No. 13586 IN THE SUPREMECOURT OF THE STATE OF MONTANA 1977

DIEHL AND ASSOCIATES, INC., A Montana Corporation, Plaintiff and Respondent,

-vsL. R. HOUTCHENS, Defendantand Appellant.

Appeal from: District Court of the First Judicial District, Honorable Gordon R. Bennett, Judgepresiding. Counsel of Record: ForAppellant: Smith and Harper, Helena,Montana CharlesA. Smith argued, Helena,Montana For Respondent: Kline and Niklas, Helena,Montana John R. Kline argued, Helena,Montana

Filed: Submitted: April 27, 1977 Decided: 

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## 5977 -Mr. Justice Gene B. Daly delivered the Opinion of the Court. Defendant appeals from the judgment of the district court, Lewis and Clark County, sittingwithout a jury. The district court entered judgment for plaintiff and decreed thatplaintiff recover from defendant the sum of $5,450 in real estate broker's commissions plus reasonable attorney fees in the amount of $400. Plaintiff initiated this action to recover real estate broker's commissionspurportedly due and owing from the sale of two parcels of real property owned by defendant. On March 19, 1975,plaintiff and defendant entered into two listing agreements entitled REAL ESTATE BROKER'S EMPLOYMENT CONTRACT. One of the contracts was for the sale of 80 acres of agricultural land in the vicinity ofApplegate Road (the Applegate property). The employment contract specified a purchase price of $50,000 cash or possible contract for deed with a sizeable down payment. The rate of brokerage commissionwas to be 10% of the stated sellingprice and the agreementwas to expire on June 1,1975. The second listing agreementwas for the sale of a trailer park referred to as the Broadwater Trailer Court. This employment contract specified a purchase price of $55,000 cash or terms of $15,000 down paymentwith the buyer assuming defendant's outstanding contract for deed, the balance to be financedby defendant on a contract for deed at 8% interest. The rate of brokerage commissionwas to be 6%of the stated selling price and the agreementwas to expire on June 1,1975. OnApril 18, 1975,plaintiff obtained the signatures of Courtney B. Atlas and defendant on a buy/sell agreement entitled EARNESTMONEY RECEIPT AND AGREEMENT TO SELLAND PURCHASE. Atlas deposited $500as earnestmoney toward the purchase of the Applegate property. The buy/sell agreement provided for a purchaseprice of $35,000with Atlas to pay $5,000 to defendant, assume defendant's existing contract for deed at existing terms, the balance of the purchase price to be financed by defendant on a contract for deed at 7-1/2% interest for 15years. The buy/sell agreement specified the sale was to be closed on or before May 30, 1975, with a 30 day grace period allowed for the completion of financing, if necessary. The buy/sell agreement furtherprovided that the earnestmoney was to be returned if the purchaser

was unable to assume defendant's existing contract for deed at the existing terms; plaintiff was to receive a brokerage conmission in the amount of 7% of the stated selling price; in the event of a forfeitureof the deposit, the depositwas to be used to pay the agent's incurred expenses related to the sale and the balance was to be apportioned to the seller and agent equally, provided the amount to the agentwould not exceed the agreed commission. Courtney B. Atlas failed to complete thepurchase of the Applegate property by May 30, 1975. Atlas attempted to substitute his wife, Donna Jean Atlas, as the purchaser and upon defendant's refusal to acceptMs. Atlas as a purchaser the negotiations terminated. On April 25, 1975,plaintiff obtained the signaturesof Ray R. Buck and defendant on a similarbuy/sell agreement entitled EAIFJESTMONEY RECEIPT AND AGREEMENT TO SELLAND PURCHASE. Buck deposited $200 as earnestmoney toward the purchase of the Broadwater Trailer Court. The buy/sell agreementprovided for

a purchase price of $50,000 with Buck to pay $10,000as down payment, assume defendant's existing contract for deed, the balance of the purchase price to be financed by defendant on a contract for deed at 8% interest for 10years. The buy/sell agreement furtherprovided for the return of any earnest money in thesame manner as in the previous buy/sell agreement; plaintiff

was to receive a brokerage commission in the amount of 6% of the stated selling price; and the earnest money was accepted ''subjectto the easement being granted and recorded for the disputed western boundary line of the aboveproperty". The sale of the Broadwater Trailer Courtwas not conpleted by June 1, 1975. Defendant's reason for failing to consumate the sale to Buck was the failure to reconcile the boundary dispute, the condition precedent contained in the buy/ sell agreement. No easement was granted or recorded,nor was the lawsuit settled prior to the June 1, 1975,termination date of the buy/sell agreement. On July 3, 1975,plaintiff filed his original complaint which was subsequentlyamended on September 12, 1975. In the amended complaintplaintiff sought to recover $3,000 as the brokerage commission for procuring a purchaser for defendant's Broadwater Trailer Court, $2,450 as the brokerage commission forprocuring a purchaser fordefendant's Applegate property, plus reasonable attorney feesand costs. Defendant filed an

answer and counterc~aim seeking the $500 earnest money deposit made by Courtney B. Atlas and held by plaintiff, plus attorney fees and costs. Plaintiff and defendant instituted discovery and both parties filedmotions for summary judgment. On May 20, 1976, the district court issued its order vacating the June 1, 1976, date for trial and ordered: "Thematter will be submitted to the Court for decision on the basis of the record, including allwritten discovery, as of June 1, 1976,by stipulation of counsel, the Court reserving the right to hold a hearing on factual issues, if necessary." On August 13, 1976,the district court issued its findings of fact and conclusions of lawholding the defendant,by virtue of his acceptance and execution of the contracts entitledEARNEST MONEY RECEIPT AND AGREEMENT TO SELLAND PURCHASE 

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## * * is thereupon obligated to pay the plaintiff broker its commissions, as beyond doubt the plaintiff broker had compliedwith the terms of its listing agreement and has done all that could be done by it." Judgment was accordingly entered in plaintiff's favor onAugust 19, 1976,and defendant appealed to this Court. Indefendant's brief on appeal and on oral argument before this Court defendant's counsel contends the sole issue for review iswhether the district court erred "ingranting Plaintiff's motion for summary judgment and not Defendant's." Apparently defendant's counsel overlooked the effect of the pretrial conference held with the district court on May 20, 1976, and the district court order which provided thematter to be submitted to the district court fordecision on the basis of the record,pursuant to the oral stipulationsof both parties. For purposes of our discussion,we characterizethe district court's judgment as a final judgmenton themerits and view defendant's arguments as challenging the sufficiencyof the evidence relied on by the district court in its findingsof fact,conclusions of law and judgment. Our resolution of thismatter is simplified by a brief summationof the law in the area of a real estate broker's right to compensation for commissions. It is a generally accepted law that a real estate broker is entitled to commissionswhen he has, in pursuance of his employment and within the time specified in the contract of employment,procured a purchaser able, ready and willing to purchase the seller's property on the terms and conditions specified in the contractof employment. Roscow V. Bara, 114 Mont. 246, 135 P.2d 364; 12

### Am Jur 2d 921,Brokers S182. Whenthe broker procures a buyer who makes a counteroffer or agrees to terms at variance to the terms specified in the employment contract, the sellerhas the option of accepting or rejecting the counteroffer. If the seller accepts the counteroffer of the procured buyer, the seller is legally obligated to pay commissions to the broker, either under the terms of the contract of employment or themutually agreed terms of a contract for sale. The broker's ability to recover commissions ispremised

on the broker's ability to accomplish what he undertook to do in his contract of employment. 32ALR3d 321, section 2. The broker isnot entitled to compensation forunsuccessful efforts under his contract of employment, irrespective of how great his effortswere or howmeritorious his services. Roscow v. Bara, supra. It is generally necessary to refer to the specific terms of the particular employment contract in order to determine whether or not the broker's duties have been performed. Plaintiff contends it completed performance under the employment contract when it obtained the signatures of Courtney B. Atlas and Ray 

### R. Buck on the buy/sell agreements, the terms of which were agreed to by defendant. Plaintiff insists that any failure to complete the sale transaction is due to the default or refusal of defendant and is not attributable to the actions of the buyers. In order to resolvewhat the broker's duties were under the enployment contract,we look to the listing agreementswhich provide: "FORVALUE RECEIVED, you hereby are employed to sell or exchange the property described hereon at the selling price and on the terms noted. You hereby are authorized to accept a deposit on the purchase price. You may, if desired, secure the cooperation of any other broker, or group of brokers, in procuring a sale of said property. In the event-that you, or any other brokers cooperatingwith you, shall find a buyer ready and willing to enter into a deal for said priceand terms,or such other terms and price as I may accept,or that durinq your employmentyou place me in contact with a buyer to or throuqh whom at any time within 90days after the termination of said employment Imay sell or convey said property, I hereby aqree to pay you in cash foryour services a commission equal in amount to % of the above stated selling price. I agree to convey said real estate to the purchaser by a good and sufficient deed, to transfer and deliver said personal property, if any,by good and sufficientbill of sale and to furnish title insurance insuring marketable title to said real estate and good right to convey. I hereby warrant that the information shown hereon below is true, that I am the owner of said property, thatmy title thereto is a good and marketable title, that the same is freeof encumbrances except as shown hereafter under "Financial Details"and except taxes levied on said property for the current tax year which are to be pro rated between the seller and buyer. In case of an exchange, Ihave no objection to your representing and accepting compensation from the other party to the exchange aswell asmyself. 

### Ihereby authorizeyou and your customers to enter any part of said property at any reasonable time to show same. Also, I authorizeyou,at any time, to fill in and completeall or any part of the "Informative Data" below, except financialdetails. This agreement expires atmidnight on 

## , 19 I but I further allowyou a reasonable time thereafter to close any deal onwhich earnest money is then deposited. In case of suit or action on this contract, I agree to pay suchadditional sum as the court,both trial and appellate,may adjudge reasonable as plaintiff's attorneys fees. It is further agreed thatmy signature affixed to the renewal clausebelow shall have the effect of renewing and extending your employment to a new date to be fixed by me on the same terms and all with the same effect as if the said new date had been fixed above as the expirationdate of your employment.

"THISLISTING ISAN EXCLUSIVE LISTING and you hereby are granted the absolute, sole and exclusive right to sell or exchanqe the said described property. In the event of any sale,by me or any other person, or of exchanqe or conveyance of said property, or any part thereof,durinq the term of your exclusive employment, or in case I withdraw the authority hereby given prior to said expirationdate, I agree to pay you the said commission just the same as if a sale had actuallybeen consummatedby you." (Emphasis added.) We note the distinction between a brokerage contractwhich requires a broker to merely find a purchaser and a brokerage contractwhich requiresa broker to sell, make or effect a sale.In the first case the broker earns his commission when he procures a buyer able, ready and willing to purchase on the seller's terms. A broker employed to sell or effect a sale does not earn his commission until he completes the sale. Completion of the sale,where real property is involved, amounts to payment of the purchase price and conveyance of title. OtNeillv. Wall, 103Mont. 388, 62P.2d 672. The employment contract or listing agreement in the present caseprovides for the broker's employment to "sellor exchange the property described hereon

## * * * THIS LISTING ISAN EXCLUSIVE LISTING and you hereby are granted the absolute, sole and exclusive right to sell or exchange the property." The plain and clear meaning of the language in the listing agreement specifies a contract to sell or effect a sale, not a contract merely requiring the broker to find a purchaser. In order for plaintiff to recover commissions in the present case it must have completed the sale of the properties owned by defendant. In determining whether the saleswere completedwe must look to the provisions of the buy/sell agreements and the actions of the parties. The buy/sell agreement for theApplegate property specified Courtney B. Atlas as the purchaser and depositer of $500 earnestmoney. On May 30, 1975,Atlas refused to sign

a sale contract or otherwise complete the sale in accordance with the buy/sell agreement. In lieu of Courtney B. ~tlas' performance under the buy/sell agreement,Ms. Atlas was offered

as a signatory to all closing papers and the contract for deed. We fail to findmerit in plaintiff's argument that the substitution of Ms. Atlas benefited defendant in that defendant gained "anadditional signatory to the obligation". Courtney B. Atlas was the contracted purchaser and no party except Courtney B. Atlas was entitled to perform under the buy/sellagreement, absent the assignmentof Courtney B. Atlas' rights under the contractwith the written permission of defendant. We fail to find any legal compulsionwhich would compel defendant to accept a substitutedpurchaser. The failureof Courtney B. Atlas to perform under the buy/sell agreement amounted to amaterial breach of contract and plaintiff's attempt to perform under the listing agreement was defeated. The buy/sell agreement for the Broadwater Trailer Court

was a conditional contract, i.e., the buy/sell agreement contained the conditionprecedent of "theeasement being granted and recorded for the disputed western boundary line". The conditional contractbecame binding only in the event the easement was granted and recorded. Cochranv. Ellsworth, 272 P.2d 904, 126 C.A.2d 429;Blaine

### v. Stinger, 290 P.2d 732, 79Ariz. 376; Diamond 

### v. Haydis, 356 P.2d 643, 88Ariz. 326. Since

no evidencewas ever presented that the easement was granted and recorded, the legal effect is that no binding contractwas ever consummated between defendant and Ray R. Buck. Plaintiff's attempt to perform under the listing agreement failed. The plaintiff failed to accomplish what he undertook to do as set forth in his contractsof employment with defendant and plaintiff is neither entitled to brokerage commissions for his unsuccessful efforts nor reasonableattorney fees for plaintiff's prosecution of the two actions. Lastly, we consider the subject of the $500 earnestmoney deposit made by Courtney B. Atlas. Atlas' failure to perform under the terms of the buy/sell agreement amounted to a material breach of contract and pursuant to the terms of the buy/sell agreement "said earnest money shallbe forfeited to the seller

as liquidated damages

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## *". The buy/sell agreement further provides:"Inthe event of a forfeitureof the deposit as above provided, the said deposit shall be used to pay the agents incurred expenses related to this sale and the balance shall be apportioned to the seller and agent equally, provided the amount to the agent shallnot exceed the agreed commission." Therefore,we remand this matter to the district court for determination of any "agentsincurred expense related to this sale",the balance of the deposit to be equally apportioned between plaintiff and defendant. The judgment of the district court is reversed and the

cause is remanded to the district court for further consideration consistentwith this opinion.

Justice We concur,: P

Chief Justice (1

Justices

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