Agent's Duties to Principal. Ana Barreto and Flavia Gugliuzzi asked Ruth Bennett, a real estate salesperson who worked for Smith Bell Real Estate, to list for sale their house in the Pleasant Valley area of Underhill, Vermont. Diana Carter, a California

Question

resident, visited the house as a potential buyer. Bennett worked under the supervision of David Crane, an officer of Smith Bell. Crane knew, but did not disclose to Bennett or Carter, that the house was subject to frequent and severe winds, that a window had blown in years earlier, and that other houses in the area had suffered wind damage. Crane knew of this because he lived in the Pleasant Valley area, had sold a number of nearby properties, and had been Underhill's zoning officer. Many valley residents, including Crane, had wind gauges on their homes to measure and compare wind speeds with their neighbors. Carter bought the house, and several months later, high winds blew in a number of windows and otherwise damaged the property. Carter filed a suit in a Vermont state court against Smith Bell and others, alleging fraud. She argued in part that Crane's knowledge of the winds was imputable to Smith Bell. Smith Bell responded that Crane's knowledge was obtained outside the scope of employment. What is the rule regarding how much of an agent's knowledge a principal is assumed to know? How should the court rule in this case? Why?

Answer 1

Agent's duties to principal
The court held Smith Bell liable for the wind damage. Smith Bell appealed to the Vermont Supreme Court, which affirmed the judgment of the lower court. The state supreme court explained that Crane "had supervised and consulted with the listing agent, Ms. Bennett, inspected the property, and conveyed certain information concerning the house to Carter. Hence, the trial court's threshold finding that Crane had operated as an agent of Smith Bell was thus amply supported by the evidence." The court recognized that "the knowledge of an agent acting within the scope of his or her authority is chargeable to the principal, regardless of whether that knowledge is actually communicated" and "regardless of the source." The court reasoned that it was "immaterial whether Crane's information was derived from his residence in the area, his listing and sale of other properties in the area, or his experience as the town's zoning officer." A "broker's business consists precisely of acquiring and conveying information about the community, neighborhood conditions, comparable properties, and other local factors that may affect the value, marketing and sale of property. Such information is always, in effect, acquired in the ‘scope of employment.' It is thus meaningless to attempt to parse a broker's knowledge about a given property on the basis of the precise time, date, or circumstances in which it was obtained. Crane's knowledge concerning the presence of high winds on the property was properly imputed to Smith Bell."