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Court: Broker must pay back commission

Jennifer Nelson
January 1, 2008
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A broker who breaches his fiduciary duty to disclose material information to a client loses the right to collect a commission for his services, the Indiana Supreme Court ruled today.

The high court unanimously reversed a trial court decision finding that although a broker breached his fiduciary duty to his client, his commission shouldn't be revoked and be repaid to his client.

In Tonda Beth Nichols v. Rex David Minnick and R. David Minnick Inc. d/b/a Commercial Properties, No. 53S01-0711-CV-515, Nichols sued Minnick for a $22,500 commission on the sale of a gentleman's club and bar she owned in Bedford to James Blickensdorf. Nichols hired Minnick as her real estate broker to sell the club and signed a preprinted real estate listing agreement giving Minnick the exclusive right to sell the property with a 10 percent commission on the sale price.

Minnick showed the property to only one potential buyer, Blickensdorf, who made an offer of $225,000, which Nichols accepted. The agreement called for a $25,000 cash down payment and a five-year installment note for $175,000. The agreement also stated Blickensdorf would pay Minnick's $22,500 commission.

After Blickensdorf took over the club, he had financial problems. Without Nichols' knowledge, Minnick advanced money to Blickensdorf. He had also given Blickensdorf money for the cash down payment on the club. After Blickensdorf paid off the club in full to Nichols, he transferred the shares of the club to Richards Properties Inc., which was partly owned by Minnick.

After Minnick filed a lawsuit against Nichols for failing to convey the parking lot next to the club, which she still owned, Nichols discovered Minnick had given money to Blickensdorf for the down payment and to help keep the club afloat.

Nichols sued Minnick for his commission, claiming he used Blickensdorf as a straw man to purchase the club and he breached his fiduciary duty to her by failing to disclose those loans. The trial court ruled Minnick breached his fiduciary duty, but disgorgement of his commission wasn't an appropriate remedy because Nichols didn't prove she suffered monetary damages.

The trial court also found the breach was not serious because Nichols had reason to know of a relationship between the two men based on the purchase agreement in which Blickensdorf stated he would pay Minnick's commission. The Indiana Court of Appeals affirmed the trial court decision. The Supreme Court granted transfer because the trial court applied the wrong legal standard to the case.

Minnick argued Nichols shouldn't receive tort damages or restitution, which are remedies for the breach of duty to disclose material information, because Nichols didn't suffer a loss from the sale because she received the total purchase price. The Supreme Court agreed with the trial court, which found Nichols didn't prove she suffered any monetary loss as a result of Minnick's actions. However, the trial court erred when it concluded disgorgement wasn't required, wrote Justice Theodore Boehm.

Disgorgement may be the only available remedy for someone because harm to the principal is difficult to prove, and it removes the temptation for an agent to act in a way that breaches the fiduciary duty in hope no harm will happen to the principal or the principal will be unable to prove the harm in litigation. The disgorgement rule facilitates the principal's trust on which a fiduciary relationship is grounded, the justice wrote.

The trial court's conclusion was inconsistent in that although Minnick breached his fiduciary duty to Nichols, the breach was not a serious violation that requires him to repay his commission. Disgorgement is required, although it may be of little consequence, Justice Boehm wrote. Minnick received a $22,500 note from Blickensdorf instead of a monetary payment. Equity requires that Minnick transfer to Nichols what he wrongfully obtained, which in this case is the note and any payments he received toward that debt, plus interest at the statutory rate 8 percent per annum.

"If Blickensdorf's note proves to be uncollectible, that merely reflects the fact that Minnick did not benefit from his breach, and restitution is not meaningful," he wrote.
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  1. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

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  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

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