Kohne v. Wood

129 N.E.2d 865, 98 Ohio App. 424, 57 Ohio Op. 472, 1954 Ohio App. LEXIS 668

• Court: Ohio Court of Appeals
• Decided: November 15, 1954
• Docket: 4795
• Status: Published

Opinions

Fess, J.

This is an appeal on questions of law from a judgment of the Toledo Municipal Court in favor of the plaintiffs in the sum of $500.

On February 13, 1953, plaintiffs (hereinafter sometimes referred to as the purchaser) and defendants (hereinafter sometimes referred to as the seller) entered into an agreement in writing whereby the plaintiffs offered to purchase a parcel of real estate from defendants for the sum of $9,900 upon the following terms:

“$25 herewith deposited to apply on the purchase price; the purchasers further agree to pay in cash the additional sum of $225, balance of purchase price to be paid as follows: $250 on closing, balance by G. I. loan for $9,400, when warranty deed is furnished,” etc.

The agreement further provided:

“If this proposition is accepted by the owner within 5 days, on these terms or any other terms whatsoever between the parties hereto, it shall constitute a binding contract for the purchase and sale (through the Walter J. Urban Co., agent) of said property. If the owners fail to accept this proposition upon the terms herein set forth, the said deposit of $25 shall be returned to the purchasers, without any liability upon the part of the Walter J. Urban Co. to either party. If the owners accept this proposition, or any modification thereof, the purchasers hereby agree to deposit with the Walter J. Urban Co. the sum of $225 as additional earnest money which shall be applied on the purchase price.”

The proposition was accepted by the defendants and shortly thereafter plaintiffs paid the broker $225. Thereafter, on or about March 25, plaintiffs paid to the broker an additional $250. Why such payment was made is unexplained, other than that one of the plaintiffs testified he called one of the defendants and told him the deal was going to close within ten days and that he was going to pay the $250 to the broker. Defendants made no objection to the payment of .this additional $250 to the broker. One of the plaintiffs testified also that his offer was made contingent upon securing the $9,400 loan. But he was unable to obtain the necessary financing and the deal was apparently mutually terminated. Thereupon, the purchaser demanded from either the seller or the broker the return of the $500 which had been paid to the broker.

In 8 Ohio Jurisprudence (2d), 95, Section 22, it is stated:

“A real estate broker has no authority, in the absence of special agreement, to receive payment of the purchase money for land sold through his efforts, and one who pays such broker the purchase price of property sold by him in his representative capacity does so at his peril, in the absence of express or apparent authority in the broker to receive such purchase money.” (Citing Frank v. Levy, 24 W. L. B., 227, 13 Dec. Rep., 67.)

It is of interest to note that upon appeal of the Frank case (10 C. C., 554, 6 C. D., 819) the Circuit Court found that the broker had apparent and actual authority, as agent of the plaintiff, to deliver the deed made by the plaintiff to the defendant, and to receive from her the purchase price for the property, and concluded that the owner must suffer the loss as a result of the defalcation of the broker. In other words, the Circuit Court held that payment to the broker was payment to the owner.

Apparent authority in an agent to receive payment may be created by a course of dealing, or previous conduct, leading persons of ordinary prudence to believe that the principal had conferred authority upon the agent to receive payment. 2 Ohio Jurisprudence (2d), 126, Section 75. As a general rule, where a payment is properly made to a known agent acting within the scope of his authority for a disclosed principal, without mistake, fraud or duress, and the payer ultimately becomes entitled to the return of the payment, his action is not against the agent individually, but against the principal. 2 Ohio Jurisprudence (2d), 265, Section 135, citing Dobell v. Koch, 16 Ohio App., 41.

In the instant ease, the listing contract between the owner and the broker merely conferred upon the broker the exclusive right, within 90 days, to sell the property, and contained no provisions regarding receipt of the purchase money. Under the terms of the listing agreement, the broker thereby only became the agent of the owner to negotiate the sale. However, the sales agreement in its terms provided that the $25 deposit and the $225 additional earnest money be paid to the broker, and that upon acceptance of the proposition it should constitute a binding contract for the purchase and sale through the broker of the property. Under the terms of the agreement, the first $250 received by the broker was for and on behalf of his principal, the owner. It may be inferred from the evidence that the broker called the purchaser, advised him that the deal would be ready for closing, and requested payment of the additional $250 incident thereto. The evidence fails to disclose that the broker had any express authority to receive this additional payment. But it can not be held that a finding that the owner clothed the broker with apparent authority to receive this additional payment is against the weight of the evidence or contrary to law. It was the intention of the purchaser to make this payment to the broker to be ap plied on the ultimate balance due upon the contract. It was therefore the owner’s money.

The owner defendants contend that the Court of Appeals for Hamilton County overruled Dobell v. Koch, supra, in Downey v. Arnonoff, 19 Ohio App., 424. But in the Downey case, the broker expressly agreed to return the earnest money if a satisfactory loan was not procured, or if the title be imperfect. Glens Falls Indemnity Co. v. Kirkpatrick, 46 Ohio App., 23, 187 N. E., 643, and Glen Falls Indemnity Co. v. Bradfute, 44 Ohio App., 189, 184 N. E., 770, turn primarily upon, the liability of a surety upon a broker’s bond and are not applicable to the circumstances presented by the instant case. Phillip Metropolitan Colored M. E. Church v. Wahn-Evans & Co., 153 Ohio St., 335, 91 N. E. (2d), 686, 17 A. L. R. (2d), 1007, is to be distinguished because in that case the broker likewise expressly agreed to refund the deposit of earnest money.

Cases relating to defaulting escrow holders likewise are decided upon the terms of the escrow arrangement and the circumstances under which the payments have been made. 15 A. L. R. (2d), 870. For a comprehensive annotation on the subject of payment to a broker or agent authorized to sell real property as payment to the principal, see 30 A. L. R. (2d), 805.

In the instant case, it is apparent that the $500 was paid upon condition that the loan be secured, but it was paid to the broker as agent for the owner, and there is no evidence to support the claim that the broker was obligated to refund the deposit upon failure to complete the transaction. It is unfortunate, of course, that either party should suffer the loss, but we are forced to the conclusion that the owner is liable for the return of the money. As an abstract proposition, the owner has a right of recovery from the broker for his failure to account for such deposit. 1

Judgment affirmed.

Deeds, J., concurs. Conn, J., concurs in part and dissents in part.

1 Although not disclosed in the record, the broker became insolvent.