Diversified General Corp. v. White Barn Golf Course, Inc.

584 P.2d 848, 1978 Utah LEXIS 1400

• Court: Utah Supreme Court
• Decided: August 31, 1978
• Docket: 15462
• Status: Published

Opinions

MAUGHAN, Justice:

Plaintiff, a Utah corporation, initiated this action to recover a commission, claimed pursuant to a written agreement denominated by the parties a “Finders Agreement.” After completing discovery defendant moved for summary judgment on the ground plaintiff was performing the services of a real estate broker as specified in § 61-2-2, U.C.A., 1953, was unlicensed under chapter 2, Title 21, and was, therefore, precluded from maintaining such an action under § 61-2~18(a), U.C.A., 1953. The trial court granted defendant summary judgment on the aforecited ground and plaintiff appeals. We affirm. No costs awarded. All statutory references are to U.C.A., 1953, unless otherwise noted.

The finders agreement recited as consideration the listed services and consultation set forth. Defendant was described as a corporation seeking purchasers, who would be willing to enter into an agreement to purchase its real property. The parties agreed plaintiff should have “the right to act as finder for purchase of the property from the corporation.” The agreement recited that in consideration of the services as a finder, defendant agreed to pay plaintiff 13½ percent of the sales price. The agreement provided the terms “sale, according sale” included “the transfer, contract for sale, or other disposal of all or substantially all of the property described; or as a merger, consolidation, or other reorganization of the Corporation.”

Plaintiff further agreed it would not be entitled to compensation in the event no purchase of the property was made during the effective time of the agreement. Plaintiff was also given a lifetime membership in defendant’s country club.

The parties further agreed plaintiff should “not be under any liability for or in respect of any matter not connected with this Agreement except for lack of good faith and for obligations expressly assumed in this Agreement.” The parties agreed plaintiff was to render no other services than those specifically provided. The parties specified the sale price as $1,545,000.00.

The deposition of the President of plaintiff was published and quoted by the court in its memorandum decision. Plaintiff’s President stated the purpose of the agreement was to give him an opportunity as a finder to find a buyer. His objective was to locate a buyer for the property and bring him to defendant, and for this service plaintiff was to receive a commission. No real estate broker was involved in behalf of either plaintiff or defendant.

The trial court ruled that one, who undertakes on a commission or fee basis to secure a purchaser for property belonging to another, is within the Real Estate Broker’s Statute, Title 61, Chapt. 2, and must be licensed. 61-2-18, prohibits an action for recovery of compensation.

61-2-2, provides:

The term ‘real estate broker’ within the meaning of this chapter shall include all persons, partnerships, associations and corporations, foreign and domestic, who for another and for a fee, commission or other valuable consideration, or who with the intention or in the expectation or upon the promise of receiving or collecting a fee, commission or other valuable consideration, . . . assists or directs in the procuring of prospects . which does or is calculated to result in the sale, exchange, leasing or renting of any real estate . . . [Emphasis supplied.]

In Anderson v. Johnson ¹ the Court ruled that one who accompanied a licensed real estate broker, and assisted him in obtaining a listing of a farm, from the owners, was not a real estate broker or salesman; within the licensing statutes. Therefore, the complaint, seeking recovery on the broker’s agreement to pay for such assistance, stated a claim.

This Court stated:

. The second part of the statute [61- -2 -2] calls for more careful consideration. Do the words and terms ‘or assists or directs in the procuring of prospects’ apply to appellant? Does the following include the acts of the appellant:

‘or assists or directs . . . the negotiation or closing of any transaction which does or is calculated to result in the sale, exchange, leasing or renting of any real estate’?

While these terms are very broad and inclusive, we think they do not. The primary purpose of real estate business is to sell real estate or its use and from such transactions receive a fee or commission. While it is necessary to secure listings, the term ‘real estate prospect’ refers to one interested in the purchase of realty or in obtaining a lease of its use and does not refer to one from whom you might secure a listing.

Had the legislature intended to prohibit one from assisting a real estate broker to secure listings, it could have done so without difficulty. If we should stretch the meaning of the statute where it uses the words

‘or assists . the negotiation . of any transaction calculated to result in the sale, exchange, leasing or renting of any real estate’

to include the plaintiff as a real estate salesman, it would be just as feasible to include the abstractor who prepared an abstract of the property or the stenographer who typed the contract of sale or the deed or lease used in the transaction.²

Justice Wade, in a concurring opinion, stated:

A reading of the statutes regulating real estate brokers makes it apparent they were enacted for the benefit of the public to protect them from dishonest and unscrupulous real estate agents. Such protection of the public is not needed from the casual or remote influence of a stenographer or a person who introduces a real estate broker to one who may wish to deal with him. Neither the stenographer nor the man who introduces the broker in the example I have mentioned are active participants in any contract affecting real estate or any liability of the persons entering into such contracts or listings. The dealings which the statutes aim to protect the public in are those which result in legal liabilities between the parties. Nothing the stenographer or the man who introduces the real estate broker does, has that effect. This is true even though the real estate broker contracts to pay the man who introduces him a part of his commission in the event he makes a sale.³

Here, the written finder’s agreement, in effect, appointed plaintiff as a special agent with authority to find a prospective purchaser for defendant’s property. This agreement even recited that plaintiff owed the agent’s duty of good faith to his principal and provided for a commission based on the specified sale price.⁴

In Corson v. Keane⁵ plaintiff urged his activity was not covered under the real estate licensing statutes since he did not negotiate, but merely put the defendant in the position where he might negotiate, viz., plaintiff’s bargain was merely to bring the two parties together.

The court questioned whether “negotiating” required the conducting by a broker of all proceedings in a transaction from the initial step to the making of a contract or whether it could connote something less. The court stated a real estate broker is a special agent of one who employs him, and his authority is circumscribed by the terms of the agency agreement. He may by its terms be required to effect a sale or merely produce a customer. The court cited the following:

The essential feature of a broker’s employment is to bring the parties together in an amicable frame of mind, with an attitude toward each other and toward the transaction in hand which permits their working out the terms of their agreement. They may reach that agreement without his aid or interference. Indeed, in a transaction of any magnitude, the terms would never be settled beforehand or negotiated finally by the broker.

This does not mean that the broker has not negotiated the transaction. . If the statute does not apply to such a situation, then it is a toothless enactment. Every unlicensed broker will make the same argument that the plaintiff here has made, that he did not have to bring the parties to actual agreement upon all the details, that that phase was something for the parties themselves to determine. In short, every unlicensed broker will be enabled to carry on his business just as he did before the statute came into existence, simply by calling himself a finder, an originator, an introducer, instead of a broker. This would be an absurd limitation of the statute and one unfounded in reason or policy. A broker ‘negotiations’ just as much when he brings parties together in such frame of mind that they can by themselves evolve a plan of procedure, as when he himself carries on the discussion and personally induces an agreement to accept a specific provision. Baird v. Krancer, 138 Misc. 360, 246 N.Y.S. 85, 88 (N.Y.Sup.Ct.1930).

The New Jersey court ruled the broad language of the real estate broker’s statute resulted in the conclusion the agreement, upon which plaintiff’s suit was predicated, was within the statutory prohibition.⁶

In Carnahan v. McCarver⁷ plaintiffs contended that merely supplying information as to who might be interested in purchasing real estate did not constitute assisting another in the procuring of prospects.

The Oregon statute, which is similar to 61-2-2, provides a real estate broker was:

any person who, for another and for compensation or with the intention or in the expectation or upon the promise of receiving or collecting compensation: ... [a] assists or directs in the procuring of prospects, calculated to result in the sale, exchange, leasing or rental of real estate. O.R.S. 696.010(8)(j).

The court ruled the statutes involved clearly and explicitly prevented others than brokers from receiving remuneration for aiding another in consummating the sale of real property by furnishing the name or names of interested purchasers.

In Whitaker v. Arizona Real Estate Board,8 the court interpreted the following provisions of A.R.S. 32-2101:

24. ‘Real estate broker’ means a person, other than a salesman, who, for another and for compensation: .

(h) Advertises or holds himself out as being engaged in the business of buying, selling, exchanging, rental or leasing real estate or counseling or advising thereon.

(i) Assists or directs in the procuring of prospects, calculated to result in the . leasing or rental of real estate. [Emphasis supplied.]

The court observed the statute, being remedial in nature, required liberal construction to accomplish its purpose. The underlying purpose of statutes regulating real estate activities was to protect the public from unqualified and unscrupulous people. It ruled the conduct of'plaintiff fell within the statutory definition of “real estate broker.” The court explained plaintiff assisted in the procuring of prospects for “another” and not for himself; he received compensation from the prospects. The court noted the statute did not specify the source of the compensation. Further, plaintiff’s conduct was calculated to result in the leasing or rental of real estate. It concluded the trial court had not erred in its determination requiring plaintiff be a licensed real estate broker.

In the matter at hand, plaintiff relies on the finder’s exception created by judicial construction in California, viz., one who simply finds and introduces two parties to a real estate transaction need not be licensed as a real estate broker.⁹ The California courts have consistently adhered to this exception for a period in excess of fifty years, although in 1929, the licensing statute was amended to include in the definition of a real estate broker one who “solicits” for prospective purchasers. (Stats.1929, ch. 130, § 223). Subsequently, the court ruled that by the addition of these words, the legislature did not intend them to mean the same as “introduces an owner and a prospective purchaser.”¹⁰ In Crofoot v. Spivak11 the court stated there had been no amendment of the act, which would change the scope of the definition of who was a real estate broker, since the interpretation in Shaffer v. Beinhorn.12 Under such circumstances, the court stated, there would be no justification to modify an interpretation in which the legislature had acquiesced for such a long period of time.

Section 10131, California Business And Professional Code (as amended 1961) provides:

A real estate broker within the meaning of this part is a person who, for compensation or in expectation of a compensation, does or negotiates to do one or more of the following acts for another or others:

(a) Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property.

When this statutory provision is contrasted with the comprehensive language of section 61-2-2 it becomes apparent a judicial interpretation creating a finder’s exception would violate the express language of the enactment. A “real estate broker” under this section is one, who for another, and for a fee or commission, “assists or directs in procuring prospects”; which action is calculated to result in the sale of real estate.

The duties undertaken by plaintiff in the finder’s agreement fall precisely within the statutory definition of a real estate broker. No evidence was adduced to bring the transaction within any of the exceptions contained in 61-2-2.

ELLETT, C. J., and WILKINS and HALL, JJ., concur.

1 . 108 Utah 417, 160 P.2d 725, 729, 167 A.L.R. 768 (1945).

2 . 108 Utah 424-425, 160 P.2d 729.

3 . 108 Utah 427, 160 P.2d 730.

4 . See Seal v. Powell, 9 Utah 2d 372, 374, 345 P.2d 432 (1959).

5 . 4 N.J. 221, 72 A.2d 314, 316 (1950).

6 .See 24 A.L.R.3d 1160, Anno. Validity, Construction, And Enforcement of Business Opportunities or Finder’s Fee Contract, § 6(a), pp. 1172-1173; Brakhage v. Georgetown Associates, 33 Colo.App. 385, 523 P.2d 145 (1974); Goff v. Halandras, Colo.App., 523 P.2d 147 (1974).

7 . 255 Or. 36, 463 P.2d 857 (1970).

8 . 26 Ariz.App. 347, 548 P.2d 841 (1976).

9 . Shaffer v. Beinhorn, 190 Cal. 569, 213 P. 960 (1923); Tyrone v. Kelley, 9 Cal.3d 1, 106 Cal.Rptr. 761, 507 P.2d 65 (1973).

10 . Freeman v. Jergins, 125 Cal.App.2d 536, 271 P.2d 210, 220 (1954).

11 . 113 Cal.App.2d 146, 248 P.2d 45 (1952).

12 .Note 9, supra.