In Hilgendorf v. Hague, the Supreme Court of Iowa addressed a dispute between a broker and a vendor regarding the vendor’s breach of a listing agreement. The court held that the vendor had the power, but not the right, to terminate the agreement, and that the broker could recover damages rather than a commission.
Hague owned tracts of land consisting of 200, 160, and 80 acres. In March 1976, due to financial problems, Hague sought to sell the two larger parcels and executed a one-year exclusive listing agreement with Hilgendorf (Broker). The listing price for the 160-acre tract was $224,000. The agreement provided for a commission if Broker found a buyer who was ready, willing, and able to purchase on those terms. During July 1976, Hague’s principal creditor commenced foreclosure. Hague realized he would have to liquidate the land, grew impatient about its sale, and determined that the 160-acre and 80-acre tracts would have to be sold together. In August 1976, Hague sent Broker a letter purporting to terminate the listing on the 160-acre tract. Broker insisted he had the right to sell the 160 and 200-acre tracts. In September 1976, Broker affected a sale of the 200-acre tract and received a commission for his efforts.
On September 30, 1976, Broker presented Hague with a written offer for $224,000 for the 160-acre tract, but Hague ignored the offer. On October 5, 1976, the parties met and Hague insisted that the 160 and 80-acre tracts be sold together. Broker asserted that he had earned the commission on the 160 acres, then flew into a rage and left the meeting. In November, Hague’s attorney sent Broker’s attorney a letter indicating Hague’s obligation to pay Broker a commission. Broker’s attorney responded that Broker would accept a note for the commission, but nothing further came of these negotiations. Hague subsequently sold the two remaining parcels through another broker for a combined $510,000. The selling broker received a commission on only the 80-acre tract. No one was paid a commission for the 160-acre portion. Broker sued Hague. The trial court held for Broker and Hague appealed.
Regarding liability, the Court noted that “a principal has [the] power to terminate an agency which is not coupled with an interest . . . . Ordinarily the agent’s authority thereupon ceases. Absent some legal ground, however, the principal does not have a right to terminate an unexpired agency contract, and may subject himself to damages by doing so.” The court held that financial strictures do not constitute a legal ground for terminating contractual obligations. Thus the supreme court upheld the lower court’s finding that Hague did not have a right to terminate the one-year listing contract on the 160 acres.
Regarding damages, the Court noted that because Hague had the power to terminate the listing, Broker no longer had authority to sell the 160-acre tract. For that reason, Broker could not recover a commission as such. However, the court held that because Hague breached the agreement by terminating it, Broker could recover damages. Regarding the measure of damages, the court stated that “a broker whose employment or authority is wrongfully revoked . . . is entitled to have his recovery include the value of the services he has already rendered, his disbursements and such prospective profits as he can establish would have been his but for such revocation.” The court held that Broker established beyond question that he would have sold the 160-acre parcel for the asking price within the listing period. Thus, he was entitled to his lost profit, which incidentally, was equal to the commission.
Hilgendorf v. Hague, 293 N.W.2d 272 (Iowa 1980).