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Keywords

contractfiduciarytrustfiduciary dutybreach of fiduciary duty
contractplaintiffdefendanttrialfiduciarytrust

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Anderson v. Griffith, 501 S.W.2d 695

Facts

A. J. Griffith and his wife sued Bryan Anderson, a real estate broker, claiming he breached his fiduciary duty by failing to disclose a prior oral agreement with third parties regarding the sale of their land. The Griffiths conveyed their land to Anderson as trustee, believing he was acting solely in their interest. However, Anderson had an undisclosed agreement to sell two-thirds of the land to Kelly and Hamm, which would have influenced the Griffiths' decision to sell. The jury found that the Griffiths would not have entered into the contract had they known of this agreement.

The undisputed facts in the case were: the Griffiths had owned their land since 1935; in May, 1970, the defendant, Anderson, a licensed real estate broker, started negotiating with the Griffiths for the purchase of their land for $250,000.00; a contract dated June 1, 1970, for the sale of the property to Bryan Anderson, Trustee, was prepared by Anderson in which he also named himself as the seller's agent entitled to a commission of 5% Of the sales price for negotiating the sale and which commission was to be paid to him upon closing the transaction; and the Griffiths and Anderson on June 23, 1970, all signed this sales contract just referred to.

Issue

Did Bryan Anderson breach his fiduciary duty to the Griffiths by failing to disclose his prior oral agreement with third parties regarding the sale of the land?

Whether the agreement with third persons was made orally before vendors and broker executed their sales contract was for jury.

Rule

A real estate broker has a fiduciary duty to disclose all material facts to their principal that may affect the principal's rights and interests. If an agent breaches this duty, they forfeit any compensation and must account for any profits made from the transaction.

Real estate broker has legal obligation to make a full, fair and prompt disclosure to his employer of all facts that come to his knowledge that are or may be material or which might affect his principal's right and interest or influence the action that he takes.

Analysis

In this case, Anderson had a prior agreement with Kelly and Hamm to sell two-thirds of the land, which he did not disclose to the Griffiths. The jury found that the Griffiths would not have entered into the sales contract had they known of this agreement. This failure to disclose constituted a breach of Anderson's fiduciary duty, as he was obligated to inform the Griffiths of any material facts that could influence their decision.

Applying the rules announced above to the facts of this case, it was the duty of Anderson to inform the Griffiths that Kelly and Hamm had agreed to advance to him the $50,000.00 required to make the down payment on the land, and had agreed to advance the money needed to pay three years' taxes and the interest on the $200,000.00 note for three years in exchange for his conveyance to them of a two-thirds interest in the property.

Conclusion

The court affirmed the judgment in favor of the Griffiths, holding that Anderson was liable for the commission paid and the profits he made from the transaction due to his breach of fiduciary duty.

Because of Anderson's breach of the fiduciary obligations owed to the Griffiths he is not entitled to retain the $12,500.00 commission that they paid to him for his services to them as their real estate agent, and he must turn back to them all the profit that he realized with respect to the land involved.

Who won?

The Griffiths prevailed in their action against Anderson, as the court found that he breached his fiduciary duty by failing to disclose his prior agreement with third parties. The jury's findings supported the conclusion that the Griffiths would not have entered into the sales contract had they been aware of Anderson's undisclosed interests, leading to their entitlement to recover the commission paid and the profits realized by Anderson.

The trial court rendered judgment in plaintiffs' favor and against Anderson for a recovery of the $12,500.00 commission the Griffiths paid Anderson. The judgment also awarded to the Griffiths Anderson's one-third interest in the profits realized when the land that had been purchased from the Griffiths for $5,000.00 an acre on December 2, 1970, was resold for $10,000.00 per acre on September 1, 1971.

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