Agency Highlights: 3Q 2016

The Agency cases from this period address issues that we frequently see in this context, such as whether an agency relationship existed, whether a licensee was an employee or independent contractor, whether a broker could be liable for the negligence of a licensee, and the duty owed by a licensee.

A.         Cases

1.        Maida Development, LLC v. Tarantino Properties, Inc., No. 07-16-00014-CV, 2016 WL 413050 (Tex. Ct. App. Aug. 2, 2016)

No agency relationship existed between licensee and prospective purchaser of property.

The prospective purchaser of a commercial property brought a lawsuit after he was not successful in purchasing the property. At the time the would-be purchaser contacted the licensee, the licensee had already been working on behalf of the seller to find a buyer. He agreed to bring the prospective purchaser’s offer to the seller, but informed the purchaser that the property was off-market. The prospective purchaser alleged that the real estate salesperson breached his fiduciary duty to the potential purchaser.

The written offers prepared by the purchaser indicated the licensee represented the “Seller only,” the purchaser did not have control over the details of the licensee’s actions, and the licensee had autonomy and independent decision-making authority in the sales process. The court concluded that no principal-agent relationship was created between the purchaser and the licensee, and therefore, the licensee did not owe a fiduciary duty to the purchaser. In the absence of a fiduciary duty, the licensee’s broker was also not vicariously liable for the licensee’s conduct. Summary judgment in favor of the licensee and broker was affirmed on appeal.

2.        Santorii v. MartinezRusso, LLC, No. 1: CA-CV-15-0211, 2016 WL 4440375 (Ariz. Ct. App. Aug. 23, 2016)

Broker was not vicariously liable for salesperson’s negligent driving because salesperson was an independent contractor.

The court considered whether the broker could be vicariously liable for the negligent driving of its licensee. The licensee was driving back from a real estate sales appointment when his car struck another car, resulting in the death of both drivers. The court concluded that the broker was not liable for the licensee’s actions because the licensee was an independent contractor, not an employee.

The court determined that under Arizona statutes and regulations, a broker’s duty to supervise its salespeople relates only to real estate transactions. The licensee had control over the time, manner, and means of traveling to meet clients, had no quotas or required meetings, and controlled his own hours. Thus, the licensee was not an employee or agent of the broker and the broker was not vicariously liable for the licensee’s actions. On appeal, the court affirmed the trial court’s entry of summary judgment in favor of the licensees.

3.         Wagner v. MSE Technology Applications, Inc., 384 Mont. 436 (Aug. 30, 2016)

Licensee acting as dual agent could be liable for failing to act in the best interest of the potential purchaser.

The potential purchaser of land sued the seller, buyer, and a listing broker claiming they interfered with his attempt to purchase the property. The potential purchaser and seller entered an agreement, with the listing broker acting as dual agent in the transaction. A few months later, several meetings were held between the seller, an adjacent property owner, the listing broker, and an individual interested in purchaser the adjoining property. The potential purchaser did not attend these meetings, and indicated that she was not interested in purchasing the adjacent parcel, which contained the only existing road providing access to the property. When the potential purchaser failed to close on the property, the seller then closed the deal with the buyer.  The listing broker assisted with the new transaction and claimed that the potential purchaser had indicated she was no longer interested in the original property. The trial court granted judgment for all defendants on the intentional interference claim. The trial court also granted summary judgment in favor of the licensee on a professional negligence claim.

On appeal, the appellate court reversed the court’s decision with respect to the licensee. The appellate court concluded that summary judgment on the negligence claim was improper because disputed facts had to be determined, such as what the licensee knew at the time and to what extent he participated in the actions at issue. Furthermore, the other claims could go forward because the potential purchaser presented some evidence showing that the licensee may not have acted in the would-be purchaser’s best interest as dual agent. The court reversed summary judgment and dismissal of claims in favor of the licensee.

B.         Statutes and Regulations[2]

North Carolina

North Carolina amended several regulations relevant to licensees. With respect to advertising, a broker may not advertise or operate in any manner using a name different from the name under which they are licensed.[3] A broker also may not advertise or operate in any way which could mislead a consumer as to the broker’s actual identity or identity of the firm with which the broker is affiliated.[4]

Another amended regulation adds to the list of documents that must be maintained by a broker in its real estate transaction file. Brokers must maintain “sketches, calculations, photos, and other documentation used or relied upon to determine square footage” and “advertising used to market a property.”[5]

C.         Volume of Materials Retrieved

Agency issues were identified 13 times in 11 cases (see Table 1). Breach of fiduciary duty and vicarious liability were the most commonly raised issues. Three Agency regulations were retrieved this quarter.

 

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