Opinion ID: 852474
Heading Depth: 2
Heading Rank: 1

Heading: An Agent's Duty to Disclose

Text: Minnick was acting as agent for Nichols. A real estate broker representing a seller has the duty to [disclose] to the seller . . . adverse material facts or risks actually known by the [broker] concerning the real estate transaction. Ind. Code §§ 25-34.1-10-9.5, -10(a)(3)(C) (2004). The parties agree that a buyer's creditworthiness is material to a real estate transaction and therefore a broker must disclose to the seller any loans the broker has made to the buyer to finance the purchase. The trial court found that Minnick did not disclose his loan of $15,000 for the down payment. The trial court also found that [t]he evidence is conflicting as to whether or not Minnick told Nichols that Minnick had loaned Blickensdorf the commission. The trial court concluded that the deferral of the commission did not support Nichols's claim to recover the commission. The court reasoned that Nichols had reason to know of a relationship between Minnick and Blickensdorf from the provision in the sales document that Blickensdorf would pay Minnick's commission. In light of that, Minnick's action in concealing that he loaned Blickensdorf $15,000.00 for the down payment was not a serious violation of a duty of loyalty or seriously disobedient conduct such that Minnick should be ordered to repay the commission he received to Nichols. We agree that the evidence is conflicting as to whether Nichols knew that Blickensdorf gave a note rather than cash for Minnick's commission. Minnick testified that Nichols and Blickensdorf both knew that he was an agent for the other. That is an insufficient explanation. Minnick engaged in two transactions with Blickensdorf incident to the initial purchase of BHL. Minnick agreed to accept a note rather than immediate payment of $22,500 representing the commission that Minnick was to receive from Nichols. Second, Minnick lent $15,000 to supply sixty percent of Blickensdorf's down payment to Nichols. Even if Nichols knew of the dual agency, knowledge that Minnick was acting as Blickensdorf's agent is quite different from knowledge that Minnick had lent Blickensdorf the bulk of the down payment. The trial court found that if Nichols had known of the $15,000 loan, Nichols would have had additional very important information about the credit worthiness of the buyer she was about to extend credit to. Nichols might very well have decided not to accept Blickensdorf's Installment Promissory Note for $177,500. By failing to disclose the $15,000 loan to Nichols, Minnick violated his duty to disclose material information known to him, namely, Blickensdorf's lack of cash. Presumably as events unfolded this lack of financial stability contributed to BHL's later struggles.