Opinion
No. 89 CV 08114.
Decided December 12, 1989.
Schulzinger Immerman Co., L.P.A., and Stuart Tobin, for plaintiffs.
Porter, Wright, Morris Arthur and Brian S. Sullivan, for defendant.
This is a breach of contract case which comes to this court on cross-motions for summary judgment. For the reasons stated herein, plaintiffs' motion for summary judgment is granted, and defendant's motion is denied. The relevant facts are undisputed.
Plaintiff BHMS Partnership was to manage office condominiums to be built in 1986 at 7400 Jaeger Court, Cincinnati, Ohio. Plaintiff Anderson Hills Pediatrics, Inc. ("AHP") is a group of physicians who lease space from BHMS. On June 20, 1986, plaintiffs executed a contract with defendant, Harold Peck, authorizing Peck to procure the desired financing at a specified interest rate for the construction of the office condominiums. The contract stated that the agreement was to be "exclusive" for two months from the signing date and was to "remain in full force and effect for six months."
The contract provided that defendant would receive a $10,000 fee with a $10,000 deposit to be paid in advance. Seventy-five percent of the deposit was to be returned to AHP if Peck did not procure the financing "as specified by this agreement."
On August 17, 1986, defendant Peck received a letter dated August 15, 1986 from AHP's office manager, Rita Williams, stating that AHP had procured a "loan offer at Central Trust Bank," and demanded that Peck return $7,500 of the $10,000 deposit. Whether Williams had authority, apparent or otherwise, to make this communication was argued by the parties; however, in view of the court's holding, this factual dispute is irrelevant.
Peck refused to return the money on the grounds that plaintiff had breached the contract thereby frustrating Peck's efforts to follow through with his contractual obligations. Defendant Peck contends that the term "exclusive" served to preclude not only other financial consultants from procuring financing during the contract term, but also precluded AHP from procuring its own financing. Plaintiff, on the other hand, claims that it always retained the right to procure its own financing absent any language in the contract surrendering that right. Thus, the analysis turns on what is meant by the term "exclusive."
At the outset, it must be noted that defendant, by attempting to procure financing for plaintiffs for a commission, was acting as a broker. Generally, "a broker is an agent who, for a commission or brokerage fee, bargains * * * on behalf of his principal as an intermediary between * * * [the principal and third parties] in transacting business relative to the acquisition * * * or * * * sale * * * of property * * *." 10 Ohio Jurisprudence 3d (1979) 8, Brokers, Section 1. Because the nature of this transaction involved herein, defendant acting as a broker for plaintiffs, the agency principles generally applicable to "broker" cases must also apply to this case.
Defendant contends that AHP is not entitled to a refund of $7,500 since the contract was "exclusive" for two months from the signing date, and plaintiffs unilaterally breached the contract by procuring their own financing. Defendant's position, then, is that the term "exclusive" prohibited the plaintiffs from procuring their own financing. We cannot agree with defendant's position.
The issue is settled by looking to the agency principles applicable to brokers. In Dohner v. Bailey (1984), 20 Ohio App.3d 181, 20 OBR 225, 485 N.E.2d 727, Dohner, a licensed real estate broker, executed an "exclusive" agreement with Bailey to sell Bailey's hotel under certain conditions. Bailey prematurely terminated the contract pursuant to a cancellation clause in the contract. Dohner then sought to recover his commission on the grounds that the cancellation clause did not authorize a termination of the contract while negotiations were taking place with potential buyers. Bailey claimed that he was free to revoke the contract since consideration did not pass until Dohner procured a buyer. In order to resolve the issue, the Court of Appeals for Clark County distinguished between an exclusive agency contract and an exclusive right to sell contract, stating:
"* * * Under the exclusive agency contract, the broker becomes the exclusive agent of the owner. Thus, the broker may sell and obtain his commission to the exclusion of all other brokers. However, under such an agreement, the seller reserves the right to sell the property himself without incurring an obligation to pay the broker's commission. * * * Thus, condition precedent to the broker's entitlement to his commission is that he be the procuring cause of the sale. * * *
"* * *
"An exclusive right to sell contract differs in that in addition to granting the broker the right to sell to the exclusion of all other brokers, the seller also gives the broker the right to sell for the period of the contract even to the exclusion of the seller himself. Thus, should the property be sold during the term of the agency, the broker would be entitled to his commission regardless of whether or not he was the procuring cause of the sale. * * *" Id. at 183, 20 OBR at 227, 485 N.E.2d at 730.
Although the Dohner court held for the Baileys on the ground that no consideration had passed, it did state that because the contract contained specific language that clearly indicated a preclusion of the seller's capacity to sell, the contract was an exclusive right to sell contract, rather than an exclusive agency contract.
In Bell v. Dimmerling (1948), 149 Ohio St. 165, 36 O.O. 505, 78 N.E.2d 49, the Ohio Supreme Court found specific language in the contract that indicated an exclusive right to sell and noted that it was the "rule that an agreement of agency for the sale of property should be construed, if possible, to give the owner himself the right to sell his property without incurring liability for the payment of a commission * * *." Id. at 170, 36 O.O. at 507, 78 N.E.2d at 51. Without specific language that converts an exclusive agency contract to an exclusive right to sell contract, a presumption arises that the owner retains the right to sell the property.
In the present case, the contract states only that the agreement was to be exclusive for two months from the signing date. Without more, the term "exclusive" must be construed to preclude the use of other brokers — plaintiffs, then, retaining the right to procure their own financing. Unless specific language appears to the effect that the contract places liability on the plaintiffs even in case of their own procurement of financing, then, as a matter of law, plaintiffs never lose the right to do so.
That plaintiffs retained the right to procure their own financing pursuant to the contract is also supported by contract law that construes ambiguous terms against the party that drafted the contract, ambiguitas contra stipulatorem est. In Central Realty Co. v. Clutter (1980), 62 Ohio St.2d 411, 16 O.O.3d 441, 406 N.E.2d 515, defendant seller entered into an "exclusive" listing agreement with plaintiff broker to sell defendant's farm. The agreement provided in part: "`If you secure a purchaser for my property, or if the same is sold or exchanged during the term of this listing, or is sold within three months after the period of this listing to anyone with whom you have negotiated with respect to a sale during the period of this listing and of whom I have notice, I agree to pay you commission of 6% upon the price at which same may be sold or exchanged.'" (Emphasis added.) Id. at 411, 16 O.O.3d at 441, 406 N.E.2d at 516. After the listing term expired, defendant seller sold the property through another broker within three months of the expiration date of the listing to parties who had originally sought to buy the property through the plaintiff broker. Plaintiff subsequently sought to recover the commission. The court determined that the ambiguity as to whether the above-quoted clause applied to a sale by another broker or only by the plaintiff broker had to be resolved against the plaintiff broker. The court, quoting the trial court, stated that "* * * `* * * [t]here is a doubt which the broker could have prevented by more explicit phraseology. * * * The ambiguity and doubt is to be resolved against the plaintiff.'" (Footnote omitted.) Id. at 412-413, 16 O.O.3d at 442, 406 N.E.2d at 517. Likewise, here, defendant could have, by explicit language, indicated that the plaintiffs were bound to pay him even if they provided their own financing. Also on point is Sulfur Springs Realty, Inc. v. Blackstone (1982), 7 Ohio App.3d 27, 7 OBR 29, 453 N.E.2d 1279.
For all of the foregoing reasons, the court holds that the document prepared by defendant Peck was effective to preclude the use of other loan brokers by plaintiffs, but that, as a matter of law, plaintiffs retained the right to procure their own financing without paying defendant a fee or commission. Thus, plaintiffs' motion for summary judgment is hereby granted and defendant's motion is denied.
Reporter's Note: Peck's subsequent appeal to the Court of Appeals for Hamilton County was dismissed in (Aug. 13, 1990), No. C-900059.