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Fry v. George Elkins Co.

District Court of Appeal, Second District, California
327 P.2d 905 (1958)


Facts

Fry (plaintiff) entered negotiations to purchase the home of Miller (defendant) using the services of George Elkins Co. (Elkins) (defendant), a brokerage firm. On May 20, 1956, Fry made an offer to purchase the Miller home for $42,500. Fry provided a deposit of $4,250 to Elkins. Half of this amount ($2,125) was the brokerage fee due from Fry to Elkins. Under the brokerage agreement, Miller agreed to pay Elkins $2,125 in the event Fry forfeited the brokerage fee by not going through with the transaction. Under the terms of Fry’s offer to purchase Miller’s home, Fry’s purchase was conditioned on his ability to obtain a $20,000 loan at five percent interest for 20 years. Elkins advised Fry that there was a current five percent loan on Miller’s property with a balance of $16,650 that could most likely be refinanced to provide Fry with the required $20,000. This loan was held through Western Mortgage. Fry did not contact Western Mortgage. At the urging of Elkins, a representative of Western Mortgage repeatedly contacted Fry and stated that a $20,000 loan at five percent interest for 20 years would be available to him if he completed the application papers. Fry did not complete application papers. Instead, Fry contacted two other banks for loans. Both banks rejected Fry’s loan applications. Fry wrote Miller saying that he had changed his mind about purchasing the house and wanted to rescind the deal on the ground that he was unable to obtain the requisite financing. Miller agreed, and was able to sell the home to another party, Rothschild, for $40,375. Rothschild obtained a loan from Western Mortgage. As part of the new deal, Miller was required to include personal property worth $937.50 in the sale to Rothschild. Additionally, Miller had to spend $250 to hire an attorney to facilitate the sale. Finally, since Fry broke the sale agreement, Miller was required to pay Elkins the brokerage commission of $2,125. The total extra amount paid by Miller as a result of Fry’s breach was $3,312.50. Fry brought suit in federal district court against Elkins and Miller seeking to recover his $4,250 deposit. The trial court deducted the $3,312.50 paid by Miller from Fry’s deposit and awarded Fry $937.50. Fry appealed.

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Holding and Reasoning (Fox, J.)

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