## Facts

- Sylvia Powell owned an apartment complex in Irving, Texas and entered a written contract to sell it to Dale Riley for $420,000.
- The contract price structure included: $65,000 cash (including $5,000 earnest money), assumption of a first-lien note of about $230,000, and a $125,000 second-lien note to Powell at 9% interest payable over 240 months.
- Riley was a licensed real estate broker and simultaneously acted as Powell’s real estate agent for the transaction, to be paid a 4% commission.
- The contract contemplated closing 60 days after Riley’s inspection and approval; Riley inspected and approved, and the parties set November 14, 1979 as the closing date.
- To fund the cash portion, Riley obtained a $50,000 bank loan.
- Shortly before closing, Riley presented closing documents that included an addendum to the $125,000 second-lien note stating Riley would have no personal liability and Powell’s sole remedy on default would be foreclosure on the property.
- The written contract did not authorize a nonrecourse limitation, and Powell did not agree to it; after her attorney discovered the provision, Powell refused to close and later sold to others.
- Evidence showed Riley knew of a substantially higher third-party offer (about $700,000) but did not disclose it to Powell.
- Riley sued Powell and the subsequent purchasers seeking specific performance; at the close of Riley’s evidence, the trial court granted an instructed verdict for defendants and rendered a take-nothing judgment.

## Issues

1. Whether the evidence raised a jury question on Riley’s entitlement to specific performance, or whether his breach of fiduciary duty and attempted unilateral nonrecourse term barred equitable relief as a matter of law.
2. Whether the trial court properly granted an instructed verdict because no evidence of probative force supported Riley’s claim when the evidence was viewed most favorably to him.

## Decision

- The court of appeals affirmed the take-nothing judgment.
- It held the instructed verdict was proper because, even taking Riley’s evidence as true, Riley’s conduct barred specific performance as a matter of law.
- Riley breached his fiduciary duties as Powell’s broker by self-dealing and failing to disclose material information, including a substantially higher offer.
- Riley materially altered the bargain by inserting an unauthorized nonrecourse addendum that shifted economic risk to Powell without her informed consent.
- Because specific performance is equitable, Riley’s lack of good faith and “clean hands” defeated his claim, leaving no material fact issue for the jury.

## Legal Principles

- An instructed verdict is proper when there is no evidence of probative force raising a material fact issue; the reviewing court considers evidence in the light most favorable to the nonmovant.
- A real estate broker owes the principal fiduciary duties of utmost good faith, loyalty, and full disclosure of material facts, including conflicts and information bearing on price and terms.
- A broker who is also the purchaser must fully disclose self-interest and may not use the agency relationship to gain an undisclosed advantage over the principal.
- A party seeking specific performance must show equitable entitlement, including good faith, readiness to perform contractual obligations, and clean hands.
- A seller may reject closing documents that materially depart from the contract’s terms; a buyer cannot compel specific performance based on an altered, unauthorized term favorable to the buyer.

## Conclusion

The court affirmed an instructed verdict denying specific performance where a broker purchasing his principal’s property failed to disclose a substantially higher offer and attempted to convert the agreed second-lien note into a nonrecourse obligation without contractual authority or informed consent, rendering him ineligible for equitable relief as a matter of law.


Riley v. Powell, 665 S.W.2d 578 (Tex. App.—Fort Worth 1984)