Neece v. A. A. A. Realty Co.

322 S.W.2d 597, 159 Tex. 403, 2 Tex. Sup. Ct. J. 199, 1959 Tex. LEXIS 567

Opinions

Mr. Justice Norvell

delivered the opinion of the Court.

This is an action for damages resulting from the alleged breach of a real estate listing agreement. The contract which is the subject matter of this litigation reads as follows:

This Court has heretofore considered this particular contract. Upon the first trial of the case the District Judge rendered a summary judgment for the defendant, Jas. F. Neece, and against the plaintiff, A.A.A. Realty Company,¹ Inc., upon the theory that the disputed agreement was an open listing agreement. This judgment was reversed by the Court of Civil Appeals and the cause remanded for another trial.² 292 S.W. 2d 811. We affirmed the Court of Civil Appeals and held that, “It cannot be said as a matter of law that petitioner (defendant) Neece did not by his written contract confer upon respondent (plaintiff) Realty Company, an exclusive agency to sell the property in question.” [156 Texas, 614, 617, 299 S.W. 2d 270.]

A second trial was had to a jury and judgment again rendered for Neece. The Court of Civil Appeals reversed and held as a matter of law that the written contract sued upon was an exclusive agency contract and on authority of Park v. Schwartz, 110 Texas 564, 222 S.W. 156, rendered judgment against Neece for seven per cent of $410,000, the listed sales price of the Catalina Motel. 314 S.W. 2d 384.

In our opinion the Court of Civil Appeals erred in reversing the judgment of the trial court.

While in the main, the pleadings of the parties present the contentions that as a matter of law the contract was either an exclusive listing agreement or an open listing agreement, the trial judge evidently considered that the written instrument was ambiguous and submitted numerous issues to the jury designed to ascertain the actual agreement made by the parties.

Two theories of recovery were open to A.A.A.; first, that the written contract was unambiguous and as a matter of law vested in it an exclusive sales agency for a period of six months from and after August 19, 1954; or, second, that the written agreement was ambiguous, but when explained by admissible extrinsic evidence, it provided that A.A.A. should have an exclusive sales agency for the six-months period mentioned. The findings of the jury were for the most part favorable to the defendant, or what is more to the point, they do not support, but on the contrary refute the theory of an ambiguous contract which, when explained by extrinsic evidence, would sustain a recovery for the plaintiff. Such theory is thus effectively removed from the case even if considered at all by the parties. The onerous burden of proving a case for recovery rested upon the plaintiff and that burden was neither lifted nor shifted by defendant’s failure to secure a summary judgment upon the theory that the written agreement constituted an open listing as a matter of law. Neece was under no burden to affirmatively establish that the agreement was an open listing. On the contrary the burden lay upon A.A.A. to establish that it had an exclusive sales agency.

In order to meet this burden plaintiff presents the contention which was accepted by the Court of Civil Appeals that the written agreement was unambiguous; that it established an exclusive sales agency as a matter of law; that such agreement had been breached, and hence plaintiff was entitled to damages for such breach which amounted to $28,700.00, the amount he would have received had the contract been carried out and the property sold at the listed price of $410,000.00.

The case turns upon question of whether or not the written instrument evidencing the contract is ambiguous.³ If it be unambiguous and by its terms provides for an exclusive sales agency, then that is the end of the matter and A.A.A. should recover. If on the other hand the written contract is ambiguous and reasonably capable of conflicting constructions, then the plaintiff has failed to meet its burden and the trial court’s judgment should be affirmed.

The written form of agreement devised by A.A.A. for its commercial uses is somewhat ingenious. It consists of two parts: the caption or label and a short paragraph of operative contractual obligations. If we accept plaintiff’s theory of construction, the contract, insofar as legal consequences are concerned, may be entirely changed by merely substituting labels without altering the operative contractual clauses in any way. The use of labels affixed to contracts is nothing new. We have warranty deeds, deed of trust notes and through bills of lading. It would, however, be unusual to metamorphose a quit claim into a warranty deed simply by labeling it as such, or affix a deed of trust lien on land by simply calling an ordinary promissory note a deed of trust note. And of course the through bill of lading is usually backed by paragraph after paragraph of operative contractual obligations that spell out the respective rights and liabilities of the parties. While in certain cases, one must consider captions in order to ascertain the meaning and nature of a written instrument, it has been held that the greater weight must be given to the operative contractual clauses of the agreement, for “An instrument is that which its language shows it to be, without regard to what it is labelled.” Bailey v. Mullens, Texas Civ. App., 313 S.W. 2d 99, 1.c. 103, wr. ref., n.r.e.; Pate v. Goyne, 212 Ark. 51, 204 S.W. 2d 900.

The form of contract or listing card involved in this suit contains two captions or labels. One reads, “Open Listing Agreement.” The second reads, “Exclusive Listing Agreement, No. Days? _________________________”

The operative contractual provisions as distinguished from caption read as follows:

“I, (or we) agree to pay A.A.A. Realty Co. 7% of the sale price, (if they sell the property), and to protect them on their prospects or anyone that they are instrumental in property being sold to.”

In the present case the property was not sold by plaintiff, nor was it sold to any of its prospects, nor was A.A.A. instrumental in any way in effecting the sale of the property. Had the operative contractual clause contained no caption or had the label been left as “Open Listing Agreement,” Neece would have no obligation to pay A.A.A. anything. The asserted $28,-700.00 liability lies solely in a change of caption effected by marking out the words, “Open Listing Agrément” and leaving the words “Exclusive Listing Agreement” and inserting “Six Months” in the blank following “No. Days?”

No doubt the draftsman who prepared the form for plaintiff’s use intended that the character of the contract, whether open or exclusive, should be fixed by erasing or obliterating one label and leaving the other. However, while the caption “Open Listing Agreement” is consistent with the operative contractual provisions of the listing, the same cannot be said of the label, “Exclusive Listing Agreement.” There is suggested repugnancy between the heading, “Exclusive Listing Agreement” and the contracting clause, “I (or we) agree to pay A.A.A. Realty Co. * * * if they sell the property, * * By attaching the “exclusive” caption to the open listing agreement (according to its operative terms) an ambiguity arises. We have the opposite of the other detailed, “fine print” contract and are concerned with something which approaches the novel. Hence, we should be hesitant in placing our stamp of approval upon a type or method of contracting which could lead to the perpetration of frauds or injustices upon unsuspecting contracting parties. No' great hardship. will be entailed by insisting that contracts be clear in term or else made clear by explanation before the transfer of one man’s money or property to another is ordered, adjudged or decreed.

By way of example or contrast, we quote from the exclusive listing contract used by Knapton Business Brokers, Inc. (who actually sold the property) which contains operative contractual obligations clearly fixing the character of the contract, viz:

“1 own the business above described and in consideration of your advertising this business for sale, I hereby grant and give you the sole and exclusive right to sell the same for a period of 180 days from this date and thereafter until notified by me in writing.

“In the event it is sold by you, or myself, or by any other person during said time, for the price and above said terms [sic], or for a price and upon terms acceptable to me, then in either of said events, in consideration of your listing the business and endeavor to sell the same, I promise and agree to pay the regular fixed commission of 5% as adopted by the Oklahoma City Real Estate Board, * * *.”⁴

Anyone of ordinary intelligence reading this agreement would know from its operative contractual clauses, i.e. clauses containing verbs, that the right to sell granted the broker was sole and exclusive and that regardless of who sold the property prior to 180 days from date (or a written cancellation of the contract thereafter), the broker would be entitled to five per cent of the sales price. There undoubtedly is a distinction between the words, “I hereby grant and give you the sole and exclusive right to sell” and “I, (or we) agree to pay A.A.A. Realty Co. 7% of the sale price, (if they sell said property), * * *” and the contracting clauses cannot be rendered substantially identical in effect by simply placing an “Exclusive Listing Agrément” label above the second clause quoted.

There is, of course, a distinction between a suit for compensation under a contract and one for damages growing out of a breach of contract. The Knapton agreement quoted provides for a contractual basis of recovery in the event the property is sold by one other than the contracting broker while the present action is one for breach of contract for depriving the broker of a full six-months opportunity to sell the property. Park v. Swartz, 110 Texas 564, 222 S.W. 156. But, however that may be, it seems that one reading the operative contractual clauses of the contract before us in connection with its label, “Exclusive Listing Agreement” would be assailed by doubt as to the meaning of contracting parties; — sufficiently so, as to require investigation and the receiving of parol evidence to ascertain the true meaning of the contract.

In admitting parol evidence to explain this seeming contradiction, we do not countenance a violation of the rule against disturbing the clear meaning of a written instrument. After all, we are to construe contracts from a utilitarian standpoint bearing in mind the particular business activity sought to be served and need not embrace strained rules of interpretation which would avoid ambiguity at all costs, especially where there is danger of enforcing obligations which a contracting party never intended to assume. As Professor Wigmore has said.

“* * * There can be, in the nature of things, no absoluteness of standard in interpretation. An imaginary communism might conceivably bring men to such a level of intellectual uniformity that their thoughts would be expressed in invariable identical symbols. But till such a day comes, the varieties of individual expression and sense must be unquenchable. So long as men are allowed to grant and contract freely, and so long as the law undertakes to carry out those acts by enforcement, just so long must the standard of interpretation continue to be mobile, subjective, and individual.”⁵ Wigmore on Evidence (3rd Ed.) Sec. 2462.

As opposed to plaintiff’s interpretation of the written instrument, there is the theory that the only liability which would arise under the agreement was one to pay if A.A.A. sold, or was instrumental in selling the property, or such property was sold to one of its prospects. Extrinsic evidence was properly admissible. Such evidence taken with the circumstances surrounding the making of the agreement and the contract itself disclose the following record situation:

All material events took place during 1954. On April 7 the defendant Neece listed the Catalina Motel at Wichita Falls with Knapton Brokers, Inc. of Oklahoma City under the terms of the contract heretofore set out. This agreement was to remain in force for at least 180 days. The sales price named was $385,000.

On July 30 R. M. Andrews, acting for plaintiff, A.A.A. Realty Company, secured an “open listing” of the property from Neece at a substantially higher price, — $410,000, which was a sufficient sum to pay 5% to Knapton, plus 7 % to A.A.A. and still leave Neece with approximately the same money as he would receive if Knapton sold the property for $385,000.

On July 5 Arnold wrote Neece and requested an “exclusive listing” and enclosed a proposed form for him to sign. Neece did not answer this letter.

On August 19 Arnold went to Wichita Falls and talked to Neece about an exclusive listing. As to this conversation, there was a direct conflict in the testimony. Neece testified that he told Arnold that he was not sure that the Knapton contract had expired and for that reason did not want to give A.A.A. an exclusive listing. Then according to Neece, Arnold explained that by the term “exclusive,” it was meant that if the motel were sold by A.A.A. or to one of its prospects, A.A.A. would receive all of the 7 % contractual commission, exclusively.

Neece’s testimony as to this matter was as follows:

“Q. What did Mr. Andrews — (say) ?

“A. Mr. Andrews said, ‘Well I really feel you don’t fully understand what we mean by an exclusive listing.’

“Q. Then what did Mr. Andrews —.

“A. Then he pointed out this card to me and he said, ‘All we want is a guarantee that if we sell the Catalina Motel or if it is sold by anyone else to one of our clients, we are to collect the entire commission.’ ”

Neece thereupon signed the listing card which, except for the substitution of the label “Exclusive Listing Agreement, No. Days six months,” for the reading “Open Listing Agreement” was identical in terms with the one which he had signed on June 30th. Neece however signed the card in the wrong place and thereafter Arnold wrote to Neece pointing out the mistake and requested him to sign another identical card which he enclosed in the letter. This card was received by A.A.A. and is the basis of the present action. Neece testified that this card was returned with a letter signed by him dated August 22, and addressed to A.A.A. Realty Company, Attention: R. W. Andrews. Andrews denied receipt of this letter. The body of the copy thereof received in evidence read as follows:

“I am returning the card, which I trust has been properly signed.

“I presume, that due to our little argument, about the meaning of the exclusiveness of this listing, and your pointing out, and explaining it to me confused me, resulting in signing the wrong card.

“I want to emphasize again, I would not think of depriving Mr. Gentry (Knapton’s representative) of the right to sell this Motel.

“I do hope you have good luck, and come up with a good deal real soon.”

On September 21 and within the 180-day period after April 7, the motel property was sold by Knapton. Neece denied any liability to A.A.A. as a result of the sale and this action was instituted on September 26.

While, as above indicated, the evidence in certain particulars was sharply conflicting, the burden of proving its case rested upon the plaintiff and the verdict of the jury affords no comfort or support to A.A.A.

The plaintiff having failed to establish its claim for recovery as a matter of law and having failed to prove a case as a matter of fact, it follows that the judgment of the Court of Civil Appeals should be reversed and that of the trial court affirmed.

It is so ordered.

Opinion delivered February 18, 1959.

1 . —The trial court designations of the parties will be followed in this opinion.

2 . —Because of the rule of Wright v. Wright, 154 Texas 138, 274 S.W. 2d 670, the Court of Civil Appeals did not pass upon plaintiff’s contention that it was entitled to a summary judgment upon the theory that the listing agreement was unambiguous and provided for an exclusive sales agency and hence plaintiff was entitled to judgment as a matter of law. This holding in Wright v. Wright, while followed in Rogers v. Royalty Pooling Co., 157 Texas 304, 302 S.W. 2d 938, was later overruled in Tobin v. Garcia, 159 Texas 58, 316 S.W. 2d 396, and is no longer followed by this Court. The history of this case well illustrates the cumbersomeness of the discarded rule announced in Wright v. Wright.

3 . — The Baconian distinction between patent and latent ambiguities is disregarded by the Texas courts. McCormick & Ray, Texas Law of Evidence (2d Ed.), Sec. 1683. “Parol Evidence is admissible to explain ambiguities apparent on the face of a writing. This proposition is well established and frequently applied, * * Id., Sec. 1685. A contract is ambiguous if, after applying established rules of interpretation to the contract, it remains reasonably susceptible to more than one meaning. Universal C.I.T. Credit Corporation v. Daniel, 150 Texas 513, 243 S.W. 2d 154, reversing Daniel v. Universal C.I.T., Corporation, Texas Civ. App., 238 S.W. 2d 727, in which the lengthy and detailed contract considered by the Court is set out in the margin of the opinion. See also 17 C.J.S. 685, Contracts, Sec. 294. However, rules for the interpretation of contracts are not inflexible, 12 Am. Jur. 745, Contracts, Sec. 226, and a court may not interpolate terms and provisions into a contract and thus under guise of construction make contracts for the parties. 12 Am. Jur. 749, Contracts, Sec. 228.

4 . — The Knapton agreement provides for an exclusive right to sell while the A.A.A. contract at most provides for an exclusive agency to sell. This distinction is, however, immaterial as it is undisputed that the property was not sold by Neece personally, but through the agency of Knapton.

5 . — Wigmore questions the soundness of the theory underlying the rule that one cannot disturb a plain meaning. However, what he says in the above quotation is believed applicable to the present situation, although the meaning of the written instrument involved is hardly clear or plain. For a discussion of the rule against “disturbing a clear meaning,” see Wigmore on Evidence, (3rd Ed.), Sections 2461-2.