Hardy v. Davis

Hammond, J., delivered the opinion of the Court. In April 1955, appellants, the owners of a dwelling, employed the appellee, a real estate broker, to effect its sale. He sold it for $16,950, of which a deposit of $50.00 was paid when purchasers signed the contract; $450.00 was to be paid after the owners signed the contract; $11,000 was to be provided by a first trust lender, and the balance of $5,450 was to be in the form of two promissory notes of the buyers in the amount of $2,725 each, secured by a second deed of trust. After the contract was signed by both owners and buyers, the broker lent the buyers $205 of the $450 payment, and thereafter lent them $432.25 to pay part of the settlement expenses.

The owners were not told, and did not learn, of these loans until some time after the settlement. The purchasers did not meet the payments due under the first or second trusts (the broker says this was because the owners did not deliver a valid deed, and in writing ordered buyers to move from the property some three months after the settlement) and the property was sold under the first trust. The owners neither foreclosed the second trust nor bid up the property at the sale under the first trust in order to protect their interest. ²³² In March 1959, the owners sued the broker for breach of his alleged duty to disclose to them the making of the loans to the buyers, claiming damages for the difference between the sales price of the house and the amount of the sales price they had actually received. The broker filed a plea of limitations, general issue pleas, a plea of res judicata by reason of a prior suit by the owners against him for a claimed violation of his obligations as agent, in which the broker prevailed, and a plea on the equitable grounds that the owners were es-topped because any losses suffered by them were “the direct and proximate result” of their failure to deliver the déed, and in ordering buyers to vacate prior to default.

The broker moved for summary judgment and filed a supporting affidavit. The owners filed contravening affidavits which, aside from statements designed to refute the defense of limitations, essentially were claims that had they known prior to “the transfer of title” that the broker had made the loans to the buyers they would “have realized” the buyers would default, and would have rescinded the contract of sale. The trial court granted the broker’s motion for summary judgment on the ground there was no breach of duty. We agree and therefore do not reach the questions of limitations, res judicata or the cause or mitigation of damages.

The owners concede the broker’s assertion that he procured a report from a national credit reporting agency which showed that the buyer held a permanent job as designer with an engineering company, that he had a good record and was a good credit risk, as well as that the broker had no knowledge, or reason to know, the buyers would not make payments as agreed, and no reason to anticipate before the contract was signed that they would seek a loan from him or anyone else. During the term of the agency, a real estate broker cannot act for both vendor and vendee in respect of the same transaction because of possible conflict between his interest and his duty in such case, and he must disclose to his principal all facts or information which may be relevant or material in influencing the judgment or action of the principal in the matter. Coppage v. Howard, 127 Md. 512, 523 ; Restatement (Second), Agency Sec. 381. ²³³ It has been opined, and held, that the fact a broker lends money to the purchaser to help consummate the sale he has arranged, does not make him the purchaser’s agent and does not constitute action adverse to his principal, the seller. “An agent can properly deal with the other party to a transaction if such dealing is not inconsistent with his duties to the principal. Thus, an agent employed to sell can properly lend money to the buyer to complete the purchase * * Restatement (Second), Agency Sec. 391, Comment b.

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