## Facts

- L.F. Haymes owned a parcel of real property in Phoenix and listed it for sale with broker Kelley Rogers for $9,500.
- The signed listing provided for a commission of 5% of the selling price.
- Rogers employed a salesman, Tom Kolouch.
- Kolouch contacted prospective buyers, Mr. and Mrs. Pour, showed them other properties, and arranged an appointment for the next day to show Haymes’s property.
- To help the Pours find the property, Kolouch drew them a diagram.
- Before any meeting with Haymes, Kolouch told the Pours that he had an offer of $8,250 from another buyer that he was about to submit to Haymes, and that while Haymes likely would not accept $8,250, the Pours might get the property for $8,500.
- The Pours went to the property the same day, met Haymes, negotiated directly with him, and agreed to purchase for $8,500, paying a $50 deposit.
- Evidence indicated Haymes learned the Pours had been directed to the property through Kolouch’s efforts; after learning that, Haymes stated he would “take care of the salesman.”
- Rogers sued Haymes for a $425 commission; a jury returned a verdict for Rogers, and judgment was entered for the broker.
- Haymes appealed, arguing the trial court should have directed a verdict in his favor because the broker’s side acted in bad faith and forfeited any commission.

## Issues

1. Whether a broker (through his salesman) breaches the duty of loyalty and forfeits a commission by telling prospective purchasers, without the seller’s authority, that the property can likely be bought for less than the listing price.
2. Whether the evidence required the trial court to direct a verdict for the seller rather than submitting the commission claim to the jury.

## Decision

- The Arizona Supreme Court reversed the judgment for the broker.
- The court recognized the settled rule that a real estate broker owes the principal the utmost good faith and loyalty.
- The court held that the salesman’s statements to the Pours—indicating they could likely purchase for $8,500 despite a $9,500 listing—constituted bad faith toward the seller as a matter of law.
- Because that disloyal conduct barred recovery of compensation, the broker was not entitled to a commission on the sale.
- The trial court therefore erred by denying Haymes’s motion for an instructed (directed) verdict.

## Legal Principles

- A real estate broker and the broker’s salesmen owe the seller a duty of the utmost good faith and loyalty.
- A broker may not, without authority, communicate to a prospective buyer that the seller will accept less than the listed price; such conduct is inconsistent with the broker’s duty to seek the seller’s best terms.
- A broker who acts in bad faith toward the principal forfeits the right to compensation, even if the broker’s efforts contributed to the sale.
- When the facts show disloyal conduct establishing bad faith as a matter of law, the court should take the case from the jury and direct a verdict against the broker’s commission claim.

## Conclusion

The court held that the broker’s salesman acted disloyally by suggesting to the buyers that the seller would probably accept $8,500 instead of the $9,500 listing price, and that this bad faith barred any commission; the judgment for the broker was therefore reversed because the seller was entitled to a directed verdict.


Haymes v. Rogers, 70 Ariz. 257, 219 P.2d 339 (1950)