In George v. Bolen, the Court of Appeals of Kansas addressed breach of fiduciary duty in an implied agency situation. The court held that whether an agency relationship arises expressly or impliedly, the agent owes fiduciary duties to the principal.
George, a Kansas property owner, sought to purchase land from his neighbor, Tolle. After discussions with Williams, a partner in the real estate firm of Bolen-Williams Realty (firm), George maintained that Williams agreed to be his agent for the purchase of the property. Williams subsequently obtained the listing on the Tolle property, which was to sell for $178,000. Two days after the firm secured the listing agreement, one of the firm's partners, Stover, purchased the property with a partner from another firm, M & S Investments. George sued the firm and M & S, alleging that there was a breach of fiduciary duty owed to him by the firm. A jury verdict was favorable for George, as he received an award of $180,000 compensatory and $184,647 punitive damages. The firm appealed.
The Kansas Court of Appeals found that an agency relationship exists only by virtue of contract, express or implied; and whether there is a binding contract creating an agency relationship must be determined by application of contract rules, including consideration, mutuality, and a meeting of the minds as to essential matters. The court found that although the evidence was conflicting, there was evidence to support George's claim that an implied contract existed. George testified that he visited Williams to see if there was a possibility of securing the property on his behalf from Tolle. George also stated that there was no doubt in his mind that Williams was representing him. Further, George stated that he told Williams he would purchase the property if Williams could arrange a sale price between $150,000 and $200,000. The court concluded from this evidence that George had obligated himself to purchase the property if a sale could be arranged within the appropriate price range.
After determining that an implied agency situation existed, the Kansas Court of Appeals found that the firm, and all of its members owed a fiduciary duty to George. The purchase of the property by M & S constituted a breach by Stover and the firm, and subjected the firm to liability on the breach. The court of appeals then affirmed the compensatory damages award. However, the court of appeals reversed the trial court regarding the punitive damages award and ordered a new trial regarding these damages.
George v. Bolen, 2 Kan. App. 2d 385, 580 P.2d 1357 (1978).