Court Opinion

ID: 9461683
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:22:37.349591+00
Date Added: 2024-06-11T17:37:13.425431
License: Public Domain

EUGENE A. WRIGHT, Circuit Judge
(dissenting):
I must dissent. The decision of my brothers is supported neither by the weight of precedent nor the unequivocal findings of the district court. Even if the courts of Idaho were to ignore the weight of authority in other states and hold that Mr. Tifft owed a fiduciary obligation to the Funks, the plaintiffs have failed to sustain their burden of showing they were injured by the alleged breach.
The district court found that an Idaho real estate broker did not owe a duty to a prospective buyer for his client’s property requiring him to inform the buyer that he was bidding on the property himself. The rule of this circuit is that
In diversity cases, where state law controls, a district judge’s interpretation of the law of the state where he sits will not be overturned unless clearly wrong, particularly if the highest state court has not passed on the matter.
Douglas v. Beneficial Finance Co. of Anchorage, 469 F.2d 453, 455 (9th Cir. 1972).
There is no Idaho case in point. However, the courts in other states which have considered - similar facts have concluded that a broker for the seller can, with the seller’s knowledge, outbid prospective buyers, Ries v. Rome, 337 Mass. 376, 149 N.E.2d 366, 371 (1958); Klotz v. Fauber, 213 Va. 1, 189 S.E.2d 45 (1972); DiBurro v. Bonasia, 321 Mass. 12, 71 N.E.2d 401 (1947); cf. Fish v. Teninga, 330 Ill. 160, 161 N.E. 515 (1928); Jacoby v. Shell Oil Co., 196 F.2d 855 (7th Cir. 1952); Quinn v. Phipps, 93 Fla. 805, 113 So. 419, 423 (1927).
In Ries, supra, plaintiffs sued to impose a constructive trust on property purchased by an associate of the seller’s agent. They argued that the broker had a fiduciary duty not to compete with them for the property. The court held that the plaintiffs dealt with the broker “with whom they were, or should have been, dealing at arm’s length and who was under no fiduciary duty not to compete with them.” 149 N.E.2d at 371.
In Klotz, the Virginia Supreme Court held that the agent of a seller of land did not breach a fiduciary duty to a buyer where it was not alleged that he purchased the property at a price equal to or lower than that offered by the prospective buyer. In that case the broker had not even transmitted the offer to his principal. 189 S.E.2d 45.
In DiBurro, supra, the Supreme Judicial Court of Massachusetts held that there was no breach of fiduciary duty on the part of a broker for a seller of land who purchased the property himself. Plaintiff, a prospective buyer, had made an offer on one parcel and asked the broker to determine if the property was worth that amount. The broker learned that the seller was willing to sell an adjoining parcel as well. The broker eventually purchased the combined properties without informing the plaintiff or other bidders. Absent an agency relationship with the buyer, the court held that no constructive trust could be imposed.
In Teninga, the plaintiff approached a broker who was already interested in purchasing some land for his own account. The court held that the broker *28did not have to disclose that he was bidding on the property himself. Although the court held that the broker might be liable if he had misrepresented material facts to the prospective buyer, 161 N.E. at 518-519, absent an employment relationship the broker was not required to make a disclosure of his bidding to the plaintiff: “It is required that there be proof of the existence of an employment to constitute a broker an agent in any case.” 161 N.E. at 518.
In Phipps, the leading 'case relied on by the majority, the court dealt with a broker who was employed by the prospective buyer to arrange for the purchase of land. The court distinguished those facts from the case where the broker is employed by the seller or acting for himself:
If Phipps and Quinn had been dealing at arm’s length, he (Quinn) might not have been bound by his agreement to purchase for Phipps, but having undertaken to act for Phipps, he becomes an agent .
113 So. 419 at 423.
The cases cited by the majority can be distinguished. They dealt with situations in which the broker was in an agency relationship with the prospective buyer, made affirmative misrepresentations, or bid under the price offered by the plaintiff.
In Phipps, Mitchell, and Golden, the brokers were the employees of the plaintiff buyers. As such, they had a fiduciary duty not to compete with their principals. Here, however, the Tifft employees were agents of and employed by the owners of the land, and dealt at arm’s length with the several prospective buyers.
Similarly, in all the cases cited by the majority, the broker committed acts which traditionally had been held to breach an agent’s fiduciary duty: fraudulent misrepresentation, Phipps, 113 So. at 421-422, Taggart, 336 P.2d at 537; misuse of confidential information, Golden, 276 N.W. at 858; failure to disclose conflicting agency, Allison, 213 P.2d at 233. Here there was no allegation of fraudulent misrepresentations, no confidential information, and a disclosure of Tifft’s employment as broker for the vendor.
In discussing the Phipps and Taggart decisions, the Supreme Court of Virginia summarized their teachings:
Under the rule of those cases, a real estate agent is liable to a prospective buyer when the agent fails to transmit the buyer’s offer and buys the property for his own account at a price equal to or less than the price the prospective buyer agreed to pay.
Fauber, 189 S.E.2d at 45.
Here, the broker did transmit the Funks’ offer to the owner. The terms he offered the owner were substantially better than those presented by any prospective buyer. The owner chose to accept those terms rather than wait for another round of offers. I cannot see how the broker can be held liable in such circumstances. Where the broker is not the agent of the prospective buyer, where he acts with the knowledge of his principal, the seller, where there is no misuse of confidential information, where there is no fraudulent misrepresentation, and where the broker bids more than any of the prospective buyers, there should be no liability on the part of the broker if the seller chooses to accept his offer without asking for another round of bids.
The premise of the majority opinion is that the broker somehow prevented the plaintiffs from making a higher bid once he had made his own. This was not an auction sale in which bidding had to be kept open until the highest price was found.
The Carlocks set a price and terms. Tifft and his associates met them. The decision to accept that offer was that of the seller. There was no finding of the court whether the Carlocks would have waited for another round of bids. Their decision to accept the Tifft bid implies that they would not. Moreover, it is far from clear that the Funks could have *29made a more attractive bid, even had they known of the one made by Tifft.
The majority dismisses the finding of the district court that the Funks could not have bettered the Tifft bid * on the ground that it is “speculation.” On the basis of this speculation, however, they are willing to mandate a constructive trust and turn the property over to the plaintiffs. This ignores the requirement that a plaintiff must demonstrate “damage or injury” to obtain equitable relief, Nab v. Hills, 92 Idaho 877, 452 P.2d 981, 987 (1969).
Even if the majority were to hold that the finding of the district court was clearly erroneous — as they must in order to ignore it — the property surely cannot be turned over to the plaintiffs on the basis of a purely speculative showing that they might have been able to raise the necessary money and assure the Car-locks of their financial stability. At worst, the case should be remanded to the district court for additional findings of fact. At best, it should be dismissed.
Here the trial judge had an opportunity to hear the testimony of the Funks as to their financial status at the time of the sale. He had their financial statements and copies of their income tax returns for the relevant period. These reflected relatively substantial debts. He had before him the Funks’ offer, including terms of only $1,000 down and $100 per month for the first 15 months, without interest. (Tifft offered $6,000 down, $300 per month at 6.5% interest.) The trial judge observed the testimony of the real estate agent that the Funks said their offer was the best they could make. On the basis of this evidence and the judge’s observation of the witnesses’ demeanor, I cannot say that his findings were clearly erroneous.

 The court found, RT 391-392:
I believe the statement made by Mr. and Mrs. Funk to the effect that they could have or would have met or exceeded an offer made by the defendant, or some of them in the action, cannot be accepted. I think that it comes four years later. It is self-serving in the extreme and I think that it is unreliable in that respect. The evidence with respect to their financial circumstances, I think, also renders it quite doubtful that Mr. and Mrs. Funk either could or would have had the financial ability to equal or exceed the offer had it been communicated. Additionally, there was some impeachment and contradiction as to their financial ability.