Burkland v. Electronic Realty Associates, Inc.

• Decision Date: 17 August 1987
• Docket Number: No. 86-562,86-562
• Parties: Robert H. BURKLAND and Betty M. Burkland, Plaintiffs and Appellants, v. ELECTRONIC REALTY ASSOCIATES, INC., Defendants and Respondents.
• Court: Montana Supreme Court

Page 1142

740 P.2d 1142

228 Mont. 113

Robert H. BURKLAND and Betty M. Burkland, Plaintiffs and Appellants, v. ELECTRONIC REALTY ASSOCIATES, INC., Defendants and Respondents.

No. 86-562.

Supreme Court of Montana.

Submitted June 17, 1987.

Decided Aug. 17, 1987.

Nye & Meyer, Joan Meyer Nye (argued), Billings, for plaintiffs and appellants.

Crowley Law Firm, William O. Bronson (argued), Billings, for defendants and respondents.

McDONOUGH, Justice.

Plaintiffs Robert and Betty Burkland appeal the August 28, 1986, order of the Thirteenth Judicial District Court, County of Yellowstone, granting summary judgment in favor of defendant Electronic Realty Associates, Inc. We reverse.

The basic issue in this case is whether the local franchisee, ERA Hannah, may be considered an ostensible agent of the franchisor, Electronic Realty Associates, Inc. (ERA, Inc.) Plaintiffs Robert and Betty Burkland purchased a home from defendants Scott and Carmen Mullen. At that time, Scott Mullen was an agent for ERA Hannah Real Estate in Billings, Montana. The sale of the Mullen home was transacted through ERA Hannah with Zane Johnson acting as the real estate broker.

After moving in, Burklands became sick from drinking the tap water which was supplied by a well on the property. The heating system broke down and had to be supplemented with wood heat. Burklands filed suit against Scott and Carmen Mullen, Elwood, Randall and Thomas Hannah d/b/a ERA Hannah Real Estate; and ERA, Inc. The suit alleged fraud, breach of fiduciary duty, breach of the duty of good faith and fair dealing, realtor malpractice and breach of implied warranty.

ERA, Inc. moved for summary judgment contending that there was no evidence of an agency relationship with ERA Hannah and that ERA, Inc. could not be held responsible for ERA Hannah's actions as a matter of law. The affidavit of ERA, Inc. President E.R. Gresham included the following: 1) ERA, Inc. has no ownership interest in ERA Hannah; 2) ERA, Inc. exercises no control over the management and operations of ERA Hannah; 3) ERA Hannah is independently owned and operated and must display its licensed name ERA "Hannah" in all advertising; 4) ERA, Inc. does not share in the profits or losses of ERA Hannah but merely charges fixed fees for use of the ERA trademark and national marketing services; 5) ERA, Inc. is not a licensed real estate broker in Montana and had nothing to do with the sale to Burklands.

Burklands opposed summary judgment contending ERA Hannah's relationship with ERA, Inc. raised questions of material fact regarding the existence of actual or apparent agency. Burklands argued that ERA, Inc. requires ERA Hannah to prominently display the national logo on all advertising and materials and that they had relied on the national reputation of ERA, Inc. in purchasing the Mullen's home. Burklands did not notice the "independently owned and operated" disclaimer in ERA Hannah's listing of the Mullen home nor was it explained to them.

The District Court entered summary judgment in favor of ERA, Inc. The court found no actual or apparent agency between ERA Hannah and ERA, Inc. The court determined that Burklands did not produce evidence in support of their claim that they reasonably believed ERA Hannah was an agent of ERA, Inc. Burklands appeal and raise the following issue: Whether the District Court erred in finding no genuine issue of material fact as to the existence of ostensible agency between ERA Hannah and ERA, Inc.?

Section 28-10-103, MCA, provides:

An agency is either actual or ostensible. An agency is actual when the agent is really employed by the principal. An agency is ostensible when the principal intentionally or by want of ordinary care causes a third person to believe another to be his agent who is not really employed by him.

Burklands contend they relied on ERA, Inc.'s reputation in deciding to purchase the Mullen home. Betty Burkland's affidavit states in part:

3. I responded to Scott Mullen's ad on a house to rent. Mullen was an agent for ERA Hannah, and he persuaded us to buy their house right away. In making that investment we had faith in what the ERA Hannah representatives said, partly because we had seen TV advertising for ERA realties. We saw the big "ERA" name and ERA logo on ERA Hannah materials given to us. We trusted and relied on the reputation of that national name and company.

4. No Defendant ever explained to me that there was a difference or separation between ERA Hannah and the ERA I had seen advertised on TV.

5. I never noticed any small print in any advertisement stating that ERA was separate from ERA Hannah. No one ever called my attention to the print at any time. I was under the impression that ERA Hannah was responsible to or controlled by the ERA company I had seen advertised on TV.

The membership agreement between ERA, Inc. and ERA Hannah contains goals for shared identity. ERA Hannah is required to prominently display the ERA, Inc. trademark, yet ERA Hannah must also hold itself...