Ruble v. Reich: Nebraska Licensee Does Not Have Duty to Explain Contract Term to Client

The Supreme Court of Nebraska considered the question of whether a seller’s agent has a duty to inform his client of the terms of an agreement signed by the client.

Harold Reich ("Seller") listed his home for sale with broker Tim Francis of the Wood Bros. Realty, Inc., (collectively, "Brokerage"). Tim and Karen Ruble ("Buyers") were interested in buying the property, and the parties entered into a purchase agreement ("Purchase Agreement"). The Purchase Agreement was contingent upon the Buyers being able to sell their current residence, and set a closing date of August 31, 1996. However, the Buyers called the Seller in the middle of August to tell him that they would not be able to close at the end of the month because they were having problems with the sale of their house. In the middle of September, the Buyers called the Sellers to see if they could move into his house prior to the new closing date. At that time, the Seller told the Buyers that he no longer wanted to proceed with the sale.

In late September, the Buyers completed the sale and were ready to close their purchase of the Seller's property. The Seller refused to proceed with the closing. The Buyers brought a lawsuit, claiming that the Seller breached the terms of the Purchase Agreement. The Seller filed a third-party action against the Brokerage, claiming that if he had breached the Purchase Agreement, it was caused by the actions of the Brokerage. The trial court ruled that the Seller had breached the Purchase Agreement and was liable to the Buyers for the extra costs they incurred as a result of their inability to close. The trial court also dismissed the third-party complaint against the Brokerage. The Seller appealed, and the appellate court affirmed the trial court. The Seller appealed these rulings.

The Supreme Court of Nebraska affirmed the lower court rulings. The court considered the allegations made by the Seller against the Brokerage. Like many other states, Nebraska has adopted a statute which governs the relationships between real estate licensees and consumers. This statute specifies the duties that licensees owe to consumers in various relationships. These statutory duties replace the prior Nebraska common law, or court created, duties of licensees. Here, the Seller argued that the Brokerage was required to alert him to the fact that the Purchase Agreement required him to close past the original August 31 closing date. The court reviewed the duties of a seller’s agent described in the Nebraska statute, and found that the Brokerage had no duty to explain contract terms to the Seller when these terms were clear from a simple reading of the contract itself. Thus, the court affirmed the earlier ruling dismissing the Brokerage from this lawsuit.

The court also considered the ruling in favor of the Buyers. The question was whether it was clear from the Purchase Agreement that the Seller had a duty to close on the sale of his house when the Buyers successfully had completed the sale of their prior residence. The Purchase Agreement stated that the sale would close either on August 31 or when the Buyers received loan approval, whichever was the last to occur. The Seller argued that the Buyers had received loan approval when the Buyers' bank had preapproved them for a loan, which was before the August 31 closing date. The Buyers argued that their preapproval was conditioned upon the sale of their prior residence, and so they did not receive loan approval until they closed on their house on September 26th. The court reviewed the Purchase Agreement, and found that the term "loan approval" was clear in its meaning. It found that "loan approval" required the satisfaction of all contingencies before the loan could be granted, and one of the contingencies for the Buyers' loan was the sale of their prior home. Therefore, the Seller was obligated to close at the time the Buyers completed the sale of their prior home and the court affirmed the rulings of the lower courts. The court also affirmed the rulings made by the lower courts on the proper measure of damages, which is the amount of damages avoided by the breach deducted from the damages incurred by the breach.

Ruble v. Reich, 259 Neb. 658, 611 N.W.2d 844 (2000).