Haymes v. Rogers
219 P.2d 339, 17 A.L.R. 2d 896, 70 Ariz. 257 (1950)
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Rule of Law:
A real estate agent breaches the fiduciary duty of good faith and loyalty owed to a principal by informing a prospective buyer that the property may be purchased for less than the listed price. This breach of duty results in the agent forfeiting their right to a commission.
Facts:
- L. F. Haymes listed his real property for sale for $9,500 with Kelley Rogers, a real estate broker, under an agreement for a 5% commission.
- Tom Kolouch, a salesman for Rogers, contacted prospective buyers, Mr. and Mrs. Louis Pour, about the property.
- Kolouch informed the Pours that while the listed price was $9,500, he had another offer for $8,250 and believed Haymes would likely sell for a price around $8,500.
- Kolouch drew a diagram of the property for the Pours to enable them to locate it for an appointment the following day.
- Instead of waiting for the appointment, the Pours went to the property that same day and negotiated directly with Haymes.
- The Pours purchased the property from Haymes for $8,500.
- Haymes was unaware that the Pours had been sent by Rogers' salesman until after he had accepted a $50 deposit and verbally agreed to the sale.
- Upon learning of the salesman's involvement, Haymes told the Pours he would 'take care of the salesman'.
Procedural Posture:
- Kelley Rogers sued L. F. Haymes in an Arizona trial court to recover a real estate commission.
- The case was tried before a jury, which returned a verdict in favor of the plaintiff, Rogers.
- The defendant, Haymes, made a motion for an instructed verdict in his favor, which the trial court refused.
- Following the entry of judgment on the jury's verdict, Haymes (appellant) appealed to the Supreme Court of Arizona.
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Issue:
Does a real estate agent breach the fiduciary duty of good faith and loyalty owed to a seller, thereby forfeiting the right to a commission, by informing a prospective buyer that the property may be purchased for less than the listed price?
Opinions:
Majority - De Concini, J.
Yes. A real estate agent's conduct of informing a prospective purchaser that a property may be purchased for less than the list price is a breach of the fiduciary duty of utmost good faith and loyalty owed to the principal, which precludes the agent from recovering a commission. The court reasoned that an agent owes a duty of undivided loyalty to their principal. By suggesting that the property could be bought for $8,500 instead of the listed $9,500, the salesman placed the purchasers at a distinct advantage in bargaining, which was contrary to the interests of his principal, Haymes. This action constitutes a clear breach of the fiduciary relationship, and as a result, the agent forfeits any right to compensation for the services rendered.
Dissenting - Udall, J.
No. The agent's conduct in this case does not rise to the level of bad faith or gross misconduct necessary to disentitle him to compensation. The dissenting judge argued that the majority's holding is too severe for the facts presented. He contended that the salesman's statement was merely an attempt to bring the parties together and keep the buyers' interest, not a malicious breach of duty. Justice Udall reasoned that any prospective purchaser would naturally assume a seller might accept less than the asking price, so the salesman's comment did not constitute a significant betrayal. He expressed concern that the majority's rule would provide an easy way for sellers to avoid paying commissions that were justly earned.
Analysis:
This case establishes a strict standard for a real estate agent's fiduciary duty of loyalty in Arizona. The decision clarifies that an agent's undivided loyalty is paramount and that actions undermining the principal's bargaining position, even if seemingly minor, constitute a breach of duty. This precedent serves as a clear warning to real estate professionals that any suggestion to a buyer about price flexibility, without the seller's express consent, can lead to the forfeiture of their entire commission. The ruling empowers sellers to challenge commission payments where an agent's loyalty is compromised, reinforcing the principle that an agent must always act in the principal's best interest.
