Court Opinion

ID: 9487022
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:06:10.275131+00
Date Added: 2024-06-11T17:52:03.398713
License: Public Domain

KENNEDY, Circuit Judge,
dissenting in part and concurring in part.
Because I am of the opinion that plaintiffs right to noncancellation commissions on the leases in effect when the property was sold had accrued, I respectfully dissent. The leasing agreement provided:
7.1 With respect to new leases ..., Owner shall pay Leasing Manager the leasing commissions set forth in Section I of Exhibit E hereto.
Section A(l) of Exhibit E provides:
With respect to each such new lease ..., Owner shall pay Leasing Manager a commission of five percent (5%) of the commission base, hereafter defined in Section III below.
Section A(4) of Exhibit E provides:
If a lease provides that a tenant alone or both landlord and tenant have the right to cancel the lease or any portion thereof prior to the expiration of the original term, then a leasing commission shall be payable only on the uncancellable portion of the term. If the lease provides for a penalty to be paid by the tenant upon cancellation of the lease, then a commission shall be paid to Leasing Manager on the amount of the penalty which does not represent Owner’s recovery for tenant finish costs, and only when the penalty is actually paid by the tenant. If the tenant elects not to cancel the lease, then an additional commission, for the remainder of the original terms, shall be paid to Leasing Manager at the time the right of cancellation has expired. If the landlord has the sole right of cancellation, a commission for the entire term shall be paid to Leasing Manager.
Plaintiff was paid its commission for the noncancellable portion of the leases at the time they were executed or on the first anniversary date. It had fully performed all of its obligations under the agreement and was entitled to commissions on the balance of the leases unless the tenant elected to cancel. The agreement provided that the leasing commissions on the cancellable portion be paid at the time the right of cancellation expired. The fact that payment was deferred until that time does not change plaintiff’s right to the commissions. As the majority acknowledges, a right accrues when all of the events creating the liability have occurred. Archer v. Comm’r of Revenue of Kentucky, 312 Ky. 454, 227 S.W.2d 1001, 1002 (Ct.App.1950). Defendant’s liability ac*250crued when plaintiff secured the leases. That liability could be excused if the leases were cancelled. “The word ‘accrued’ does not signify that an item is due in the sense of being payable; the accrual system disregards dates of payment, making the right to receive and not actual receipt decisive.” Id. (citing Law of Federal Income Taxation, Paul and Mertens, Vol. 1, § 11.69). With respect to the commissions on the existing leases, the events which make payment due have occurred. Although a condition subsequent could have cut off plaintiffs accrued rights, namely, the election of the tenant to cancel the lease, that condition subsequent has not occurred.1
The majority interprets this condition as a condition precedent to defer liability. Its interpretation is based on the following language of the agreement: “if the tenant elects not to cancel the lease.” No act, however, is required of the tenant to fix defendant’s liability. The tenant merely has a right to cancel, which it may or may not exercise. An affirmative act of the tenant is required to cancel and to cut off plaintiffs accrued rights. If the tenant is required to pay a penalty for exercising its right to cancel, plaintiff is, under Exhibit E, entitled to a commission on the amount of the penalty. That provision seems to me to indicate an accrued right to the commissions on the unexpired terms of the lease.
The current Restatement of the Law of Contracts treats conditions of this kind as excuses for nonperformance, which is what they really are. See Restatement (Second) of Contracts §§ 224-226 (1979). When, as here, the leases are not cancelled, performance is not excused. The fact that defendant’s duty to perform is conditional does not mean plaintiffs right to performance is not accrued or vested. It merely means that plaintiffs right is limited to the conditional performance. There was no event here which was a condition of the contract to pay commissions coming into existence.
With respect to the renewal commissions, I would agree that they were contingent, i.e., not vested or accrued at the time of sale. Defendant’s liability as to these commissions was not fixed unless the tenant renewed. Since Kentucky appears to adhere to the condition precedent/condition subsequent distinction, rather than the Restatement (Second) of Contracts condition analysis, I agree with the majority that plaintiff lost its right to renewal commissions at the time of sale.

. In Archer, Archer was to receive an annual salary of $12,000 beginning August 1, 1942, the amount not to be credited until the last of the year. The court held that the salary accrued at the rate of $1,000 per month and $5,000 had accrued at the end of the 1942 year. The taxpayer was arguing that he should only be liable for salary earned on a quantum meruit basis.