This is an action for damages resulting from the alleged breach of a real estate listing agreement. The contract which is the subject matter of this litigation reads as follows:
This Court has heretofore considered this particular contract. Upon the first trial of the case the District Judge rendered a summary judgment for the defendant, Jas. F. Neece, and against the plaintiff,
A second trial was had to a jury and judgment again rendered for Neece. The Court of Civil Appeals reversed and held as a matter of law that the written contract sued upon was an exclusive agency contract and on authority of Park v. Swartz, 110 Tex. 564, 222 S.W. 156, rendered judgment against Neece for seven per cent of $410,000, the listed sales price of the Catalina Motel. 314 S.W.2d 384.
In our opinion the Court of Civil Appeals erred in reversing the judgment of the trial court.
While in the main, the pleadings of the parties present the contentions that as a matter of law the contract was either an exclusive listing agreement or an open listing agreement, the trial judge evidently considered that the written instrument was ambiguous and submitted numerous issues to the jury designed to ascertain the actual agreement made by the parties.
Two theories of recovery were open to A.A.A.; first, that the written contract was unambiguous and as a matter of law vested in it an exclusive sales agency for a period of six months from and after August 19, 1954; or, second, that the written agreement was ambiguous, but when explained by admissible extrinsic evidence, it provided that A.A.A. should have an exclusive sales agency for the six-months period mentioned. The findings of the jury were for the most part favorable to the defendant, or what is more to the point, they do not support, but on the contrary refute the theory of an ambiguous contract which, when explained by extrinsic evidence, would sustain a recovery for the plaintiff. Such theory is thus effectively removed from the case even if considered at all by the parties. The onerous burden of proving a case for recovery rested upon the plaintiff and that burden was neither lifted nor shifted by defendant's failure to secure a summary judgment upon the theory that the written agreement constituted an open listing as a matter of law. Neece was under no burden to affirmatively establish that the agreement was an open listing. On the contrary the burden lay upon A.A.A. to establish that it had an exclusive sales agency.
In order to meet this burden plaintiff presents the contention which was accepted by the Court of Civil Appeals that the written agreement was unambiguous; that it established an exclusive sales agency as a matter of law; that such agreement had been breached, and hence plaintiff was entitled to damages for such breach which amounted to $28,700, the amount he would have received had the contract been carried out and the property sold at the listed price of $410,000.
The case turns upon question of whether or not the written instrument evidencing
The written form of agreement devised by A.A.A. for its commercial use is somewhat ingenious. It consists of two parts: the caption or label and a short paragraph of operative contractual obligations. If we accept plaintiff's theory of construction, the contract, insofar as legal consequences are concerned, may be entirely changed by merely substituting labels without altering the operative contractual clauses in any way. The use of labels affixed to contracts is nothing new. We have warranty deeds, deed of trust notes and through bills of lading. It would, however, be unusual to metamorphose a quit claim into a warranty deed simply by labeling it as such, or affix a deed of trust lien on land by simply calling an ordinary promissory note a deed of trust note. And of course the through bill of lading is usually backed by paragraph after paragraph of operative contractual obligations that spell out the respective rights and liabilities of the parties. While in certain cases, one must consider captions in order to ascertain the meaning and nature of a written instrument, it has been held that the greater weight must be given to the operative contractual clauses of the agreement, for "An instrument is that which its language shows it to be, without regard to what it is labelled." Bailey v. Mullens, Tex.Civ.App., 313 S.W.2d 99, loc.cit. 103, wr. ref., n.r.e.; Pate v. Goyne, 212 Ark. 51, 204 S.W.2d 900.
The form of contract or listing card involved in this suit contains two captions or labels. One reads, "Open Listing Agreement". The second reads, "Exclusive Listing Agreement, No. Days? _______."
The operative contractual provisions as distinguished from caption read as follows:
In the present case the property was not sold by plaintiff, nor was it sold to any of its prospects, nor was A.A.A. instrumental in anyway in effecting the sale of the property. Had the operative contractual clause contained no caption or had the label been left as "Open Listing Agreement", Neece would have no obligation to pay A.A.A. anything. The asserted $28,700 liability lies solely in a change of caption effected by marking out the words, "Open Listing Agreement" and leaving the words "Exclusive Listing Agreement" and inserting "Six Months" in the blank following "No. Days?"
No doubt the draftsman who prepared the form for plaintiff's use intended that
By way of example or contrast, we quote from the exclusive listing contract used by Knapton Business Brokers, Inc. (who actually sold the property) which contains operative contractual obligations clearly fixing the character of the contract, viz.:
Anyone of ordinary intelligence reading this agreement would know from its operative contractual clauses, i.e. clauses containing verbs, that the right to sell granted the broker was sole and exclusive and that regardless of who sold the property prior to 180 days from date (or a written cancellation of the contract thereafter), the broker would be entitled to five percent of the sales price. There undoubtedly is a distinction between the words, "I hereby grant and give you the sole and exclusive right to sell" and "I, (or we) agree to pay A.A.A. Realty Co. 7% of the sale price, (if they sell said property), * * *" and the contracting clauses cannot be rendered substantially indentical in effect by simply placing an "Exclusive Listing Agreement" label above the second clause quoted.
There is, of course, a distinction between a suit for compensation under a contract and one for damages growing out of a breach of contract. The Knapton agreement quoted provides for a contractual basis of recovery in the event the property is sold by one other than the contracting broker while the present action is one for breach of contract for depriving the broker of a full six-months opportunity to sell the property. Park v. Swartz, 110 Tex. 564, 222 S.W. 156. But, however that may be, it seems that one reading the operative contractual clauses of the contract before us in connection with its label, "Exclusive Listing Agreement" would be assailed by doubt as the meaning of contracting
In admitting parol evidence to explain this seeming contradiction, we do not countenance a violation of the rule against disturbing the clear meaning of a written instrument. After all, we are to construe contracts from a utilitarian standpoint bearing in mind the particular business activity sought to be served and need not embrace strained rules of interpretation which would avoid ambiguity at all costs, especially where there is danger of enforcing obligations which a contracting party never intended to assume. As Professor Wigmore has said,
As opposed to plaintiff's interpretation of the written instrument, there is the theory that the only liability which would arise under the agreement was one to pay if A.A.A. sold, or was instrumental in selling the property, or such property was sold to one of its prospects. Extrinsic evidence was properly admissible. Such evidence taken with the circumstances surrounding the making of the agreement and the contract itself disclose the following record situation:
All material events took place during 1954. On April 7 the defendant Neece listed the Catalina Motel at Wichita Falls with Knapton Brokers, Inc. of Oklahoma City under the terms of the contract heretofore set out. This agreement was to remain in force for at least 180 days. The sales price named was $385,000.
On July 30 R. M. Andrews, acting for plaintiff, A.A.A. Realty Company, secured an "open listing" of the property from Neece at a substantially higher price,— $410,000, which was a sufficient sum to pay 5% to Knapton, plus 7% of A.A.A. and still leave Neece with approximately the same money as he would receive if Knapton sold the property for $385,000.
On July 5 Arnold wrote Neece and requested an "exclusive listing" and enclosed a proposed form for him to sign. Neece did not answer this letter.
On August 19 Arnold went to Wichita Falls and talked to Neece about an exclusive listing. As to this conversation, there was a direct conflict in the testimony. Neece testified that he told Arnold that he was not sure that the Knapton contract had expired and for that reason did not want to give A.A.A. an exclusive listing. Then according to Neece, Arnold explained that by the term "exclusive", it was meant that if the motel were sold by A.A.A. or to one of its prospects, A.A.A. would receive all of the 7% contractual commission, exclusively.
Neece's testimony as to this matter was as follows:
"A. Mr. Andrews said, `Well I really feel you don't fully understand what we mean by an exclusive listing.'
"Q. Then what did Mr. Andrews ___.
"A. Then he pointed out this card to me and he said, `All we want is a guarantee that if we sell the Catalina Motel or if it is sold by anyone else to one of our clients, we are to collect the entire commission.'"
Neece thereupon signed the listing card which, except for the substitution of the label "Exclusive Listing Agreement, No. Days six months," for one reading "Open Listing Agreement" was identical in terms with the one which he had signed on June 30th. Neece however signed the card in the wrong place and thereafter Arnold wrote to Neece pointing out the mistake and requested him to sign another identical card which he enclosed in the letter. This card was received by A.A.A. and is the basis of the present action. Neece testified that this card was returned with a letter signed by him dated August 22, and addressed to A.A.A. Realty Company, Attention: R. W. Andrews. Andrews denied receipt of this letter. The body of the copy thereof received in evidence read as follows:
On September 21 and within the 180-day period after April 7, the motel property was sold by Knapton. Neece denied any liability to A.A.A. as a result of the sale and this action was instituted on September 26.
While, as above indicated, the evidence in certain particulars was sharply conflicting, the burden of proving its case rested upon the plaintiff and the verdict of the jury affords no comfort or support to A.A.A.
The plaintiff having failed to establish its claim for recovery as a matter of law and having failed to prove a case as a matter of fact, it follows that the judgment of the Court of Civil Appeals should be reversed and that of the trial court affirmed.
It is so ordered.
CALVERT, SMITH and WALKER, JJ., dissenting.
HAMILTON, J., not sitting.
I respectfully dissent.
The holding of the majority that the judgment of the Court of Civil Appeals must be reversed and that of the trial court affirmed because of ambiguity in the contract between the parties gives this case a most peculiar turn. It will no doubt come as a complete surprise to the parties as well as to the courts below.
The presentation of the case in this Court on this occasion is the sixth time it has been before a court, and never before has it even been suggested that the contract was ambiguous. It was first presented to the trial court on motions by both parties for summary judgment. Those motions contained no hint by either party that the contract was thought to be ambiguous. The summary judgment entered by the trial court did not suggest ambiguity in the contract. Neither party suggested it on appeal from that judgment, either in the Court of Civil Appeals or in this Court.
When, after remand, the case was tried on its merits, neither party pleaded that the contract was ambiguous. Contrary to intimations in the majority opinion, no special issues were submitted for the purpose
The application for writ of error filed in this Court by the defendant contains no point of error or argument that he is entitled to prevail on the ground that the contract is ambiguous and the plaintiff failed to plead the ambiguity and failed to tender evidence and secure findings to resolve it. On the contrary, defendant asserts again and again in his application that it is the duty of the court to disregard or "chop off" the title of the contract, and that the meaning of the contract is then found in "the plain and unambiguous language of the body" of the instrument which, when he signed it, he thought was in "clear and understandable language" and in which he states "there is not even the ambiguity present in the Pate [Pate v. Goyne, 212 Ark. 51, 204 S.W.2d 900] case." It was not until defendant replied to plaintiff's answer to his application that he suggested that if the contract was ambiguous the plaintiff had failed to discharge the burden which the law required that it discharge before it was entitled to a recovery.
In reversing the judgment of the Court of Civil Appeals and affirming the judgment of the trial court on the ground that the contract is ambiguous the majority have thus violated the rule stated in this language in 3-B Tex.Jur. 275, Appeal and Error, § 872: "It is well established that the case on appeal or writ of error must be decided on the same theory as that on which it was tried in the court below." The rule is as applicable to defendants who undertake to inject a new theory on appeal as it is to plaintiffs who attempt to do so, Estes v. Hartford Accident & Indemnity Co., Tex.Civ.App., 46 S.W.2d 413, 416, writ refused, and is as applicable to one who seeks to sustain a trial court judgment as to one who seeks to overthrow one. Sargent v. Williams, 152 Tex. 413, 258 S.W.2d 787. The Commission of Appeals has put the rule in these words: "The law forbids the assumption of an attitude on appeal inconsistent with that taken at the trial, and on appeal litigants are restricted to the theory upon which the cause was prosecuted or defended in the court below." Boatner v. Providence-Washington Ins. Co., Tex.Com.App., 241 S.W. 136, 140.
Assuming, however, that we are justified in affirmiing the trial court's judgment on a new theory, is the contract ambiguous? The precise basis of the majority's holding that the contract is ambiguous is difficult to ascertain from the opinion. Three possible reasons are suggested, none clearly.
The quotation from Bailey v. Mullens, Tex.Civ.App., 313 S.W.2d 99, 103, citation of Pate v. Goyne, 212 Ark. 51, 204 S.W.2d 900, and the statement that a quit claim
Moreover, we have no right to disregard or "chop off" the title of this contract. The parties selected it deliberately. The rule of interpretation which requires rejection of the title of an instrument when it and the body of the instrument are at war and cannot be harmonized, as was the case in Bailey v. Mullens, supra, is a sound rule. We have no such instrument here. When the title of an instrument is not in necessary conflict with its other parts but may be harmonized with them we are governed by the rule announced by this Court in E. H. Perry & Co. v. Langbehn, 113 Tex. 72, 252 S.W. 472, 474-475, in which we said:
The opinion seems next to suggest that ambiguity is achieved by considering the title and the body of the instrument separately, thus disjointing it into conflicting parts taken out of context. The idea seems to be that if the title stood alone it would create an exclusive agency, whereas if the "contractual clauses" stood alone they would create a non-exclusive agency, and thus an ambiguity necessarily exists. That type of reasoning is in clear violation of sound rules of interpretation. Guardian Trust Co. v. Bauereisen, 132 Tex. 396, 121 S.W.2d 579, 583; 10-A Tex.Jur. 344, Contracts, § 171. It is our duty to harmonize all of the provisions of a contract whereever that is possible. 10-A Tex.Jur. 341, 381, Contracts, §§ 171, 189; Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617, 620-621; McMahon v. Christmann, Tex., 303 S.W.2d 341, 344. Associate Justice Norvell at a time past stated the rule in this language in Alderman v. Alderman, Tex. Civ.App., 296 S.W.2d 312, 315:
When under the rule of E. H. Perry & Co. v. Langbehn, supra, the title of an instrument is to be considered in interpreting the instrument it should not be disjointed from the other provisions in the instrument in order to create an ambiguity.
Finally, the opinion seems to suggest that ambiguity results when the legal import of the title is read into the body of the instrument. This seems the most likely basis for the holding of ambiguity, and seems to stem from the statement that there
A listing of property with a real estate broker has a well understood meaning. It imports the granting of an agency to sell property. Farquharson v. Lightner, 96 Kan. 117, 150 P. 565. The legal effect of a listing is to write into the contract between the parties the words: "I hereby appoint broker my agent to sell," and that is all that is imported into the contract when the agreement is titled merely "Listing Agreement." When the agreement is titled "Open Listing Agreement", the title necessarily imports into the contract the words: "I hereby appoint broker a non-exclusive agent to sell." When the agreement is titled "Exclusive Listing Agreement", the title, by the same token, necessarily imports into the contract the words: "I hereby appoint broker my exclusive agent to sell." We must either give it that meaning or give it no meaning at all, and if we give it no meaning at all we are back in this case with a contract which the majority admits is not ambiguous but creates a non-exclusive agency as a matter of law.
The printed form of contract used by the parties to this suit was obviously prepared for use in creating any type of agency the parties might agree upon, the nature of the agency actually created to be indicated by elimination of the inapplicable title and retention of the applicable title. When the property was first listed by the defendant with the plaintiff on June 30, the parties eliminated the title, "Exclusive Listing Agreement", and retained the title, "Open Listing Agreement." The legal effect of that act, importing the meaning of the title into the contract, was to make it read as follows:
No one would doubt that that agreement created a non-exclusive agency, with the possible added right in the defendant to a commission if the property were sold to one of its prospects.
When the parties entered into a new contract on August 19 they eliminated the titile, "Open Listing Agreement," and retained the title, "Exclusive Listing Agreement." The legal effect of that act, importing the meaning of the title into the contract, was to make it read as follows:
That, then, is the contract before us. Does it contain an irreconcilable repugnancy or conflict? Obviously not.
A provision that an agent will be paid a commission only if he sells listed property does not necessarily mean that the right is reserved to appoint other agents. Nor does it necessarily mean that the owner will not be held to respond in damages if he breaches his contract by selling through another agent. The plaintiff in this case might not have sold the property in the six months' period, but the agreement to pay it a commission if it did sell it is not inharmonious with an exclusive right to try to sell it in that period. Having appointed plaintiff an exclusive agent to sell and having agreed to pay it 7% of
Actually, the words, "if they sell said property", may be harmonized with the other language creating an exclusive agency in another important particular. They expressly prevent the instrument from granting an exclusive right to sell the property and thus expressly preserve to the owner his own right to sell
If the printed contract form had incorporated the words appearing in the title in what the majority term the "operative contractual clauses," the contract would read as follows:
There could be but little doubt that the contract in that form would create an exclusive agency. And yet the parties would have selected their language with no more care than they did in the instrument before us, the instrument would still contain the words, "if they sell said property", and the form of the contract would have been just as susceptible to the charge that it "might result in a device that could lead to the perpetration of frauds or injustices upon unsuspecting contracting parties."
The test for determining whether a contract is ambiguous is expressed in Universal C.I.T. Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 157, where it is said:
The real question in this case then is whether after the application of settled rules of interpretation the contract is subject to two reasonable meanings, one of which is that it creates an exclusive agency and the other that it creates a non-exclusive agency. The analysis of the contract made in the light of sound rules of interpretation, supra, should leave no doubt that it may reasonably be said to create an exclusive agency. But may it reasonably be interpreted to create a non-exclusive agency? I submit that it cannot be. When the title is given meaning and that meaning it imported into the contract, I can conceive of no theory on which it may be said that it can reasonably be interpreted as creating a non-exclusive agency.
The thesis of the majority opinion seems to be that the contract is ambiguous because upon looking at it one would have some doubt of its meaning. That thesis is inherent in the statement that "* * * it seems that one reading the operative contractual clauses of the contract before us in connection with its label, `Exclusive Listing Agreement,' would be assailed by doubt as to the meaning of the contracting parties * * *." It is inherent also in the statement that there is "suggested repugnancy" and a "seeming contradiction" between the title and the body of the instrument. The rule of the Daniel case imposes on the Court the duty to resolve repugnancies and contradictions when that may reasonably be done. The majority recognize the rule of the Daniel case but decline to apply it. Only by declining to apply the rule of the Daniel case and by adopting the philosophy of Wigmore that "standards of interpretation [must] continue to be mobile, subjective and individual" is the majority able to find ambiguity in the instant contract. I respectfully suggest, Wigmore to the contrary notwithstanding, that rules of interpretation are unsound which permit a court to use rules so "mobile, subjective and individual" as to decide one case by one rule and another case by a different rule. In McMahon v. Christmann, Tex., 303 S.W.2d 341, we recognized that separate provisions of an oil and gas lease were in "obvious conflict," but we did not hold the lease ambiguous. On the contrary, we used rules of interpretation to harmonize the "obvious conflict." If we are now to hold ambiguous all contracts which contain suggested repugnancies and seeming contradictions, making no effort to resolve or harmonize them, the rule of the Daniel case is a dead letter. It cannot be kept alive by recognizing it while at the same time we decline to apply it.
The majority undertake to support their position by quoting certain testimony and a letter of the defendant indicating that plaintiff's agent represented to the defendant that an exclusive listing meant that the plaintiff would receive a commission only if it sold the property or the property were sold to one of its prospects and that the defendant believed the representation to be true. The representation, even if made and believed, would not make the contract ambiguous. A misunderstanding by the parties of the meaning of language used in writing a contract does not make it ambiguous, and parol evidence is not admissible to show that the parties intended that the language used mean something other than what it clearly imports. Jackson v. Richards, Tex.Civ.App., 157 S.W.2d 982, writ refused; Davis v. Davis, 141 Tex. 613, 175 S.W.2d 226. The representation that plaintiff would get a commission only if it sold the property or if the property was sold to one of its prospects was literally true. An exclusive listing also gives rise to a right to damages for breach of the contract by the owner, whether or not the parties understood that to be true.
If by referring to the evidence mentioned the majority intend to imply that the plaintiff perpetrated a fraud on the
I would hold that the contract before us creates an exclusive agency as a matter of law, and, finding no other reason for reversing the judgment of the Court of Civil Appeals, I would affirm that judgment.
SMITH and WALKER, JJ., join in this dissent.