Phillip Metropolitan Colored Methodist Episcopal Church v. General Casualty Co. of America

89 N.E.2d 111, 86 Ohio App. 261, 55 Ohio Law. Abs. 46, 41 Ohio Op. 254, 1949 Ohio App. LEXIS 695

• Court: Ohio Court of Appeals
• Decided: May 2, 1949
• Docket: 7080
• Status: Published

Opinions

OPINION

By MATTHEWS, J.:

The Municipal Court sustained the general demurrer of the General Casualty Company to the amended bill of particulars and the plaintiff not desiring to plead further, the court entered judgment of dismissal at plaintiff’s costs in favor of the General Casualty Company. This appeal is from that judgment.

The sole issue raised by the appeal is whether a cause of action against General Casualty Company is alleged in the amended bill of particulars.

It is alleged in the amended bill of particulars that the General Casualty Company is, and was at all times mentioned in the amended bill of particulars, a corporation engaged in the bonding and surety business; and that its co-defendant Wahn-Evans Company is, and was at all such times a corporation authorized to and engaged in the business of a real estate broker, under a broker’s license issued by the State of Ohio.

The amended bill of particulars purports to state two causes of action. The first relates to the conduct of Wahn-Evans & Company as a real estate broker in a transaction between the plaintiff and the First English Lutheran Evangelical Church. The second cause of action purports to allege a cause of action against General Casualty Company as surety upon the real estate broker’s bond of Wahn-Evans & Company given in accordance with the requirements of §§6373-25 to 6373-51 both inclusive, of GC. However, as the allegations of the first cause of action are expressly incorporated into the second cause of action, it is necessary to consider all the allegations of the amended bill of particulars. The General Casualty Company recognized that it was necessary to consider all the allegations by directing its demurrer to the entire amended bill of particulars.

From the amended bill of particulars we learn that the plaintiff owned real estate located at 643 Carlisle Avenue in the City of Cincinnati, and desired at purchase real estate located at 1208 Race Street in that City, owned by the First English Lutheran Evangelical Church. On August 13th, 1947, the plaintiff employed Wahn-Evans & Company to act as a real estate agent in purchasing the 1208 Race Street property and of advising it in the financing of the purchase. In due time, Walin-Evans & Company reported to the plaintiff that the Race Street property could be purchased for $50,000.00, and that it could sell the plaintiff’s property at 643 Carlisle Avenue for $20,000.00 and could arrange for financing the balance of $30,000.00 necessary to complete the purchase, that thereupon the plaintiff made a written offer to purchase the real estate at 1208 Race Street for $50,000.00, and deposited $1,000.00 with Wahn-Evans & Company as earnest money to bind the bargain, .and that this offer was accepted by the First English Lutheran Evangelical Church. It also appears that Wahn-Evans & Company was unable to arrange for the financing of the purchase by this plaintiff, but represented to the plaintiff that if given an additional 90 days it could do so, and that if this extensión was given and it failed to arrange for the financing within that time “then it would return to plaintiff at the direction of the seller the plaintiff’s binder money in the amount of $1,000.00,” and that thereupon the plaintiff entered into a new contract, a copy of which was attached to the amended bill of particulars and incorporated therein. It is also alleged that Wahn-Evans & Company failed again in its efforts to finance the purchase and, as a result, the seller rescinded the contract .and notified Wahn-Evans & Company of such rescission and directed it to return to the plaintiff the $1,000.00 deposited with it as earnest money which Wahn-Evans & Company, after repeatedly promising to do, finally failed and refused to do, although demand had been made therefor by the plaintiff.

The prayer was for judgment against both defendants for .$1,000.00 with interest from the date of the rescission of the contract by the seller and its direction to Wahn-Evans & Company to return the $1,000.00 deposit to the plaintiff.

It is contended that the facts alleged do not show a breach of the statutory bond upon which the General Casualty Com;pany is surety and that, therefore, the demurrer to the amended bill of particulars was properly sustained. In passing upon the validity of this contention, we must give full effect to the relevant statutes (§§6373-25 to 6373-51 GO and treat those statutes as though they were fully set forth in the bond .signed by General Casualty Company and in the amended bill of particulars filed by the plaintiff.

Before, however, considering the legal effect of the allegations of the amended bill of particulars, it would be well to make some reference to the terms of the contract, a copy of which is attached to and incorporated in the amended bill of particulars. It is in the form of an offer by the plaintiff to pay $50,000.00 for the 1208 Race Street real estate, $1,000.00 of which was payable in cash accompanying the offer in the .following manner:

“I/we hereby deposit One Thousand -Dollars ($1,000.00) as above provided with Wahn-Evans & Company as agent for the seller, to apply on the purchase price which is to be retained by the agent until the terms of this contract have been complied with. Said payment to be refunded if offer is not. accepted or if title to said Real Estate is not as above set. forth.”

Appended- to this offer was an acceptance including an agreement to pay Wahn-Evans & Company the prescribed, commission and authorizing it “When this transaction is completed, to apply the above payment in your hands in connection therewith toward the payment of such commission.” And following that acceptance there was this receipt signed by Wahn-Evans & Company: “We hereby acknowledge receipt-of One Thousand Dollars ($1,000.00) payment as provided above.”

It will thus be seen that both by the facts alleged in the-amended bill of particulars and also by the terms of the written contract itself Wahn-Evans & Company held this deposit of $1,000.00 in trust not only for the seller, but also, for the buyer-plaintiff under certain circumstances. It will also be observed that Wahn-Evans & Company was also under contractual obligation to the plaintiff to arrange for the financing of this purchase, and was also the plaintiff’s broker, authorized to sell its Carlisle Avenue property for $20,000.00, and that as between the plaintiff and Wahn-Evans & Company the purchase of the Race Street property by the plaintiff was conditional upon the ability of Wahn-Evans & Company to sell the Carlisle Avenue property and arrange for tlm financing of the residue. Under such circumstances, it could not be seriously argued that Wahn-Evans & Company in accepting the deposit of $1,000.00 was not acting as a real estate broker in a transaction involving the transfer of real estate titles.

Turning now to the conditions of the bond, we find this set forth in §6373-35 GC, wherein it is provided that “Such bond shall be conditioned upon the faithful performance of all the provisions of this act and shall indemnify any person who may be damaged by a failure on the part of the applicant for a reai estate broker’s license to conduct his business in accordance with the requirements of this act. (Secs. 6373-25 to 6373-51.) Any person claiming to have been damaged by any misrepresentation or fraud on the part of a real estate broker or by reason of the violation of the terms of this act, may maintain an action at. law against the broker — and may join as parties defendant the sureties on the bond herein provided for.”

By §6373-42 GC, it is provided the real estate broker’s license may be revoked where the broker in acting as “a real estate broker or a real estate salesman or in any transaction involving the leasing or sale of an interest in real estate, is guilty of:

“(1) Knowingly making any misrepresentation, or,

“(2) Making any false promises with intent to influence, persuade or induce, or—

“(5) Failure within a reasonable time to account for or to remit any moneys coming into his possession which belongs to others.

“(6) Any other conduct, whether of the same or a different -character than hereinbefore specified which constitutes dishonest conduct.”

All told, there are twenty-four prescribed grounds for the revocation of a real estate broker’s license.

Although the word “may” is used in §6373-42 GC, in conferring power to revoke the license, it is clear that should the board of real estate examiners, upon hearing, find that the agent had committed one of the acts constituting a ground for revocation, it could not do otherwise than pronounce the judgment of revocation, and such revocation would be on the ground that the agent had failed to observe the provisions of the act (§§6373-25 to 6373-51 GC) and such failure to observe the provisions of the act would likewise be a breach of the bond.

In Larson v. Marsh, 153 A. L. R. (- Neb., -, 14 N. W. (2d) 189) 101 at 106, it is said:

“The rule seems to be that where a public officer has been clothed by statute with power to do an act which concerns the public interest or the rights of third persons, the execution of the power may be insisted on as a duty, although the wording of the statute is permissive merely and not peremptory. We are of the opinion therefore that the statute imposes a positive duty upon the Secretary of State to perform the acts required by such statute when conditions exist which make the statute applicable.”

We are of the opinion that the amended bill of particulars shows a violation of the condition of the broker’s bond in two respects: (1) It alleges fraud in representing that the, broker could arrange the financing of the residue of the purchase price. We believe that misrepresentation or fraud as used in §6373-35 GC, must be construed in the light, of §6373-42 GC, to include not only misrepresentation as to-an existing fact, but also promissory misrepresentation made-with intent to influence, persuade, or induce action. (2) We-are of the opinion that the failure to account for or remit, the $1,000.00 constituted a breach of the bond. In this connection it should be observed that according to the allegations of the amended bill of particulars Wahn-Evans & Company repeatedly promised to pay the plaintiff. The amended bill of particulars, therefore, excludes the idea of a bona fide dispute between the broker and the party claiming money due from him.

California has a real estate brokers’ licensing law not unlike the Ohio law. The California law requires a bond conditioned, for faithful performance of duty. Liability on such a bond was considered in the case of Clark v. Patterson and New York, Indemnity Co., 75 A. L. R. (- Cal. -, 300 Pac. 967) 1124 in a case in which the facts bear a strong analogy to the facts, in the case at bar. The syllabus, which we quote, is sufficient to disclose this analogy and the result of the application of the statute to the facts:

“The surety on a bond filed by a real estate broker under-a statute requiring applicants for a broker’s license to file a bond ‘conditioned for the faithful performance by such broker of any undertaking as a licensed real estate broker’, on which any person injured by the failure of the broker ‘to perform his duties’ shall have a right of action, is liable to one who, on agreeing to purchase property offered by the broker, placed money in the broker’s hands to be applied on the purchase price, where through no fault of the purchaser the sale was never consummated, and the broker failed to return the money.”

But it is urged that when the plaintiff paid the $1,000.00 to Wahn-Evans & Company, the title passed to its principal— the owner of the 1208 Race Street property. To reach this, conclusion, it is necessary to ignore the express provision of the terms of the deposit as alleged in the amended bill of particulars. And to hold that this amended bill of particulars does not state a cause of action against Wahn-Evans Ss Company and General Casualty Company, it is necessary to ignore the allegations that it was the failure of WahnEvans & Company to arrange for the financing, as they had. agreed to do, that resulted in the necessary rescission of the contract. However, even though no specific agreement had been entered into by the broker and he had not been the cause of the failure to consummate the sale, he would be under an obligation to return the earnest money. In 8 Am. Jur., 1060 (Sec. 130) it is said:

"If earnest money is paid to a broker, and the contract is broken by the principal, the broker, notwithstanding that he has disclosed his principal, is liable to the other party for the return of the earnest money, unless he has in good faith paid it over to his principal.”

The fact that the broker has a claim against his principal is no justification for his refusal to return the earnest money. Gosslin v. Martin, 56 Ore., 281, 107 Pac. 957.

Appellee’s counsel relies strongly upon the case of Stanson, Inc. v. McDonald, 147 Oh St, 191, and we are advised that the trial court considered that case to require the sustaining of the demurrer. This reliance is not placed upon anything in the syllabus, which, of course, is the law of the case. The argument is based on what we regard as a misinterpretation of statements in the opinion of the court. It is true it is said in the opinion that a broker’s surety may be held only for ex delicto acts of the broker, and that the action before the court was not based on any ex delicto act of the broker, but was an action ex contractu, that is, an action for money had and received, but when the facts of the case and the subsequent statements in the opinion are considered, there is no doubt as to the meaning of the court, and that meaning was that in the absence of misrepresentation or fraud, or a violation of the terms of the act, the surety was not liable, and that if there was misrepresentation or fraud, or a violation of the terms of the act, the surety was liable. This is demonstrated by the fact that the Court analyzed §5373-42 GO, to determine whether it had been violated by the defendant broker. The action was by an unlicensed broker to recover a share of a commission from another broker and the surety upon his bond. Not only did the defendant broker not violate the terms of the act by refusing to pay the unlicensed broker or agent, but if he had complied with the request to split his commission and made payment that would have violated the act. After quoting the pertinent parts of §6373-42 GC, the Court said:

“As §6373-47 GC, supra, forbids the splitting of a real estate commission with other than a licensed real estate broker and as S. D. Stanson, Inc., was not a licensed broker at the time the cause of action arose, we see no violation of §6373-42 GC. It is argued in substance that, under the finding the deal was a continuing proposition, McDonald’s conduct was inequitable. However, conduct cannot be held inequitable which is forbidden by law.”

It is clear that the court reversed the judgment in favor of the unlicensed agent solely because there could be no valid contract under the statute to split a commission with an unlicensed real estate broker or agent. The opinion clearly shows that the phrase “ex delicto” was used as a comprehensive phrase to include misrepresentation and fraud, and violations of the statute. Of course any violation of a statute no matter what the form, is a delict.

That there was no misunderstanding in the Supreme Court on this subject is shown by the ground upoi| which the two dissenting judges placed their dissent. They interpreted the facts to show that at the time the work was done by the plaintiff in the real estate transaction he was licensed, and having found that, then they reached the conclusion that the defendant broker violated §6373-42 GC, in refusing to split the fee and that, therefore, his surety was liable. They also were of the opinion that §6373-48 GC, denying a right of action to a real estate broker, without proof that he was licensed, was enacted solely for the protection of the property owner and not for the protections of brokers inter sese, and for that additional reason, they were of the opinion that the broker and his surety were liable to the unlicensed broker for a share of the commission. If the case was to turn on any arbitrary technical distinction between causes of action ex contractu and causes ex delicto, the minority opinion would have been based on immaterial and irrelevant differences.

For these reasons, the judgment is reversed and the cause remanded for further proceedings according to law.

HILDEBRANT & MATTHEWS, JJ., concur in syllabus, opinion and judgment.