In some jurisdictions commissions on loans are not earned until the loan is actually made, or refused because of the fault or miscarriage of the principal. Elsewhere they are held to be earned when the broker has procured a lender ready, willing and able to loan on the principal's terms. (Sec. 185-190.)
Defects in title to property may defeat a loan but do not deprive the broker of his claim for commission.
The broker must have been duly employed, and the loan must be procured on the terms of his principal. (Sec. 192-193.) And the broker is entitled to his commission after a loan has been found, even though the principal refuses to accept. (Sec. 194.)
We have seen that there is some conflict in the decisions on the question as to when the broker has earned his commissions on a sale of property.1 And so, there is a difference of opinion as to when the broker is entitled to his commissions with reference to procuring mortgage loans on real estate. The conflict of opinion on the subject with respect to loans is, however, somewhat different than that with respect to sales, or, at least, must be stated differently.
1 See Sec. 117-119 supra.
There are authorities which hold that the broker's obligation in the matter of a loan is not regarded as fully-performed until the prospective lender actually makes the loan, or refuses because of the fault or miscarriage of the principal. Among the decisions to this effect are those of the courts of New York State.2 The above rule will therefore be called the "New York rule" in this chapter.
On the other hand, there are authorities which hold that a loan broker is entitled to his commissions when he has procured a lender who is ready, willing and able to lend the money upon the authorized terms. This type of cases is also illustrated in the present chapter.
A broker employed to procure a loan on real estate is not entitled to his commissions on mere proof that he secured a person able and willing to make the loan, who was accepted by his principal. The contract of brokerage in the matter of a loan differs from one with respect to a sale of real estate, in that it is not regarded as fully performed until the prospective lender actually makes the loan or refuses because of the fault or miscarriage of the principal.3 In Henken v. Schwicker, 174 N. Y. at 302 (1903), the New York Court of Appeals said, though perhaps obiter, that in the absence of more definite specifications, the broker's commissions are earned when he procures a lender ready and willing to make the loan.
But where a broker has secured the acceptance of a loan, but the loan is not made because the owner's title is defective, the broker is entitled to his commissions. In such case, the broker must show clearly that the title is defective and that the money was not advanced for that reason. The mere fact that the title was rejected by lawyers or title guarantee companies, does not have the effect of establishing that the title was defective as a matter of fact. The specific facts must be shown evidencing the defect.4 And in such a case the broker cannot recover under an allegation of full performance. He must allege the fact of non-performance and the reason or excuse therefor.5
² See Sec. 186 infra.
³Duckworth v. Rogers, 109 App. Div. 168 (N. Y. 1905); Astafleld v. Case, 93 App. Div. 452 (N. Y. 1904).