Opinion
Docket No. 18204.
Decided August 15, 1974. Leave to appeal denied, 393 Mich ___.
Appeal from Oakland, John N. O'Brien, J. Submitted Division 2 May 14, 1974, at Lansing. (Docket No. 18204.) Decided August 15, 1974. Leave to appeal denied, 393 Mich ___.
Complaint by Irving Rich against Emerson-Dumont Distributing Corporation, National Union Electric Corporation, and Robert Piche, for damages for breach of contract. Judgment for defendants. Plaintiff appeals. Affirmed.
Schussel, Lifton, Simon, Rands Kaufman (by Joseph F. Galvin and Ronald H. Riback), for plaintiff.
Miller, Canfield, Paddock Stone (by Gordon A. Becker), for defendants.
Plaintiff Irving Rich is a real estate broker duly authorized and licensed under the laws of the State of Michigan. On or about August 1, 1972, defendants, through their agent, Robert Piche, solicited plaintiff's services for the purpose of locating suitable warehouse space for defendants' use. Plaintiff subsequently located suitable space and on or about August 31, 1972, executed an "offer to lease". On or about September 1, 1972, the lessor of the premises in question, one Delmer G. Garrison, accepted the "offer to lease" and on September 5, 1972, the defendants' agent, Robert Piche, acknowledged receipt of the "accepted offer to lease".
Defendants thereafter failed to consummate the lease. Plaintiff commenced suit alleging that defendants had breached an implied promise to consummate the lease and claiming damages in the amount of $8,000, a figure equivalent to the commission to be paid him upon consummation of the lease.
The Oakland County Circuit Court granted defendants' motion for a summary judgment on the basis that the complaint failed to state a claim upon which relief could be granted. GCR 1963, 117.2(1). Plaintiff thereafter filed a motion for judgment notwithstanding the verdict. The trial court denied the motion, thus reaffirming its dismissal of the complaint. Plaintiff now brings this appeal as of right.
The sole issue presented on appeal is:
Where a prospective lessee enters into an executory agreement with a property owner to enter into a lease at a later time, which executory agreement contains an express promise by the owner to the real estate broker to pay him a commission at the time the lease is consummated, and where the prospective lessee does not consummate the lease, is the real estate broker entitled to recover his commission from the prospective lessee?
In the absence of a special agreement, the general rule is that a broker is deemed to have earned his commission when the seller and the purchaser enter into a binding agreement. Hayman Management Co v Dura Corporation, 45 Mich. App. 522; 206 N.W.2d 754 (1973); Smith-Burns Investment Co v Jones, 240 Mich. 89; 214 N.W. 946 (1927). However, a broker and his principal may, and usually do, agree that the broker's right to a commission is contingent on the actual performance of an executory agreement for the sale and purchase of property. Hayman Management Co, supra; Fortner v Connell, 367 Mich. 146; 116 N.W.2d 37 (1962). Although the instant case deals with a lease rather than a contract for the sale of land, we think the principles enunciated above are nevertheless applicable.
In this case, there was no contract between plaintiff and defendant either with respect to employment or the lease arrangement. Rather, under the terms of the offer to lease, it was the lessor, and not the defendant-lessee, who agreed to pay plaintiff a commission "upon execution of lease". Thus we see that plaintiff's right to a commission was not absolute, but contingent "upon execution of lease". Since the lease was never executed, plaintiff, under the terms of the offer to lease, has not earned his commission. Thus, the terms of the offer to lease preclude recovery of a commission by plaintiff in the absence of an executed lease.
Plaintiff, citing Ellsworth Dobbs, Inc v Johnson, 50 N.J. 528; 236 A.2d 843 (1967), asks us to imply a promise on the part of the defendant-lessee to consummate the lease and further urges us to hold that since the defendant failed to consummate the lease, he is liable to plaintiff for breach of the implied promise. Ellsworth is distinguishable from the case at bar since in Ellsworth the plaintiff was the vendor's broker, while such is not the case here. Furthermore, in Ellsworth, the New Jersey Supreme Court was merely extending a rule it had stated in an earlier opinion. However, in our research efforts we have not uncovered any authority in this jurisdiction subjecting a purchaser or lessee to an implied obligation to a broker to complete a purchase or lease. Neither have we located any cases holding the purchaser or lessee liable to pay the broker's commission upon default in completion of the contract or lease. Nor do we think that such a rule should be applied to the facts of the present case.
Tanner Associates, Inc v Ciraldo, 33 N.J. 51; 161 A.2d 725 (1960).
The offer to lease specifically stated that the lessor was the party who would pay plaintiff his commission "upon execution of lease". As mentioned earlier, there was no express contract between plaintiff and defendant with respect to either employment or the lease transaction. Plaintiff had the opportunity to obtain from defendant an express promise to execute the lease or pay his commission upon failure to do so. Since plaintiff failed to procure such promise from defendant, this Court will not, as an afterthought, now imply such a promise for him.
The trial court acted properly in granting defendants' motion for summary judgment.
We wish to note that our decision does not leave plaintiff totally remediless. There is evidence in the record that an action by the landlord against the defendant-lessee is currently pending. Plaintiff can await final outcome of that case, and if specific performance or damages is awarded, plaintiff's commission could be advanced therefrom, since plaintiff could maintain an action against the landlord for commission earned and unpaid. Alternatively, plaintiff could seek to join in the pending action between the landlord and the defendant lessee.
Affirmed.