Judgement Against Licensee Reversed

Read the full decision : White v. Miller

Tennessee appellate court reverses lower court’s determination that a real estate professional had acted as an undisclosed dual agent.

Owners (“Owners”) of a residential property (“House”) entered into a listing agreement with a real estate broker (“Referring Broker”). The Referring Broker then referred the Owners to another brokerage firm (“Selling Firm”) in exchange for a referral fee. Tennessee has designated agency in its license law, and so the Selling Firm and the Owners specified in the listing agreement that one of its salespeople (“Designated Representative”) would serve as the designated agent for the Owners.

A couple (“Buyers”) became interested in purchasing the House and they negotiated a price with the Designated Representative, who then presented the offer to the Owners. The Buyers also asked the Designated Representative to serve as the listing broker for the Buyers’ townhouse (“Townhouse”) and so he entered into a representation agreement with them.

Eventually, the Buyers entered into an agreement to purchase the House and the Owners agreed to accept the Townhouse as part of the purchase price. During the closing, the closing agent filed an interpleader action and deposited all of the commissions with the court, seeking a judicial determination on how to pay the commissions to the real estate professionals.

The Owners filed a lawsuit against the Selling Firm, alleging the firm had acted as an undisclosed dual agent when it represented the Buyers in the sale of the Townhouse as well as the Owners in the sale of the House. The Referring Broker joined the lawsuit, seeking payment of her referral fee. The trial court awarded the Referring Broker her commission; ruled that the Selling Firm had acted as undisclosed dual agent; and ruled in favor of the Selling Firm on the other allegations. The trial court awarded the commissions held in escrow to the Owners, except for the commission from the sale of the House. The Owners and the Selling Firm appealed.

The Court of Appeals of Tennessee reversed the undisclosed dual agency ruling and entered judgment in favor of the Selling Firm, affirming all other rulings. The court first looked at the state’s agency statute. The state law provides that an agency relationship is only created if the parties specify that they are entering into an agency relationship via the representation agreement; otherwise, the parties are in a nonagency relationship and the licensee is serving as a facilitator.

Since the Designated Representative had only entered into an agency relationship with the Sellers, the court ruled there was no undisclosed dual agency. The representation agreement between the Owners and the Selling Firm created an agency relationship by specifying that the Designated Representative was serving as their agent; however, the agreement between the Buyers and the Designated Representative did not reference an agency relationship between the parties and so the Designated Representative was a facilitator in that transaction. Thus, the Designated Representative was not serving as a dual agent, since he was only designated to represent one party in the transaction. Thus, the court reversed the dual agency ruling by the trial court and entered judgment in favor of the Selling Firm.

White v. Miller , No. M201600888COAR3CV, 2017 WL 3769409 (Tenn. Ct. App. Aug. 30, 2017). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information.]

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