## Facts

- Telly B. Turner, acting as trustee and owner of three rental houses in New Bedford, Massachusetts, wanted to sell the properties quickly.
- Turner contacted Nathanial Guy, a local real estate agent, about selling the three houses.
- Guy told Turner that, as a “rule of thumb,” the properties were probably worth about five times their rental income, or approximately $17,500.
- Turner and Guy signed a written exclusive real-estate-agency agreement: Guy would try to procure a buyer at $17,500, and Turner would pay a 6% commission.
- After inspecting the properties, Guy offered not to find a buyer, but instead to buy the properties himself for $16,000.
- Turner and Guy signed an option agreement giving Guy the right to purchase the properties for $16,000 at a later date; the option recited that the prior agency agreement was terminated.
- Guy paid Turner $500 in connection with the option.
- Before the sale closed, Turner learned that an inheritance-tax appraisal from several years earlier had valued the properties at $25,000.
- Turner retained an attorney and obtained a new appraisal valuing the properties at about $29,500.
- Turner’s attorney offered to return the $500 to Guy in exchange for a release from the option agreement; Guy refused and stated he would sue if Turner did not go forward.
- Turner conveyed the properties to Guy for the $16,000 price.
- After taking title, Guy made repairs and improvements to bring the houses up to code and then listed them for sale at about $33,000.
- Turner filed a bill in equity seeking rescission of the transaction on the ground that Guy, as her broker, violated fiduciary duties by purchasing the properties on unfair terms without full disclosure.
- The trial judge found Guy had breached fiduciary duty, but dismissed the case on laches because Turner delayed and Guy had materially changed his position by spending money on the properties.
- Turner appealed.

## Issues

1. When a real estate broker shifts from agent to purchaser in a transaction arising from the agency relationship, does the broker bear the burden to show the deal was entirely fair and fully disclosed, and was that burden met here?
2. Even if the broker breached fiduciary duty, was rescission properly denied on the ground of laches because the principal delayed after learning facts suggesting undervaluation and the buyer made substantial improvements in reliance on the sale?

## Decision

- The Appeals Court of Massachusetts accepted the trial judge’s determination that Guy, as Turner’s broker, owed fiduciary duties of loyalty and full disclosure and failed to carry the burden of showing entire fairness in buying her properties.
- The court nonetheless affirmed the final decree dismissing Turner’s bill because Turner’s delay, coupled with Guy’s post-sale expenditures and change of position, made rescission inequitable under laches.
- The court held that rescission is not automatic for a fiduciary breach; equitable defenses and the parties’ conduct after learning the material facts may justify denying that remedy.

## Legal Principles

- A real estate broker is a fiduciary who must act with the utmost good faith and loyalty toward the principal.
- When a broker purchases the principal’s property in a transaction connected to the broker-principal relationship, the broker bears the burden to prove the transaction was open, honest, and entirely fair, including full disclosure of material facts affecting value.
- A contractual statement that the agency relationship is terminated does not necessarily remove fiduciary scrutiny where the purchase arises directly from the recent confidential relationship and the broker’s informational advantage.
- Laches may bar rescission where the plaintiff, after learning material information and having the ability to act, delays unreasonably and the defendant materially changes position in reliance on the transaction (such as by making repairs and improvements).
- Rescission is an equitable remedy subject to the trial court’s discretion and may be denied where unwinding the sale would be unfair in light of the delay and resulting prejudice.

## Conclusion

Turner v. Guy held that a broker who buys from his own principal must prove complete fairness and disclosure, and the trial court could find that Guy breached those duties in obtaining Turner’s property at a reduced price; however, the Appeals Court affirmed dismissal because Turner waited too long to seek rescission after learning the higher valuations, and Guy’s reliance-based improvements made rescission inequitable under laches.


Turner v. Guy, 311 N.E.2d 921 (1974)