North Carolina Real Estate Licensing Board v. Gallman

CLARK, Judge. The respondent did not offer evidence in substantial conflict with that offered by the complainants. We, therefore, find that the findings of fact made by the North Carolina Real Estate Licensing Board were based on all the evidence and were fully supported. The questions before us are whether the conclusions of law are supported by the findings of fact. In determining these questions we direct our attention to the duties which the respondent owed to the seller, to the buyer, and to the public. In doing so we are not as concerned with the technical niceties of the law as we would be if rendering a decision in a case involving a claim by the seller or buyer against the broker. Rather, we consider these duties in light of the nature of this proceeding for sanctions against the respondent-broker for misconduct in violation of the licensing statutes. In upholding the constitutionality of Chapter 93A, General Statutes of North Carolina, entitled “Real Estate Brokers and Salesmen” the court quoted with approval the language from decisions of other courts: “ ‘There is involved in the relation of real estate broker and client a measure of trust analogous to that of an attorney at law to his client, or agent to his principal.’ . . . ‘The real estate broker is brought by his calling into a relation of trust and confidence. Constant are the opportunities by concealment and collusion to extract illicit gains. . . . The broker should know his duty. To that end, he should have “a general and fair understanding of the obligations between principal and agent.” ’ ” State v. Warren, 252 N.C. 690, 695-96, 114 S.E. 2d 660, 665 (1960). It is the duty of the Licensing Board, in determining the qualification of those to be licensed as real estate salesmen or brokers, to have “due regard to the paramount interests of the public as to the honesty, truthfulness, integrity and competency of the applicant.” G.S. 93A-4(b). The right of the real estate broker to take an option from or make a contract to purchase with the listing seller and the duty of the broker to optionee-seller has not heretofore been decided by the courts of this State. In determining for the first time the *124 applicable standards of conduct for real estate brokers and salesmen under these circumstances we are guided by the foregoing statutory language which prescribes a standard of honesty, truthfulness, and integrity. “The general rule is that a broker can neither purchase from, nor sell to, his principal unless the latter expressly assents thereto, or, with full knowledge of all the facts and circumstances, acquiesces in such course.” The reason is that the broker-agent is bound to exercise the best skill and judgment and a high degree of fidelity and good faith to secure for his principal the best bargain possible, even though his own conflicting interests impel him to gain the most advantageous terms for himself. Annot., “Broker With Option To Purchase For Self,” 164 A.L.R. 1378, 1378-79 (1946). While an option to purchase real estate, given by the seller to a broker employed to sell the property, is generally valid, he cannot enforce the option without making a full disclosure to his principal of any information which he has relating to other prospective sales or the value of the property. The leading case on this subject is Rattray v. Scudder, 28 Cal. 2d 214, 169 P. 2d 371, 164 A.L.R. 1356 (1946), and its holding has been approved in other cases. See Bell v. Scudder, 78 Cal. App. 2d 448, 177 P. 2d 796, cert. denied, 332 U.S. 792, 92 L.Ed. 374, 68 S.Ct. 102 (1947); Vigli v. Davis, 79 Cal. App. 2d 237, 179 P. 2d 586 (1947); Wells Fargo Bank v. Dowd, 139 Cal. App. 2d 561, 294 P. 2d 159 (1956). Respondent takes the position that when Billings executed to him the option to purchase the property within 30 days for $11,000, there was a severance of the listing agreement, a termination of the broker-agent and seller-principal relationship, and thus no duty on the part of respondent to disclose to Billings the offer subsequently made by Rubis to buy for $15,000. The listing agreement, a copy of which was not given to Billings, is not in the record on appeal, and the evidence does not disclose, and the court did not specifically find, whether there was a termination of the listing. We find respondent’s position untenable in light of his representation to Rubis that Billings was the owner of the property and that Billings had accepted his offer of $15,000. Respondent was purporting to act for Billings but in fact was acting for himself without disclosing his role in the transaction to either Billings (seller) or Rubis (buyer). *125 The record on appeal reveals that respondent made a secret profit of $4,000. He did so by representing to Rubis that he was acting as broker for Billings, when in fact he was acting for himself. He falsely represented to Rubis that the owner (Billings) had received an offer of $14,500 for the property. Even if respondent was not an agent for the buyer (Rubis), once respondent discussed the transaction with Rubis, he had the duty of dealing with honesty and integrity. Instead, he took advantage of the confidence reposed in him as a broker. Under the circumstances it makes no difference whether respondent in dealing with Rubis was acting as broker or as optionee-owner. The licensing act should not be interpreted to require a licensee to be honest as a broker or salesman while allowing him to be dishonest as an owner. We find that the findings of fact support the conclusion that respondent violated G.S. 93A-6(a)(l) and (4). The judgement of the Superior Court upholding the license revocation is Affirmed. Judges ARNOLD and MARTIN (Harry C.) concur.