Radetic v. Murphy

• Decision Date: 15 April 2011
• Docket Number: 1091462.
• Citation: 71 So.3d 642
• Parties: Anthony RADETICv.Michael MURPHY, Sr., Brenda Murphy, and the Eufaula Agency, Inc.
• Court: Alabama Supreme Court

71 So.3d 642

Anthony RADETIC

v.Michael MURPHY, Sr., Brenda Murphy, and the Eufaula Agency, Inc.

1091462.

Supreme Court of Alabama.

April 15, 2011.

Robert I. Hinson and Spencer W. Danzey of Ludlum & Gil, LLC, Dothan, for appellant.Jim S. Calton, Jr., of Calton Legal Services, SP, Eufaula, for appellee Michael Murphy, Sr.; and Richard A. Harrison, Eufaula, for appellee Brenda Shiver (Murphy).SHAW, Justice.

Anthony Radetic appeals from a judgment in favor of Michael (Mike) Murphy, Sr., Brenda Murphy, and The Eufaula Agency, Inc.¹ For the reasons discussed below, we reverse and remand.

Facts and Procedural History

Pursuant to a divorce judgment, Mike Murphy and Brenda Murphy ² were ordered to sell their marital home in Eufaula and to divide the proceeds. The Murphys hired the Eufaula Agency, a real-estate agency, to assist with the court-ordered sale. Initially, the Murphys entered into a $600,000 contingency-sales contract with individuals who are not parties to the present action.³ However, based upon Radetic's offer to purchase the house at the same price, purportedly without contingencies, and upon Radetic's receiving from Quicken Loans (“Quicken”) a “Home Loan Pre–Qualification Certificate” evidencing Radetic's prequalification for a $540,000 mortgage,⁴ the Murphys canceled the initial contingency-sales contract and, on April 11, 2006, ⁵ entered into a real-estate-sales contract with Radetic. On that same date, pursuant to the terms of the contract, Radetic remitted to the Eufaula Agency $20,000 in earnest money, which was to be held in escrow by the Eufaula Agency pending closing.

According to the terms of the sales contract between Radetic and the Murphys, closing was scheduled to occur within 30 days. In order to obtain financing, in addition to his previous application to Quicken, Radetic also applied for a loan with Countrywide Home Loans (“Countrywide”). On April 18, 2006, Countrywide informed the Eufaula Agency that Radetic had failed to qualify for the loan. On the following day, Quicken likewise informed Radetic that it was denying his mortgage request. As a result of the foregoing denials, Radetic immediately contacted the Eufaula Agency to cancel the contract and to request the return of his earnest money.

On May 11, 2006, as permitted by the terms of the real-estate-sales contract, the Eufaula Agency filed a complaint seeking to interplead the $20,000 earnest money, which, according to the Eufaula Agency, had been claimed both by the Murphys and by Radetic. The parties thereafter engaged in various counter-and cross-pleadings.⁶ Notably, with regard to the present appeal, the Murphys filed a cross-claim against Radetic seeking damages resulting from the alleged breach of the sales contract by Radetic and Radetic filed a cross-claim against the Murphys asserting fraud and misrepresentation claims based on the Murphys' alleged failure to disclose defects in the house.

In February 2007, the Murphys' residence was purchased by another party for $425,000.⁷ On March 1, 2007, the Eufaula Agency amended its initial interpleader complaint to add a claim asserting that, if the trial court determined that Radetic breached his contract with the Murphys, then the Eufaula Agency was “entitled to ... the amount of commission it would have made on the sale of the home less the commission earned on the sale of the home in February 2007, to a third party for the sum of $425,000.” Similarly, both Mike Murphy and Brenda Murphy amended their cross-complaints to assert a claim that, assuming the trial court determined that Radetic breached the sales contract, they were “entitled to an award of $175,000.00, which is the amount of the loss in property sale, plus additional award of $30,000 in expenses paid as a result from the February 2007 sale to a third party for the sum of $425,000.00.”

On July 26, 2007, Mike Murphy filed a motion seeking a summary judgment as to Radetic's cross-claim against the Murphys in which Radetic asserted fraud and misrepresentation claims based on allegations that the Murphys had failed to disclose information regarding purported defects in the residence. On September 20, 2007, the trial court entered an order holding that the Eufaula Agency had discharged all responsibility with regard to the interpleaded funds and dismissing the Eufaula Agency as a party to the initial interpleader action. In that same order, the trial court granted the summary-judgment motion filed by Mike Murphy, indicating that only the following remaining issues would proceed to a nonjury trial: “[T]he competing claims to the escrow fund, the claims against Radetic for breach of contract and the claim of The Eufaula Agency for loss of commissions.”

Subsequently, Mike Murphy moved for sanctions against Radetic pursuant to Rule 37, Ala. R. Civ. P., asserting that, based on Radetic's failure to comply with outstanding discovery requests, Murphy was entitled to have “establish[ed] as facts the allegations of breach of contract” asserted against Radetic and to be awarded a default judgment against Radetic. On July 28, 2008, following a hearing, the trial court entered an order granting Mike Murphy's motion, in which it noted that it was “established as fact ... that ... Radetic had the financial ability to close on the residential sales contract made the basis of this action, and further that he breached said contract by failing to close on same.” As a result, the trial court “ordered ... that ... Michael Murphy and Brenda Murphy, and the Eufaula Agency, have and recover against ... Radetic, a judgment by default in the amount [sic] as to all remaining claims in this action.” ⁸ In its order, the trial court scheduled a hearing on damages for September 10, 2008.

Thereafter, in August 2008 Radetic filed a motion seeking to set aside the default judgment, in which he contended that Mike Murphy had failed to meet the requirements entitling him to sanctions under Rule 37. Nothing in the record before us suggests that the trial court ever ruled on Radetic's motion to set aside the default judgment.

In March 2009, in accordance with a request by the Eufaula Agency and with the purported agreement of the Murphys, the trial court entered an order distributing the majority of the interpleaded funds to the prevailing parties and rescheduling the damages hearing. On February 17, 2010, following that rescheduled hearing, the trial court entered an order containing the following findings:

“By virtue of the Court's previous default judgment against Radetic, which was effective as to all claims, liability is no longer an issue. The sole issue before the Court is the amount of damages to be assessed against Radetic and in favor of the Murphy Defendants and Eufaula Agency.

“At the hearing, the Court heard testimony from Michael Murphy, Brenda Murphy, and Robert Powers, a real estate broker with Eufaula Agency, Inc. The evidence shows that the Real Estate Purchase Agreement between Anthony Radetic and Brenda and Michael Murphy was in the amount $600,000.00, and Radetic failed to close on the home. Mr. Powers testified that following the breach of the agreement by Mr. Radetic, the Murphys' continued efforts to market and sell the home for approximately one year. Mr. Powers testified that during that time the local real estate market declined, and they received no offers on the home. On or about January 17, 2007, almost a year after Radetic failed to close on the home, the Murphy Defendants finally received an offer and entered into a contract ... to sell the home at a price of $425,000.00. The parties closed on the sale of this home on February 2, 2007. Therefore, the Murphy Defendants were damaged in the amount of $175,000 by virtue of Radetic's breach. Eufaula Agency was paid a commission of $20,500.00. The evidence showed that had Radetic closed on the home, Eufaula Agency would have earned a commission of $36,000.

“Thus, the evidence presented indicates that because of the market conditions, the Murphy Defendants received no other offers on the home subsequent to Radetic's breach of contract until they entered into the [January 2007] contract ... despite the fact that they [made] continuing efforts to market and sell the home. They made a good faith effort to mitigate their damages.

“The sales contract between the Murphy Defendants and Radetic was admitted into evidence. Paragraph 16 provides, in pertinent part, as follows:

“ ‘If Buyer/s default by wrongfully refusing to purchase, or by breaching this agreement, and the property does not close, Buyer/s agree (i) to pay said full brokerage fee due broker/s had sale been consummated and (ii) Seller/s may pursue all remedies available to Seller at law and equity including but not limited to Specific Performanceand may elect that the earnest money be forfeited by Buyer/s as liquidated damages which shall be divided equally between (1) Seller/s and (2) listing broker (the sum to listing broker not to exceed the full commission).... In the event of a default by either Seller/s or Buyer/s, all reasonable attorney fees and court costs may be recovered against the defaulting party.’ (Emphasis added.)

“The contract provides that the Murphy Defendants may claim damages on the loss of the sale—that is, the difference in what Radetic should have paid them and what they ultimately sold the home for—plus half of the earnest money. The non-breaching parties are also entitled to attorneys fees. The Court has previously awarded and distributed to the Murphy Defendants part of their share of the earnest money, net of attorney fees, in the total amount of $7,250. Thus, the Murphy Defendants are entitled to a judgment in the amount of (1) $175,000, which is the difference in the price Radetic had agreed to pay for the home and the amount that [a subsequent purchaser] ultimately paid, plus (2) $2,750 (the balance of the earnest money, previously interpled and distributed to pay...