Court Opinion

ID: 3502402
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:09:13.388795+00
Date Added: 2024-06-11T13:39:48.438579
License: Public Domain

I cannot concur in the opinion upholding the decision of the trial court. Some background is necessary to an understanding of the problem in the case. Before the contract was executed, defendant had been in the real estate mortgage business. It secured applications for loans, made the mortgages, had them insured by the Federal housing administration, and sold them to agencies of the Federal government, to banks, and to private investors. Its business was highly unprofitable at the start, having resulted in a loss of over $20,000 in the first six months; it had the additional discomfort of threatened litigation by applicants who claimed losses through defendant's failure to make loans after acceptance of the applications. Eagerness to stop the losses and other difficulties was *Page 344 
manifested by defendant's desire to sell the enterprise, but it refused an offer of $4,000, insisting upon $6,000 plus indemnification against the threatened litigations and the undertaking by the purchaser to carry out the previous loan commitments. Plaintiff had been employed by defendant company. He negotiated taking over defendant's mortgage business; terms were agreed upon, and defendant's board of directors adopted a resolution authorizing the execution of the contract upon written approval of counsel.
The contract was quite complex. Plaintiff put up a guarantee fund to insure his performance of the contract. He rented part of defendant's offices, guaranteed to pay defendant at least $750 per month in fees for closing mortgage applications and agreed to take care of all of defendant's previous mortgage commitments as well as to repay defendant all expenses such as abstracts, attorneys' opinions, surveys, et cetera, that had been advanced on mortgage applications. In addition to the $750 per month guarantee, defendant was given an option to cancel the agreement if plaintiff failed to produce in any three-month period at least $4,500 in fees from closing mortgage applications. The agreement was prepared by counsel then representing defendant, a firm of high repute. Plaintiff set up his offices with 25 employees to take care of the business.
I agree with my Brother that there is no ambiguity on the face of the agreement, but I cannot agree with his construction. His conclusion appears illogical when he states that "the contract * * * ran for a period of two years," and then concludes that there is a "definite contract period of two years" which "controls the rights of the parties." While the agency set up was to endure for two years, there is nothing in the instrument that declares such a limit to the life span of rights acquired under *Page 345 
it. The opinion of my Brother relies on the two-year limitation of the first section as governing all rights to accrue under the engagement. Under this first section, the first party "grants unto the second party the exclusive right for a period of two years * * * to sell and dispose of mortgages owned by it," et cetera, and from which plaintiff may make a profit. The seventh section, however, upon which this suit is founded, deals with an additional profit or compensation which accrues to plaintiff "in the event of sale of mortgages in which the allowance for servicing charges is in excess of one-half of one per cent.," in which event defendant is to "pay such excess" to plaintiff "monthly." This section, as the following explanation will show, was intended to take care of plaintiff's profit when the buyer of the mortgage is the R. F. C. Mortgage Company, a Federal agency, where the sale contemplates that the mortgagee will be under a service contract to take care of the management of the mortgage for a fee of one-half of one per cent. per annum.
The administrative rules and regulations of the Federal housing administration in force at the time the contract was made permitted the mortgagee to require of the mortgagor throughout the life of the mortgage a service charge not to exceed one-half of one per cent. per annum upon the outstanding monthly balances. If the mortgage is sold to the R. F. C. Mortgage Company, a service contract was permitted whereby the original mortgagee collects the monthly payments from the mortgagor and transmits them to the R. F. C. Mortgage Company for which the R. F. C. Mortgage Company is charged a service fee of one-half of one per cent. per annum. It is with reference to this service fee paid by the R. F. C. Mortgage Company that the seventh section of the contract relates. The servicing contract providing *Page 346 
for this "excess service fee" might be cancelled by the R. F. C. on a 30-day notice. The service fee charged to the mortgagor was to be retained by the defendant for its own benefit. The "excess service fee" charged the R. F. C. Company, like the fee required of the mortgagor, runs for the life of the mortgage, except that the R. F. C. contract reserved in the R. F. C. Company a 30-day option to terminate it.
Any two-year limitation is only in the first paragraph of the contract before us, and it limits by its very letter the establishment of the agency, the opportunity to serve. The compensation provision of section 7 deals with a subject matter that was likely to be long-lived. This section might be described loosely as an equitable assignment of defendant's R. F. C. contract rights to the excess service fees arising out of mortgages sold by plaintiff. The terms of limitation of the opportunity clause should not be wrested from one context and carried over into the later-appearing "assignment" clause so as to derogate from the broad grant. If the "assignment" were intended to be limited to the duration of the agency, it would seem that the natural place to express such a qualification would be in the assignment" clause itself, for the parties were dealing there with a subject matter that was clearly known in all likelihood to have a much longer life than the agency itself. My Brother's construction would give plaintiff only a jagged benefit under section 7, for, under his interpretation, the mortgages sold in the early days of the agency would bring plaintiff almost two years' collection of excess service fees, while those consummated in its last days would bring little or none. I see no occasion, from the language used or the subject matter dealt with, to imply by construction any such carving out of the right so *Page 347 
broadly granted. In my view, once a mortgage was sold to the R. F. C. Mortgage Company, plaintiff acquired a vested right to all excess service charges as they accrued during the life of the mortgage, subject only to the right of the R. F. C. Mortgage Company to cancel its servicing contract with the mortgagee according to the option reserved. I see nothing in the contract itself which was intended to give plaintiff a diminishing compensation for the services rendered as the life span of the agency approached its terminus.
Even if the language of the contract were deemed ambiguous, which is not my view, I believe plaintiff sustained the burden of establishing its meaning by evidence dehors the instrument itself. Opposed to the positive testimony of plaintiff, the attorney who drew the contract, and the man who was president of defendant at the time the contract was executed, there is testimony of other witnesses, some of which is characterized largely by testimony that they did not remember statements made by plaintiff's witnesses as to what took place. Notwithstanding our inclination to follow the conclusion of the trial judge as to facts which are partially in dispute, I believe the determining factor is the fact that the contract was prepared by defendant and is to be construed against it.
"If the intent is not clear, ambiguities will be solved [resolved?] against the party who was relied upon to, and who did, select the language of the contract." Mills Novelty Co. v.Morett, 266 Mich. 451, 457.
Defendant cites several cases involving contracts between insurance companies and their agents and claims they support a rule that the agent is not entitled to commissions on renewal premiums after *Page 348 
his agency terminates unless the contract specifically grants such a right. Fidelity  Deposit Co. v. Washington Life Ins.Co., 193 Fed. 512; Masden v. Travelers' Ins. Co. (C.C.A.),52 Fed. (2d) 75 (79 A.L.R. 469); Fabian v. Provident Life, etc.Ins. Co., 5 Fed. Supp. 806; Locher v. New YorkLife Ins. Co., 200 Mo. App. 659 (208 S.W. 862). Even if we were to overlook the inappositeness of the analogy, the Federal cases are of no help, for each one dealt with a contract that specifically defined the rights of the agent on termination of the agency. The Missouri case cited explained the result as inevitable "where the right to commissions on renewals rests, in part, on the consideration of the services by the agent to the company in keeping the policies written by him alive." In the last analysis, the analogy is hardly helpful, for, as pointed out by the annotation in 79 A.L.R. 475, the right of the insurance agent to commissions on renewals "depends upon the contract existing between the agent and the insurance company." We are only back to the contract before us and to the problem of interpreting the specific provision dealing with a long-lived subject matter in a different sphere of business. It is indeed difficult to see how the disposition of the problem of insurance commissions can help us in deciding the unique problem before us now. The construction contended for by plaintiff seems to be more in accord with the law and reasonable business expectations than the interpretation of the trial court.
The judgment should be reversed and the cause remanded for ascertainment of damages, with costs to plaintiff.
McALLISTER, J., concurred with BUTZEL, J. The late Justice POTTER took no part in this decision. *Page 349