Wednesday
February 21, 2018

Seller Can't Allege Broker Fraud When Only Remedy Sought was to Rescind Sale

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Seller Can't Allege Broker Fraud When Only Remedy Sought was to Rescind Sale

U.S. District Court, District of Maine; White v. Meador, 2002

A seller accepted an offer on his vacation home. Although the buyer’s inspection revealed high radon levels and the lender appraised the property $100,000 higher than the purchase price, the sale closed at the agreed-upon price.

After closing and paying the broker’s commission, the seller sued the broker, seeking to rescind the sale on the basis of fraud and unjust enrichment.

The seller alleged that the broker had made fraudulent statements: that home sales in the area were “dead”; that there’d been no sales in the area in a year; and that the radon results would make it hard to sell.

The court ruled that the radon test comment didn’t constitute fraud because the statement was made after the purchase agreement was signed, and thus the seller couldn’t have relied on this information in deciding to accept the offer. Further, the court ruled that since the seller didn’t seek damages, but rather wanted to rescind the sale, the seller had no basis to assert fraud against the broker, who wasn’t a party to the purchase agreement. Rescission is a contractual remedy. So, the only appropriate party to sue on that basis would be the buyer.

The court also ruled in favor of the broker on the claim of unjust enrichment, which allows for recovery when there’s no contract or when a contract is deemed invalid or unenforceable. Because the broker and seller had signed a listing agreement, the court said the seller couldn’t claim unjust enrichment.

Another seller charge, alleging that the broker breached fiduciary duties, is still pending.

Broker allowed to file public notice of unpaid commission

District Court of Appeal of Florida, Third District; Alamagan Corp. v. The Daniels Group Inc., 2002

A broker introduced various buyers to a commercial property. After the seller accepted an offer, another prospective buyer (the plaintiff) sued the buyer whose offer had been accepted over who had the right to purchase the property. The broker and her brokerage intervened in the suit, asserting their right to collect a commission from whomever the court determined was the purchaser.

The court found that the plaintiff actually had a contractual right through a lease to buy the property but that the plaintiff was obligated to pay the commission. The court awarded the broker a judgment for her share of the commission, which, once recorded, would constitute a lien against the property.

The plaintiff paid the brokerage’s portion of the commission, but refused to pay the broker. The broker recorded the judgment against the property, filed a motion seeking to enforce the judgment, and filed a “notice of lis pendens.” This alerts potential purchasers and lenders that the property is subject to litigation and that they’re bound by the outcome.

In response, the plaintiff filed suit against the broker, alleging slander of title.

The court upheld the broker’s lis pendens filing, pointing out that recording the judgment alone didn’t adequately protect the broker: since the buyer had fulfilled part of the judgment, potential purchasers or lenders might be confused if they found a satisfaction of judgment in the public record.

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