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SHALIMAR DEV'T, INC. v. FDIC (59847)


SHALIMAR DEV’T, INC.

v.

FDIC


April 16, 1999
Record No. 981365

SHALIMAR DEVELOPMENT, INC.

v.

FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER
FOR HERITAGE SAVINGS BANK

FROM THE circuit court of the city of Richmond
Theodore J. Markow, Judge
Present: All the Justices
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.


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 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 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
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 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. 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 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.
Sect. 1821(e)(3), no liability for any subsequent commission
on a future completed sale could accrue to RTC, Heritage Federal,
or, ultimately, FDIC.

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.

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.

For these reasons, we will affirm the judgment
of the trial court.
[2]

Affirmed.

 

 

FOOTNOTES:

[1] A 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.

[2] Our resolution of the main issue in
this appeal renders moot the cross-error assigned by FDIC.
Accordingly, we express no opinion on that issue.

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