The opinion of the court was delivered by
This is an action by a real estate broker to recover a commission on the ground that he produced a purchaser who was ready, willing and able to purchase the defendant's 9,000 acre South Dakota ranch upon terms previously agreed by the parties, where the owner who had listed the ranch with the broker refused to sign the contract upon tender of the down payment. The case was tried to a jury which returned a verdict for the broker in the sum of $15,000. The defendant has duly perfected an appeal.
The action was defended on the ground that the broker never produced a qualified purchaser willing to meet the terms and conditions upon which the owner desired to sell his South Dakota ranch.
Although numerous points are asserted on appeal our decision hinges upon the issue whether the broker produced a qualified purchaser.
In the early part of September, 1970, J.R. Allen (defendant-appellant) went to the office of a real estate broker, Chester Winkelman (plaintiff-appellee) and orally listed his South Dakota ranch consisting of approximately 9,000 acres for sale at $40 an acre. The total purchase price at $40 per acre figured $356,800. During the
By reasons of Winkelman's efforts to sell the land he found Russell Bird who was interested in the property. Winkelman then consulted with Allen and procured his authorization to show the ranch in South Dakota to Bird. Allen inquired about the prospective purchaser and was told by Mr. Winkelman that the Bird family were farmers and they were one of the most prominent farming families in southwest Kansas.
Russell Bird testified that he was a resident of Ellington, Missouri, a farmer, 22 years of age and married. He stated his net worth during the months of September and October, 1970, was approximately $6,000, and that he was working for wages at Moscow, Kansas, for $550 per month. He stated for the year 1970 his gross wages totaled $7,158, and for the year of 1969 his gross wages totaled $5,059.
Roger Bird is the brother of Russell. The only thing in the record concerning Roger is that he accompanied Russell and his father to see the South Dakota ranch on the second visit.
Randall Bird is the father of Russell and Roger. Randall testified he farmed approximately 5,000 irrigated acres of land in southwest Kansas, and he was a stockman and owned a feed lot with a 2,000 head capacity.
Throughout the record there is confusion concerning the dates upon which events transpired. The record establishes the South Dakota ranch was shown to Russell Bird sometime during the middle of September 1970, and to Randall Bird, Russell Bird and Roger Bird on the second visit, which apparently occurred September 24, 1970. Mr. Winkelman was the only other person with the Birds on these trips.
When Mr. Winkelman told Mr. Allen the Birds wanted to inspect the South Dakota ranch a second time and sought his permission to view the property, Mr. Winkelman told Mr. Allen that Russell Bird wanted to show the place to his father and brother and that they would be working in a "partnership type thing".
On the return trip from South Dakota on the second occasion, September 25, 1970, Russell Bird offered Mr. Winkelman $320,000
The next day, September 26, 1970, Mr. Winkelman together with with Randall Bird and Russell Bird met with Mr. Allen at his farmyard. This was the only occasion Allen conferred with the Birds during the entire negotiations.
Mr. Winkelman testified that it was on or about the evening of the 26th day of September, 1970, that a figure of $340,000 was discussed with Mr. Allen and that Mr. Allen was informed that Mr. Winkelman (the Thunderbird Agency) "had a check for $1,000.00 as earnest deposit to hold on to it." He then asked Allen "how he wanted it paid and so on and so forth to see if the sale could be worked out."
Mr. Winkelman also testified that on the way back from the second trip to South Dakota, on or about October 6, 1970, Russell Bird made an offer of $320,000 with $20,000 down and the purchaser to make payments in an amount sufficient to meet the Prudential Insurance Company mortgage payments, and to pay Mr. Allen $5,000 per year on his equity, plus interest on the unpaid portion of his equity, for ten years with the balance due and payable at that time. This offer was made after Russell conferred with his father and brother on the way back from South Dakota.
Prior to Mr. Winkelman taking the Birds to South Dakota on the second occasion he had consulted with Mr. Allen and had his own attorney prepare a contract which is marked defendant's Exhibit No. 1. This exhibit is a typewritten contract of sale. It has a blank space for the date, a blank space for the description of the real estate and blank spaces in the paragraph providing for the terms of payment of the remaining balance of $300,000. The significance of this exhibit is that the seller is described as J.R. Allen and the buyers are collectively described as "BELLA FOURCHE RANCH, INC., (a corporation to be formed)". At the end of this typewritten contract of sale is a blank space for the seller's signature and three blank spaces for the signatures of the buyers followed by "BELLA FOURCHE RANCH, INC." with a blank space for the signature of the one signing for the corporation to be formed.
The purchase price recited in defendant's Exhibit No. 1 is $320,000, to be paid in the following manner:
In the blank space following is written in pen:
The mortgage carried by the Prudential Insurance Company on the ranch was indicated in the record to be $151,000. This indebtedness was to be paid at the rate of $4,500 principal per year and 7 1/2% interest on the unpaid balance.
Mr. Winkelman testified the defendant's Exhibit No. 1 is the only contract of sale document that he ever discussed with Mr. Allen.
When the reduced price was discussed by Mr. Winkelman with Mr. Allen he told Allen his commission would be $15,000. Allen would not agree to the payment of this sum out of the $20,000 down payment, and Mr. Winkelman finally said he would take $10,000. The matter was left open when Mr. Allen said the payment could be negotiated later.
At the beginning of the farmyard meeting on the 26th day of September, 1970, Mr. Allen assumed he was dealing with a qualified purchaser — namely, Randall Bird and his son. It was at this meeting Randall Bird informed Mr. Allen he was not going to sign the contract with his son Russell. James Cook, president of the Peoples National Bank, Liberal, Kansas, testified he had advised Randall Bird not to sign a contract of purchase for the South Dakota ranch because he did not believe it would be advisable to have a contingent liability. This statement was made by Cook after he testified concerning a consultation with Russell Bird and Randall Bird, wherein he gave a verbal commitment to Russell Bird of $20,000 as the down payment for the purchase of the South Dakota ranch, upon the condition that Randall Bird would sign a continuing guarantee for Russell's indebtedness to the bank.
At the farmyard meeting on the 26th day of September, 1970, Winkelman testified he told Allen that Russell Bird was tendering an offer to buy the ranch for $320,000, with $20,000 down on the terms previously indicated. Allen, having been informed that Randall
Thereafter Mr. Winkelman had a new contract prepared by an attorney which incorporated the change. This contract is marked plaintiff's Exhibit No. 3 and was prepared by the law firm of Smith and Greenleaf. Mr. Winkelman testified this contract was taken to Allen's farm and given to a woman believed to be one of Mr. Allen's daughters with the request to give the contract to Mr. Allen. Mr. Winkelman does not know for certain whether the contract was actually received by Mr. Allen. Mr. Allen testified that he did not receive the contract and knew nothing of it.
Subsequently Mr. Winkelman contacted Mr. Allen on several occasions to ascertain whether everything in the contract met with his approval. According to Mr. Winkelman's testimony the appellant always replied that he had not had a chance to examine it. Mr. Winkelman believed that in the middle or latter part of October 1970, Mr. Allen became reluctant to go ahead with the sale and began to hedge.
Mr. Winkelman testified that in the latter part of October 1970, he had a telephone conversation with Mr. Allen concerning a four-wheel drive vehicle being used on Mr. Allen's Kansas farm, when the parties had agreed it was to go with the South Dakota ranch. Mr. Allen replied that the truck was still his until he sold the ranch and he could do what he wanted with it until that time. Mr. Winkelman testified that he asked Mr. Allen, "is the deal still on?" and Mr. Allen reassured him that it was and not to worry.
Mr. Allen testified Mr. Koebler agreed to purchase the ranch by contract dated October 1, 1970, and executed on October 5, 1970, for the sale price of $356,920.
Two days thereafter, on November 20, 1970, Mr. Winkelman filed suit against Mr. Allen for his commission.
Subsequently, Russell Bird also filed suit against Mr. Allen for damages. An effort to have these two actions consolidated was denied by the trial court.
There is sharp conflict in the testimony between Mr. Winkelman and Russell Bird on the one hand, and Mr. Allen on the other, concerning whether the parties had agreed upon the terms of sale. The record indicates various matters included in the written contracts were never the subject of testimony by the witnesses at the trial. The only place these terms are found is in the typewritten contracts introduced at the trial. For example, plaintiff's Exhibit No. 3 includes two tractors which are described in detail, a two-wheel trailer with stockrack, a working chute, and a 1963 IHC four-wheel drive pickup. There is nothing in the record to indicate any discussion concerning this personal property other than the broad statement of Russell Bird that "certain personal property" was to go with the sale of the South Dakota ranch, and in particular a 1963 International four-wheel drive pickup.
The discrepancies in the testimony were all submitted to the jury
The general rule is that a real estate agent or broker is entitled to a commission if (a) he produces a buyer who is able, ready and willing to purchase upon the proffered terms or upon terms acceptable to the principal; (b) he is the efficient and procuring cause of a consummated deal. (DeYoung v. Reiling, 165 Kan. 721, 199 P.2d 492, Syl. ¶ 1; Patee v. Moody, 166 Kan. 198, 199 P.2d 798; and Hiniger v. Judy, 194 Kan. 155, 398 P.2d 305.)
In Hiniger v. Judy, supra, it was said that the conditions specified in both (a) and (b) above must be met before the real estate broker is entitled to a commission. The condition specified in (b), however, is subject to a qualification where failure in completion of the contract, or closing title, results from the wrongful act or interference of the seller. (Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843, 30 A.L.R.3d 1370 .)
We are not concerned on this appeal with a discussion of the appellant's rights to sell his property through another broker, where a non-exclusive listing of the property is given, because the trial court instructed on these matters without objection as follows:
"Instruction No. 4
"Instruction No. 5
The term "able" in the general rule that entitles a real estate agent or broker to a commission, if he produces a buyer who is able, ready and willing to purchase upon the proffered terms or upon terms acceptable to the principal, in the context of the rule means more than mere mental competence to make a contract or physical ability to sign it. We have been cited to no Kansas cases dealing with the subject and our research on the point has been unavailing. We therefore must resort to decisions from other jurisdictions to analyze the point. This situation is brought about probably because it was so plain that financial capacity was the primary ingredient of the word. Our opinions appear to have given no consideration to the matter of the buyer's financial ability to complete the transaction by paying the agreed price and taking title to the premises. Nothing has been said specifically as to whether it is any part of the broker's obligation to present a financially capable buyer, nor has anything been said that by producing the buyer the broker impliedly represented he was able, in the financial sense, to perform.
Many jurisdictions leave no doubt that "able" refers to the financial ability of the broker-produced purchaser to complete the transaction. In cases where the broker sued the owner for commission because of alleged unreasonable refusal to enter into a contract of sale with the proffered willing and able customer, it was held that as a condition precedent to recovery, the broker was required to establish that his customer was financially able not only to make the initial payment required on execution of the contract, but also to have available the requisite funds to complete the undertaking at the time fixed for performance. (Ellsworth Dobbs, Inc. v. Johnson, supra, and the many authorities cited therein.)
The ability to buy refers to the financial ability of the purchaser. A prospective buyer meets the legal standard of "ready, willing and able" to buy, although he does not have the cash in hand, if he is able to command the necessary funds to complete the purchase within the time allowed by the offer. (C. O. Frick Co. v. Baetzel,
A purchaser without the ability to finance the purchase is no purchaser at all. Where the only available source from which the greater part of the money is to come to make the purchase possible is, to knowledge of the broker, admittedly in the ownership and possession of a third person, and its use in the interest of the purchaser is subject to the gratuitous consent of such third person who is in no way bound by or a party to the purchase agreement, such a purchaser cannot be considered one able to buy the principal's property. Such funds cannot be considered assets of the purchaser. (McGarry v. McCrone, 97 Ohio App. 543, 118 N.E.2d 195; Morere v. Dixon Real Estate Co., 188 So.2d 623 [La. App. 1966], and the many authorities cited therein; and DeHarpport v. Green, 215 Or. 281, 333 P.2d 900 .)
An excellent discussion of the purchaser's financial ability to buy in connection with a real estate transaction is made by the Supreme Court of Minnesota in Shell Oil Co. v. Kapler, 235 Minn. 292, 50 N.W.2d 707 (1951), where the court said:
In Potter v. Ridge Realty Corporation, 28 Conn.Sup. 304, 259 A.2d 758 (1969) the purchaser was solely dependent upon third persons who were in no way bound to furnish him funds to qualify as an able purchaser. There the court said that even if the parents of the purchaser's wife had in fact been shown to have had funds available to take over and assist in the transaction, entirely or a necessary part, the purchaser still would not qualify for the status of an "able" purchaser within the meaning of the rule.
Turning now to the facts in the instant case, it was established by the testimony of Russell Bird himself that the two checks given by him to the Thunderbird Agency (the $1,000 earnest money check and the $19,000 check for the balance of the down payment) at the time they were tendered by the appellee to the appellant on November 18, 1970, were not covered by funds on deposit in the bank upon which they were drawn. In other words, the clearance of these checks through the bank was dependent upon further action by Randall Bird, the father of Russell Bird, to guarantee and
Analyzing the terms of the contract set forth in plaintiff's Exhibit No. 3, Russell Bird was obligated to pay on the Prudential Insurance Company of America's first mortgage, in the amount of $151,000, $4,500 principal per year plus interest in the amount of 7 1/2% on the unpaid balance. On the $149,000 balance due to the appellant Russell Bird would be obligated the first year to pay $8,940 interest and $7,450 principal. The grand total of fixed obligations due under the contract of purchase for the first year, therefore, would be $32,215, in addition to the $20,000 down payment Russell Bird was obligated to borrow, and for which he had no binding commitment.
The testimony was that 1,700 head of cattle would be put on the South Dakota ranch after its purchase. If Russell Bird were to purchase these cattle, presumably stocker cattle, they would in all likelihood cost a minimum of approximately $200 per head, for a total of $340,000. All of this would have to be borrowed capital. If this court could take judicial notice of interest rates for the year of 1971, the interest rate would exceed 8% on $340,000.
It is to be noted the contract of sale, marked defendant's Exhibit No. 1, had penned notations with respect to the payment of the remaining balance of $300,000, indicating that the Prudential Insurance Company mortgage would not be assumed by the buyer until after the payment of the first ten annual installments were paid to the appellant. This was the only written document admitted by the appellee to have been discussed with the appellant.
In the appellant's attempt to defend this action on the ground that Russell Bird was not a qualified purchaser, he was asked by his counsel on direct examination whether he considered Russell Bird, the son, as a qualified buyer. Opposing counsel objected to such testimony on the ground that it invaded the province of the
Similarly the appellant's expert witness, Mr. Richard Wood of Erie, Kansas, president of the Kansas Association of Realtors, at the last minute could not be present for trial. The weather had closed in and made travel to the place of trial either by road or air impossible. The appellant's counsel by motion requested a one day continuance which the trial court denied. The appellant's counsel then requested sufficient time to prepare an affidavit as to the testimony of his absent expert witness as required by K.S.A. 60-240 (c). This motion was presented on the last day of trial after the appellee had presented his evidence and there was no opportunity to prepare the affidavit without leave of court. The trial court denied counsel for the appellant his only opportunity to file an affidavit.
The appellant argues in his brief that it was crucial to his case that expert testimony be presented as to the standards of the real estate industry concerning a "qualified buyer" of both farm and ranch lands. The appellant contended in his petition and it is set forth in the pre-trial order that the prospective purchaser, Russell Bird, a person 22 years of age with a net worth of $6,000 was in no way a qualified buyer. The trial court's denial of the appellant's motion was on the ground that the appellant had not subpoenaed Mr. Wood. Mr. Wood was not a hostile witness but a willing witness who volunteered to come without the issuance of a subpoena. We think this ruling of the trial court further prejudiced the appellant in the trial of this lawsuit.
The foregoing rulings of the trial court substantially eliminated or reduced the effectiveness of the defense that Russell Bird was not a qualified buyer within the standards of the real estate industry, and that he was not considered a qualified buyer at the time by the appellant.
The appellant was also prejudiced when his motion, termed a motion In Limine, was overruled. The written contract identified as plaintiff's Exhibit No. 3 was prepared by the law firm of Smith and Greenleaf according to the testimony of the appellee before the jury. This either appeared to the jury, or could have appeared to the jury, that the firm of Smith and Greenleaf, who was representing the appellant at the trial in this case, had prepared the contract as
It is argued by the appellee that the appellant accepted Russell Bird as a purchaser on the 26th day of September, 1970, at the farmyard meeting between the parties. Therefore, it is argued Russell Bird's qualifications to purchase the ranch and his financial means to do so are immaterial.
The appellee cites no authority whatever for the position taken in his brief that not only was Russell Bird a qualified buyer, but that Mr. Allen accepted him as a qualified buyer.
An analysis of cases from other jurisdictions clearly indicates that the rule regarding the acceptance of a prospective buyer by the owner is undergoing change. The leading case on the subject which has been followed or approved by numerous other jurisdictions in this county is Ellsworth Dobbs, Inc. v. Johnson, supra. The New Jersey Supreme Court changed its earlier rule in a well reasoned opinion stating as follows:
Some jurisdictions have always had the rule announced in Ellsworth Dobbs, Inc. v. Johnson, supra. (See Anno. 74 A.L.R.2d 437, 452.) Other jurisdictions are following New Jersey's lead. Decisions which have either adopted or expressly approved Ellsworth Dobbs, Inc. v. Johnson, supra, are: Setser v. Commonwealth, Inc., 256 Or. 11, 470 P.2d 142 (1970); Staab v. Messier, 128 Vt. 380, 264 A.2d 790 (1970); Potter v. Ridge Realty Corporation, supra; Rogers v. Hendrix, 92 Idaho 141, 438 P.2d 653 (1968); and Mullenger v. Clause, 178 N.W.2d 420 (Iowa 1970). For a comprehensive discussion of the New Jersey case see Note, 23 Rutgers L. Rev. 83 (1968); Note, 9 Ariz. L. Rev. 519 (1968); Note, 17 Cath. U.L. Rev. 487 (1968); and Note, 10 Wm. & Mary L. Rev. 240 (1968).
We are persuaded by the cogent reasoning in Ellsworth Dobbs, Inc. v. Johnson, supra, and adopt the rules stated in the above quoted portion thereof as the law in Kansas.
On the facts in the instant case the appellant did not sign the contract tendered by the appellee. Factually, therefore, the case presently before us does not involve an executed contract wherein the purchaser subsequently defaults because he is financially unable to perform. But in either situation the broker is obligated to produce a qualified purchaser before he is entitled to a commission. The argument that the appellant "accepted" Russell Bird during the course of negotiations, and in particular on the 26th day of September, 1970, when the appellee claims the appellant accepted him as a purchaser, is not availing to the broker, Mr. Winkelman.
The trial court properly instructed the jury the burden of proof was upon the broker "to prove that he obtained a customer who was ready, able and willing to meet the terms offered by the defendant prior to the sale of the land to another, and so notified the defendant of that fact." The jury was also instructed that if the broker "did not produce an able, ready and willing buyer" the jury must find for the defendant, Mr. Allen. The jury was given no instruction concerning an "acceptance" of the prospective purchaser by the owner.
Mr. Winkelman, the appellee, admitted in his testimony on cross-examination that when the appellant orally listed his South Dakota ranch with him for sale he agreed to find a qualified buyer, which meant "someone able to handle it."
Accordingly, under the foregoing rules and upon the record here presented, the appellee did not, as a matter of law, produce a prospective purchaser who was qualified financially to handle the transaction. The appellee by his own evidence on the trial of this action failed in his burden of proof on this point. The trial court should have entered judgment for the defendant, Mr. Allen, on his motion for a directed verdict at the close of the plaintiff's evidence.
In view of the foregoing other points asserted by the appellant in his brief for reversal of the judgment have become immaterial.
The judgment of the lower court is reversed with directions to enter judgment for the appellant, J.R. Allen.
FONTRON, J., concurring:
It is my feeling that this case should be returned for a new trial. The evidence, as I view it, presents a question of fact as to whether an able qualified buyer was produced in the person of Russell Bird. My conclusion is based largely on the testimony of James Cook, the president of a Liberal bank, and Randall Bird, Russell's father. Mr. Cook testified he gave Russell a verbal commitment for the $20,000 down payment, while Randall Bird stated on the stand he was going to back his son in the ranching adventure, intended to help him if need be, was willing to cosign
In the face of the foregoing evidence I believe the court goes too far in saying that as a matter of law that Mr. Winkelman failed to produce an able or qualified buyer for Mr. Allen's land.
OWSLEY, J., joins in the foregoing concurring opinion.