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COURT OF
APPEALS DECISION DATED AND
RELEASED April
4, 1996 |
NOTICE |
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A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 95-2378
STATE OF WISCONSIN IN
COURT OF APPEALS
DISTRICT IV
PREFERRED
REALTY,
Plaintiff-Respondent,
v.
PAT
WEBER,
Defendant-Appellant.
APPEAL
from a judgment of the circuit court for Vernon County: MICHAEL J. ROSBOROUGH, Judge. Affirmed.
VERGERONT,
J.[1] Pat
Weber appeals from a judgment awarding Preferred Realty, a real estate sales
company, a $1,950 commission for finding a buyer for her house. Weber contends the trial court erred in
awarding a commission when a sale between her and the buyers, Lisa and Dennis
Knight, was never completed. We
conclude that the trial court correctly interpreted the residential listing
contract, and we affirm.
BACKGROUND
On
April 16, 1994, Weber entered into a written residential listing contract with
Preferred Realty to sell her house. The
contract provided that Weber would pay Preferred Realty a commission of five
percent based either on the sale price or the list price, depending on how the
commission was earned. Carole Cook, an
agent of Preferred Realty, located buyers Lisa and Dennis Knight. On April 18, 1994, the Knights extended a
written offer to purchase for $39,000 and Weber accepted. The offer entitled the Knights to cancel the
deal if the house sustained damage exceeding five percent of its selling price
between acceptance and closing of the offer.
The offer also entitled the Knights to any insurance proceeds resulting
from such damage if they decided to carry out the offer in spite of the damage.
The
house caught fire several days after the offer to purchase was signed, and
before closing. The property was
declared a total loss by Weber's insurance company. The insurance company sent Weber a check for insurance proceeds
in the amount of $50,000. Weber used
approximately $28,000 to pay off the remaining mortgage on the house. The remaining proceeds were placed in a
special account.
The
Knights were still interested in closing the deal until they learned of Weber's
use of the insurance proceeds and a pending suit involving the insurance
company. They then cancelled the
deal. Because the sale did not close,
Weber asserted that Preferred Realty was not entitled to its five percent
commission. Preferred Realty sued in
small claims court for $1,950, five percent of $39,000. The trial court awarded the commission, plus
costs and fees.
The
interpretation of a contract is a question of law, which we decide de
novo. Katze v. Randolph &
Scott Mut. Fire Ins. Co., 116 Wis.2d 206, 212, 341 N.W.2d 689, 691
(1984).
DISCUSSION
The
residential listing contract is a standard form contract approved by the
Wisconsin Department of Regulation and Licensing. The contract states that a broker earns a commission in four instances: (1) if a seller accepts an offer which
creates an enforceable contract for the sale of all or any part of a property;
(2) if a seller grants an option to purchase all or any part of a property
which is subsequently exercised; (3) if a seller enters into a binding
exchange agreement on all or any part of a property; or (4) if a purchaser
is procured by a broker, a seller or any other person at the price and on
substantially the terms set forth in the listing contract and the offer to
purchase, even if the seller does not accept the purchaser's offer. Weber contends that only the first instance
is applicable and that no enforceable contract existed. We disagree and conclude that the fourth
instance is applicable and requires payment of the commission.
"[A]
broker, employed to `procure a purchaser' for real estate, has earned his
commission when he produces a person ready, willing and able to purchase upon
the terms specified by the owner in the listing contract." Winston v. Minkin, 63 Wis.2d
46, 51, 216 N.W.2d 38, 41 (1974) (footnote omitted). Final consummation of the sale is not required. Id.
No
dispute exists that Preferred Realty procured a purchaser for Weber's house as
defined by the contract terms. The
contract defines "procure" as:
"A purchaser is procured when a valid and binding contract of sale
is entered into between the Seller and the purchaser or when a ready, willing
and able purchaser submits a written offer at the price and on substantially
the terms specified in this Listing."
The contract also states:
"A purchaser is ready, willing and able when the purchaser
submitting the written offer has the ability to complete the purchaser's obligations
under the written offer."
Based
on the plain terms of the contract, Preferred Realty earned its commission on
April 18, 1994, when the offer to purchase was signed by the buyer and
seller. When the Knights extended the
offer, they were "ready, willing and able" to purchase upon substantially
the terms specified by Weber in the listing contract. Preferred Realty therefore "procured" a buyer and
earned its commission.
Even
if we were to apply the first instance, as urged by Weber, Preferred Realty has
earned the commission. Weber contends
that no enforceable contract existed because the Knights chose to exercise the
option of cancelling the deal since damages exceeded five percent of the
property's selling price. Weber asserts
that the Knights' contractual right to back out of the deal was a condition
precedent, similar to a "subject to financing clause." We do not agree.
A
condition precedent is "[a]n event, not certain to occur, which must
occur, unless its non-occurrence is excused, before performance under a
contract becomes due." Restatement (Second) of Contracts § 224
(1979). A "subject to financing
clause" is a common provision in listing contracts which conditions sale
of property on the buyer's ability to obtain financing at a specified rate. If the buyer is unable to obtain financing,
the contract may be terminated. Such
clauses are bargained-for elements which shift risk to the seller. See John M. Payne, Mortgage
Contingency Clauses, 19 Real Est.
L.J. 249 (1991).
The
contract provision at issue is not a condition precedent because no
"event" exists in the contract which must occur before performance is
due. The contract clause reads in
relevant part:
If, prior to the
earlier of closing or occupancy of Buyer, the Property is damaged in an amount
of not more than five percent (5%) of the selling price, Seller shall be
obligated to repair the Property and restore it to the same condition that it
was on the day of this Offer. If the
damage shall exceed such sum, Seller shall promptly notify Buyer in writing of
the damage and this Offer may be cancelled at option of Buyer. Should Buyer elect to carry out this Offer
despite such damage, Buyer shall be entitled to the insurance proceeds relating
to the damage to the Property, plus a credit towards the purchase price equal
to the amount of Seller's deductible on such policy. However, if this sale is financed by a land contract or a
mortgage to Seller, the insurance proceeds shall be held in trust for the sole
purpose of restoring the Property.
Delivery of the property in an undamaged condition was
not a condition precedent because in the event of damage exceeding five percent
of the property's value, the Buyer could either cancel the deal, or take the
insurance proceeds. The contract clause
provides options by which performance may be carried out, but no "event
... must occur ... before performance ... becomes due." Restatement
(Second) of Contracts § 224 (1979).
The exercise of the option to cancel the deal does not render the
contract unenforceable.
For
the foregoing reasons, Preferred Realty was entitled to its commission.
By
the Court.—Judgment affirmed.
This opinion will not be
published. See Rule 809.23(1)(b)4, Stats.