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Davis v Beling: Liability for Purchase Not Subject to Sale

A Nevada’s highest court has considered whether to uphold a jury verdict against a real estate professional over allegations that she failed to make a subsequent purchase contingent on the sale of a residence.

Kristen Beling and William Dougherty, Jr. (collectively, “Doughertys”) decided to sell their home in Augusta (“Augusta Property”) and build a new home in a development.  They entered into a listing agreement with Cheryl Davis (“Davis”) of Triple Win, LLC d/b/a Platinum Properties GMAC Real Estate (“Brokerage”) to sell their existing home.  The Doughertys planned to use the proceeds from the sale of the Augusta Property to finance the construction of their new home.

The Doughertys entered into a purchase agreement with a buyer for the Augusta Property.  The Doughertys then located a property on which to build their home.  Based on Davis’s assurances that the Augusta Property transaction would close, the Doughertys closed on the property on which they planned to build their new home.

Davis also advised the Doughertys to purchase another home to live-in while their new home was being constructed, after which they could sell the second home.  Davis helped the Doughertys locate a property on Ping Drive (“Ping Property”) to purchase as a temporary residence.  However, the Doughertys explained to Davis that the closing of the Ping Property had to be contingent upon the sale of the Augusta Property.  Despite those instructions, Davis did not include this contingency in the Doughertys’ offer.

The buyers for the Augusta Property were unable to close because they were unable to sell their home.  The Doughertys learned that their purchase of the Ping Property was not contingent on the sale of their home, and had to decide whether to forfeit their earnest money or close the second transaction.  Purporting to represent the buyers of the Augusta Property, Davis offered the Doughertys $150,000 to allow them to close the Ping Property transaction. The Doughertys accepted this money and closed the Ping Property transaction.  Eventually, Davis offered to repurchase the Ping Property from the Doughertys, but they refused.

Davis filed a lawsuit against the Doughertys seeking repayment $150,000.  The Doughertys filed a countersuit, alleging negligent misrepresentation, breach of fiduciary duty, slander of title, and abuse of process.   The Doughertys also sued the Brokerage under a theory of respondeat superior, alleging that the Brokerage was responsible for Davis’s conduct.  A jury returned a verdict making the following awards: $115,455 to Davis on her unjust enrichment claim; $199,558 to the Doughertys on their fraud claim against Davis; $100,000 in punitive damages against Davis; and a total of $37,773 against the Brokerage for Davis’s actions.  The trial court also awarded the Doughertys part of their attorneys’ fees.  All parties appealed the trial court’s judgment.

The Supreme Court of Nevada partially affirmed the trial court’s judgment and sent the case back to the lower court for further proceedings.  The court first looked at the fraud-in-the-concealment claim.  Nevada has statutorily defined the duties that a real estate licensee owes to his/her clients, eliminating the common law of agency.  Davis and the Brokerage argued that they were shielded from these common law fraud allegations because of the statute.

The court found that the statute did not preclude all common law forms of liability.  The court ruled that while some of the license law proscribed the duties of care and disclosure for real estate licensees, it did not limit licensee’s liability for all common law fraud claims.  The court stated that if there wasn’t a statute setting forth a standard of conduct, then the common law could still determine the duties of a licensee. 

The license law did contain rules for the types of disclosure that Davis needed to make to the Doughertys, and so the court agreed that the Davis could not be liable under common-law theories but was still liable for statutory violations.  Meanwhile, the Brokerage was liable under common law, since its role was not addressed in the statutes.  Therefore, the court upheld the liability award in favor of the Doughertys.

Next, the court considered challenges to the way the trial court had calculated damages.   Davis argued that the Doughertys’ damages should be limited to their out-of-pocket losses, while the Doughertys argued the trial court had improperly denied them recovery for the carrying costs of the Ping Property.  The court found the way the trial had calculated damages was incorrect, and so sent the case back to the trial court to recalculate the damages awarded to the Doughertys.  The court affirmed the liability findings against Davis and the Brokerage, but vacated the damages awarded and sent the case back to the trial court for a recalculation of damages.

Davis v. Beling, 278 P.3d 501 (Nev. 2012).