Court Opinion

ID: 9797476
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:21:50.028339+00
Date Added: 2024-06-11T08:56:22.025447
License: Public Domain

*522Justice EISMANN,
Dissenting.
Because I do not believe that we should uphold the judgment based upon a factual finding not addressed by the trial court and not supported by the evidence, I respectfully dissent.
In this case there was no issue as to whether the Corporation owed the Brokers the $135,000 commission. That issue was decided by arbitration. The only issue in this ease was whether the Brokers were entitled to be paid that $135,000 out of the sale' proceeds. Because the sale proceeds were property of the Corporation, and the Brokers had not acquired any lien on the proceeds, the Brokers would be entitled to payment from the proceeds only if, the Corporation had so agreed. That is a factual issue. Indeed, it is the sole factual issue presented to the district court and the sole issue upon which the judgment below can be based. The district court, however, did not make any finding regarding this factual issue. The majority states, “It seems he [the district judge] implicitly concluded the parties agreed the commission, if owed, should come out of the escrow proceeds.” We should not uphold a judgment where the sole factual finding upon which the judgment can be based must be implied on appeal. Furthermore, that “implicit” factual finding is not supported by the evidence.
The majority resolves this factual issue by finding that the Corporation agreed in the escrow instructions to pay the Brokers out of the sale proceeds. The majority states as follows:
In the instant case, the instructions specifically identified the creditors to be paid, and the Brokers were identified as one of these creditors. The escrow instructions state:
Covering the property described above which you may deliver and/or record when you have collected for the undersigned Sellers the sum of $2,250,000 (Selling Price) from which you are authorized to pay or deduct:
1. Balance of existing Deed(s) of Trust
2. Pay Demand of Chateau Drug
3. Pay Demand of United States of America/Intemal Revenue Service
4. Pay Demand of Ringert, Clark Chartered
5. Real Estate Commission of $135,000 to Collier’s Paragon
6. Title Insurance Premium,$ of the escrow fee and usual recording fees.
7. Federal Express
8. Escrow Holdback of $100, 000
Therefore, by virtue of its own escrow instructions, the $135,000 was to go directly to the Brokers as payment for their commission, and the Corporation therefore did not have an interest to the $135,000 held by Blaine County Title and the Trust could not attach those funds. (Emphasis theirs.)
In making the above factual finding, the majority overlooks two things. First, the escrow instructions were not a list of the creditors to be paid. The instructions authorized Blaine County Title “to pay or deduct” the amounts listed. For example, the “Escrow Holdback of $100,000” was not a direction to pay anyone. It was authorization for Blaine County Title to deduct those funds — to hold them pending further authorization for payment. Second, the Corporation and Blaine County Title expressly agreed that Blaine County Title could retain custody of the $135,000, but they did not agree that such sum could be paid to the Brokers.
A few days prior to the closing, the Brokers threatened to sue Blaine County Title if it did not pay them the $135,000 commission out of the sale proceeds. Not wanting to be a defendant in a lawsuit, Blaine County Title decided that it would not close the transaction unless it could withhold $135,000 from the sale proceeds and retain it until either the Brokers and the Corporation agreed, or a judge decided, where it would be paid. If the sale did not close on the date scheduled, then the property would be sold at a foreclosure sale scheduled on the following day.
Four people testified at the trial. They were D. Blair Clark, counsel for the Corporation; James Gibson, president of the Corporation; Andrea Gibson, secretary of the Cor*523poration; and Daryl Fauth, President of Blaine County Title.
Andrea Gibson was present at Blaine County Title on Friday, November 28, 1997, to sign documents for the closing. On Monday, December 1, 1997, when the closing occurred, she was in her office in Seattle, Washington, where she communicated with James Gibson by facsimile machine. She testified that she did not believe the Brokers were entitled to a commission and did not agree to the holdback of the $135,000.
Mr. Thompson: Q. How did you react to being told about a commission?
Mrs. Gibson: A. I was incredulous.
Mr. Thompson: Q. Why?
Mrs. Gibson: A. Because they had had the property listed for some time, I saw nothing come forth from them at all. Jim went out and found a buyer and had a sale pending and I couldn’t believe that someone else would get any money for that.
Mr. Thompson: Q. Did you think a commission was owed?
Mrs. Gibson: A. No.
Mr. Thompson: Q. Did you, either in your capacity as secretary of 100 Building or as the Trust and creditor at the closing, consent to the hold back?
Mrs. Gibson: A. No, I did not.
Messrs. Clark, Gibson, and Fauth were present for the closing on Monday December 1, 1997, and they all testified about the agreement between the Corporation and Blaine County Title regarding the $135,000. They all testified that the $135,000 was to be held by Blaine County Title, not paid to the Brokers. Their testimony also showed that there was not an agreement to pay the Brokers from the sales proceeds, even if it were later determined that they were entitled to the commission claimed.
Mr. Clark, the Corporation’s counsel, testified that the Corporation acquiesced in Blaine County Title’s demand that it hold the funds until the dispute with the Brokers was resolved, but it did not agree that the funds could under any circumstances be paid to the Brokers. His testimony included the following:
Mr. Thompson: Q. Did you as the agent for 100 Building Corporation consent to a commission being paid that day?
Mr. Clark: A. No.
Mr. Thompson: Q. To your knowledge did Jim Gibson consent to a commission?
Mr. Clark: A. No. No, it wasn’t a consent situation. It was a situation that Mr. Fauth basically said he was going to have to hold it back until evidently he got further instructions from his underwriter, because otherwise he couldn’t close.
Mr. Thompson: Q. That was my next question. There was no consent to a commission—
Mr. Clark: A. No.
Mr. Lombardi: Q. So you acquiesced in Blaine County Title Company holding the $135,000 until the dispute between the realtors and 100 Building Corporation was resolved so the dosing could take place, correct?
Mr. Clark: A. The problem I’m having with your question is “until the dispute was resolved”, because we never did agree to a withhold agreement. We agreed that — we acquiesced that Mr. Fauth could hold back the money. We didn’t know at that time whether we ■ were going to file suit against the title company or exactly what we were going to do.
Mr. Thompson: Q. Did you testify that 100 Building Corporation agreed to do anything other than let Daryl Fauth and Blaine County Title hold onto those funds that day?
Mr. Clark: A. No. That’s all we agreed to do.
Mr. Clark also testified that after the closing, counsel for the Brokers drafted two or three proposed contracts regarding the procedure for the disposition of the $135,000 based upon the outcome of the arbitration, but the Corporation did not agree to any of them.
*524James Gibson, the Corporation’s president, testified that he did not agree that any portion of the $135,000 be paid to the Brokers. He only agreed that Blaine County Title could withhold the funds so that the transaction could close as scheduled. His testimony included the following:
Mr. Thompson: Q. Explain what happened there.
Mr. Gibson: A. [0]ur belief and our understanding was — and mine personally— was that this referred to a sum of money which I agreed with Daryl Fauth, we would allow to stay with him, but it was more to protect Blaine County Title, which I stated to Daryl Fauth, and certainly not for the benefit of the realtors. And there was no listing presented at that time, there was nothing but a letter noticing a commission due. And I didn’t feel that the $135,000 should even be withheld, but Daryl told me that the underwriters said that’s the only way they could close and issue the insurance.
Mr. Thompson: Q. Was it your intention by allowing the title company to hold onto the money that day, to hold it in abeyance pending some arbitration proceeding?
Mr. Gibson: A. No. I didn’t have a copy of the original listing agreement which referred to arbitration. I didn’t know anything about arbitration at that point.
Mr. Lombardi: Q. Did you understand on December 1, 1997, that Blaine County Title Associates and their underwriters would not insure the title for the Pinnacle Inn to Eagle Crest if JSGACG or 100 Building Corporation took the $135,000 that was claimed as a commission by the realtors?
Mr. Gibson: A. Mr. Lombardi, I’ll answer the question as I think you intended it to be. Mr. Fauth told me that his underwriters or their attorneys would not allow him to close the escrow and would not issue the title insurance unless they held back $135,000.
Mr. Lombardi: Q. So was the $135,000 to be withheld on December 1st and then on December 2nd be available to be paid to JSGACG? •
Mr. Gibson: A. I told Mr. Fauth that I would memorialize this in a memo to him and that I was not authorized to act on behalf of JSGACG Trust to withhold any moneys for the benefit of the realtors, nor would I as 100 Building Corporation do so because I did not have the funds to do so. And I did memorialize that with a memo to him a day or two later.
The final witness was Daryl Fauth, the vice president of Blaine County Title. He testified that to protect Blaine County Title, he would not close the sale transaction unless Blaine County Title had permission to withhold $135,000 from the sale proceeds.
Mr. Lombardi: Q. What was going to happen with the title insurance policy if the Gibsons and 100 Building Corporation, JSGACG, did not agree to the withhold?
Mr. Fauth: A. I can’t speak for Stewart Title____However, Blaine County Title was threatened with litigation, and quite frankly, I didn’t want to drag the new buyer into any future litigation, so basically since we were threatened, we couldn’t close without the withhold.
Mr. Lombardi: Q. So, it was one or the other: Close or withhold?
Mr. Fauth: A. Yes.
Mr. Fauth did not testify that there was any agreement that the withheld funds would be paid to the Brokers. He testified that Blaine County Title would hold the funds until either the parties agreed, or a judge ordered, who was entitled to them.
Mr. Lombardi: Q. What was your intent regarding how the withheld sum would be ultimately distributed?
Mr. Fauth: A. Basically I was hoping for an amicable resolution. That Colliers [Brokers] and the Gibsons would talk and negotiate some sort of resolution, and I was either going to do one of — I was going to disburse on two things: Direction from both Gibsons and Colliers, or a judge telling me what to do.
*525Mr. Lombardi: Q. Did you explain to them [the Gibsons] that you would require either an agreement between them and the realtors or direction from a court before you would release the $135,000?
Mr. Fauth: A. Yeah, in a roundabout way. I didn’t use those exact terms. I said that, you know, this money is going to have to be withheld out of this closing and we will hold it until we have resolution. That’s basically what I said, until it’s resolved.
Mr. Lombardi: Q. Did the Gibsons agree to that withhold on those conditions on November 28th 1997?
Mr. Fauth: A. They did. Actually — Let me take that back. They walked out and I believe they used kind of the weekend to think about it. They weren’t happy, and I could see that, so I said, “This is where your option is.” And so on Monday I believe that there was no further direction from anyone to tell me otherwise, so yeah, they did agree.
Mr. Lombardi: Q. Mr. Clark used the word acquiescence.
Mr. Fauth: A. Yeah. And it kind of puts— he also used the words I said, “You’re going to do this.” And I heartily disagree. I don’t tell people what to do in their closings, they tell me what to do in their closings. And we’re there to facilitate the transaction, not to tell them what they’re going to do. So when Monday came there was no negotiation of the commission, there was no talk of reduction. Either side wasn’t going to budge. So I said, “Well, here’s what we’ve got. What do you want to do?” And so I was instructed to do this.
Mr. Lombardi: Q. So did you withhold the $135,000?
Mr. Fauth: A. I did.
The evidence was uncontradicted. The Corporation did not agree that the $135,000 could be paid to the Brokers. The Corporation simply agreed that Blaine County Title could withhold the $135,000 from the sale proceeds in order to protect itself from a lawsuit by the Brokers. The evidence does not support the majority’s finding of fact that “by virtue of its [the Corporation’s] own escrow instructions, the $135,000 was to go directly to the Brokers as payment for their commission.” The evidence likewise does not support the majority’s finding that “the parties agreed the commission, if owed, should come out of the escrow proceeds.”
The majority also finds that the Corporation and the Brokers agreed in the listing agreement that the Brokers would be paid from the sale proceeds. The listing agreement provided that the real estate commission was “payable at the closing of escrow.” The majority concludes, “It would be contrary to accepted business practices to say that the parties entered into an agreement for payments of the commission ‘at closing’ but did not intend for the commission to be paid as a part of the sales proceeds.”
On September 10, 1993, the Corporation and the Brokers entered into the listing agreement, which they later extended several times through December 31, 1997. The listing agreement provided that the Corporation would pay a six percent commission, regard-' less of who procured the buyer, and that the commission was “payable at the closing of escrow.” Neither the Brokers nor the majority point to any authority holding that the phrase “payable at the closing of escrow” means “payable from the sale proceeds at the closing of escrow.” The majority supplies that interpretation, stating that it is consistent with “accepted business practices.”
“Accepted business practices” are of no relevance unless they constitute a custom in the industry. Contracts are to be interpreted according to their terms, even if those terms are not in accord with accepted business practices. Assuming that the majority intends the phrase “accepted business practices” to mean “industry custom,” evidence of custom in an industry is appropriate where there is an ambiguity as to a contract term and the evidence will be helpful in clarifying the ambiguity. Perkins v. Highland Enterprises, Inc., 120 Idaho 511, 817 P.2d 177 (1991). Industry custom must be clearly proven, Id., and it must be one that has existed for such length of time as to become generally known and practiced in the area in *526question, or in reference to the particular business with which it is connected. Commercial Ins. Co. v. Hartwell Excavating Co., Inc., 89 Idaho 581, 407 P.2d 312 (1965). Before a person can be bound by an industry custom, that person must have actual knowledge of, or have consented to, it, or the custom must be so general and universal that it can be presumed that the person had knowledge of it. 21A AM. JUR. 2D Customs and Usages §§ 18 & 19 (1998).
In the instant case, neither side offered any evidence as to any industry custom regarding the payment of real estate commissions from the proceeds of land sales. There was absolutely no evidence offered on this issue. The Brokers did not even argue there was an industry custom that real estate commissions are paid from the sale proceeds, nor did the district court so find. Assuming that the listing agreement is ambiguous and that the custom in the industry is admissible in this case to resolve that ambiguity, it is not appropriate for an appellate court to make that finding on appeal where no evidence was offered on the issue.
There is a distinction between when a real estate commission is earned and the source of the funds to pay that commission. Consistent with Margaret H. Wayne Trust v. Lipsky, 123 Idaho 253, 846 P.2d 904 (1993), the district court held that the Brokers’ real estate commission was earned when the transaction closed. The district court did not address, however, the issue of the source of that payment. Whether or not the Brokers had a contractual right to payment of their commission from the sale proceeds was the only issue tried. The district court did not make any findings of fact on that issue, and I do not believe that it is proper for an appellate court to make that finding, especially when it must supply missing evidence in order to do so.
To ensure they were paid, the Brokers could have required James Gibson to sign the listing agreement, they could have included in the listing agreement a provision stating that their commission would be paid from the sale proceeds, or they could have offered evidence showing an industry custom to pay real estate commissions from the sale proceeds. They did none of those things, however, and I do not believe it is appropriate for this Court to correct those omissions on appeal. Therefore, I would vacate the judgment and remand this case for further proceedings.