Haymes v. Rogers

Arizona Supreme Court

Haymes v. Rogers

219 P.2d 339, 70 Ariz. 257, 17 A.L.R. 2d 896, 1950 Ariz. LEXIS 221

CourtArizona Supreme Court

DecidedJune 12, 1950

Docket5189

StatusPublished

Cited by24 cases

This text of 219 P.2d 339 (Haymes v. Rogers) is published on Counsel Stack Legal Research, covering Arizona Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Haymes v. Rogers, 219 P.2d 339, 70 Ariz. 257, 17 A.L.R. 2d 896, 1950 Ariz. LEXIS 221 (Ark. 1950).

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DE CONCINI, Justice.

Kelley Rogers, hereinafter called appellee, brought an action against L. F. Haymes, hereinafter referred to as appellant, seeking to recover a real estate commission in the sum of $425. The case was tried before a jury which returned a verdict in favor of appellee. The said appellant owned a piece of realty which he had listed for sale with the appellee, real estate broker, for the sum of $9,500. The listing card which appellant signed provided that the commission to be paid appellee for selling the property was to be five (5%) per cent of the total selling price. Tom Kolouch was employed by the said appellee as a real estate salesman, and is hereafter referred to as “salesman”.

On February 4, 1948, the said salesman contacted Mr. and Mrs. Louis Pour, prospective clients. He showed them various parcels of real estate, made an appointment with them for the following day in order to show them appellant’s property. The salesman then drew a diagram of the said property in order to enable the Pours to locate and identify it the next day for their appointment. The Pours, however, proceeded to go to appellant’s property [259]*259that very day and encountering the appellant, negotiated directly with him and purchased the property for the price of $8,500. The transcript of evidence (testimony) reveals that the appellant knew the Pours had been sent to him through the efforts of appellee’s salesman but he did not know it until they verbally agreed on a sale and appellant had accepted a $50 deposit. Upon learning that fact he told the Pours that he would take care of the salesman.

Appellant makes several assignments of error and propositions of law. However we need only to consider whether the trial court was in error by refusing to grant a motion for an instructed verdict in favor of the defendant.

One of the propositions of law relied upon by the appellant is as follows: “The law requires that a real estate broker employed to sell land must act in entire good faith and in the interest of his employer, and if he induces the prospective buyer to believe that the property can be bought for less, he thereby fails to discharge that duty and forfeits all his rights to claim commission and compensation for his work.”

There is no doubt that the above proposition of law is correct. A real estate agent owes the duty of utmost good faith and loyalty to his principal. The immediate problem here is whether the above proposition is applicable to the facts in this instance. The question is, is it a breach of a fiduciary duty and a betrayal of loyalty for a real estate broker to inform a prospective purchaser that a piece of realty may be purchased for less than the list price? We believe that such conduct is a breach of faith and contrary to the interests of his principal, and, therefore, is a violation of the fiduciary relationship existing between ágent and principal which will preclude the agent 'from recovering a commission therefrom.

The facts here are clear and undisputed. The salesman informed the purchasers that he had an offer of $8,250 for the property from another purchaser which he was about to submit to appellant. He further told them he thought appellant would not take $8,250 but would probably sell for a price between $8,250 and $9,500 and that they in all probability could get it for $8,500. The agent was entirely without justification in informing the purchasers that the property might be bought for $8,500, since that placed the purchasers at a distinct advantage in bargaining with the principal as to the purchase price of the realty. As a general rule an agent knows through his contacts with his principal, how anxious he is to sell and whether or not the principal will accept less than the listed price. To inform a third person of that fact is a clear breach of duty and loyalty owed by the fiduciary to his principal. Such misconduct and breach of duty results in the agent’s losing his right to compensation for services to which he [260]*260would otherwise be entitled. 2 Am.Jur. 235, Agency, section 299; Restatement of Agency, section 469.

The case of Mitchell v. Gould, 90 Cal.App. 647, 266 P. 565, 566, is very helpful. The California court in that case subscribed to the proposition of law, hereinabove set out, in the following words:

“It was the duty of Mitchell, as broker, to act in good faith and put forth his best efforts to further his principal’s interests. If he failed in this regard, he forfeited his right to a commission. His instructions were to find a tenant for a short period, from five to seven years, and, in fact, he did find one for ten years. The principal urged him to secure a short lease, but, according to the evidence stricken out, he informed the prospective tenant that a fifteen years’ lease could be obtained, whereupon the tenant refused to enter into a ten years’ lease. This testimony stood uncontradicted at the close of defendant’s evidence, and, if true, established bad faith on the part of the broker. There is a very good reason for the rule requiring the exercise of good faith on the part of a broker in transactions of this kind. The principal engages a broker to secure a tenant on the best terms obtainable, in this case for a short period. He depends upon the efforts of the broker to secure a tenant. The opportunity might readily be presented to the broker to act in the interests of the tenant and against those of his principal. H*

“In Harvey v. Lindsay, 117 Mich. 267, 75 N.W. 627, the plaintiff was suing for a commission alleged to have been earned as a real estate broker. The following instruction of the trial court was approved:

“ ‘If Mr. Gamble gave Mr. Leathers such information or made to him such statements as to cause Mr. Leathers to become satisfied that the defendants would not insist upon the price asked, and that he could press them into accepting a substantially less price for the pine, Mr. Gamble was guilty of bad faith towards the defendants and his assignee, and the plaintiff, Mr. Harvey, would not be entitled to recover any compensation for what he may have done in connection with the deal with Mr. Leathers.’ ”

4^

“In Alford v. Creagh, 7 Ala.App, 358, 62 So. 254, the court lays down these rules:

“ ‘The law requires that a real estate agent, employed to sell land, must act in entire good faith and in the interest of his employer. Henderson v. Vincent, 84 Ala. 99, 101, 4 So. 180. To this end he must exact from the purchaser the price, the terms, and conditions of sale which his employer has fixed. 23 Am. & Eng. Ency.Law (2d Ed.) p. 902. If he fails to do this, but induces the prospective purchaser to believe that the property can be [261]*261bought for less, he fails to discharge that duty to his principal that good faith demands. Such conduct on the broker’s part is well calculated to lead the purchaser to stand out and thereby either force from the seller a lower price than that fixed or delay the sale, even if he finally buys at the price fixed, both detrimental to the interest of the seller. * * * The real estate agent loses his right to commissions where, in his dealings in reference to the subject-matter of his employment, he is guilty of either fraud or bad faith towards his employer. 23 Am. & Eng.Ency.Law (2d Ed.) p. 921.’ ”

This determination makes a consideration of the other grounds for appeal unnecessary.

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DE CONCINI, Justice.

Kelley Rogers, hereinafter called appellee, brought an action against L. F. Haymes, hereinafter referred to as appellant, seeking to recover a real estate commission in the sum of $425. The case was tried before a jury which returned a verdict in favor of appellee. The said appellant owned a piece of realty which he had listed for sale with the appellee, real estate broker, for the sum of $9,500. The listing card which appellant signed provided that the commission to be paid appellee for selling the property was to be five (5%) per cent of the total selling price. Tom Kolouch was employed by the said appellee as a real estate salesman, and is hereafter referred to as “salesman”.

On February 4, 1948, the said salesman contacted Mr. and Mrs. Louis Pour, prospective clients. He showed them various parcels of real estate, made an appointment with them for the following day in order to show them appellant’s property. The salesman then drew a diagram of the said property in order to enable the Pours to locate and identify it the next day for their appointment. The Pours, however, proceeded to go to appellant’s property [259]*259that very day and encountering the appellant, negotiated directly with him and purchased the property for the price of $8,500. The transcript of evidence (testimony) reveals that the appellant knew the Pours had been sent to him through the efforts of appellee’s salesman but he did not know it until they verbally agreed on a sale and appellant had accepted a $50 deposit. Upon learning that fact he told the Pours that he would take care of the salesman.

Appellant makes several assignments of error and propositions of law. However we need only to consider whether the trial court was in error by refusing to grant a motion for an instructed verdict in favor of the defendant.

One of the propositions of law relied upon by the appellant is as follows: “The law requires that a real estate broker employed to sell land must act in entire good faith and in the interest of his employer, and if he induces the prospective buyer to believe that the property can be bought for less, he thereby fails to discharge that duty and forfeits all his rights to claim commission and compensation for his work.”

There is no doubt that the above proposition of law is correct. A real estate agent owes the duty of utmost good faith and loyalty to his principal. The immediate problem here is whether the above proposition is applicable to the facts in this instance. The question is, is it a breach of a fiduciary duty and a betrayal of loyalty for a real estate broker to inform a prospective purchaser that a piece of realty may be purchased for less than the list price? We believe that such conduct is a breach of faith and contrary to the interests of his principal, and, therefore, is a violation of the fiduciary relationship existing between ágent and principal which will preclude the agent 'from recovering a commission therefrom.

The facts here are clear and undisputed. The salesman informed the purchasers that he had an offer of $8,250 for the property from another purchaser which he was about to submit to appellant. He further told them he thought appellant would not take $8,250 but would probably sell for a price between $8,250 and $9,500 and that they in all probability could get it for $8,500. The agent was entirely without justification in informing the purchasers that the property might be bought for $8,500, since that placed the purchasers at a distinct advantage in bargaining with the principal as to the purchase price of the realty. As a general rule an agent knows through his contacts with his principal, how anxious he is to sell and whether or not the principal will accept less than the listed price. To inform a third person of that fact is a clear breach of duty and loyalty owed by the fiduciary to his principal. Such misconduct and breach of duty results in the agent’s losing his right to compensation for services to which he [260]*260would otherwise be entitled. 2 Am.Jur. 235, Agency, section 299; Restatement of Agency, section 469.

The case of Mitchell v. Gould, 90 Cal.App. 647, 266 P. 565, 566, is very helpful. The California court in that case subscribed to the proposition of law, hereinabove set out, in the following words:

“It was the duty of Mitchell, as broker, to act in good faith and put forth his best efforts to further his principal’s interests. If he failed in this regard, he forfeited his right to a commission. His instructions were to find a tenant for a short period, from five to seven years, and, in fact, he did find one for ten years. The principal urged him to secure a short lease, but, according to the evidence stricken out, he informed the prospective tenant that a fifteen years’ lease could be obtained, whereupon the tenant refused to enter into a ten years’ lease. This testimony stood uncontradicted at the close of defendant’s evidence, and, if true, established bad faith on the part of the broker. There is a very good reason for the rule requiring the exercise of good faith on the part of a broker in transactions of this kind. The principal engages a broker to secure a tenant on the best terms obtainable, in this case for a short period. He depends upon the efforts of the broker to secure a tenant. The opportunity might readily be presented to the broker to act in the interests of the tenant and against those of his principal. H*

“In Harvey v. Lindsay, 117 Mich. 267, 75 N.W. 627, the plaintiff was suing for a commission alleged to have been earned as a real estate broker. The following instruction of the trial court was approved:

“ ‘If Mr. Gamble gave Mr. Leathers such information or made to him such statements as to cause Mr. Leathers to become satisfied that the defendants would not insist upon the price asked, and that he could press them into accepting a substantially less price for the pine, Mr. Gamble was guilty of bad faith towards the defendants and his assignee, and the plaintiff, Mr. Harvey, would not be entitled to recover any compensation for what he may have done in connection with the deal with Mr. Leathers.’ ”

4^

“In Alford v. Creagh, 7 Ala.App, 358, 62 So. 254, the court lays down these rules:

“ ‘The law requires that a real estate agent, employed to sell land, must act in entire good faith and in the interest of his employer. Henderson v. Vincent, 84 Ala. 99, 101, 4 So. 180. To this end he must exact from the purchaser the price, the terms, and conditions of sale which his employer has fixed. 23 Am. & Eng. Ency.Law (2d Ed.) p. 902. If he fails to do this, but induces the prospective purchaser to believe that the property can be [261]*261bought for less, he fails to discharge that duty to his principal that good faith demands. Such conduct on the broker’s part is well calculated to lead the purchaser to stand out and thereby either force from the seller a lower price than that fixed or delay the sale, even if he finally buys at the price fixed, both detrimental to the interest of the seller. * * * The real estate agent loses his right to commissions where, in his dealings in reference to the subject-matter of his employment, he is guilty of either fraud or bad faith towards his employer. 23 Am. & Eng.Ency.Law (2d Ed.) p. 921.’ ”

This determination makes a consideration of the other grounds for appeal unnecessary. Under the circumstances the court should have directed a verdict for the defendant, appellant.

Judgment reversed.

LA PRADE, C. J., and STANFORD and PHELPS, JJ., concur.

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219 P.2d 339, 70 Ariz. 257, 17 A.L.R. 2d 896, 1950 Ariz. LEXIS 221, Counsel Stack Legal Research, https://law.counselstack.com/opinion/haymes-v-rogers-ariz-1950.

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