Cornett v. Nathan
1976 Neb. LEXIS 779, 196 Neb. 277, 242 N.W.2d 855 (1976)
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Rule of Law:
A real estate broker earns a commission only when they produce a purchaser who is not only ready and willing but also financially able to complete the real estate transaction.
Facts:
- N.E. Nelson Co., a licensed real estate broker, entered into a listing agreement with the Landises, who desired to sell their property for $349,700.
- The Landises promised to pay N.E. Nelson Co. a 7 percent commission for its services.
- N.E. Nelson Co. presented the Landises with a potential buyer who offered $251,680 for the property.
- The Landises accepted the offer and, along with the buyer and N.E. Nelson Co., entered into a purchase agreement.
- The purchase agreement stipulated a $17,617.60 commission for N.E. Nelson Co. and provided that $5,000 in earnest money would be considered liquidated damages if the buyer failed to complete the sale.
- Before the sale was consummated, the buyer refused to honor the purchase agreement because he was financially unable to do so.
- The Landises' property was not sold, but N.E. Nelson Co. still demanded its $17,617.60 commission.
- If the Landises paid the commission, they would lose over $12,000 (receiving $5,000 damages while owing over $17,000 commission) without having sold their property.
Procedural Posture:
- N.E. Nelson Co. (plaintiff) initiated an action in District Court against the Landises (defendants) to collect a real estate commission.
- Both N.E. Nelson Co. and the Landises filed motions for summary judgment.
- The District Court granted the Landises' motion for summary judgment, concluding that the parties did not intend for a commission to be paid if the property sale was never consummated.
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Issue:
Does a real estate broker earn a commission when the buyer they procured signs a purchase agreement but subsequently fails to consummate the sale due to financial inability?
Opinions:
Majority - White, C. J.
No, a real estate broker does not earn a commission if the buyer procured fails to consummate the sale due to financial inability. The court has consistently held that a broker earns a commission only by producing a purchaser who is 'ready, able, and willing' to purchase on terms satisfactory to the seller. The term 'able' explicitly means financially capable of completing the transaction. It is contrary to the common intent of parties in a listing agreement for a seller to pay a commission if the sale is not completed, as sellers typically expect to pay from the proceeds of the sale. The burden of verifying a buyer's financial ability rests with the broker, who possesses the specific expertise for this task, rather than with the seller, especially in transactions between distant parties. The court reaffirmed its previous holdings in Wisnieski v. Coufal and Huston Co. v. Mooney and adopted reasoning from Ellsworth Dobbs, Inc. v. Johnson (New Jersey), which states that the commission is not earned unless the buyer 'completes the transaction by closing the title.' Any contrary language in prior Nebraska cases like Felthauser v. Greeble and Lincoln Realty Co. v. Garden City Land & Immigration Co. is disapproved.
Analysis:
This case clarifies the 'able' requirement of the 'ready, able, and willing' buyer standard in real estate brokerage, firmly placing the risk of a buyer's financial inability to close on the broker rather than the seller. It protects sellers from incurring substantial commission liabilities without receiving any sale proceeds, thereby promoting fairness and aligning with the typical expectations in real estate transactions. This ruling reinforces the broker's professional responsibility to vet potential buyers thoroughly, potentially influencing standard practices for qualifying buyers and drafting listing agreements.
