Opinion
As Corrected June 9, 1970.
Page 197
Martin & Riggs, Boulder, for plaintiff in error.
Clell W. Hardee, Aurora, for defendants in error.
COYTE, Judge.
This case was originally filed in the Supreme Court of the State of Colorado and subsequently transferred to the Court of Appeals under authority vested in the Supreme Court.
The parties appear before this court in reverse order from their appearance at trial, but shall be referred to in this opinion as they appeared at trial or by name.
At issue is the right of a real estate broker to a commission, although the sale upon which that commission is claimed was never consummated. In general, on this issue the court below found that the brokers had procured a buyer, and that the buyer and seller had entered into an agreement for the sale of the property, but that the sale was never consummated due to the seller's refusal to close. The court thereupon entered judgment in favor of the brokers for $4,000.00.
A chronological summary of the facts is as follows: In December, 1966, defendant entered into a contract with plaintiff, Chism-Scherling, whereby Chism-Scherling was to have an exclusive listing to sell a business and certain real estate used in connection with the business and owned by defendant. In March, 1967, plaintiff, Wilkinson Realty, brought forth a potential buyer. A contract of sale was offered to defendant on March 4, 1967. After consultation with her business advisor, defendant signed the contract on March 5, 1967. March 31, 1967, was designated as a tentative date for closing. Some time after March 5, defendant contacted her attorney, who sent Chism-Scherling a letter stating that certain matters still needed to be resolved before the sale could be consummated, but the buyer took the position that he would stand on the contract as signed. He appeared at the office designated for the closing--ready and willing to close. Defendant did not appear. Thereafter plaintiffs initiated this suit with the results as related above.
In order to fully understand the problem, it is necessary to state the substance of two pertinent documents as they relate to this opinion; (1) the agreement entered into between buyer and seller on March 5, 1967, and (2) the letter sent Chism-Scherling by defendant's attorney on March 30, 1967.
The agreement basically provided for a sale of the business for $40,000.00; $1,000.00 down, $6,000.00 due on closing and the balance of $33,000.00 was to be evidenced by a note payable over a 15-year period and secured by a chattel mortgage on the fixtures. Buyer and seller would execute a 2-year lease on certain real estate owned by defendant at $300.00 per month with buyer having the option to purchase said real estate for $50,000.00 at the expiration of the lease, or renew the lease for a 5-year period at $300.00 per month rental.
The letter sent March 30, 1967, stated that defendant was prepared to close upon resolution of several matters, which were not covered in the alleged agreement. These matters included a right in defendant to have possession immediately of the premises, equipment and fixtures in the event the buyer should default in either the note or the lease; the right to require buyer to insure the business for $40,000.00 with defendant named as beneficiary; and the right to require the buyer to pay the first and last months' rent in advance.
In approaching this case we are guided by C.R.S.1963, 117--2--1, which states:
'* * * No real estate agent or broker shall be entitled to a commission for finding a purchaser who is ready, willing and able to complete the purchase of real estate as proposed by the owner, until the same is consummated or is defeated by the refusal or neglect of the owner to consummate the same as agreed upon.'
This statute contemplates that buyer and seller shall reach an agreement as to the sale of the property at which time the broker shall acquire a conditional right to his commission. This right becomes fixed upon the closing of the transaction, or seller's refusal to carry out his part of the agreement.
It is plaintiffs' contention that when defendant refused to close the sale in accordance with the alleged contract, plaintiffs became entitled to a commission under the statute. However, this argument presupposes that the defendant and buyer entered into a binding agreement as is required by the statute. In our view, the agreement entered into on March 5, 1967, between plaintiff and seller was incomplete on its face, and at best was an incomplete agreement to sell pending the resolution of certain material factors relative to the terms and conditions of the lease which required agreement between the parties.
In Walker v. Chatfield, 126 Colo. 600, 252 P.2d 109, the fact situation was similar to the present case. In Walker the buyer procured by the broker entered into an agreement with the seller for the purchase and sale of a business. The agreement set forth the purchase price, the amount paid down, the amount to be carried, and security being a note secured by a chattel mortgage on the fixtures. The agreement further provided that:
'Seller is to grant a lease for 5 years with an option of 5 additional years at a rental of $300.00 per month; * * *.'
In refusing to enforce the broker's right to his commission, the court stated:
'The rule upon which they rely assumes a complete agreement as to terms. In the present case, the evidence indicates that there never was a complete agreement. There was a lease to be negotiated. * * *.'
Similarly in this case, plaintiffs' reliance is based upon an assumption that a complete agreement as to terms had been entered into between defendant and buyer, entitling plaintiffs to a commission upon defendant's refusal to close on March 31, 1967.
The agreement reached by the parties fails to resolve certain material and important factors and, as such, cannot be considered a complete agreement. Walker, supra. The question of taxes, insurance, upkeep and maintenance, provisions in case of default by buyer were all material and important terms, necessitating resolution and agreement by the parties before they could close the deal. These factors were neither insubstantial nor peripheral to the main issue, but indeed went to the core of the contract. Without resolution or agreement as to these terms there could not be a complete agreement as to the sale of the business, and plaintiffs are not entitled to their commission until said agreement is complete and closed or if it is ultimately made complete until closing is rejected by seller.
In light of our ruling on this issue, we need not discus plaintiff's other points of error.
Judgment entered by the trial court is in error and is reversed with directions to dismiss plaintiffs' complaint.
DUFFORD and PIERCE, JJ., concur.