This section contains the nature of the case and procedural background.

Highland Inns (P) entered into a transaction for the sale of a Master Host Inn, to American Landmark (D). The broker in the transaction was Overton, Realty Inc. The contract provided that D was to pay $950,000 on closing subject to obtaining a first mortgage in the amount of $1,300,000 on or before August 19, 1978. A separate term of the contract required D to deposit $10,000 as earnest money to be applied to the purchase price on closing but if D failed to perform the deposit was to become P’s liquidated damages. D made the deposit but was unable to get the long-term commitment. P then sued D and the escrow agent for the deposit. D cross-claimed the broker over ownership of the money and counterclaimed P. The court found the evidence was that the broker had dissipated the escrow funds and denied the counterclaim for commission. The court then entered judgment for P against D and the broker. The broker did not appeal. D appealed.

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