JAS. F. NEECE v. A. A. A. Realty CO., INC.
No. A-6952
Supreme Court of Texas
February 18, 1959
March 25, 1959
322 S.W. 2d Series 597
Opinion delivered February 18, 1959.
Rehearing overruled March 25, 1959.
The Court of Civil Appeals erred in holding as a matter of law that the listing cards executed by the parties under the date of August 19, 1955, resulted in an “exclusive” listing of petitioner‘s motel with the respondent. Commercial Standard Ins. Co. v. Davis, 134 Texas 487, 137 S.W. 2d 1; Cartwright v. Canode, 106 Texas 502, 171 S.W. 696; White v. White, 141 Texas 328, 172 S.W. 2d 295.
House, Mercer & House and James D. Cunningham, all of San Antonio, for respondent.
In response cited Kemper v. Police and Firemen‘s Ins. Ass‘n. Texas Com. App., 48 S.W. 2d 254; Shaw v. Shaw, Texas Com. App., 58 S.W. 2d 3; Tower Contracting Co. v. Flores, 157 Texas 297, 302 S.W. 2d 396.
MR. JUSTICE NORVELL delivered the opinion of the Court.
This is an action for damages resulting from the alleged breach of a real estate listing agreement. The contract which is the subject matter of this litigation reads as follows:
EXCLUSIVE LISTING AGREEMENT
No. Days? Six Months
Date: August 19, 1955
MOTEL
I, (or we) agree to pay A.A.A. Realy Co. 7% of the sale price, (if they sell said property), and to proteсt them on their prospects or anyone that they are instrumental in property being sold to.
Sale Price $ 410,000.00
Address 1409 E. Scott Wichita Falls tex.
Possession 30 days After deal is closed.
X Signature: Jas. F. Neece
This Court has heretofore considered this particular contract. Upon the first trial of the case the District Judge rendered a summary judgment for the defendant, Jas. F. Neece, and against the plaintiff, A.A.A. Realty Company,1 Inc., upon the theory that the disputed agreement was an open listing agreement. This judgment was reversed by the Court of Civil Appeals and the cause remanded for another trial.2 292 S.W. 2d 811. We affirmed the Court of Civil Appeals and held that, “It cannot be said as a matter of law that petitioner (defendant) Neece did not by his written contract confer upon respondent (plaintiff) Realty Company, an exclusive agency to sell the property in question.” [156 Texas, 614, 617, 299 S.W. 2d 270.]
A second trial was had to a jury and judgment again ren-
In our opinion the Court of Civil Appeals erred in reversing the judgment of the trial court.
While in the main, the pleadings of the parties present the contentions that as a matter of law the contract was either an exclusive listing agreement or an open listing agreement, the trial judge evidently considered that the written instrument was ambiguous and submitted numerous issues to the jury designed to ascertain the actual agreement made by the parties.
Two theories of recovery were oрen to A.A.A.; first, that the written contract was unambiguous and as a matter of law vested in it an exclusive sales agency for a period of six months from and after August 19, 1954; or, second, that the written agreement was ambiguous, but when explained by admissible extrinsic evidence, it provided that A.A.A. should have an exclusive sales agency for the six-months period mentioned. The findings of the jury were for the most part favorable to the defendant, or what is more to the point, they do not support, but on the contrary refute the theory of an ambiguous contract which, when explained by extrinsic evidence, would sustain a recovery for the plaintiff. Such theory is thus effectively removed from the case even if considered at all by the parties. The onerous burden of proving a case for recоvery rested upon the plaintiff and that burden was neither lifted nor shifted by defendant‘s failure to secure a summary judgment upon the theory that the written agreement constituted an open listing as a matter of law. Neece was under no burden to affirmatively establish that the agreement was an open listing. On the contrary the burden lay upon A.A.A. to establish that it had an exclusive sales agency.
In order to meet this burden plaintiff presents the contention which was accepted by the Court of Civil Appeals that the written agreement was unambiguous; that it established an exclusive sales agency as a matter of law; that such agreement had been breached, and hence plaintiff was entitled to damages for such breach which amounted to $28,700.00, the amount he
The case turns upon question of whether or not the written instrument evidencing the contract is ambiguous.3 If it be unambiguous and by its terms provides for an exclusive sales agency, then that is the end of the matter and A.A.A. should recover. If on the other hand the written contract is ambiguous and reasonably capable of conflicting constructions, then the plaintiff has failed to meet its burden and the trial court‘s judgment should be affirmed.
The written form of agreement devised by A.A.A. for its commercial uses is somewhat ingenious. It consists of two parts: the caption or label and a short paragraph of operative contractual obligations. If we accept plaintiff‘s theory of construction, the сontract, insofar as legal consequences are concerned, may be entirely changed by merely substituting labels without altering the operative contractual clauses in any way. The use of labels affixed to contracts is nothing new. We have warranty deeds, deed of trust notes and through bills of lading. It would, however, be unusual to metamorphose a quit claim into a warranty deed simply by labeling it as such, or affix a deed of trust lien on land by simply calling an ordinary promissory note a deed of trust note. And of course the through bill of lading is usually backed by paragraph after paragraph of operative contractual obligations that spell out the respective rights and liabilities of the parties. While in certain cases, one must consider captions in order to ascertain the meaning and nature of a written instrument, it has been held that the greater weight must be given to the operative contractual clauses of the agreement, for “An instrument is that which its language shows it to be, without regard to what it is labelled.” Bailey v. Mullens, Texas Civ. App., 313 S.W. 2d 99, l.c. 103, wr. ref., n.r.e.; Pate v. Goyne, 212 Ark. 51, 204 S.W. 2d 900.
The operative contractual provisions as distinguished from caption read as follows:
“I, (or we) agree to pay A.A.A. Realty Co. 7% of the sale price, (if they sell the property), and to protect them on their prospects or anyone that they are instrumental in property being sold to.”
In the present case the property was not sold by plaintiff, nor was it sold to any of its prospects, nor was A.A.A. instrumental in any way in effecting the sale of the property. Had the operative contractual clause contained no caption or had the label been left as “Open Listing Agreement,” Neece would have no obligation to pay A.A.A. anything. The asserted $28,700.00 liability lies solely in a change of caption effected by marking out the words, “Open Listing Agreement” and leaving the words “Exclusive Listing Agreement” and inserting “Six Months” in the blank following “No. Days?”
No doubt the draftsman who prepared the form for plaintiff‘s use intended that the character of the contract, whether open or exclusive, should be fixed by erasing or obliterating one label and leaving the other. However, while the caption “Open Listing Agrеement” is consistent with the operative contractual provisions of the listing, the same cannot be said of the label, “Exclusive Listing Agreement.” There is suggested repugnancy between the heading, “Exclusive Listing Agreement” and the contracting clause, “I (or we) agree to pay A.A.A. Realty Co. * * * if they sell the property, * * *.” By attaching the “exclusive” caption to the open listing agreement (according to its operative terms) an ambiguity arises. We have the opposite of the other detailed, “fine print” contract and are concerned with something which approaches the novel. Hence, we should be hesitant in placing our stamp of approval upon a type or method of contracting which could lead to the perpetration of frаuds or injustices upon unsuspecting contracting parties. No great hardship will be entailed by insisting that contracts be clear in term or else made clear by explanation before the transfer of one man‘s money or property to another is ordered, adjudged or decreed.
“I own the business above described and in consideration of your advertising this business for sale, I hereby grant and give you the sole and exclusive right to sell the same for a period of 180 days from this date and thereafter until notified by me in writing.
“In thе event it is sold by you, or myself, or by any other person during said time, for the price and above said terms [sic], or for a price and upon terms acceptable to me, then in either of said events, in consideration of your listing the business and endeavor to sell the same, I promise and agree to pay the regular fixed commission of 5% as adopted by the Oklahoma City Real Estate Board, * * * ”4
Anyone of ordinary intelligence reading this agreement would know from its operative contractual clauses, i.e. clauses containing verbs, that the right to sell granted the broker was sole and exclusive and that regardless of who sold the property prior to 180 days from date (or a written cancellation of the contract thereafter), the broker would be entitled to five per cent of the sales price. There undoubtedly is a distinction between the words, “I hereby grant and give you the sole and exclusive right to sell” and “I, (or we) agree to pay A.A.A. Realty Co. 7% of the sale price, (if they sell said property), * * *” and the contracting clauses cannot be rendered substantially identical in effect by simply placing an “Exclusive Listing Agreement” label above the second clause quoted.
There is, of course, a distinction between a suit for compensation under a contract and one for damages growing out of a breach of contract. The Knapton agreement quoted provides for a contractual basis of recovery in the event the property is sold by one other than the contracting broker while the present actiоn is one for breach of contract for depriving the broker of a full six-months opportunity to sell the property. Park v. Swartz, 110 Texas 564, 222 S.W. 156. But, however that may be, it seems that one reading the operative contractual clauses
In admitting parol evidence to explain this seeming contradiction, we do not countenance a violation of the rule against disturbing the clear meaning of a written instrument. After all, we are to construe contracts from a utilitarian standpoint bearing in mind the particulаr business activity sought to be served and need not embrace strained rules of interpretation which would avoid ambiguity at all costs, especially where there is danger of enforcing obligations which a contracting party never intended to assume. As Professor Wigmore has said.
“* * * There can be, in the nature of things, no absoluteness of standard in interpretation. An imaginary communism might conceivably bring men to such a level of intellectual uniformity that their thoughts would be expressed in invariable identical symbols. But till such a day comes, the varieties of individual expression and sense must be unquenchable. So long as men are allowed to grant and contract freely, and so long as the law undertakes to carry out those acts by enforcement, just so long must the standard of interpretation continue to be mobile, subjective, and individual.”5 Wigmore on Evidence (3rd Ed.) Sec. 2462.
As opposed to plaintiff‘s interpretation of the written instrument, there is the theory that the only liability which would arise under the agreement was one to pay if A.A.A. sold, or was instrumental in selling the property, or such property was sold to one of its prospects. Extrinsic evidence was properly admissible. Such evidence taken with the circumstances surrounding the making of the agreement and the contract itself disclose the following record situation:
All material events took place during 1954. On April 7 the defendant Neece listed the Catalina Motel at Wichita Falls with Knapton Brokers, Inc. of Oklahoma City under the terms of the
On July 30 R. M. Andrews, acting for plaintiff, A.A.A. Realty Company, secured an “open listing” of the property from Neece at a substantially higher price, — $410,000, which was a sufficient sum to pay 5% to Knapton, plus 7% to A.A.A. and still leave Neece with approximately the same money as he would receive if Knapton sold the property for $385,000.
On July 5 Arnold wrote Neece and requested an “exclusive listing” and enclosed a proposed form for him to sign. Neece did not answer this letter.
On August 19 Arnold went to Wichita Falls and talked to Neece about an exclusive listing. As to this conversation, there was a direct conflict in the testimony. Neece testified that he told Arnold that he was not sure that the Knapton contract had expired and for that reason did not want to give A.A.A. an exclusive listing. Thеn according to Neece, Arnold explained that by the term “exclusive,” it was meant that if the motel were sold by A.A.A. or to one of its prospects, A.A.A. would receive all of the 7% contractual commission, exclusively.
Neece‘s testimony as to this matter was as follows:
“Q. What did Mr. Andrews — (say)?
“A. Mr. Andrews said, ‘Well I really feel you don‘t fully understand what we mean by an exclusive listing.’
“Q. Then what did Mr. Andrews —
“A. Then he pointed out this card to me and he said, ‘All we want is a guarantee that if we sell the Catalina Motel or if it is sold by anyone else to one of our clients, we are to collect the entire commission.‘”
Neece thereupon signed the listing card which, except for the substitution of the label “Exclusive Listing Agreement, No. Days six months,” for the reading “Open Listing Agreement” was identical in terms with the one which he had signed on June 30th. Neece however signed the card in the wrong place and thereafter Arnold wrote to Neece pointing out the mistake and requested him to sign another identical card which he enclosed in the letter. This card was received by A.A.A. and is the basis
“I am returning the card, which I trust has been properly signed.
“I presume, that due to our little argument, about the meaning of the exclusiveness of this listing, and your pointing out, and explaining it to me confused me, resulting in signing the wrong card.
“I want to emphasize again, I would not think of depriving Mr. Gentry (Knapton‘s representative) of the right to sell this Motel.
“I do hope yоu have good luck, and come up with a good deal real soon.”
On September 21 and within the 180-day period after April 7, the motel property was sold by Knapton. Neece denied any liability to A.A.A. as a result of the sale and this action was instituted on September 26.
While, as above indicated, the evidence in certain particulars was sharply conflicting, the burden of proving its case rested upon the plaintiff and the verdict of the jury affords no comfort or support to A.A.A.
The plaintiff having failed to establish its claim for recovery as a matter of law and having failed to prove a case as a matter of fact, it follows that the judgment of the Court of Civil Appeals should be reversed and that of the trial court affirmed.
It is so ordered.
Opinion delivered February 18, 1959.
MR. JUSTICE CALVERT, joined by JUSTICES SMITH and WALKER, dissenting.
The holding of the majority that the judgmеnt of the Court of Civil Appeals must be reversed and that of the trial court affirmed because of ambiguity in the contract between the par-
The presentation of the case in this Court on this occasion is the sixth time it has been before a court, and never before has it even been suggested that the contract was ambiguous. It was first presented to the trial court on motions by both parties for summary judgment. Those motions contained no hint by either party that the contract was thought to be ambiguous. The summary judgment entered by the trial court did not suggest ambiguity in the contract. Neither party suggested it on appeal from that judgment, either in the Cоurt of Civil Appeals or in this Court.
When, after remand, the case was tried on its merits, neither party pleaded that the contract was ambiguous. Contrary to intimations in the majority opinion, no special issues were submitted for the purpose of resolving an ambiguity or which were calculated to do so. The special issues submitted the law question of whether the contract was in fact an open or an exclusive listing, whether a fraud was practiced by the defendant on the plaintiff, whether a fraud was practiced by the plaintiff on the defendant, and whether the parties were mutually mistaken as to the meaning of the contract they signed. The only proper issue for resolving an ambiguity in the instrument, if any, was one inquiring whether the parties intended by their contract to create an exclusivе agency. No such issue was submitted. If the contract was ambiguous and the plaintiff failed to discharge its burden of pleading the ambiguity and of offering evidence to resolve it, the defendant was entitled to an instructed verdict. But the defendant did not even present a motion for instructed verdict. Instead, he sought to defeat the plaintiff‘s right of recovery only by securing findings supporting his affirmative defenses. It was not suggested by either party on the second appeal to the Court of Civil Appeals that the contract was ambiguous. The absence of any such suggestion in that court is reflected by the briefs of the parties and by the following statement in the opinion of the Court of Civil Appeals: “There is no contention that the contract is ambiguous; and the construction of an unambiguous contract is for the court.” 314 S.W. 2d 384, 387.
The application for writ of error filed in this Court by the defendant contains no point of error or argument that he is entitled to prevail on the ground that the contract is am-
In reversing the judgment of the Court of Civil Appeals and affirming the judgment of the trial court on the ground that the contract is ambiguous the majority have thus violated the rule stated in this language in 3-B Texas Jur. 275, Appeal and Error, Sec. 872: “It is well established that the case on appeal or writ of error must be decided on the same theory as that on which it was tried in the court below.” The rule is as applicable to defendants who undertake to inject a new theory on appeal as it is to plaintiffs who attempt to do so, Estes v. Hartford Accident & Indemnity Co., Texas Civ. App., 46 S.W. 2d 413, 416, writ refused, and is as applicable to one who seeks to sustаin a trial court judgment as to one who seeks to overthrow one. Sargent v. Williams, 152 Texas 413, 258 S.W. 2d 787. The Commission of Appeals has put the rule in these words: “The law forbids the assumption of an attitude on appeal inconsistent with that taken at the trial, and on appeal litigants are restricted to the theory upon which the cause was prosecuted or defended in the court below.” Boatner v. Providence-Washington Ins. Co., 241 S.W. 136, 140.
Assuming, however, that we are justified in affirming the trial court‘s judgment on a new theory, is the contract ambiguous? The precise basis of the majority‘s holding that the contract is ambiguous is difficult to ascertain from the opinion. Three possible reasons are suggested, none clearly.
The quotation from Bailey v. Mullens, Texas Civ. App., 313 S.W. 2d 99, 103, citation of Pate v. Goyne, 212 Ark. 51, 204 S.W. 2d 900, and the statement that a quit claim deed may not be metamorphosed into a general warranty deеd nor a promissory note into a deed of trust by labeling them, respectively,
Moreover, we have no right to disregard or “chop off” the title of this contract. The parties selected it deliberately. The rule of interpretation which requires rejection of the title of an instrument when it and the body of the instrument are at war and cannot be harmonized, as was the case in Bailey v. Mullens, supra, is a sound rule. We have no such instrument here. When the title of an instrument is not in necessary conflict with its other parts but may be harmonizеd with them we are governed by the rule announced by this Court in E. H. Perry & Co. v. Langbehn, 113 Texas 72, 252 S.W. 472, 474-475, in which we said:
“The title, like every other portion of a contract, may be looked to in determining its meaning. *** In fact, the purpose of giving a person or thing a name is to distinguish that person, or thing, or class from others.”
The opinion seems next to suggest that ambiguity is achieved by considering the title and the body of the instrument separately, thus disjointing it into conflicting parts taken out of context. The idea seems to be that if the title stood alone it would create an exclusive agency, whereas if the “contractual clauses” stood alone they would create a non-exclusive agency, and thus an ambiguity necessarily exists. That type of reasoning is in clear violation of sound rules of interpretation. Guardian Trust Co. v. Bauereisen, 132 Texаs 396, 121 S.W. 2d 579, 583; 10-A Texas Jur. 344, Contracts, Sec. 171. It is our duty to harmonize all of the provisions of a contract wherever that is possible. 10-A
“It is axiomatic that, ‘An agreement should be interpreted as a whole and the meaning gathered from the entire context and not from particular words, phrases, or clauses. In fact the entire agreement is to be considered to determine the meaning of each part. All provisions should, if possible, be so interpreted as to harmonize with each other.’ 12 Am. Jur. 112, Contracts, Sec. 241.”
When under the rule of E. H. Perry & Co. v. Langbehn, supra, the title of an instrument is to be considered in interpreting the instrument it should not be disjointed from the other provisions in the instrument in order to create an ambiguity.
Finally, the opinion seems to suggest that ambiguity results when thе legal import of the title is read into the body of the instrument. This seems the most likely basis for the holding of ambiguity, and seems to stem from the statement that there is a distinction and a necessary repugnance and conflict between a provision of a contract which reads: “I hereby grant and give you the sole and exclusive agency to sell,” and a provision which reads: “I, (or we) agree to pay A.A.A. Realty Co. 7% of the sale price, (if they sell said property) * * *.” I respectfully submit that that is precisely the contract we have before us and that its provisions are not in conflict and it is not ambiguous when subjected to the proper legal test.
A listing of property with a real estate broker has a well understood meaning. It imports the granting of an agency to sell property. Farquharson v. Lightner, 96 Kan. 117, 150 Pac. 565. Thе legal effect of a listing is to write into the contract between the parties the words: “I hereby appoint broker my agent to sell,” and that is all that is imported into the contract when the agreement is titled merely “Listing Agreement.” When the agreement is titled “Open Listing Agreement,” the title necessarily imports into the contract the words: “I hereby appoint broker a non-exclusive agent to sell.” When the agreement is titled “Exclusive Listing Agreement,” the title, by the same token, necessarily imports into the contract the words: “I hereby appoint broker my exclusive agent to sell.” We must
The printed form of contract used by the parties to this suit was obviously prepared for use in creating any type of agency the parties might agree upon, the nature of the agency actually created to be indicated by elimination of the inapplicable title and retention of the applicable title. When the property was first listed by the defendant with the plaintiff on June 30, the parties eliminated the title, “EXCLUSIVE LISTING AGREEMENT,” and retained the title, “OPEN LISTING AGREEMENT.” The legal effect of that act, importing the meaning of the title into the contract, was to make it read as follows:
“I, (or we) hereby appoint A.A.A. Realty Co. a non-exclusive agent to sell the Catalina Motel and agree to pay them 7% of the sale price, (if they sell said property), and to рrotect them on their prospects or anyone that they are instrumental in property being sold to.”
No one would doubt that that agreement created a non-exclusive agency, with the possible added right in the defendant to a commission if the property were sold to one of its prospects.
When the parties entered into a new contract on August 19 they eliminated the title, “OPEN LISTING AGREEMENT,” and retained the title, “EXCLUSIVE LISTING AGREEMENT.” The legal effect of that act, importing the meaning of the title into the contract, was to make it read as follows:
“I, (or we) hereby appoint A.A.A. Realty Co. my exclusive agent to sell the Catalina Motel and agree to pay them 7% of the sale price, (if they sell said property) and to protect them on their prospects or anyone they аre instrumental in property being sold to.”
That, then, is the contract before us. Does it contain an irreconcilable repugnancy or conflict? Obviously not.
A provision that an agent will be paid a commission only if he sells listed property does not necessarily mean that the right is reserved to appoint other agents. Nor does it necessarily mean that the owner will not be held to respond in damages if
Actually, the words, “if they sell said property,” may be harmonized with the other language creating an exclusive agency in another important particular. They expressly prevent the instrument from granting an exclusive right to sell the property and thus exрressly preserve to the owner his own right to sell1 without incurring liability for a commission, except perhaps as that right may be limited by the language which follows.
If the printed contract form had incorporated the words appearing in the title in what the majority term the “operative contractual clauses,” the contract would read as follows:
“I, (or we) grant A.A.A. Realty Co. an exclusive listing — an-open-listing — (strike one) of the described property, and agree to pay them 7% of the sale price, (if they sell said prop-
erty), and to protect them on their prospects or anyone that they are instrumental in property being sold to.”
There could be but little doubt that the contract in that form would create an exclusive agency. And yet the parties would have selected their language with no more care than they did in the instrument before us, the instrument would still contain the words, “if they sell said property,” and the form of the contract would have been just as susceptible to the charge that it “might result in a device that could lead to the perpetration of frauds or injustices upon unsuspecting contracting parties.”
The test for determining whether a contract is ambiguous is expressed in Universal C.I.T. Corp. v. Daniel, 150 Texas 513, 243 S.W. 2d 154, 157, where it is said:
“In a fairly recent case this court said that ‘if a written contract is so worded that it can be given a certain or definite legal meaning or interpretation, it is not ambiguous.’ (Cases cited). The converse of this is that a contract is ambiguous only when the application of pertinent rules of interpretation to the face оf the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning. * * * In other words, if after applying established rules of interpretation to the contract it remains reasonably susceptible to more than one meaning it is ambiguous, but if only one reasonable meaning clearly emerges it is not ambiguous.”
The real question in this case then is whether after the application of settled rules of interpretation the contract is subject to two reasonable meanings, one of which is that it creates an exclusive agency and the other that it creates an non-exclusive agency. The analysis of the contract made in the light of sound rules of interpretation, supra, should leave no doubt that it may reasonably be said to create an exclusive agency. But may it reasonably be interpreted to create a non-exclusive agency? I submit that it cannot. When the title is given meaning and that meaning is imported into the contract, I can conceive of no theory on which it may be said that it can reasonably be interpreted as creating a non-exclusive agency.
The thesis of the majority opinion seems to be that the contract is ambiguous because upon looking at it one would have some doubt of its meaning. That thesis is inherent in the statement that “* * * it seems that one reading the operative con-
The majority undertake to support their position by quoting certain testimony and a letter of the defendant indicating that plaintiff‘s agent represented to the defendant that an exclusive listing meant that the plaintiff would rеceive a commission only if it sold the property or the property were sold to one of its prospects and that the defendant believed the representation to be true. The representation, even if made and believed, would not make the contract ambiguous. A misunderstanding by the parties of the meaning of language used in writing a contract does not make it ambiguous, and parol evidence is not admissible to show that the parties intended that the language used mean something other than what it clearly imports. Jackson v. Richards, Texas Civ. App., 157 S.W. 2d 982, writ refused; Davis v. Davis, 141 Texas 613, 175 S.W. 2d 226. The representation that plaintiff would get a commission only if it sold the property or if the property was sold to one of its prospects was literally true. An exclusive listing also gives rise to a right to damаges for breach of the contract by the owner, whether or not the parties understood that to be true.
I would hold that the contract before us creates an exclusive agency as a matter of law, and, finding no other reason for reversing the judgment of the Court of Civil Appeals, I would affirm that judgment.
Opinion delivered February 18, 1959.
Rehearing overruled March 25, 1959.