No. 84-243 

IN THE SUPRES4.E COURT OF THE STATE OF MONTANA 

1984 

ERA REAL ESTATE HOME & RANCH 

PROPERTIES, a Montana corp. , 

Plaintiff and Appellant, 

BIG HOWJ GAME WCH, INC. , a Montana corp., 

Defendant and Respondent. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Diane G. Barz, Judge presiding. 

COUXSEL OF RECORD: 

For Appellant: 

Parker, Sweeney, Healow & Lee; Mark D. Parker argued, 

Billings, Montana 

For Respondent : 

Davidson, Beeder, Baugh, Broeder, Poppler and 

Michelottir G. Todd Baugh argued, Billings, Montana 

Submitted: September 21, 1984 

Decided: October 18, 1984 

-, .- 

Clerk 
Mr. Chief Justice Frank I. Haswell delivered the Opinion of 

the Court. 

ERA Real Estate appeals a summary judgment dismissiilg 

its claim for a commission in the Yellowstone County District 

Court. 

The plaintiff real estate broker (ERA) brought this 

action to recover a real estate commission it believed had 

been earned on a large ranch sale. The defendant, Bighorn 

Game Ranch, Inc. (Bighorn), was the owner and seller of the 

16,000-acre ranch located near Hardin, Montana. ~ighorn gave 

Michael Murphy, an agent for ERA, a nonexclusive listing to 

sell the ranch in March 1982. There was no formal listing 

agreement executed, but the understanding between Bighorn and 

Murphy was that Murphy would earn a 5 percent sales commission upon making or effecting a sa1.e. 

At the time the listing was given to Murphy, Bighorn 

was in a Chapter XI bankruptcy proceeding. Murphy was given 

authority by the trustee to sell the ranch and told to take 

directions from Larry Feldman, the president of Bighorn. 

Feldman directed Murphy to sell 100 percent of Biqhorn's 

stock, which would include the ranch asset and a substantial 

tax loss carry-over which Bighorn had accrued. 

Acting for ERA, Murphy found a potential buyer in 

September 1982. Dennis Haden of Dallas, Texas, was eager to 

buy the ranch for its tax advantages and proposed a tax-free 

exchange of a building he owned in Dallas for the ranch. 

Feldman was amenable to the deal and signed a buy-sell agreement with the buyer on Septemher 10, 1982. Closing was set 

for December 9, 1982. 

The buy-sell agreement contains several provisions 

pertinent to this appeal. One page entitled "Special 
Provisi.ons" contained the following language in normal--sized 

type : 

"THIS SALE JS SUBJECT TO THE FOLLOWTNG: 

"E. Concurrent execution of an agreement 

between the holders of 100% of the common 

stock in Big Horn Game Ranch, Inc., 

wherein they agree to sell all of their 

stock in said corporation free and clear 

of all encumbrances to PURCHASER, and 

PURCHASER agrees to purchase same for the 

sum of $300,000.00 

"J. $142,300.00 shall be paid at closing 

to ERA Home & Ranch Properties, Bill-ings, 

Montana. 

"L. This offer is made to the shareholders of Big Horn Game Ranch, Inc., but 

-- must be approved by --- all of the sharehold- 

- ers and the trustee of the Big Horn 

Fanch, Inc. bankruptcy." (Emphasis 

supplied . ) 

The contract to make a sale was therefore conditional 

upon approval by the shareholders of Bighorn. 

The shareholders of Bighorn were a group of oriental 

businessmen. The exact ownership of the common stock changed 

during the course of these dealings. The president Feldman 

negotiated with the buyer Haden under the belief he had 

authority to enter into a sales contract for Bighorn. Haden 

recalled in a deposition that Feldman told him before the 

buy-sell agreement was signed that he had the authority to 

speak for the shareholders of Bighorn Game Ranch. 

The shareholders of Bighorn never unconditionally 

approved the proposed ranch sale and the deal never closed. 

On October 2, 1982, a combined meeting of the shareholders 

and directors was held in San Francisco. The meeting was 

conducted in various Eastern dialects. Feldman followed the 
business of the meeting through interpreters and afterwards 

drafted his impressions into proposed minutes. These minutes 

were never signed by the Secretary of Bighorn or the majority 

shareholder, Supasit Mahaguna. They state in relevant part: 

"In principal [sic] the Shareholders and 

board approved the sale and exchange [of 

the ranch] subject to an inspection of 

the building in Dallas, the approval of 

title insurance on the Dallas building, 

and the approval of the net lease on the 

building in Dallas." 

Supasit Maha-guna visited and inspected the Dallas 

building owned by Dennis Haden the day following the shareholder meeting. Mahaguna speaks a little English and Haden 

asked him if he was satisfied with the deal. Mahaguna nodded 

affirmatively and shook hands with Haden. 

Feldman learned indirectly in December that Mahaguna 

had rejected Haden's purchase offer. The closing date had 

previously been extended to February 28, 1983. Prior to 

February Feldman attempted to resurrect and keep the deal 

alive by writing Mahaguna and requesting him to reconsider. 

llahaguna did not respond. Feldman informed Haden in 

mid-February of these events and wrote, ". . . it currently 

appears as if I am not going to be able to deliver on my 

promise to se1.l you the Bighorn Game Ranch." In late February, Haden traveled to Colorado and was prepared to close hut 

Feldman was unable to proceed without the shareholders' 

approval or stock certificates. 

ERA brought this action to recover the real estate 

commission from Bighorn. The District Court granted summary 

judgment in favor of defendant Bighorn on April 20, 1984. 

The District Court noted that the buy-sell agreement 

contains conditions precedent--specifically, full shareholder 

approval. Only upon such approval would the contract become 
bindinq. The court accepted the authenticity of the minutes 

prepared by Peldman and stated in its order that the shareholders at the meeting had ratified the transaction "subject 

to an inspection of the building in Dallas." However, the 

trial court found the shareholders never outright approved 

the contract. Hence, the condition precedent was not performed, a valid contract did not result, and ERA did not 

effect a sale. The court concluded ERA was not entitled to a 

broker's commission. We affirm. 

The arguments appellant ERA presents on appeal can be 

summarized as one issue: 

Did the failure of the seller to close the sale constitute wrongful conduct entitling ERA to its broker's 

commission? 

The parties agree that the controlling Plontana cases 

are Diehl & Associates, Inc. v. Houtchens (1377), 173 Mont. 

372, 567 P.2d 930, and Associated Agency of Bozeman, Inc. v. 

Pasha (Mont. 1981), 625 P.2d 38, 38 St.Rep. 344. ERA was 

required to effect a sale and under Diehl we have interpreted 

this language to mean the broker must complete the sale to 

earn his commission. Completing the sale involves payment of 

the purchase price and conveyance of title. In Pasha, the 

genera1 rule was modified: a broker is entitled to his 

commission even if the sale is not completed, providing a 

ready, willing and able buyer is procured and the failure to 

close was due to the wrongful conduct of the seller. See 

also, Ehly v. Cady (Mont. 19841, P.2d , 41 St.Rep. 

1611. 

The broker ERA has failed to produce evidence of wrongful conduct on the part of Bighorn. The buy-sell agreement 

was clearly conditioned on full shareholder approval. 
Tndeed, this clause was added to the contract at the request 

of the buyer Haden. Haden undoubtedly recognized the importance of shareholder approval in a deal where the entire 

assets of a corporation would be purchased. 

Bighorn's shareholders never unconditionally approved 

the sale. The "minutes" of the October shareholder meeting, 

even if elevated in authenticity to a signed, executed and 

accurate representation of the meeting, do not indicate 

ratification of the sale. The sale was only approved in 

principle and subject to the approval of the Dallas building. 

One shareholder did apparently inspect and approve the exchange building. However, there were several other shareholders in Bighorn and the record does not disclose their 

opinions. 

The District Court correctly reasoned that the buy-sell 

agreement was a conditional contract containing the condition 

precedent of full shareholder approval. The condition precedent was never performed and therefore the legal obligations 

under the contract--i.e., payment of the broker's commission 

--never became enforceable. Section 28-1-403, MCA. Under 

these circumstances, the seller's failure to close did not 

constitute wrongful conduct within the meaning of our Pasha 

decision. Consequently, the broker ERA was not entitled to 

its commission on the uncompleted sale. 

ERA further argues that the corporation Bighorn should 

he held liable for the representation by its president, 

Feldman, that he had authority to speak for the shareholders. 

This matter is addressed by the principles of the law 

of agency. The third party broker would like to hold the 

principal, Bighorn, liable for the contract executed by the 

agent, Feldman. Here, where the disclosed principal did 
nothing to indicate to the broker that the agent had authority to bind all. shareholders, there is no liability. There 

was no apparent authority whereby the principal could be held 

liable. Restatement (Second) of Agency, 5 159 (1958) . 

This is a case where the agent possibly exceeded hi^ 

authority. Even where the agent was reasonably mistaken and 

believed in good faith that he acted with authorization, the 

Restatement, supra, would absolve the principal and hold the 

agent liable. See, S 329, comment b. Cf., Losinski v. 

American Dry Cleaning Co. (Minn. 1979), 281 N.F!.2d 884; Husky 

Industries, Inc. v. Craig Industries (KO. App. 1981), 618 

S.W.2d 458. 

In this case we have an express provision in the underlying contract that indicated additional approval from the 

shareholders was required. The provision should have given 

the broker Murphy notice that the president had no authority 

to bind Bighorn. See, Hansen v. Power (1977), 279 Or. 589, 

569 P.2d 573 (where it appears that a person dealing with an 

agent knew that approval by another person was required, 

there can be no claim of the agent's apparent authority) ; 

Mid-State Homes, Inc. v. Berry (Ala.Civ.App. 1978), 359 So.2d 

401 (where the contract for sale of real estzte indicated 

that written approval was required, the agent's assurance 

that the contract would be approved did not negate the express restriction known to the buyer). 

Appellant ERA cites Acmer Corporation v. State Transport Company (1976), 275 Or. 51, 549 P.2d 1114, for the 

proposition that a person who fails to deliver at closing is 

still liable for a commission. 

Respondent Bighorn justifiabl-y distinguishes this case. 

In Acmer the corporation was found liable, but there was an 
express grant of authority to its president to sell the 

corporation. The president was a board member who owned 

two-thirds of the stock and the board of directors in a duly 

authorized meeting specifically granted him the authority to 

sell the corporation subject to approval by the owners of 

two-thirds of the stock of the corporation. When the president who had authorized the sale as a board member later 

rejected the transfer as a shareholder, the Oregon Supreme 

Court held the corporation liable for the broker's commission. There was no analogous grant of authority in this 

case. Feldman was not expressly authorized by Righorn to 

sell, and Bighorn did nothing to indicate to the broker that 

he was. The corporation is not liable for representations by 

its agent that he acted with full shareholder approval, 

particularly when the underlying contract was expressly 

conditioned on such approval. 

The judgment of the District Court is affirmed. 

~LDAAJ .&* 

Chief Justfce 

We concur: