Thomas Bunger as Personal Representative of the Estate of Kenneth K. Kinney, and Cheryl Underwood v. Sheree Demming
40 N.E.3d 887
Ind. Ct. App.2015Background
- Plaintiff Sheree Demming, a real-estate investor, engaged realtor Cheryl Underwood (a licensed broker) repeatedly from 2002–2007 to help acquire two off-market rental properties on East Sixth Street; they discussed strategy and Underwood agreed to contact the seller’s managing agent periodically.
- Underwood made multiple inquiries for Demming (and expected a customary 7% commission), but unbeknownst to Demming Underwood later sought to buy the properties herself.
- In March 2007 Underwood and Kenneth Kinney (her business partner) submitted their own offer, purchased the properties, and did not inform Demming when the sellers indicated they would accept offers.
- Demming sued for breach of fiduciary duty, constructive fraud, and sought a constructive trust; summary judgment for defendants was reversed on appeal and the case was tried on remand.
- The trial court found an agency relationship between Demming and Underwood, held Underwood breached fiduciary duties, imposed a constructive trust, awarded damages, prejudgment interest, and attorney fees, and held Kinney vicariously liable as Underwood’s partner.
- On appeal the court affirmed liability, partnership/vicarious liability, damages and attorney fees, but reversed the prejudgment interest award and remanded to recalculate damages without prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of common-law agency | Demming: repeated requests and strategizing; Underwood accepted and acted on Demming's behalf over years | Underwood: no meeting of minds, no consideration, merely casual/unsupported assistance | Court: agency existed (manifestation of consent, acceptance, and control shown); findings not clearly erroneous |
| Statutory agency under real estate statute (I.C. ch. 25-34.1) | Demming: statute does not require property be listed or sale consummated; gratuitous service does not preclude client status | Defendants: no compensation/only cold calls so no statutory agency | Court: genuine issue of fact; statutory language does not bar agency here and trial court did not err |
| Whether broker may purchase property while representing a buyer (I.C. §25-34.1-10-11) | Demming: broker purchasing creates conflict and fiduciary breach | Underwood: statute allows showing property to other buyers and thus permits broker to buy | Court: statute does not authorize broker, who is a buyer, to purchase from client’s target during the agency; conflict forbids it |
| Damages, attorney fees, prejudgment interest | Demming: seeks full equitable relief (constructive trust, profits, fees) | Underwood/Kinney: damages miscalculated (exclude partnership draws), no contractual/statutory basis for fees, no qualified settlement so no prejudgment interest | Court: damages and attorney fees proper under equitable constructive trust/fiduciary breach theory; partnership draws may be included as "fruits"; attorney fees allowed in equity; but prejudgment interest improperly awarded — reversed and remanded to recalc damages without that interest |
Key Cases Cited
- Demming v. Underwood, 943 N.E.2d 878 (Ind. Ct. App. 2011) (prior appellate decision reversing summary judgment and defining agency issues in this dispute)
- Turner v. Bd. of Aviation Comm’rs, 743 N.E.2d 1153 (Ind. Ct. App. 2001) (agency definition and control element)
- W & W Equip. Co. v. Mink, 568 N.E.2d 564 (Ind. Ct. App. 1991) (measure of damages for breach of fiduciary duty: entire loss sustained)
- In re Bender, 844 N.E.2d 170 (Ind. Ct. App. 2006) (equitable award of attorney fees where fiduciary breached duty and constructive trust imposed)
- Life v. F.C. Tucker Co., 948 N.E.2d 346 (Ind. Ct. App. 2011) (elements and nature of partnership for vicarious liability)