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Nystrom v. First National Bank of Fresno: California Court of Appeals Finds for Broker in Commission Dispute With Lienholder

In Nystrom v. First National Bank of Fresno, the Court of Appeal of California addressed a broker's claims for a commission on the sale of property which was in the possession of the bank. The court held that the letter agreement between the parties was enforceable and that the bank could not avoid liability because its own actions brought the sale of the property outside the terms of the agreement.

First National Bank of Fresno made a loan on an apartment complex. After the loan was in default, the bank took possession and began foreclosure proceedings. The bank and Nystrom (Broker) executed a letter agreement providing for a commission in consideration for collecting rents and obtaining renters for the property, payable when the property went to the Trustee's Sale or the default was cured. The agreement also provided that if the bank obtained a deed to the property as a result of the Trustee's Sale, the property would be listed for sale on an exclusive listing with Broker at a stated commission rate for a minimum of 90 days. Broker began performing rental activities and was soon informed by the bank that the property was going to be "deeded back" to the bank and that he should find a buyer. After Broker submitted an offer that was declined, he was told that the persons in possession of the property refused to deliver the promised deed.

The bank then obtained title to the property by deed in lieu of foreclosure and subsequently sold the property and paid the commission to another broker. Broker sued for a commission. The trial court granted summary judgment to the bank and Broker appealed.

The Court first addressed the bank's contention that the letter agreement was unenforceable because it violated the state Business and Professions Code. The code forbids a real estate broker to write an exclusive listing agreement with a property owner "where such agreement does not contain a definite, specified date of final and complete termination." The court found that there was a definite termination date, as the beginning of the period would be the date of the Trustee's Sale, and the end of the period would be 90 days later. Thus, the court found that the agreement did not violate the code.

The Court also addressed the bank's contention that the exclusive listing of the property never became operative because the condition precedent, namely the bank's acquisition of a deed through a Trustee's Sale, never occurred. The court stated that "a person cannot take advantage of his own act or omission to escape liability; if he prevents or makes impossible the performance or happening of a condition precedent, the condition is excused." The court also noted that in every contract there is an implied covenant of good faith and fair dealing by each party not to do anything which will deprive the other parties thereto of the benefits of the contract. Further, the covenant not only imposes the duty to refrain from doing anything which would render performance of the contract impossible, but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose. The court also refuted the bank's contention that Broker assumed the risk that it would acquire title by some means other than through a Trustee's sale. Finally, the court refuted the bank's contention that the letter agreement was unenforceable because Broker performed no sales services. The court responded that the bank repudiated the agreement and made it impossible for Broker to perform the sales services which would have earned him the commission. For all these reasons, the judgment was reversed.

Nystrom v. First National Bank of Fresno, 81 Cal. App. 3d 759, 146 Cal. Rptr. 711 (Cal. Ct. App. 1978).