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Baird & Warner, Inc. v. Ruud

OPINION FILED DECEMBER 7, 1976.

BAIRD & WARNER, INC., PLAINTIFF-APPELLANT,

v.

ARNOLD RUUD ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. MINOR K. WILSON, Judge, presiding.

MR. JUSTICE JIGANTI DELIVERED THE OPINION OF THE COURT:

Rehearing denied February 14, 1977.

This is an action for a real estate commission allegedly due under an exclusive real estate brokerage contract dated January 23, 1968. The action is brought by plaintiff, Baird & Warner, Inc., a real estate broker, against the defendants, Addison Industrial Park, Inc., and Arnold Ruud and his wife.

The matter first came before the trial court on plaintiff's motion for summary judgment. The motion judge entered summary judgment in favor of plaintiff as to liability on two counts of the complaint. But the judge to whom the matter was then assigned for trial on the issue of damages only, vacated the summary judgment order and submitted the entire case to the jury. The jury verdict was for the defendants. Judgment was entered on the verdict and plaintiff takes this appeal.

In May 1966, Stewart D. Matthews, senior vice president of Baird & Warner, first met with Arnold Ruud, managing officer of Addison Industrial Park, for the purpose of engaging Baird & Warner to act as broker for the sale of a 174-acre parcel of unimproved industrially zoned property located in Addison, Illinois. This property was the corporation's only asset. Arnold Ruud then owned 30% of the stock of the corporation; National Life Insurance Company owned 40%, and Lee N. Sutliffe owned the remaining 30%.

On June 1, 1966 (over a year and a half prior to the January 23, 1968, contract that gives rise to this action), Addison Industrial Park entered into an exclusive listing agreement covering the sale of the property at $11,000 per acre for a customary real estate commission. The contract was terminable at any time after six months and automatically terminated after two years. The property in this contract is described as the northwest corner of Fullerton and LaLonde Avenues, Addison, Illinois, comprising approximately 175 acres.

Also on June 1, 1966, the three shareholders of Addison Industrial Park entered into a contract with Baird & Warner which provided that Baird & Warner was to receive a commission of 5.25% of the stock sale price if it sold the stock of Addison Industrial Park, Inc., at a price of $890,000. This contract was to extend until December 1, 1966. A second agreement regarding the sale of the stock was subsequently entered into and was identical to the first in all respects except that Baird & Warner's commission was to be 11% of the stock sale price. Still later a third agreement was entered into which was identical with the second agreement except that it covered the nine-month period from December 1, 1966 to September 1, 1967. No further agreements regarding the sale of the stock were ever entered into and when, in September 1967, the last agreement expired, Baird & Warner discontinued its efforts to market the stock. During the time the above agreements were in effect, Baird & Warner produced no offer to purchase the stock nor any offer to purchase the real estate.

On January 23, 1968, an exclusive agreement was executed between Baird & Warner and Addison Industrial Park (by their respective representatives, Matthews and Ruud) which provided that Baird & Warner was to be the exclusive agent for the sale of the real property and that Addison Industrial Park "shall pay the broker the brokerage commission specified above (10% of the gross selling price) if the property is sold by the broker, by the company or through any other person during the period of this agreement." The agreement was to remain in full force and effect until the entire property was sold or leased, but, after a period of 18 months from June 1, 1968, either party had the right to terminate the agreement by a 60-day notice in writing. The property referred to in the agreement is described as "real estate located at the northwest corner of Fullerton and LaLonde Avenues, Addison, Illinois, consisting of 66 lots." The agreement stated the broker desires to represent the company in the "sale of the 66 lots referred to * * *." Each of the 66 lots is listed in an addendum to the agreement by lot number, size, price per square foot, and total estimated selling price. Although the "property" is variously referred to as "property", "real estate" and "66 lots," it is clear that the parties referred only to the real estate and not to the stock in the agreement of January 23, 1968. This fact is undisputed. And, Baird & Warner does not contend that there was any commission due to it on the sale of the stock. The exclusive agreement was terminable by either party on December 1, 1969, after notice and was the only agreement in effect between the parties and any of the other parties to this lawsuit at anytime after January 23, 1968.

On August 7, 1969 (after negotiations between the parties which began in March of 1969), a contract was entered between Arnold Ruud and his wife (the Ruuds had acquired all of the stock from the other shareholders prior to this date) and Bliss & Laughlin Industries. That agreement provided for the exchange of all the stock of Addison Industrial Park for shares of stock in Bliss & Laughlin Industries. The agreement indicates that Addison Industrial Park was in title to the real estate at the time of the agreement and that the consummation of the agreement would not affect the state of title. The title of the property in Addison is reflected by a title insurance commitment dated July 8, 1969, wherein the titleholder and the proposed insured are both indicated as Addison Industrial Park, Inc. Baird & Warner had been informed at least as early as July 1, 1969, of the proposed stock exchange and, at Addison Industrial Park's request, Baird & Warner had made an appraisal of the property in anticipation of the Bliss & Laughlin Industries' transaction. There was no claim made by Baird & Warner at that time that there was any commission due to Baird & Warner as a result of the transaction. Bliss & Laughlin Industries and the Ruuds were brought together by another broker for purposes of the stock transaction, and Baird & Warner never alleged or contended that it was the procuring cause of that transaction. Baird & Warner contends, however, that it is entitled to the commission under the provision of the contract which provides for a commission for Baird & Warner if the real property is sold by anyone during the period of the agreement.

Subsequent to the agreement between the Ruuds and Bliss & Laughlin Industries, Baird & Warner with the express concurrence of Bliss & Laughlin Industries, continued to treat the January 23, 1968, agreement as in effect and tendered to Addison Industrial Park an offer (at below contract price) to purchase certain lots. After Baird & Warner was fully informed that the exchange of stock had been consummated, Baird & Warner negotiated with Addison Industrial Park concerning renewal of the exclusive agreement. The exclusive agreement was then terminated by Addison Industrial Park pursuant to the terms of the contract as of December 1, 1969.

Plaintiff's primary contention is that the principle established in Benedict v. Dakin (1909), 243 Ill. 384, 90 N.E. 712, is applicable in the instant case. In Benedict the court held that "[t]he sale of all of the stock of the corporation is, in legal effect, a sale of all of its assets." 243 Ill. 384, 388.) The plaintiff argues that it is entitled to its commission under its brokerage contract with Addison Industrial Park for the sale of Addison's real property, since the Ruuds, owners of all of Addison's stock, exchanged all their stock (and consequently in effect the real estate) for Bliss & Laughlin Industries' stock, so that this transaction is the same as the transaction in Benedict. In Benedict, Dakin contracted with Benedict for Benedict "to find a purchaser for the property of the Natalbany Lumber Company and the New Orleans, Natalbany and Natchez Railroad Company" and Dakin told Benedict that "if he was successful he would be properly compensated." 243 Ill. 384, 386.) The capital stock of both corporations was owned by Dakin and two associates. Benedict obtained detailed information of the nature and character of the property to be sold. Dakin and his associates then sold the entire capital stock of the two corporations to a purchaser procured by Benedict. Dakin refused to pay Benedict any commission. Benedict sued and a judgment in his favor was entered by the trial court sitting without a jury.

On appeal the court said Dakin "contends that there should have been a finding for him because the contract of employment was to sell a saw mill, real estate and a railroad, while the evidence shows that what [Benedict] really did was to find a purchaser who bought the stock of the two corporations which owned the tangible property which he was commissioned to sell. The distinction which [Dakin] seeks to make in this regard is too finely drawn to be of practical value. The sale of all of the stock of the corporation is, in legal effect, a sale of all of its assets. The mere fact that the parties found it more convenient to transfer all of the stock rather than to make conveyances of its assets does not change the substance of the transaction." 243 Ill. 384, 388.

Baird & Warner argues that, in accordance with the rule in the Benedict case, the sale by the Ruuds of all of the Addison Industrial Park stock to Bliss & Laughlin Industries was in legal effect the sale by Addison of its real property under the contract. The construction that Baird & Warner apparently would put on Benedict is that, in every instance, the sale of the stock is the sale of the real estate. We cannot agree.

• 1 Implicit in Benedict is the finding that it was the intention of the parties that, if Benedict found a purchaser for the saw mill, railroad, and real estate, no matter what form the sale took, he was entitled to a commission. Our Supreme Court specifically noted that "there was no room for doubt" that under the evidence Benedict was employed to find a purchaser for the property and that Benedict was the procuring cause of the sale and further that Benedict was promised a compensation in case he succeeded in finding a purchaser. Hence, the principle established in Benedict is that, where the broker is exclusively commissioned for a term to procure a purchaser for corporate property and where the brokerage contract does not distinguish between the direct purchase of the property itself and the indirect purchase of the property through the purchase of all the shares of the corporate owner and where the broker then procures a purchaser for all of the said shares, the broker has earned his commission. Should an issue arise as to whether the parties did or did not intend to make the said distinction, then the silent brokerage contract would be ambiguous in that respect, so that extrinsic evidence would be admissible to resolve the issue. Even where the parties did intend only the direct purchase of the corporate realty itself (as evidenced either by the brokerage contract on its face or by the extrinsic evidence where the brokerage contract is silent) ...


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