The Supreme Court of Virginia has reversed a trial court's ruling in favor of a real estate broker, and has held that The Mottley Law Firm's client, who was the seller of real estate, does not owe money to the broker.
In October 2008, John Filichko signed a standard Virginia Association of Realtors "Exclusive Authorization to Sell" contract with real estate broker Ware Creak Realty Corp. of New Kent County, Virginia. The contract entitled Ware Creek the exclusive right, for a period of 7 months, to sell a parcel of real estate in New Kent County known as the "Jackass Flats" property on Route 60 in Lanexa. After the initial period of exclusivity, the contract allowed for a 90-day period of "non-exclusivity." During the 90-day period of non-exclusivity, Ware Creek could still earn a commission on a sale of the property, but only if it introduced and "sold" the property to a buyer within the 90-day period of non-exclusivity. After the 90-day period, Ware Creek had no right to a commission even if it introduced a buyer to the property.
The initial exclusive period passed without Ware Creek selling the property to a buyer. But during the 90-day non-exclusive period, Ware Creek introduced the property to two gentlemen who wanted to buy it. They signed a contract to buy the property. But the sale was "contingent" on the purchasers finding "adequate and suitable financing" for the purchase. And that is when the trouble began. No bank would lend them the money to buy the Jackass Flats property. After several months went by, the purchasers gave up. They had a conversation with the Ware Creek realtor, in which they told him to cancel the deal. According to them, he agreed.
Eight months later, one of the gentlemen who signed the failed purchase contract saw Mr. Filichko's grandson at a local gas station in New Kent County. He told the grandson that he was still interested in the property, but only if Mr. Filichko would consider owner financing. The grandson encouraged him to speak with Mr. Filichko, which he did. The two men who signed the failed purchase contract also brought in a new investor who had additional money for a down payment. The three purchasers quickly negotiated and signed a new purchase contract for the property with Mr. Filichko. Although the new contract was for the same price as the initial contract, which failed to close 8 months earlier, the new contract had the new investor as one of the three people signing the contract, and it also included 90% owner financing by Mr. Filichko. Shortly thereafter, the sale closed and the property was transferred to a limited liability company formed by the three men who signed the purchase contract.
When Ware Creek learned of the sale, it sued Mr. Filichko, claiming that it was owed a commission on the sale. Ware Creek argued that the second contract was really nothing more than an elaborate attempt by Mr. Filichko to avoid paying a real estate commission on the first contract. It also argued that, by agreeing to owner financing, the financing contingency in the first contract was satisfied, albeit 8 months later.
The trial judge in New Kent County Circuit Court agreed with Ware Creek, and ordered Mr. Filichko to pay Ware Creek a commission. But Mr. Filichko appealed the ruling to the Supreme Court of Virginia. In the appeal, which involved the interpretation of the Exclusive Authorization to Sell form, the Virginia REALTORS Association made an appearance and filed an amicus curiae, or "friend of the court," brief, in which the Association sided with Ware Creek.
The Supreme Court heard arguments on the appeal on September 11, 2018. On October 4, 2018, in an unpublished opinion linked here, the Supreme Court of Virginia agreed with Mr. Filichko's argument. The Supreme Court held that Mr. Filichko was not obligated to pay a commission to Ware Creek. The Supreme Court also remanded the case to the trial court in New Kent County for the trial judge to award Mr. Filichko his attorneys' fees.