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An Ohio court has considered whether a buyer's representative was liable to a seller for failing to turn buyer's deposit over to seller when buyer failed to close sales transaction.
In February 1997, Troy S. Cleveland ("Buyer") made an offer to purchase property owned by Dorothy Ballard ("Seller"). The Buyer was represented by Vision Realty, Inc. ("Buyer's Representative"). The purchase contract stated that the Buyer's Representative would receive the Buyer's deposit and would disburse the deposit in one of three ways: apply deposit towards purchase contract or return to Buyer when transaction closed; return to Buyer, if Seller failed to perform the purchase contract; or pay to Seller, if Buyer failed to perform the purchase contract.
The Buyer failed to show up at the scheduled closing date. The Seller requested payment of the deposit, but the Buyer's Representative returned the deposit to the Buyer. The Seller filed a lawsuit against both the Buyer and the Buyer's Representative. Since the Buyer never appeared before the trial court, a default judgment was entered against him. The trial court ruled in favor of the Buyer's Representative on the Seller's claims made against it, and the Seller appealed.
The Court of Appeals of Ohio, Tenth District, affirmed the ruling of the trial court. The Seller argued that because the transaction had not closed due to the Buyer's failure to perform, the purchase contract required the Buyer's Representative to turn the Buyer's deposit over to the Seller and the Buyer Representative's failure to turn over the deposit constituted a breach of its fiduciary duty owed to the Seller. The alleged fiduciary duty would have arisen if the Buyer's Representative was holding funds belonging to the Seller.
The Buyer's Representative argued that the purchase contract had contained a financing contingency which required the Buyer to have financing in place by a certain date and if he didn't, the purchase contract terminated. Since the Buyer did not have financing in place by the date specified in the purchase contract (but did prior to closing), the Buyer's Representative argued that the contract had terminated, so the Seller was never entitled to the Buyer's deposit and the Buyer's Representative never owed the Seller a fiduciary duty.
The court agreed with the Buyer's Representative and so affirmed the trial court. Since the contract had lapsed by its own terms when the Buyer had failed to obtain the required financing, the Buyer was entitled to receive a return of his deposit. Since the contract was terminated prior to closing, the Buyer's Representative never owed a fiduciary duty to the Seller. Thus, the trial court's ruling in favor of the Buyer's Representative was affirmed.
Ballard v. Cleveland, No. 02AP-485, 2002 WL 31870134 (Ohio Ct. App. Dec. 24, 2002). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].