Commission Recovered from Failed Deal

Read the full decisions:
Wing v. Still Standing Stable LLC
Elite Legacy Corp. v. Schvaneveldt

Still Standing LLC (“Seller”) purchased 170 acres of property in 1998.  The property did not have access from any public roads.  The Sellers attempted to gain access by suing adjoining landowners but those efforts failed to secure road access to the property.

In 2006, the property was advertised as a for-sale-by-owner property.  A real estate broker (“Broker”) contacted the Seller on behalf of a client, and the Broker visited the property with his client (“Buyer”).  Following the visit, the parties exchanged offers to purchase the property.  The parties eventually reached an agreement, and the final purchase agreement (“Contract”) contained a brokerage fee clause and required the Seller to convey marketable title by general warranty deed.

Initially, the transaction proceeded as planned, with the Buyer making the required deposits and the Seller making the required disclosures, including disclosing that the property did not have direct access to a public road.  As closing approached, the Seller informed the Buyer that the Seller would convey the property by special warranty deed.  The Buyer’s attorney said that might be ok if the Buyer could obtain title insurance, but the Buyer could not obtain title insurance and so did not appear at the closing.

Following the collapse of the transaction, the Broker brought an interpleader action to claim the earnest money held in escrow as a commission payment.  The Broker also filed a complaint against the Seller for payment of its commission based on the Contract, arguing that the Seller had breached the agreement by failing to deliver a general warranty deed to the Buyer as specified in the Contract.  The Seller filed a counterclaim against the Broker with various allegations, including misrepresentation and breach of fiduciary duty. 

The trial court ruled that the Broker had earned the commission because the Seller had breached the Contract, and a jury awarded the Broker $30,000.  Following the award, the Broker moved for a new trial because the commission award was not the full amount. Rather than order a new trial, the trial court increased the commission award by $100,000.  The court also awarded the Broker attorneys’ fees and interest.  The Seller appealed these rulings.

In a series of rulings, the Court of Appeals of Utah affirmed the trial court’s rulings.  First, the court examined whether the trial court properly ruled that the Broker had earned the commission.  The trial court had determined that the Contract required the Seller to pay the Broker a commission and the only reason that the transaction failed was because the Seller failed to provide insurable access to the property. 

In Utah, a real estate professional is entitled to a commission when he/she procures a buyer who is ready, willing, and able and who is accepted by the seller.  The parties can also establish by contract when a commission is payable, and the Contract’s “Brokerage Fee” language stated that if the closing was prevented by the Seller’s default, then the Broker could collect the commission.  The court agreed that the Seller had defaulted by failing to provide a general warranty deed or insurable access to the property and so the court affirmed the trial court rulings.

Next, the court considered the breach of fiduciary duty and misrepresentation allegations made by the Seller.  The trial court had ruled that the Seller’s own breach of the Contract had caused its damages and so the Seller could not prove causation for either cause of action and so the court had dismissed these allegations.  The Seller failed to address the causation issue on appeal, and so the court affirmed the trial court rulings in favor of the Broker.

Wing v. Still Standing Stable LLC, 387 P.3d 605, cert. denied sub nom. Wing v. Still Standing, No. 20161053, 2017 WL 825549 (Utah Feb. 22, 2017)

Elite Legacy Corp. v. Schvaneveldt, 2016 UT App 228, cert. denied sub nom. Elite Legacy Corp v. Schvaneveldt, No. 20161057, 2017 WL 825552 (Utah Feb. 22, 2017). [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.]