Sec. 182. Reason For Rule.20

"In an action by a broker to recover commissions upon a proposed exchange of real property, it is necessary for him to show," says the court in Mutchnick v. Davis, 130 App. Div. 419 (N. Y. 1909), "that the customer produced by him was the owner of the property offered to be exchanged as well as that, after the terms of the exchange had been agreed upon, the client refused to carry them out.21 Where the agreement to sell or exchange real property no longer remains executory but has been consummated by an actual execution of a written contract therefor the rule is different, and in the absence of any stipulation to the contrary the broker's commissions are earned when the contract is signed by the client, and a defect in title under such circumstances becomes unimportant and constitutes no defense to the payment of the commissions.22 The distinction between these two situations is very wide and very apparent. In the absence of any stipulation to the contrary a marketable title to real property is always presumed to be bargained for; 23 and when a broker produces a person who proposes to exchange property with his client, that person must have good title to the property which is proposed to be given in exchange. On the other hand, if the client sees fit to execute a contract and exchange property, whether the other person has a good title or not, the broker has performed his service to the satisfaction of his client and has earned his commission." 24

19 Barber v. Hildebrand, 42 Nebr. 407 (1894).

20 See Sec. 176 supra as to scope of this chapter.

21 Citing Woolley v. Lowensteln, 83 Hun 155 (N. Y. 1894) ; Alt v. Doscher, 102 App. Div. 344 (N. Y. 1905).

22 Citing Kalley v. Baker, 132 N. Y. 1 (1892); Gilder v. Davis, 137 N. Y. 504 (1893).

Where the broker brings about an exchange, the party employing him cannot resist a claim for commission on the ground that the title of the other party to the exchange is defective and that he is therefore unable to perform the contract.25

In Baumann v. Nevins, 52 App. Div. 290 (N. Y. 1900), the court said: "If the defendant employed him to effect the exchange, and he brought parties ready and willing so to do, and a contract was entered into binding upon them, it was an acceptance by the defendant of the purchasers proposed by the plaintiff, and he became entitled to his commission, entirely independent of the fact as to whether the defendant could convey or not. The plaintiff was not an insurer of the defendant's title. If he chose to employ a broker to dispose of property to which he had no title, and the broker brought purchasers who were acceptable to him, and a contract was entered into between them for the purchase, it was entirely immaterial to the broker as to whether his employer had title or not. His work was accomplished, and his commission did not depend upon the fact of the ability of his employer to carry out his contract. The provision in the contract in regard to the time for the completion of the purchase was entirely for his benefit, and his default in conveying the title could not defeat the plaintiff's claim for commissions." Of course the broker must have acted in good faith in such a case.

23 Citing Scudder v. Watt, 98 App. Div. 228 (N. Y. 1904); Burwell v. Jackson, 9 N. Y. 535 (1854).

24 See the authorities under Chap. XVII supra.

25 Kalley v. Baker. 132 N. Y. 1 (1892); Boche v. Smith, 176 Mass. 595; 51 L. R. A. 510 (1900). See also Sec. 168 supra.

It is somewhat difficult to follow the words of this opinion, for in its course the court speaks at one and the same time apparently about the proposed purchasers not having title 26 and then about the defendant not having title, while the facts of the case seem to indicate that the only question was as to the proposed purchaser's title. It may be that the court in speaking about the defendant's position in not being able to convey, intended that as a statement of the law if the facts had been that way, while on the other hand it may mean that as the proposed purchasers were unable to convey their property, therefore the defendant was unable to convey his in exchange.

In a dissenting opinion, Justice Ingraham says: "I do not understand that a broker complies with the terms of his employment until he brings a customer, not only ready and willing, but also able to purchase the property upon the terms proposed; and the production of a person ready to sign a contract, but who was manifestly unable to perform it, does not comply with the conditions of employment under which the broker is entitled to recover his commissions."

Also in Norman v. Reuther, 25 Misc. 161 (N. Y. 1898), it was held (in an exchange), that the broker must show that he had procured a valid contract of exchange, and that it was not sufficient to show that the broker had secured a person who was not the owner of the property, to sign a contract for the exchange.27