96 N.Y.2d 337 (2001)
A real estate broker owes no duty to a seller to refrain from showing a potential buyer other properties, even after oral negotiations have commenced, unless there is an explicit agreement to the contrary.
Summary
Plaintiffs, the Sonnenscheins, listed their condo for sale. DEGI, a brokerage firm, found potential buyers (the Tams) and began negotiations. However, DEGI also showed the Tams another, more desirable apartment in the same building. The Tams purchased the other apartment. The Sonnenscheins sued DEGI for breach of fiduciary duty, claiming DEGI sabotaged their sale. The court held that DEGI owed no such duty, as there was no exclusive agreement and no binding contract between the Sonnenscheins and the Tams. Real estate brokers can represent multiple principals unless explicitly agreed otherwise.
Facts
The Sonnenscheins listed their condominium for sale with Phyllis Koch Real Estate.
Koch contacted other brokers, including Douglas Elliman-Gibbons & Ives (DEGI), seeking potential buyers.
Susan Turkewitz, a DEGI salesperson, found potential buyers, the Tams, who were initially interested in the Sonnenscheins’ apartment.
Negotiations ensued, and Sonnenschein drafted a commission agreement with DEGI.
The Tams were shown another apartment in the same building by Patricia Cliff, another DEGI salesperson; this apartment was superior to the Sonnenscheins’.
The Tams ultimately purchased the other apartment.
The Sonnenscheins sold their apartment for a lower price and sued DEGI for breach of fiduciary duty.
Procedural History
The Sonnenscheins sued DEGI in Supreme Court, which denied DEGI’s motion for summary judgment.
A jury found in favor of the Sonnenscheins.
The Appellate Division reversed, directing judgment for DEGI.
The Sonnenscheins appealed to the New York Court of Appeals.
Issue(s)
Whether a real estate brokerage firm that produces a potential purchaser for a seller owes the seller a fiduciary duty to refrain from showing the potential purchaser additional properties after oral negotiations have commenced.
Holding
No, because, in the absence of an agreement with a principal to the contrary, a broker owes no duty to refrain from offering the properties of all its principals to a prospective customer.
Court’s Reasoning
The Court of Appeals emphasized that a real estate broker is a fiduciary with a duty of loyalty to their principal. However, determining the existence of a broker/principal relationship requires reviewing the communications and agreements between the parties.
The Court found that the Sonnenscheins did not establish that DEGI agreed to become their broker or act as their fiduciary. The commission agreement alone was insufficient to create such a relationship.
Even assuming a broker/principal relationship existed, the Court held that DEGI did not breach any fiduciary duty by showing the Tams another property. The Court adopted the view that, absent an explicit agreement, a broker is not obligated to decline a prospective purchaser’s request to see other properties listed with that broker.
“Unless a broker and principal specifically agree otherwise, a broker cannot be expected to decline a prospective purchaser’s request to see another property listed for sale with that broker. Any other rule would unreasonably restrain a broker from simultaneously representing two or more principals with similar properties for fear of violating a fiduciary obligation in the event a buyer chose the property of one principal over that of another.”
The Court also noted that there was no complete and enforceable purchase agreement between the Sonnenscheins and the Tams. The commission agreement and cover letter drafted by Sonnenschein indicated that the parties were free to decline to enter into a contract.
The Court declined to address the Sonnenscheins’ argument regarding disclosure of confidential price information, as this theory was not raised in the original complaint or summary judgment papers.