Suing your real estate agent in Texas is a big decision. The basis of the suit is usually a misrepresentation or negligence. Negligence is generally based on a breach of a duty.
This case (Wyrick v. Tillman & Tillman Realty, Inc., 03-00-00061-CV, 2001 WL 123877) has some interesting information about the duties of Texas real estate agents. It is an unpublished and some problems with the opinion (such as the Court’s statement that a DTPA action generally requires a showing of intent, when that is only required for a few of the laundry list actions). Even so, there are some good points to review. If you have had trouble with your real estate agent or if you are a real estate agent that needs representation, call Hector Chavana Jr. at 713-979-2941.
Duty to perform work in a competent, skillful, and professional manner
Wyrick complains in her third point of error that although there might be no duty to inspect, Tillman, who was hired as the “buyer’s exclusive agent,” owed her a duty to perform his work in a competent, skillful, and professional manner and to exhibit his best efforts and unbiased judgment. See Burleson v. Earnest, 153 S.W.2d 869, 875 (Tex.Civ.App.-Amarillo 1941, writ ref’d w.o.m.) (holding that in all cases where relationship of principal and agent is shown, principal is entitled to best efforts and unbiased judgment of his agent). Wyrick argues that Tillman breached the warranty that all material information known at the time about the good had been disclosed. Additionally, she argues that Tillman had a duty to exercise skill and judgment in his profession, which requires full disclosure and sound judgments about what information to disclose. According to the Canons of Professional Ethics and Conduct under the Texas Real Estate Commission, a broker is a fiduciary and owes a duty of fidelity to his client:
A real estate broker or salesperson, while acting as an agent for another, is a fiduciary. Special obligations are imposed when such fiduciary relationships are created. They demand: (1) that the primary duty of the real estate agent is to represent the interests of the agent’s client, and the agent’s position, in this respect, should be clear to all parties concerned in the real estate transaction; that, however, the agent, in performing duties to the client, shall treat other parties to the transaction fairly; (2) that the real estate agent be faithful and observant to trust placed in the agent, and be scrupulous and meticulous in performing the agent’s functions; (3) that the real estate agent place no personal interest above the agent’s client.
22 Tex.Admin.Code § 531.1 (2000). Additionally, administrative rules provide that “a [licensed real estate agent] has an affirmative duty to keep the principal informed at all times of significant information applicable to the transaction or transactions in which the licensee is acting as agent for the principal.” 22 Tex.Admin.Code § 535.156(c) (2000).
In response, Tillman Realty argues there is no legal duty for a real estate broker to inspect and disclose all facts that might affect the listed property’s value or desirability. Tillman Realty cites case law holding that an implied warranty does not apply to services in which the essence of the transaction is the exercise of professional judgment by the service provider. Kubinsky v. Van Zandt Realtors, 811 S.W.2d 711, 715 (Tex.App.-Fort Worth 1991, writ denied); Forestpark Enters. v. Culpepper, 754 S.W.2d 775 (Tex.App.-Fort Worth 1988, writ denied). Again, Tillman Realty misstates Wyrick’s point of error. Wyrick is not complaining that there is a legal duty to inspect and disclose all information. Accordingly, we need not decide whether a real estate broker has a legal duty to inspect and disclose the information learned from the inspection.
If a broker, under his contract with his principal, is charged with no responsibility and is not obligated to exercise any discretion, but his duty consists merely of bringing the parties together so that, between themselves, they may negotiate a sale, and the sale is made in that manner, the broker is considered a mere “middleman” and is not necessarily the “agent” of either party. Rauscher Pierce Refsnes, Inc. v. Great Southwest Sav., F.A., 923 S.W.2d 112, 115 (Tex.App.-Houston [14th Dist.] 1996, no writ); Chien v. Chen, 759 S.W.2d 484, 495 n. 7 (Tex.App.-Austin 1988, no writ). Where, however, the relationship of principal and agent is shown, the principal is entitled to the best efforts and unbiased judgment of the agent. Rauscher Pierce, 923 S.W.2d at 115; Burleson, 153 S.W.2d at 873-74. A broker’s contract of employment calls for the utmost good faith on the part of the broker and he is bound to disclose to his principal all material facts within his knowledge affecting any transaction. Rauscher Pierce, 923 S.W.2d at 115. The broker may become liable to his principal for any negligent or other wrongful act done by him where his principal suffers damage. Barnsdall Oil Co. v. Willis, 152 F.2d 824, 828 (5th Cir.1946); Rauscher Pierce, 923 S.W.2d at 115-16.
It is clear from the present record that Tillman was not a mere “middleman,” but rather was Wyrick’s exclusive agent. Tillman had a duty to comply with the specifications set forth in his contract with Wyrick. Tillman has not proven conclusively that he performed his obligations to Wyrick in a manner conforming to the standards set forth above. Therefore, we sustain Wyrick’s third point of error.
Legal duty to disclose all material facts.
By her fourth point of error, Wyrick complains on appeal that a real estate agent has a legal duty to disclose all material facts that have a bearing on the decision to purchase, irrespective of whether these factors or conditions pertain to the subject property itself and regardless of the proximity thereto. Tillman responds that in order for him to have a duty to make disclosures to Wyrick regarding either the railroad right-of-way or the meat-processing plant, he must have actual knowledge of the facts that would cause a reasonable person to conclude that the abandoned railroad right-of-way and the meat-processing plant would have some significant adverse effect on the subject property. Tillman Realty urges that the uncontroverted summary judgment evidence established that Tillman had no such knowledge. We hold that even if a real estate agent does not have a duty to inspect the property and disclose all facts that might affect the listed property’s value or desirability, he does have a duty to disclose facts known to him that, viewed in the context of the contract between the broker and his client, would have an effect on the client’s satisfaction with the property.
Tillman Realty cites to Hagans and Kubinsky for the proposition that a broker has no legal duty to inspect listed property and disclose all facts that materially affect its value or desirability. Hagans, 830 S.W.2d at 736; Kubinsky, 811 S.W.2d at 715. As stated above, the issue here is not whether Tillman was required to inspect the property to learn of defects. Tillman already knew of the existence of the railroad right-of-way and the meat-processing plant; no inspection was necessary for him to learn of these defects. While he may not have a duty to inspect, Tillman has not proven as a matter of law that, in light of his express oral contract, he had no duty to tell Wyrick of the existence of the right-of-way and the meat-processing plant. Therefore, we sustain Wyrick’s fourth point of error.
Tillman Realty, in its third ground for summary judgment, argued that Wyrick is deemed to have relied upon her own personal investigation that was free and unhampered. Tillman argues on appeal, therefore, that he did not have a duty to Wyrick with respect to the railroad right-of-way or the meat-processing plant that would support a cause of action against Tillman Realty. Wyrick concedes that she did not perform an investigation of the area where the right-of-way or meat-processing plant are located. She argues, however, that a broker has a duty to disclose all material facts that would not be discovered by the exercise of ordinary care and diligence, which, at a minimum, she performed.
The rule is that where a person makes his own investigation of the facts, he cannot sustain an action of misrepresentation made by others. Kolb v. Texas Employers’ Ins. Ass’n, 585 S.W.2d 870, 872 (Tex.Civ.App.-Texarkana 1979, writ ref’d n.r.e.); M.L. Mayfield Petroleum Corp. v. Kelly, 450 S.W.2d 104, 110 (Tex.Civ.App.-Tyler 1970, writ ref’d n.r.e.). According to Wyrick’s affidavit, she spent time driving around the neighborhood and the town at night after work. One evening, she returned to visit New Braunfels and the neighborhood with a friend, and they drove around together looking at the area. From the record, the evidence tends to show that the railroad tracks were difficult to discover; many of them had been torn up and covered with asphalt. When Wyrick did visit the neighborhood, it was in the evening and often dark outside. The summary judgment evidence does not prove conclusively that Wyrick should have discovered the right-of-way and the meat-processing plant during her drives around the neighborhood. Tillman Realty has not proven the factual premise of the rule deeming one to have relied on one’s own investigation. Wyrick’s fifth point of error is sustained.
—
Other sources for duties charged to realtors can come from outside sources. For example, the Texas Association of Realtors says that their members are charged with the knowledge of a real estate inspection report, even if they don’t open it:
A broker or seller who receives an inspection report is charged with knowledge of the information in the report even if the broker or seller does not open the report. While sellers and listing agents should review inspection reports they receive on the property, a buyer and/or buyer’s representative can’t force them to do that.