Case Name: Arthur Wiesenberger, Appellant, v. Lawrence S. Mayers et al., Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1952-12-16
Citations: 281 A.D. 171
Docket Number: 
Parties: Arthur Wiesenberger, Appellant, v. Lawrence S. Mayers et al., Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 281
Pages: 171–183

Head Matter:
Arthur Wiesenberger, Appellant, v. Lawrence S. Mayers et al., Respondents.
First Department,
December 16, 1952.
John W. Davis of counsel (William B. Meagher and Joseph Lotterman with him on the brief; Lotterman & Tepper, attorneys), for appellant.
Simon H. Bifldnd of counsel (Maurice Finkelstein, Joseph S. Iseman, Edioard N. Gostikyan with him on the brief; Paul, Weiss, Bifkind, Wharton & Garrison, attorneys), for Lawrence S. Mayers and another, respondents.
Maurice Finkelstein, attorney for Chauncey M. Mayers and another, respondents.

Opinion:
Van Vooehis, J.
Plaintiff appeals from a summary judgment dismissing the complaint in an action for brokerage commissions claimed to be payable for procuring a purchaser of corporate stock. Plaintiff's terms of employment were expressed in the form of a letter addressed to defendants Lawrence and Chauncey Mayers, which they approved in writing, and which reads as follows:
" This will serve as the memorandum which you requested of what we previously agreed upon orally regarding the sale of all of the outstanding stock of L. & C. Mayers Co., Inc., which I understand is owned by your wives and yourselves.
" As I explained, it takes time to negotiate a sale because first, considerable preparatory work is required before a proper presentation can be made to a prospective buyer, and, second, it takes time for a buyer to decide whether or not to buy. Accordingly, you now give me the exclusive right until August 31, 1950 to sell the above stock. The price is $2,500,000 for all the shares, payable in cash, or upon such other terms as may be acceptable to you. For my efforts in procuring a purchaser by that date, you will pay me $100,000 upon completion of the transaction. Of course, if I do not obtain a purchaser by that date, you will owe me nothing, regardless of my efforts and expense— and it follows also that should I obtain a purchaser by that date, but the transaction should perchance close thereafter, my commission nonetheless will have been earned.
" Because the deal is capable of being worked out in different ways, our understanding is that I am to receive my commission no matter what kind of assets you actually sell or in what form the transaction is cast.
' ' I believe this covers our understanding completely, and, if you agree, kindly sign the enclosed copy of this letter and return it to me."
Construing the facts stated in the affidavits most favorably to appellant, it appears that he procured no prospective purchaser of respondents' stock for $2,500,000, that the price was reduced to $2,170,000 in cash and 12,500 shares of stock in the purchasing corporation worth approximately $134,000 (making a total proposed purchase price of $2,304,000), that no definitive agreement was ever made for the sale of the stock except a written contract signed August 4, 1950, which contained an escape clause expressly allowing the purchaser or the sellers to withdraw unconditionally at the election of either, that no sale was executed at any price nor was any executory agreement concluded which obligated defendants to sell or the prospective purchaser to buy.
The basis on which plaintiff claims to have earned the commission is that after the services which he rendered had been completed without producing a purchaser willing to pay the price asked by the sellers, the latter reduced their demands to what the prospective purchaser was willing to pay, but thereafter changed their minds and declined to sell. It has been conceded that there never was a binding contract compelling defendants to sell. • It is not contended that plaintiff did anything tending to bring the parties together after defendants are claimed to have lowered their demands to the purchaser's level. Recovery is sought upon the basis that defendants said " yes " to the offer that was presented at less than the original terms, but then said '1 no " before a sale had been made or incorporated into an executory contract. Assuming, without deciding, that such facts alone would be sufficient in law to support a recovery, additional facts uphold the dismissal of the complaint by Special Term. These additional facts are narrated briefly, resolving any conflicting statements in the affidavits in favor of plaintiff.
On August 2, 1950, defendants Lawrence and Ohauncey Mayers, in company with plaintiff, met with a representative of the prospective purchaser, Nathan Straus-Duparquet, Inc. The purchaser's representative announced that a loan, which was a necessary condition of the transaction, had been approved, and that upon the consummation of this loan the purchaser would be ready to buy defendants' stock for the consideration herein-before mentioned, to wit: $2,170,000 in cash and 12,500 shares of stock in the purchasing corporation. Later that afternoon they met again, and, according to plaintiff's affidavit: " It was then agreed that the agreement of sale would be finalized by counsel for the parties and executed within the next day or two, and that the agreement, when executed, would be held by Mr. G-old-water in escrow pending the successful conclusion of the loan negotiations, which Straus expected would take place within a few days thereafter."
On August 4,1950, according to an affidavit by the purchaser's president, the parties met for the purpose of signing an agreement. Plaintiff was not present. A draft of the proposed contract had been made containing no escape clause. Defendants Rena, and Helen Mayers arrived late during the meeting. In the affidavit of appellant, who was not present, it is stated that the insertion of an escape clause was then proposed by these two women.
All that is shown by affidavits of persons who were present, is that at the same time when defendants and the purchaser signed the contract, they also signed an escrow agreement that Special Term correctly read in conjunction with the contract of sale. This escrow agreement contained the following paragraphs which are material to the present dispute:
"2. If the Purchaser shall fail within two days after the notification to you of the successful conclusion of the loan negotiations above mentioned to deliver said checks to you, or if the Sellers shall fail within two days after you have notified them that the Purchaser has advised you of the successful conclusion of the loan negotiations to deliver the certificates for the shares of stock of the Corporation as herein provided, then this escrow shall be deemed terminated, and you shall detach from the three counterparts of said agreement and destroy the signatures of the parties thereto at the foot thereof and return one counterpart without said signatures, to the Purchaser, and two counterparts without said signatures, to the Sellers, and said agreement shall be deemed of no force and effect.
"3. If at the end of two weeks from the date hereof you have not (a) received notification from the Purchaser of the successful conclusion of the loan negotiations above mentioned, and (b) received from the Purchaser the four checks above mentioned, and (c) received from the Sellers the certificates for the shares of stock of the Corporation as herein provided, then this escrow shall at the end of such two weeks period, be deemed automatically terminated, and you are to detach from the three counterparts of said agreement and destroy the signatures of the parties thereto at the foot thereof and return one counterpart without said signatures to the Purchaser and two counterparts without said signatures to the Sellers, and said agreement shall be of no force and effect."
It appears not to be questioned that under this language both purchaser and sellers reserved an unconditional right to cancel the contract of sale. The exercise of their respective options to cancel was to be manifested by omission to deposit with the escrow agent the stock certificates, indorsed for transfer, in case of the sellers, and the checks to apply upon the purchase price, in case of the buyer. Defendants exercised the election reserved to them by omitting to deliver their stock certificates to the escrow agent, and by notifying him that they would not consummate the sale. Although the purchaser's president makes affidavit that the purchaser would have closed had not the sellers withdrawn, the fact is that the purchaser also omitted to deposit its checks with the escrow agent, which was the procedure provided to evidence withdrawal by the purchaser. At most, whatever opinion may now be entertained by the purchaser's president concerning the action which his corporation would then have taken, it cannot be known whether the purchaser would have exercised its right to withdraw if the sellers had not already done so.
Appellant contends that inasmuch as the sellers availed themselves of the escape clause, a commission was earned. In support of that position the cases are cited which hold that a broker's right to his commission cannot be defeated by the seller's refusal to complete the transaction after a purchaser has been procured to buy at a price and on terms previously specified by the seller, or in which the seller has acquiesced (Stern v. Gepo Realty Corp., 289 N. Y. 274; Mengel v. Lawrence, 276 App. Div. 180). It is true that ' ' The risks of failure assumed by a broker, as enumerated in the leading case of Sibbald v. Bethlehem Iron Co. (83 N. Y. 378, 383, 384), do not include bad faith on the part of the employer." (Pease & Elliman v. Hopt, 136 Misc. 825.) The facts in the instant case differ, however, even if the circumstance be ignored that the purchaser omitted to deposit its checks with the escrow agent, in that here buyer and sellers reserved an option unconditionally to withdraw from the agreement to sell. Special Term has held that in exercising this option, the sellers were not guilty of bad faith toward the broker, but were merely pursuing a right which each party to the contract had reserved to himself, and the exercise of which by defendants counteracted any acquiescence in the terms of the deal. We think that this conclusion was correct.
It must be borne in mind that where a broker has failed to procure a customer prepared to buy at a price which the seller has specified, and no sale has occurred, the broker must prove that the seller acquiesced in the transaction which the broker arranged. Moreover, under such circumstances, even where buyer and seller have agreed upon a sale, the broker cannot recover a commission where his prospective customer recedes from a willingness to buy (Kampf v. Dreyer, 119 App. Div. 134; Kronenberger v. Bierling, 37 Misc. 817; 33 A. L. R. 581). It is not enough that the buyer says that he wants to buy, if he later says that he does not know whether he wishes to buy or not, and contracts for leave to withdraw, and no sale is ever executed. That is a different type of condition from the happening of some external event, beyond the parties' control.
Plaintiff does not claim to have procured a purchaser at the price and on terms which defendants had designated, but rests his case upon the proposition that he did obtain one that was ready, willing and able to buy upon a basis less favorable to the sellers, which it is asserted that defendants subsequently acquiesced in and approved. Such acquiescence or approval is not established, however, if the manner in which defendants manifested it was by stating, in effect, that the proposed transaction was tentatively acceptable to them, but that they would need further time before giving final approval. If final approval were not to be forthcoming, defendants could not be held to have acquiesced in or ratified the basis for dealing which plaintiff had brought about.
Appellant appears to have recognized this, upon the argument, by basing the appeal upon the contention that the minds of the purchaser and defendants met orally on August 2, 1950, on the essential items of the transaction, and that what happened afterward is immaterial provided that the purchaser would have been willing to consummate the purchase notwithstanding his having been granted the right to withdraw. That differs from the complaint, which bases the cause of action on the signing of the written contract on August 4th, and the subsequent exercise by the sellers of their option to withdraw.
It is clear, however, that any meeting of minds which may have been reached on August 2d was tentative pending formalization and that, as Special Term observed, both the purchaser and sellers intended throughout that whatever agreement, if any, was reached, should be embodied in a formal written contract and that unless such written contract was executed neither was bound.
The undisputed fact is, as has been stated, that on August 4th when the papers were signed, the prospective purchaser was allowed an option to cancel the transaction in addition to the similar privilege accorded to defendants. It does not matter, nor does it appear from the record except as hearsay, at whose instance these cancellation options were inserted in the agreement. Where plaintiff's cause of action depends, as it does here, upon proof that defendants adhered to a less favorable price and different terms of sale from those which plaintiff had been employed to effectuate, and where neither a sale nor a binding contract of sale has resulted, the circumstance cannot be ignored that the purchaser's willingness to buy was intercepted by a clause that enabled the purchaser as well as the sellers to withdraw unconditionally from any and every obligation. This privilege of escaping from the contract having been balanced by a corresponding right of withdrawal on the part of the sellers, the entire transaction was rendered inchoate and tentative in character in any event, as though it had been so from the beginning, with the consequence that neither party could be held to have broken faith with the other nor with the broker by failing to perform.
In this light it makes no difference which party elected to exercise its right to withdraw. If we were to look, however, only at the buyer's position, and make a determination only upon the basis of whether the broker had produced a purchaser who was willing to buy upon terms approved by the sellers, we would have to say that the plaintiff had not produced such a purchaser. We are left without the requisite certainty that the buyer would have completed the transaction. The indication that it would, and any statement from its president that it would, cannot be accepted in lieu of a commitment, and the fact that the purchaser retained the right to cancel up to the time the sellers exercised their right to cancel is decisive against plaintiff. We do not know and it can never be ascertained whether or not the purchaser ultimately would have cancelled. Willingness to buy is not merely a subjective mental process. The court cannot engage in speculative inquiry concerning whether Straus would have invoked its cancellation privilege if the defendants had not. Nor can plaintiff be given the benefit of what might be regarded as the probabilities or be excused from strict compliance with the requirement of producing a willing buyer because the defendants exercised a privilege which it was their right to exercise.
In this latter view of the case, it is unnecessary to determine whether, under the language of plaintiff's contract of hiring (which appears to have been drawn by plaintiff), a commission could be deemed to have been earned in any event until a binding executory agreement of sale had been signed. The words that the commission was to be paid " upon completion of the transaction " point in that direction. Neither is it considered whether the brokerage contract with plaintiff is rendered unenforcible by subdivision 10 of section 31 of the Personal Property Law, in view of the oral change in the purchase price which had been submitted to plaintiff.
The order and judgment appealed from should be affirmed, with costs.