NO. 95-481

IN THE SUPREME COURT OF THE STATE OF MONTANA

1996

E. T. AASHEIM and ETTABEL AASHEIM,

d/b/a MONTANA REAL ESTATE EXCHANGE,

Plaintiffs and Appellants,

LeROY REUM and CLIFF REUM, d/b/a ROY'S

READY MIX and LAKE COUNTY ABSTRACT CO.,

Defendants and Respondents.

APPEAL FROM: District Court of the Twentieth Judicial District,

In and for the County of Lake,

The Honorable C. B. McNeil, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Bryan Charles Tipp and Raymond P. Tipp;

Tipp and Buley, Missoula, Montana

For Respondent:

James A. Manley; Manley, O'Rourke-Mullins,

Polson, Montana

Filed:

Submitted on Briefs: June 27, 1996

Decided: August 20, 1996
Justice Charles E. Erdmann delivered the opinion of the Court.

This is an appeal from the Findings of Fact and Conclusions of

Law and Judgment by the Twentieth Judicial District Court, Lake

County, holding that the plaintiffs/real estate brokers were not

entitled to a commission for an aborted sale as a ready and willing

buyer was not procured. We affirm.

The issue on appeal is as follows:

Did the District Court err when it concluded that Aasheim was

not entitled to recover his commission for the aborted sale?

FACTS

LeRoy Reum operated a concrete business and owned the real

property upon which the business was located. Reum entered into a

listing agreement with real estate brokers E. T. Aasheim and

Ettabel Aasheim for the purpose of completing a sale to Larry L.

Smith. In October 1988, Reum and Smith entered into a buy/sell

agreement for Reum's business and property for $200,000. This

agreement required Reum to carry fire insurance on the real

property, fixtures, and equipment. Smith paid $2,000 earnest money

upon signing the agreement and the closing date was set for

December 15, 1988.

On November 28, 1988, a fire destroyed the main building on

the property, a vehicle, and some miscellaneous tools. Reum did

not have fire insurance on the real property, although he did have

insurance for the personal property. Reum offered to rebuild the

main structure, replace the personal property, and go through with

the deal. Smith declined this offer and negotiations continued

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between the parties' attorneys over the next two months. Smith and

Reum agreed to new terms and a reduction of the purchase price to

$140,000 in early February 1989. A modified agreement was drafted

but was never executed by the parties.

During the next three months there was continued

correspondence between the parties; however, a closing date was

never set. By late April 1989, Reum was informed by his bank that

he was at risk of losing his property unless he concluded the sale

and paid his debt. Reum wrote Smith on April 21 that the sale must

close no later than April 25, 1989. In May, Reum notified Smith

that the sale was terminated because of Smith's financial inability

to close. Reum entered into another buy/sell agreement at this

time.

The attorney for the new buyer contacted Aasheim and Smith

seeking liability releases. Smith provided the new buyer with a

release but Aasheim refused to release Reum from his alleged

obligation to pay a brokerage fee. Aasheim faxed a letter to the

closing agent claiming a $10,000 commission on the closing

proceeds. The new buyer insisted that $10,365 out of the total

sale amount to be disbursed to Reum be withheld due to Aasheim's

claim. This money was placed in an interest bearing trust account

which was subsequently paid over to the Clerk of District Court,

Lake County. Smith's $2,000 earnest money was returned by the

title company to Aasheim who placed it in his own noninterest

bearing account.
The District Court determined that a modified agreement was

reached between Reum and Smith and that Smith was not a financially

able buyer in the spring of 1989. The District Court therefore

held that Aasheim was not entitled to the commission. Aasheim

appeals.

ISSUE

Did the District Court err when it concluded that Aasheim was

not entitled to recover his commission for the aborted sale?

We review a district court's findings of fact to determine

whether they are clearly erroneous. Daines v. Knight (1995), 269

Mont. 320, 324, 888 P.2d 904, 906. This Court has adopted a

three-part test to determine whether the findings are clearly

erroneous. Interstate Prod. Credit Ass'n v. DeSaye (1991), 250

Mont. 320, 323, 820 P.2d 1285, 1287. The test provides that:

(1) the Court will determine whether the findings are supported by

substantial evidence; (2) if the findings are supported by

substantial evidence the Court will determine if the trial court

has misapprehended the evidence; and (3) if the findings are

supported by substantial evidence and that evidence has not been

misapprehended, this Court may still find that a finding is clearly

erroneous when, although there is evidence to support it, a review

of the record leaves the Court with the definite and firm

conviction that a mistake has been committed. DeSave, 820 P.2d at

1287.

The standard of review for a district court's conclusions of

law is whether the court's interpretation of the law is correct.

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Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459, 469,

898 P.2d 680, 686; Steer, Inc. v. Dep't of Revenue (1990), 245

Mont. 470, 474-75, 803 P.2d 601, 603-04.

This Court, in Ehly v. Cady (1984), 212 Mont. 82, 687 P.2d

687, has previously held that:

[Al broker employed to 'sell or effect a sale' and

exchange (as is the case here) does not earn his

commission until the purchase price is paid, title is

conveyed and the sale is completed. See Diehl and Associates,

Inc.v.Houtchens (1977), 173 Mont. 372, 567 P.2d 930. In an

expansion of this holding, however, we must also conclude

that a broker is still entitled to his commission even if

the sale is not completed if a ready, willing and able

buyer is procured and the failure to consummate was

solely due to the wrongful acts or interference of the

seller.

Ehly, 687 P.2d at 698 (quoting Associated Agency of Bozeman, Inc.

v. Pasha (1981), 191 Mont. 407, 414, 625 P.2d 38, 43).

The District Court found that there was no wrongful act or

interference by Reum which caused the sale to fail and that it was

Smith's financial inability which actually prevented the completed

sale. It held that there was a modified contract which acted as an

accord and satisfaction discharging any previous claims of breach

of contract from the initial sales agreement and therefore, based

its determination of Smith's financial ability during the later

negotiation period.

Aasheim argues that the District Court erred in finding that

Smith was not a ready, willing, and able buyer in the spring of

1989. He asserts that at the time of the initial closing date

Smith was willing and able to purchase the business and that the

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cause of the sale's failure was Reum's wrongful act of failing to

procure fire insurance on the property.

Reum responds that the District Court's findings that the

failure to close was not the result of any wrongful act or

interference by Reum and that Smith was not financially able to

close the transaction are supported by substantial evidence and are

not clearly erroneous.

After the fire occurred, Reum was willing to complete the sale

and offered to reconstruct the building and replace the property

destroyed in the fire, in effect self-insuring the property. Smith

chose to decline Reum's offer and instead offered to negotiate new

terms for the sales contract, including a lower price. The

District Court's finding of fact, albeit mislabeled as a conclusion

of law, that the cause of the failure to close was not Reum's

failure to procure insurance, is supported by substantial evidence.

The District Court's finding, again mislabeled as a conclusion

of law, that the failure of the sale to close was actually the

result of the lack of a ready, willing, and able buyer was also

supported by substantial evidence. Smith was not willing to

purchase the property at the time of the initial closing, nor was

he ready, willing, and able to purchase the property in the period

of negotiations over the next few months as a result of his

precarious financial position.

There is also substantial evidence to support the District

Court's finding that the negotiations produced a modified version

of the original sales agreement. Whether or not this agreement was

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fully executed is irrelevant, as the record establishes that there

was no wrongdoing or interference by Reum which caused the sale to

fail, as Smith was unwilling to complete the sale at the time of

the initial closing, and that he was clearly financially unable to

perform as the negotiations continued. The District Court's

finding that the failure to set a specific date for closing was not

a result of failed negotiations, but rather was the result of Smith

being financially unable to perform, is also supported by

substantial evidence. The District Court did not misapprehend any

of this evidence and we have no firm conviction that a mistake has

been made. DeSave, 820 P.2d at 1287. We therefore determine that

the District Court's findings are not clearly erroneous.

We hold that based upon these findings the District Court did

not err in its interpretation of the law. Having found that the

failure to consummate the sale was not a result of any wrongful

acts or interference by Reum and that Aasheim's buyer, Smith, was

not financially able to close the transaction, the court correctly

concluded that Aasheim was not entitled to a commission under the

terms of the agreement. Ehly, 687 P.2d at 698.

Affirmed.

We concur: