Summary
In Stanton, Inc., v. McDonald, supra, the Supreme Court expressly held that a court may not, in disregard of such legislation as is here applicable, afford relief on the theory of money had and received.
Summary of this case from DeMetre v. SavasOpinion
No. 30635
Decided December 4, 1946.
Real estate brokers — Action to collect compensation for services — License for year claimed right of action accrued, prerequisite — Section 6373-48, General Code — Unlawful for licensed broker to split commission, when — Section 6373-47, General Code — Bond of real estate broker — Section 6373-35, General Code — Recovery may be had only for damages, when — Theory of money had and received inapplicable, when.
1. A corporation to which a real estate broker's license was issued for a particular year but which did not renew or possess such a license for the following year has no right of action for the collection of compensation for the performance of service in the rental or leasing of real estate where such claimed right of action accrued during such following year. (Section 6373-48, General Code.)
2. By the terms of Section 6373-47, General Code, it is unlawful for a licensed real estate broker to split his commission for the rental or leasing of real estate with anyone not also a duly licensed real estate broker or salesman.
3. Recovery may be had on the bond of a real estate broker only for damages caused by misrepresentation or fraud on the part of such broker in his dealings as such broker or by a violation by such broker of the terms of the Act, Section 6373-25 et seq. (Section 6373-35, General Code.)
4. Where the General Assembly has denied a right of action to recover compensation in certain cases a court may not, in disregard of such legislation, afford relief upon the theory of money had and received.
APPEAL from the Court of Appeals for Summit county.
The action below was brought by plaintiffs under Chapter 27 a, of the General Code, pertaining to real estate brokers, being Section 6373-25 et seq.
During the year 1940, S.D. Stanson, Inc., was a corporation doing business and 'duly licensed as a real estate broker. The individual Stanson was president of the corporation and was the officer to whom the license issued by the State Board of Real Estate Examiners was to apply. The defendant McDonald was associated with the corporation as a licensed real estate salesman.
By the terms of their association McDonald was to receive 50 per cent of the commissions on such transactions as here involved were negotiated by him and plaintiffs were to receive the remaining 50 per cent of the commissions earned as a result of such association.
Negotiations were had whereby the commission on a certain real estate transaction, if consummated, was to be divided between S.D. Stanson, Inc., and McDonald on one hand and Al Scheetz, another licensed real estate broker who represented the owner of the real estate, on the other hand.
In November 1940, McDonald reported to Stanson that the proposed deal was dead for the apparent reason that the owner of the property had received a better offer from another source. On November 1, McDonald terminated his association with plaintiffs and on January 1, 1941, became a real estate broker in his own right. As such real estate broker McDonald gave a bond dated January 1, 1941, with defendant St. Paul-Mercury Indemnity Company as surety. It was claimed that about March 1, 1941, the original McDonald's prospect submitted a new proposition to the real estate owner. On March 26, 1941, a lease between the owner of the property and McDonald's prospect was entered into.
On March 29, 1941, Scheetz wrote a letter to McDonald, enclosing a check for $1,012.50, "being the commission in full on the A.M. Deuber and The Park Theatre Co. lease deal at Canton." Stanson made demand upon McDonald for a share of the commission, which demand was refused by McDonald.
McDonald admitted that if the commission had been earned during the time he was associated with plaintiffs, one-half of the amount which he received from the broker Scheetz would have belonged to S.D. Stanson, Inc.
The trial by jury being waived, the Common Pleas Court entered judgment "against the plaintiffs and in favor of the defendants." In the course of the court's finding it is said:
"In the court's opinion, Stanson, Inc., the corporation, working through Stanson and McDonald, in 1940, were the real procuring cause. The deal may have cooled off somewhat, but in the court's opinion it was a continuing proposition.
"The court holds, therefore, that if S.D. Stanson, Inc., can maintain this lawsuit, it should recover.
"During all of 1940 S.D. Stanson, Inc., a corporation, had a broker's license to sell real estate, and S.D. Stanson was designated as the person to whom the license was to apply. This license expired on December 31, 1940. (See license No. 7304 County Clerk's Office.) The license was not renewed in 1941, but a new license was taken out for Stanson-Stroup, Inc., a corporation, and S.D. Stanson was designated as the person to whom it was to apply. S.D. Stanson and defendant McDonald were employees and agents of S.D. Stanson, Inc., the corporation.
"General Code No. 6373-48 reads as follows:
" 'No right of action shall accrue to any person, partnership, association or corporation for the collection of compensation for the performance of the acts mentioned in Section 6373-25 of the General Code without alleging and proving that such person, partnership, association or corporation was duly licensed as a real estate broker or a real estate salesman, as the case may be, at the time the cause of action arose.'
"The cause of action sued on by plaintiff, S.D. Stanson, Inc., did not accrue until in March, 1941, when the deal was consummated, and when McDonald received the commission. At that time S.D. Stanson, Inc., a corporation, was not licensed, and apparently has never been since December 31, 1940.
"The corporation, S.D. Stanson, Inc., was and is the real principal and the only one entitled to claim. All the letters of importance, and particularly the one in November, 1940, to Mr. Deuber, in re commission, are corporate letters.
"The fact that Mr. Stanson at all times in question was a licensed broker individually or through S.D. Stanson, Inc., or Stanson-Stroup, Inc., adds nothing.
"In view of G. C. 6373-48 and 9 Ohio Law Abs., 412, Powell v. Loeber, and 42 Ohio App. 1, and other local decisions of our Common Pleas Court, S.D. Stanson, Inc., cannot maintain the suit. (See also 63 Ohio App. 223 [ninth]; 70 Ohio App. 385. ) Nor can S.D. Stanson, the agent, individually recover, although I believe that the corporation, through him, otherwise would be entitled to recover as aforesaid, were it not for G. C. 6373-48."
Plaintiffs appealed to the Court of Appeals, which court, in reversing the judgment of the Court of Common Pleas, stated in its journal entry:
"Upon consideration whereof, the court finds that in the record and proceedings aforesaid there is error manifest upon the face of the record to the prejudice of the appellants in this, to wit, that the judgment is contrary to law.
"It is, therefore, considered, ordered and adjudged by this court that the judgment and proceedings of said Court of Common Pleas in said cause in favor of said appellees and against the said appellants be and the same hereby are set aside, reversed and held for naught and that the appellants be restored to all things which they have lost by occasion of said judgment.
"That the said action be and it hereby is remanded to the Common Pleas Court of Summit county, Ohio, with instructions to enter judgment for the plaintiffs and against the defendants for the sum of five hundred six and 25/100 dollars ($506.25) together with interest thereon at six per cent (6%) from March 29, 1941. * * *"
The cause is in this court pursuant to the allowance of a motion to certify the record.
Mr. Scott A. Belden, for appellees.
Mr. Carl D. Sheppard and Mr. Harold J. Eckroate, for appellants.
The following assignment of error is urged in this court:
"The appellants in this court claim that the Court of Appeals, Ninth District, Summit county, erred in reversing the judgment of the Court of Common Pleas, in its construction of the Real Estate Brokers Law (Sections 6373-25 to 51 inclusive, Ohio General Code) and in giving judgment for the appellees herein and against the appellants."
The Court of Appeals agreed with the trial court on the facts and, in substance, on the conclusion that "the deal may have cooled off somewhat, but in the court's opinion it was a continuing proposition."
However, the Court of Appeals disagreed with the trial court upon the law applicable to the facts. It is conceded that McDonald received from Scheetz $1012.50 which represented one-half of the real estate commission on the transaction in question and that McDonald retained all of such sum and refused to account to plaintiffs for any part thereof.
In the opinion of the Court of Appeals it was stated:
"The evidence warrants the conclusion that the deal for which defendant McDonald was paid a commission, was one which originated in plaintiffs' office, and that the transaction continued to pend therein in varying stages of activity until its consummation.
"When defendant received his share of the commission and appropriated it to his own use, there arose, under his contract, a liability to pay to plaintiffs one-half thereof. However, at that time, the money had lost its identity as commission, or 'compensation for the performance of the acts mentioned in Section 6373-25 of the General Code.' It was mingled with the funds of defendant, and his responsibility was to account for money had and received.
Such an action is based on contract, expressed or implied, and the possession of a license of any kind is not a prerequisite to the maintenance of such an action."
As this court does not weigh the evidence, our primary concern is with the proper effect to be given to Section 6373-47, General Code, which provides in part that "It shall be unlawful for any licensed real estate broker to pay a commission for performing any of the acts specified in Section 6373-25 of the General Code to any person who is not a licensed real estate broker or a licensed real estate salesman," and to Section 6373-48, General Code, which is set out in the foregoing statement of facts.
S.D. Stanson, Inc., was not licensed during the year 1941. It was admitted that during the years 1940 and 1941 S.D. Stanson as an individual was not a licensed real estate broker. However, during the year 1940, S.D. Stanson as president of S.D. Stanson, Inc., was the person to whom the license applied (Section 6373-29, General Code). During the year 1941 S.D. Stanson was designated as one of two people to whom the license issued to Stanson-Stroup, Inc., applied.
Section 6373-39, General Code, provides in part:
"If a broker * * * desires to sever his connection with the * * * corporation and engage in business on his individual account or * * * as an officer of another corporation, he may do so by making application and payment of a transfer fee of $5.00."
The trial court considered that S.D. Stanson, Inc., was the only one entitled to claim (with which conclusion we agree) and that inasmuch as that corporation was not licensed during the year 1941 (when the cause of action arose) the action could not be maintained.
The Court of Appeals was of the opinion that Section 6373-48, General Code, "has no application whatsoever to this action. The action is simply one for money had and received, and must be determined as such."
Section 6373-48, General Code, provides that no right of action shall accrue to any person for the collection of compensation for the performance of the acts mentioned in Section 6373-25, General Code, without alleging and proving that such person was duly licensed as a real estate broker or a real estate salesman at the time the cause of action arose. There was neither allegation nor proof of such fact. The proof shows that S.D. Stanson, Inc., was not licensed at the time the cause of action arose. There is no warrant in law for holding that notwithstanding the provisions of Sections 6373-47 and 6373-48, General Code, plaintiff may recover under the theory of money had and received. Where the General Assembly has said there is no right of action, courts are without authority to create one and thus defy the law of the state. The amended petition herein seeks recovery of compensation for the performance of nonexempted acts mentioned in Section 6373-25, General Code. (This section is too long to set out especially since there is no controversy about its terms or application.) Therefore, the judgment of the Court of Appeals must be reversed and that of the trial court affirmed.
We might stop at this point but inasmuch as the Court of Appeals held the bonding company liable we are of the opinion that there is an additional reason for reversing the judgment against the bonding company.
In order to hold the bonding company the record must show either that the claimant has been damaged by misrepresentation or fraud on the part of the real estate broker or by reason of the violation of the terms of the act.
Section 6373-35, General Code, provides in part as follows:
"No real estate broker's license shall be issued until the grantee thereof shall have executed and filed a bond to the state of Ohio in the sum of $1,000 * * *. Such bond shall be conditioned upon the faithful observance of all the provisions of this act and shall also indemnify any person who may be damaged by a failure on the part of the applicant for a real estate broker's license to conduct his business in accordance with the requirements of this act. Any person claiming to have been damaged by any misrepresentation or fraud on the part of a real estate broker or by reason of the violation of the terms of this act, may maintain an action at law against the broker making such representations or perpetrating such fraud or violating the provisions of this act, and may join as parties defendant the sureties on the bonds herein provided for.* * *"
Before recovery may be had against such surety it must be alleged and proved that the party complaining has been damaged by some misrepresentation or fraud on the part of the real estate broker or by reason of the violation of the terms of the act. No such allegation is contained in the amended petition upon which this case was tried. Plainly a broker's surety may be held only for ex delicto acts of the broker. Here attempt is made to hold the surety as for an ex contractu act of the broker, i. e., for money had and received. Neither of the lower courts found there was any misrepresentation or fraud on the part of McDonald or any violation by him of any term of the act. Neither do we find that there has been any violation of the terms of the act by McDonald to justify holding the bonding company. We are not unmindful of the fact that the State Board of Real Estate Examiners suspended McDonald's license issued January 1, 1942, the year following the matters herein complained of.
Section 6373-42, General Code, provides that the State Board of Real Estate Examiners may suspend, or revoke or refuse to renew any license at any time "where the licensee, in performing or attempting to perform any act as a real estate broker or real estate salesman or in any transaction involving the leasing or sale of an interest in real estate, is guilty of: * * *
"(5) Failure within a reasonable time to account for or to remit any moneys coming into his possession which belong to others, or
"(6) Any other conduct, whether of the same or a different character than hereinabove specified, which constitutes dishonest dealing."
As Section 6373-47, supra, forbids the splitting of a real estate commission with other than a licensed real estate broker and as S.D. Stanson, Inc., was not a licensed broker at the time the cause of action arose, we see no violation of Section 6373-42, General Code. It is argued in substance that, under the finding the deal was a continuing proposition, McDonald's conduct was inequitable. However, conduct cannot be held inequitable which is forbidden by law. The remedy for such situation, if needed, is with the General Assembly.
The judgment of the Court of Appeals should be and hereby is reversed and the judgment of the Court of Common Pleas is hereby affirmed.
Judgment reversed.
WEYGANDT, C.J., ZIMMERMAN, WILLIAMS and MATTHIAS, JJ., concur.
BELL and HART, JJ., dissent.
S.D. Stanson, Inc., and McDonald were bound by their contract to divide equally moneys earned, in such transactions as here involved, by the effort of McDonald as a real estate salesman for S.D. Stanson, Inc., during the year 1940. The court found that during that year S.D. Stanson, Inc., working through McDonald, was the procuring cause of a real estate transaction, the work upon which had been concluded so far as McDonald was concerned in 1940 while S.D. Stanson, Inc., was a licensed broker. The owner and McDonald's prospect closed their deal on March 26, 1941. The real estate commission was paid by the owner to Scheetz, a Canton broker who by contract was entitled to one-half of the commission, and he immediately remitted the other one-half to McDonald.
The majority statement of facts says: "McDonald admitted that if the commission had been earned during the time he was associated with plaintiffs, one-half of the amount which he received from the broker Scheetz would have belonged to S.D. Stanson, Inc." I am of the opinion that the commission was so earned during the year 1940. All that was ever done by McDonald and S.D. Stanson, Inc., relating to the consummation of the deal was done in 1940. Their right to the commission related back to the efforts of McDonald, then already expended. Only the collection of the commission from the owner remained and the commission became due and was paid in 1941.
Although the cause of action in favor of the plaintiff did not fully accrue until the commission was paid to or collected by McDonald, which was at a time when S.D. Stanson, Inc., had no license, yet that element of the cause of action — service on the part of McDonald, constituting the effort which was the ultimate procuring cause of the sale and expended while S.D. Stanson, Inc., was a licensed broker — accrued within the time covered by its license.
The primary purpose of Section 6373-48, General Code, is to require a real estate broker to be licensed when the transaction giving rise to his commission is effected. But the statute has a secondary purpose, and that is, to permit the broker to recover a commission if licensed when the service giving rise to the commission was performed, even though the recovery is sought after his license has expired. In other words, a current license is not necessary to recovery provided the broker was licensed when the commission was earned.
To construe the statute to the effect that a commission earned must be collected before the broker's license expires would permit a property owner to hold up his deal with a purchaser until the broker's license had expired and then deny liability for commissions; or until the broker dies and then deny recovery to his estate. Such interpretation would permit a broker to delay the consummation of a sale until the license of his cobroker expired, deny the latter a recovery and thus permit unjust enrichment. Clearly, a denial of plaintiff's right to recover accomplishes unjust enrichment in the instant case.
In my opinion, such a construction of the statute gives it an unconstitutional operation resulting in a denial of due process and equal protection of the law. The statutory requirement that "no right of action shall accrue * * * without * * * proving that such person * * * was duly licensed as a real estate broker * * * at the time the cause of action arose" must, to meet constitutional requirements, be construed to mean that no right of action shall accrue unless the broker was licensed at the time the commission was earned. A valid limitation of action may operate on a cause of action only after it accrues; such limitation cannot operate to extinguish and defeat a legal right or interest before it ripens into a cause of action. It is not within the power of the state to take away all remedy in the enforcement of a right. Steele v. Gann, 197 Ark. 480, 123 S.W.2d 520, 120 A. L. R., 754; Bd. of Edn. Normal School Dist. v. Blodgett, 155 Ill. 441, 40 N.E. 1025, 46 Am. St. Rep., 348, 31 L.R.A., 70.
Furthermore, I am of opinion that Section 6373-48, General Code, relates solely to the cause of action against the property owner for the broker's commission. The statute was enacted for the protection of the property owner, not for the protection of cobrokers inter sese.
I agree that there is no liability on the part of the bonding company.
BELL, J., concurs in the foregoing dissenting opinion.