Mississippi's highest court has considered whether a buyer's representative was entitled to payment of commission by her client when her client backed out of transaction just prior to the transaction's scheduled closing date.
Billy M. Hamilton ("Buyer") entered into an agency agreement with Cynthia Pringle ("Buyer's Representative") of The Buyer's Agent ("Brokerage"). On July 15, 1998, the Buyer entered into an agreement to purchase a home owned by Gerald J. and Gay T. Hopkins ("Sellers"). The Sellers had listed their home for sale with Carolyn Catchot of Century 21 Bay South Realty, Inc. ("Listing Broker"). The purchase agreement set a closing date of August 31, 1998.
The Buyer commissioned a home inspection of the property, which revealed problems with the property's heating and cooling systems. The Sellers contracted for repairs, after which the HVAC contractor issued a report stating that the HVAC systems were functioning normally. The Brokerage received a copy of this report, and notified the Buyer of the results. There were differing accounts on how the Buyer received this information. The Brokerage testified that the Buyer accepted the results of the report and requested to move onto the premises by July 24th if possible, while the Buyer claimed he told the Brokerage that he wanted the Sellers to either replace the HVAC system or lower the purchase price.
On August 24th, the Buyer informed the Brokerage that he no longer wanted to purchase the Sellers' home. The Buyer testified that he tried to contact the Buyer's Representative at an earlier time to inform her of his decision, but he had been unable to reach her. The Buyer also informed the Listing Broker of his decision to not purchase the home.
The Buyer did not appear at the closing a week later, and the Sellers sued the Buyer. In their lawsuit, the Sellers alleged breach of contract, and sought specific performance or damages as well as attorney's fees. The Brokerage intervened in the lawsuit, claiming it was entitled to receive its commission. The trial court awarded the Sellers the Buyer's earnest money as damages and also attorney's fees, and the Brokerage was awarded its commission. The Buyer appealed.
The Supreme Court of Mississippi partially reversed the trial court. The court first looked at the purchase agreement which was the basis for the trial court's award of attorney's fees. The purchase agreement stated that if the "purchaser" was required to initiate litigation to assure performance of the contract, then the "losing party" would be required to pay attorney's fees. Since the Buyer was not the party initiating this litigation, the court ruled that the trial court had improperly awarded the Sellers their attorney's fees.
Next, the court considered whether the Brokerage was entitled to recover a commission. The Buyer argued that the purchase agreement provided that the commission was only due for a closed transaction, whereas the Brokerage argued that it had a contractual entitlement to a commission. The purchase agreement stated that the Brokerage was entitled to a commission "from the proceeds of the transaction", payable "at the time of closing". Looking at Mississippi law, the court found that the relevant cases were lawsuits between listing brokers and their seller clients, not buyer's representatives. The court also found that the terms of the contract between a broker and its client determine the broker's right to a commission. The trial court had awarded the Brokerage a commission because the trial court ruled that the Brokerage had fulfilled all of its contractual duties by procuring a ready, willing, and able buyer. The court disagreed, finding the contractual language determined the Brokerage's right to a commission. Since the Brokerage was only entitled to receive its commission from the closing proceeds and the transaction never closed, the court ruled that the Brokerage was not entitled to a commission and so reversed the trial court.
Finally, the Buyer argued that he was entitled to a return of his earnest money because the inspection had revealed problems with the HVAC system. The Sellers argued that there was little evidence to support the Buyer's argument and also that he had raised his objections in an untimely manner. The purchase agreement provided that an unsatisfactory inspection allowed the Buyer to recover his earnest money and cancel the agreement and did not provide a specific time period for the Buyer to voice his dissatisfaction. However, the court ruled that the Sellers did not learn of the Buyer's intention to rescind the agreement until two days before the scheduled closing date and had already moved out of the home at that time. The court ruled it would be inequitable to order the Sellers to return the earnest money to the Buyer because he unfairly gave late notice to the Sellers of his intention to rescind the purchase agreement. Thus, the court reversed the trial court's award of attorney's fees and a commission, but upheld its award of the Buyer's earnest money to the Sellers.
Hamilton v. Hopkins, 834 So. 2d 695 (Miss. 2003).