Herman v. Stern

213 A.2d 594, 419 Pa. 272, 1965 Pa. LEXIS 499

• Court: Supreme Court of Pennsylvania
• Decided: October 13, 1965
• Docket: Appeal, 281
• Status: Published

Opinions

Opinion by

Mr. Justice O’Brien,

The instant appeal arises from a suit by a real estate broker for a commission which he alleges was earned through the sale of property owned by James L. Stern, the appellant herein. Stern and his wife owned the land and building located at 1707 Walnut Street in Philadelphia. In May of 1954, Stern rented his building to John J. Shaw, Jr. Late in 1959, Shaw sought to be relieved of his lease. The Shaw lease did not expire until August 31, 1960. In order to find a subtenant, Sbaw engaged Herman, the appellee. Soon thereafter, a subtenant was obtained by Herman for the unexpired term of the Shaw lease. The subtenant also signed a new lease for the rental of the premises for an additional three year period. Herman prepared the sublease from Shaw to the new tenant and the new lease from Stern to the new tenant.

Both of these leases contain in paragraph 37 (B), the following clause: “In consideration of the services of Richard B. Herman & Company, Inc., in securing the execution of the above lease, the principal hereby authorizes Richard B. Herman & Company, Inc., as bis agents to collect the rent due or to become due thereunder during the continuance of the same, or for any renewal or renewals thereof, and to deduct and retain five percent (5%) of the amount collected each month, and for this purpose to retain possession of the lease during said period. ... In the event that, at any time while Lessee or any affiliate or successor to or assignee of Lessee is in possession of the demised premises . . ., the premises shall be sold to the Lessee, . . . Principal agrees to pay to Richard B. Herman & Company, Inc., a commission of 5% of the sale price . . . regardless of whether or not Principal shall have obligated himself to pay a commission on said sale to anyone else. Tbe provisions of this clause shall be binding on the assignees, . . . [etc.] of the Principal. The foregoing authority shall be considered one coupled with an interest in Richard B. Herman & Company, Inc. . . .”

The leases were signed by Herman as agent and the tenant. At the bottom of the lease appeared the sentence: “The principal of Richard B. Herman & Company, Inc., having examined the above lease and agreements, hereby agrees to them and ratifies and approves of the same in all particulars.” This was followed by the signature of James L. Stern and seal.

In October, 1962, Alex Sailor and Roslyn Sailor, his wife, purchased the property from Stern, the tenant being Roslyn Sailor, trading as Roslyn Sailor Boutique. The appellee, Herman, then sought a commission on the sale. Stern refused to pay, alleging that the sale was consummated through the effort of others and not through the effort of Herman. The plaintiff filed a complaint in assumpsit and the defendant filed an answer containing new matter. The plaintiff then filed a reply to new matter, then both parties moved for judgment on the pleadings.¹

The complaint alleges that: “3. On or about October 23, 1959, plaintiff as agent for defendant entered into a certain Lease Agreement with Roslyn Sailor, a true and correct copy of which is attached hereto, made a part hereof, and marked Exhibit A. Defendant ratified and approved the same in writing on October 23, 1959, as appears therefrom.

“4. Said Lease Agreement in Section 37B thereof contains certain stipulations and agreements between plaintiff and defendant (the name ‘Richard B. Herman & Company, Inc.’ in Section 37 and in the signature being changed by Section 38 to read ‘Richard B. Herman & Company’) including an agreement that if at any time while Lessee should be in possession of the demised premises, having remained in possession uninterruptedly since the commencement of the term or any renewal or extension thereof or under any other agreement or arrangement, the premises should be sold to the Lessee, the principal (meaning defendant) would pay to plaintiff a commission of 5% of the sale price, regardless of whether or not defendant should have obligated himself to pay a commission on said sale to anyone else.”

Defendant, in his answer and new matter, denied any obligation to pay a commission to the plaintiff on the sale of the property as the plaintiff had nothing to do with the sale, and for the further reason (a) that the plaintiff acted as agent for John J. Shaw, Jr., and as an accommodation to Shaw; (b) that through error and mistake paragraph 37 (B) was not stricken from the printed form before being signed as no arrangement or agreement or discussion was made with the plaintiff with respect to any payment of any commissions in the event of any sale; (c) the premises were sold through the effort of a person other than the plaintiff; (d) all interest and authority of plaintiff under the lease was cancelled by defendant paying the plaintiff in advance the entire amount of the commission on the rent to which he was entitled.

The lower court entered judgment for the plaintiff and against the defendant. Defendant appealed and asked that the judgment be reversed and that judgment on the pleadings be granted in favor of the defendant and against the plaintiff. The appellant argues (1) the plaintiff admits that no agreement was made for the payment of any commission in the event of a sale, and defendant is not liable even though such a clause was in the printed lease; (2) the plaintiffs reply to defendant’s new matter is vague, indefinite and not responsive, and under Pennsylvania Rules of Civil Procedure, admits facts pleaded by the defendant; (3) under the express terms of the lease, the broker was not entitled to commissions for the sale of the premises which did not result from his efforts, and that (a) any right which plaintiff may have had under the lease to receive a commission in the event of the sale of the premises was ended when the defendant, in accordance with the terms of the lease, cancelled plaintiff’s authority and interest and retook possession of the lease almost three years prior to the sale of the premises, and (b) section 37 (B) of the lease does not provide for a commission to be paid in event of the sale of a premises where plaintiff was not the procuring cause of the sale.

Appellant contends that the appellee has “admitted that the written provision in the lease dealing with the payment of commission in the event of a sale of the premises was never any part of the understanding or arrangement between the plaintiff and defendant”.² The plaintiff-appellee, in his reply to defendant-appellant’s new matter, made an averment that the matter contained therein was irrelevant. The averment in defendant’s new matter being: “8. In October of 1959 the then tenant of the premises in question, John J. Shaw, Jr., was desirous of vacating the premises under his lease which still had to August 31, 1960, to run. On information and belief, defendant is informed said John J. Shaw, Jr., engaged Richard B. Herman, as agent to rent the property. Roslyn Sailor, trading as Roslyn Sailor Boutique was obtained by Shaw or Herman as a sublessee and defendant authorized plaintiff to execute a lease to that effect. On October 16, 1959, a lease was executed by plaintiff on behalf of John J. Shaw, whereby Roslyn Sailor, trading as Roslyn Sailor Boutique was made sublessee for the remainder of the unexpired term of Shaw’s lease and which contained a printed provision that should the premises be sold to the lessee the principal would pay to plaintiff a commission of five (5%) percent. Said provision as to payment of commission should the premises be sold was entered into between plaintiff and his principal Shaw and was not part of any understanding or agreement between plaintiff and defendant.” And, the appellant further avers in new matter: “10. . . . Through error and mistake the said printed form of the lease contained a clause³ which was not applicable to the arrangement made between the parties and should have been deleted before signing.” There was a similar averment in defendant’s answer: “4. . . . Through error and mistake, the said paragraph³ was not stricken from the printed form before signing as no such arrangement or agreement or discussion was made with the plaintiff with respect to payment of any commission in the event of any sale. . . .”

The foregoing averments in defendant’s answer and in new matter were not sufficient to meet pleading standards of Rules of Civil Procedure,⁴ and the plaintiff-appellee was not required to answer, and therefore, he could not be deemed to have admitted what was not properly pleaded.

The appellant contends that through error and mistake the portion of paragraph 37 (B) was not stricken from the printed form. He does not point out by whose error or by whose mistake this was not done. The bald assertion of error and mistake falls far short of the requirement necessary for reformation of the contract. No place in the pleading is there any proper averment which would permit a court to allow evidence to show that the provision for payment of commission should be omitted. Pa. R. C. P. 1019(b). Without the proper averment, parol evidence could not he introduced to show that the provision as to payment of compensation was not part of any understanding or agreement between the parties. On the contrary, the lease agreement shows careful consideration and draftsmanship. A portion of paragraph 37 (A) was stricken out as not applicable to the particular situation.⁵

Appellant further contends that under the provision in paragraph 37 (B) that provides for the principal reserving the right to cancel the agent’s authority and to retake possession of the lease whereby the principal pays the amount of rental commission for the unexpired period of the lease, that this invocation of the lease agreement and compliance therewith extinguished the provision for the payment of a commission in the event of a sale of the property. There is no part of the lease agreement that would, under any conceivable notion, warrant this construction. The plain language of the provision for the payment of commission in the event of sale is to the contrary and unequivocal in its terms that a commission is due the agent, appellee, by the principal, appellant. The terms of this provision of the paragraph are unequivocal. The appellant, under the lease, had the right to make payment to the appellee in full of all claims on rental commission due under the lease. The appellee was compelled to accept payment in full of all commissions due on rentals when that provision was invoked by the appellant. The payment of the amount of commuted rental commission to which the appellee was entitled is not consideration for the release of the other claim for commission in the event of the sale of the property, particularly when the lease agreement does not provide for it to be such a release.

Appellant maintains that the appellee is not entitled to a commission in the event of the sale of the premises where the appellee was not the procuring cause of sale. The lease agreement specifically and unequivocally provides that: “Principal [appellant] agrees to pay to Richard B. Herman & Company, Inc., a commission of 5% of the sale price, without deduction for any other payments paid to or due Richard B. Herman & Company, Inc., hereunder, regardless of whether or not Principal shall have obligated himself to pay a commission on said sale to anyone else.” There are many cases on the subject of real estate commissions, and when brokers are entitled to a commission, and what the requirements are to entitle a broker to commissions. It would serve no purpose for us to review the long line of cases. It is only necessary for us to point out the specific language in the lease agreement to show in the instant case that the broker is entitled to his commission whether he was the procuring cause of the sale or not when that sale was made to persons encompassed within the provisions of the agreement. The plain language of the agreement cannot be ignored.

Appellant says in his supplemental brief on reargument of this case that: “It is submitted that the clauses in the printed lease between the landlord and the tenant do not impose any obligation on the landlord unless he had agreed to the payment of a commission for the sale of the property. It is expressly provided in Section 35 of the lease that the lease sets forth '. . . all the promises, agreements, conditions, and understandings between the lessor and lessee . . .’. Nowhere is there any statement that the lease constitutes an agreement between the lessor and the broker. It is apparent that the contention of the Appellee is hanging upon the thread of fine print in the seven page lease agreement wherein appears the words Tease and agreements’. The approval therein contained refers only to the lease agreement made between the landlord and the tenant which contains many clauses. . . . Herman was employed only to lease — not to sell the property . . . the real and legal issue in this case and that issue is whether the defendant, Stern, made any agreement to pay a commission in the event the tenant purchased the property. The fact that a statement to this effect is set forth in the fine print in the lease to which no reference or discussion was otherwise made is of no legal validity when admittedly no such agreement was made.” (Emphasis in original)

Appellee was not a party to the contract, he signed it as agent for appellant, and the provisions in the lease agreement are between the landlord, appellant, and tenant, Roslyn Sailor, trading as Roslyn Sailor Boutique, and do not impose any obligation on the landlord, unless he, the landlord, appellant, agreed to the payment of a commission on the sale of the property in the event of a sale to those persons enumerated in paragraph 37 (B). In section 35 of the lease agreement, it is provided: “. . . all the promises, agreements, conditions and understandings between the lessor and lessee . . .”, and no reference is made to any agreement between the lessor, appellant, and the broker, appellee. In paragraph 37 (B) of the lease agreement it is provided: “In consideration of the services of Richard B. Herman & Company, Inc., in securing the execution of the above lease, the principal hereby authorizes Richard B. Herman & Company, Inc., as his agents to collect the rent due or to become due thereunder during the continuance of the same, or for any renewal or renewals thereof, and to deduct and retain five per cent (5%) of the amount collected each month, and for this purpose to retain possession of the lease during said period. . . In the event that, at any time while Lessee or any affiliate or successor to or assignee of Lessee is in possession of the demised premises . . ., the premises shall be sold to the Lessee, .... Principal agrees to pay to Richard B. Herman & Company, Inc., a commission of 5% of the sale price . . . regardless of whether or not Principal shall have obligated himself to pay a commission on said sale to anyone else. The provisions of this clause shall be binding on the assignees, ... of the Principal. The foregoing authority shall be considered one coupled with an interest in Richard B. Herman & Company, Inc. . . .” The language in the foregoing paragraph 37 (B) would not impose liability on the lessor, appellant without more than the manner in which the lease agreement was executed, that is, by the appellee as agent for the appellant and the lessee, Roslyn Sailor, trading as Roslyn Sailor Boutique. The appellee was not a party to this lease agreement in his own right and therefore no liability was imposed upon the appellant to the appellee.

Appellee grounded his action on the foregoing provisions of paragraph 37 (B), and the following provision at the end of the lease agreement which provides: “The principal of Richard B. Herman & Company, Inc., having examined the above lease and agreements, hereby agrees to them and ratifies and approves of the same in all particulars. [Signed] James L. Stern (Seal) Philadelphia, Pa. Oct. 23, 1959”. Appellant contends this ratification and approval refers only to the lease agreement made between the landlord and the tenant, which contains many clauses.

May the appellee recover a commission for the sale of the premises to the lessee from the appellant in the instant situation?

Appellant obligates himself in clear and unambiguous language, for a recited consideration from the broker, under seal, to pay specific commissions. That this particular agreement is contained in the lease agreement between the lessor, appellant and lessee, Sailor, is neither unusual nor legally objectionable. Its presence in the document can be only to create a binding agreement between principal, appellant and agent, appellee, who signed as agent, for those commissions. Otherwise, its existence cannot be rational!y explained. •There is no legal or logical reason for prohibiting the inclusion of such promise. It is a practical manner of handling an everyday business matter in an efficient and legally effective manner, avoiding the necessity of other separate contracts. The simple matter is that the lessor, appellant, adopts the lease agreement prepared by his agent with the lessee as his own contract with the agent. The adoption of the contract in clear, unambiguous language, under seal, for the purpose for which it was executed, cannot be denied. This situation is a fundamental problem in ordinary contract law. There are many instances in which a party not a signatory to the writing may recover on the instrument, e.g., a payee of a check or note, a grantee under a deed. In these instances, only the maker or grantor signs the writing. Here, the action is on appellant’s promise to pay commissions as determined by that portion of the lease agreement between appellant and lessee and signed under seal by appellant. He is the party to be charged, and his signature to that promise is sufficient.

The lease agreement contains two agreements, as the ratification and approval of appellant suggests in the use of the word “agreements”, that between the lessee and lessor, through his agent, and that between the lessor and his agent, which came into being upon signature by the lessor, appellant. When the lease agreement was tendered to the appellant for his approval, it consisted, in effect, of two offers: (1) an offer by the appellee to accept, in consideration of his services in procuring the lease (if appellant should approve it), a promise on the part of the appellant to pay the commission set forth in Section 37 (B) of the lease agreement : (2) an offer by the lessee to promise the payment of rent in return for the appellant’s promise to provide the lessee with the building. The second of these offers was an offer of a bilateral contract, the first an offer of a unilateral contract, analogous to the appellee’s saying to the appellant: “If you will promise to pay me the commission set forth in section 37 (B), this lease is yours”. When appellant ratified and approved the document, he accepted not only the lessee’s offer, but also the appellee’s offer.

Appellant maintains that the appellee was employed to lease the property and not to sell the property. This contention is not borne out by the plain, clear language of the document. Appellant also contends the provision for the payment of a commission on the sale of the property is in fine print in the document and, in addition, there had been no reference or discussion of the provision for the payment of a commission on the sale. An examination of the document reveals that with the exception of the part of the document that had been typed in on a typewriter and a rider, evidently prepared on a typewriter, all of the document provisions were of the same size and style type, and the provision appears directly over the end of the document containing the signatures.⁶ Whether an oral discussion was had concerning the commission in the event a sale took place between the parties is of no moment in face of the written agreement in clear and unambiguous terms, there having been no allegation of fraud.

Judgment affirmed.

1 Because we Rave motions for judgment on the pleadings from both parties, we must carefully delineate what pleadings we may consider. When we consider the plaintiff’s motion for judgment on the pleadings, we may consider only the complaint and the answer containing new matter. Luria Steel & T. Corp. v. Dittig, 414 Pa. 197, 199 A. 2d 465 (1964). However, when we consider the defendant’s motion for judgment on the pleadings, we must consider the complaint, the answer containing new matter, and the reply to new matter.

2 Appellant’s brief, page 6.

3 Paragraph 37(B) of lease agreement.

4 Pa. R. C. P. 1019(b) : “Averments of fraud or mistake shall be averred with particularity. Malice, intent, knowledge, and other conditions of mind may be averred generally.”

5 If the inclusion of 37 (B) was an error or mistake as Stern alleges, the mistake was unilateral in nature. The law is clear that a unilateral mistake will not void a contract. Restatement, Contracts, §502; Marmon Phila. Co. v. Blocksom, 103 Pa. Superior Ct. 542, 157 A. 510 (1931).

6 This case is thus distinguished from Cutler Corporation v. Latshaw, 374 Pa. 1, 97 A. 2d 234 (1953), where a confession of judgment clause was hidden in a mass of small print, smaller than the bulk of the agreement and hidden on the reverse sheet of the agreement pages.