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SHUMAKER v. LEAR ET AL. (09/22/75)

SUPERIOR COURT OF PENNSYLVANIA


decided: September 22, 1975.

SHUMAKER
v.
LEAR ET AL., APPELLANTS

Appeal from judgment of Court of Common Pleas of Lancaster County, Sept. T., 1973, No. 6, in case of R. J. Shumaker v. Charles R. Lear and Evelyn G. Lear.

COUNSEL

Robert H. Reese, Jr., with him John W. Beyer, and Arnold, Bricker, Beyer & Barnes, for appellants.

Lawrence E. Stengel, and Rengier, Musser & Stengel, submitted a brief for appellee.

Watkins, P. J., Jacobs, Hoffman, Cercone, Price, Van der Voort, and Spaeth, JJ. Opinion by Jacobs, J. Hoffman, J., did not participate in the decision of this case.

Author: Jacobs

[ 235 Pa. Super. Page 511]

This is an action brought by a licensed real estate broker to recover a sales commission. Judgment on the pleadings*fn1 was entered in favor of the appellee [hereinafter broker] and against the appellants [hereinafter sellers].

The facts*fn2 reveal that the sellers and the broker entered into an exclusive listing agreement for the sale of their house at a price of $41,900.00. Under the terms of

[ 235 Pa. Super. Page 512]

    the listing agreement the sellers employed the broker as their "sole and exclusive agent for the sale of the property at the price and for the terms above mentioned or at any other price or terms which may be mutually agreed upon in writing . . .," and the sellers agreed to pay a commission of six percent of the total selling price.*fn3

The broker procured a prospective purchaser at a price of $40,000.00 and on May 19, 1973, the sellers and the purchaser entered into an agreement of sale. The agreement of sale, however, was expressly subject to the buyer's securing an approved mortgage of specified amount and terms. "Mortgage commitment [sic] to be arranged by June 10, 1973. If this cannot be arranged these agreements become null & void and down payment returned to the buyer in full."*fn4 It is the effect of this clause which forms the focus of the case before us.

The buyer failed to obtain his mortgage by June 10th, the specified date. On June 19th the sellers notified the purchaser and the broker that due to the purchaser's failure to obtain a mortgage commitment the sellers were electing to terminate the agreement. The broker subsequently notified the sellers that settlement would proceed as planned on June 28, 1973. When the sellers failed to proceed to settlement the broker brought this action for his commission. The court below granted judgment on the pleadings in the amount of $2,400.00 plus interest and this appeal followed.

As a general rule a real estate broker becomes entitled to his commission when he procures a purchaser who is ready, willing and able to buy upon the agreed terms. Keys v. Johnson, 68 Pa. 42 (1871). When the broker completes this task his commission has accrued, Walsh v. Turlick, 164 Conn. 75, 316 A.2d 759 (1972), and as to the broker the sale is treated as constructively consummated.

[ 235 Pa. Super. Page 513]

The general rule which accrues the broker's commission when a purchaser enters into contract with the seller, however, requires a binding and enforceable contract. When the contract is conditional, the broker earns his commission only when the condition is fulfilled. Mulvihill v. DiPrima, 47 A.D.2d 560, 363 N.Y.S. 2d 629 (1975). The requirement of mortgage financing in this case was clearly a condition precedent to the purchaser's obligation to perform, Robert F. Felte, Inc. v. White, 451 Pa. 137, 302 A.2d 347 (1973), and if the sale had not proceeded because of the buyer's inability to obtain financing, the broker would not be entitled to his commission. Goss v. Whitmore, 46 A.D.2d 949, 362 N.Y.S. 2d 76 (1974).

The broker contends, however, that the condition precedent would have been met but for the wrongful act of the sellers in terminating the contract. This is so, he reasons, because time was not of the essence in obtaining the mortgage; and the mortgage could and would have been obtained prior to settlement.*fn6 It is well settled that a principal cannot assert the failure of a condition precedent to defeat his broker's right to a commission when

[ 235 Pa. Super. Page 515]

    the principal himself has prevented the fulfillment of the condition. Aiello v. B.E.P.R.A. Inc., 39 A.D.2d 541, 331 N.Y.S.2d 924 (1972); see 10 Williston on Contracts § 1287 (3d ed. 1967); Restatement (Second) of Agency § 445, comment d (1958). If the sellers in the case before us wrongfully prevented the occurrence of the financing condition they nevertheless would remain liable for the broker's commission. W. C. Pinkard & Co., Inc. v. Castlewood Realty Co., Inc., 271 Md. 598, 319 A.2d 123 (1974); see 3A Corbin on Contracts § 768 (1960); but cf. Sork v. Rand, supra. We conclude, however, that the parties intended time to be of the essence in the subject to financing clause and that the appellants, therefore, did not wrongfully prevent the fulfillment of any condition precedent.

Ordinarily, time is not regarded as of the essence of contracts for the sale of real property. Knable v. Bradley, 430 Pa. 153, 242 A.2d 224 (1968). However, time may be expressly stipulated to be of the essence, or it may be necessarily so implied. Carsek Corp. v. Stephen Schifter, Inc., 431 Pa. 550, 246 A.2d 365 (1968). In the case before us the financing clause clearly states, inter alia :

"Mortgage commitment [sic] to be arranged by June 10, 1973. If this cannot be arranged these agreements become null & void and down payment to be returned to the buyer in full."*fn7

In Dauchy v. Pond, 9 Watts 49 (Pa. 1839), the Court held that the use of the phrase "null and void and of no effect" necessarily implied that time was of the essence. "That it was intended that time should be of the essence of the contract is apparent, from the agreement itself, and the conduct of both the parties to it. . . ." Id. at 51. The agreement of sale in Axford v. Thomas, 160 Pa. 8, 28 A. 443 (1894) stated that it would "become null and void" if payments were not made as specified. The Court stated:

[ 235 Pa. Super. Page 516]

"[t]ime was made of the essence of the contract and we cannot disregard that provision without making a new contract for the parties." Id. at 13, 28 A. at 444.

A mortgage financing clause is "an important condition in a written agreement of sale [which] must be given effect unless altered by the parties or specifically waived . . .," Robert F. Felte, Inc. v. White, supra at 145, 302 A.2d at 351, and when the words of a writing are clear and unambiguous, the intent of the parties is determined only from the express language of the agreement. East Crossroads Center, Inc. v. Mellon-Stuart Co., 416 Pa. 229, 205 A.2d 865 (1965). We conclude that the use of the proviso declaring the contract "null and void" if the mortgage arrangements were not completed by June 10 is a sufficient expression of the intent of the parties to make the June 10 date the essence of the contract. See R & R Insurance & Builders, Inc. v. Fink, 232 Ga. 165, 205 S.E.2d 297 (1974) (contract "contingent" upon purchaser being able to secure financing within 45 days); cf. Brackin v. Welton Engineering Co., 283 Pa. 91, 128 A. 818 (1925); Vito v. Birkel, 209 Pa. 206, 58 A. 127 (1904).

It follows both in law and logic that if the parties intended time to be of the essence of the contract, the sellers rightfully could act to rescind the contract when the purchasers were unable to meet the condition. Sork v. Rand, supra; Wasserman v. Steinman, 304 Pa. 150, 155 A. 302 (1931); Enerdyne Corp. v. Wm. Lyon Dev. Co., supra (a contracting party may repudiate his performance if a condition precedent to that performance cannot be satisfied).

The broker's right to a commission remained contingent upon fulfillment of the condition precedent,*fn8 and

[ 235 Pa. Super. Page 517]

    the condition was not fulfilled. The sellers having acted in good faith and having done nothing to prevent the fulfillment of the condition, the broker is not entitled to recover his commission. White Realty & Ins. Agency Co. v. Moreland, supra; Business Realty Co. v. Schaffer, 99 Pa. Superior Ct. 175, allocatur refused, 99 Pa. Superior Ct. xxvii (1930); Weaver v. Fairbanks, 10 Wash. App. 688, 519 P.2d 1403 (1974); see Baumbach v. Seip, 442 Pa. 443, 275 A.2d 71 (1971); cf. Robert F. Felte, Inc. v. White, supra.

Judgment reversed; the court is directed to enter judgment on the pleadings in favor of the appellants. Commonwealth v. Transamerica Ins. Co., 462 Pa. 280, 341 A.2d 74 (1975).

Disposition

Judgment reversed and court directed to enter judgment on the pleadings in favor of the appellants.


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