Opinion ID: 1844301
Heading Depth: 1
Heading Rank: 4

Heading: The Agency Issue

Text: ¶ 14. The buyer, the real estate agent, and the attorney each knew of the termite inspection report and of the report of the contractor engaged by Owen. Each argues that it was the responsibility of the others to inform the buyers, who deny receiving both reports. Each would have us impute to the buyers constructive knowledge of these important documents through the agency of either the real estate agent or the attorney. ¶ 15. The law of agency generally imputes knowledge and information received by an agent in conducting the business of a principal to the principal, even where that knowledge or information is not communicated by the agent to the principal. Pittman v. Home Indem. Co., 411 So.2d 87, 89 (Miss.1982) (citing Home Ins. Co. of N.Y. v. Thornhill, 165 Miss. 787, 796, 144 So. 861, 863 (1932)). See also Weathersby v. Gore, 556 F.2d 1247, 1251 (5th Cir.1977) (applying Mississippi law). This general principle is fundamental to commerce; without the ability to rely on communications through representatives most trade would halt. The Court of Appeals relied on this principle in holding that, as a matter of law, the seller here satisfied his contractual obligation to the buyers by relying on the agents to communicate with them. ¶ 16. Here, however, Alfonso Realty served two masters, the buyer and the seller. Miss.Code Ann. § 73-35-21, allows such representation by real estate professionals if the dual representation takes place with the knowledge of all parties. In addition, the trial court found that Rosetti as well as Alfonso represented both parties. The Lanes argue that there should be an exception to the rule of imputed knowledge when the agent is acting in a dual capacity for two principals. The argument is that imputing the knowledge of the agent to both principals whose interests may become adverse is unreasonable and unfair. On appeal, the Lanes further argued that the attorney breached his fiduciary duty, not only in failing to inform them of the documents, but also in his failure to ensure that the seller complied with all of his contractual obligations. This argument proceeds to conclude that it is improper to constructively impute the knowledge of the seller to the Lanes, via the attorney, when it is unclear what principal he was representing when he received the termite inspection report. ¶ 17. In a number of jurisdictions, knowledge of a dual agent, acquired in the course of his employment, at least where the agent has not acted out of self interest or fraudulently, has been held, as between the principles, to be imputed to each of the principles even if not actually transmitted to them. Carlton v. Moultrie Banking Co., 170 Ga. 185, 152 S.E. 215 (1930); Farr v. Newman, 14 N.Y.2d 183, 250 N.Y.S.2d 272, 199 N.E.2d 369 (1964) (holding the rule applicable as to third parties.) ¶ 18. In an opinion which is somewhat at odds with Farr, at least one New York appellate court, recognizing that an agent serving dual interests occupies a field of extremely delicate relationships, observed: [t]he important thing about the case in hand, however, is not fraud or the authority of the agent. It is the fact that when an agent undertakes to act in a transaction for two parties whose interests are or can become adverse, as a reasonable man might foresee, knowledge of facts arising from the transaction is not deemed the knowledge of the principal to operate as a waiver or to work otherwise to his detriment, unless the principal has actual and not merely constructive knowledge of the true facts. Otsego Aviation Serv. Inc. v. Glens Falls Ins. Co., 277 A.D. 612, 102 N.Y.S.2d 344, 349 (1951), cited with approval in C.B. & T. Co. v. Hefner, 98 N.M. 594, 651 P.2d 1029 (Ct.App.1982.) ¶ 19. Alabama has also held that where an agent occupies a dual relation, notice acquired by him in such other agency is not binding on the principal. Florence v. Carr, 226 Ala. 654, 148 So. 148, 149 (1933). ¶ 20. It has been said also that even where there is no ethical breach, an attorney must act with the greatest circumspection in the representation of multiple clients where their exists a possibility that their interest may conflict or be at cross purposes. Stump v. Flint, 195 Kan. 2, 402 P.2d 794, 801 (1965) (attorney representing seller and purchaser in real estate transaction.) Put differently, whether real estate broker or attorney, although a professional may be permitted under law to represent both parties to a transaction, as a dual agent he must proceed with a heightened sense of duty and conduct to assure that he serves both masters' interests fully. ¶ 21. The problem with rigidly imputing knowledge of the agent to both principals in a dual agency context is clear. Simply put, if everyone is responsible, then no one is responsible. In such a situation, the imputation, based on the presumption that the agent will do what is expected of him becomes a fiction which interferes with rather than promotes commerce and the interest of full disclosure. A proper analysis requires that we recognize that in a dual agency two distinct agencies are vested in the agent with separate duties and responsibilities as to each principal. If Alfonso and Rosetti, as agents of Oustelat, failed to communicate required information to the Lanes, then Oustelat breached his contract through the neglect of his agents. If, on the other hand, Oustelat delivered the information to Alfonso and Rosetti, as the agent of the Lanes, they are deemed to have received it and have no complaint against Oustelat. The arguments become circular and cannot lead to a resolution of the equities between the buyers and the sellers. No doubt, this can create special difficulties for the dual agent, but they are difficulties inherent in choosing to serve two masters. ¶ 22. We cannot establish a bright line for all cases as to whether knowledge held by the dual agent is to be imputed to either or both principals. Here, the jury could have inferred that Oustalet, in telling Owen to take care of the matter concerning termite certificate and any evaluation of the damage, was speaking to her as his own representative. In resolving that question, we better approach the dilemma as to Oustalet by asking whether the seller was acting reasonably in relying on the dual agentsthe real estate agent and the attorneyto attend to the matter and in believing that they would properly inform the buyer. The question of Oustalet's liability should have been submitted to the jury. ¶ 23. As to Alfonso Realty, the Court of Appeals correctly held that the real estate agency breached its duty to the buyers in simply assuming that the attorney would provide the termite inspection report to them. Owen had important information in her possessionthe termite inspection report and the later report from the contractor which she contactedand failed to disclose it to them. She recognized her obligation to communicate directly with the seller, but did not accord the same treatment to the buyers. It is not enough that she says that she thought she performed her duty by ordering the contractors inspection, which concluded that there was no structural damage. The Lanes were entitled to have all significant information in order to make their own decisions as to how they wanted to proceed under the sales contract. The jury should determine under the facts presented whether this breach caused damage to the Lanes. ¶ 24. The Court of Appeals analyzed the duty of an attorney to his client and concluded that, under the evidence, a reasonable person could conclude that there was an attorney-client relation between Rosetti and the buyers. The evidence was sufficient to allow the jury to conclude that the buyers did not receive the termite certificate at the closing conducted by Rosetti and that he did not inform, them of the contractor's report. However, that court affirmed the directed verdict in his favor based on the belief that liability could not be established without expert testimony as to the standard of care imposed on a closing attorney. This brings us to the second issue presented by the petition for certiorari.