by the contract or does not understand the contract. Flernmer v. Ming (1980), Mont

# . , 621 - P.2d 1038, 37 St.Rep. 1916;First Trust Company of Montana



### v. McKenna (1980), 

### -Mont

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### , 614 P.2d 1027, 37 St.Rep. 1026. 

### Mr. Smalley testified on cross-examination that he

was familiarwith standard broker employment contracts such

as the one used by Nardi, that he was not fooled or deceived by the contract and that he understood the contract and knew what he was signing. Furthermore, there is no evidence that Nardi, in breach of the fiduciary relationship, gained an advantage which could result in constructive fraud under section 28-2-406, ICA. The instant case is distinguishable from Lyle v. Moore (1979)

### , Mont

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### , 599 P.2d 336, 36 St.Rep. 1307. In Lyle, this Court found a breach of the fiduciary duty when the broker failed to disclose to the seller that should the sellerwithdraw the broker's authority to sell the property

or sell the property himself, the seller would be liable to the brcker for his coritmission. In the instant case, the breach of the fiduciary duty is based on the broker's failure to disclosewhether or not his 10 percent commission included 10percent of the inventory price. The contract called for a commission to be paid equal to 10percent of the "selling price." The selling price herewas $200,000. The trial court applied the clear terms of the contract. Appellants contend Nardi abandoned his listing. Abandonment is a question of fact. In its findings of fact, the District Court stated: "After the contingency in the original Buy/Sell failed, the parties entered into direct negotiations to the exclusion of the broker,Mike Nardi." The court went

on to conclude, "[tlheplaintiff,Mike ~ardi, did not abandonhis agency agreement." There is substantial credible evidence to support this conclusion of the DistrictCourt. Mr. Nardi testified that he remained in contactwith the parties both prior and subsequent to January 5, 1981, the date established for fulfillment of the contingency. After January 5, 1981,Nardi was told by all appellants that there was nothing he could do as theywere awaiting finalization of the highway condemnation proceedings and/or valuation of the inventory. We uphold the District Court's conclusion that no abandonment occurred. SinceNardi did not abandon his duties under the employment contract or breach any fiduciary duty owed by him to the seller, he is entitled to receive his commission if the contractby which Altmayers purchased the floral shop was finalwithin the time stipulated inNardi's employment contract. The employment contractprovided forpayment of the commission should Nardi, during his employment,place Smalleys "incontact with a buyer to or throughwhom at anytimewithin 90days after the termination of said employment I (Smalleys)may sell or convey suchproperty." The contract terminated onNovember 20, 1977. Ninety days thereafterwas February 18, 1978. A contract for deed was executed by Smalleys and Altmayers

on January 31, 1978. Two financial termswithin the contract

were leftblank. The District Court found that they "were leftblank to be determined after the inventory value had been determined and the condemnation payment from the State of Montana had been received and credited as agreed." heref fore, the onlymissing terms involved the method of payment, a collateral issue to this contract. The amount of payment was set, $200,000. "Matters which are subsidiary, collateral,or which do not go to the performance of the contract, are not essential and do not have to be expressed in the contract." Van Atta v. Schillinger (1981),

### -Mont

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## , 625 P.2d 73, 38 St-Rep.426. Even without the missing "methodof payment" terms, the contract for deed was valid and enforceableas of January 31, 1978. The employment contractbetween Nardi and Smalleys stated thatNardi would be paid a commissionupon completion of a sale of Smalleys' shop to an individual with whom Nardi had established contact, if the sale occurred within 90days of November 20, 1977. A sale is defined in section 30-11- 101,MCA, as: "Saledefined. Sale is a contractby which, for a pecuniary consideration called a price, one transfers to another an interest in property." The contract for deed is a sale as the buyer receives an equitable interest in the shop in return for an obligation to pay seller $200,000. The contract for deed was valid and enforceable well within the 90day period. The broker, Nardi, is entitled to his commission. The original employment contract stated that the broker would be entitled to a commission of 10percent of the selling price. The selling price was stated to be "$220,000 

### + inventory." The final contract for deed had a selling price of "$200,000including inventory." Inboth instances, the inventorywas included under the term "sellingprice." In the first contract, the value of the inventorywas unknown so no figure was attached to it. However, since "inventory"

was initially included under the selling price, itwas reasonable for the trial court to determine the broker's commission on the basis of the final selling price of $200,000,which included the purchase price of both the real property and inventory involved. Finally, the employment contract states that the seller will be liable for reasonableplaintiff's attorney's fees should an action be brought on the contract. An action was brought, the District Court properly determined plaintiff's attorney's fees and we uphold its determination. Judgment of the District Court is affirmed.

We Concur:

,$hief Justice