Court Opinion

ID: 9550811
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:42:46.089216+00
Date Added: 2024-06-11T15:22:30.053478
License: Public Domain

UDALL, Justice, with whom PHELPS, Justice, joins
(dissenting in part).
We concur with our brethren of the majority (1) in their analysis of the legal effect of the use of the term “merchantable title” which appears thrice in the preliminary sales agreement, (2) that the trial court erred in entering a summary judgment for defendants, and (3) that the judgment must be reversed.
We dissent from that portion of the court’s opinion which holds that the parol evidence rule was inapplicable on the motion to strike or will not be relevant upon the retrial of this matter when defendants undertake to establish proof of their second special defense, to wit: that plaintiff was informed and knew prior to the execution and delivery of the preliminary sales agreement that the property in question was in process of probate and that objections (“a contest”) had been filed to the petition for *385distribution and that said matter was yet to be litigated in the Pima County Superior Court.
We are familiar with the general rule, quoted in the court’s opinion, from 8 Am. Jur., Brokers, sec. 185, page 1098, and have read the cases collated in the annotation, 156 A.L.R. 1398, to the case of Best v. Kelley, supra. Significantly, however, none of the cited cases, as we read them, come to grips with the problem with which we are here confronted, i.e., the establishment of such a defense as that here interposed by admitting oral evidence on the part of the seller varying the express terms of a written agreement of the parties to furnish merchantable title and pay a commission to the broker.
Let us examine some of the principal cases relied upon by the majority, as we believe they are readily distinguishable. In the case of Brenard Mfg. Co. v. McCarty Drug Co., supra, the contract was ambiguous in that it provided that the goods sold would be delivered at their “earliest convenience”. The court said [212 Ala. 66, 101 So. 761]: “ * * * It was material and important for the jury to know the circumstances of the case and how the parties understood this indefinite term of the contract. It was dependent upon the disputed facts, was a question of fact for the jury, and resort was properly had to parol testimony. * * *” (Emphasis supplied.) In Dunn v. Kramer, supra, this obiter dicta statement appears [306 Ky. 377, 208 S.W.2d 43]: “ * * * the relationship of principal and agent requires good faith dealing between the parties, and evidence of the lack of it upon the part of the agent is always admissible.” However, the decision really turned upon a holding to the effect that where an original brokerage contract, requiring the owner to furnish the purchaser a good and sufficient warranty deed, was subsequently modified orally with respect to the sale price of the property, oral evidence that it was likewise modified as to terms of conveyance was held not incompetent as an attempt by parol to alter the written contract. It is elemental that if a written agreement is subsequently modified by an oral agreement and evidence is admitted concerning any part of such oral agreement then evidence is admissible as to the whole thereof. Such evidence does not tend to vary the terms of a written agreement but simply tends to establish the subsequent oral agreement admittedly executed. In Hurt v. Sands Co., supra, the parol evidence rule is not mentioned. The facts disclose a written agreement of sale was executed by the sellers, the buyers materially altered the agreement before signing same, the sellers then declined to accept the proposition as altered, and the negotiations failed. Thereafter, one of the owners (the husband) signed another proposition substantially the same as the counter offer, the buyers accepted but the owner’s wife (who had advised the broker that she would not make any other trade or join in any deed except *386upon the terms contained in the original proposition) refused to execute the instruments of conveyance and the deal collapsed. While the trial court directed judgment for the broker the court of appeals reversed the case. This is a far cry from the situation in the instant case where the defendants (both Watson and wife) unequivocally agreed in writing to furnish a merchantable title and pay the broker’s fee herein sued for.
The fallacy of the court’s reasoning in the majority opinion, we believe, stems from the statement that pleading knowledge of defect in title is in effect pleading a breach of the brokerage contract but not a variance of its terms. The effect of the majority opinion is that the equitable principle of utmost good faith which the courts have declared must exist between principal and agent now by judicial fiat becomes an integral part of the written contract establishing agency; that this equitable principle thus written into the contract furnishes the basis for the introduction of parol evidence to vary, and in this case to unequivocally contradict, the terms of an agreement which the parties themselves voluntarily reduced to writing. Such a doctrine is wholly unsupported by the authorities where the parol evidence rule has been raised and amounts to pure sophistry. Quaere: In what respect, we ask, did the plaintiff breach his contract? The defendants do not claim that the plaintiff was guilty of any fraud, concealment or misrepresentation in his dealings with the purchaser Feldman. 'The record shows that two days after the broker’s part of the agreement was signed the defendants in executing their part of the contract solemnly covenanted, without any strings attached, to give merchantable title and pay the brokerage fee.
The court holds that knowledge by the plaintiff of the pending probate proceedings was not such an encumbrance as to defeat the right to a brokerage fee but it concludes that prior knowledge by the broker of objections ("contest”) to the petition for distribution by two of defendant Watson’s daughters by a prior marriage, was sufficiently serious to be a violation of good conscience on the part of the plaintiff inasmuch as the consummation of the sale was dependent upon a “seriously doubtful contingency”. To bolster its conclusion that the broker was chargeable with such knowledge the court refers to the defects in the title shown by Exhibit I, being “Preliminary Report for Title Insurance” doubtless overlooking the fact that this report bears a date subsequent to the sales agreement. The record indubitably shows that this report was not brought to the attention of any of the parties until after the sales agreement had been fully executed. How can it be seriously contended that the broker in the instant case breached his duty to his principal or acted in bad faith by negotiating the contract with Feldmans because he allegedly knew of facts or' circumstances that would prevent the deal from being consum*387mated? Did not the defendants in signing the sales agreement expressly covenant to assume the risk of clearing the title of whatever defects might exist? Is it fair to give to defendants this shady avenue of escape from being required to pay the brokerage fee called for in the contract? In just what respect did the broker fail in his duty to his principal ? We have searched the majority opinion in vain for an answer to any of these questions.
In the written contract, the sellers unequivocally agreed to convey to the purchaser a good and merchantable title and to pay the broker the regular commission provided by the Real Estate Board of Tucson. No exception relieving defendants from either their obligation to convey to the purchaser a good and merchantable title or to pay plaintiff his commission was incorporated in the written contract. Yet under the majority opinion defendants will be permitted to introduce parol evidence at a trial of the case to establish an entirely different contract, to wit, that sellers would not be required to pay a commission to broker Sligh unless the defendants were able to give the buyer a merchantable title. We believe this constitutes a gross violation of the parol evidence rule.
The majority opinion gives lip service to the parol evidence rule wherein they state: “The defendants were not entitled to introduce parol evidence to vary the terms of the written contract such as attempting to prove an agreement or understanding aliunde the contract, * * * ” but it seems to us that this is precisely what is sanctioned. On a trial will not the defendants undertake to prove that it was understood between them and the broker that no fee would be paid if the deal fell through on account of their inability to clear title? We confess our inability to follow the tenuous reasoning by which the court concludes: “ * * * they were entitled to offer proof of the realtor’s state of knowledge or information concerning the want of merchantable title in the sellers, * * *. If this information was brought to the realtor’s notice by word of mouth it is admissible on the question of knowledge and is not objectionable because it might come from the lips of the sellers.” In our opinion this holding in effect tosses the hoary and fundamental “parol evidence rule” out of the window in brokerage fee cases. It seems to us that such a pronouncement is a complete departure from the rule as announced in the case of Jarnagin v. Edwards, 22 Ariz. 116, 194 P. 1097, 1098: “It is a well-settled rule of law that when parties reduce their contract to writing, and that writing is free from ambiguity and uncertainty, it may not be added to or taken from, altered, or varied, by any contemporaneous oral agreement or understanding, except for fraud or mistake. It is assumed, since that method of expressing their understanding was adopted, it will be employed to record all of their agreement, and not a part thereof.” See also S. H. Kress & Co. v. *388Evans, 21 Ariz. 442, 189 P. 625. The test seems to be: “Is the proffered testimony inconsistent with the written agreement?” If it is then such evidence is excluded. Wells v. Hocking Valley Coal Co., 137 Iowa 526, 114 N.W. 1076. Wigmore on Evidence, 3d Ed., Vol. 9, Sec. 2430(3) says in effect that if the subject is dealt with at all in writing, then parol evidence is inadmissible to vary it. Judged by these standards, in our opinion, there can be no question but that the proffered defense would violate the rule.
We are convinced that a broker’s contract in this respect stands on no different footing than any other contract. We quote from Nichols Applied Evidence, Vol. 1, Brokers, Sec. 66, p. 865: “Sec. 66. Parol evidence to vary contract. Parol evidence ordinarily is not admissible to add to or vary a written contract with a broker for his services. Parol evidence is inadmissible to vary written contract as to broker’s commission. * * * ” In support of this text statement the following excellent cases are cited: Kendrick v. Hansen, 35 Cal. App. 578, 170 P. 675; Starbird v. Davis, 27 Colo. App. 467, 150 P. 244; Buxton v. Colver, 102 Kan. 871, 171 P. 1158; Sexton v. Reilly, 131 Wash. 206, 229 P. 305. We have carefully scrutinized such well-known authorities as Wigmore on Evidence and Jones Commentaries on Evidence to see if they recognize an exception to the parol evidence rule in brokerage cases. Our search proved futile as we have been unable to find such an exception anywhere outside the majority opinion.
The most recent case law statement of the parol evidence rule in brokerage matters is found in the syllabus of Berger v. Community Founders, Inc., Ct.Cl. 1948, 83 N.Y.S.2d 791: “Where agreement for payment of brokerage commissions was complete on its face, parol evidence that broker was advised of a previous contract by which owner was obligated to sell the property to another purchaser and that such was part of the agreement of hiring was inadmissible as in violation of the parol evidence rule.” See also the following brokerage fee cases from other jurisdictions wherein it is held that parol evidence is inadmissible to alter the express and unequivocal terms of a written contract to pay a brokerage fee: Lundeen v. Ottis, 164 Cal. 183, 128 P. 335; Morgan v. W. A. Howard Realty Co., 68 Colo. 414, 191 P. 114; Wells v. Hocking Valley Coal Co., supra; Green v. Booth, 91 Miss. 618, 44 So. 784; Loxley v. Studebacker, 75 N.J. L. 599, 68 A. 98; Smith v. Geis, 32 Ohio Cir.Ct.R. 666.
We deem it much more important to preserve inviolate the rule that the terms of a written instrument shall not be varied by oral testimony than to create an exception to the “parol evidence rule” solely for the protection of those who deal at arm’s length with real estate brokers. If a brokerage fee is not to be payable under certain contingencies it would seem to work no hardship to require the parties to write such a *389proviso into their agreement, otherwise they cannot he heard to complain of the result of their own folly or lack of foresight. Martin v. Ede, 103 Cal. 157, 37 P. 199; McDonald v. Bernard, 87 Cal.App. 717, 262 P. 430.
Inasmuch as the defendants failed to plead a defense that can be legitimately established we favor reversing the case with directions to enter judgment for plaintiff.