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Fericks v. Lucy Ann Soffe Trust: Statute of Frauds Does Not Bar Tort Action

Utah's highest court has considered whether a real estate professional could be liable in tort for statements which were unenforceable oral modifications to a real estate contract.

C. Kurt Hoffman and John A. Fericks ("Buyers") entered into an agreement to purchase property from the Lucy Ann Soffe Trust ("Seller"). Joe Goodman ("Salesperson") of Pentad Properties, Inc. ("Brokerage") represented the Seller in the transaction. The purchase agreement required an initial $5,000 down payment and an additional $10,000 earnest money payment on April 6, 2002.

On March 26th, one of the Buyers contacted the Salesperson and requested an additional 30 days to make the second earnest money payment. The Salesperson stated that the Buyers should consider the extension "done" and he would memorialize the extension in writing. On April 5th, one of the Buyers contacted the Salesperson again about the extension, as the Buyers had not received the extension paperwork. The Salesperson apologized for not having obtained the written extension and stated that he would get it done today. The second deadline passed without the Seller ever granting the Buyers an extension of the deadline, and so the Salesperson notified the Buyers on April 8th that the Seller had terminated the purchase contract.

On April 18th, one of the Buyers contacted a trustee of the Seller to discuss the cancellation. The trustee stated that the Salesperson had never asked the Seller for an extension of the second earnest money date. Around that time, the Buyers also learned that after they had requested an extension, the Sellers had received another offer containing a higher price as well as an earlier closing date.

The Buyers filed a lawsuit against both the Seller and the Brokerage. The actions against the Seller sought performance of the purchase contract while the actions against the Brokerage alleged fraudulent misrepresentation and intentional interference with a contractual relationship. The trial court ruled that the Statute of Frauds barred the Buyers' contract claims against the Seller because the Statute of Frauds bars oral modifications to real estate contracts. The trial court also ruled because the alleged misrepresentations were oral modifications to a real estate contract barred by the Statute of Fraud, the Buyers' tort claims against the Brokerage were also barred, since the oral modifications were unenforceable. The Buyers appealed only the rulings denying their claims against the Brokerage.

The Supreme Court of Utah reversed the trial court's rulings in favor of the Brokerage. The Buyers argued that the tort claims against the Brokerage should not have been dismissed by the trial court because these claims did not depend on whether or not they were enforceable contract claims. Meanwhile, the Brokerage argued that the alleged modifications to the purchase contract must be enforceable before serving as the basis for a tort claim.

Looking at prior Utah case law, the court determined that when the oral contract representation is a "circumstance" of the alleged fraud, then the Statute of Frauds has no application to the tort claims. Here, the Buyers argued that the Salesperson and Brokerage had induced them to breach the purchase agreement in order to collect a higher commission from the sale to the group who made the second offer. The alleged misrepresentations about the extension were simply part of the alleged plan to induce the Buyers’ breach of the purchase agreement and so the tort claims were not barred by the Statute of Frauds. Thus, the tort claims were sent back to the trial court for further proceedings.

Next, the Buyers challenged the trial court's award of attorney fees to the Brokerage. The Brokerage had collected fees based on a provision in the purchase contract which stated that if a lawsuit arose out of the purchase contract, the prevailing party in the litigation was entitled to an award of attorney fees. The Brokerage argued that, as agents of the Seller, they were entitled to enforce this provision as well. The court rejected this argument and ruled that the Brokerage had no right to enforce the purchase contract provision, no matter what happened on remand to the trial court. The contract provision only applied to the parties to the agreement and not to their agents. Thus, the court ruled the Brokerage was not entitled to the recovery of attorney's fees, even if it was the prevailing party on remand.

Fericks v. Lucy Ann Soffe Trust, 100 P.3d 1200 (Utah 2004).