October 17, 2017

Colorado Court of Appeals: Statutory Limitations Period Began when Broker Knew of Contractual Breach

The Colorado Court of Appeals issued its opinion in International Network, LLC v. Woodard on April 6, 2017.

Breach of Contract—Exclusive Right-to-Sell Listing—Statute of Limitations—Jury Instructions.

Woodard (seller) owned a 100-acre ranch. In 2006 he signed an exclusive right-to-sell listing agreement with International Network, Inc. (broker). The agreement was for a six-month listing period and provided for a percentage commission to be paid to broker upon sale. Seller had the absolute right to cancel the agreement at any time upon written notice.

Approximately four months into the listing period, seller began negotiating with an attorney who represented a group of potential buyers. Seller did not disclose his negotiations to broker. About a month after commencing these discussions, seller abruptly cancelled the listing agreement without cause. Broker ceased marketing the property. After the listing period had expired, but within the 90-day holdover period set forth in the agreement, seller and the buyers finalized an agreement resulting in the sale of the property.

Seven years later, broker initiated this action against seller for breach of contract based on seller’s failure to comply with the referral provision, which required seller to conduct all negotiations for the sale of the property through broker and refer to broker all communications received from prospective buyers. Following trial, a jury found in favor of broker and awarded damages in the amount of the commission that would have been owed under the listing agreement.

On appeal, seller argued that the trial court erred in denying his motion for directed verdict and his post-trial motion for judgment notwithstanding the verdict because broker’s breach of contract claim was barred by the statute of limitations. C.R.S. § 13-80-101(1)(a) states that a breach of contract claim must be commenced within three years after accrual of the cause of action, and accrual occurs when the breach is discovered or should have been discovered. It was undisputed that seller breached the referral provision in 2006. Seller argued that under the facts, broker should have realized there might have been a breach of the referral provision and through the exercise of reasonable diligence should have discovered it in 2006. Broker asserted it had no knowledge of seller’s duplicity until broker’s agent heard seller’s testimony in another lawsuit in 2011 in which seller testified he had violated the listing agreement and intentionally concealed his negotiations to avoid paying a commission. Therefore, in commencing this action in 2013 broker was within three years of its discovery of the breach. Based on the record, the Colorado Court of Appeals could not conclude that the evidence, viewed in the light most favorable to broker, compelled a different result.

Seller also argued that it was error to not give a jury instruction on the elements of liability for recovery on a real estate commission claim, contending that the broker was not the procuring cause of the sale. Here, seller breached the referral provision and cannot use his intentional concealment of his negotiations to prevent broker from obtaining damages in the form of a commission. The court did not err in rejecting seller’s procuring cause instruction.

Seller contended the trial court erred by rejecting seller’s proposed jury instruction on the affirmative defense of laches. The trial court ruled, and the Court agreed, that seller’s improper conduct precluded his assertion of a laches defense.

Seller further argued that the court erred in denying him the right to impeach broker’s agent with certain evidence. The court precluded seller’s questioning due to lack of a sufficient foundation and acted within its discretion in limiting seller’s cross-examination.

Broker requested attorney fees and costs in accordance with the agreement, which the court awarded.

The judgment was affirmed and the case was remanded for further proceedings to award broker’s costs and attorney fees incurred on appeal.

Summary provided courtesy of The Colorado Lawyer.

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