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HERMAN v. STERN (10/13/65)

decided: October 13, 1965.

HERMAN
v.
STERN, APPELLANT



Appeal from judgment of Court of Common Pleas No. 4 of Philadelphia County, Dec. T., 1962, No. 2136, in case of Richard B. Herman, trading as Richard B. Herman and Company v. James L. Stern.

COUNSEL

Jerome L. Markovitz, with him Milton Brooks, for appellant.

C. Laurence Cushmore, Jr., with him White & Williams, for appellee.

Warren G. Morgan, and Morgan & Roth, for amicus curiae.

Milton P. King, Philip Sterling, and Mancill, Sterling, Magaziner & Semans, for amicus curiae.

Emanuel Romm, and Barnie F. Winkelman, for amicus curiae.

Jones, Cohen, O'Brien and Roberts, JJ. Bell, C. J., Musmanno, Eagen, JJ. Opinion by Mr. Justice O'Brien. Concurring Opinion by Mr. Justice Roberts. Dissenting Opinion by Mr. Justice Cohen. Mr. Justice Jones joins in this dissenting opinion. Dissenting Opinion by Mr. Justice Eagen. Mr. Justice Jones joins in this dissenting opinion.

Author: O'brien

[ 419 Pa. Page 274]

The instant appeal arises from a suit by a real estate broker for a commission which he alleges was earned through the sale of property owned by James L. Stern, the appellant herein. Stern and his wife owned the land and building located at 1707 Walnut Street in Philadelphia. In May of 1954, Stern rented his building to John J. Shaw, Jr. Late in 1959, Shaw sought to be relieved of his lease. The Shaw lease did not expire until August 31, 1960. In order to find a

[ 419 Pa. Page 275]

    subtenant, Shaw engaged Herman, the appellee. Soon thereafter, a subtenant was obtained by Herman for the unexpired term of the Shaw lease. The subtenant also signed a new lease for the rental of the premises for an additional three year period. Herman prepared the sublease from Shaw to the new tenant and the new lease from Stern to the new tenant.

Both of these leases contain in paragraph 37 (B), the following clause: "In consideration of the services of Richard B. Herman & Company, Inc., in securing the execution of the above lease, the principal hereby authorizes Richard B. Herman & Company, Inc., as his agents to collect the rent due or to become due thereunder during the continuance of the same, or for any renewal or renewals thereof, and to deduct and retain five percent (5%) of the amount collected each month, and for this purpose to retain possession of the lease during said period. . . . In the event that, at any time while Lessee or any affiliate or successor to or assignee of Lessee is in possession of the demised premises . . ., the premises shall be sold to the Lessee, . . . Principal agrees to pay to Richard B. Herman & Company, Inc., a commission of 5% of the sale price . . . regardless of whether or not Principal shall have obligated himself to pay a commission on said sale to anyone else. The provisions of this clause shall be binding on the assignees, . . . [etc.] of the Principal. The foregoing authority shall be considered one coupled with an interest in Richard B. Herman & Company, Inc. . . ."

The leases were signed by Herman as agent and the tenant. At the bottom of the lease appeared the sentence: "The principal of Richard B. Herman & Company, Inc., having examined the above lease and agreements, hereby agrees to them and ratifies and approves of the same in all particulars." This was followed by the signature of James L. Stern and seal.

[ 419 Pa. Page 276]

In October, 1962, Alex Sailor and Roslyn Sailor, his wife, purchased the property from Stern, the tenant being Roslyn Sailor, trading as Roslyn Sailor Boutique. The appellee, Herman, then sought a commission on the sale. Stern refused to pay, alleging that the sale was consummated through the effort of others and not through the effort of Herman. The plaintiff filed a complaint in assumpsit and the defendant filed an answer containing new matter. The plaintiff then filed a reply to new matter, then both parties moved for judgment on the pleadings.*fn1

The complaint alleges that: "3. On or about October 23, 1959, plaintiff as agent for defendant entered into a certain Lease Agreement with Roslyn Sailor, a true and correct copy of which is attached hereto, made a part hereof, and marked Exhibit A. Defendant ratified and approved the same in writing on October 23, 1959, as appears therefrom.

"4. Said Lease Agreement in Section 37B thereof contains certain stipulations and agreements between plaintiff and defendant (the name 'Richard B. Herman & Company, Inc.' in Section 37 and in the signature being changed by Section 38 to read 'Richard B. Herman & Company') including an agreement that if at any time while Lessee should be in possession of the demised premises, having remained in possession uninterruptedly since the commencement of the term or any renewal or extension thereof or under any other agreement or arrangement, the premises should be sold

[ 419 Pa. Page 277]

    to the Lessee, the principal (meaning defendant) would pay to plaintiff a commission of 5% of the sale price, regardless of whether or not defendant should have obligated himself to pay a commission on said sale to anyone else."

Defendant, in his answer and new matter, denied any obligation to pay a commission to the plaintiff on the sale of the property as the plaintiff had nothing to do with the sale, and for the further reason (a) that the plaintiff acted as agent for John J. Shaw, Jr., and as an accommodation to Shaw; (b) that through error and mistake paragraph 37 (B) was not stricken from the printed form before being signed as no arrangement or agreement or discussion was made with the plaintiff with respect to any payment of any commissions in the event of any sale; (c) the premises were sold through the effort of a person other than the plaintiff; (d) all interest and authority of plaintiff under the lease was cancelled by defendant paying the plaintiff in advance the entire amount of the commission on the rent to which he was entitled.

The lower court entered judgment for the plaintiff and against the defendant. Defendant appealed and asked that the judgment be reversed and that judgment on the pleadings be granted in favor of the defendant and against the plaintiff. The appellant argues (1) the plaintiff admits that no agreement was made for the payment of any commission in the event of a sale, and defendant is not liable even though such a clause was in the printed lease; (2) the plaintiff's reply to defendant's new matter is vague, indefinite and not responsive, and under Pennsylvania Rules of Civil Procedure, admits facts pleaded by the defendant; (3) under the express terms of the lease, the broker was not entitled to commissions for the sale of the premises which did not result from his efforts, and that (a) any right which plaintiff may have had under the lease to receive

[ 419 Pa. Page 278]

    a commission in the event of the sale of the premises was ended when the defendant, in accordance with the terms of the lease, cancelled plaintiff's authority and interest and retook possession of the lease almost three years prior to the sale of the premises, and (b) section 37 (B) of the lease does not provide for a commission to be paid in event of the sale of a premises where plaintiff was not the procuring cause of the sale.

Appellant contends that the appellee has "admitted that the written provision in the lease dealing with the payment of commission in the event of a sale of the premises was never any part of the understanding or arrangement between the plaintiff and defendant".*fn2 The plaintiff-appellee, in his reply to defendant-appellant's new matter, made an averment that the matter contained therein was irrelevant. The averment in defendant's new matter being: "8. In October of 1959 the then tenant of the premises in question, John J. Shaw, Jr., was desirous of vacating the premises under his lease which still had to August 31, 1960, to run. On information and belief, defendant is informed said John J. Shaw, Jr., engaged Richard B. Herman, as agent to rent the property. Roslyn Sailor, trading as Roslyn Sailor Boutique was obtained by Shaw or Herman as a sublessee and defendant authorized plaintiff to execute a lease to that effect. On October 16, 1959, a lease was executed by plaintiff on behalf of John J. Shaw, whereby Roslyn Sailor, trading as Roslyn Sailor Boutique was made sublessee for the remainder of the unexpired term of Shaw's lease and which contained a printed provision that should the premises be sold to the lessee the principal would pay to plaintiff a commission of five (5%) percent. Said provision as to payment of commission should the premises be sold was entered into between plaintiff and his principal Shaw

[ 419 Pa. Page 279]

    and was not part of any understanding or agreement between plaintiff and defendant." And, the appellant further avers in new matter: "10. . . . Through error and mistake the said printed form of the lease contained a clause*fn3 which was not applicable to the arrangement made between the parties and should have been deleted before signing." There was a similar averment in defendant's answer: "4. . . . Through error and mistake, the said paragraph*fn3 was not stricken from the printed form before signing as no such arrangement or agreement or discussion was made with the plaintiff with respect to payment of any commission in the event of any sale. . . ."

The foregoing averments in defendant's answer and in new matter were not sufficient to meet pleading standards of Rules of Civil Procedure,*fn4 and the plaintiff-appellee was not required to answer, and therefore, he could not be deemed to have admitted what was not properly pleaded.

The appellant contends that through error and mistake the portion of paragraph 37 (B) was not stricken from the printed form. He does not point out by whose error or by whose mistake this was not done. The bald assertion of error and mistake falls far short of the requirement necessary for reformation of the contract. No place in the pleading is there any proper averment which would permit a court to allow evidence to show that the provision for payment of commission should be omitted. Pa. R. C. P. 1019(b). Without the proper averment, parol evidence could not be introduced to show that the provision as to payment of compensation was not part of any understanding or agreement between the parties. On the contrary, the lease agreement

[ 419 Pa. Page 280]

    shows careful consideration and draftsmanship. A portion of paragraph 37 (A) was stricken out as not applicable to the particular situation.*fn5

Appellant further contends that under the provision in paragraph 37 (B) that provides for the principal reserving the right to cancel the agent's authority and to retake possession of the lease whereby the principal pays the amount of rental commission for the unexpired period of the lease, that this invocation of the lease agreement and compliance therewith extinguished the provision for the payment of a commission in the event of a sale of the property. There is no part of the lease agreement that would, under any conceivable notion, warrant this construction. The plain language of the provision for the payment of commission in the event of sale is to the contrary and unequivocal in its terms that a commission is due the agent, appellee, by the principal, appellant. The terms of this provision of the paragraph are unequivocal. The appellant, under the lease, had the right to make payment to the appellee in full of all claims on rental commission due under the lease. The appellee was compelled to accept payment in full of all commissions due on rentals when that provision was invoked by the appellant. The payment of the amount of commuted rental commission to which the appellee was entitled is not consideration for the release of the other claim for commission in the event of the sale of the property, particularly when the lease agreement does not provide for it to be such a release.

Appellant maintains that the appellee is not entitled to a commission in the event of ...


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