Crutchley v. First Trust & Savings Bank

Harold and Anita Crutchley (plaintiffs) sold 600 acres of land through real estate brokers Don Fishel and Jim Short (defendants). In their offer to purchase, the buyers offered to pay a total of $1,650,000 for the property by making a $300,000 down payment and paying the remaining balance over 20 years. The purchase offer also included a nonrecourse clause stating that in the event of a default, the Crutchleys would be entitled to possession of the property and any payments made, but no additional recourse from the buyers. When the buyers defaulted on the contract, the Crutchleys took possession of the land and kept the down payment. However, the value of land had decreased so much that when the Crutchleys filed for bankruptcy, the property was liquidated for only $576,465. The Crutchleys sued Fishel and Short for negligence and breach of contract for misadvising them about the nonrecourse clause and for failing to recommend that the Crutchleys consult a lawyer as required by the National Association of Realtors’ Code of Ethics (the Code of Ethics). At trial, the Crutchleys testified that Fishel and Short downplayed the significance of the nonrecourse clause by advising that it would only prevent the Crutchleys from touching certain assets of the buyers or going after the assets of the buyers’ spouses. The Crutchleys also testified that Short persuaded the Crutchleys not to consult legal counsel. Fishel was deceased at the time of trial. Short testified that he fully explained the legal significance of the nonrecourse clause and was satisfied that the Crutchleys understood its meaning. Short also testified that he did not dissuade the Crutchleys from seeking an attorney’s advice and that the Crutchleys were sophisticated real estate sellers who had freely consulted attorneys on other deals in the past. The jury found in favor of the Crutchleys, and judgment was entered against Fishel and Short for $536,250. Fishel’s estate appealed.