Opinion
Hearing Granted by Supreme Court July 30, 1928.
Appeal from Superior Court, San Bernardino County; Benjamin F. Warmer, Judge.
Action by M. F. Darrow against J. P. Houlihan and another. Judgment for defendants, and plaintiff appeals. Reversed, with directions.
COUNSEL
T. W. Duckworth and Ben Harrison, both of San Bernardino, for appellant.
U. F. Lewis, of Redlands, for respondents.
OPINION
WOOD, Justice pro tem.
Plaintiff commenced the action to recover the sum of $600 alleged to be due for services rendered as broker in the exchange of two parcels of real estate. He appeals from a judgment in defendants’ favor. On August 19, 1924, defendants signed an instrument by which they agreed to exchange certain real property owned by them, valued at $6,000, and subject to "an indebtedness in the sum of $2,000," for certain other real property owned by W. S. and Lillian M. Little, also valued at $6,000, and subject to an "indebtedness of $2,000." It was provided in the instrument that, if plaintiff should within 10 days "secure an acceptance of the proposition to exchange" the properties, defendants would pay him the regular commission. A period of 60 days from the date of acceptance was provided for the furnishing of the deeds and certificates of title. It was further provided in the instrument:
"And in case either party fails to carry out any of the terms of this contract such failing party agrees to pay the agents herein mentioned the regular brokerage commission on the exchange value of all the properties involved."
Plaintiff immediately obtained from Mr. and Mrs. Little an acceptance in writing of the offer contained in the instrument signed by defendants. The Littles promptly put their papers in escrow, but the Houlihans refused to consummate the transaction for the reason, as alleged by them, that plaintiff had falsely represented to them that the property of the Littles was incumbered with a mortgage of $2,000 due in about six months, when in truth the incumbrance was in the form of a trust deed, payable at the rate of $25 per month, and that only the sum of $1,000 remained unpaid thereon. Mr. Houlihan testified that plaintiff had told him before the offer was signed that the Littles’ property was incumbered by two mortgages of $1,000 each. On the day following the acceptance of the offer by the Littles, Mr. Houlihan had a conversation with Mr. Little, and suggested to him that the two mortgages might be consolidated with one single mortgage. He was then notified by Mr. Little of the true facts concerning the trust deed. Mr. Houlihan thereupon telegraphed his wife to cancel the contract and refused to proceed with the exchange. Plaintiff now claims the right to recover the commissions on both properties.
Defendants agreed to pay the commission to plaintiff "when he has secured an acceptance of the proposition." Plaintiff secured the acceptance and became entitled to his commission, unless his right to demand it was forfeited by his statements concerning the incumbrance upon the Little property. In Jauman v. McCusick, 166 Cal. 517, 137 P. 254, the court said:
"She agreed to pay a commission for securing a specific agreement. Such agreement having been secured, she was liable under the precise terms of her contract."
If defendants were in fact induced to sign the agreement by fraud on the part of plaintiff, there can be no question but that they should be relieved from paying the commission. The rule is well stated in 4 R. C. L. 49:
"Once the customer procured by the broker is accepted by the employer, the latter is thereafter estopped from denying the purchaser’s ability or willingness to complete the contract, inasmuch as he is not bound to accept the offer of such persons without a reasonable opportunity to inquire and satisfy himself in relation to it. Consequently his acceptance should estop him from alleging anything against the claim except fraud on the part of the broker in inducing the acceptance."
This rule has been followed in a number of California cases. Carrington v. Smithers, 26 Cal.App. 460, 147 P. 225; Freeman v. Creelman, 60 Cal.App. 14, 212 P. 56; Wood & Tatum Co v. Basler, 37 Cal.App. 381, 173 P. 1109.
The burden of establishing fraud on the part of plaintiff rested upon defendants. The real question to be determined on this appeal is whether defendants sustained this burden. Notwithstanding the findings are in favor of defendants, we are of the opinion that the conduct of plaintiff, taking as correct the testimony of defendants, was not such as justified their refusal to pay the commission. The Littles had 60 days within which to present the necessary documents to bring about a consummation of the transaction in exact accordance with the agreement. The rule is well stated in 25 Cal.Jur. 495:
"The general rule is that a vendor is only required to have title to the property at the time when he becomes obligated to convey, and that one may contract to convey property which he does not own, or even in which he has no interest at the time, if he acts in good faith, since he may be able to furnish a good title when the time for performance arrives. Such a contract will be upheld and enforced if, when the time for performance arrives, the vendor is able to furnish the title he contracted to convey. The vendor has until that time to acquire such title, and is in default only when the purchaser has performed his part and made demand for a title which the vendor is unable to furnish."
There is nothing before the court to show that defendants would not have received exactly what they bargained for if they had performed their part of the agreement. No effort was made by defendants to proceed with the transaction and comply with the terms of the contract. On the contrary, they flatly refused to go into escrow. Manifestly it cannot be contended that any damage was shown. Before defendants could properly refuse to pay plaintiff’s commission they would have to show that they had suffered some appreciable pecuniary damage, or that their position had been altered to their prejudice. In Spreckels v. Gorrill, 152 Cal. 383, 92 P. 1011, the court said:
"That fraud which has produced, and will produce, no injury will not justify a rescission, nor support an action either for rescission or damages, is an established principle of law and equity. *** It may be conceded that it must be shown that the plaintiff, by reason of the fraud, suffered an injury of a pecuniary nature, that is, an injury to his property rights, as distinguished from a mere injury to his feelings, but it will be sufficient if the facts alleged show that material injury will necessarily ensue from the fraud, although the amount of the pecuniary loss is not stated."
In the case of Munson v. Fishburn, 183 Cal. 206, 190 P. 808, the court quoted with approval from Stillwell v. Rankin, 55 Mont. 130, 174 P. 186, wherein it is stated:
"Most of the courts and textwriters employ the term ‘damage’ in the sense of injury; a few restrict its meaning to financial loss. We prefer to adhere to the rule which gives to the term its broader significance, as including either pecuniary loss or the alteration of one’s position to his prejudice."
Applying the rule stated in these decisions to the case at bar, we find that the facts established fall short of a justification for the defendants’ conduct in refusing to proceed with the exchange of the properties. It was not shown that they did not or could not obtain what they bargained of; nor is it shown that defendants would have suffered any damage or prejudice whatever by the exchange of their property for the property of the Littles incumbered by a trust deed on which there was unpaid only the sum of $1,000 instead of two mortgages for $1,000 each. In such case it is apparent that defendant’s pecuniary condition would have been improved rather than injured.
The judgment is reversed. A new trial of the action will not be necessary. It is ordered that the findings of fact and conclusions of law by the trial court, be stricken and that in lieu thereof the following be inserted:
"That all of the allegations contained in plaintiff’s complaint are true; that none of the representations or statements made by plaintiff to defendants at the time the defendants signed exhibit A, attached to the complaint, caused any damage or injury whatever to defendants or caused them to alter their position to their prejudice."
Upon the going down of the remittitur it is ordered that the superior court enter judgment, upon the findings as herein set forth, in favor of plaintiff and against defendants in the sum of $600, together with interest thereon at the rate of 7 per cent. per annum from August 19, 1914.
We concur: CONREY, P. J.; YORK, J.