Opinion ID: 2618819
Heading Depth: 1
Heading Rank: 2

Heading: Did the Sale Relate Back?

Text: It is a settled principle that when an owner sells the property covered by an exclusive listing agreement during the term of the agreement, the broker is entitled to the commission. White v. Ragle, 82 N.M. 644, 485 P.2d 978 (Ct.App. 1971). The owner-broker relationship exists during the term of the listing agreement. During that term the contractual duties of the owner are to compensate the broker for services rendered in accordance with the contract of employment and to exercise good faith toward the broker   . Wilson v. Hayner, 98 N.M. 514, 516, 650 P.2d 36, 38 (Ct.App. 1982). To support their claim for a commission, Brokers rely primarily on the case of Anthony v. Enzler, 61 Cal. App.3d 872, 132 Cal. Rptr. 553 (1976), for the proposition that when an owner grants an option during the term of the listing agreement and the option is exercised after the listing agreement terminates, the sale relates back to the date the option was granted. In Anthony, third party purchasers obtained by the broker attempted to defeat the broker's right to a commission by inducing the owner to enter into an option agreement that would not be exercised until the listing agreement had terminated. The California court of appeal found that the owner conspired with the third party buyer in order to injure the broker. This conspiracy was intended to benefit the buyer because the owner would be saved the cost of broker commission and could therefore lower the price of the land. The court found in favor of the broker and ordered the owner and the buyer to pay the commission. The court also awarded punitive damages against the buyer for interfering with broker's contractual relationship. Anthony comports with Wilson v. Hayner, supra , in that the owner has a duty to exercise good faith toward the broker and to compensate him for services rendered in accordance with the listing agreement. See also Execu-Systems, Inc. v. Corlis, 95 N.M. 145, 619 P.2d 821 (1980). The principles enunciated in Anthony with respect to the relation back of the sale in that case are inapposite to the present case, however. The trial court in this case found, in effect, that Security acted in good faith toward Brokers, and that finding is supported by the evidence. Security's agreement to grant Wood Brothers an option commenced after the listing agreement terminated. Moreover, the option was subject to Brokers' right to sell the twenty-six lots during the term of the listing agreement. Had Brokers sold the lots there would not have been an option to exercise, since the Security-Wood Brothers agreement specifically provided protection for Brokers' right to sell the lots in accordance with the listing agreement. The trial court found that Brokers were made aware of the existence of the agreement with Wood Brothers during the 180 day term of the listing agreement. This finding is also supported by substantial evidence and will be upheld. See Toltec International, Inc. v. Village of Ruidoso, 95 N.M. 82, 619 P.2d 186 (1980). Brokers urge us to apply the doctrine of relation back to the facts of this case. This we refuse to do because (1) Security did not sell the property during the term of the listing agreement; (2) Wood Brothers initiated the negotiations for a future option; (3) Brokers did not find the buyer; and (4) Security did nothing adverse to Brokers' rights under the listing agreement. Cf. White v. Ragle, supra (when broker had partially performed under contract, owner's attempted revocation of the agreement prior to expiration of its terms was ineffective).