Albright v. McDermond, 99SC823.

• Decision Date: 14 November 2000
• Docket Number: No. 99SC823.,99SC823.
• Citation: 14 P.3d 318
• Parties: M. Ashley ALBRIGHT, Petitioner, v. Duane K. McDERMOND, Denise M. Klimas, and Vicki Manton, Respondents.
• Court: Colorado Supreme Court

14 P.3d 318

M. Ashley ALBRIGHT, Petitioner, v. Duane K. McDERMOND, Denise M. Klimas, and Vicki Manton, Respondents.

No. 99SC823.

Supreme Court of Colorado, En Banc.

November 14, 2000.

M. Ashley Albright, Denver, CO, pro se.

James Black, Denver, CO, Attorney for Respondents Duane K. McDermond and Denise M. Klimas.

Burg, Simpson, Eldredge & Hersch, P.C., Tiffanie D. Stasiak, Denver, CO, Attorney for Respondent Vicki Manton.

Alan J. Gilbert, Solicitor General, Denver, CO, Attorney for Amicus Curiae, Colorado Real Estate Commission.

Rothgerber, Johnson & Lyons LLP, Richard K. Clark, Christopher T. Sullivan, Denver, CO, Attorneys for Amicus Curiae, Colorado Association of Realtors.

Justice HOBBS delivered the Opinion of the Court.

Pursuant to section 13-6-310(4), 5 C.R.S. (2000), and C.A.R. 49(a)(1), we granted certiorari to review the judgment of the District Court for the City and County of Denver (District Court) affirming a decision of the County Court for the City and County of Denver (County Court).¹ The underlying dispute is between Buyers and Seller of a home regarding their rights and duties under the Inspection Provision of the "Residential Contract to Buy and Sell Real Estate" (contract No. CBS 1/M-7-96) (Contract)² promulgated by the Colorado Real Estate Commission (Commission). The District Court held that the County Court correctly ordered return of the earnest money deposit of Duane K. McDermond and Denise M. Klimas (Buyers), because they did not reach agreement with M. Ashley Albright (Seller) regarding resolution of inspection objections; consequently, the Contract terminated in accordance with its terms. We affirm the judgment of the District Court upholding the judgment of the County Court.

I.

On December 6, 1998, Buyers viewed Seller's residence in Denver's Park Hill neighborhood. Buyers placed a bid of $230,000 on the property after another prospective purchaser had placed a bid of $225,000. Seller took the higher bid and executed a contract with Buyers dated December 6, 1998. The parties utilized form No. CBS 1/M-7-96, which the Commission promulgated pursuant to its statutory authority. See § 12-61-803(4), 4 C.R.S. (2000). Paragraph 10 of the Contract (Inspection Provision) recited:

INSPECTION. Seller agrees to provide Buyer on or before [December] 13, 1998, with a Seller's Property Disclosure form completed by Seller to the best of Seller's current actual knowledge. Buyer or any designee, shall have the right to have inspection(s) of the physical condition of the Property and Inclusions, at Buyer's expense. If written notice of any unsatisfactory condition, signed by or on behalf of Buyer, is not received by Seller on or before [December 16], 1998 (Objection Deadline), the physical condition of the Property and Inclusions shall be deemed to be satisfactory to Buyer. If such notice is received by Seller as set forth above, and if Buyer and Seller have not agreed, in writing, to a settlement thereof on or before [December 17], 1998 (Resolution Deadline), this Contract shall terminate three calendar days following the Resolution Deadline; unless, within the three calendar days, Seller receives written notice from Buyer waiving objection to any unsatisfactory condition. Buyer is responsible for and shall pay for any damage which occurs to the Property and Inclusions as a result of such inspection.

(Emphasis added.) Initially, the parties specified an Objection Deadline of December 14, 1998, and a Resolution Deadline of December 15, 1998. The parties mutually agreed to extend the Objection Deadline to December 16 and the Resolution Deadline to December 17.

The Contract specified a closing date of December 31, 1998, and an earnest money deposit of $4,000.00 to be held in trust by Seller's real estate agent. The Contract included a liquidated damages provision (paragraph 18(a)(2)), providing for forfeiture of Buyers' earnest money deposit to Seller, as her sole and only remedy, in the event of Buyers' breach.

Pursuant to the Inspection Provision, Buyers hired an inspector, inspected the property, and timely presented Seller with inspection objections. By means of an Inspection Release Addendum they proposed before the Objection Deadline of December 16, Buyers listed ten conditions they deemed unsatisfactory.³ Buyers' addendum proposed that Seller remedy these ten items prior to closing at her expense, through use of licensed contractors, in conformance with codes, and subject to a walk-through one day prior to closing to verify completion of the work:

Pursuant to Paragraph 10 of the Contract, Buyer has conducted inspection(s) of the Property and has identified certain conditions that do not meet with approval of the Buyer. Provided the Seller agrees to arrange for and pay the cost of having the following work (Work) performed at the Property, the Buyer agrees to release and waive any objection to the Property and to hold the Contract in full force and effect. Work is to be performed by licensed contractor(s) in a workmanlike manner and shall meet code requirements when applicable. Seller agrees to deliver to Buyer, on date of closing, following successful transfer of deed, any and all warranties and/or guarantees that may be provided to Seller as a result of having the Work performed. Buyer shall have the right to walk-through the Property not later than one (1) day prior to date of closing, at a mutually agreeable time, to verify completion of the Work as agreed.

(Emphasis added.)

The trial court found that Seller's agent informed Buyers' agent on December 14, and again on December 15, that Seller was "[n]ot interested in doing the work prior to closing." Buyers' agent responded that Buyers "expected all repairs to be done at the seller's expense and before closing."

On December 16, several exchanges occurred. Instead of signing Buyers' proposed Inspection Release Addendum, Seller wrote on its face that:

Seller accepts conditions 1-10 with the following notes: 1) I have obtained estimates in the minimum of $2835 and maximum of $3600. I will escrow $4500 with whomever out of closing proceeds & will have the work done after closing; & 2) while not a requirement, I would prefer a closing date of 12/21. That will allow me more time to get the work done.

(Emphasis added.) Seller accompanied this writing with a letter providing additional details about her proposed terms.

Also on the 16th, Buyers provided Seller with an additional Inspection Release Addendum, stating that:

Due to lack of agreement of seller & buyer to prior inspection addendum the contract has failed under paragraph 10. Buyers request release of earnest money. See attached earnest money release addendum.

The earnest money Mutual Release Agreement that Buyers proposed to Seller recited that the parties mutually agreed to terminate the Contract with return of the $4,000.00 earnest money deposit to Buyers. Seller did not execute this release. Finally, Buyers' agent faxed to Seller's agent a handwritten note, reciting that: "As we discussed at 5:00 the buyers don't want to accept [Seller's] proposal of $4,500 as just faxed to me." Although the parties disputed at trial the exact timing of sending and receiving of these documents dated December 16, the County Court found that these instruments and the testimony of witnesses nevertheless demonstrated that the parties did not reach agreement for resolution of the inspection objections by the Resolution Deadline.

On December 17, prior to the close of the Resolution Deadline under the Contract, Buyers entered into a contract for purchase of a house they had viewed prior to entering their bid on Seller's house. On December 18, Seller entered into a contract for sale of her house to the previous prospective purchaser whom the Buyers had outbid. Declaring the occurrence of a material breach, Seller refused to authorize the release of the $4,000.00 earnest money deposit to Buyers. Buyers' agent took the position on behalf of her clients that: (1) Seller had refused to agree to Buyers' terms; and (2) Buyers could terminate the contract for any or no reason.⁴

Buyers brought suit in Small Claims Court for return of their $4,000.00 earnest money deposit. Seller counter-claimed for damages and filed a separate suit against Buyers' agent for tortious interference with contract. By agreement of the parties, the Small Claims Court transferred the suits to the County Court for joint trial.

The County Court found that Buyers and Seller had not reached agreement under the Inspection Provision, and that, consequently, Buyers were entitled to return of their earnest money deposit. The County Court also found that Buyers' agent had not committed tortious interference with the contract by assisting Buyers in entering the contract for purchase of a different house before the Resolution Deadline. In addition to costs against Seller, the County Court awarded attorney's fees (1) to Buyers under the attorney's fees provision of the Contract; and (2) to Buyers' agent because Seller filed and pursued a frivolous and vexatious claim.

Pursuant to section 13-6-310(1), 5 C.R.S. (2000), Seller appealed to the District Court, which affirmed the judgment of the County Court, reciting, in part:

The record supports the County Court's finding that "there never was any agreement" and, therefore, the $4,000 should have been returned to the appellees. . . . There was an offer from the appellees that the repairs be made prior to closing and there was a counter-offer from the appellant that the repairs be made subsequent to closing. As a result, there was no final agreement and the appellees were entitled to their $4,000 deposit.

The District Court upheld the County Court's order (1) returning the earnest money to Buyers; (2) dismissing Seller's counterclaim against Buyers for damages; (3) dismissing Seller's claim against Buyers' agent for tortious interference with contract; and (4) awarding...