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Whirlwind Properties, LLC v. John John and Boone Group, Ltd.

Court of Appeals of Missouri, Western District, First Division

October 17, 2017

WHIRLWIND PROPERTIES, LLC, Respondent,
v.
JOHN JOHN AND BOONE GROUP, LTD, D/B/A RE/MAX BOONE REALTY, Appellants.

         Appeal from the Circuit Court of Boone County, Missouri The Honorable Kevin Crane, Judge.

          Before: Mark D. Pfeiffer, Chief Judge Presiding, James Edward Welsh, and Cynthia L. Martin, JJ.

          JAMES EDWARD WELSH, JUDGE.

         Appellants John John ("John") and Boone Group, Ltd, d/b/a Re/Max Boone Realty ("ReMax") (collectively, the "Appellants") appeal the judgment of the Circuit Court of Boone County in favor of Respondent Whirlwind Properties, LLC ("Whirlwind") declaring that Appellants were not entitled to any portion of the damages received by Whirlwind from a third-party arising out of the third-party's failure to close on the sale of property and damages therefrom. Appellants raise two points on appeal.

         Factual Background[1]

         John works as a real estate agent for his broker ReMax. John and Whirlwind entered into a contract entitled "Authorization to Show Property" that allowed John to show property that Whirlwind wished to sell, consisting of two mobile home parks with ninety-three occupied mobile homes (the "Property"), for a period of no more than thirty days after the effective date of the agreement (the "Authorization"). The Authorization became effective on March 3, 2015, and expired thirty days thereafter (the "Authorization Period"). The Authorization was a form contract provided by John for Whirlwind's representative to sign. The Authorization further provided that

if [Whirlwind] sells or leases the Property during the Authorization Period or within 180 days after expiration thereof (the "Protection Period") to a prospect introduced to the Property by [John] [ . . . ] then Whirlwind will pay John compensation of [4%] to be paid in cash at closing, unless otherwise provided herein.

         The Protection Period extended to September 29, 2015.

         Within the Authorization Period, John introduced Whirlwind to a prospective buyer, Fulton Medical Center, LLC ("Fulton Medical"). On March 23, 2015, Whirlwind and Fulton Medical executed a Real Estate Purchase and Sale Contract (the "Sale Contract"), in which Fulton Medical agreed to purchase the Property for four million dollars. The closing was set by Whirlwind and Fulton Medical to occur on January 21, 2016, which was subsequently extended by two additional months to March 21, 2016, which fell outside of the Protection Period.

         The Authorization included a liquidated damages clause in the event that the sale of the Property failed to close. The provision states:

If the transaction shall not close due to fault of [Fulton Medical], any net damages received by [Whirlwind] from [Fulton Medical] shall be divided equally between [Whirlwind] and [John] as liquidated damages and in lieu of further compensation provided, however, [John] shall in no event receive more money in lieu of compensation than the amount agreed to herein as compensation for brokerage services.

         The Sale Contract between Whirlwind and Fulton Medical also contained a liquidated damages clause in the event Fulton Medical failed to fulfill its obligations under the Sale Contract, which provided that

[Whirlwind] shall be entitled, as its sole and exclusive remedy, to retain the Earnest Money Deposit as liquidated damages, [FULTON MEDICAL] AND [WHIRLWIND] HEREBY ACKNOWLEDGE AND AGREE THAT [WHIRLWIND'S] DAMAGES IN THE EVENT OF SUCH A BREACH OF THIS CONTRACT BY [FULTON MEDICAL] WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE EARNEST MONEY DEPOSIT, TOGETHER WITH ALL INTEREST EARNED THEREON IS THE PARTIES' BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES [WHIRLWIND] WOULD SUFFER IN THE EVENT THE TRANSACTION PROVIDED FOR IN THIS CONTRACT FAILS TO CLOSE, AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE EFFECTIVE DATE. [FULTON MEDICAL] AND [WHIRLWIND] AGREE THAT [WHIRLWIND'S] RIGHT TO THE EARNEST MONEY DEPOSIT AND ALL INTEREST EARNED THEREON SHALL BE THE SOLE REMEDY OF [WHIRLWIND] AT LAW OR IN EQUITY IN THE EVENT OF A BREACH OF THE CONTRACT BY [FULTON MEDICAL]; AND [WHIRLWIND] HEREBY WAIVES ALL OTHER CLAIMS FOR DAMAGES OR FOR SPECIFIC PERFORMANCE.

("Sale Contract Liquidated Damages Clause")

         Fulton Medical breached the Sale Contract by failing to close by the agreed date, and Fulton Medical released its $100, 000.00 earnest money deposit from escrow to Whirlwind on March 21, 2016, as provided by the Sale Contract Liquidated Damages Clause. John, however, filed a realtor lien on the funds held in escrow and refused to release the entirety of the funds claiming he was entitled to an equal share of the damages.

         Whirlwind filed suit against the Appellants, which asserted seven counts, including one count for a declaratory judgment that sought a judgment by the circuit court declaring that because the Property did not sell during the Protection Period and "never sold", John was not entitled to any compensation under the Authorization. A bench trial was conducted by the circuit court with the facts stipulated by the parties. The parties' stipulation included that Whirlwind had suffered $496, 159.90 in damages as a result of Fulton Medical's breach of the Sale Contract.

         The circuit court's judgment dismissed all of Whirlwind's claims except for its request for a declaratory judgment. The circuit court's judgment held that the Authorization expired without a sale within the Protection Period, which extinguished John's right to compensation. The circuit court also found that the term "net damages" used in the Authorization's Liquidated Damages Clause was ambiguous, and the circuit court interpreted it to mean that John was only entitled to an equal share of any damages received by Whirlwind in excess of its actual damages. Thus, the circuit court subtracted the $100, 000.00 in escrow due to Whirlwind from its actual ...


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