By Peg Ritenour, OAR Vice President of Legal Services/Administration
Ohio’s brokers scored a huge win last week when the Ohio Supreme Court reversed an appellate Court decision that made brokers liable as a matter of law for the fraudulent acts of affiliated agents, regardless of whether an agent was acting contrary to the broker’s polices and engaged in such behavior without the broker’s knowledge. In overturning the Court of Appeals, the Supreme Court reaffirmed that under Ohio law the agent must be found to have been acting within the scope of his authority and that this is a question of fact for a jury to decide.
Here’s the history of the case:
A Dayton agent sold several investment properties to an out of state client, becoming partners with the client on some of them. Unbeknownst to her broker, the agent convinced her client that she would handle the rehab, leasing and management of the properties through separate companies she owned. The investor sent the agent approximately $430,000 for this purpose, but the agent never rehabbed or leased the properties. When the investor figured out what was going on, she sued both the agent and broker on several counts, including fraudulent inducement and misrepresentation.
At the conclusion of the trial, the judge instructed the jury that if it found the agent had engaged in fraud, it must find the broker liable. Therefore, the jury was not able to consider whether the broker knew of the agent’s wrongful conduct or to make a determination as to whether the agent was acting within the scope of her authority. As a result, because the jury found that the agent engaged in fraud, it was forced to find the broker liable as well. (It is noteworthy to mention that not only did the jury question the judge’s instruction during deliberations, but a jury member contacted the broker after the trial and told him that they did not want to find the brokerage liable but had no choice because of this instruction.)
On appeal the broker’s attorney argued that under existing Ohio law the jury should have been instructed to find the broker liable if it found — based on all of the evidence — that the agent was acting within the scope of her duties. Unfortunately the Court of Appeals rejected this argument, ruling that only two facts are relevant: whether the agent’s conduct was done in the name of the broker and whether the broker collected a commission. If those two facts are established, the court held, an agent’s actions are within the scope of the agent’s duties, as a matter of law and therefor the broker is vicariously liable for the acts of the agent. This meant that a jury could not consider any other evidence including evidence that the agent had acted contrary to the broker’s instructions and policies, and that the broker had no knowledge of the agent’s conduct.
The Ohio Supreme Court agreed to review this decision last year. Because of the significance of this case for all Ohio brokers, both OAR and NAR, through their Legal Action Committees, filed briefs in support the broker’s position. In reversing the Court of Appeals decision, the Supreme Court held that the mere fact that the agent acted in the broker’s name and that the broker received a commission is not enough to attach liability to the broker for the acts of an agent. Instead the agent must have been acting within the scope of his/her authority, which the Court said “turns on a multitude of considerations and fact-specific inquiries.” Further, the court held that in cases of intentional wrongdoing such as occurred in this case, a broker can only be found liable for the agent’s actions if the jury finds that the agent engaged in such fraudulent conduct in at least part with the intent to facilitate or promote the broker’s business.
Because the trial judge did not properly instruct the jury regarding the broker’s liability the Supreme Court remanded the case back to the trial court to determine if this agent was acting within the scope of her duties based on all of the facts of this case and to also determine if the evidence demonstrates that her intent in engaging in such fraudulent behavior was to further the broker’s business, not just her own.
So although this case isn’t completely over for this broker, Ohio brokers statewide can breathe a sigh of relief, knowing that the mere fact that a commission — no matter how small — was collected by the brokerage, that they aren’t going to be automatically liable when their agent engages in wrongdoing. As broker Rob Ward from Ashland, who serves on the OAR Legal Action Committee stated, “In my opinion this is one of the most important wins for brokers and OAR in past years that I can remember. This had the potential to negatively change the landscape for lawsuits on brokerages forever.”
OAR wishes to acknowledge the excellent legal work done by the broker’s attorney in this case, Thomas Pyper of Pyper and Nordstrom, and OAR legal counsel at Baker and Hostetler, Jack Burtch and Robert Tucker, as well as NAR counsel.
To read the Supreme Court’s decision click here.
By “Coach” Marilou Butcher Roth
There is a great class right now that meets our Fair Housing core requirement called Implicit Bias. It goes into how we unconsciously pass judgment on people or situations based upon how they look, talk, etc. Judgment of others and ourselves is something that can cause issues both within our business as well as our personal lives.
You may be asking how we can be in control of this if we are doing it unconsciously. Well, some of it is conscious and some is not. One of the “in your face” clues might be when you notice that you have a “should.” “He should behave differently,”or, “I should lose weight.” Obviously, there can be many other words that operate the same as should, although the word should seems to be the primary culprit!
When we are judging situations, others or ourselves, it keeps us in a space that truly doesn’t feel good. Some people are addicted to judging others which is a pretty sure sign that their self-judgement is even more severe!
Bringing awareness to your own judge is the best first step — and, I might add, to do so without judgment! :) It is funny but that is how we behave. We are harder on ourselves than anyone else is. So, just gently notice when you catch yourself “shoulding.” Don’t punish yourself — you might do some self talk around the situation to bring yourself back to a more open place, or sometimes, I call a friend that I know won’t let me get away with my judgments and just say my judgment out loud. Often times for me it just takes saying it aloud to realize how my judge has jumped into dangerous territory.
This week, pay attention to when you find yourself in judgment of yourself, others or a situation. When you catch it, ask yourself this question “do I want to be right about my judgment or do I want to be happy?” I hope you get the happy answer!
Marilou Butcher Roth is the owner of The MBR Group, a coaching and training company working primarily with REALTORS who have a desire to work and live from a more inspired place. She is also the Broker/Owner of Group REALTORS in Cincinnati.
Marilou is a member of the OAR Executive Committee and immediate past chairman of the organization’s Communications Committee. Feel free to contact Marilou to see if coaching is right for you: Marilou@mbr-group.com
By Carl Horst, OAR Director of Publications/Media Relations
The Ohio Association of REALTORS reports the number of single-family homes and condominiums put under agreement in July rose from the level posted during the month a year ago.
The rate of purchase contract signings in July did decline from the pace recorded in June.
Ohio’s July Pending Home Sales Index of 142.5, a forward-looking indicator based on contract signings, increased 9.7 percent from July 2013 (129.9). Activity in July dipped 5.6 percent from the mark posted in June (150.9).
“Throughout the first seven month’s it’s become apparent that the Ohio housing sector has entered into a more balanced phase,” said OAR President Chris Hall. “Looking forward, we’ll continue to experience a more traditional marketplace, one that has monthly ebbs and flows in activity based on overall conditions.”
Compared to 2008, a historically healthy market that marked the end of five consecutive record years for existing home sales and the onset of the recession, June’s Index score of 142.5 marks a 42.5 increase.
A pending sale or a sale “under agreement” is when the buyer and seller agree on terms of the sale of a home and have a signed purchase and sale agreement, but have yet to close and be recorded as such. Refer to the following report to view the pending home sales index and methods.
OAR, the largest professional trade association in the state with more than 27,000 members, is the only organization that compiles this state wide information from selected Multiple Listing Services each month. The tracking of “pending sales” provides reliable information about where the market is heading in coming months.
By Bob Fletcher, OAR Chief Executive Officer
Real estate visionary Chris Smith will be sharing 10 business principles designed to grow your profits for the next decade and beyond as the keynote speaker during the upcoming Ohio Association of REALTORS Annual Convention & Expo in Cleveland. Smith offers a new approach of running a people-first business in a digital-first world.
The Buzz, which previously spotlighted two of his principles (here and here), offers it’s final “tease” of what goes into a successful real estate practice. In this clip, Smith says that people who build and run successful businesses start from passion…that they simply can’t resist the effort; they’re compelled!
We’re ecstatic that Chris Smith will be sharing his complete vision for success with Ohio’s REALTOR community. Recently named one of the most influential people in real estate, he is co-founder of Curaytor and serves as chief peopleworker for dotloop.
By Paul Glass, OAR Director of Political Affairs
U.S. Sen. Sherrod Brown will be making a visit to the OAR Annual Convention & EXPO in Cleveland.
Sen. Brown will be addressing the latest developments on Capitol Hill and likely Congressional action for the balance of this year. He will be speaking during the organization’s Enlarged Legislative Committee on Monday, Sept. 8, 10 to 11 a.m.
Make sure you’re a part of this event — it’s open to all Convention attendees — and hear Ohio’s senior senator. Sen. Brown, first elected to the Senate in 2007, serves on a number of committees that have a great deal of influence on the nation’s real estate sector, including:
- Chair of the Subcommittee on Financial Institutions and Consumer Protection;
- Chair of the Subcommittee on Jobs, Rural Economic Growth and Energy Innovation;
- Chair of the Subcommittee on Social Security, Pensions and Family Policy;
- Member of the Subcommittee on Housing, Transportation and Community Development, among others.
Mark your calendar to be at Sen. Brown’s presentation. If you haven’t registered for OAR Convention, Sept. 8-10 — click here — and gain access to this special event, along with 12 hours of continuing education opportunities; a keynote address by Chris Smith, one of the nation’s leading real estate visionaries; access to a trade expo featuring the newest trends and products; nightly entertainment; and a chance to win a $2,000 “you choose” vacation getaway package presented by First Federal Lakewood!