Estate of Eller v. Bartron
2011 Del. LEXIS 595, 31 A.3d 895, 2011 WL 5357819 (2011)
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Rule of Law:
A real estate agent breaches the fiduciary duties of loyalty and disclosure if they fail to inform their principal (the seller) that they have entered into an agreement to represent the buyer in an immediate resale of the same property. A seller's general contractual consent to dual agency does not waive their right to be informed of this specific conflict of interest.
Facts:
- Loretta Eller, acting on her mother's behalf, hired real estate agent Wayne Bartron to sell a house, with a listing price of $152,000.
- The listing agreement included a clause where Eller waived her right to object to Bartron representing both a seller and a buyer in the same transaction (dual agency).
- On January 22, 1999, Brian Pierce of Pierce/O'Neill Ltd., a real estate investment firm, made a written offer of $96,000 for the house.
- On the same day, Pierce/O'Neill hired Bartron to serve as their agent for the immediate resale of the same property.
- On January 27, 1999, Wayne Knierim entered into a contract to purchase the house from Pierce/O'Neill for $130,000.
- On January 28, 1999, Bartron persuaded Eller to accept Pierce/O'Neill's $96,000 offer.
- Bartron did not disclose to Eller his agreement to represent Pierce/O'Neill in the resale, nor did he disclose that Pierce/O'Neill intended to 'flip' the house for a profit.
- Both the sale from Eller to Pierce/O'Neill and the sale from Pierce/O'Neill to Knierim closed on the same day, March 30, 1999.
Procedural Posture:
- Loretta Eller filed a suit against Wayne Bartron in the Delaware Superior Court (trial court), alleging breach of fiduciary duty.
- After one day of trial, the trial judge granted Bartron's motion for a directed verdict.
- Eller, as appellant, appealed the trial court's judgment to the Delaware Supreme Court.
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Issue:
Does a real estate agent breach their fiduciary duty to a seller by failing to disclose that they have also agreed to act as the listing agent for the buyer in an immediate resale of the same property?
Opinions:
Majority - Steele, Chief Justice
Yes. A real estate agent breaches their fiduciary duties by failing to disclose an agreement to represent the buyer in an immediate resale of the same property. Agency is a fiduciary relationship imposing high standards of loyalty, good faith, and disclosure. Bartron's agreement to represent Pierce/O'Neill in the resale created a conflict of interest, as it gave him a personal incentive—a second commission—to ensure the initial sale to Pierce/O'Neill was completed, potentially at a price unfavorable to Eller. This conflict was not covered by Eller's general consent to dual agency, which applies to representation within a single transaction, not a subsequent, related one. Bartron had a duty to disclose both his adverse interest and the buyer's intent to flip the house, as this information was material and would reasonably affect Eller's judgment. Failure to provide Eller a 'focused opportunity to assess risks' associated with his divided loyalty constituted a breach of his fiduciary duties.
Analysis:
This decision reinforces the stringent nature of a fiduciary's duty of loyalty and disclosure, particularly for real estate agents. It clarifies that a principal's general consent to dual agency is narrowly construed and does not act as a blanket waiver for all potential conflicts of interest. The ruling establishes that an agent must proactively disclose any arrangement, such as representing the buyer in an immediate resale, that creates an incentive adverse to the original principal's interests. This precedent protects sellers by ensuring they are fully informed about their agent's loyalties before making critical decisions, emphasizing that the potential for divided loyalty itself triggers the duty to disclose.
