Share
In response to a certified question propounded by a federal court, Montana’s highest court considers whether the state’s license laws allow a buyer’s representative to represent clients who are bidding against each other for the same property.
Amador Zuazua (“Bidder 1”) hired Patti Stone (“Buyer’s Representative”) of Coldwell Banker Gateway Realty (“Brokerage”) to represent him in negotiations for a property (“Property”). Bidder 1 signed an agency disclosure form which contained the legal requirements for buyer’s representatives in the state.
Louis Moritzky (“Bidder 2”) entered into a similar relationship with the Buyer’s Representative, signing an identical representation agreement. Bidder 2 also was interested in the Property. On July 8, 2003, Bidder 1 authorized the Buyer’s Representative to make a bid for the Property. On July 12, 2003, Bidder 2 also directed the Buyer’s Representative to submit a bid for the Property. The owner of the Property decided to accept Bidder 2’s offer.
Bidder 1 filed a lawsuit against the Buyer’s Representative and the Brokerage in the United States District Court for the District of Montana. The lawsuit argued that the Buyer’s Representative failed to fulfill her statutory duties to Bidder 1 by representing competing bidders for the same property. Since the state’s license law was not clear on the proper result and there were no prior cases considering Montana law on this issue, the federal court sent a certified question to the state’s highest court asking them to interpret Montana law.
The Supreme Court of Montana determined that buyer’s representatives representing competing bidders for the same property violated Montana law. The court first looked at the language of the state’s license law. One section of the license law sets forth the duties owed by a salesperson to his/her client depending on the type of relationship undertaken by the parties, including the duties of a buyer’s representative to his/her client. That part of the law does not explicitly state whether or not a buyer’s representative can represent competing bidders but instead states that a buyer’s representative must “act solely in the interests of the buyer.”
Bidder 1 argued that that the use of the word “solely”, which he interpreted to mean “only”, shows that the license law is intended to limit a buyer’s representative to only a buyer who is interested in acquiring a particular property. Conversely, the Buyer’s Representative interpreted the license law as only requiring that the licensee act in the best interests of the “class” of buyers, not a specific buyer.
The court ruled that this section of the license law limited a buyer’s representative to one buyer for a specific property at a particular time because a buyer’s representative could not act in the “best interests” of the buyer if he/she was representing multiple parties in the bidding process. This is because a buyer’s representative who is representing competing bidders is precluded from advising his/her client on the most important part of the transaction- the price that they need to bid in order to obtain the property, since the buyer’s representative obtained the other bid amount(s) in confidence. The court also found that the buyer’s representative could also misuse such information to create a bidding war, thereby increasing his/her commission from the transaction.
The Montana Association of REALTORS® (“Association”) filed an amicus curiae brief in the case arguing that because the dual agent portion of the license law requires that the dual agent “act solely in the best interests” of both the buyer and seller, it demonstrates that buyer’s representative can represent competing bidders. The Association’s argument was that the license law merely required that licensees not act adversely to their client’s interests, and the Association cited out-of-state cases which supported this argument. The court disagreed with the Association’s argument, finding that “act solely in the best interests” of a buyer imposed a duty on the buyer’s representative to help the buyer achieve their goals, not merely avoid acting counter to the buyer’s interests. Because representing competing bidders could create a conflict of interest for the buyer’s representative, the court ruled that the state law prohibits a buyer’s representative from representing competing bidders for the same property.
The Brokerage also argued that another part of the license law demonstrated that a buyer’s representative could represent multiple parties. This part of the license law states that a buyer’s representative must “disclose all relevant and material” information he/she knows to his/her client, unless this information was obtained from a “prior or existing” agency relationship. The Brokerage argued that since a buyer’s representative only represents buyers, this section demonstrated that it was permissible for a buyer’s representative to represent more than one buyer. However, the court rejected this argument, determining that the exception in this section only applied to dual agents and did not concern simple buyer’s representatives. Thus, the court determined that Montana’s license law does not allow a buyer’s representative to represent competing bidders for the same property and so sent that answer back to the federal court.
Three justices dissented from the majority opinion. The dissent agreed that the Brokerage had demonstrated that the license law did allow for multiple representation, finding that the legislature had broken the license law into parts for each type of representation and the section concerning multiple representation cited by the Brokerage appeared in the buyer’s representative portion of the license law.
Zuazua v. Tibbles, 150 P.3d 361 (Mont. 2006).