Moore and Co. v. T-A-L-L, Inc.

• Decision Date: 29 May 1990
• Docket Number: No. 88SC626,T-A-L-,INC,88SC626
• Citation: 792 P.2d 794
• Parties: MOORE AND COMPANY, a Colorado corporation, and H.L. Richison, Petitioners, v., a Colorado corporation, Respondent.
• Court: Colorado Supreme Court

Page 794

792 P.2d 794

MOORE AND COMPANY, a Colorado corporation, and H.L Richison, Petitioners, v. T-A-L-L, INC., a Colorado corporation, Respondent.

No. 88SC626.

Supreme Court of Colorado En Banc.

May 29, 1990.

Rothgerber, Appel, Powers, & Johnson, Richard K. Clark, Elizabeth T. Wald, Denver, for petitioner Moore and Co.

Hall & Evans, Eugene O. Daniels, Denver, for petitioner H.L. Richison.

Aisenberg & Kaplan, P.C., Bennett S. Aisenberg, Edward A. Brown, Holme, Roberts & Owen, Daniel S. Hoffman, Denver, for respondent T-A-L-L, Inc.

Chief Justice QUINN delivered the Opinion of the Court.

We granted certiorari to review the decision of the court of appeals in T-A-L-L, Inc. v. Moore and Co., 765 P.2d 1039 (Colo.App.1988), which held that a real estate brokerage company which has entered into an exclusive listing agreement with the seller and breaches its fiduciary duty to the seller forfeits the total amount of the commission paid by the seller, even though the broker, under the real estate contract of sale, is required to split the commission with the buyer (another real estate broker). We agree with the court of appeals that when, as here, a real estate broker breaches a fiduciary duty to the seller, the broker is not entitled to retain any part of the commission paid by the seller. Under the principle of unjust enrichment, however, we conclude that the broker is required to forfeit only the amount of commission retained by the broker under the contract of sale and not that part of the commission paid to the buyer or other parties. We accordingly affirm the judgment in part and reverse in part, and we remand the case to the court of appeals with directions to reinstate the judgment of the trial court.

I.

T-A-L-L, Inc. (TALL), a Colorado corporation, entered into an exclusive listing agreement with Moore and Company, Inc. (Moore & Co.), a Colorado real estate company, through one of Moore & Co.'s real estate brokers, H.L. Richison, for the sale of TALL's property, which consisted of approximately eighty acres of undeveloped land in Adams County, Colorado, for a price of $1.6 million. As a result of Richison's alleged conduct in connection with the sale of the property, TALL filed a complaint in the district court in which it sought money damages from Moore & Co. and Richison for their breach of fiduciary duty in the course of the listing and sale of the property. The case was tried to the court which ultimately found in favor of TALL. A review of the events leading up to the judgment will place the issues before us in proper context.

TALL entered into the exclusive listing agreement with Moore & Co. on February 1, 1982. ¹ The agreement called for TALL to pay Moore & Co. a commission of ten percent of the purchase price of the property. H.L. Richison (Richison), a licensed real estate broker with Moore & Co., handled the listing agreement for TALL at all times during the events in question.

On February 8, 1982, Newcomb-Weidner Company (N-W), a Colorado real estate company operated by Warner Newcomb and Gail Weidner, made an offer to purchase the property for $1.4 million, contingent upon N-W's ability to obtain subscriptions for 100 percent participation in a syndicate "to be formed on or before June 15, 1982, or 120 days from acceptance of [the] contract, whichever is longer." ² TALL rejected the N-W offer, but submitted a written "counterproposal" which modified the terms of the payment at closing and the interest rate on the balance. ³ TALL's counterproposal was accepted by N-W on March 1, 1982, and the acceptance was received by TALL four days later. The sale contract expressly provided that the ten percent commission to be paid by TALL would be divided equally between Moore & Co. and N-W, the real estate company-purchaser.

On March 5, 1982, David Fair, a real estate broker with Grubb & Ellis Company, submitted an offer to Richison on behalf of DG Shelter Products Co. (DG Shelter) to purchase the property for $1.6 million. ⁴ Fair requested that Richison permit him to be present when the DG Shelter offer was presented to TALL. Richison told Fair that the property was under contract with N-W, that the contract contained a syndication contingency until June, 1982, and that he expected the closing to take place. Richison and Fair mutually agreed that the DG Shelter offer would not qualify as a backup contract since DG Shelter would not know until June 1982 whether the N-W contract was effective. Two days later, on March 7, Richison contacted Warren Newcomb, an officer of N-W, and told him that a client of Grubb & Ellis had made an offer of $1.6 million on the property, a price considerably higher than N-W's offer. During this conversation, Richison asked Newcomb whether he was interested in discussing this offer, and when Newcomb indicated that he was, Richison agreed to meet with the officers of N-W the following morning.

On March 8, 1982, Warren Newcomb and Gail Weidner met Richison at his office. As the meeting began, Richison received a telephone call from Charles Taylor, TALL's agent. Richison spoke from a telephone in a separate room, and Newcomb overheard him discuss with Taylor the offer of $1.6 million made by DG Shelter. Taylor at this time told Richison that he was not interested in the $1.6 million offer because TALL was obliged to close on the N-W contract. During the conversation Richison did not seek permission from Taylor to disclose to N-W the $1.6 million offer made by DG Shelter, nor did Richison inform Taylor that he was at that time meeting with representatives of N-W.

After this telephone conversation, Richison disclosed the terms of DG Shelter's offer to Warren Newcomb and Gail Weidner, who expressed their willingness to discuss the offer with DG Shelter. In a telephone conversation with David Fair, the real estate broker with Grubb & Ellis, Richison told Fair that TALL had rejected DG Shelter's offer but that N-W was willing to discuss the assignment of its contract rights to DG Shelter. Fair requested Richison to set up a meeting with N-W. On March 10, 1982, Richison, Fair, and the officers of N-W met in Richison's office to discuss the assignment of N-W's contract rights to DG Shelter. One or two days later, the officers of N-W met with Fair and a representative of DG Shelter. At this meeting, N-W agreed to assign its contract to DG Shelter for $300,000 and effectuated the assignment on March 16, 1982. ⁵

On March 30, 1982, Richison met with Warren Newcomb and inquired about the assignment of the N-W contract to DG Shelter. When Newcomb informed Richison that N-W had received $300,000 for the assignment, Richison stated that he desired to renegotiate the 50-50 commission split between Moore and Co. and N-W to a 60-40 split. Warren Newcomb, however, rejected any renegotiation.

The closing occurred on May 25, 1982. At the closing TALL conveyed the property directly to DG Shelter for $1,402,467.50, pursuant to the assignment from N-W. Moore & Co. received a commission of $70,123.37, and, pursuant to an agreement between N-W and Grubb & Ellis, N-W received a commission of approximately $50,000 and Grubb & Ellis a commission of approximately $20,000.

After hearing testimony on the above sequence of events and expert opinion testimony from several real estate experts, the trial court found, in pertinent part: that the DG Shelter offer was very material information which was confidential and should have been disclosed to TALL; that although the prospect of TALL's buying out N-W was doubtful, a backup contract with DG Shelter was a valuable asset to TALL; and that the disclosure of the DG Shelter offer and the subsequent N-W and DG Shelter meeting ruined any chance of TALL's renegotiating the contract with N-W or of obtaining a backup contract offer from DG Shelter. The court concluded that Moore & Co., acting through Richison, breached its fiduciary duty to TALL in the following respects: disclosing to the officers of N-W on March 7, 1982, without having previously disclosed the same information to TALL, that Grubb & Ellis had submitted an offer on behalf of DG Shelter for $1.6 million--a price substantially higher than the N-W contract price; arranging a meeting with the officers of N-W concerning the DG Shelter offer without first disclosing the DG Shelter offer to TALL and without obtaining TALL's permission to attend the meeting; failing to disclose to TALL's representative, Charles Taylor, during Richison's telephone conversation with Taylor on March 8, 1982, the DG Shelter offer and the fact that Richison was meeting at that very moment with representatives of N-W concerning the DG Shelter offer; discussing the details of the DG Shelter offer with N-W during the March 8 meeting without first having obtained the permission of TALL; failing to provide TALL with advice or assistance about the possibility of buying out or renegotiating the contract with N-W or about restructuring the DG Shelter offer in a manner beneficial to TALL; meeting with Grubb & Ellis and representatives of N-W on March 10, 1982, without the knowledge or consent of TALL, regarding the assignment of the N-W contract to DG Shelter; and attempting to increase Moore & Co.'s commission split by reason of N-W's assignment of its contract to DG Shelter. Although the trial court did not find that TALL sustained a specific monetary loss as a result of Moore & Co.'s breach of fiduciary duty, ⁶ it nonetheless concluded that Moore & Co.'s forfeiture of its share of the commission would avoid any unjust enrichment to Moore & Co. and accordingly entered judgment against Moore & Co., and Richison, in the amount of $70,123.37, plus interest from the date on which the commission was paid.

TALL appealed the judgment to the court of appeals, arguing that the trial court erred in not assessing damages against Moore & Co. and Richison for the full commission of $140,246.74 paid by TALL as a result of the sale of...