acceptable, the Ahmeds did not sign it right away. Instead, they contacted Colleen and asked her about the status of the termination form. Knowing nothing about the Feketes' new offer, and the Ahmeds' intention to sign that offer, Colleen signed the termination form on May 10 and sent it back to the Ahmeds. The following day, the Ahmeds signed the Feketes' offer. The sale to the Feketes closed one month later. When Colleen discovered that the Feketes had purchased the property, she filed suit in Wake County alleging breach of contract and fraud. The Ahmeds responded that they were not obligated to pay a commission because Colleen had signed the termination form on May 10, and that form included broad release language. In January 2015, a judge in Wake County agreed with the Ahmeds and entered judgment in their favor. ENTER THE LEGAL ACTION PROGRAM At this point, Colleen had personally invested a significant amount in legal fees. Although she wanted to pursue an appeal, she was concerned about incurring additional costs. Knowing that a published reversal of the Wake County judge’s decision by the Court of Appeals of North Carolina would provide valuable assistance to other REALTORS®, Colleen decided to request assistance from the Legal Action Committee. In February 2015, the committee agreed to Colleen’s request. With the financial assistance she received, Colleen filed her appeal. The principal argument she made on appeal was that the termination form should not be given effect, and its release language should be ignored because the Ahmeds had acted in bad faith. Specifically, Colleen argued that the Ahmeds had acted in bad faith when, on May 9, they asked Colleen to sign the termination form without disclosing that they had received a new offer from the Feketes, and they intended to sign that offer. In a well-reasoned decision published in May 2016, the Court of Appeals agreed with Colleen. The Court noted that there is a “covenant of good faith and fair dealing” implied in every contract. The Court found that Colleen had presented substantial evidence that the Ahmeds 10 INSIGHT • November 2018
Legal Action Program
Administered by the Legal Action Committee, the Legal Action Program exists to provide financial resources to parties engaged in litigation or administrative action. The case must present an opportunity to set or clarify legal precedent statewide on issues affecting NC REALTORS®, real estate licensees, real estate associations, private property owners or the real estate industry generally. Contact an NC REALTORS® staff attorney for a copy of the complete policy governing the Legal Action Program and an application form. Call 336-294-1415. had breached that duty when they asked Colleen to sign the termination form without disclosing that they had an acceptable offer in hand. The Court of Appeals found that if the Ahmeds breached their duty of good faith, Colleen was not bound by the release language in the termination form. Although the Ahmeds appealed this decision to the North Carolina Supreme Court, that Court affirmed the Court of Appeals in an opinion issued in September 2017. HOW CAN I USE THE LEGAL ACTION PROGRAM? Together, these very recent decisions by North Carolina’s appellate courts affirm the principle that an owner of a property may not escape liability for a real estate broker’s commission by terminating a listing agreement and then dealing directly with a purchaser who was produced as a result of the broker’s efforts. The Court of Appeals decision can and should be cited by real estate brokers across the state who find themselves faced with similar circumstances.
It should be noted that not all cases involving real estate brokers are eligible for consideration by the Legal Action Committee. A case is eligible if it relates to governmental agency action or investigation, or to actual or proposed litigation. In either situation, however, the case must “present an opportunity for clarifying precedent on issues of significance” to NC REALTORS®, local boards and associations of REALTORS® or related organizations, or a substantial portion of the NC REALTORS® membership. If you should be involved in a case that meets these criteria, you can submit a request for assistance from the Legal Action Program. Your request must be in writing, on the form prescribed by the Legal Action Committee, and must be filed with the Chief Executive Officer of NC REALTORS® at least 45 days prior to the next scheduled meeting of the Executive Committee. REALTORS® should contact an NC REALTORS® staff attorney for a copy of the complete policy governing the Legal Action Program and the current request form. #