Opinion ID: 2055386
Heading Depth: 1
Heading Rank: 1

Heading: The Negligence and Breach-of-Contract Issues.

Text: We first consider the Fishel estate's contention that there was insufficient evidence presented to permit a finding of negligence or breach of contract by Fishel or Short and that the district court should have granted its motion for judgment notwithstanding the verdict. Throughout the course of the litigation, plaintiffs' breach-of-contract claims have been predicated on the same alleged acts or omissions as their negligence claims. Consequently, for purposes of the issues under discussion, the negligence and breach-of-contract claims are indistinguishable. The district court permitted the jury to find that the defendants were negligent or had breached their duties under the listing agreement in the following particulars: (1) by giving an inadequate and incorrect explanation of the nonrecourse provision, (2) by not affirmatively recommending that plaintiffs obtain legal counsel in a matter in which their interests required it, and (3) in discouraging plaintiffs from seeking legal counsel. Although the Fishel estate strenuously argues that the evidence fails to support any of these theories of negligence or breach of contract, we believe that based on the evidence presented a jury might have found adversely to defendants as to any or all of the three specifications we have listed. Plaintiffs offered evidence, including the testimony of Short himself, that both Short and Fishel were required to maintain the standards articulated in article 17 of the National Association of Realtors' Code of Ethics in representing their clients. That standard reads as follows: The Realtor shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it. We recognized in Menzel v. Morse, 362 N.W.2d 465, 473 (Iowa 1985), that proof of a violation of this standard is evidence upon which a trier of fact may find negligence. The evidence concerning that which was said or not said by the parties to the litigation concerning the legal effect of the nonrecourse clause or the desirability of plaintiffs seeking legal counsel was in sharp dispute. If, however, the evidence presented is viewed in the light most favorable to the plaintiffs, it will support a finding by the jury that defendants failed to exercise the standard of care required of persons engaged in their business or profession. See Restatement (Second) of Torts § 299A (1965). Because of the interrelationship between the negligence and breach-of-contract issues in the present case, we conclude that proof of a breach of this standard of professional conduct would also establish a violation of the agent's duties under the listing agreement with the broker. The district court did not err in accepting the jury's findings on the negligence and breach-of-contract issues. II. The Proximate Cause Issues. The second issue concerns the Fishel estate's contention that, assuming negligence or breach of contract has been established, there was an insufficient showing of a causally connected injury to permit plaintiffs to recover. This contention is based primarily on the premise that, even if the contract had made the buyers responsible for satisfying the unpaid balance, plaintiffs have failed to show that the underlying debt would have ultimately been collectible. In support of this theory, the estate relies on the absence of evidence in the record concerning the financial condition of Esker and his associates. A. Causal showing of actual financial loss. Although we have referred to collectibility as an element to be established in a claim for professional malpractice, it is essential that in each case this concept be adapted to the chain of causal injury on which the plaintiff's right of recovery depends. Where, as in Whiteaker v. State, 382 N.W.2d 112, 114-15 (Iowa 1986), and Pickens, Barnes & Abernathy v. Heasley, 328 N.W.2d 524, 526 (Iowa 1983), the claim consists of the client's assertion that an existing right to recover money from a specified third person was lost due to professional negligence, the award must be based on the value of the claim against the third party. Whiteaker, 382 N.W.2d at 114. In these situations, the plaintiffs must show not only that a right of recovery could have been established but also that an ascertainable amount could have been collected from the obligor. Id. at 114-15. Unlike the situation before the court in Whiteaker and Heasley, plaintiffs' theory of injury in the present litigation does not involve the loss of an existing right to recover money from a specified third party. The evidence does not indicate that if the nonrecourse clause had been adequately explained to plaintiffs this would have resulted in a contract making Esker and his associates liable for the unpaid principal balance. The transaction originated with an offer from the buyers limiting their liability in the manner specified in the nonrecourse clause. There is no suggestion in the record that they would have agreed to be personally liable for the unpaid contract balance. Plaintiffs' chain of causal injury, if any, must, therefore, be traced to the denial of an opportunity to sell the property to some other willing buyer for its fair market value. Consequently, proof of damage does not depend on showing the solvency of the defendant buyers who defaulted on the contract. Rather, it depends on showing the availability of other buyers in the marketplace willing and able to buy and pay for the property. The evidence supporting plaintiffs' loss under this theory of recovery is at least as strong as that which was found to be sufficient in Burke v. Roberson, 417 N.W.2d 209, 213 (Iowa 1987). Such showing includes the testimony of defendant Short that plaintiffs' property could have been sold on the real estate market for between $2500 and $2600 per acre at the time of the Esker transaction. The jury could have found that the actions of the defendants caused plaintiffs to accept the offer of the defaulting buyers rather than refusing it and attaining a successful sale to someone else. The circumstances were sufficient, we believe, to sustain the finding of the jury as to the loss suffered by plaintiffs. B. Timeliness of assertion of damage theory on which plaintiffs nowrely. The Fishel estate contends that plaintiffs' effort to prove damages based on the loss of an opportunity to sell the property to unspecified buyers for its fair market value was not injected into the case until after the trial had begun. It urges that this theory conflicts with the theory of recovery which had been specified in a document filed by plaintiffs in response to a pretrial order requiring specification of damage theories. The estate urges that it was prejudiced by this untimely change in legal theory because it learned of the change too late to counter the evidence that the property could have been sold for $2500 to $2600 per acre. The document filed by plaintiffs in response to the pretrial order does appear to tie their injury to the price to be paid by the defaulting contract buyers. At the time this document was filed, however, plaintiffs still were maintaining a right to recover under a legal theory that defendants had warranted the collectibility of the Esker contract. That theory was withdrawn prior to the commencement of trial. Notwithstanding the fact that the import of their pretrial statement was recovery of the unpaid contract balance, we believe that the district court did not abuse its discretion in permitting the jury to consider the case under the theory of injury which was shown by the evidence. The theory of recovery to which plaintiffs ultimately resorted was thrust upon them by the factual setting of the transaction. III. Sufficiency of the Jury Instructions. Finally, we consider the Fishel estate's argument that the instructions to the jury were inadequate for purposes of conveying the requirement of collectibility. We disagree. Although the estate relies on our decision in Burke, 417 N.W.2d at 213, to support the claimed inadequacy in the instructions, we believe the instructions in the present case do not suffer from the same omissions found to exist in that case. In Burke, the court submitted the case on a theory of loss of opportunity to sell the property to someone other than the original contract buyers for its fair market value. The instructions did not advise the jury, however, that the plaintiffs in that case had to show that they would have in fact collected an ascertainable sum of money from such a sale. In the present case, the trial court's Instruction No. 19 advised the jury that, even if it found the defendants were negligent or had breached their contract, plaintiffs could not recover unless the evidence show[ed] that Plaintiffs would have received some greater amount than the amount actually received [from the down payment and bankruptcy sale] and you shall determine that amount. We believe this language supplies the vital ingredients which were missing in the Burke instructions. We have considered all arguments advanced by appellant and conclude that the judgment of the district court must be affirmed. AFFIRMED.