Zuazua v. Tibbles, 05-640.
| Decision Date | 21 December 2006 |
| Docket Number | No. 05-640.,05-640. |
| Citation | 150 P.3d 361,335 Mont. 181,2006 MT 342 |
| Parties | Amador F. ZUAZUA, Plaintiff, v. Tom and Carol TIBBLES, Individually, and d/b/a Coldwell Banker Gateway Realty, and Patti Stone, Defendants. |
| Court | Montana Supreme Court |
Appeal from the United States District Court for the District of Montana, Donald W. Molloy, J.
For Plaintiff: Patrick G. Frank (argued), Worden Thane P.C., Missoula, Montana.
For Defendants: Matthew K. Hutchison (argued) and Daniel W. Hileman, Kaufman, Vidal, Hileman & Ramlow, P.C., Kalispell, Montana.
For Amicus Curiae: James A. Bowditch and Thomas J. Leonard, Boone Karlberg, P.C., Missoula, Montana (Mont. Association of Realtors®, Inc.).
¶1 The plaintiff, Amador F. Zuazua, brought this action in the United States District Court for the District of Montana to recover damages, in part, for Defendants Tom and Carol Tibbles, Coldwell Banker Gateway Realty, and Patti Stone's failure to fulfill their duties to Zuazua under § 37-51-313(4), MCA. Zuazua moved for partial summary judgment, alleging that § 37-51-313(4), MCA, precludes a buyer agent from simultaneously representing more than one buyer competing for the same property. Because the answer was determinative to the case and no appellate decision, constitutional provision, or statute clearly controls, the District Court certified a question and seven relevant, undisputed facts to this Court pursuant to M.R.App. P. 44(c).
¶2 We accepted the certified question which we restate1 as:
¶3 Does a buyer agent breach his obligation to a buyer under § 37-51-313(4), MCA, when a buyer agent simultaneously represents more than one buyer competing for the same property?
¶4 Our answer is yes, a buyer agent breaches his obligation to a buyer under § 37-51-313(4), MCA, when a buyer agent simultaneously represents more than one buyer competing for the same property.
¶5 1. Defendants Tom and Carol Tibbles are real estate brokers licensed and doing business in Montana as Coldwell Banker Gateway Realty (Coldwell Banker).
¶6 2. Defendant Patti Stone is a licensed real estate agent doing business in Montana, and for all purposes relative to the complaint, was employed by the Tibbleses as an agent and was acting within the course and scope of her agency. Tom and Carol Tibbles are therefore liable for the acts of Stone.
¶7 3. Plaintiff Amador F. Zuazua and Stone signed a "Relationships in Real Estate Transactions (Combined Explanation and Disclosure)" form on July 6, 2003, establishing Stone as Zuazua's buyer agent. The agency disclosure form included the language of § 37-51-313(4), MCA.
¶8 4. On July 8, 2003, Zuazua authorized Stone to extend an offer to buy real property commonly known as 2719 Kings Point Road, Polson, Montana. The initial offer was contained in a buy-sell agreement signed by Zuazua and Stone as Zuazua's agent.
¶9 5. Stone and Louis Moritzky signed a "Relationships in Real Estate Transactions (Combined Explanation and Disclosure)" form on July 12, 2003, establishing Stone as Moritzky's buyer agent. The form was identical to the one Stone and Zuazua had signed and it included the language of § 37-51-313(4), MCA.
¶10 6. On July 12, 2003, Moritzky authorized Stone to extend an offer to buy real property commonly known as 2719 Kings Point Road, Polson, Montana. The initial offer was contained in a buy-sell agreement signed by Moritzky and Stone as Moritzky's agent.
¶11 7. The seller testified in his deposition that he considered both offers and decided to accept the Moritzky offer.
¶12 Does a buyer agent breach his obligation to a buyer under § 37-51-313(4), MCA, when a buyer agent simultaneously represents more than one buyer competing for the same property?
¶13 A. Does § 37-51-313(4)(a), MCA, prohibit a buyer agent from representing competing buyers?
¶14 Section 37-51-313, MCA, governs the relationship between brokers and buyers or sellers and is intended to replace other duties as described in state law or common law. Unfortunately, the statute is not a model of clarity.2 Subpart (2) lists the obligations of a seller agent to the seller. Subpart (3) lists the obligations of a seller agent to the buyer. Subpart (4), the primary area of concern for the certified question, lists the obligations of a buyer agent to the buyer. Subpart (5) lists the obligations of a buyer agent to the seller. Subpart (6) lists the obligations of a statutory broker to a buyer or seller. Subpart (7) lists the obligations of a dual agent. Finally, the rest of § 37-51-313, MCA, deals with the length of the broker relationship.
¶15 Section 37-51-313(4), MCA, does not specifically say that a buyer agent may or may not represent multiple buyers—that is, there is no language in the statute which expressly prohibits a buyer agent from representing multiple buyers competing for the same property, or vice-a-versa. However, Zuazua argues that the language in § 37-51-313(4)(a), MCA, requiring a buyer agent to "act solely in the best interests of the buyer" is a clear statutory mandate that the buyer agent cannot represent more than one buyer competing for the same parcel of property at the same time. Zuazua's argument centers around the word "solely" which he takes to mean, essentially, "only," and the definition of "buyer" in § 37-51-102(5), MCA: "a person who is interested in acquiring an ownership interest in real property. . . ." Taken together, from Zuazua's perspective, § 37-51-313(4)(a), MCA, thus requires a buyer agent to act only for one person who is interested in acquiring property or, in other words, only one buyer.
¶16 Coldwell Banker, on the other hand, contends that § 37-51-313(4)(a), MCA, obligates the buyer agent to "act solely in the best interests" of the "class" of buyers, not specifically "a" buyer. Similarly, § 37-51-313(2)(a), MCA, according to Coldwell Banker, defines the obligations of the seller agent toward the "class" of sellers, and § 37-51-313(7), MCA, defines the dual agent, who represents both the "class" of buyers and the "class" of sellers.
¶17 Assuming that Coldwell Banker is correct in its assumption that § 37-51-313(4)(a), MCA, defines the buyer agent's duties toward the "class" of buyers, we nevertheless agree with Zuazua that subpart 313(4)(a) acts to limit the buyer agent to only representing one buyer concerning a particular piece of property at a particular time. More precisely, we find that the obligation imposed by § 37-51-313(4)(a), MCA, to "act solely in the best interests of the buyer" is breached when a buyer agent simultaneously represents more than one buyer competing for the same property because the buyer agent is unable to act in the "best interests" of competing buyers due to inherent conflicts of interest (emphasis added).
¶18 A conflict of interest is created when the buyer agent simultaneously represents multiple-buyers for the same property in at least two ways. First, if the buyer agent is prevented from revealing confidential information (as Coldwell Banker claims is the case under § 37-51-313(4)(c)), then the buyer agent is prevented from revealing the most important piece of information she has to her buyers, i.e., the other buyer's competing bid. For example, assume a buyer agent represents buyer A and buyer B who, at the same time, wish to purchase property C. Buyer A submits a bid first, through the buyer agent, for $100,000. B then asks the buyer agent for advice concerning what B should bid for property C. Assuming no contingencies, B will only "win out" over A's bid if B bids more than $100,000. The buyer agent, however, is constrained from revealing the most vital piece of information that B needs to obtain the property, how much A has already bid, because A's bid price and terms are confidential. Even worse, the buyer agent, unlike a dual agent, is under no obligation to disclose the conflict of interest. See § 37-51-313(7)(a), MCA.
¶19 Second, using the same scenario presented above but assuming the buyer agent is allowed to inform buyer B of A's bid, then the buyer agent is in a position to drive up the price by pitting B against A, with the result that the buyer agent receives a higher commission. Again, the buyer agent, unlike the dual agent, would not be obligated to disclose the conflict to either A or B.
¶20 Amicus curiae Montana Association of Realtors®, Inc. (MAR), however, contends that there is no inherent conflict. MAR, noting that a dual agent is required to "act solely in the best interests" of both buyer and seller, translates "solely in the best interests of the buyer" to mean that a buyer agent "may not act adversely to his or her principal's interests." MAR then cites to numerous out-of-state cases which it claims show that agents may represent competing principals without adversely effecting the principal's interests. Although the underlying cases all discuss multiple sellers, not buyers, MAR claims that the reasoning is even more persuasive in the multiple buyer context because a buyer agent's role is merely to find properties that fit a buyer's wishes and to relay the buyer's offer to the seller, with "little to no control over the end result."
¶21 Setting aside the fact that MAR's out-of-state authorities are distinguishable because they address multiple sellers rather than buyers, we disagree that acting "solely in the best interests of the buyer" is equivalent to not acting adversely to the principal's interest. To "not act adversely" is a passive obligation requiring that a buyer agent not do anything to harm the buyer. To "act solely in the best interests," however, is an active obligation requiring affirmative steps on the part of the buyer agent to achieve the goals of the buyer. The question is not, therefore, whether a buyer agent's facilitative role allows the buyer agent to represent competing...
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