An Ohio appellate court has considered whether a salesperson breached his fiduciary duty when he purchased a property for himself rather than for his client.
Thomas Leist ("Salesperson") is a real estate salesperson formerly associated with RE/MAX REALTORS®. In 2000, the Salesperson had an ongoing relationship with The Weidle Corporation ("Company"), as the Salesperson sold properties in the Company's various residential developments.
In August 2000, D. Scott Weidle ("Weidle"), general manager and principal of the Company, contacted the Salesperson about purchasing for development a 10.5 acre lot ("Property"). Weidle directed the Salesperson to contact the Property's owners and make an offer of $8,000/acre. Instead, the Salesperson contacted the Property's owners and sought to purchase the property on his own, submitting an option contract with a price of $80,000 to the Property's owners.
After the Salesperson told Weidle that he was still "researching" the Property before making a bid for Weidle, Weidle angrily told the Salesperson that he was retaining another salesperson to submit a bid. The second salesperson submitted an offer of $85,520 on behalf of the Company. The Property's owners informed the Salesperson of the second offer and told him that they sought a price of $100,000 for the Property.
Eventually, the Salesperson successfully purchased the Property for $100,000. The Company brought a lawsuit against the Salesperson, arguing that he breached his fiduciary duty to the Company by purchasing the Property for his own use. The trial court ruled in favor of the Company and awarded the Company damages of $461,325, based on the Company’s projected lost profits. The Salesperson appealed.
The Court of Appeals of Ohio, Second District, affirmed the trial court. First, the court found that a contract existed between the Salesperson and the Company. Even though the parties had never discussed how the Company would compensate the Salesperson for his efforts in securing the Property, the court determined that the Salesperson was not working for free and would have been entitled to a fee if he had secured the Property for the Company. So, the court ruled that a contractual relationship existed between the Salesperson and the Company.
Next, the court considered whether the Salesperson breached his fiduciary and contractual duties when he purchased the Property for himself. The trial court had concluded that he had breached both sets of duties by pursuing the Property for his own account rather than for his principal, the Company. The Salesperson did not contest this determination before the appellate court, but instead argued that the trial court had miscalculated the damages. The trial court had awarded the Company its claimed lost profits from the Property's development, based on testimony from Weidle. The Salesperson argued that instead the appropriate measure of damages is the value of the property at the time it is "converted", which in this case would be $100,000.
The court rejected the Salesperson's argument, finding that it was absurd to calculate the damages in the way proposed by the Salesperson, as that would result in no damages. Instead, the court agreed with the trial court's determination that lost profits was the correct measure of damages for the Salesperson's breach of contract, as the profits for developing the Property were contemplated by the parties when Weidle directed the Salesperson to submit a bid on the Property. The court also found that Weidle's testimony into the amount of lost profits was very specific in detailing the exact costs for developing the Property, as Weidle was able to draw on his experiences from developing similar properties. A party offering testimony to support his/her damage claims must offer reasonable data to support the testimony, and the court found that Weidle's testimony met this criteria. Thus, the court affirmed the award of $461,325 to the Company.
Weidle v. Leist, No. 20296, 2004 WL 1949509 (Ohio Ct. App. Sept. 3, 2004). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].