Opinion ID: 1367529
Heading Depth: 1
Heading Rank: 5

Heading: the trial court erred in awarding damages which represented a commission for the broker's services

Text: In spite of the fact that Wayne did not seek recovery for a commission to Reynolds and presented no evidence that Reynolds sought payment, the trial court granted $4,460 to Mrs. Wayne for real estate commission owed to Reynolds. We believe that the trial court erred in this regard. Idaho has, in the past, adopted the traditional rule that a broker earns his commission when he procures a buyer who is ready, willing and able to purchase on terms acceptable to the seller. Rogers v. Hendrix, 92 Idaho 141, 438 P.2d 653 (1968). A growing number of courts have, however, added a requirement that there must be a closing of title for the broker to receive a commission, adopting the rationale of Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843 (1967): When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract. 236 A.2d at 855. This position was addressed by our Court of Appeals in Strout Realty, Inc., v. Milhous, 107 Idaho 330, 689 P.2d 222 (Ct.App.1984), where a seller under an installment land contract claimed that he was not liable for the commission because the buyer defaulted before he had fully performed and was therefore not ready, willing, and able. In analyzing the point in time when the ability of the buyer is to be determined, the Court of Appeals employed the Ellsworth Dobbs rule in finding that the commission had been earned at the time the transaction was closed. We also adopt the three-part test set out in Ellsworth Dobbs as the general rule to determine when a real estate broker earns his commission. Because the transaction between Lipsky and Wayne was never closed, Reynolds did not earn his commission. The adoption of this rule does not, however, alter the obligation to pay the commission if the sale is not completed due to the fault of the seller. This is also recognized in Ellsworth Dobbs where the court, after setting out the three-part test, went on to say: If the contract is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his ... there is no right to commission against the seller. On the other hand, if the failure of completion of the contract results from a wrongful act or interference of the seller, the broker's claim is valid and must be paid. In short, in the absence of default by the seller, the broker's right to commission against the seller comes into existence only when his buyer performs in accordance with the contract of sale. 236 A.2d at 855. Paragraph 15 of the agreement executed by Lipsky and Wayne provides: In the event of default in the performance of the terms and conditions of this agreement by either party, the defaulting party agrees to pay the broker the commission which the broker is entitled to receive from the Seller for his/her services in connection with the sale of the premises. It is clear that Wayne, as the non-breaching party, is not liable for any commission to Reynolds under this provision of the agreement. In determining whether Lipsky is liable for payment of a commission to Reynolds, we note that Lipsky joined Reynolds in this action with a third-party complaint, alleging that Reynolds had represented that Lipsky would only be required to forfeit his earnest money if he chose not to close the sale. Reynolds cross-claimed for the commission he claimed was due from Lipsky as the defaulting party. Prior to trial, Lipsky and Reynolds reached a settlement and dismissed these claims. We hold that Reynolds' claim for a commission on this transaction has been extinguished, and that under the circumstances, it was error for the trial court to award a sum for Reynolds' commission to Wayne. The trial court calculated Wayne's actual damages as follows:

10. Reduction of $750, as a set-off for $500 rent actually received by Wayne and $250 for the value of time Wayne let friends stay in the condominium at no cost. We believe this calculation to be error. As argued by Wayne herself, the usual measure of actual damages for a purchaser's breach of contract for sale of realty is the difference between the contract price and the market value of the property at time of breach, plus rental value for any period of possession by the purchaser. Lawrence v. Franklin, 113 Idaho 895, 749 P.2d 1020 (Ct.App.1988); Smith v. King, 100 Idaho 331, 597 P.2d 217 (1979). The trial court erred in awarding the difference between the contract price and the price Mrs. Wayne obtained on resale a year later. As stated in Dobbs' treatise on damages: The general rule applied where the purchaser under a real estate contract refuses to go through with his purchase is that he is liable for the vendor's loss of bargain, plus any appropriate consequential damages. This means the vendor will recover the difference between the market value and the contract price on the date of breach or on the date at which he regains possession of the land.... The rule is that the vendor's loss is measured by the market price of the property as of breach date, not the price he obtained on resale at a later date. The price obtained on resale may, however, be sufficient evidence of the market value at the date of breach, provided market conditions are similar and the time lapse between the date of breach and the resale is not great. Dobbs, supra, § 12.11 at page 853. It was also error for the trial court to award Wayne the carrying costs for the time period between the breach and the resale. The damages for which Lipsky is liable must be measured at the time of the breach, and where he was never in possession of the property, Mrs. Wayne may not recover for the interest on the mortgage, the taxes, and the utilities. Dobbs, supra; Allen v. Kingdon, 723 P.2d 394 (Utah, 1986). We therefore remand this matter for a recalculation of the damages which should be awarded to Mrs. Wayne.