Mersky v. Multiple Listing Bureau of Olympia, Inc.

• Decision Date: 29 February 1968
• Docket Number: No. 39270,39270
• Parties: Roy M. MERSKY and Deena H. Mersky, husband and wife, Appellants, v. MULTIPLE LISTING BUREAU OF OLYMPIA, INC., a Washington corporation, Olympia Real Estate, Inc., a Washington corporation, and Alyce E. Thompson and Charles Thompson, husband and wife, Respondents.
• Court: Washington Supreme Court

Page 225

73 Wn.2d 225

437 P.2d 897

Roy M. MERSKY and Deena H. Mersky, husband and wife, Appellants, v. MULTIPLE LISTING BUREAU OF OLYMPIA, INC., a Washington

corporation, Olympia Real Estate, Inc., a

Washington corporation, and Alyce E.

Thompson and Charles Thompson,

husband and wife, Respondents.

No. 39270.

Supreme Court of Washington, Department 2.

Feb. 29, 1968.

Rehearing Denied April 23, 1968.

Seeber & Shannon, Robert Seeber, Olympia, for appellants.

Lynch & Lynch, Neil Lynch, Olympia, for respondents.

HAMILTON, Judge.

In this action appellants (plaintiffs), alleging the breach of an agent's duty of loyalty and full disclosure, seek recovery of a real-estate commission paid to respondents (defendants) who, as real-estate agents, handled the sale of appellants' home. Following trial, the superior court dismissed the claim upon the grounds that the alleged breach was immaterial. This appeal followed.

We reverse the action of the trial court.

The salient facts are these: Appellants, by virtue of a change of employment, moved from Olympia, Washington, to the state of Colorado in June, 1963. As a result, they wished to sell their beach-front home in Olympia, which they had purchased in late 1961 for $32,500 and to which they had added a number of valuable improvements. Accordingly, on June 7, 1963, they listed their residence property with respondent Olympia Real Estate, Inc., for a sales price of $39,750. The sales agency agreement was on a standard form of the exclusive-multiple listing type, and was filled out and executed on behalf of the respondent realty firm by respondent Mrs. Alyce E. Thompson, a saleslady employed by the firm. It is undisputed that appellants selected the respondent firm because they were acquainted with and held the then president-broker of that firm, Mr. Charles E. Anderson, in high esteem.

The house was shown to several prospects and produced one firm offer on July 10, 1963, of $32,500 which appellants rejected. Thereafter, in September, 1963, and during the continuance of the sales agency agreement, Mrs. Thompson showed the property to her sister and brother-in-law, who lived in California, but were frequent visitors to Olympia, were known to the members of the realty firm, and were contemplating a possible transfer to the northwest. On September 22, 1963, by way of an earnest-money receipt and agreement prepared by Mrs. Thompson, Mrs. Thompson's sister and brother-in-law made an offer of $33,000 for the property. This offer was transmitted to appellants in Colorado with a letter, dated September 27, 1963, from Mr. Anderson listing several advantages he felt pertained to the offer and urging appellants to give it their most serious consideration.

Appellants replied on the evening of September 30, 1963, by a long-distance telephone call to Mr. Anderson at his home. During the course of this call they expressed their disappointment with the amount of the offer, stated acceptance would mean a financial loss to them, discussed the advisability of a counteroffer as opposed to acceptance, and asked who the prospective purchasers were. Mr. Anderson, in essence, responded that, although final acceptance was up to them, winter was approaching with its lowered market for beach-front property, that they would be wise to take their financial loss and get it over with, and that he did not know who the purchasers were except that they were from California. Mr. Anderson candidly attributed his failure to reveal the identity of the purchasers to forgetfulness on his part.

On October 1, 1963, appellants forwarded their acceptance of the offer to respondents with a letter in which they expressed their reliance upon Mr. Anderson to further their best interests, and again reiterated their reluctance concerning the proposed sale. Upon receipt of the letter the transaction was closed by respondents. The purchasers at some later date, after making additional valuable improvements, sold the property for $46,000. This subsequent sale was also handled by Mrs. Thompson.

In mid-December, 1963, appellants for the first time discovered that the purchasers were related to Mrs. Thompson. They, thereafter, initiated this suit. At trial they testified unequivocally, through appellant husband, that they would not have accepted the offer, but would have made a counteroffer, had Mr. Anderson told them of the prospective purchasers' relationship to Mrs. Thompson.

The question thus posed on this appeal is whether, standing alone, the failure of respondents to make a full and timely disclosure of the ties of kinship between the potential purchaser and Mrs. Thompson constituted such a breach of duty as would warrant a refund of the real-estate commission respondents realized from the sale.

In answering the question in the affirmative, we start from the general and basic premise that a real-estate brokerage firm with whom property is appropriately listed for sale becomes the agent of the seller for the purpose of finding a purchaser. And, from this agency relationship springs the duty and the obligation upon the part of the listing broker, as well as on the part of his subagents, to exercise the utmost good faith and fidelity toward his principal, the seller, in all matters falling within the scope of his employment. Valley Land Office, Inc. v. O'Grady, 72 Wash.Dec.2d 246, 432 P.2d 850 (1967); Frisell v. Newman, 71 Wash.Dec.2d 509, 429 P.2d 864 (1967); Farrell v. Score, 67 Wash.2d 957, 411 P.2d 146 (1966); Henderson v. Johnson, 66 Wash.2d 511, 403 P.2d 669 (1965); Karle v. Seder, 35 Wash.2d 542, 214 P.2d 684 (1950); Westerback v. Cannon, 5 Wash.2d 106, 104 P.2d 918 (1940); Ewing & Clark, Inc. v. Mumford, 157 Wash. 617, 289 P. 1026 (1930); Easterly v. Mills, 54 Wash. 356, 103 P. 475, 28 L.R.A.,N.S., 952 (1909); Cantwell v. Nunn, 45 Wash. 536, 88 P. 1023 (1907); 12 Am.Jur.2d Brokers §§ 83, 84 (1964); 12 C.J.S. Brokers § 41 (1938).

Furthermore, there flows from this agency relationship and its accompanying obligation of utmost fidelity and good faith, the legal, ethical, and moral responsibility on the part of the listing broker, as well as his subagents, to exercise reasonable care, skill, and judgment in securing for the principal the best bargain possible; to scrupulously avoid representing any interest antagonistic to that of the principal in transactions involving the principal's listed property, or otherwise self-dealing with that property, without the explicit and fully informed consent of the principal; and to make, in all instances, a full, fair, and timely disclosure to the principal of all facts within the knowledge or coming to the attention of the broker or his subagents which are, or may be, material in connection with the matter for which the broker is employed, and which might affect the principal's rights and interests or influence his actions. Frisell v. Newman, supra; Moon v. Phipps, 67 Wash.2d 948, 411 P.2d 157 (1966); Breedlove v. Holton, 143 Wash. 347, 255 P. 132 (1927); Hay v. Long, 78 Wash. 616, 139 P. 761 (1914); Restatement (Second) Agency §§ 381, 389, 391, 394, 406 (1958); 12 Am.Jur.2d Brokers §§ 84, 87, 89 (1964); 12 C.J.S. Brokers § 41 (1938).

Against the backdrop of these general principles, we are satisfied that, as a matter of almost universal application, the duties of undivided loyalty, good faith and full disclosure, running from the broker and his subagents to the principal, embraces the obligation to timely reveal to the principal any close ties of kinship which may exist between the broker, or a participating subagent, and a prospective and proffered buyer or seller as the case might be. See, Annot., 26 A.L.R.2d, Duty of real-estate broker to disclose that prospective purchaser is a relative, 1307 (1952).

This duty imposed upon a broker to make such a disclosure has been recognized and applied in cases involving purchasers who were the broker's mother, mother-in-law, wife, sister, and daughter. Anderson v. Thacher, 76 Cal.App.2d 50, 172 P.2d 533 (1946) (mother-in-law); In re Estate of DeHart, 196 Cal.App.2d 452, 16 Cal.Rptr. 603 (1961) (mother); Curotto v. Hammack, 362 Mo. 457, 241 S.W.2d 897, 26 A.L.R.2d 1302 (1951) (mother-in-law); Herzog v. Cooke, 99 Conn. 366, 121 A. 868 (1923) (sister); Perry v. Engel, 296 Ill. 549, 130 N.E. 340 (1921) (daughter); Tyler v. Sanborn, 128 Ill. 136, 21 N.E. 193, 4 L.R.A. 218 (1889) (wife); McNutt v. Dix, 83 Mich. 328, 47 N.E. 212, 10 L.R.A. 660 (1890) (wife); McNeill v. Dobson-Bainbridge Realty Co., 184 Tenn. 99, 195 S.W.2d 626 (1946) (mother); Hay v. Long, 78 Wash. 616, 139 P. 761 (1914) (wife)

The obligation thus imposed upon the broker, and a participating subagent springs from and is predicated upon the same policy considerations which give rise to the rule prohibiting self-dealing by an agent, namely, to assure the principal that he may have and rely upon the impartial and unreserved fidelity of his agent throughout the course of the transaction for which the agent was employed. In this respect, it is both apparent and recognized that the temptation and the opportunity to compromise or temper the agent's obligation to obtain the best and most advantageous bargain for his principal is inescapably and incalculably present, and may be too easily and subtly seized upon, when an agent or his subagent is confronted, in a transaction involving the principal's property,...