Stortroen v. Beneficial Finance Co. of Colorado

• Decision Date: 27 April 1987
• Docket Number: No. 86SC106,86SC106
• Citation: 736 P.2d 391
• Parties: Odell R. STORTROEN and Kathy E. Stortroen, Petitioners, v. BENEFICIAL FINANCE CO. OF COLORADO, Carol Ann Carelli and Eugene L. Carelli, Respondents.
• Court: Colorado Supreme Court

Page 391

736 P.2d 391

Odell R. STORTROEN and Kathy E. Stortroen, Petitioners, v. BENEFICIAL FINANCE CO. OF COLORADO, Carol Ann Carelli and Eugene L. Carelli, Respondents.

No. 86SC106.

Supreme Court of Colorado En Banc.

April 27, 1987.

John S. Kellogg, Denver, for petitioners.

Grant, McHendrie, Haines and Crouse, P.C., Charles H. Haines, Jr., Denver, for respondent Beneficial Finance Co.

Richard E. Mishkin, P.C., Richard E. Mishkin, Denver, for respondents Carol Ann Carelli and Eugene Carelli.

Robert D. Butters, Chicago, for amicus curiae National Ass'n of Realtors.

Gorsuch, Kirgis, Campbell, Walker and Grover, John L. Ferguson, Denver, for amici curiae National Ass'n of Realtors and Colorado Ass'n of Realtors.

QUINN, Chief Justice.

We granted certiorari under C.A.R. 50 ¹ to review a decision of the District Court of Jefferson County, which entered a summary judgment in favor of the defendant-respondent, Beneficial Finance Company, the owner of a home that was offered for sale through a real estate broker who listed the property with a multiple listing service, and against the plaintiffs, Odell R. and Kathy E. Stortroen, who were the putative purchasers of the home. The district court held that a principal-agent relationship existed between the purchasers and the selling (or "cooperating") broker in connection with the sale and that the purchasers' act of notifying the selling broker's associate of the acceptance of the seller's counteroffer did not constitute notice to the sellers of the acceptance. We hold that in a multiple listing real estate transaction involving residential property the selling broker or salesperson, in the absence of a written agreement creating a different agency relationship, is an agent of the listing broker and, as such, is within a chain of agency to the seller. We accordingly reverse the summary judgment and remand the case to the district court for further proceedings.

I.

The Stortroens and Beneficial Finance Company (Beneficial) stipulated to the following chronology of events. The Stortroens wished to sell their home at 4270 Stuart Street in Denver and to purchase a larger residence. To accomplish these goals the Stortroens sought the assistance of Mary Panio, a broker-associate with Foremost Realty, which had sold the Stortroens their current home. The Stortroens listed their home for sale with Foremost on November 4, 1983, and relied on Panio to show them a suitable property to buy. In order to find the Stortroens a home Panio consulted a compilation of listings published by Metrolist, Inc., a multiple listing service operated by several boards of realtors in the Denver metropolitan area. Panio learned through the listing book issued by Metrolist that Beneficial had listed for sale with Paul Olthoff, doing business as Olthoff Realty Company, a house at 6927 Quay Court in Arvada. The listing agreement between Beneficial and Olthoff was captioned "Exclusive Right To Sell Listing Contract (Residential)" and provided, in pertinent part, as follows:

In consideration of the services of the hereinafter named real estate broker, I hereby list with said broker, from Oct. 26, 1983, to March 26, 1983 [sic], inclusive, the property described below and I hereby grant said broker the exclusive and irrevocable right to sell the same within said time at the price and on the terms herein stated, or at such other price and terms which may be accepted by me, and to accept deposits thereon and retain same until the closing of, or defeat of, the transaction. I further authorize said broker to list the property with any multiple listing service in which he is a participant, at the broker's expense, and to accept the assistance and cooperation of other brokers. I hereby agree to pay said broker 6% of the selling price for his services (1) in case of any sale or exchange of same within said listing period by the undersigned owner, the said broker, or by any person, or (2) upon the said broker finding a purchaser who is ready, willing and able to complete the purchase as proposed by the owner, or (3) in case of any such sale or exchange of said property withing [sic] 120 days subsequent to the expiration of this agreement to any party with whom the said broker negotiated and whose name was disclosed to the owner by the broker during the listing period.

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Additional provisions: If Paul Olthoff, personally procures a purchaser for subject property then brokerage fee shall be 4% of purchase price.

If Beneficial Finance procures a purchaser for subject property then the brokerage fee shall be 2% of purchase price.

In January 1984, Panio showed the Stortroens the Quay Court property and assisted them in preparing a written offer to purchase the property for $105,000, of which $1,000 was paid as earnest money. The Stortroens' offer was on a document entitled "Residential Contract to Buy and Sell Real Estate" and designated a closing date of March 26, 1984. The contract was contingent upon the sale and closing of the Stortroens' current home, although it provided that the Quay Court property "may remain on the market and in the event of a successful offer to seller, the purchaser has 72 hours to remove contingency on the sale of their home." Donald Reh, an officer of Beneficial, reviewed the offer with Olthoff and rejected it. Reh drafted a counterproposal offering the property for $110,000. The counterproposal stated: "If this counterproposal is accepted by Purchaser, as evidenced by Purchaser's signature hereon, and if Seller receives notice of such acceptance on or before 9 P.M. 2-3-84, 1984, the said proposed contract, as amended hereby, shall become a contract between the parties." Beneficial submitted the counterproposal through Olthoff to Panio on February 1, 1984.

In the meantime, Carol Ann and Eugene Carelli, who were defendants and third-party plaintiffs in the district court, were shown the Quay Court property by a licensed real estate salesperson employed by another broker. The Carellis prepared an offer of $112,000 for the property and submitted it to Paul Olthoff, the listing broker, on the afternoon of Friday, February 3, 1984. Olthoff informed Reh, the officer of Beneficial who was dealing with the property, of the higher offer and then instructed Carol Carelli and the real estate salesperson to take the offer directly to Reh's office because of the outstanding counteroffer to the Stortroens. When Reh received the Carelli offer, he phoned Olthoff to tell him that he wanted to accept the higher offer and directed him to withdraw the counteroffer to the Stortroens. At approximately 4:30 p.m. on the afternoon of February 3, Olthoff left telephone messages at Panio's office and residence to the effect that Beneficial had withdrawn the counteroffer. After Olthoff informed Reh that he had left these messages, Reh accepted the Carelli offer in writing.

Panio, who was unaware of the Carelli negotiations with Beneficial, took Beneficial's counteroffer to the Stortroens at their home where the Stortroens signed their acceptance at approximately 4:10 p.m. Panio then brought the signed copy back to her office and discovered the withdrawal message from Olthoff.

At a meeting of the real estate brokers and salespersons at Olthoff's office the following Monday, Panio delivered to Olthoff the counteroffer signed by the Stortroens on February 3, 1984, and a document withdrawing the contingency clause, prepared on February 4, 1984. Although the respective positions of Beneficial, the Stortroens, and the Carellis were discussed, no agreement was reached. The Stortroens subsequently recorded the contract and its modifications with the Jefferson County Clerk and Recorder. The Carellis refused to close the transaction when the title examination revealed a cloud on the title caused by the Stortroens' recordation, and they moved into the property under a month-to-month lease.

On April 26, 1984, the Stortroens filed a complaint in the District Court of Jefferson County against Beneficial and the Carellis, alleging breach of a real estate sales contract and seeking a specific performance decree against Beneficial, money damages at the rate of $45 per day from the designated date of closing, which was March 26, 1984, and an order requiring the Carellis to vacate the Quay Court property. The Carellis cross-claimed against Beneficial and added a third-party complaint against Olthoff.

The Stortroens and Beneficial executed a written stipulation of facts, and each filed motions for summary judgment. The district court concluded that Panio was the agent of the Stortroens and that the Stortroens' delivery of the written acceptance of Beneficial's counterproposal to Panio did not constitute notice of acceptance to Beneficial. As a consequence, the court granted the motion for summary judgment on behalf of Beneficial, and denied the Stortroens' motion for summary judgment. The parties then filed a joint motion with this court, requesting that we grant certiorari under C.A.R. 50 and consider whether under the circumstances of this case the selling broker, Mary Panio, was acting as an agent of the purchasers, the Stortroens, or as an agent of the seller, Beneficial.

II.

Where, as here, the issue is whether a real estate broker or salesperson is an agent of the seller or the purchaser in connection with the sale of a home, we must turn to basic principles of agency and contract law for necessary guidance.

A.

"Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Restatement (Second) of Agency § 1(1) (1957). The one for whom the action is to be taken is the principal, and the one who is to act is the agent. Id. § 1(2) and (3). Agency is thus a legal relation having its source in the mutual consent of the parties. The consensual arrangement...