§ 18.5 - Remedies for Breach of Duty

• Jurisdiction: Washington

§18.5 REMEDIES FOR BREACH OF DUTY

The remedies available to the seller or buyer for a breach of duty by the licensee vary according to the circumstances, but are essentially forfeiture of the broker's commission, damages, and/or rescission of the listing agreement. Somewhat surprisingly, Chapter 18.86 RCW does not have any provisions addressing the rights of an aggrieved buyer or seller for breach of duty, although failure to comply with the duties imposed on all licensees by RCW 18.86.030 is a violation of RCW 18.85.361, exposing the licensee to disciplinary proceedings by the Director of Licensing. Violations of the licensing statutes are covered in §18.2(4), above.

(1) Forfeiture of commission

The failure of a broker to properly discharge the broker's duty of loyalty to the principal precludes the broker from recovering his or her commission. Wesco Realty, Inc. v. Drewry, 9 Wn.App. 734, 515 P.2d 513 (1973); RESTATEMENT (SECOND) OF AGENCY §469 (1958); see also Obert v. Env'tl Research & Dev. Corp., 112 Wn.2d 323, 771 P.2d 340 (1989). The breach of duty giving rise to a forfeiture of a commission may be tantamount to actionable fraud in the broker's intentional nondisclosure of material facts actually, or impliedly, in his or her possession. In at least one case, Burien Motors, Inc. v. Balch, 9 Wn.App. 573, 513 P.2d 582 (1973), the commission was forfeited for failure to investigate and determine the true factual situation under circumstances in which a duty to investigate was found. This result is likely overturned by RCW 18.86.030(1)(d), which specifically provides that there is no duty imposed on a broker to investigate. However, although the decisions above may be based on the now-superseded concept of fiduciary duty, the same conduct described above may be a breach under Chapter 18.86 RCW as a failure to disclose a material fact.

A broker may breach his or her duty of loyalty to the principal to an extent warranting forfeiture of the commission subsequent to the execution of a valid earnest money agreement. Ramsey v. Sedlar, 75 Wn.2d 901, 454 P.2d 416 (1969); Wesco Realty, 9 Wn.App. 734. This breach may be found in the alteration or insertion by the broker, in the subsequent contract documentation, of provisions favoring the third party that were not identified in the initial earnest money agreement. In Ramsey, the breach was in the insertion of acceleration provisions and a deed release clause favoring the purchaser. 75 Wn.2d 901. In Wesco Realty, the breach was in the insertion of an option in the final document specifically designed to benefit the purchaser. 9 Wn.App. 734.

(2) Actual damages

A real estate broker, under general agency principles, may be liable to the principal for actual damages incurred by the principal arising as a...