Broker David holds earnest money of $15,000 in his trust account for a transaction involving seller Maria and buyer Chen. The purchase agreement fell through, and both parties signed a mutual cancellation agreement but disagreed on who should receive the earnest money — the agreement was silent on earnest money disposition upon cancellation. Chen demands the full $15,000 back. Maria demands $5,000 as compensation for her carrying costs. David's supervising broker advises him to release $10,000 to Chen and $5,000 to Maria based on the broker's own assessment of fairness. Under Minn. Stat. Ch. 82 and MN DOC rules, which action should David take?

Question

ContractsBreach_and_remediesHARD

Broker David holds earnest money of $15,000 in his trust account for a transaction involving seller Maria and buyer Chen. The purchase agreement fell through, and both parties signed a mutual cancellation agreement but disagreed on who should receive the earnest money — the agreement was silent on earnest money disposition upon cancellation. Chen demands the full $15,000 back. Maria demands $5,000 as compensation for her carrying costs. David's supervising broker advises him to release $10,000 to Chen and $5,000 to Maria based on the broker's own assessment of fairness. Under Minn. Stat. Ch. 82 and MN DOC rules, which action should David take?

Answer Options

A

Follow the supervising broker's instructions and split the funds $10,000 to Chen and $5,000 to Maria, as the supervising broker has authority over trust account disbursements

B

Release the full $15,000 to Chen because the mutual cancellation agreement terminated the contract and Chen is presumed entitled to a full refund absent a specific forfeiture clause

C

Retain all $15,000 in the trust account and require a written agreement signed by both parties specifying the disposition, or interplead the funds with a court if no agreement is reached

D

Release the full $15,000 to Maria because she is the seller and the listing agreement gives the seller priority over earnest money upon cancellation