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Appeals court: Developer owes despite unsold land

Appeals court: Developer owes despite unsold land

October 19th, 2017 by Bob Watson in Local News

A state appeals court ruled this week a Columbia land developer owes a Realtor half of the damages the developer received when a land sale fell through.

The land, at the south end of Columbia, was the site of two mobile home parks that were closed, forcing the occupants to move, in anticipation that Fulton Medical Center would build a 10-bed unit there.

But the hospital's plans fell through in July 2015, when the Missouri Health Facilities Committee, on a 5-2 vote, rejected the medical center's certificate of need application for the small hospital.

Fulton Medical Center then breached its contracted promise with Whirlwind Properties, the land owner and developer, to buy the land for $4 million.

A three-judge panel of the state appeals court in Kansas City this week noted, under terms of the sales contract between Fulton Medical Center and Whirlwind, there were specified liquidated damages if the sale never closed — the $100,000 earnest money Fulton Medical Center posted when it signed the original sales contract.

Columbia Realtor John John filed a lien against the settlement between Whirlwind and Fulton Medical Center, arguing he was entitled to half that money because of his contract with Whirlwind to show the land and bring potential buyers to the developer.

Whirlwind sued, and Boone-Callaway County Circuit Judge Kevin Crane agreed with the developer that Fulton Medical's breach of contract happened after the developer's agreement with John had run out.

The appeals court ruling Tuesday overturned Crane's decision.

John argued his contract with Whirlwind entitled him to 4 percent of the final sale price or half of the "net damages" if the sale failed — and his end of the deal was fulfilled when "Whirlwind and Fulton Medical executed the Sale Contract for the Property on March 23, 2015," the appeals court noted.

"The contract interpreted as a whole and in context supports John's interpretation that the parties intended that John earned his commission upon the execution of a sale contract, with the commission to be paid at closing," Judge James Edward Welsh wrote for the three-judge appeals court panel.

The judges also rejected Whirlwind's argument John didn't provide a "ready, willing and able" buyer because the contract between the developer and Fulton Medical included conditions that weren't met.

"There is no indication in the stipulated facts or in the circuit court's judgment that Fulton Medical was not a ready, willing, and able buyer, but only that it breached the contract by failing to close," Welsh wrote. "The mere fact that the contract was not performed does not mean that Fulton Medical was not a ready, willing, and able buyer."

Whirlwind also said John wasn't entitled to any money because it actually lost $469,159.90 in the failed deal, so there were no net damages for John to share, even after the $100,000 earnest money was paid.

But, the appeals court noted, the sales contract between Whirlwind and Fulton Medical included language that if the sale fell through, the liquidated damages would be treated as "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."

Therefore, the court ruled, "Whirlwind agreed to waive any other claim for damages it may have had (and) pursuant to (John's contract with Whirlwind), the liquidated damages must be divided equally between Whirlwind and John."

Fulton Medical Center was not involved in the lawsuit between Whirlwind and John.

Last month Fulton Medical Center was sold to Kansas City-based EmpowerHMS.

The land involved in the failed transaction remains empty and for sale.