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Lockhart v. Holiday Homes of St. John Inc.

decided: May 24, 1982.



Before Garth, Circuit Judge, Rosenn, Senior Circuit Judge, and Higginbotham, Circuit Judge.

Author: Garth


Herbert Lockhart and several other individuals ("the owners") appeal from a judgment of the district court holding them liable to Holiday Homes of St. John, Inc., a real estate agency, for payment of a brokerage commission in connection with the sale of a parcel of the owners' land. The owners had signed a brokerage agreement with Holiday Homes giving the latter the "exclusive right to sell" the property and promising payment of a commission "in the event the realtor ... procures a prospect." After the owners consummated a sale of their land, allegedly on their own and without Holiday Homes' assistance, Holiday Homes brought suit, claiming that the brokerage contract entitled it to a commission even if the owners themselves sold the property. The district court agreed and awarded judgment to Holiday Homes.

Because we believe that the district court's interpretation of the phrase "exclusive right to sell" is supported neither by the applicable law nor by the evidence in this record, we will reverse the district court's judgment in favor of Holiday Homes. Before the district court, however, Holiday Homes presented an alternative argument-that it did in fact procure a buyer for the owners' land. As the district court did not reach this issue in light of its ruling on the meaning of the phrase "exclusive right to sell," we will remand the case to the district court for decision on the question whether Holiday Homes in fact procured a buyer for the owners and so is entitled to a commission.


For a number of years, the Land Acquisition Division of the United States National Park Service had discussed with the owners the possibility of purchasing a parcel of shoreline property which Lockhart and the others owned, but the parties were unable to come to an agreement as to price. On August 21, 1978, the owners, dissatisfied with the state of the negotiations with the Park Service, signed a brokerage contract with Holiday Homes. The agreement was a form contract, supplied by Holiday Homes, with blanks left for certain terms such as the size of the commission and the duration of the agreement; these terms were negotiated by the owners' attorney, who was present at the signing of the contract. The agreement provided in part that

I, the Owner of the real estate described above, ... hereby authorize HOLIDAY HOMES OF ST. JOHN, INC. (hereafter called REALTOR) to act as Agent and to render such personal and professional services as is deemed necessary for the sale of the real estate ... under the terms stated herein on an Exclusive Right to Sell bassis (sic). I certify that I have cancelled or terminated other listing agreements or broker contracts for the sale of this property.


In the event the REALTOR named procures a prospect, ready, willing and able to purchase the said real estate during the period of this agency, or any extension or renewal thereof, for the price and terms stated in the property description, or for any other price and terms acceptable to the Owner, the Realtor's sale commission shall be deemed to have been earned and I agree to pay the said Realtor, at closing, an amount equal to 6% of the gross selling price as the Realtor's commission earned and due.

Appendix at 13.*fn1

What happened after the contract was signed is a matter of dispute between the parties, a dispute which the district court found unnecessary to resolve in light of its interpretation of the contract. In essence, Holiday Homes claimed before the district court that in late August or early September of 1978 it showed the property to one Janet Adams. With the aid of Holiday Homes, Adams began to make arrangements for the purchase of the property by herself and her business associates, though-out of her concern for the environment-she preferred that the National Park Service acquire the property and thereby safeguard it from commercial development. In fact, according to Holiday Homes, by contacting various officials in Washington, and by holding out the prospect of a private acquisition of the property, Adams spurred the Park Service on to sign a purchase agreement with the owners, at a price that exceeded the Park Service's earlier offers by over a million dollars. See generally Appendix at 98-107 (Plaintiff's Proposed Findings of Fact and Conclusions of Law Before the District Court).

The owners presented a sharply different picture of the events to the district court. Although they did not know it at the time, the owners argued, the Park Service had in fact already decided by August 21, 1978 (when the brokerage contract was signed), to purchase their land at the price that the owners had been demanding. Whatever communications Adams engaged in with federal officials,*fn2 then, had no effect on the Park Service's decision to buy the property. Further, the owners contended, Adams was acting on her own-she was not an employee of Holiday Homes-and so Holiday Homes could not be said to have procured a buyer.

Though the preceding events were the subject of much disagreement between the parties, there was no dispute that, as the district court found,

(o)n September 27, 1978 the defendants entered into a contract with the Park Service for the sale of the Property for $3,995,000.... Upon learning of the sale of the property, the plaintiff made a demand to the defendants for his commission which, at 6% of the selling price, amounts to $239,700. The defendants refused to pay the commission to the plaintiff.

Appendix at 112. Thus, on August 8, 1979, Holiday Homes filed a complaint in federal district court alleging that the owners had breached the brokerage contract. After a bench trial conducted on November 21, 1980, the district court issued its findings of fact and conclusions of law on January 23, 1981.

In its opinion, the district court did not pass upon any of the factual disputes concerning Holiday Homes' efforts to secure a buyer. Instead, the district court accepted a second argument that Holiday Homes made, which was that under an "exclusive right to sell" contract, the broker is entitled to a commission regardless of who-that broker, another one, or the owner himself-actually brought about the sale. The district court held that this interpretation of the contract was correct as a matter of law, and, in awarding judgment for Holiday Homes, rejected two counter-arguments that the owners put forth.

First, the owners argued that they had in fact understood the contract, including the phrase "exclusive right to sell," to mean that they could engage no other real estate agent, but that they, the owners, were nevertheless free to find a buyer through their own efforts and sell the property themselves. To this the district court replied that the question of the defendants' actual understanding of the phrase "exclusive right to sell" was irrelevant:

A unilateral mistake or ignorance as to the meaning of an objectively understandable and well known term, placed in capital letters, and located in a one page document, is not a basis for avoiding the terms of a contract.... There is no reason why the defendants should be afforded relief from this general rule regarding unilateral mistakes as the defendants were not "unwary and unsophisticated" and induced by "fraud, duress, or coercion" to sign the brokerage agreement, but in fact had engaged in real estate transactions in the past and were represented and advised by an attorney who had the obligation to scrutinize the contract and advise his clients as to its import.

Appendix at 114.

Second, the owners argued that the language in the contract concerning payment of a commission "in the event the realtor procures a prospect" rendered the contract ambiguous. Even if by itself the phrase "exclusive right to sell" clearly and unambiguously meant "exclusive of everyone, even the owners," rather than (as the owners contended) "exclusive of other brokers," the contract as a whole was ambiguous because it also contained language that seemed to require that Holiday Homes actually procure a willing buyer in order to be entitled to a commission. The district court rejected this argument as well, holding that the two provisions should be read consistently with each other:

(T)his Court does not agree that the contract is rendered ambiguous by a statement which sets forth the basis on which the broker can earn his commission. The recital stating that the broker must procure a buyer "ready, willing and able" to purchase the property in order to earn his commission is consistent with an exclusive right to sell, as the former states the basis by which the broker can "earn" his commission, while the latter specifies the circumstances by which the broker is entitled to his commission regardless of whether he in fact "earned" it by procuring the buyer.

Appendix at 114-15.

Thus, on July 13, 1981, the district court entered judgment in favor of Holiday Homes in the sum of $239,700.00, together with prejudgment interest, costs, and attorneys fees. The district court, for reasons not here relevant, entered an amended judgment on September 16, 1981. On September 29, 1981, the owners filed a timely notice of appeal from the district court's judgment, see Fed. R. App. P. 4(a)(4).


The district court, as noted, held that the contract was "clear and unambiguous" in providing that a sale of the property by anyone-Holiday Homes, another broker, or the owners-would entitle Holiday Homes to a commission. The phrase "exclusive right to sell," the district court ruled, has an objectively ascertainable meaning to that effect, a meaning that was not rendered ambiguous by inclusion of the phrase referring to payment of the commission in the event the broker procured a ...

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