Gibbons v. Ludlow

• Decision Date: 05 August 2013
• Docket Number: Supreme Court Case No. 11SC899
• Citation: 304 P.3d 239
• Parties: Lynda S. GIBBONS, Brent Wilson, and Gibbons–White, Inc., a Colorado corporation, Petitioners v. Gregory T. LUDLOW, S. Reid Ludlow, and Jean E. Cowles, Respondents
• Court: Colorado Supreme Court

304 P.3d 239

Lynda S. GIBBONS, Brent Wilson, and Gibbons–White, Inc., a Colorado corporation, Petitioners

v.Gregory T. LUDLOW, S. Reid Ludlow, and Jean E. Cowles, Respondents

Supreme Court Case No. 11SC899

Supreme Court of Colorado.

July 1, 2013

Rehearing Denied Aug. 5, 2013*

Certiorari to the Colorado Court of Appeals, Case No. 10CA1719.

Attorneys for Petitioners: Balaban, Levinson & Costigan, P.C., Kenneth L. Levinson, Cherami Ball Costigan, Bernadette J. Wasilik, Denver, Colorado.

Attorneys for Respondents: Cooper & Clough, P.C., Paul D. Cooper, Jeremy L. Swift, Denver, Colorado, Hensley & Kennedy, P.C., John F. Hensley, Boulder, Colorado.

En Banc

JUSTICE RICE delivered the Opinion of the Court.

¶ 1 In this transactional broker professional negligence case, we hold that to sustain a professional malpractice claim against a transactional real estate broker, a plaintiff must show that, but for the alleged negligent acts of the broker, he either: (1) would have been able to obtain a better deal in the underlying transaction; or (2) would have been better off by walking away from the underlying transaction.

¶ 2 Here, the plaintiff Sellers failed to present evidence of the fact of damages because they do not establish beyond mere possibility or speculation that they suffered a financial loss because of the transactional brokers' professional negligence. Because no injury could be shown, the trial court properly granted summary judgment as a matter of law.

I. Facts and Procedural History

¶ 3 In 2000, Gregory T. Ludlow, S. Reid Ludlow, and Jean E. Cowles (collectively the “Sellers”) entered into an exclusive listing agreement with the real estate brokerage firm Gibbons–White, Inc., for the sale of approximately 131 acres of vacant land in Boulder County. Over the next seven years, the Sellers received offers from at least three different buyers to purchase portions of the land; however, none of the offers resulted in a completed sale. Then, on February 21, 2007, Actis, LLC, a real estate investment business, made an offer to purchase 49.2 acres of the land for $6,439,910. As pertinent to this appeal, the offer contained the following provision:

Reimbursement Agreement:

On or before sixty (60) days following the Mutual Execution of this Contract, Seller shall provide Buyer with a proposed cost-sharing and reimbursement agreement (“Reimbursement Agreement”) relating to shared utilities, road and infrastructure for the Property. This Contract shall terminate unless a mutually acceptable Reimbursement Agreement is placed into escrow with the Title Company on or before the Resolution Deadline. If the Parties are unable to successfully agree to acceptable terms and execute the Reimbursement Agreement on or before the Resolution Deadline, Buyer's Earnest Money shall be refunded to Buyer in full, pursuant to the provisions of Section 2(b) of this Contract Addendum, without penalty. Buyer's proportionate share of any said shared utilities, road and infrastructure costs for the Property shall be deducted from the Purchase Price referenced in the Contract at Closing.

(Emphasis added). The language deducting a buyers' share of the infrastructure costs from the purchase price had not appeared in any of the previous offers for the Sellers' property. Actis requested that the Brokers insert the clause because Actis wanted to purchase the land with certain infrastructure already in place, and wanted a credit against the purchase price at closing if the Sellers had not installed the infrastructure by that time.

¶ 4 The Sellers rejected the offer and submitted a fully executed counteroffer. The counteroffer: (1) reduced the size of the property to be sold to 44.3 acres at a price of $5,790,822.60; and (2) included an option for Actis to purchase the remaining 4.98 acres at a higher price per square foot. The counteroffer did not, however, eliminate or alter the infrastructure credit provision. Actis accepted the counteroffer. A few months later, the parties entered into a second contract for the sale of the 4.98 acres included in the option. That contract also contained an infrastructure credit provision. In total, the stated purchase price for both parcels was $6,550,073.40.

¶ 5 Brent Wilson, a real estate broker employed by Gibbons–White (collectively the “Brokers”), brokered the real estate transaction between the Sellers and Actis. In negotiating the two contracts and subsequent amendments thereto, the Sellers were also represented by an attorney, Cameron Grant, and the law firm of Grant, Grant & Goiran, LLP (together, the “Lawyers”). Though Wilson and Grant were involved in the transaction from the start, neither of them informed the Sellers that their contracts with Actis contained the infrastructure credit provisions. Therefore, according to the Sellers, when the Sellers reviewed the draft settlementstatement one week before closing, they were surprised to learn that Actis would receive a $1,615,909.95 credit against the purchase price at closing for infrastructure costs. The Sellers, having been advised that they were legally obligated to complete the sale, closed as scheduled despite the $1,615,909.95 credit.

¶ 6 The Sellers then brought this action against the Brokers and the Lawyers asserting four claims for relief: (1) professional negligence by the Lawyers; (2) professional negligence by the Brokers; (3) negligent supervision by Lynda Gibbons, the employing broker of Gibbons–White; and (4) breach of fiduciary duty by the Brokers. Relevant to this appeal, the Sellers alleged that the Lawyers' and the Brokers' failures to timely advise them of the infrastructure credit provisions in the contracts constituted professional negligence. According to the Sellers, this negligence caused them to have to sell their land to Actis for $1.6 million less than what it was worth and what they had anticipated under the contracts.

¶ 7 After substantial discovery, the Brokers moved for summary judgment. ¹ The Brokers asserted that the Sellers could not prove causation for the professional negligence and negligent supervision claims alleged against them. They also argued that any damages alleged by the Sellers were speculative as a matter of law, and that they owed no fiduciary duties to the Sellers as a matter of law.

¶ 8 The trial court granted the Brokers' motion for summary judgment as to all claims. The trial court ruled that: (1) the Sellers failed to establish a genuine issue of material fact as to causation because they did not present evidence that they would have sold the property to a specifically identifiable person or entity for $6.6 million but for the Brokers' negligence, and (2) the Brokers did not owe fiduciary duties to the Sellers because they acted as transaction brokers rather than as the Sellers' agents. The Brokers subsequently requested attorney fees and costs pursuant to their original listing agreement with the Sellers. Finding that the Brokers were the prevailing parties in the litigation, the trial court awarded them attorney fees and costs.

¶ 9 The Sellers appealed. In a published, split decision, the court of appeals reversed the judgment of the trial court and remanded for a trial on the merits. Ludlow v. Gibbons, No. 10CA1719, ––– P.3d ––––, ––––, ––––, slip op. at 24, 31, 2011 WL 5436481 (Colo.App. Nov. 10, 2011) (selected for official publication). The court of appeals held that the Sellers met their burden of opposing summary judgment with respect to causation of damages by presenting genuine issues of material fact. Id. at 21–22. Specifically, the court of appeals held that the $6.6 million appraisal, along with the three unconsummated deals, and testimony from Actis's president that there was other interest in the property, sufficiently demonstrated a genuine issue of material fact as to the cause of damages. Id. at 22–24. The dissent disagreed with the majority's approach, and instead would have required either direct evidence of potential buyers at the $6.6 million price or expert testimony on the current market conditions or the likelihood of sale. Id. at 41 (Loeb, J., dissenting). According to the dissent, the appraisal alone failed to demonstrate causation of damages. Id. at 41–42 (Loeb, J., dissenting).

¶ 10 This Court granted certiorari to review whether a licensed professional can be liable for damages to a seller of real estate when, through the alleged negligence of the professional, the seller sells his property for less than its appraised value, in the absence of proof or any buyer willing to pay that higher amount.

II. Standard of Review

¶ 11 Summary judgment is appropriate when the pleadings and supporting documents establish that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ryder v. Mitchell, 54 P.3d 885, 889 (Colo.2002); Roberts v. Holland & Hart, 857 P.2d 492, 496 (Colo.App.1993). “The moving party has the burden of establishing the nonexistence of a material fact.” Roberts, 857 P.2d at 496. When the nonmoving party has the burden of proof at trial, the party moving for summary judgment need only identify those portions of the record and affidavits which demonstrate an absence of a genuine issue of material fact. Id. If the non-moving party cannot produce enough evidence to establish a triable issue, then the moving party is entitled to summary judgment as a matter of law. Id.; Luttgen v. Fischer, 107 P.3d 1152, 1154 (Colo.App.2005). This Court reviews a trial court's order on a summary judgment motion de novo. Ryder, 54 P.3d at 889.

III. Establishing Causation and the Fact of Damages in a Professional Negligence Claim Against a Broker

¶ 12 To recover on a claim of professional negligence, the plaintiff must prove that the professional owed a duty of care to the plaintiff, that the professional breached the duty of care, that the breach proximately caused an injury to the plaintiff, and that...