John Terrell Fruge v. Onob, Inc. D/B/A Century 21 Mike D. Bono & Company

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

09-1028

JOHN TERRELL FRUGE

VERSUS

ONOB, INC., D/B/A CENTURY 21
MIKE D. BONO & COMPANY

**********

APPEAL FROM THE
LAKE CHARLES CITY COURT - NO. 07-2668
HONORABLE JOHN S. HOOD, CITY COURT JUDGE

**********

MARC T. AMY
JUDGE

**********

Court composed of John D. Saunders, Marc T. Amy and J. David Painter, Judges.

REVERSED AND RENDERED.

Joseph A. Delafield
3401 Ryan Street, Suite 307
Lake Charles, LA 70605
(337) 477-4655
COUNSEL FOR PLAINTIFF/APPELLEE:
John Terrell Fruge

Patricia B. McMurray
Renee C. Crasto
Adams and Reese, LLP
450 Laurel Street, Suite 1900
Baton Rouge, LA 70801
(225) 336-5200
COUNSEL FOR AMICUS CURIAE:
Louisiana Realtors

Scott David Johnson
Louisiana Realtors
4638 Bennington Avenue
Baton Rouge, LA 70808
COUNSEL FOR AMICUS CURIAE:
Louisiana Realtors

Timothy O’Dowd
921 Ryan Street, Suite D
Lake Charles, LA 70601
(337) 310-2304
COUNSEL FOR DEFENDANT/APPELLANT:
ONOB, Inc.

AMY, Judge.

The defendant broker company appeals the trial court’s judgment granting the

plaintiff’s motion for summary judgment. The defendant asserts that the trial court

erred in finding that it owed a duty to the plaintiff, a prospective seller, to place

deposit money given by the prospective buyer into its escrow account when the

plaintiff and a prospective buyer never executed a purchase agreement. For the

following reasons, we reverse and render judgment in favor of the defendant.

Factual and Procedural Background

The plaintiff, John Terrell Fruge (Fruge), hired the defendant, ONOB, Inc.

d/b/a Century 21, Mike D. Bono and Company (Bono), to sell a tract of land located

in Calcasieu Parish. Negotiations began between Fruge’s listing agent, Betty Sittig,

and the prospective buyer of the property, Innovative Hospitality Services (IHS), who

was represented by Luis DeCastro (DeCastro). DeCastro/IHS’s real estate agent was

Debbie Lafleur. Lafleur and Sittig were both real estate agents employed by Bono,

and, thus, a dual agency relationship existed.1

On July 31, 2006, Lafleur met DeCastro at the Lake Charles Airport and

presented him with an agreement to purchase or sell the tract of land for $550,000.00.

DeCastro initialed and dated the written agreement on every page, however, he did

not sign the purchaser’s line. Several days later, DeCastro sent Bono a $10,000.00

deposit check, as called for in the written agreement. According to Ms. Lafleur’s

deposition, when she received the deposit check, she reviewed the purchase

agreement and realized DeCastro had not signed the purchaser’s line. Bono then

placed the check into an office safe. Ms. Lafleur contacted DeCastro and informed

him that his signature was not on the purchase agreement, and according to Ms.

1
“‘Dual agency’ means an agency relationship in which a licensee is working with both
buyer and seller or both landlord and tenant in the same transaction.” La.R.S. 9:3891.

Lafleur’s deposition, DeCastro indicated that “he just wasn’t going to sign it.” Some

time later, DeCastro died in a plane crash, and a stop payment order was issued on the

$10,000.00 check.

On October 15, 2007, Fruge filed a petition against Bono contending that Bono

“owes [him] at least $10,000.00” because “[t]he conditions of the contract were met,

however, the $10,000.00 was not turned over to [him].” Fruge stated that “[t]he

check was not deposited in an escrow account under Louisiana law.” Bono answered

the petition, denying Fruge’s allegations and asserting that “[t]here was never an

agreed upon contract therefore the $10,000.00 was never delivered to plaintiff.”

Bono then filed a motion for summary judgment, alleging that because

DeCastro did not sign the purchase agreement, the parties never contracted, and

therefore no obligations were due to Fruge. Bono supported his argument by citing

La.Civ.Code art. 1839, which provides that “[a] transfer of immovable property must

be made by authentic act or by act under private signature.”

Fruge filed a cross motion for summary judgment, alleging that “but for the

negligence of the Bono sales agents in failing to secure a single signature and place

into their Sales Escrow Account the deposit, the matter would not be pending today.”

Fruge also contended that, apart from the absence of DeCastro’s signature, “every

requirement for sale of the Fruge property was met.”

After a hearing, the trial court issued a judgment denying Bono’s motion for

summary judgment and granting Fruge’s cross motion and awarding him $10,000.00.2

2
In written reasons for ruling, the trial court explained as follows:

We do not have a signed contract in this proceeding and thus, as a matter of
law, we do not have a contractual basis upon which a sale of the property could be
enforced. Both a contract to sell and the later actual transfer must be by authentic act.

On a negligence basis, however, we have a different question. Debbie

2

Bono now appeals, assigning the following errors:

Lafleur, the agent of the defendant, did not acquire the buyer’s signature on the offer
to purchase on July 31, 2006. This signature is the primary aspect and reason for
both the meeting and the preparation of the offer. We do not know why there was
not a signature because Ms. Lafleur did not specifically ask him to sign. If she had
asked him on that date to sign and he had refused, there would be no offer and Ms.
Lafleur could testify to that fact.

The buyer initialed every page of the offer and even wrote the time of his
initials but did not sign. Ms. Lafleur cannot explain why there was no signature.

The Louisiana Real Estate Commission has adopted Rules and Regulations
under LA.R.S. 37:1435.

Chapter 27. Escrow and Trust Accounts Sec. 2701. Resident Broker
Requirements.

“. . .Except as otherwise provided in this Chapter, all funds
received by a broker in connection with the sale of real estate shall be
deposited in this account.” (Emphasis supplied)

The money was not deposited into this account but was merely placed in an
office safe until much later a stop payment order was received upon the death of Luis
Castro.

....

Despite the mandatory language of Sec. 2701 “all” funds were not deposited
into the escrow account. Thus the plaintiff was never allowed to negotiate for those
funds under Section 2715.A.1. Nor was the plaintiff allowed to pursue those funds
in court by a concursus under Section 2715.A.3 and 4.

This was a dual agent designated agency. A duty is owed to both clients of
the agency. By not depositing the check the seller of the property was allowed to
pursue those funds. That favored the proposed buyer over the seller.

The court recognizes that purchasers (and sellers) change their minds all the
time. The very essence of the deposit is to show good faith and intent on both parties
to be bound. By not depositing the check into the escrow and trust account, it made
it too easy for the proposed purchaser to change his mind if he ever intended to be
bound in the first place. It is curious that he did not sign the contract but did send in
the deposit. Without the money being in escrow there would have possibly been no
reason for further negotiation.

Courts in this state are allowed to use the Rules and Regulations of state
agencies as guidelines in a determination of negligence. The Court finds that ONOB,
d/b/a Century 21 Mike D. Bono and Company was negligent in this proceeding by
not depositing the check in its escrow account. The Motion for Summary Judgment
of John Terrell Fruge is granted. The Motion for Summary Judgment of defendant
is denied. The sum of Ten Thousand and no/100 ($10,000.00) Dollars is awarded to
John Terrell Fruge together with legal interest from date of demand and all costs.

3

I. The Trial Court committed reversible error finding Bono acted
negligently by failing to deposit [IHS]’s check into its real estate escrow
account despite the fact that the unrefuted evidence showed that [IHS]
and Fruge never got beyond negotiations, never had an offer and
acceptance, did not execute an Agreement to Purchase and Sell, did not
enter any real estate transaction, and neither Fruge nor anyone else had
any interest in [IHS]’s check.

II. The Trial court committed reversible error assessing damages
without any evidence of damages being presented.

Discussion

Summary Judgment

Louisiana Code of Civil Procedure Article 966(B) states that summary

judgment shall be rendered “if the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to material fact, and that mover is entitled to judgment as a matter

of law.” In Boykin v. PPG Industries, Inc., 08-117, p. 4 (La.App. 3 Cir. 6/18/08), 987

So.2d 838, 842, writs denied, 08-1634 and 08-1649 (La. 10/31/08) 994 So.2d 537,

this court explained the standard of review applicable to motions for summary

judgment, stating:

Appellate courts review a trial court’s grant or denial of a motion
for summary judgment using the de novo standard of review, under the
same criteria that govern the trial court’s consideration of whether a
summary judgment is appropriate in any given case. Indep. Fire Ins. Co.
v. Sunbeam Corp., 99-2181, 99-2257 (La.2/29/00), 755 So.2d 226.

Merits

The defendant asserts that the trial court erred in finding that it owed a duty to

place the $10,000.00 into escrow absent a properly executed agreement to purchase

or sell and, accordingly, in failing to dismiss the plaintiff’s claim. As explained

below, we find merit in this argument.

4

We note that the trial court correctly determined that the parties did not execute

a valid agreement to purchase or sell in light of DeCastro’s failure to sign the

document. Depsite DeCastro’s partial completion of the document, the contract is

deficient in vital respects. Namely, it contains no notation in the area of the form

indicating it was “accepted as written,” “accepted as amended on addendum,”

“accepted as amended or countered,” or “rejected.” Rather, the adjacent boxes

remained unfilled. And, as stated, it lacks the “purchaser’s signature.” Louisiana

Civil Code Article 1839 provides, in pertinent part, that “[a] transfer of immovable

property must be made by authentic act or by act under private signature.”

Accordingly, the trial court did not err in determining that the plaintiff failed to

demonstrate that he could prove a contract claim at trial.

Duty/Risk

Otherwise, the plaintiff argued he would be able to recover for negligence due

to what he contends was the defendant’s responsibility to deposit the check into an

escrow account and/or to ensure the completion of the agreement to purchase or sell.

Louisiana Civil Code Article 2315 provides the foundation for negligence

claims in Louisiana. This article states, in part, that “[e]very act whatever of man that

causes damage to another obliges him by whose fault it happened to repair it.”

Negligence claims are examined using a duty/risk analysis, wherein the plaintiff must

prove each of the following elements: (1) the defendant’s conduct was cause in fact

of the plaintiff's injuries; (2) the defendant had a duty to conform conduct to a

specific standard; (3) the defendant breached that duty; (4) the defendant’s conduct

was the legal cause of plaintiff’s injuries; and (5) plaintiff sustained actual damages.

Perkins v. Entergy Corp., 00-1372 (La. 3/23/01), 782 So.2d 606. In order to succeed

5

in a negligence claim, every element of the claim must be established. Johnson v.

Gilmore, 99-1300 (La.App. 3 Cir. 4/5/00), 771 So.2d 662, writ denied, 00-1300 (La.

6/16/00), 765 So.2d 341.

The plaintiff relies on Chapter 46, Section 2701 of the Louisiana Real Estate

Commission’s Rules and Regulations, for the proposition that Bono had a duty to

deposit the $10,000.00 into an escrow account. This regulation provides:

A. A resident broker, including corporations, partnerships and limited
liability companies, engaged in the sale of real estate on behalf of clients
shall open and maintain a sales escrow checking account in a financial
institution in the state of Louisiana. . . . Except as otherwise provided
in this Chapter, all funds received by a broker in connection with the
sale of real estate shall be deposited in this account.

(Emphasis added).

The plaintiff contends that, because the $10,000.00 check related to a sale,

Bono had a duty, under the above regulation, to deposit it into an escrow account.

This assertion lacks merit. The regulation refers generally to “funds” and to “the sale

of real estate.” Yet, the plaintiff failed to produce evidence indicating that he would

be able to demonstrate that there was a contract regarding a sale of real estate.

Instead, the parties’ submissions indicate that the parties never proceeded past the

point of an incomplete agreement to purchase and sell. Furthermore, the purpose of

the $10,000.00 check can only be surmised by reference to the agreement to purchase

and sale, that was not executed, as it contains the following provisions:

DEPOSIT: Upon acceptance of this offer, the SELLER and
PURCHASER shall be bound by all terms and conditions and
PURCHASER becomes obligated to deposit immediately with
SELLER’S Agent/Broker the sum of TEN THOUSAND DOLLARS
FOR OPTION TO PURCHASE TO BE PAID TO THE SELLER (AND
WILL BE NON-REFUNDABLE UNLESS BUYER INSPECTION
PROVES HE CANNOT DEVELOP AND BUILD A MINIMUM OF 50,
1500 SQ. FT. HOMES ON SAID PROPERTY. dollars ($10,000.00), by
Check to be applied to the sale price and/or closing costs, at Act of Sale.

6

Failure to do so shall be considered a breach of this Agreement. The
deposit is to be considered earnest money and is to be placed in the
listing Broker’s non-interest-bearing escrow account. This deposit is to
be placed in any Federally insured Banking or Savings & Loan
Association without responsibility on the part of Agent/Broker in cases
of failure or suspension of such institution.

....

OTHER CONDITIONS OF SALE include the following. . . .

2. BUYER TO GIVE SELLER 10,000 CASH OPTION TO
PRUCHASE UPON ACCEPTANCE. THIS IS NON-REFUNDALE
UNLESS BUYER IS PROHIBITED FROM BUILDING MINIMUM
OF 50 HOME (1500 SQ. FT. EACH ON SAID PROPERTY.

- BUYER TO DO ALL INSPECTIONS BY AUGUST 31,2006

- UPON APPROVAL OF THESE INSPECTIONS BY BUYER,
SELLER TO BE GIVEN THE $10,000 THAT IS BEING HELD BY
CENTURY 21 MIKE D. BONO IN ESCROW.

Again, however, this agreement was not finalized. The plaintiff failed to

demonstrate any other basis in negligence on which he would be able to recover. He

contends that, but for the agent’s failure to ensure the completion of the agreement

to purchase and sell, the check would have been placed into escrow, and he could

have pursued his claim through a concursus proceeding. This argument is speculative

at best and assumes that DeCastro intended to complete the document. However, the

submissions in evidence only that DeCastro did not complete the entirety of the

agreement to purchase and sell. His intent to fully execute the agreement cannot be

derived from these documents. Rather, according to Ms. Lafleur, DeCastro reported

that he was not going to sign the document. Accordingly, we find that the plaintiff

did not carry his burden of proving genuine issues of material fact regarding either

the existence of a duty or a breach of that duty.

7

For these reasons, we find that the trial court erred in the granting of the

plaintiff’s motion for summary judgment and in the denial of the defendant’s motion

for summary judgment. We enter judgment accordingly.

DECREE

For the foregoing reasons, the trial court’s judgment granting the plaintiff’s

motion for summary judgment and denying of the defendant’s motion for summary

judgment is reversed. We grant the defendant’s motion for summary judgment,

dismissing the plaintiff’s petition. All costs of this appeal are assessed to the

plaintiff.

REVERSED AND RENDERED.

8