LAW: Judgments

COMMISSIONS – FIDUCIARY DUTY

(N.C. Court of Appeals, 2004) Resort Realty v. Brandt

Broker gets paid on expired listing

Two owners listed their adjacent oceanfront lots with a salesperson. The six-month listing contained a clause that gave the brokerage a commission if a buyer it had introduced bought the properties within 60 days of the listing’s expiration. The agreement also stated that the property was “subject to a 1031 tax-free exchange.”

The salesperson received several offers, including one for full price. The owners didn’t accept the terms of any of the offers, telling the salesperson they hadn’t identified a suitable re-placement property to execute a 1031 exchange.

Two months after the 60-day protection period expired, the buyer who had made a full-price offer on the property purchased it. The replacement property used in the 1031 ex change was owned by a corporation in which one of the sellers was the sole shareholder.

The brokerage sued for its commission. The trial court determined the owners had conspired with the buyer to avoid payment of the commission and awarded the brokerage the full commission. The owners appealed.

The appellate court stated that under North Carolina law, a broker is entitled to a commission if it produces a ready, willing, and able buyer, which the salesperson had done. Although the court found no conspiracy existed, the fact that the buyer and owners had had several conversations about the property be fore the listing expired and that the replacement property had been under the control of owners during the listing period showed that the owners had acted in bad faith to avoid paying a commission. Thus the court awarded a commission to the brokerage.

(Court of Appeals of Ohio, 2004) Weidle v. Leist

Salesperson’s purchase cuts profits

An Ohio appellate court has found that a salesperson was liable for a developer’s lost profits when the salesperson breached his fiduciary duty and purchased a property that his client, the developer, hoped to buy. A salesperson had an ongoing relationship selling homes for a development company. In August 2002 the development company’s general manager told the salesperson the company was interested in purchasing a 10.5-acre parcel and directed him to make an offer. Instead the salesperson submitted a contract on his own behalf for $80,000.
The manager, angry that the salesperson hadn’t made his offer, hired another salesperson and offered $85,520. Eventually, the salesperson bought the property for $100,000. The development company then sued him, claiming he’d breached his fiduciary duty by purchasing the land.
The trial and appellate courts found for the company. The Court of Appeals of Ohio first determined the salesperson and the company had an enforceable contract even though the parties had never discussed compensation. Next the court said the salesperson had breached both his fiduciary and contractual duties by purchasing the property on his own account. The court also stated the amount of profit the company expected to make, $461,325, was the correct measure of damages.

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