Investor's Claims Against Brokerage Fail

Court of Appeals of Texas, Austin

A real estate brokerage that had purchased a property for its own investment portfolio and later sold it for a profit didn’t breach its fiduciary duty to a client who also wanted the property, the Court of Appeals of Texas ruled, affirming the trial court.

The broker’s real estate company had an agreement to help find and buy properties for the investor. In the agreement, the brokerage disclosed that it would offer properties it found to its other clients as well.

Over a three-year period, the brokerage helped the investor buy three properties. During this time, the investor’s agreement with the brokerage expired and was never renewed.

In 2006, a salesperson of the brokerage sent an e-mail about an available multifamily rental property to the investor and 20 other clients. After receiving no responses, the brokerage made an offer on its own behalf. However, the investor was out of town when the e-mail was sent and later came forward to express interest. In response, the brokerage presented the investor with a proposal to form a joint venture and convert the property to condos for sale.

The investor said he would be interested in the building only as a multifamily rental, not as a condo conversion. So the brokerage bought the property on its own. Ten months later, after the brokerage sold the property for a profit, the investor filed suit alleging breach of contract and breach of fiduciary duty.

The appellate court said there was no breach of fiduciary duty because the brokerage had, among other things, disclosed that properties wouldn’t be offered for sale exclusively to the investor and that the brokerage submitted a purchase contract on the property only after the investor failed to respond to the initial offer. The court also said the investor failed to show he incurred any damages as a result of the deal.