Opinion
No. 105,550.
2012-11-9
HAYDEN OUTDOORS, LLC, a Colorado Limited Liability Company, Appellee/Cross–Appellant, v. Delmer ZWEYGARDT, Lavonne Zweygardt, ZWZ, LLC, a Kansas Limited Liability Company, Deer Creek Water, Inc., and RTM Services, LLC, a Kansas Limited Liability Company, Appellants/Cross–Appellees.
Appeal from Sherman District Court; Scott Showalter, Judge. Bradley C. Ralph, of Williams, Malone & Ralph, P.A. of Dodge City, and Kenneth J. Eland, of Sloan & Eland, of Hoxie, for appellants/cross-appellees. Vernon L. Jarboe, Martha A. Peterson, and Shaye L. Downing, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, L.L.C., of Topeka, for appellee/cross-appellant.
Appeal from Sherman District Court; Scott Showalter, Judge.
Bradley C. Ralph, of Williams, Malone & Ralph, P.A. of Dodge City, and Kenneth J. Eland, of Sloan & Eland, of Hoxie, for appellants/cross-appellees. Vernon L. Jarboe, Martha A. Peterson, and Shaye L. Downing, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, L.L.C., of Topeka, for appellee/cross-appellant.
Before BUSER, P.J., ATCHESON, J., and KNUDSON, S.J.
MEMORANDUM OPINION
PER CURIAM.
This litigation arises because of a dispute over commissions due under a brokerage contract for the marketing and sale of farmland worth millions of dollars. Following a bench trial, Delmer Zweygardt, Lavonne Zweygardt, ZWZ, LLC, RTM Services, LLC, and Deer Creek Water, Inc. (Zweygardt) appeal a commission awarded by the trial court to the real estate broker, Hayden Outdoors, LLC (Hayden). Hayden cross-appeals the amount of the commission and an evidentiary ruling. We affirm the district court's judgment.
Factual and Procedural Background
Zweygardt owned 22,720 acres of noncontiguous tracts in Cheyenne, Sherman, Thomas, Wallace, and Logan Counties (property). The property was apparently put up for sale some time before Zweygardt engaged John Hayden, the principal of Hayden Outdoors, LLC as the real estate broker for the property.
On June 27, 2008, Zweygardt and Hayden executed a form “Exclusive Right to Sell Listing Agreement” (Listing Agreement). Pursuant to the contract, Zweygardt agreed to pay Hayden 7% of the selling price (either the $27,264,000 listing price or another price “later agreed upon”) if “the property” sold before 1 year's time, June 27, 2009. Zweygardt further agreed to pay a brokerage fee “if property” sold within 90 days of June 27, 2009, but only if the sale was made “to anyone with whom the [Broker] has negotiated or to whom the [Broker] has exposed the property prior to final termination, provided Seller[s have] received notice in writing, including the names of prospective purchasers, before or upon termination of this agreement” (Extension Clause). Zweygardt also agreed to refer all inquiries to Hayden.
Hayden created a website and prepared a catalog showing maps, photos, legal descriptions, and leases, if any, for each tract of land. Hayden also advertised the property in several agricultural and financial periodicals. During the year, Hayden showed the property to five potential buyers, including Ben Hudye.
In late February and early March 2009, Zweygardt had telephone conversations with John Stratman, a real estate broker in Colorado. Stratman testified that he had telephoned Zweygardt on behalf of a colleague in Colorado, Linda Niebur, because Hayden had not returned her calls inquiring about the property. Zweygardt did not tell Hayden he had spoken with Stratman, though he did inform him of Niebur's interest in the property.
Hayden eventually discovered Stratman had contacted Zweygardt and told him to stop contacting the seller. Hayden then called Niebur and scheduled an appointment with her and her client, Jerome Pribil. The testimony regarding this appointment was in conflict.
According to Niebur, Hayden said the property had been sold and provided information on other land for sale. According to Hayden, he gave Niebur and Pribil a catalog of the Property and allowed them to borrow plat maps in addition to providing information about other land for sale. The trial court made findings regarding Niebur's testimony and not Hayden's, suggesting it had credited Niebur's account. The trial court apparently also believed Niebur's testimony that, “Pribil did look at [Broker's] property with [her] after finding it listed on [Broker's] website and using [Broker's catalog].” While the trial court seemingly found that Hayden may have not treated Pribil as a prospective buyer of the property, it determined that Pribil had become interested in the real estate based on Hayden's efforts.
At some point, realizing that Zweygardt did not plan to relist the property, Hayden prepared a list of contacts as required under the 90–day Extension Clause. The trial court found Hayden provided Zweygardt with “a list of contacts” including Ben Hudye and Niebur. Pribil was not listed, but since Niebur had purposefully withheld his last name, Zweygardt listed “the name of the broker who brought the buyer in.” Stratman, however, was not listed.
On June 30, 2009, 3 days after Hayden's exclusive listing period expired, Stratman contacted Zweygardt about the property. The next day, July 1, 2009, Stratman, Niebur, and Pribil met with Zweygardt. Zweygardt purported to sell the property to “John Stratman, LLC” in a series of transactions, and that entity immediately resold certain portions of the property, comprising less than the total, to Hudye and Pribil.
In early July 2009, according to Hayden, Niebur called to offer cooperation on a commission. Hayden contacted Zweygardt, who confirmed the property had been sold but refused to provide any details. When Hayden asked Zweygardt for a commission, he refused.
Hayden filed the present lawsuit for breach of the Listing Agreement or for quantum meruit. After a bench trial, the district court ruled that Hayden had earned a commission under the Extension Clause and also, at least with respect to Hudye, as a procuring cause of the sale. The trial court did not rule on Hayden's quantum meruit theory. The trial court then reduced Hayden's commission based on commissions it considered were owed to Stratman and Niebur, leaving it to those brokers to pursue Zweygardt for payment. The trial court's rulings are discussed more fully in the analysis section. Zweygardt appeals, and Hayden cross-appeals.
Analysis
Preliminarily, Zweygardt does not brief the trial court's ruling that Stratman and Niebur may seek their commissions from him. For his part, Hayden does not brief the trial court's failure to rule on his quantum meruit theory. Issues not briefed are deemed waived or abandoned on appeal. See National Bank of Andover v. Kansas Bankers Surety Co., 290 Kan. 247, 281, 225 P.3d 707 (2010).
Zweygardt's Appeal of Trial Court's Judgment regarding Hayden's Commission
Zweygardt challenges the trial court's judgment granting Hayden a commission as contrary to the Listing Agreement. Before considering Zweygardt's arguments, it is necessary to set out the proceedings below in more detail. We begin with the pretrial order, which “controls the subsequent course of an action.” See Nelson v. Nelson, 288 Kan. 570, Syl. ¶ 14, 205 P.3d 715 (2009).
The pretrial order listed the questions for trial. Three of these questions involved whether Hayden was owed a commission under the Extension Clause based on sales to, respectively, John Stratman, LLC, Hudye, and/or Pribil. Another three questions asked whether Hayden was the “procuring cause” for each of these respective sales.
After hearing the evidence, the trial court determined that Zweygardt had “waited until expiration of the [L]isting [A]greement before consummating the straw man sale to [John] Stratman [LLC] ... in order to avoid paying the commission.” The trial court also found “ample evidence ... that John Stratman, LLC was merely a ‘straw man’ for the subsequent purchaser Hudye and Pribil.” According to the trial court, the transactions between Zweygardt and John Stratman, LLC were “done without any money changing hands. The earnest money checks were not cashed.” In contrast, Hudye and Pribil made payments in the same amount and at the same time as the payments purportedly made by John Stratman, LLC. With regard to the rest of the property, the trial court found that “[Sellers] agreed to hold a note on [John] Stratman, LLC, and the property, ... is to be sold at auction.”
On appeal, Zweygardt does not challenge these findings, including the “characterization of John Stratman, LLC, as a ‘straw man.’ “ Zweygardt explicitly states he “[is] not requesting this Court disturb any finding of fact made by the Trial Court.” If Zweygardt believed the paper transfers to John Stratman, LLC were sufficient to avoid commissions on the sales to Hudye and Pribil, he could have challenged the trial court's findings. Because he does not, we deem this point abandoned on appeal. See Cooke v. Gillespie, 285 Kan. 748, 758, 176 P.3d 144 (2008) (“a point raised only incidentally in a brief but not argued there is deemed abandoned”).
The trial court held that Hayden had earned a commission under the Extension Clause with respect to both Hudye and Pribil. It also held that Hayden had earned a commission as the procuring cause of the sale to Hudye. Initially, the trial court held Hayden had earned a commission as the procuring cause of the sale to Pribil, but after a motion to amend, the trial court apparently modified its earlier ruling:
“As for the proposed amended conclusions of law and judgment, the court specifically finds that Niebur/Stratman may have been involved in the Pribil sale as a procuring agent but [Broker] clearly was entitled to commission based upon the ‘[E]xtension [C]lause.’
“It may be inequitable to allow [Broker] to receive full benefit for a sale he may have discouraged, but it does fall within the parameters of the [E]xtension [C]lause so [Broker] should receive some benefit.”
With this factual background, we consider Zweygardt's arguments on appeal.
1. Extension Clause
Zweygardt maintains “neither Pribil nor Hudye was a ready, willing and able buyer ‘for the sum of $27,264,000.00,’ as required by the ... Listing Agreement.” As a result, Zweygardt contends that he was not contractually required to pay Hayden any commission on these two sales.
Because Zweygardt does not challenge the trial court's findings and we are interpreting a written document, our review is unlimited. See Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 900–01, 220 P.3d 333 (2009); Liggatt v. Employers Mut. Casualty Co ., 273 Kan. 915, 920, 46 P.3d 1120 (2002). Absent ambiguity, “courts do not construe contracts but merely enforce the contract terms in accordance with their plain and ordinary meaning.” Sheldon v. KPERS, 40 Kan.App.2d 75, 82, 189 P.3d 554 (2008).
At the outset, Hayden protests that Zweygardt did not raise this argument below:
“This issue was not included in the pretrial order. [Sellers] did not submit any findings of fact or conclusions of law concerning this issue following trial. [Sellers] also did not ask the [trial] court to amend its Memorandum Decision concerning this issue. The [trial] court made no findings on this claim and, therefore, this issue is not properly before the court.”
We have previously discussed the pretrial order, which included questions on sales to Hudye and Pribil, as well as the purported sales to Stratman. After trial, Zweygardt submitted the following proposed finding of fact: “During the term of the ... Listing Agreement, [Broker] ... was unable to secure a ready, willing and able buyer for the sum of $27,264,000.00 as required by the ... Listing Agreement and said agreement expired on June 27, 2009.” The trial court adopted this statement as its finding of fact Number 19, adding the following sentence: “However, [b]uyers for portions of the property were identified, including Hudye and Pribil.” On appeal, Zweygardt relies on this finding (omitting the added sentence), arguing: “The Trial Court's Finding of Fact No. 19 is dispositive of the issue before this Court.” All things considered, we are persuaded that this issue was adequately raised below.
The operative language in the Listing Agreement is found in two separate clauses. We will refer to paragraph 3 as the “Commission Clause.” It provided:
“3. The Seller agrees to pay the Broker a brokerage fee of 7% of the selling price, if the Broker produces a ready, willing, and able buyer for the property at the price and subject to the terms stated, or later agreed upon, or if the sale, lease or exchange of the property is made by the Seller or any other person during the term of this exclusive right to sell listing agreement.” (Emphasis added.)
The next paragraph, paragraph 4, we will refer to as the “Extension Clause.” It provided:
“4. Such compensation shall be paid if property is sold, leased, exchanged, conveyed, or otherwise transferred within 90 days after termination of this agreement, or any extension thereof, to anyone with whom the [Broker] has negotiated or to whom the [Broker] has exposed the property prior to final termination, provided Seller has received notice in writing, including the names of prospective purchasers, before or upon termination of this agreement or any extension thereof. However, Seller shall not be obligated to pay such compensation if a valid listing agreement is entered into during the term of said protection period.” (Emphasis added.)
The first words of the Extension Clause, “[s]uch compensation,” refer to the Commission Clause. As a result, to interpret the Extension Clause, we must also interpret the Commission Clause.
The Commission Clause provided Hayden a commission under two independent conditions: “ if the Broker produces a ready, willing, and able buyer for the property at the price and subject to the terms stated, or later agreed upon, or if the sale, lease or exchange of the property is made by the Seller or any other person during the term of this exclusive right to sell listing agreement.” (Emphasis added.)
The first condition applies here with respect to Hudye because Hayden produced him, and Hudye then purchased at a price and subject to terms later agreed upon. Contrary to Zweygardt's argument, finding of fact Number 19 does not rule out this conclusion, because the finding incorporated only the price and terms stated in the Listing Agreement. The Commission Clause's first condition also allowed a commission where the price and terms were later agreed upon.
The same reasoning would apply to Pribil, but we note the trial court's ambivalence regarding whether Hayden was the procuring cause of this sale. The trial court apparently conceded after the motion to amend that Hayden may have discouraged Pribil in the meeting arranged by Niebur and, therefore, was not the procuring cause of the eventual transaction. That being said, the question is not whether Hayden was the procuring cause of the eventual transaction, with Pribil. The question under the Commission Clause's first condition is whether Hayden produced Pribil.
A comparison of the terms “produces” and “procuring cause” is necessary to the analysis. In Winkelman v. Allen, 214 Kan. 22, 29, 519 P.2d 1377 (1974), our Supreme Court taught the following:
“The general rule is that a real estate agent or broker is entitled to a commission if ( a ) he produces a buyer who is able, ready and willing to purchase upon the proffered terms or upon terms acceptable to the principal; ( b ) he is the efficient and procuring cause of a consummated deal. [Citations omitted.]” (Emphasis added.)
Our Supreme Court added, “[T]he conditions specified in both ( a ) and ( b ) above must be met before the real estate broker is entitled to a commission.” 214 Kan. at 29. We read this to mean that there is a distinction between the terms “produces” and “procuring cause.” We conclude the trial court's apparent finding on procuring cause does not rule out our consideration of whether Hayden produced Pribil.
The most applicable definition of “produce” is “to offer to view or notice.” Webster's New Collegiate Dictionary 918 (1976). Thus, Hayden produced Pribil if, at the very least, he offered Pribil Zweygardt's view or notice. We believe our Supreme Court indicated some limits to this concept when it held: “Where a real-estate agent is employed to find a purchaser ready, able, and willing to buy on terms acceptable to the seller, it is not required in order to earn his commission that he bring the parties together personally or introduce them.” Owen v. Spangler, 111 Kan. 484, Syl., 207 P. 772 (1922). In the context of the present case, although Hayden did not actually bring Zweygardt and Pribil together personally or introduce them, he nevertheless brought Pribil to Zweygardt's notice by including Niebur, Pribil's agent, on Hayden's list of potential buyers. Any other conclusion would ignore the reality of the situation as found by the trial court.
Importantly the Commission Clause's first condition did not go on to require that the broker also be the producing cause of the consummated deal with the seller. The trial court nevertheless ruled on the producing cause question, and we consider that below. In any event, our point here is that the first condition applied to both Hudye and Pribil.
Moreover, even if the first condition did not apply, the second condition was applicable. The second condition required nothing more than a sale, reflecting Hayden's exclusive right to sell the property. An exclusive right to sell is violated “[i]f anyone sells the property—another agent or even the seller.” 11 Thompson on Real Property, § 95.07(c)(1), p. 487 (2d Thomas ed., 2002). Stated another way, “[a]n ‘exclusive right to sell’ agreement listing real property for sale forbids the owner from selling his property either by himself, or through another broker, without liability while the property is listed with the original broker.” Foltz v. Begnoche, 222 Kan. 383, Syl. ¶ 2, 565 P.2d 592 (1977).
The sales to Hudye and Pribil occurred after the 1–year term of the Listing Agreement. But the Extension Clause extended both of the Commission Clause's conditions for persons “ with whom the [Broker] has negotiated or to whom the [Broker] has exposed the property,” provided again that Hayden made the persons known to Zweygardt. Hayden had negotiated with and/or exposed the property to Hudye and Pribil, and he had also made them known to Zweygardt, as the district court specified in the sentence it added to finding of fact Number 19. Given the trial court's disregard of the sale to Stratman, which Zweygardt does not challenge on appeal, the sales to Hudye and Pribil within 90 days triggered the obligation to pay Hayden a fee under both conditions of the Commission Clause.
Contrary to Zweygardt's assertion, the fact that Hudye and Pribil did not purchase the entire property does not change the result. The Extension Clause omitted the definite article “the” before the word “property,” suggesting a meaning distinct from “the property,” as used elsewhere in the Listing Agreement. See Martinez v. Dallas Cent. Appraisal Dist., 339 S.W.3d 184, 188 (Tex.App.2011) (“Use of the definite article ‘the’ before ‘property’ suggests the inclusion of the entirety of the property.”). The Extension Clause provided “[s]uch compensation shall be paid if property is sold.” (Emphasis added.) Undoubtedly, property was sold to Hudye and Pribil which resulted in Zweygardt's obligation to pay a fee to Hayden.
We will not ignore contractual language, no matter how small a part of the whole, when doing so vitiates the terms of an agreement. See City of Arkansas City v. Bruton, 284 Kan. 815, 832–33, 166 P.3d 992 (2007) (contracts are interpreted “ ‘considering the entire instrument from its four corners' ”). We agree with the result reached by the district court below.
2. Procuring Cause
Zweygardt contends the trial court erred in allowing Hayden a brokerage fee under the theory that Hayden was the procuring cause of the sale of real estate. Hayden counters that he earned a commission as the procuring cause of the sales to both Pribil and Hudye. The trial court held Hayden's status as a procuring cause was “a necessary element of the claimed right of recovery” on these two sales. Whether the procuring cause rule applied to these sales is a question of law subject to unlimited review. See Trevizo v. El Gaucho Steakhouse, 45 Kan.App.2d 667, 672, 253 P .3d 786 (2011).
The procuring cause rule “does not apply in the case of an exclusive right to sell agreement.” J.C. Nichols Co. v. Osborn, 12 F.Supp.2d 1196, 1199 (D.Kan.1998) (Kansas law). Where parties have agreed to specific conditions in a brokerage contract, “the ordinary theories regarding the broker's right to recover do not apply.” 15 Powell on Real Property, § 84C.04[4], p. 84C–51 (Wolf ed., 2009). Instead, a “real estate broker's entitlement to a commission is dependent on the express terms and conditions set forth in the listing agreement.” Wright v. Shepherd, 31 Kan.App.2d 484, Syl. ¶ 1, 66 P.3d 921 (2003). In the present case, the Listing Agreement gave Hayden an exclusive right to sell, meaning he earned a commission upon any sale, even if another agent was the procuring cause of the sale. See 11 Thompson on Real Property, § 95.07(c)(1), p. 487. Because the Listing Agreement controlled Hayden's commission on the sales to Hudye and Pribil, the procuring cause rule did not apply.
3. Good faith
Next, Zweygardt contends the trial court erred in awarding a commission based on Hayden's lack of good faith, loyalty, and fidelity. Once again, Hayden contends this issue was not raised below, and this time we agree. Zweygardt attempts to frame the issue as contract interpretation, a question of law, but the parties do not dispute Hayden's contractual duty to use “the utmost good faith, loyalty and fidelity.” As a result, this issue does not involve contract interpretation but contract performance, which is a question of fact. See Dexter v. Brake, 46 Kan.App.2d 1020, 1030, 269 P.3d 846 (2012); Bank of America v. Narula, 46 Kan.App.2d 142, 169, 261 P.3d 898 (2011). More specifically, the issue is the presence or absence of good faith, loyalty, and fidelity, which is similarly a question of fact. See Narula, 46 Kan.App.2d at 169.
The trial court found the testimony at trial regarding Hayden's good faith, loyalty, and fidelity was “inconsistent at best.” Notably, the trial court was not asked to make findings on Hayden's good faith, loyalty, and fidelity to Zweygardt. As a result, we are presented with a novel factual question, and none of the exceptions allowing this court to consider this issue for the first time on appeal apply. See In re Estate of Broderick, 286 Kan. 1071, 1082, 191 P.3d 284 (2008), cert. denied555 U.S. 1178 (2009). Accordingly, this issue is not appropriate for appellate review.
Hayden's Cross–Appeal of Trial Court's Judgment Regarding the Commission
In his cross-appeal, Hayden raises three issues for our consideration. We will separately consider each issue.
1. Reduction of the Commission
On cross-appeal, Hayden challenges the trial court's reduction of his commission based upon the cooperation of Stratman and Niebur. Hayden argues he could not have lawfully offered a portion of the commission because Stratman and Niebur were not licensed in Kansas. Hayden also claims that he could not have lawfully paid a referral fee because the referral was not disclosed to Stratman.
We conclude this issue is not properly before us. First, this issue was not included in the pretrial order. Second, although the issue probably arose only when the trial court imposed the reduction in Hayden's commission, Hayden did not raise his statutory arguments (which he raises on appeal for the first time) when he filed his motion to amend in the district court. As a result, we have no rulings to review, and we do not believe any exceptions justify consideration of the issue for the first time on appeal. See In re Estate of Broderick, 286 Kan. at 1082.
2. Admission of Evidence
Hayden contends the trial court erred by excluding as hearsay computer-generated information showing Stratman had viewed his website advertising Zweygardt's property. In considering a challenge to the admission or exclusion of evidence, an appellate court first considers relevance. Once relevance is established, the court must then consider whether the applicable statutory provisions permit admission of the evidence. State v. Richmond, 289 Kan. 419, 426, 212 P.3d 165 (2009).
Hayden argues that the computer-generated information “was directly relevant to show that [Hayden] was the procuring cause of the property sales.” Hayden apparently means the purported sales to John Stratman LLC, but as established in the next issue, Hayden was not owed a commission on those sales. If Hayden means the sales to Pribil and Hudye, then the procuring cause rule does not apply as discussed and determined earlier. Either way, Hayden does not show prejudice to his substantial rights. See K.S.A. 60–261; K.S.A. 60–2105.
3. Commission on Sale to John Stratman, LLC
Hayden argues for a commission on the entire 22,720 acres purportedly sold to John Stratman, LLC. This issue is one of law subject to unlimited review. See Trevizo, 45 Kan.App.2d at 672.
As Zweygardt points out, neither the names of Stratman personally nor John Stratman, LLC were on the list that Hayden provided to Zweygardt. As a result, under the plain terms of the Listing Agreement, the Extension Clause did not apply.
Alternatively, Hayden argues that he was the procuring cause of what he calls the “purchase” by John Stratman, LLC. But in his argument regarding the Extension Clause, Hayden alleges only that Zweygardt “transferred” the property to John Stratman, LLC, which is more consistent with the trial court's unchallenged finding regarding the nature of these purported sales. Given that John Stratman, LLC, paid nothing for the property, there was nothing upon which to base a commission. Once again, under these circumstances, Hayden does not show prejudice to his substantial rights. See K.S.A. 60–261; K.S.A. 60–2105.
Affirmed.
ATCHESON, J., dissenting.
I respectfully dissent because the real estate brokerage contract between Plaintiff Hayden Outdoors, LLC, and the Zweygardt defendants does not call for payment of a commission on a sale of less than the entire acreage during either its principal term or the extension period. Under the relevant language of the brokerage contract, Hayden should have received no commissions for the sales of part of the property to Ben Hudye or to Jerome Pribil. I would reverse and remand the decision of the Sherman County District Court awarding Hayden commissions on those sales with directions that judgment be entered for the Zweygardt defendants. Given that disposition of the legal controversy, I have no particular reason to address the other issues in the case. I, therefore, do not. And I neither endorse nor reject the majority's handling of them.
The Zweygardt defendants engaged Hayden, an experienced real estate brokerage company, to market tracts of farmland they owned in western Kansas. Hayden supplied the written contract.
The record indicates that several persons and entities had some ownership interests in the land. They all appear to be fully aligned in this litigation, and the parties do not distinguish among them in arguing the case. I, therefore, refer to the defendants collectively as Zweygardt. The relevant conduct at issue here would be that of Defendant Delmer Zweygardt alone. Similarly, I refer to the plaintiff as Hayden, meaning both the corporate entity and its principal John Leo Hayden. Only John Leo Hayden took any material action on behalf of the brokerage company.
Both the district court's decision and the majority's opinion affirming it come across more as feel-good rulings than legally rigorous applications of the actual contract between the parties. The allure of that sort of a result is especially seductive here. John Leo Hayden, the principal of Hayden Outdoors, expended some measurable time and money to market the property. The evidence also strongly indicates Delmer Zweygardt engineered a series of transactions aimed at cheating Hayden out of commissions for the sales to Hudye and Pribil—machinations that were wholly unnecessary in light of the contract language but no less underhanded and reprehensible. Those circumstances make it easy to say Hayden should have gotten something.
But Hayden's entitlement to payment depends upon the enforceable legal rights and obligations that bind that company and Zweygardt. Those rights and obligations exist in the brokerage contract—the language of which Hayden proposed. The contract cannot reasonably be read to require commissions on sales of less than all of the described property. The majority strains to construe the language otherwise to rescue Hayden from the bad bargain it made. But the business of the courts does not include saving sophisticated parties from the otherwise lawful agreements they create for themselves.
As the majority points out, this case arises from a commercial transaction involving the marketing and sale of multiple parcels of farmland worth millions of dollars. Despite the enormity of the venture, Hayden chose to use a form contract apparently intended for the sale of a single, contiguous parcel, such as a house. The contract requires that Hayden procure a buyer for all of the described property to receive a commission. That choice seems baffling for an experienced real estate brokerage firm handling a deal such as this. Baffling or not, the resulting contract governs the legal dispute. Given the plain language of the contract and the factual findings of the district court, Hayden was entitled to no commissions the way the sales of the land unfolded.
Factual Background and Procedural History
In 2008, Zweygardt decided to sell nearly 23,000 acres of land consisting of numerous noncontiguous parcels in Sherman, Cheyenne, Thomas, Logan, and Wallace Counties, much of it under lease to area farmers. Zweygardt contracted with Hayden on June 27, 2008, to market the land. The brokerage contract gave Hayden 1 year as the exclusive agent to sell the land. The agreement required that the 22,720 acres be sold in a single transaction for $27,264,000. That is, the agreement, as written, did not permit Hayden to negotiate a deal for less than all of the land. The opening paragraph of the contract described the arrangement between Hayden and Zweygardt as an “exclusive right[-]to[-]sell agreement ... for the property known as Delmer Zweygardt farmland.” And that paragraph provides: “This property is offered for the sum of [ $ ] 27,264,000 on the following terms: [ ]Cash.” Cash was one of four payment options included in the form agreement. The parties had placed an X in the box in front of the cash option. All of the tracts contractually described as “the property” were listed in an attachment to the form contract.
The form contract contained other sections that could be tailored by checking a box or filling in a blank.
Under the contract, Zweygardt was to pay Hayden “a brokerage fee of 7% of the selling price, if the Broker produces a ready, willing, and able buyer for the property at the price and subject to the terms stated, or later agreed upon.” That clause also provided Hayden would receive the commission if Zweygardt or anyone else sold “the property ... during the term of this exclusive right to sell listing agreement.” A separate paragraph required Zweygardt to pay Hayden a commission if a sale were made, under certain circumstances, within 90 days after the agreement ended. That obligation figures prominently in the legal dispute, so I set forth the pertinent language: “Such compensation [the commission] shall be paid if property is sold ... within 90 days after termination of this agreement ... to anyone with whom the agent has negotiated or to whom the agent has exposed the property prior to final termination, provided Seller has received notice in writing, including the names of prospective purchasers, before or upon termination of this agreement.”
During the 1–year term of the brokerage agreement, Hayden promoted the Zweygardt property in various ways, including distribution of a detailed sales brochure, placement of advertising in national and specialized publications, and creation of an internet site. The marketing materials Hayden prepared are consistent with the offer requiring acceptance by purchase of the entire acreage—the property—rather than some portion of it.
Despite that marketing, Hayden failed to secure a successful buyer for the property. Hayden did obtain an offer Zweygardt accepted, but the deal fell apart when the potential buyer couldn't line up the necessary financing. While the brokerage agreement was in effect, Hayden communicated about the property with Hudye and an agent for Pribil. Hayden included those contacts in the written notice provided to Zweygardt upon termination of the brokerage agreement on June 27, 2009. John Stratman, a Colorado real estate broker, may have visited the internet site promoting the property. But he was not included among the contacts Hayden furnished to Zweygardt.
On July 31, 2009, Hayden sued Zweygardt on the grounds he was entitled to a commission under the brokerage contract based on a purported sale Zweygardt made to Stratman after the contract's exclusive agency period had ended. Hayden alternatively sought compensation on a quantum meruit or unjust enrichment theory. As the majority notes, Hayden has not pursued recovery on that theory on appeal, and it is not before us. Zweygardt duly answered the suit, denying liability to Hayden for commissions under the brokerage agreement or otherwise. Discovery in the case confirmed sales to Pribil and Hudye in August 2009. Thus, Zweygardt had put together the transactions involving Stratman, Pribil, and Hudye less than 90 days after the termination of the brokerage contract. Following discovery, the parties tried the case to the district court sitting without a jury on September 29, 2010.
Once litigation began, Zweygardt alleged Hayden did not make a good-faith effort to market the property and even diverted potential buyers to other real estate. The district court acknowledged evidence to that effect in its written findings of fact and conclusions of law but characterized the testimony on that point to be “inconsistent at best.” The district court made no finding that Hayden acted in bad faith or otherwise failed to fulfill its contractual obligations to Zweygardt.
The trial evidence and the district court's findings, however, cast a long shadow on Zweygardt. The testimony showed that during the term of the brokerage agreement Zweygardt had ongoing communications directly with Stratman. Four days after the brokerage agreement terminated, Zweygardt entered into a contract to sell the property to Stratman. But the evidence at trial revealed that Zweygardt never cashed checks Stratman tendered as earnest money under their purported contract. And Stratman could not have covered the checks had they been presented to his bank. Nothing in the record indicates Stratman actually paid any money to Zweygardt or received and recorded deeds for the property—conduct that would have been consistent with performing a legitimate contract for sale.
In short order, however, Stratman “sold” some of the property to Hudye and some to Pribil. In mid-August 2009, Hudye bought tracts in Logan County for which he paid $2,249,280. About the same time, Pribil bought various tracts for $6,086,912. The paperwork on each of those transactions shows a consummated sale from Zweygardt to Stratman and a consummated sale later the same day from Stratman to either Pribil or Hudye, as the respective buyer. Hudye paid Stratman exactly what Stratman paid Zweygardt for the same land, according to Stratman's trial testimony and various exhibits. In the Pribil transactions, the sale prices were also the same, but Stratman testified he retained 160 acres for himself.
Roughly a year later, shortly before trial began, Stratman “bought” the remainder of the property from Zweygardt. But he paid no money to Zweygardt. According to his trial testimony, Stratman intended to auction the remaining land. The auction proceeds up to the agreed upon purchase price apparently would be turned over to Zweygardt. If the auction brought in more than the purchase price, Stratman testified he would realize a profit. If not, he would owe Zweygardt the difference. There is no paperwork in the record regarding that arrangement.
Based on the evidence, the district court concluded no sale of the property actually took place between Zweygardt and Stratman and characterized the dealings between them as an artifice “to avoid the provisions of the [brokerage] Agreement” with Hayden. The district court found that the purpose was to insulate the sales to Pribil and Hudye so Zweygardt would not have to pay any commission to Hayden under the 90–day post-termination clause. The district court described Stratman as simply a “straw man” or a conduit for sales between Zweygardt, on the one hand, and Pribil and Hudye, on the other. The district court ruled that because Zweygardt did not legitimately sell the property to Stratman, Hayden could not receive a commission based on that contrived transaction. The district court reached the correct conclusion on that score.
The district court found that both Pribil and Hudye were legitimate purchasers of portions of the property. The evidence also demonstrated they had been introduced to the property through Hayden and had been included on the list Hayden furnished to Zweygardt when the brokerage agreement terminated. Pribil was identified on the list through his agent rather than in his own name, but nobody contests the trial testimony showing he and his agent learned about the property through Hayden's marketing. The district court, therefore, ruled that under the brokerage agreement, Zweygardt owed Hayden commissions on the sales to Pribil and Hudye. As I explain, the district court fumbled that conclusion.
The record fails to establish the precise acreage included in those purchases. Based on the amount paid, however, it appears to be substantially less than the entire 23,000 acres. Pribil paid $6,086,912 for a portion of the property. The sale price would generate a gross commission of $426,083 at the 7 percent rate in the brokerage contract. Hudye paid $2,249,248 for the portion he bought, which would generate a gross commission of $157,447. The district court concluded Hayden would have paid referral or cooperation fees to other agents from the gross commissions. In fashioning the award of damages, the district court reduced the gross commissions by the referral fees to arrive at a net commission to Hayden of $437,649. The district court entered judgment against Zweygardt and in favor of Hayden in that amount plus interest from the dates of the respective sales to Pribil and Hudye.
Zweygardt timely appealed and contends Hayden should have received nothing. Hayden cross-appealed and argues the commissions should have been based on the transaction with Stratman or that the commissions the district court actually awarded should not have been reduced by potential referral fees.
Legal Analysis
In reviewing a judgment entered following a bench trial, an appellate court affords marked deference to the credibility determinations of the district court and its overall assessment of the evidence as reflected in specific factual findings. See K.S.A. 60–252 (In an action tried to the district court, “[f]indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.”); Hodges v. Johnson, 288 Kan. 56, 65, 199 P.3d 1251 (2009) (“In evaluating the evidence to support the district court's factual findings, an appellate court does not weigh conflicting evidence, evaluate witnesses' credibility, or redetermine questions of fact.”). If the factual findings rest on substantial evidence, they should be accepted. Progressive Products, Inc. v. Swartz, 292 Kan. 947, 955, 258 P.3d 969 (2011). An appellate court, however, reviews anew a district court's ultimate legal conclusions. 292 Kan. at 955 (on appeal from bench trial, appellate court “reviews the legal conclusions ... de novo”).
The meaning and, thus, the legal effect of an unambiguous written contract presents a question of law. Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011). An appellate court may construe that contract without any particular deference to the district court's determination of its meaning. 291 Kan. at 768;Wichita State Univ. Intercollegiate Athletic Ass'n v. Marrs, 29 Kan.App.2d 282, 283, 28 P.3d 401 (2001). A written contract should be applied to give effect to the parties' intent as reflected in the words of the document. Osterhaus, 291 Kan. at 768;Liggatt v. Employers Mut. Casualty Co., 273 Kan. 915, 921, 46 P.3d 1120 (2002) (“If the terms of the contract are clear, there is no room for rules of construction, and the intent of the parties is determined from the contract itself.”).
In this case, the relevant language of the brokerage agreement between Hayden and Zweygardt is dispositive. The contract requires the sale of the entire acreage in a single transaction for Hayden to receive a commission. That didn't happen here. The district court misconstrued the agreement in concluding Hayden satisfied the contractual requirements for any commission. The majority replicates that error. In my view, this court is obligated to reverse the judgment in favor of Hayden. Because the plain language of the agreement defeats Hayden's contractual claim, the case should be remanded with directions that the district court enter judgment in favor of Zweygardt.
The brokerage contract refers to the nearly 23,000 acres of land collectively as “the property” in the opening section and states “this property is offered for sale for the sum of [$]27,264,000.” The contract contains no language indicating offers for less than the entire acreage—the whole of “the property”—would be entertained, and nothing outlines prices for particular tracts or a per-acre price. The phrases “the property” and “this property” then recur throughout the contract to describe the land to be sold. As I have suggested, the preprinted portions of the form contract suggest it was designed as a brokerage agreement for a single contiguous tract or parcel in contrast to multiple tracts. One clause, for example, provides that the broker may “place a For Sale sign on the property” and remove any other signs. But that doesn't in any way change the legal effect of the contractual language requiring the whole of the property be sold for the asking price in a single transaction.
To earn a commission during the 1–year term of the contract, Hayden had to produce a “buyer for the property at the price ... stated, or later agreed upon.” Thus, Zweygardt could reduce the asking price or change other terms of sale during the contract term by, for example, agreeing to transfer all of the mineral rights rather than half, as stated in the brokerage contract. In short, Zweygardt could alter the terms of the sale of the property but was not obligated to do so. If he dropped the price, Hayden would receive a 7 percent commission based on the reduced price rather than the original contract price. That section, however, includes no provision for sale of less than all of the property in describing the circumstances under which Hayden would receive a commission.
As the majority and I have pointed out, a separate provision requires that Hayden receive a 7 percent commission should Zweygardt sell the property within 90 days after the termination of the brokerage agreement if Hayden had “exposed the property [to the buyer] prior to ... termination.” Again, that section contains no discussion of a commission to Hayden if less than all of the property were sold. The section does state “compensation shall be paid if property is sold,” thus omitting the word “the” before the word “property.”
Unlike the majority, I decline to read any substantive meaning into the omission that would entitle Hayden to a commission for a sale of less than all of the described property. The language appears in the preprinted form and is, therefore, less reflective of the contracting parties' intent than specific additions or deletions the parties might make to the standard language. Restatement (Second) Contracts § 203(d) (1981) (“added terms are given greater weight than standardized terms”); com. f (handwritten or typewritten terms ordinarily prevail over standard terms); see Royal Ins. Co. Amer. v. Overseas Container, 525 F.3d 409, 420 (6th Cir.2008). If the form language had referred to “the property” in that clause and the parties had stricken the article, we would be left to decipher the intended meaning of the change. A deliberate amendment of the form language would carry considerable weight.
The brokerage contract admittedly leaves Hayden vulnerable if less than all of the property were sold, either during the term of the contract or during the 90–day period following its termination. Without renegotiating the contract, Hayden would get no commission for a sale of part of the property. I would suggest the omission is the product of Hayden's inadvertence in using a form contract designed for a single parcel. With an offer to sell an undivided tract, there is little or no chance only part of the property would be sold, so the contract need not address that improbable contingency. But, here, given the nature of the property, sales of separate parcels loomed as a realistic alternative if no one came forward to purchase the whole of the property.
If Hayden had wanted some arrangement to guard against loss of a commission in that situation, the company should have drafted different—and explicit—contract language. For example, it would have been simple enough to provide in the commission clause that Hayden would receive a 7 percent commission if it “produces a ... buyer for the property or any portion of it at the price and subject to the terms stated, or later agreed upon.” The parties easily could have included the same or similar language in the 90–day post-termination clause: “If the property or any portion of it is sold within 90 days of the termination of this agreement to a buyer to whom Hayden exposed the property, Hayden shall receive a commission of 7% of the sale price.” There is no such language. And a court should not infer that sort of a material and detailed condition from an omitted article in the form language. But that is precisely what the majority has done.
The majority's construction of the contract is legally and logically unsustainable. The article goes missing only in the 90–day, post-termination clause and not in the clause calling for a commission during the term of the brokerage contract. Applying the majority's interpretation in a consistent way across those two provisions leads to a distinctly strange result: Hayden and Zweygardt must have intended that Hayden receive a commission on a sale of less than all of the land after the contract expired but not during the term of the contract. To infer and then give life to such an anomaly based on an omitted article in a preprinted form overtaxes the rules of contract interpretation, especially when there would have been far more obvious and far more effective ways to make such a purpose readily apparent.
The majority relies on a single inapposite case, Martinez v. Dallas Cent. Appraisal Dist., 339 S.W.3d 184, 188 (Tex.App.2011), to support its conclusion. In that case, the court had to construe a tax statute to determine if the phrase “the property” permitted the occupant of residential property to claim 100 percent of a cap on assessments of homesteads, even though he owned only an undivided quarter interest, or whether he could claim only 25 percent of the cap, corresponding to his actual ownership interest. The court held the statute contained no language indicating the cap should be prorated to reflect an occupant's fractional ownership interest and suggested the use of the term “the property” bolstered that reading of the provision. 339 S.W.3d at 188. The court was not required to construe a statute using the term “the property” in one clause and “property” in another—an issue that would have been roughly analogous to the circumstances here.
Courts generally should be wary of extracting a sentence from a judicial opinion, disembodied from the facts of the case, and citing that proposition as authority controlling a dissimilar set of facts. Illinois v. Lidster, 540 U.S. 419, 424, 124 S.Ct. 885, 157 L.Ed.2d 843 (2004) (Language in judicial opinions should be read “as referring in context to circumstances similar to the circumstances then before the Court and not referring to quite different circumstances that the Court was not then considering.”); Armour & Co. v. Wantock, 323 U.S. 126, 132–33, 65 S.Ct. 165, 89 L.Ed. 118 (1944). In Armour, Justice Robert Jackson admonished counsel that “words of our opinions are to be read in light of the facts of the case under discussion.” Armour, 323 U.S. at 133. And he cautioned: “General expressions transposed to other facts are often misleading.” 323 U.S. at 133. The vice in doing so is on display in the majority opinion.
We also ought to suppose that a statute has been drafted with more care and deliberation as to its exact phrasing than a form contract with an unknown pedigree. Because the form contract was written for use with the sale of a single parcel or tract of land, the omission of “the” before “property” in the 90–day post-termination clause looks to be a typographical or scrivener's error rather than a considered design to alter how commissions were to be earned. Here, the parties neither contemplated nor addressed a sale of less than all of the property in the contract. Certainly from Hayden's perspective, they should have, but they didn't. As a result, there had to be a successful sale of the entire acreage in a single transaction for Hayden to receive a commission. The contract reflects a singularly poor arrangement for Hayden.
To the extent the contract language might be ambiguous, it should be construed against Hayden, as the party having proposed the agreement. Botkin v. Security State Bank, 281 Kan. 243, Syl. ¶ 7, 130 P.3d 92 (2006) (“Ambiguous language in a written instrument will be strictly construed against the drafter of the document.”). Hayden would fare no better if the language were strictly construed against him.
The sales to Pribil and Hudye, as purchases of only portions of the property, do not call for the payment of commissions under the plain language of the brokerage agreement. The required outcome here may seem unfair especially when viewed as part of the picture depicting the overall business relationship between the parties. Zweygardt's subterfuge aimed at depriving Hayden of a commission is legally irrelevant, though it may be characterized as morally deficient. This is a contract case. And the matter of Hayden's commission depends on the language of the brokerage agreement. In short, the evidence may fairly be said to show that Zweygardt meant to cheat Hayden out of a commission with the sham sale to Stratman. The device, however, was unnecessary. Zweygardt avoids paying a commission to Hayden not because of that unseemly effort but because the brokerage contract Hayden presented and signed fails to provide for commissions on sales of only a portion of the property.