-The sellers placed their apartment on the market.
-Seller told broker that she would like to keep the apartment and combine it with the neighbor's, but the neighbor refused to sell.
-Broker eventually purchased the property herself. She had sellers double check with neighbor. The contract deleted all provisions about a brokerage relationship.
-After sellers found a new apartment, they discovered that broker had purchased the neighbor's apartment and planned to combine the two.
-Sellers sued, claiming violation of a fiduciary duty.
-Summary judgment was granted to broker and brokerage, the supreme court affirmed, and sellers appealed to the Court of Appeals.
PROCEDURAL HISTORY: Plaintiff sellers appealed the grant of summary judgment by the Appellate Division (New York) in favor of defendants real estate broker and brokerage in the underlying breach of fiduciary claim.
-In New York, it is well settled that a real estate broker is a fiduciary with a duty of loyalty and an obligation to act in the best interests of the principal.
-A real estate broker/principal relationship and accompanying fiduciary duty can be severed by agreement of the parties or by unilateral action of the principal.
-Where a real estate broker's interests or loyalties are divided due to a personal stake in the transaction or representation of multiple parties, the broker must disclose to the principal the nature and extent of the broker's interest in the transaction or the material facts illuminating the broker's divided loyalties. The disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its stark significance.
Broker disclosed information bearing on her purchase at the time of the contract. The contract specified she was no longer the sellers' broker or had a fiduciary duty. Sellers did not prove their comments were confidential or exclusive.
OUTCOME: The grant of summary judgment was affirmed.
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