## Facts

- Harold and Anita Crutchley listed approximately 600 acres of Iowa farmland for sale through a real estate office where Don Fishel and Jim Short acted as their agents.
- A buyer group agreed to purchase the property for $1,650,000 on installment terms, including a $300,000 down payment and the balance over 20 years.
- The sales contract included a “nonrecourse” clause limiting the sellers’ remedy upon default to repossession of the land and retention of payments made.
- The real estate market declined and, in 1985, the buyers defaulted; the Crutchleys regained the land through forfeiture and kept the down payment and earlier payments.
- The Crutchleys later suffered substantial financial loss when the land’s value had fallen significantly.
- The Crutchleys sued Fishel and Short for negligence and breach of contract, alleging they misadvised or failed to explain the legal effect of the nonrecourse clause and failed to recommend consulting legal counsel (and allegedly discouraged doing so).
- At trial, the Crutchleys testified the agents minimized the clause’s effect; Short testified he explained it and did not discourage seeking counsel.
- A jury found for the Crutchleys and awarded $536,250 in damages; judgment was entered against Fishel and Short.
- Fishel’s estate, through First Trust & Savings Bank as executor, appealed; Short did not appeal.

## Issues

1. Whether the evidence was sufficient to support the verdict that the sellers’ agents were negligent or in breach of contract regarding the nonrecourse clause and advice about legal counsel.
2. Whether a real estate professional code of ethics was admissible and properly used as evidence of the standard of care, and what limits applied.
3. Whether alleged instructional or evidentiary errors required reversal.

## Decision

- The Iowa Supreme Court affirmed the judgment.
- The court held the evidence permitted the jury to find the agents failed to meet their duties in handling and explaining the nonrecourse clause and in advising about legal counsel.
- The court held the National Association of Realtors’ Code of Ethics was properly admitted as some evidence relevant to the standard of care, but it did not establish negligence per se.
- The court declined to disturb the jury’s credibility determinations and damage award.

## Legal Principles

- Real estate agents owe clients professional duties of reasonable care, skill, and diligence in negotiating and explaining transaction terms within the scope of their engagement.
- When a transaction includes unusual or legally significant terms that materially affect a client’s remedies or risk, an agent must adequately explain those terms or recommend consultation with legal counsel.
- A professional or trade association code of ethics may be admitted as evidence bearing on the profession’s standard of care.
- Violation of an ethical code is not negligence per se; the trier of fact must determine breach and causation from all the circumstances.

## Conclusion

The court upheld liability and damages against the broker’s estate, recognizing that ethical rules may help inform the standard of care for real estate professionals but do not, by themselves, establish negligence, and that the jury could reasonably find the agents failed to protect and properly advise the sellers regarding a nonrecourse clause and the need for legal counsel.


Crutchley v. First Trust & Sav. Bank, 450 N.W.2d 877 (Iowa 1990)