Martineau v. Hanson

155 P. 432, 47 Utah 549, 1916 Utah LEXIS 90

• Court: Utah Supreme Court
• Decided: February 8, 1916
• Docket: No. 2790
• Status: Published

Opinion

FRICK, J.

The plaintiff sued the defendant to recover judgment upon a promissory note made by the defendant to the plaintiff for the sum of $1,750. The defendant answered plaintiff’s complaint, admitting the execution and delivery of the note sued on. He, however, pleaded several defenses to the note, which are to the effect that prior to the execution thereof defendant had employed the plaintiff as agenit to sell certain lands owned by the defendant, and that for his services or commission for procuring a purchaser for said lands plaintiff was to receive all that he could obtain in excess of the sum of $20,800; that plaintiff produced one John H. Earl who, plaintiff represented, was willing to purchase said lands, and was financially able to pay the sum of $23,300 therefor; that the defendant believed and relied on the representations of the plaintiff that said Earl was financially able to pay said sum of money for said lands, and in pursuance of said representations entered into a contract, whereby the defendant agreed to sell said lands to ,said Earl for said sum of $23,300; that said Earl was to make a payment on said purchase price on or before November 1, 1911, amounting to the sum of $5,500; that the promissory note sued on “was delivered to the plaintiff upon the express condition and understanding between the said defendant and the plaintiff that the said note was not to. be paid until the said John H. Earl should pay to the defendant the aforesaid sum of $5,500; that the plaintiff received the said note from said defendant, and at the time of its receipt agreed to the condition upon which the same was delivered as stated, and agreed with the defendant that the said note should not become due until the said John Earl should make the payment of $5,500 which was due on or before the 1st day of November, A. D. 1911, and that said plaintiff further agreed that said note * * * was never to be paid by the defendant unless the said John H. Earl should pay the sum-of $5,500;” that said Earl never paid the said $5,500, or.any part thereof; that said Earl was not financially able to pay the purchase price of said lands, which fact was well known to the plaintiff at the time the contract of sale was entered, into; that the representations of the plaintiff respecting said Earl’s ability to pay for said lands were false; and that the defendant was deceived and misled by plaintiff’s representations in that regard, and by reason thereof was induced to execute said note. The defendant also pleaded that the plaintiff made said representations for the sole purpose of inducing the defendant to enter into the contract of sale for said lands, and for the purpose of obtaining the commission evidenced by said note. The ease was submitted to the jury under instructions from the court. 'The jury returned a verdict in plaintiff’s favor, upon which the court entered judgment, from which this appeal is prosecuted.

Defendant’s counsel has assigned a large number of errors, and we shall, consider those deemed material in their order. We shall refer to the evidence only to the extent that it may be necessary to illustrate the points decided.

1 The first assignment relates to the ruling of the court by which it excluded defendant’s parol evidence offered by him for the purpose of proving the agreement between the parties set forth in the answer, namely, that the note was delivered upon the condition therein stated. Counsel for the defendant very forcibly insists that the court erred in excluding the proffered parol evidence. The plea in the answer and the evidence offered in support thereof •were based upon Comp. Laws 1907, Section 1568, which, so far as material here, reads as follows:

“Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him, is conclusively presumed.”

The section in question is part of the act relating to negotiable instruments, and is found, with some slight changes, in the statutes of the various states which have adopted said act. The statute adopted by the state of Wisconsin is, word for word, like our own, and the Supreme Court of that state, in passing upon a similar question to that presented here, in the ease of Hodge v. Smith, 130 Wis. 333, 110 N. W. 195, says:

“It is familiar law, nothwitbstanding some conflict in the authorities, that a person may manually deliver an instrument, though it he in the form of commercial paper, to another, on its face containing a binding obligation in vraesenti of such person to such other, with a contemporaneous verbal agreement that it shall not take effect until the happening of some specified event; and that the paper as between the parties will have no validity as a binding contract till the condition shall have been satisfied; and that proof of such condition does not violate the rule that a written instrument cannot be varied by a contemporaneous parol agreement; that such evidence only goes to show that the instrument never had vitality as a contract.”

To tbe same effect are the following eases: Hill v. Hall, 191 Mass. 265, 77 N. E. 831; McFarland v. Sikes, 54 Conn. 250, 7 Atl. 408, 1 Am. St. Rep. 111; Burke v. Dulaney, 153 U. S. 228, 14 Sup. Ct. 816, 38 L. Ed. 698; Howell v. Ware, 175 Fed. 742, 99 C. C. A. 318; 1 Daniel, Negotiable Insts. Section 68a; Brannon’s Negotiable Insts. Law, Section 16, and notes.

Counsel for plaintiff contends, however, and it seems the court agreed with him that the effect of the proffered evidence merely went “to show that the note in suit was to be paid out of a particular fund,” and that parol evidence was not admissible to establish that fact. To sustain that contention, the following cases are cited: Gorrell v. Home Life, etc., Co., 63 Fed. 371, 11 C. C. A. 240; National Bank v. Foote, 12 Utah, 157, 42 Pac. 205; Underwood v. Simonds, 12 Metc. (Mass.) 275; Clanin v. Easterly, etc., Co., 118 Ind. 372, 21 N. E. 35, 3 L. R. A. 863; Stewart v. Anderson, 59 Ind. 375; and Central Sav. Banks v. O’Connor, 132 Mich. 578, 94 N. W. 11, 102 Am. St. Rep. 433. A mere cursory reading of the foregoing cases will disclose that the decisions cited by plaintiff’s counsel, with possibly two exceptions, have no controlling influence upon the question raised by defendant’s counsel; and if we were to follow literally the two cases to which we have referred, we would have to repeal section 1568, supra, by judicial edict, and would be required to overrule all the cases we have before cited.

2 While the fact that the note in question was delivered only upon tbe condition that it should not become a completed or enforceable contract unless the purchaser of the lands in question paid the sum stated is not as directly pleaded as it might have been, yet it seems clear to us that the condition is sufficiently set forth, and that, as pleaded, it constituted a condition precedent to the right of recovery on the note, and one which the parties could legally agree upon.

3 An agent who is authorized by his principal to sell the latter’s lands, certainly may agree that the payment of his commission, or any part of it, shall be dependent upon the condition that the purchaser shall pay to the principal either a specific part or all of the purchase price, and that in ease the purchaser shall fail or refuse to do so without the fault or connivance of the principal, the agent’s commission shall be forfeited. Such an agreement is certainly not against any positive law nor contrary to public policy.

4 If, therefore, the principal executes his promissory note evidencing the agent’s commission, they may undoubtedly agree that the same is delivered upon the condition that it shall not be an enforceable contract unless and until the condition is fulfilled. That such a condition may be proved by parol as between the parties to the instrument the decisions we have referred to leave no room for doubt. And it seems to us that our statute, to which we have referred, expressly so provides. We are.clearly of the opinion, therefore, that the district court erred in excluding defendant’s proffered evidence.

5 The defendant, however, further contends that, entirely apart from the question just discussed, the court erred in refusing to propeiiy submit to the jury the question as to whether the plaintiff had earned his commission. As we have pointed out, defendant in his answer averred that the plaintiff represented that Mr. Earl was financially able to pay .for the lands in question; that the representations were false, and that the defendant, in entering into the contract of sale, relied thereon; and that he was deceived and misled by the representations aforesaid. Counsel for defendant contends, therefore, that the general rule applicable between a broker and bis principal, as laid down by the Court oí Appeals of New York, in Kalley v. Baker, 132 N. Y. 1, 29 N. E. 1091, 28 Am. St. Rep. 542, is not applicable to the facts of this case. The general rule is stated in the headnote in 28 Am. St. Rep. in the following words:'

“Broker employed to sell property becomes entitled to his commission when he finds a purchaser satisfactory to his employer and they enter into a mutual contract of purchase and sale, .though it subsequently turns out that the purchaser is unable to comply with his contract, and on that account the sale is not consummated' by the transfer of the property.”

Of course the rule above stated is based upon the assumption that both the principal and the broker act in good faith. The text of the headnote is fully supported by the case of Riggs v. Turnbull, 105 Md. 135, 66 Atl. 13, 8 L. R. A. (N. S.) 824, 11 Ann. Cas. 783. There, however, seems to be a well-grounded exception to the general rule stated above, which the authors of 2 Clark Skyles on the Law of Agency, at section 773, state in the following words:

“Yet if the principal in accepting him (the prospective purchaser) as a purchaser did not rely on his own judgment, but rather upon that of the broker, and the purchaser is not able to comply with his contract, the broker would not be entitled to commissions; nor would he be entitled to commissions if the ratification was made on the strength of false statements made by him.”

The foregoing text is supported' in Butler v. Baker, 17 R. I. 582, 23 Atl. 1019, 33 Am. St. Rep. 897.

6 The court refused defendant’s request to charge the jury which were based upon the theory that the defendant did not know the financial standing of John H. Earl, and did not rely upon his own judgment respecting Earl’s ability to pay the purchase price, but relied wholly upon the statements and representations of the plaintiff in that regard which defendant alleged were false. There was, to say the least, some evidence produced by the defendant in support of his theory and averments in his answer, and for that reason we think the court should have charged the jury upon that phase of the case, if not in the language requested by the defendant yet in substance to that' effect. Without pausing now to set forth the charge as given, it is manifest from what has already been said that it did not sufficiently present to the .jury either the law applicable to the evidence or the defendant’s theory of the case. In this connection plaintiff’s counsel insists that it was- the defendant’s fault that the purchaser did not fulfill the terms of his contract, and did not pay the purchase price agreed upon. The defendant denied plaintiff’s contention in that regard. Whether the plaintiff’s or the defendant’s contention should prevail is a question of fact for the jury, and cannot affect defendant’s right to have submitted to the jury his contention or theory of the case that the plaintiff did misrepresent the purchaser’s ability to pay for the land, and that he was not financially able to pay therefor, and that for that reason defendant failed to obtain the purchase price agreed upon.

7 Defendant, however, further contends that the court erred in not permitting him to prove and in refusing to submit the question to the jury that the plaintiff was interested with Mr. Earl as part purchaser of the lands in question, and for that reason, if his contentions were found by the jury to be true, the plaintiff should not recover any commission. Counsel invokes the familiar doctrine that a broker in dealing with his principal must act in the utmost good faith, and must not conceal or miserpresent any material fact or facts, and that he cannot act for his principal and also for himself in the same transaction without the principal’s knowledge and consent, and that if he fails in any one or all of the duties thus imposed on him, he forfeits his ri'ght to commission. The court in general terms so charged the jury. The court, however, did not, in any particular instruction, submit to the jury the question of plaintiff’s alleged interest in the lands purchased by Earl, and also refused defendant’s request to charge upon that phase of the case. In view of all the evidence produced by the parties, we are of the opinion that the case in hand is not one where it should be held that the broker forfeits his right to commissions by reason of having an interest with the purchaser in the lands- purchased, providing the broker acted in good faith and did not conceal from the principal some material fact or facts. It should be remembered that in this ease the defendant fixed his own price for the lands in question, and the plaintiff’s commission was made dependent entirely upon whether he could find a purchaser who was willing and able to pay more than the price fixed by the defendant. If the plaintiff found such a purchaser, then he was entitled to whatever sum he realized for the lands in excess of defendant’s price. In what way could it have affected the defendant, therefore, if it were found that the plaintiff advanced any part of the purchase price, and for doing so was given some interest in the lands, or that he obtained some interest therein as purchaser? True, it is, as we have already poitned out, that if the plaintiff misrepresented the purchaser’s financial ability to pay for the lands, and that he thereby misled the defendant and induced him to enter into the contract of sale, so that plaintiff might obtain the commission, and for that reason was given the note in question, he could not recover in this action. But that is entirely a different proposition from the one insisted upon by the defendant, namely, that under no circumstances may a broker be interested, either directly or.indirectly, with, the purchaser. Under the contract of employment in this case, if the defendant received the price fixed by him for his lands, it was entirely immaterial to him how, or through'what sources the purchaser obtained the money or means to pay therefor. Nor was he interested in the question of who purchased, .except to the extent that such purchaser was financially able to pay for the lands. The question here is somewhat akin to the question passed on in Neighbor v. Pacific Realty Ass’n., 40 Utah, 610, 124 Pac. 523, Ann. Cas. 1914D, 1200, where the exception to the general rule that a broker may not be interested in the lands purchased or sold is pointed out. So, as not to be misunderstood upon the question just discussed, we repeat that the foregoing statements are based upon the express condition that the plaintiff acted in good faith, and did not, by false, representations, induce the defendant to enter into a contract of-sale with Mr. Earl for-the purpose merely of obtaining the commission, regardless of the financial ability of said Earl to pay the purchase price.

8 The question is also presented as to whether the burden of proof to show the financial ability of Mr. Earl to pay for the lands rested upon the plaintiff or upon the defendant. The authorities are not uniform upon that question. The cases are in part collated in the case of Butter v. Baker, supra, to which cases we refer' the reader. It seems to us that, in view that the law presumes solvency and never presumes fraud or deceit, and in view that if a principal relies upon the defense of having been deceived by .the broker with regard to the purchaser’s financial ability to pay, he must allege the facts in that regard in his pleading, therefore he should also be required to assume the burden of proof to establish the facts thus pleaded. To that effect, as we read the decisions, is the weight of authority. We are of the opinion, therefore,, that the burden of proof rested upon the defendant to prove the financial inability of Mr. Earl to pay, as well as to prove the fraud or bad faith charged against plaintiff.

The question of want of consideration for the note in question raised by the”defendant, and upon whom rested the burden of proof -in that regard under the rule laid down by this court in Hudson v. Moon, 42 Utah, 377, 130 Pac. 744, in our judgment, is not involved, here. The question was not one of want of, or failure of, consideration. The question was whether the note in question was conditionally delivered or not. If it was delivered upon a condition precedent and the condition was not fulfilled; then the note did not constitute an enforceable contract, and that is the end of the matter.

. While we have not considered all of the assignments separately, yet what we have said upon the whole assignments sufficiently covers the principles which are discussed by counsel. Neither is it necessary to refer specifically to the ruling of the court on the admission or the exclusion of evidence, since the rulings complained of were based upon the theory upon which the court tried the ease,- and in so far as that theory is contrary to the law herein expressed, the court will, no doubt, modify the rulings upon a retrial of the cause if one is had. The foregoing statement applies to .the instructions complained of and to the refusal of defendant’s request to charge which we have not specifically discussed.

For the reasons stated herein, the judgment is reversed, and the. cause is remanded to the District Court of Cache County, with directions to grant a new trial and to proceed with the case in accordance with the views herein expressed. Appellant to recover costs.

STRAUP, C. J., and McCARTY, J., concur.