Title: Quechee Lakes Rental Corp. v. Boggess

State: vermont

Issuer: Vermont Supreme Court

Document:

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 89-457


 Quechee Lakes Rental Corporation             Supreme Court

                                              On Appeal from
      v.                                      Windsor Superior Court

 Stephen J. Boggess and                       September Term, 1991
 Mary B. Boggess


 Ellen H. Maloney, J.

 P. Scott McGee of Hershenson, Carter, Scott & McGee, Norwich, for
   plaintiff-appellant

 Michael F. Hanley of Plante, Hanley & Gerety, P.C., White River Junction,
   for defendants-appellees


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      JOHNSON, J.   Plaintiff, Quechee Lakes Rental Corporation (QLRC), a
 licensed real estate corporation in Vermont, appeals from a superior court
 order denying its claim for a broker's commission for the sale of defend-
 ants' residential property.  The trial court held that plaintiff was not
 entitled to receive a broker's commission because it breached its fiduciary
 duty to defendants, Mary and Stephen Boggess.  We affirm.
      On November 9, 1985, Mary Boggess, the owner of a Quechee Lakes
 condominium unit, and her husband Stephen, entered into a listing contract
 with QLRC to sell the condominium.  The Boggesses agreed to pay QLRC an
 eight percent broker's commission if it sold the furnished unit within a
 year for $289,500.  In May, 1986, Maureen Bacon, a licensed real estate
 salesperson employed by QLRC, showed the property to a prospective buyer who
 offered to purchase the condominium at less than the full listing price.
      A series of negotiations followed.  On May 30, 1986, the buyers' first
 offer, for $275,000, lapsed because it was not timely accepted.  During a
 telephone conversation with Maureen Bacon, Steven Boggess falsely stated
 that he had received a $280,000 offer for the property.  Bacon asked Boggess
 if he would consider a $281,000 offer.  Boggess indicated that he would con-
 sider, but not necessarily accept, such an offer.  Bacon, although not
 authorized to do so, then told the buyers that Boggess would accept a
 $281,000 offer.  In response, the buyers offered $281,000 for the unfurn-
 ished condominium, but included a mortgage contingency.  The Boggesses were
 hesitant to accept this offer.  After Boggess informed Bacon that he was
 considering taking the unit off the market, Bacon telephoned the buyers and
 suggested that they needed to make a full purchase price offer without
 contingencies, if they wanted to be assured of the purchase.
      Because the buyers were hesitant, Bacon and a QLRC vice-president,
 Edward Elliott, informed the buyers that if they made a $289,500 offer, QLRC
 would purchase the condominium's furnishings for $8,500 upon closing.  This
 would effectively make the buyers' $281,000 offer a full-price offer.  The
 buyers agreed to this arrangement, and on June 23, 1986, they offered
 $289,500, without contingencies, for the condominium.  The Boggesses were
 never told that a collateral arrangement was made between the buyers and the
 realtors regarding the condominium's furnishings, and the realtor's com-
 mission was not decreased as a result of the reduction in the sales price
 from $289,500 to $281,000.  The June 23 offer was sent to Boggess on June
 26, 1986.  He began to express concerns about taxes which would result from
 the property's sale in 1986, and asked Edward Elliott to delay closing until
 January, 1987.  The buyers agreed, and, on July 15, 1986, Elliott sent a
 contract to Boggess modifying the closing date.  Boggess, however, did not
 return the contract.
      In late July, Boggess consulted with an attorney for his mortgage
 brokerage firm in Massachusetts, and based on this consultation, made a
 counter-offer.  Among other things, the counter-offer increased the amount
 of the buyers' security deposit, transferred responsibility for the deposit
 to the seller, required the buyers to execute a note and mortgage, and
 reserved "[i]n the sellers' sole and uncontrolled discretion" the election
 to reject the sale by October 12, 1986.  The counter-offer was sent to the
 buyers on July 31, 1986.  The buyers were "quite shocked" when they received
 the counter-offer "on or about August 2 or 3, 1986."  They concluded that
 Boggess did not want to sell and would continue to throw "monkey wrenches"
 into further attempts to reach agreement.  That same day, during a telephone
 conversation with Bacon, the buyers expressed their frustration and anger
 about Boggess's counter-offer.
      On August 4, 1986, Elliott contacted Boggess's attorney, Raphaele
 Terino, and informed him that Boggess had turned down a full-price offer and
 could be liable for the broker's fee.  That same day, Boggess responded and
 agreed to rescind his counter-offer, and accept the buyers' offer.  One day
 later, on August 5, Elliott informed Bacon that Boggess accepted the
 buyers' offer.  In the meantime, however, Bacon had already arranged to show
 the buyers some other Quechee Lakes condominium units on August 8.  Bacon
 did not inform the buyers of Boggess's change of heart immediately because
 she did not wish to expose the buyers to further aggravation.  Instead,
 aware of the anger expressed by the buyers, Bacon decided to wait three days
 until August 8, to give this information to the buyers, when they were
 scheduled to return to Quechee to look at other units.  Bacon did not obtain
 Boggess's consent to wait three days to inform the buyers.  When Bacon did
 inform the buyers that Boggess changed his mind, she did so in such an
 indirect manner that it made no impression on them.  The trial court found
 that the actions of both Bacon and Elliott "reflect[ed] the realtors' strong
 desire to keep the [buyers] interested as customers."
      During the buyers' visit on August 8, QLRC showed them another more
 expensive unit, owned by QLRC's parent, Quechee Lakes Corporation, and
 offered a discount of $55,000 on the full price as a "furniture discount."
 The buyers decided to purchase this condominium from QLRC for $385,000 minus
 the discount.  QLRC received a larger broker's fee for this sale than the
 expected fee for the sale of the Boggess unit.  Boggess was not informed
 that the buyers had purchased another unit until he received a letter from
 QLRC dated August 15, 1986.
      The trial court concluded, based on the foregoing facts, that QLRC
 breached its fiduciary duty by failing to disclose its interest in the sale
 and reduce its commission,  It also concluded that QLRC was negligent in
 failing to immediately communicate the seller's change of heart regarding
 the buyers' latest offer.  Accordingly, it denied QLRC its commission.  QLRC
 argues on appeal that it did not breach its fiduciary duty to the Boggesses
 and, in any event, the Boggesses were not harmed because QLRC produced a
 buyer willing to purchase the property on their terms.
      We agree that QLRC breached its fiduciary duty to the Boggesses, but we
 base our opinion on a ground not specified by the trial court.  In doing so,
 we do no violence to the trial court's findings of fact or our proper
 function as an appellate court.  The trial court's findings of fact were
 supported by the evidence.  We affirm because QLRC failed to communicate
 material information from its principal to the buyers and acted in a manner
 antagonistic to the interests of its principal.  The trial court character-
 ized this behavior as negligence, but, however it is labeled, it defeats
 plaintiff's claim.
      Under a listing agreement in Vermont, a real estate broker is an agent
 of a seller and owes the seller the duties of a fiduciary.  Vermont Real
 Estate Commission Rule 30(a).  A real estate broker, as an agent, must act
 "with the utmost good faith and loyalty for the furtherance and advancement
 of the interests of his [or her] principals."  Prouty v. Blanchard, 93 Vt.
 206, 209, 106 A. 831, 833 (1919).  A person employing a broker to negotiate
 a sale "bargains for the disinterested skill, diligence and zeal of the
 broker for his [or her] own exclusive benefit."  Yerkie v. Salisbury, 264
 Md. 598, 603, 287 A.2d 498, 501 (1972).  Part of this duty requires that a
 broker disclose all matters that are material to, and might affect, the
 principal's actions.  Strout Realty v. Wooster, 118 Vt. 66, 70,