In 2009 Shawn and Stephanie Holloway hired Jeremy Williams, a sales agent with Keller Williams Realty Northeast, to help them sell their existing home and find a new one. M/M Holloway were shown a home owned by Jennifer Blalock – another sales agent with Keller Williams Realty NE.
Following intermediary protocol,
Keller Williams Realty NE engaged Tina Martin, also a sales agent with Keller
Williams, to assist Jennifer Blalock. Meanwhile Jeremy Williams continued to
represent M/M Holloway.
A Contract was signed for the
purchase and sale of Blalock’s property. Keller Williams NE was designated as
the broker for both seller and buyers. The Holloways were allowed a 10-day
inspection period, and so they hired Clint Simon (referred to them by Jeremy Williams)
for a termite inspection.
Simon found no visible evidence of
active termite infestation or previous infestation, although Simon did disclose
his finding of evidence of previous treatment for subterranean termites.
M/M Holloway closed the purchase and
soon after closing the Holloways started renovating the property. The
contractors discovered extensive termite damage – substantial enough to cause
the Holloways to move out.
The Holloways filed a lawsuit
against Blalock, Simon and Keller Williams NE. Blalock filed bankruptcy; Simon
paid $200,000 to be released. That left Holloways vs. Keller Williams NE.
The trial jury found liability
against Keller Williams NE based primarily on a theory of failure-to-disclose
under the Texas Deceptive Trade Practices Act. The trial court then converted
the jury’s findings into a Judgment.
Keller Williams NE appealed,
claiming that the evidence was insufficient to support the jury findings. The
point made by Keller Williams NE was that the only means for the jury to find
it liable would have been due to the actions (possible failure to disclose) of
Jennifer Blalock. And – that Jennifer Blalock was not an agent for Keller
Williams NE, because Jennifer Blalock was acting only for herself.
Now of course Jennifer Blalock had
signed an Independent Contractor’s Agreement with Keller Williams NE, to
perform services as a real estate agent. However, in the Holloway deal Blalock
was not acting in an agency capacity but rather as an owner and seller of the
property. As such, the ICA was inapplicable and the actions (inactions) of
Blalock did not bind Keller Williams NE as no principal-agency relationship was
intended by this one, unique transaction.
So the argument went.
The Court of Appeals evaluated
evidence that Blalock’s agent did “very little” and instead Blalock represented
herself, offered the Property for sale herself, negotiated the sale herself,
and sold the Property for her own account.
Thus, no agency relationship existed
between Blalock and Keller Williams NE.
Then the Court turned its attention
to the question of Keller Williams’ knowledge of the existence of unrepaired
termite damage. Again, the evidence did not support the conclusion that Keller
Williams knew of the issue, and failed to disclose.
The trial court’s Judgment was
reversed in favor of the Keller Williams franchisee.
See Flutobo, Inc., dba Keller Williams Realty
Northeast v. Holloway; Nos. 14-12-00104-CV and 14-12-00170-CV, December
the non-disclosure is significant enough, there will be a claim. If the claim
is not resolved, there will be a lawsuit. If there is a lawsuit, the only
winners will be the lawyers as attorneys’ fees might eclipse the amount of any
judgment. Particularly if there are appeals.
case is residential in context. But the same rules regarding disclosure and
intermediary relationships apply to commercial transactions. There is no
difference in Texas law, as TREC makes no distinction between the types of
transactions relative to the disclosures that must be made although the DTPA
applies only to “consumers.”
on the side of disclosing too much, after of course you have obtained your
principal’s written authorization. You might need to consider withdrawing if
your principal refuses to furnish that consent. Better a blown commission than
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.