Title: Shalimar Development v. FDIC

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
SHALIMAR DEVELOPMENT, INC. 
 
OPINION BY 
v.  Record No. 981365 
JUSTICE LAWRENCE L. KOONTZ, JR. 
 
April 16, 1999 
FEDERAL DEPOSIT INSURANCE CORPORATION, 
RECEIVER FOR HERITAGE SAVINGS BANK 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Theodore J. Markow, Judge 
 
 
In this appeal, we consider whether the trial court erred 
in granting a renewed motion to strike, setting aside the 
greater part of a $222,000 jury verdict for the plaintiff for 
defendant’s breach of a real estate brokerage contract.  The 
dispositive issue is whether the trial court correctly 
determined that as a matter of law the plaintiff was not the 
procuring cause of a particular sale and, thus, that issue was 
improperly submitted to the jury.1
BACKGROUND 
Heritage Savings Bank (Heritage Savings), a federally 
chartered savings bank with its principal place of business in 
Richmond, acquired ownership of the Shalimar Condominiums (the 
property) in Myrtle Beach, South Carolina, as the result of a 
foreclosure on a “problem loan.”  On July 22, 1989, Heritage 
                     
1A portion of the jury’s award, $8,800 and interest thereon, 
related to the sale of two individual units of the property in 
question and is not an issue in this appeal. 
Savings contracted with Shalimar Development, Inc. (Shalimar), a 
real estate broker, to attempt to sell the unsold units in the 
property.  Under that contract, Shalimar was to receive at 
settlement a commission of “23% of the gross sales price” for 
each unit sold at or above specified minimum prices.  Although 
the contract provided Shalimar with the exclusive right to sell 
individual units, Heritage Savings retained the right to sell 
the entire property.  The contract further provided that either 
party could terminate the contract on 30-days’ notice. 
 
Shalimar successfully sold units in the property over the 
course of the next year and received its commissions on these 
sales.  John Woodley Wallace, Sr. and Betty Belk Wallace (the 
Wallaces) negotiated with Shalimar for the purchase of two 
units.  In the course of these negotiations, upon Shalimar’s 
suggestion, the Wallaces indicated that they were interested in 
purchasing all the remaining units in the property.  
Accordingly, Shalimar conducted negotiations with the Wallaces 
and apprised Heritage Savings that a sale of all the remaining 
units to a single buyer was possible.  Heritage Savings 
authorized Shalimar to negotiate a sale of the remaining units 
for a sales price of between 1.8 and 2.1 million dollars.  The 
Wallaces rejected this price as “too high.” 
 
In July 1990, Heritage Savings terminated its brokerage 
contract with Shalimar.  Over the next several months, according 
 
2
to Anthony P. Renaldi, Heritage Savings’s executive vice 
president in charge of real estate lending, employees of 
Heritage Savings had “several conversations” with the Wallaces 
concerning the purchase of the remaining units of the property, 
but no agreement was reached. 
On October 11, 1990, Charles McCotter, Shalimar’s 
principal, believing “that [Heritage Savings] had struck a deal 
with the Wallaces for the remaining units,” caused a motion for 
judgment to be filed on behalf of Shalimar alleging that 
Heritage Savings had breached the parties’ contract in that the 
bank had “failed and refused to pay Shalimar any of the amounts 
due it.”  Shalimar further alleged that its damages were “not 
less than $150,000,” but did not otherwise give specific details 
of the alleged sales upon which it asserted it was due a 
commission. 
 
On October 19, 1990, the Office of Thrift Supervision, 
pursuant to federal law, placed Heritage Savings in receivership 
and appointed the Resolution Trust Corporation (RTC) as 
receiver.  On that same day, the Office of Thrift Supervision 
chartered a new bank, Heritage Federal Savings Bank (Heritage 
Federal), placed this bank in conservatorship, and appointed RTC 
as conservator.  As a result, Heritage Federal assumed the 
operations of Heritage Savings.  Still on the same day, the 
 
3
property in question was conveyed from Heritage Savings to 
Heritage Federal. 
Thereafter RTC, as conservator of Heritage Federal, resumed 
negotiations with the Wallaces and ultimately reached an 
agreement in April 1991 to sell the remaining units in the 
property to them for $1,010,000.  By deed dated May 9, 1991 and 
recorded May 15, 1991, Heritage Federal conveyed the property to 
the Wallaces. 
 
RTC, as receiver for Heritage Savings, filed an answer to 
the October 11, 1990 motion for judgment denying any liability 
to Shalimar.  After a lengthy period of discovery, a jury trial 
commenced in the trial court on February 9, 1998.  The Federal 
Deposit Insurance Corporation (FDIC) assumed the defense of the 
suit as successor to RTC.  In addition to evidence in accord 
with the above recounted facts, FDIC adduced testimony from Mr. 
Wallace and his attorney, directly contradicting Shalimar’s 
evidence, that the first discussions concerning buying the 
remaining units were initiated by Heritage Savings sometime 
after Shalimar ceased to market the property.  The Wallaces’ 
attorney testified that the first mention in his records of the 
sale of the remaining units to his clients was in a December 3, 
1990 telephone conference. 
 
At the conclusion of all the evidence, the trial court took 
FDIC’s motion to strike under advisement and the case was 
 
4
submitted to the jury.  The trial court instructed the jury that 
“[i]n order for Shalimar Development to have been the procuring 
cause of the sale, it must have been responsible for causing a 
series of events which, without break in their continuity, 
resulted in completing the sale.”  The jury returned its verdict 
for Shalimar, awarding $222,000 in damages.  FDIC made a motion 
to set aside the jury verdict, and the trial court took the 
motion under advisement, directing the parties to file briefs. 
 
In an order dated April 8, 1998, the trial court sustained 
the motion to set aside the jury verdict, finding that  
the evidence [was] insufficient to establish that 
Shalimar was the actual “procuring cause” of the April 
1991 transaction.  Due to the pricing impasse, the 
termination of [Shalimar’s brokerage] contract, and 
the receivership, it was erroneous to submit the issue 
to the jury as reasonable people could not find this 
series of events to be continuous.  The facts of 
[Shalimar’s] original brokerage role and introduction 
of the Wallaces to the property are insufficient to 
sustain its entitlement to a commission in light of 
the break in the continuous series of events leading 
up to the sale. 
 
 
We awarded Shalimar this appeal.  We also granted FDIC’s 
assignment of cross-error asserting that Shalimar’s recovery 
should be limited to the amount claimed in its ad damnum. 
DISCUSSION 
We apply a well-settled standard of review to cases where 
the trial court has set aside a jury verdict.  As we explained 
in Lane v. Scott, 220 Va. 578, 260 S.E.2d 238 (1979), cert. 
 
5
denied, 446 U.S. 986 (1980), the trial court’s authority to set 
aside a jury verdict 
can only be exercised where the verdict is plainly 
wrong or without credible evidence to support it.  If 
there is a conflict in the testimony on a material 
point, or if reasonable [persons] may differ in their 
conclusions of fact to be drawn from the evidence, or 
if the conclusion is dependent on the weight to be 
given the testimony, the trial judge cannot substitute 
his conclusion for that of the jury merely because he 
would have voted for a different verdict if he had 
been on the jury. 
 
Id. at 581, 260 S.E.2d at 240 (citation omitted).  Further, in 
considering the evidence, we give the recipient of the verdict 
the benefit of all substantial conflicts in the evidence and all 
reasonable inferences that may be drawn from the evidence.  
Henderson v. Gay, 245 Va. 478, 481, 429 S.E.2d 14, 16 (1993); 
Fobbs v. Webb Building Ltd. Partnership, 232 Va. 227, 230, 349 
S.E.2d 355, 357 (1986); T.M. Graves Const., Inc. v. Nat’l 
Cellulose Corp., 226 Va. 164, 169-70, 306 S.E.2d 898, 901 
(1983). 
 
With regard to the dispositive issue in this case, “[w]e 
have said that a real estate broker is the procuring cause of a 
sale when it has ‘originated or caused a series of events which, 
without break in their continuity, result in the accomplishment 
of the prime object of [its] employment, which is, usually, to 
procure a purchaser ready, willing and able to buy on the 
owner’s terms.’”  Edmonds v. Coldwell Banker Residential Real 
 
6
Estate Services, Inc., 237 Va. 428, 432, 377 S.E.2d 443, 445 
(1989) (quoting Ford v. Gibson, 191 Va. 96, 103, 59 S.E.2d 867, 
870 (1950)).  Thus, under a “general contract” of employment, as 
distinguished from a “special contract,” the broker is entitled 
to its commission from the owner when the broker produces a 
purchaser ready, willing, and able to buy the property on the 
owner’s terms regardless of whether the sale is ultimately 
consummated.  See Kuga v. Chang, 241 Va. 179, 182-83, 399 S.E.2d 
816, 818 (1991); Kingsland Land Corp. v. Lange, 191 Va. 256, 
261, 60 S.E.2d 872, 874 (1950).  In contrast, a special contract 
imposes conditions upon the broker’s right to a commission; for 
example, “that the commission shall be payable only when the 
purchase price has been received, or when the contract for the 
purchase has been executed.”  Parker v. West, 191 Va. 710, 714, 
62 S.E.2d 862, 864 (1951). 
 
FDIC contends that Shalimar’s contract with Heritage 
Savings was a special contract.  Because there was no sale by 
Heritage Savings at the time Heritage Savings failed and RTC was 
appointed as receiver on October 19, 1990, FDIC further contends 
that Shalimar could not have been entitled to a sales commission 
at that time and, thus, under 12 U.S.C. § 1821(e)(3), no 
liability for any subsequent commission on a future completed 
sale could accrue to RTC, Heritage Federal, or, ultimately, 
FDIC. 
 
7
 
We need not determine whether the contract between the 
parties in this case was a general or special contract; nor is 
it necessary that we address the federal regulations implicated 
by the facts of this case.  The trial court determined that “the 
break in the continuous series of events leading up to the sale” 
precluded the jury from finding that Shalimar was the procuring 
cause of the sale of the property by Heritage Federal to the 
Wallaces.  Accordingly, we will sustain the trial court’s 
determination that Shalimar did not procure “a purchaser ready, 
willing and able to buy on the owner’s terms” if the record 
supports the conclusion that reasonable persons may not differ 
on that factual issue, causing the jury verdict to be plainly 
wrong as a matter of law. 
 
Even viewing the evidence and all reasonable inferences 
therefrom in the light most favorable to Shalimar, it is 
apparent that the Wallaces were not “ready, willing and able to 
buy on the owner’s terms” on October 19, 1990.  The Wallaces at 
that time had rejected Heritage Saving’s sales price and, thus, 
were clearly not willing to buy the property on the owner’s 
terms.  In addition, Renaldi, the former Heritage Savings 
employee who testified for Shalimar, was certain in his 
testimony that no agreement had been reached with the Wallaces 
prior to the failure of Heritage Savings. 
 
8
Thereafter, there is no dispute that Heritage Savings did 
not sell the property to the Wallaces, but transferred it to 
Heritage Federal pursuant to the applicable federal regulations.  
Moreover, the ultimate sale of the property was from Heritage 
Federal to the Wallaces for a sales price significantly below 
the price Heritage Savings had been willing to accept.  That 
contract was not entered into until six months after Heritage 
Savings failed, and there were clearly intervening negotiations 
between Heritage Federal and the Wallaces. 
 
In short, although the record supports Shalimar’s claim 
that it negotiated with the Wallaces for the sale of the 
remaining units in the property, there is simply no evidence 
that these negotiations resulted in or facilitated the ultimate 
sale of the property to the Wallaces.  While Heritage Federal 
may have benefited from the knowledge that the Wallaces had 
considered and rejected Heritage Savings’ prior offer, there was 
simply insufficient continuity between Shalimar’s negotiations 
and the ultimate sale to warrant a finding by the jury that 
Shalimar was the procuring cause of that sale.  “[T]he broker is 
not entitled to commission upon the sale merely because the 
purchaser is one whom he introduced . . . to the property.”  
Ford, 191 Va. 104, 59 S.E.2d at 870. 
 
9
 
For these reasons, we will affirm the judgment of the trial 
court.2
Affirmed. 
                     
2Our resolution of the main issue in this appeal renders 
moot the cross-error assigned by FDIC.  Accordingly, we express 
no opinion on that issue. 
 
10