Hecht Co. v. Whiteford

137 F.2d 929, 78 U.S. App. D.C. 134, 1943 U.S. App. LEXIS 4125

• Court: Court of Appeals for the D.C. Circuit
• Decided: August 16, 1943
• Docket: No. 8246
• Status: Published

Opinions

ARNOLD, Associate Justice.

The main facts in this case are not in dispute. Appellant, the Hecht Company, owned a large warehouse which was to become vacant. In February, 1936, it retained appellee, Whiteford, a real estate broker, to sell or find a tenant for the property. Whiteford’s agency was not exclusive and other brokers were retained for the same purpose. Since the property was in Washington, Whiteford’s first and obvious move was to interview an employee of the government’s Office of Space Control. He promptly did so. Some months later he took another Space Control employee out for a casual inspection of the property.

The Office of Space Control is in effect a real estate office set up by the government to serve the vast number of agencies, departments, boards and divisions of the government which need building space. It performs for these divisions of the government the services ordinarily rendered by a real estate broker to his clients. Government agencies are compelled to close all contracts for space through the Office of Space Control. However, since the agencies that require space are more aware of their own needs than an outside department, they often call up private brokers directly to find out what is available.

Accordingly, in August, 1936, a real estate broker named Rosinski received a call from the Social Security Board for information as to available space. Rosinski knew the Hecht building was for rent so he got in touch with Whiteford. Through the joint efforts of Whiteford and Rosinski a proposal (which never ripened into an offer) was made to lease thfe building for the occupancy of the Social Security Board. The rental was $38,000 a year but alterations which would cost about $135,-000 were required before the Social Security Board would take possession. The Hecht Company declined to consider the proposal.

This is the only proposal which was procured by Whiteford, or with which Whiteford had anything to do. In the meantime other agents who had been requested by the Hecht Company to search for a tenant had contacted the Office of Space Control without success. There is no evidence that Whiteford or any other agent spent any substantial time or used any special knowledge in dealing with the government.

Finally the Office of Space Control, dealing directly with Hecht, leased the property for the Government Printing Office. The rent was $38,000. The offer differed from the Social Security Board proposal in that instead of requiring a large expenditure before occupancy, only slight improvements were necessary.

On the basis of these facts, the jury found Whiteford was entitled to a commission of 5% of the $38,000 annual rental so long as the Government Printing Office or any other agency of the government occupies the premises. The commission given by the judgment below amounted to $5,447.04. The effect of the decision enables appellee to collect further commissions during the occupancy of the property by the Government Printing Office at the rate of $1,900 a year.

Ordinarily a broker must complete the lease before he is entitled to a commission. Nevertheless, where the broker is the procuring cause of a lease to a particular customer the owner cannot prevent the broker’s full performance, by completing the performance himself, without paying a commission.¹ But in such a case the burden of proof is always on the broker to show that he is the procuring cause of a lease subsequently made by the owner.²

We find no evidence in the record to support a finding that Whiteford was the procuring cause of the lease made by the Office of Space Control on behalf of the Government Printing Office. The only proposal which Whiteford was instrumental in obtaining was from the Social Security Board, which the owner declined to accept.³ It is true that Whiteford was the first to call the property to the attention of the Division of Space Control, the office which subsequently negotiated a lease with the owner. In some cases there may be an inference of fact that a broker who has introduced an individual customer to the owner is the procuring cause of subsequent dealings between that customer and the owner⁴ since without the special service of the broker the owner might never have met the customer. But such an inference can hardly be made where the “customer” introduced by the broker is the Office of Space Control, a large government real estate service generally known to be searching for space on behalf of other government agencies and dealing with a large number of property owners and real estate brokers.

In any event, if such an inference ever arose here it is rebutted. Whiteford’s first contact with Space Control was in February, 1936, when he saw the Chief of that office, Guthridge. Guthridge was not much interested because the building was not then available for occupancy. The next contact Whiteford made with Space Control was in April, 1936, when he took another employee of that office to„ the Hecht warehouse. Only a casual examination was made since the building was still not available. Whiteford filed no listing or report in writing with Space Control. There was no evidence that either of these episodes had anything to do with bringing about the lease that was ultimately signed. There is strong evidence to the contrary. Jawish, an independent broker, brought the warehouse to the attention of the Office of Space Control and formally listed the property there in May, 1936. In the fall of 1936, Russell, of the Office of Space Control, inspected the property with Jawish and made a report to the chief, Guthridge. The manners of the Space Control staff who were concerned in the transaction positively testified that Whiteford had no part in the chain of causation which resulted in the lease to the Government Printing Office. They made it clear that if any broker caused them to get in touch with the Hecht Company, it was not Whiteford but Jawish.⁵

The appellee, Whiteford, had also the burden of proving that the commission claimed represented the fair and reasonable value of the service. The service alleged to have been rendered consisted simply in discovering that the government needed office space and calling its attention to the property. For this trifling effort the compensation allowed amounted to $5,447.-04 at the time of the verdict, and would accumulate at the rate of $1,900 a year so long as the government occupies the property. The testimony to support this large fee is based on a schedule made up by a combination of private real estate agents. However, in view of the failure of appellee to produce substantial evidence that he was the procuring cause of the lease, we need not decide whether a fee which appears on its face to be unconscionable can nevertheless be upheld as reasonable when it is supported by such testimony.

Nor need we decide the equally doubtful question whether public policy justifies a contingent fee in procuring a government contract where the fee has no relationship to the actual value of the services. The Supreme Court of the United States on one occasion positively asserted that contingent fees for soliciting executive action were contrary to public policy.⁶ Though this was a dictum it was not inadvertently said. It is true that in a later dictum the Supreme Court exempted from this rule “the percentage allowed by established custom of commission merchants and brokers, though dependent upon sales made.” 7 It is a fair assumption in the light of the' Providence Tool case that this dictum applies to such customary brokers’ fees as bear an actual relationship to the value of the work performed, — not to speculative windfalls which the broker is to receive if he is successful in soliciting executive action. To extend this dictum to the latter type of brokers’ fees would overrule the reasoning of the Providence Tool case. The facts of this case, however, do not require us to consider that question.

The judgment should be reversed on the ground that the evidence is not sufficient for the jury to find that appellee, White-ford, was the procuring cause of the lease.

Reversed.

1 Moore & Hill, Inc., v. Breuninger, 1909, 34 App.D.C. 86, 91; Mechem, The Real Estate Broker and His Commission, 6 Ill.L.Rev. 145, 313, and eases cited ibid., n. 64.

2 Battle v. Price, 1934, 63 App.D.C. 326, 72 F.2d 377; Wardman v. Washington Loan & Trust Co., 1937, 67 App.D.C. 184, 186, 90 F.2d 429; See Goldsmith v. Buckey, 1933, 62 App.D.C. 61, 62, 64 F.2d 559.

3 In Battle v. Price, supra, 63 App.D.C. at page 327, 72 F.2d at page 378, this court said: “* * * To become entitled ■ to a commission, a broker must find a purchaser who is able and willing to buy on the identical terms offered by the seller. * * * It is true that the plaintiff first introduced the eventual purchaser to the defendant, but this circumstance alone, though significant, is not determinative, in the present circumstances.”

4 See Note, 36 Harv.L.Rev. 875 (1923), “Thus, although ordinarily it is not enough that the broker merely introduce the purchaser to the principal, it is easily conceivable that introduction might be sufficient.” Contra, Arent Co. v. Cinnamon, Sup.Ct.App.Term, 1921, 188 N.Y.S. 86, 87, a case in which the court refused to allow a broker’s commission where the broker had introduced the customer and the owner completed the sale, saying: “The broker may have introduced to each other parties who otherwise would have never met; he may have created impressions which under later or more favorable circumstances would naturally lead to and materially assist in the consummation of a sale; he may have planted the very seeds from which others reap the harvest; but all that gives him no legal claim for commission.”

5 In Taylor v. Maddux, Marshall & Co., Inc., 1925, 55 App.D.C. 254, 4 F.2d 447, 448, where competing brokers were involved, the lower court gave judgment for commission to the broker who had first taken the ultimate purchaser to see the property. The sale was made by another broker. In reversing the judgment this court said: “Taking the plaintiff’s case in its most favorable light, it amounted merely to a competition between two agents for the sale of the premises. It is well settled that, in the absence of collusion between the owner and the purchaser, there can be no recovery by an agent who has failed in such a competitive race.”

In Whitcomb et al. v. Bacon, 1898, 170 Mass. 479, 49 N.E. 742, 64 Am.St.Rep. 317, the court points out that a different rule than the one above stated by this court might allow two brokers to recover commissions on the same sale.

6 Providence Tool Co. v. Norris, 1865, 2 Wall. 45, 17 L.Ed. 868.

7 Oscanyan v. Winchester Repeating Arms Co., 1881, 103 U.S. 261, 276, 26 L.Ed. 539.