S & W RLTY. & BOND. COM. A. v. Duckworth & Shelton, Inc.

Annotate this Case

162 S.E.2d 486 (1968)

274 N.C. 243

S & W REALTY & BONDED COMMERCIAL AGENCY, INC. v. DUCKWORTH & SHELTON, INC.

No. 276.

Supreme Court of North Carolina.

August 23, 1968.

*491 Ervin, Horack & McCartha, by Paul R. Ervin and William E. Underwood, Jr., Charlotte, for plaintiff appellee.

Berry & Bledsoe, by Louis A. Bledsoe, Jr., and C. Ralph Kinsey, Jr., Charlotte, for defendant appellant.

SHARP, Justice:

In this case, plaintiff alleges one brokerage contract; defendant's minutes, upon which plaintiff relies, show another; plaintiff's evidence shows a third. Necessarily, the issues do not bring the case into sharp focus.

These facts are conceded by both parties: On 23 November 1962, defendant agreed that it would pay plaintiff a 5% commission if plaintiff sold defendant's Trade Street property to Belk's for $116,500.00 or more. Plaintiff was never able to effect a sale upon those terms. Approximately two and one-half years later defendant sold the property to Belk's for $100,000.00 in negotiations conducted by an attorney, Mr. Paul Ervin. The case was submitted to the jury to determine whether plaintiff was the procuring cause of the sale and, if so, what was the reasonable value of its services.

Ordinarily, a broker with whom an owner's property is listed for sale becomes entitled to his commission whenever he procures a party who actually contracts for the purchase of the property at a price acceptable to the owner. Cromartie v. Colby, 250 N.C. 224, 108 S.E.2d 228; Martin v. Holly, 104 N.C. 36, 10 S.E. 83. If any act of the broker in pursuance of his authority to find a purchaser is the initiating act which is the procuring cause of a sale ultimately made by the owner, the owner must pay the commission provided the case is not taken out of the rule by the contract of employment. American Trust Co. v. Goode, 164 N.C. 19, 80 S.E. 62. The broker is the procuring cause if the sale is the direct and proximate result of his efforts or services. The term procuring cause refers to "a cause originating or setting in motion a series of events which, without break in their continuity, result in the accomplishment of the prime object of the employment of the broker, which may variously be a sale or exchange of the principal's property, an ultimate agreement between the principal and a prospective contracting party, or the procurement of a purchaser who is ready, willing, and able to buy on the principal's terms." 12 C.J.S. Brokers § 91, p. 209 (1938). Accord, 12 Am.Jur.2d Brokers § 190 (1964).

The law does not permit an owner "to reap the benefits of the broker's labor without just reward" if he has requested a broker to undertake the sale of his property and accepts the results of services rendered at his request. In such case, in the absence of a stipulation as to compensation, he is liable for the reasonable value of those services. Thompson v. Foster, 240 N.C. 315, 82 S.E.2d 109, 46 A.L.R.2d 843; Thomas v. Piedmont Realty & Development Co., 195 N.C. 591, 143 S.E. 144; Reams v. Wilson, 147 N.C. 304, 60 S.E. 1124. Of course, the listing agreement can make the payment of commissions dependent upon the broker's obtaining a certain price for the property. See Annot., 46 A.L.R.2d 848, 859 (1956); Thompson v. Foster, supra.

The foregoing decisions, however, do not fit the facts of this case. This is not a situation in which an owner, who has listed real estate with the broker at a specified price, reduces the price and sells it to the broker's prospect. When that occurs, clearly the broker is entitled to compensation. Cromartie v. Colby, supra; Thompson v. Foster, supra; Lindsey v. Speight, 224 N.C. 453, 31 S.E.2d 371; American Trust Co. v. Goode, supra; Martin v. Holly, supra. Here, plaintiff-broker did not find the prospect to which defendant-owner sold the property nor did it initiate Belk's interest in the *492 property. As every individual involved in the affairs of plaintiff and defendant well knew, Belk's wanted the land because it adjoined its property. Mr. Robinson, one of Belk's vice-presidents, testified that in 1964 he had told both Shelton, Sr., and Taylor that Belk's wanted the property; that it would pay $100,000.00 for it but no more. Belk's was defendant's prime prospect and so far as this evidence revealsits only one. In making the sale, the directors' sole problem was how to exploit the strategic location of defendant's property and to get Belk's top dollar for it as soon as possible.

Defendant's assignment of error that the judge erred in failing to grant its motion of nonsuit raises the question whether the evidence will support a finding that defendant employed plaintiff to negotiate the sale of its property to Belk's for $100,000.00 and that plaintiff procured the sale.

To establish its contract of employment to sell the property to Belk's for $100,000.00, plaintiff does not rely upon corporate minutes but upon the oral testimony of its two stockholders. A corporation is required to keep minutes of the proceedings of its shareholders and board of directors. G.S. § 55-37. They are the best evidence of its acts. Pegram-West, Inc. v. Winston Mutual Life Insurance Company, 231 N.C. 277, 56 S.E.2d 607; Respess v. Rex Spinning Co., 191 N.C. 809, 133 S.E. 391. However, when it is shown that no minutes were made of a particular meeting, or that they are incomplete, the proceedings may be proved by parol testimony. Tuttle v. Junior Building Corp., 228 N.C. 507, 46 S.E.2d 313; Robinson, North Carolina Corporate Law and Procedure § 49 (1964).

The absence of the minutes authorizing the offer of the property to Belk's for $100,000.00 is not explained in the evidence. Notwithstanding the foregoing rule, Shelton, Jr., testified without objection that, at a meeting of the board of directors, Shelton, Sr., "as representative of S & W was authorized to offer it (the land) to them (Belk's) for $100,000.00; that defendant's directors asked Ervin to accompany Shelton, Sr., to Belk's "in his capacity." Also without objection, Shelton, Sr., testified that defendant's board of directors had directed Ervin to make the offer to Belk's through S & W Realty Company; that he himself employed Ervin to help him consummate the sale; and that it was he who directed him to make the offer to Belk's through plaintiff corporation, which "was exclusive agent at that time as there had never been anything changed from the meeting in 1962." He added, "We were continually discussing the property with Belk's up until the property was sold."

The only minutes in evidence which relate to the sale of the Trade Street property contain the resolution of 23 November 1962 and the resolution of 2 July 1965, which approved the action of defendant's officers "in negotiating for the sale" of the Trade Street property to Belk's "for the sum of $100,000.00 as a part of the plan of liquidation and dissolution of the corporation."

An officer of a corporation has no right to compensation for services rendered the corporation in the absence of an express contract to pay for them. North Carolina Agricultural Credit Corporation v. Boushall, 193 N.C. 605, 137 S.E. 721; Caho v. Norfolk & R.R., 147 N.C. 20, 60 S.E. 640. Certainly, plaintiff-corporation was not an officer of defendant corporation, but Shelton, Jr., and Shelton, Sr., two of the three directors and stockholders of defendant-corporation, were also the sole directors and stockholders of plaintiff-corporation. Thus, in the transaction in suit, all plaintiff's stockholders (two realtors now composing a corporation, G.S. § 55-3.1) have an interest adverse to defendant-corporation. No corporate veil can conceal this interest. If the Sheltons, through plaintiff-corporation, obtain a realtor's commission upon the sale of the property, which they owned as stockholders in defendant-corporation, they will profit over and above their distributive share in the distribution of defendant's assets. Their gain will be at the expense of *493 Taylor, a director and the majority stockholder, who testified that defendant never employed plaintiff to negotiate a sale with Belk's for $100,000.00.

The brokerage services which plaintiff-corporation alleges it rendered defendant-corporation were within the scope of the duties of the directors and officers of defendant-corporation, which was patently formed for the purpose of buying and selling real estate. Its only assets upon dissolution were the net proceeds of the sale to Belk's and a lot valued at $15,000.00. The reason for the rule which prohibits an officer of a corporation from maintaining an action against it for services rendered within the scope of his duties as such officer absent an express contract to pay for those services is equally applicable to the dealings between these two closely held corporations. Before plaintiff-corporation can recover commissions in this case it must prove an express contract of employment whereby defendant employed it to sell the Trade Street property to Belk's for $100,000.00. The testimony of Shelton, Jr., and Shelton, Sr., although largely a statement of their conclusions that plaintiff and defendant had entered into a contract, went in without objection; it constitutes a prima facie showing of a contract of employment between plaintiff and defendant.

We hold that plaintiff's evidence was sufficient to withstand defendant's motion for nonsuit.

We next consider defendant's assignments of error to the charge. After having instructed the jury as to the burden of proof, the court gave the following instruction as to the third issue: "The procuring cause, members of the jury, is the approximate cause, the cause originating a series of events which without breaking their continuity result in the accomplishment of the prime object. * * * (contentions omitted) * * * Now, members of the jury, if the plaintiff has satisfied you by the greater weight of the evidence that the effort, if any, which it put forth or expended in offering or trying to sell the property to Belk was the procuring cause, as I have defined procuring cause to you, of the sale of the property to Belk Investment Company, it would be your duty to answer this third issue `yes.' If you fail to so find, it would be your duty to answer the third issue `no.'"

The foregoing instructions, which defendant assigns as error, were inadequate. Inter alia, they failed to comply with G.S. § 1-180 in that the court made no attempt to apply the law to defendant's evidence.

In effect, we have here the anomalous situation in which two stockholders and directors of defendant are suing defendant upon an oral contract which must be established by their testimony, which is unsupported by any minutes, and which is denied by the majority stockholder. Defendant contends that its three directors knew that they could sell the property to Belk's at any time they were willing to take $100,000.00 for it; that under these circumstances, the contract which plaintiff declares was not just and reasonable to the corporation; that Taylor would never have consented to pay a realtor to make a sale which was, in effect, already made; that the corporation could not have made such a contract without Taylor's consentwhich was not given; and that defendantcorporation authorized Ervin to act for it in effecting the sale. Whom Ervin represented is one of the disputed facts in the case. Plaintiff contends that he represented it exclusively. Defendant contends that he represented the Sheltons individually as stockholders and directors (in this case, inseparable statuses) and that, in acting for them in that capacity, he acted for defendant-corporation under authority of the directors.

In April 1965, the contract which defendant had made with plaintiff on 23 November 1962 was at an end. It was then obvious to the directors that plaintiff would be unable to sell the property to Belk's for $116,500.00. When no time is specified in his contract, if a broker fails to find a *494 purchaser or to make the sale within a reasonable time, his contract of employment is at an end. 12 C.J.S. Brokers §§ 66c, 88 (1938); 12 Am.Jur.2d Brokers § 57 (1964). See Parkey v. Lawrence, 284 S.W. 283 (Tex.Civ.App.)

No legal bar prevented defendant from employing Shelton, Sr.,individually or through his corporationto sell its property to Belk's and to pay the reasonable value of its services. A new and express contract of employment, however, was required. Furthermore, the provisions of G.S. § 55-30 were applicable to the contract. Presumably, however, in this case, if the jury finds in accordance with the Sheltons' testimony that the directors of defendant employed plaintiff-corporation to effect a sale to Belk's for $100,000.00, such a finding would bring the contract within the provisions of G.S. § 55-30(b), (1) and (2). These sections validate a contract between a corporation and a director having an adverse interest if, after a full disclosure, the transaction is specifically approved by a majority of the voting shares other than those owned or contracted by the adversely interested directors. Taking plaintiff's evidence as true, and giving plaintiff the benefit of every inference of fact which may reasonably be drawn from the evidenceas we are required to do in passing upon a motion for nonsuit, Taylor was one of the directors who "authorized" plaintiff to sell the property to Belk's for $100,000.00. The transcript does not reveal the manner in which the directors are authorized to do business. G.S. § 55-28(d).

The judge should have instructed the jury (1) that the contract of 23 November 1962 had terminated in April 1965, that plaintiff could base no recovery upon it, and that it had no bearing upon the value of the services for which plaintiff sues; (2) that in order to recover, plaintiff must satisfy the jury by the greater weight of the evidence (a), that the directors of defendant-corporation made an express contract with plaintiff whereby it employed plaintiff to negotiate a sale of its Trade Street property to Belk's for $100,000.00, (b), that the contract came within the provisions of G.S. § 55-30(b), (1) and (2), or (3); and (3) that, pursuant to the contract, plaintiff did procure the sale to Belk's.

On the issue of damages, the court instructed the jury as follows: "Even though the plaintiff failed to obtain a purchaser willing, able and ready to take the property at the price stipulated, $116,500.00, in the contract between the plaintiff and defendant, plaintiff may still recover the reasonable value of his services, if such services were the procuring cause of the sale of the property."

Defendant's exception to the foregoing portion of the charge must likewise be sustained. It erroneously referred to the contract of 23 November 1962 as the basis of defendant's liability to plaintiff, and it inadequately dealt with the question of damages. Testimony that commissions for the sale of commercial property in Charlotte was 5% of the sales price was offered and admitted as evidence bearing upon what sum was ordinarily considered reasonable compensation for plaintiff's services as a broker. Even though the jury found plaintiff to be entitled to compensation for its services with reference to the sale to Belk's, it was not bound to fix plaintiff's compensation at this rate, and the court should have so instructed the jury. Thomas v. Piedmont Realty & Development Co., supra.

As heretofore pointed out, plaintiff did not procure Belk's as a prospect nor did it interest Belk's in the property. Defendant contends that plaintiff's evidence showed that little work was required to make the sale to Belk's once defendant's director-stockholders had decided to accept its offer to pay $100,000.00 for the property; that the sale was effected when, by a telephone call, Mr. Ervin gave Mr. Robinson this information; that if Shelton, Sr., did anything at all, he merely accompanied Mr. Ervin on a visit to Robinson; that if plaintiff paid Ervin for these services there is no evidence what the fee was.

*495 If plaintiff is entitled to recover compensation in connection with the sale, it is entitled to recover only the reasonable value of the services it rendered after defendant reduced the price of the land to $100,000.00. In fixing this amount, the jury may properly consider the skill required and the time, effort, and cost expended in procuring the sale.

For the errors indicated, there must be a new trial. Prior thereto, plaintiff would be well advised to seek permission to recast its pleadings to conform to its evidence.

New Trial.