Rohauer v. Little
| Decision Date | 27 April 1987 |
| Docket Number | No. 85SC226,85SC226 |
| Citation | 736 P.2d 403 |
| Parties | Frank G. ROHAUER and Suzanne M. Rohauer, Petitioners, v. Floyd D. LITTLE and Joyce G. Little, Respondents. |
| Court | Colorado Supreme Court |
Dixon and Snow, P.C., Jerre W. Dixon, Denver, for petitioners.
Darrell S. Elliott, P.C., Denver, for respondents.
Duane Woodard, Atty. Gen., Charles B. Howe, Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Linda K. Baker, First Asst. Atty. Gen., Denver, for amicus curiae, Colorado Real Estate Com'n.
Gorsuch, Kirgis, Campbell, Walker and Grover, John L. Ferguson, Denver, for amici curiae, Nat. Ass'n of Realtors and Colorado Ass'n of Realtors.
We granted certiorari to review the decision of the court of appeals in Little v. Rohauer, 707 P.2d 1015 (Colo.App.1985), which held that the defendants-petitioners, Frank G. and Suzanne M. Rohauer, were liable to the plaintiffs-respondents, Floyd D. and Joyce G. Little, in the amount of $20,000 as liquidated damages for the Rohauers' breach of a real estate contract for the purchase of the Littles' home. In rejecting the Rohauers' claim that they were excused from their contractual obligation due to the Littles' failure to furnish them with a title insurance commitment within the time required by the contract, the court of appeals held that the Littles satisfied their obligation by furnishing the title insurance commitment to a real estate salesperson employed in the office of the listing broker because, in the court of appeals' view, the real estate salesperson was an agent of the Rohauers. We hold that, in the absence of a written agreement authorizing the listing broker or salesperson to act on behalf of a purchaser, such broker or salesperson stands in an agency relationship to the seller only and not to the purchaser. We therefore reverse that part of the judgment which holds that the delivery of the title insurance commitment to the salesperson of the listing broker constituted delivery to an agent of the Rohauers. We, however, affirm that part of the judgment upholding the validity of the liquidated damages provision, and we direct that the case be returned to the trial court for the purpose of determining whether the Littles substantially performed their contractual obligation and thus rendered the Rohauers liable to them pursuant to the liquidated damages provision of the contract.
Floyd D. and Joyce G. Little entered into an exclusive listing agreement with the real estate brokerage firm of Coldwell Banker whereby Coldwell Banker, through its salesperson Dorothy Porter, undertook to sell the Littles' property in Arapahoe County, Colorado. 1 In June 1981, Rhonda Gorenz, another salesperson in the same Coldwell Banker office in which Porter was employed, received a telephone call from the employer of Frank G. Rohauer, informing her that Rohauer was moving from Houston, Texas, to Denver and would need assistance in finding a home. Gorenz telephoned Rohauer in Texas and obtained further information from him regarding his housing needs. After the conversation, Gorenz, in keeping with her normal practice, consulted the multiple listing service in order to find homes matching Rohauer's needs. Gorenz then made appointments to show several homes to Rohauer and his wife, and the Rohauers came to Denver for several days for that purpose. The first homes which Gorenz showed the Rohauers were those listed by Coldwell Banker, including the Littles' home. After several visits to the Littles' home, the Rohauers decided to make an offer to purchase it. Through conversations with Coldwell Banker's salesperson Dorothy Porter, Gorenz learned that the Littles would be willing to take less than the listed price of $525,000 if a cash contract could be obtained. She conveyed that information to the Rohauers, and a decision was made to make a cash offer of $400,000 for the property.
On June 18, 1981, Gorenz prepared a receipt and option contract incorporating the Rohauers' offer to purchase the Littles' property for $400,000 in cash or certified funds, of which $20,000 was to be tendered as earnest money. After obtaining Rohauer's signature on the receipt and option contract and his $20,000 check, Gorenz presented the contract to Porter, who in turn gave it to the Littles. The Littles rejected the offer, but informed Gorenz that they would be willing to sell their home for $425,000. This price, which was agreeable to the Rohauers, was written into the receipt and option contract, after which the Littles and Frank Rohauer initialed the changes and signed the contract.
The receipt and option contract acknowledged receipt of the $20,000 earnest money, to be held in escrow by Coldwell Banker as part payment for the property, and included the following provisions:
3. An abstract of title to said property, certified to date, or a current commitment for title insurance policy in an amount equal to the purchase price, at seller's option and expense, shall be furnished the purchaser on or before July 10, 1981. If seller elects to furnish said title insurance commitment, seller will deliver the title insurance policy to purchaser after closing and pay the premium thereon.
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9. Time is of the essence hereof, and if any payment or any other condition hereof is not made, tendered or performed as herein provided, there shall be the following remedies. In the event a payment or any other condition hereof is not made, tendered or performed by the purchaser, then this contract shall be null and void and of no effect, and both parties hereto released from all obligations hereunder, and all payments made hereon shall be retained on behalf of the seller as liquidated damages. In the event that the seller fails to perform any condition hereof as provided herein, then the purchaser may, at his election, treat the contract as terminated, and all payments made hereunder shall be returned to the purchaser; provided, however, that the purchaser may, at his election, treat this contract as being in full force and effect with the right to an action for specific performance and damages.
The contract further provided that title to the Little property was to be in the name of Frank G. and Suzanne M. Rohauer. The closing date designated in the contract was July 20, 1981.
After the contract was executed, Rohauer encountered difficulties in obtaining the necessary financing for the purchase of the home. He discussed with Gorenz certain alternative proposals to modify the terms of the contract. In early July Gorenz relayed these proposals through Porter to the Littles' attorney. On July 12, 1981, Gorenz was notified that the proposed modifications were not acceptable to the Littles, and she relayed that information to the Rohauers.
In the meantime, Porter and Gorenz had taken steps to secure the title insurance commitment which, pursuant to the contract, was to be furnished to Rohauer on or before July 10, 1981. Porter received the commitment from Transamerica Title Insurance Company at the Coldwell Banker office on July 7, 1981, and notified Gorenz of the receipt on the same date. The Rohauers, however, were not notified of the receipt of the title insurance commitment at this time and did not receive the commitment until a copy arrived by mail at their Houston home on July 15, 1981. By that time, the Rohauers had already stopped payment on their earnest money check and had advised Gorenz on July 14 that they were meeting with legal counsel and would probably not proceed with the purchase. The Rohauers failed to appear at the closing on July 20, 1981, and the Littles sold their home in November 1981 to other purchasers for $430,000.
The Littles brought suit against the Rohauers, claiming that the Rohauers had breached their contract by not proceeding with the closing and that they (the Littles) were entitled to the $20,000 earnest money as liquidated damages. The Rohauers defended on the basis that their duty of performance never arose, since the Littles had failed to furnish them with the title insurance commitment by July 10, 1981, as required by the contract.
The evidence presented at trial established that the exclusive listing agreement between the Littles and Coldwell Banker provided for a sales commission of seven percent, which was to be divided as follows: thirty percent of the commission to Gorenz, twenty-five percent of the commission to Porter, and the remaining forty-five percent to Coldwell Banker. It was undisputed that Gorenz had no formal agency arrangement with the Rohauers and that her compensation would be in the form of a share in the commission which the Littles paid to Coldwell Banker, the listing broker. Frank Rohauer testified that he had not authorized Gorenz to accept the title insurance commitment or to do anything else on behalf of himself or his wife in connection with the contemplated purchase of the Little home.
The trial court found that a valid contract had been formed, that the Rohauers had breached the contract, and that the Littles were thus entitled to the $20,000 earnest money deposit as damages. The court based its decision primarily on its determination that Gorenz "was the agent of the [Rohauers] to consummate all necessary acts in their behalf for the purchase of the residence" and that Gorenz was advised on July 7, 1981, "that a title commitment copy was available in the Coldwell Banker office where she worked." The Rohauers appealed, claiming that the trial court erred in finding that there was an agency relationship between them and Gorenz and in awarding the entire $20,000 to the Littles as liquidated damages. The court of appeals affirmed the judgment, and we granted certiorari to consider two issues: first, whether Rhonda Gorenz, a salesperson in the employ of Coldwell Banker, the listing broker, was acting as an agent of Rohauers, the purchasers, in connection with the sale of the Little home; and second, whether...
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