IMBACH v. SCHULTZ

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District Court of Appeal, Third District, California.

Joseph IMBACH, Plaintiff and Appellant, v. Jack SCHULTZ, et al., Defendants and Respondents.*

Civ. 10418.

Decided: July 27, 1962

Hoseit & Luther, Sacramento, for appellant. Sidney Rudy, San Francisco, for respondent.

Plaintiff Joseph Imbach, a licensed real estate broker, appeals from an adverse judgment in an action brought by him to recover the sum of $7,500 allegedly due as a commission.

The factual situation, as shown by the engrossed statement of facts on appeal and as found by the trial court, is as follows. Jack Schultz and Margaret Schultz were the owners of the Flamingo Motel located at Stateline, California. Although plaintiff had no listing agreement with defendants, he had discussed with defendant Jack Schultz the terms and conditions under which he would sell the motel. Plaintiff thereafter secured a purchaser and presented a deposit receipt agreement to defendant, drafted in accordance with the prior discussions. Schultz refused to sign it until it was approved by his attorney. Accordingly, a meeting was held in the attorney's office at which the plaintiff, Schultz, and the purchasers were present. During the course of this meeting, which lasted between one and one-half to two hours, the deposit receipt agreement was reviewed paragraph by paragraph. Considerable discussion took place, and a number of changes were made in ink on the face of the document. The final document is not before us on this appeal, but it was stipulated that the total sales price was $550,000; that a commission of $18,500 was to be paid to plaintiff; that a deposit of $15,000 was immediately paid over to Schultz, in accordance with the provision in the deposit receipt, so that he could meet current obligations; and that the purchaser had two hundred days to complete the purchase. It was also agreed that if the purchaser failed to complete the agreement, the $15,000 which was immediately released to the seller would be forfeited at his option. The purchasers failed to perform within the two hundred day period and defendant elected to retain the $15,000.

Schultz refused plaintiff's demand for $7,500, which was based on the following provisions of the deposit agreement, as finally drafted and approved.

‘I agree to sell the property described on the reverse side hereof on the terms and conditions therein stated and agree to pay the agent named herein as commission on closing the sum of EIGHTEEN THOUSAND FIVE HUNDRED 18,500 Dollars, or one-half the deposit in case same is forfeited by purchaser.’

At the time the agreement was executed and during the discussions above mentioned, defendants' attorney had inserted the italicized words, ‘on closing,’ into the clause to make it read as above.

The trial court, over plaintiff's objection, entertained oral testimony by Schultz to the effect that the words ‘on closing’ were inserted because his attorney told him, in the presence of plaintiff, that the deposit agreement should be so corrected since no commission was to be paid unless the sale of the property was completed. Plaintiff objected that the clause, as written, was unambiguous and that no grounds existed for the admission of this testimony which would, if believed, negate the clause of the written contract upon which he relies in this action. Plaintiff further expressed no knowledge of such a discussion.

The propriety of admitting this oral testimony is the crucial inquiry on this appeal, since it is the only testimony offered which would substantiate the pertinent findings of the trial court, which are as follows.

‘That at the time of the signing of the Agreement and prior to the affixing of the signature of Sellers, the final paragraph of the Agreement relating to payment of commissions was corrected by insertion of the words ‘on closing’ after Plaintiff was advised that the Agreement could not be signed in its printed form because no commission was to be paid unless the transaction was closed.

‘It was the intention of the parties hereto that no commission be paid unless the sale of the property was completed.’

On appeal, the principal contentions of plaintiff are: (1) that the facts were insufficient to support a finding that plaintiff was not entitled to one-half the forfeited deposit; and (2) that the trial court erred in allowing parol evidence to vary the terms of the written contract.

We agree with plaintiff that there is no uncertainty or ambiguity in the quoted language of the deposit receipt, and that therefore the court erred in admitting parol evidence of the parties' ‘intentions,’ which varied the terms of the written instrument. (Deeble v. Stearns, 82 Cal.App.2d 296, 186 P.2d 173; Nourse v. Kovacevich, 42 Cal.App.2d 769, 109 P.2d 999; Parigian v. Citizens Nat. T. & S.Bk. 42 Cal.App.2d 773, 110 P.2d 117.)

The language, ‘and agree to pay the agent named herein as commission on closing the sum of EIGHTEEN THOUSAND FIVE HUNDRED 18,500 Dollars, or one-half the deposit in case same is forfeited by purchaser,’ not only is clear in import, but the substance of it has long been a familiar part of many real estate contracts. Schultz, who held a real estate salesman's license for a number of years, could scarcely have been unfamiliar with the concept.

Furthermore, the only potential ambiguity in the deposit agreement, as originally drafted, was obviated when defendants' attorney noted it and established the time for payment of the full commission if the transaction was completed; that is, as both parties to this appeal agree, the commission would then be paid ‘on closing’ the transaction. The consideration of testimony that ‘on closing’ meant to render the next following forfeiture clause completely meaningless, particularly in the context of the negotiations, is clearly prejudicial error in this case.

We agree with plaintiff that the clause as written is clear. The words ‘on closing’ and the word ‘forfeiture’ are inconsistent and alternate. If there is a closing, there is no forfeiture, and if there is a forfeiture there is no closing. They are exclusive of each other and in the alternate. This is true quite apart from the doctrine urged by plaintiff that the final contract perfected by defendants must be construed most strongly against them.

When a seller has said in a contract that he agrees to pay to the agent ‘one-half the deposit in case same is forfeited,’ it is extremely difficult to see how it can be construed to mean that he agrees to pay to the agent none of the deposit in case same is forfeited. To do so is to construe white as black. To paraphrase and state the converse of Barham v. Barham, 33 Cal.2d 416, 417, 202 P.2d 289, it is not admitting extrinsic evidence to show what the parties meant by what they said; it is admitting extrinsic evidence to show they meant something other than what they said. Hence, it amounts to making a new contract for the parties. It is a repudiation of the parol evidence rule, entirely and absolutely, and a judicial repeal of a legislative act. (Code Civ.Proc. sec. 1856.)

Although the court made no specific finding to that effect, it is clear from the evidence that a forfeiture within the meaning of the compensation clause has occurred.

Judgment is reversed.

I dissent.

The instant case was tried by the court sitting without a jury and the court held that plaintiff was not entitled to recover. Among the court's findings were the following:

‘IV

‘At the time of the signing of the Agreement and prior thereto, Plaintiff and Purchaser knew that Defendants required the Fifteen Thousand Dollars ($15,000.00) to pay certain obligations.

‘V

‘That at the time of the signing of the Agreement and prior to the affixing of the signature of Sellers, the final paragraph of the Agreement relating to payment of commissions was corrected by insertion of the words ‘on closing’ after Plaintiff was advised that the Agreement could not be signed in its printed form because no commission was to be paid unless the transaction was closed.

‘VI

‘It was the intention of the parties hereto that no commission be paid unless the sale of the property was completed.’

The principal contentions of appellant are: (1) The facts were insufficient to support a finding that plaintiff was not entitled to one-half of the forfeited deposit; and (2) the trial court erred in allowing parol evidence to vary the terms of the written contract.

Appellant points to the language of the deposit receipt and argues that ‘This promise on the part of defendants to pay plaintiff a commission of $18,500.00 on closing, or one-half the deposit in the event there is a forfeiture, is in the alternative and the words ‘on closing’ cannot possibly, as held by the trial court, be applied to limit or qualify the provision for payment upon forfeiture of one-half of the deposit. The words ‘on closing’ and the word ‘forfeiture’ are inconsistent and alternate. If there is a closing, there is no forfeiture and if there is a forfeiture, there can be no closing. They are exclusive of each other and in the alternate. Since the words ‘on closing’ were inserted by interlineation on the part of defendant's [sic] attorney SIDNEY RUDY after a thorough and detailed conference with all parties present, they must be construed most strongly against the defendants.'

Appellant argues also that there is no uncertainty or ambiguity in the language of the deposit receipt and that therefore the court erred in admitting parol evidence of the intention of the parties.

As was said by Mr. Justice Peters in Wells v. Wells, 74 Cal.App.2d 449, at page 456, 169 P.2d 23 at page 27: ‘The function of all interpretation is, of course, to try to ascertain the true intent of the parties. Parol evidence should not be admitted to vary, to add to, or to subtract from the terms of a written agreement, but it should be, and is admissible, to explain what the parties meant by what they said.’

‘* * * When the language used is fairly susceptible to one of two constructions, extrinsic evidence may be considered, not to vary or modify the terms of the agreement but to aid the court in asscertaining the true intent of the parties [citation], not to show that ‘the parties meant something other than what they said’ but to show ‘what they meant by what they said.’ * * *' (Barham v. Barham, 33 Cal.2d 416, 422–423, 202 P. 289, 293.)

‘* * * When the language used in the contract is fairly susceptible to the construction claimed by one of the parties, extrinsic evidence may be considered, not to vary or modify the terms of the agreement, but to aid the court in ascertaining its true meaning.’ (Reid v. Overland Machined Products, 55 Cal.2d 203, 210, 10 Cal.Rptr. 819, 823, 359 P.2d 251, 255.)

Among the surrounding circumstances that are admissible for purposes of interpretation are included many acts and statements of the parties antecedent to and contemporaneous with the making of the contract. (3 Corbin on Contracts, sec. 543; Union Oil Co. v. Union Sugar Co., 31 Cal.2d 300, 188 P.2d 470.)

The phrase by which the agent was to receive ‘as commission on closing the sum of EIGHTEEN THOUSAND FIVE HUNDRED 18,500 Dollars, or one-half the deposit in case same is forfeited by purchaser’ may on a first reading seem clear but “As the court said in California Employment Stabilization Commission v. Walters, supra [64 Cal.App.2d 554, 149 P.2d 17], ‘[t]he very fact, however, that plaintiff questioned the meaning of certain words and clauses in framing the agreement in itself shows that it was ambiguous. * * *” (Beneficial, etc., Ins. Co. v. Kurt Hitke & Co., 46 Cal.2d 517, 524, 297 P.2d 428, 431.) We are satisfied that the record sufficiently supports the findings of the trial court that the words ‘on closing’ were inserted after ‘Plaintiff was advised that the Agreement could not be signed in its printed form because no commission was to be paid unless the transaction was closed,’ and that ‘It was the intention of the parties hereto that no commission be paid unless the sale of the property was completed.’

When parol evidence is admitted as an aid to construction, upon appeal the trial court's construction is ordinarily conclusive if the extrinsic evidence is conflicting and the determination is supported by the evidence. (Woodbine v. Van Horn, 29 Cal.2d 95, 173 P.2d 17.)

I am convinced that the court did not err in reaching the conclusion that there was sufficient ambiguity to justify the admission of parol evidence and that the judgment in favor of respondents is supported by the evidence and the law.

I would affirm the judgment.

PEEK, Presiding Justice.

PIERCE, J., concurs.