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Daubman v. CBS Real Estate Co. - 254 Neb. 904, 580 N.W.2d 552 (1998)

Rule:

An agent is required to act solely for the benefit of the principal in all matters connected with the agency and adhere faithfully to the instructions of the principal. An agent and principal are in a fiduciary relationship such that the agent has an obligation to refrain from doing any harmful act to the principal.More specifically, a real estate agent owes the principal a fiduciary duty to use reasonable care, skill, and diligence in performing her or his obligations and to act honestly and in good faith. The rule requiring an agent to act with utmost good faith toward the principal places the agent under a legal obligation to make a full, fair, and prompt disclosure to the principal of all facts within the agent's knowledge which are or may be material to the matter in connection with which the agent is employed, which might affect the principal's rights and interests or influence the principal's action in relation to the subject matter of the employment, or which in any way pertain to the discharge of the agency which the agent has undertaken.

Facts:

Plaintiffs Allen E. and Renee A. Daubman, a married couple, were homeowners, who contracted with  defendant Arlene Engelbert, a real estate agent for a one-party listing agreement, giving defendant CBS Real Estate Co., the company through which Engelbert worked, the exclusive right to sell the home to the buyers with CBS Real Estate receiving a commission for that sale. After the buyers' loan request was turned down, Engelbert sought loan approval for the buyers from a second lender. During that loan process, the Daubmans were forced to find an apartment. 

Claiming that CBS Real Estate and Engelbert had breached their fiduciary duties, the Daubmans sought the return of the real estate sales commission they had paid. Following a bench trial, the state district court entered judgment in favor of the Daubmans. CBS and Engelbert appealed to the Nebraska Court of Appeals, claiming that the district court had erred in (1) finding that they breached their fiduciary duties, (2) failing to find that the Daubmans ratified and otherwise acquiesced in their actions, (3) finding that the Daubmans sustained damages, and (4) awarding prejudgment interest. Concluding that the evidence failed to support the district court's judgment, the Court of Appeals vacated the judgment and remanded the cause with directions to dismiss. Plaintiffs Daubmans petitioned for further review, claiming, in summary, that the Court of Appeals erroneously set aside the district court's factual findings.

Issue:

Did Engelbert breach her fiduciary duty to the Daubmans?

Answer:

Yes

Conclusion:

The court held that Engelbert breached her fiduciary duty to the Daubmans by encouraging the sale when the situation was detrimental to the Daubmans’ interest. Engelbert contacted the apartment manager to discover if the Daubmans could continue renting the apartment and allow the buyers time to secure their loan and thus secure Engelbert’s commission. The Daubmans, as sellers, alleged that Engelbert falsely told them that the buyers' loan was preapproved. Having violated her duties, Engelbert was not entitled to the commission. But because there had been a reasonable dispute as to whether the corporation and agent were entitled to the commission, the claim was not liquidated and prejudgment interest was improperly allowed, Neb. Rev. Stat. § 45-103.02(1)(1996).

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