Stortroen v. Beneficial Finance Co.
1987 Colo. LEXIS 533, 736 P.2d 391 (1987)
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Rule of Law:
In a multiple listing real estate transaction, the selling broker or salesperson is an agent of the listing broker and a subagent of the seller, unless a written agreement creates a different agency relationship with the buyer. Therefore, notice of acceptance of a contract given to the selling broker constitutes notice to the seller.
Facts:
- Beneficial Finance Company (Beneficial) listed a residential property for sale with its broker, Paul Olthoff of Olthoff Realty Company, under an exclusive listing contract.
- The contract authorized Olthoff to list the property with a multiple listing service (MLS) and to cooperate with other brokers.
- Odell and Kathy Stortroen engaged Mary Panio, a broker with Foremost Realty, to help them find a new home.
- Panio found the Beneficial property through the MLS, showed it to the Stortroens, and helped them prepare an offer.
- Beneficial rejected the Stortroens' initial offer but submitted a written counteroffer, stating it would become a contract if Beneficial received notice of signed acceptance by 9 p.m. on February 3, 1984.
- At 4:10 p.m. on February 3, the Stortroens signed their acceptance of the counteroffer and delivered the signed document to Panio.
- After receiving a higher offer from another party, Beneficial directed Olthoff to withdraw the counteroffer.
- At approximately 4:30 p.m. on February 3, Olthoff left messages for Panio attempting to withdraw the counteroffer, but Panio did not receive these messages until after she had already received the signed acceptance from the Stortroens.
Procedural Posture:
- Odell R. and Kathy E. Stortroen filed a complaint in the District Court of Jefferson County against Beneficial Finance Company for breach of contract, seeking specific performance.
- The Stortroens and Beneficial filed cross-motions for summary judgment based on a written stipulation of facts.
- The district court (trial court) granted summary judgment in favor of Beneficial, holding that the selling broker was an agent of the Stortroens, and thus notice of acceptance to her was not notice to Beneficial.
- The parties filed a joint motion with the Colorado Supreme Court for a writ of certiorari to review the case before a judgment by the intermediate court of appeals.
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Issue:
In a residential real estate transaction using a multiple listing service, does the selling broker who assists the purchaser act as an agent of the purchaser or as a subagent of the seller?
Opinions:
Majority - Quinn, Chief Justice
No, the selling broker who assists the purchaser acts as a subagent of the seller. In a multiple listing service (MLS) transaction, the listing broker's placement of a property on the MLS constitutes a unilateral offer of subagency to all other member brokers. A selling broker, like Panio, accepts this offer by rendering substantial performance, such as showing the property and procuring a buyer. This creates a chain of agency from the seller (Beneficial) to the listing broker (Olthoff) and then to the selling broker (Panio). Consequently, notice of acceptance given to the subagent (Panio) is imputed to the principal (Beneficial), and a binding contract was formed when the Stortroens delivered their signed acceptance to Panio. The court concluded that an agency relationship between a buyer and a selling broker cannot arise by implication and must be established by a written agreement to avoid the potential for undisclosed dual agency.
Concurring - Erickson, Justice
Yes, a contract was formed, but for an additional reason beyond subagency. Under general contract principles, an acceptance is operative as soon as it is put out of the offeree's possession. The Stortroens accepted Beneficial's counteroffer the moment they signed it and gave it to Panio for delivery. Because this act occurred before Beneficial's attempted revocation, a binding contract was formed. The contract's requirement of "notice" to the seller was an ambiguous condition that should be construed against the drafter, Beneficial, and did not change the moment the acceptance became effective.
Analysis:
This decision established a clear default rule for agency relationships in the common scenario of an MLS-facilitated residential real estate transaction. It holds that, absent a written buyer's agency agreement, the selling broker is a subagent of the seller, owing fiduciary duties to the seller, not the buyer. This ruling provides certainty and discourages undisclosed dual agency, which is prohibited. By requiring a written agreement to establish a buyer's agency, the court placed the burden on brokers and buyers to define their relationship explicitly, thereby clarifying duties and liabilities for all parties involved in future transactions.
