[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Auer v. Paliath, Slip Opinion No. 2014-Ohio-3632.]




                                        NOTICE
     This slip opinion is subject to formal revision before it is published in
     an advance sheet of the Ohio Official Reports. Readers are requested
     to promptly notify the Reporter of Decisions, Supreme Court of Ohio,
     65 South Front Street, Columbus, Ohio 43215, of any typographical or
     other formal errors in the opinion, in order that corrections may be
     made before the opinion is published.


                         SLIP OPINION NO. 2014-OHIO-3632
        AUER, APPELLEE, ET AL., v. PALIATH ET AL.; KELLER WILLIAMS
                         HOME TOWN REALTY, APPELLANT.
   [Until this opinion appears in the Ohio Official Reports advance sheets,
     it may be cited as Auer v. Paliath, Slip Opinion No. 2014-Ohio-3632.]
Real estate—Sales—Fraud by real-estate agent—Vicarious liability of broker—
        Jury must be instructed to find that agent acted within scope of agency
        before vicarious liability can be imposed.
   (No. 2013-0459—Submitted February 4, 2014—Decided August 28, 2014.)
     APPEAL from the Court of Appeals for Montgomery County, No. 25158,
                                    2013-Ohio-391.
                               ____________________
        FRENCH, J.
        {¶ 1} This case concerns the vicarious liability of appellant, real-estate
broker Keller Williams Home Town Realty (“Home Town”), for the tortious
conduct of its former real-estate agent, Jamie Paliath. We affirm a long line of
precedent in holding that in order to impose vicarious liability, a jury first has to
make a factual determination that the agent was acting within the scope of her
                             SUPREME COURT OF OHIO




agency when she committed the torts at issue. Because the court of appeals in this
case erroneously concluded that scope of agency was a matter of law and
therefore outside the province of the jury, we must reverse.
                                   Background
        {¶ 2} In 2006, Paliath began working for Home Town as a licensed real-
estate salesperson. Paliath’s contract with Home Town specified that she would
“assist clients * * * with the purchase and sale of real estate.” Paliath was free to
“choose * * * her own target clients, marketing techniques and sales methods.”
The contract also specified that Paliath had to pay Home Town 30 percent of the
commissions she earned on real-estate transactions.
        {¶ 3} Appellee, Torri Auer, a California resident, became acquainted
with Paliath in September 2007 through the Internet website Bid4Assets.com.
Auer was interested in purchasing investment properties in Dayton, Ohio, and
Paliath had listed several such properties online. Auer contacted Paliath and
arranged to come to Dayton to look at some of the properties. During the visit,
Paliath informed Auer that she also owned a property-rehabilitation business and
a property-management business. Paliath suggested that the two women start
rehabbing properties together; if Auer could provide the funds, Paliath would
renovate, manage, and sell the properties.
        {¶ 4} Between October and December 2007, Paliath assisted Auer in
purchasing five separate properties. Home Town received a commission on each
of these sales.
        {¶ 5} Auer hired Paliath’s personal companies to rehab and manage rents
on the properties. Auer soon discovered, however, that although she had paid
Paliath considerable sums to renovate the buildings, Paliath had actually done
very little work. When Auer visited Dayton in 2008 to inspect her properties, she
found them to be uninhabitable and still in need of considerable repair. The
business relationship soon began to sour.




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                               January Term, 2014




        {¶ 6} All told, Auer invested over $430,000 in the properties. As of
2012, the properties had no value and were scheduled for destruction.
        {¶ 7} Auer filed suit against Paliath and Home Town, seeking to recover
the amounts she had invested. Auer alleged, among other things, that Paliath had
fraudulently induced her to purchase the properties by misrepresenting their worth
and their capacity to generate rental income.
        {¶ 8} Auer’s claims against Home Town initially sounded in direct
liability; the complaint alleged that Home Town had failed to supervise Paliath
properly. But at trial, Auer abandoned any direct-liability claim and pursued her
case against Home Town solely on the basis of respondeat superior liability. At
the close of trial, the jury was instructed to consider only whether Home Town
was vicariously liable for Paliath’s fraud, rather than whether Home Town was
liable for any of its own independent actions.
        {¶ 9} The jury returned verdicts against Paliath and Home Town. It
found that Paliath had fraudulently induced Auer to purchase three of the five
parcels of property in Dayton and that Home Town was vicariously liable for
Paliath’s fraud. The jury awarded Auer $135,200 in damages for this fraudulent
inducement.
        {¶ 10} Home Town appealed, arguing in part that the trial court failed to
properly instruct the jury on scope of agency as it related to Home Town’s
vicarious liability. Auer v. Paliath, 2013-Ohio-391, 986 N.E.2d 1052, ¶ 20, 38
(2d Dist.). The court of appeals determined that any such error was harmless,
because scope of agency was a matter of law that the jury did not need to address.
Id. at ¶ 46-52.
        {¶ 11} We accepted review over Home Town’s discretionary appeal.
Auer v. Paliath, 135 Ohio St.3d 1458, 2013-Ohio-2285, 988 N.E.2d 578. For the
reasons that follow, we reverse.




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                                      Analysis
                              A. The Jury Instructions
       {¶ 12} “A trial court must give jury instructions that correctly and
completely state the law.” Groob v. Keybank, 108 Ohio St.3d 348, 2006-Ohio-
1189, 843 N.E.2d 1170, ¶ 32. “An inadequate jury instruction that misleads the
jury constitutes reversible error.” Id.
       {¶ 13} In this case, the jury had to determine whether Home Town was
vicariously liable for Paliath’s fraud, based on a theory of respondeat superior.
The respondeat superior doctrine makes an employer or principal vicariously
liable for the torts of its employees or agents. Clark v. Southview Hosp. & Family
Health Ctr., 68 Ohio St.3d 435, 438, 628 N.E.2d 46 (1994). But “in order for an
employer to be liable under the doctrine of respondeat superior, the tort of the
employee must be committed within the scope of employment.” Byrd v. Faber,
57 Ohio St.3d 56, 58, 565 N.E.2d 584 (1991).
       {¶ 14} The trial court did not instruct the jury in accordance with this
precedent. Instead, the trial court instructed the jury as follows:


               A real estate broker is vicariously liable for intentional torts
       committed by a salesman acting within the scope of their authority.
       A salesman is required to work under the supervision of a licensed
       broker and [in] all of her activities relating to real estate
       transactions.
               Vicarious liability means that the broker, in this case,
       Defendant Keller Williams Hometown Realty of Vandalia, is
       bound by action taken on its behalf by a realtor, in this case
       Defendant Paliath, while acting within the scope of her authority.
       A real estate agent is not within the scope of her agency when she




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                                January Term, 2014




       clearly and completely departs from the services or jobs that she
       was hired to do.
                 When an agent acts solely for her own benefit or solely for
       the benefit of a person other than her broker, she does not act
       within the scope of her agency and the broker is not liable for the
       agent’s act.
                 If you find that Defendant Jamie Paliath committed fraud
       with respect to the sale of [properties] to Plaintiff Torri Auer, then
       Defendant Keller Williams Hometown Realty of Vandalia is
       vicariously liable and you must find in favor of Plaintiff Torri Auer
       and against Defendant Keller Williams Hometown Realty of
       Vandalia * * * .


       {¶ 15} Although the trial court began by appropriately describing scope of
agency, it then issued an instruction that made scope of agency irrelevant. The
court told the jury, “If you find that Defendant Jamie Paliath committed fraud
* * *, then Defendant Keller Williams Hometown Realty of Vandalia is
vicariously liable * * *.” That instruction is incomplete. It does not inform the
jury that in order to impose vicarious liability on Home Town, the jury first had to
find that Paliath was acting within the scope of her agency when she committed
the fraud. Groob, 108 Ohio St.3d 348, 2006-Ohio-1189, 843 N.E.2d 1170, at
¶ 42, citing Byrd, 57 Ohio St.3d at 58, 565 N.E.2d 584. Rather, the instruction
forces the jury to impose liability on Home Town without considering scope of
agency at all.
       {¶ 16} In fact, the jury expressed confusion on this very point. During
deliberations, the foreman submitted a question to the trial judge, asking if the
jurors were required to find against Home Town if they found against Paliath.




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The trial court responded by referring the jurors back to the erroneous jury
instructions.
       {¶ 17} To be correct, the jury instruction should have stated, “If you find
that Defendant Jamie Paliath committed fraud, and if you find that Paliath
committed this fraud within the scope of her agency, then Home Town is
vicariously liable.” Because the trial court omitted the italicized language, its
instruction was incomplete and incorrect. A principal is not vicariously liable
unless its agent acted within the scope of her agency when committing a tort. Id.
       {¶ 18} Although the court of appeals recognized that the instruction was
likely erroneous, it nevertheless affirmed the jury verdict. The court reasoned that
any error in the instruction was harmless because the jury never needed to make a
scope-of-agency determination in the first place. According to the court, R.C.
4735.21 already establishes scope of agency for real-estate brokers as a matter of
law.
       {¶ 19} R.C. 4735.21 provides that “[n]o real estate salesperson * * * shall
collect any money in connection with any real estate * * * transaction, * * *
except in the name of and with the consent of the licensed real estate
broker * * *.” Looking to this language, the court of appeals concluded:


       Under R.C. 4735.21, a real estate salesperson cannot complete a
       real estate transaction outside of his or her association with a
       licensed real estate broker.     As a result, when a real estate
       salesperson acts in the name of a real estate broker in connection
       with the type of real estate transaction for which he or she was
       hired and the broker collects a commission for the transaction, the
       salesperson’s actions in connection with that real estate transaction
       are within the scope of the salesperson’s employment, as a matter
       of law.




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                                January Term, 2014




2013-Ohio-391, 986 N.E.2d 1052, at ¶ 46. Here, because Paliath worked as a
real-estate salesperson for Home Town, assisted Auer in purchasing properties,
and gave Home Town commissions from the sales, the court held that she was
working within the scope of her agency as a matter of law when she committed
her fraud.
       {¶ 20} In essence, the court of appeals’ decision holds that a broker is
always liable as a matter of law for the tortious conduct of rogue agents whenever
the broker receives a portion of the agent’s sales commission. We cannot endorse
this bright-line rule. The fact that a broker eventually received a commission
from an agent’s sale does not mean that every action the agent took prior to the
sale was within the agent’s scope of authority as a matter of law. “[W]hether an
employee is acting within the scope of his employment is a question of fact to be
decided by the jury.” Osborne v. Lyles, 63 Ohio St.3d 326, 330, 587 N.E.2d 825
(1992), citing Posin v. A.B.C. Motor Court Hotel, Inc., 45 Ohio St.2d 271, 344
N.E.2d 334 (1976); see also Posin at 278 (“The term ‘scope of employment’ * * *
cannot be defined because it is a question of fact and each case is sui generis”).
The scope-of-agency determination necessarily turns upon a multitude of
considerations and fact-specific inquiries that R.C. 4735.21 does not address.
       {¶ 21} First, the agent’s tortious acts must have been “an ordinary and
natural incident or attribute of the service to be rendered, or a natural, direct, and
logical result of it.” Posin at 278, citing Tarlecka v. Morgan, 125 Ohio St. 319,
181 N.E. 450 (1932).      It is not enough that the agent’s position within the
principal’s business simply aided her in committing the tort. Groob, 108 Ohio
St.3d 348, 2006-Ohio-1189, 843 N.E.2d 1170, at ¶ 58.
       {¶ 22} Most importantly, in cases “where the tort is intentional, * * * the
behavior giving rise to the tort must be ‘calculated to facilitate or promote the
business for which the servant was employed * * *.’ ” Byrd, 57 Ohio St.3d at 58,



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                              SUPREME COURT OF OHIO




565 N.E.2d 584, quoting Little Miami RR. Co. v. Wetmore, 19 Ohio St. 110, 132
(1869). Therefore, “the determination of whether conduct is within the scope of
employment or outside the scope of employment necessarily turns on the fact-
finder’s perception of whether the [employee] acted, or believed himself to have
acted, at least in part, in his employer’s interests.” Ohio Govt. Risk Mgt. Plan v.
Harrison, 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 1155, ¶ 17; see also
Restatement of the Law 3d, Agency, Section 7.07(2) (2006) (employee’s act is
outside scope of employment “when it occurs within an independent course of
conduct not intended by the employee to serve any purpose of the employer”).
The agent’s motivations and the self-interested nature of her actions are therefore
necessary considerations in a scope-of-agency inquiry. Theobald v. Univ. of
Cincinnati, 111 Ohio St.3d 541, 2006-Ohio-6208, 857 N.E.2d 573, ¶ 28 (“if an
employee’s actions are self-serving or have no relationship to the employer’s
business, then the conduct is ‘manifestly outside the scope of employment’
* * *”); Posin at 278 (“A servant who departs from his employment to engage in
affairs of his own relieves the master from liabilities for his acts”).
        {¶ 23} Here, the jury found that Paliath fraudulently induced Auer to
purchase several properties. In order to find Home Town vicariously liable for
this fraud, the jury would have to find that Paliath committed the fraud, at least in
part, with the intent to facilitate or promote Home Town’s business. Groob at
¶ 43; Byrd at 58. This finding is neither a question of law nor a question that R.C.
4735.21 can answer; R.C. 4735.21 does not tell us what Paliath’s intentions were
when she committed her tort. The jury could find, as Home Town argues, that
Paliath’s actions were calculated to facilitate Paliath’s own businesses, rather than
Home Town’s brokerage business. Whether the facts support Home Town’s
argument is not an issue before this court. It is an issue for the factfinder to
resolve.




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                                 January Term, 2014




       {¶ 24} The court of appeals’ reliance on R.C. 4735.21 was also misplaced
in another respect. R.C. 4735.21 speaks only to one specific act of a real-estate
agent: the collection of money in connection with a real-estate transaction. Yet
the court of appeals concluded that R.C. 4735.21 puts any act “in connection
with” a real-estate transaction within the scope of a salesperson’s agency. R.C.
4735.21 simply does not reach that far. It does not speak to the entire universe of
actions a salesperson may undertake “in connection with” a sale. The question
whether these actions are within the agency relationship is a factual one that the
jury must answer, based on the factors delineated in our case law.
       {¶ 25} To reach its contrary conclusion, the court of appeals relied on
Bunch v. Tom Althauser Realty, Inc., 55 Ohio App.2d 123, 379 N.E.2d 613 (10th
Dist.1977). Bunch, however, dealt solely with a real-estate salesman’s actual
collection of, and refusal to return, a purchaser’s deposit. The Bunch court held
that “R.C. 4735.21 makes the real estate salesman the agent of the licensed real-
estate broker for whom he is working as a matter of law when commissions are
collected by the salesman in the name of the broker.” Id. at 129. This holding
states only that the act of collecting the deposit falls within the scope of the
salesperson’s authority.   Id.    (“The question is whether the intent of [R.C.
4735.21] is to make the collection of the deposit a transaction of the broker
* * *”). (Emphasis added.) Here, the court of appeals read Bunch as suggesting
that whenever a salesperson collects a commission for her broker, everything the
salesperson did prior to that act of collection also falls within the scope of the
salesperson’s agency. Neither Bunch nor R.C. 4735.21 expands the scope of a
real-estate salesperson’s agency so generously.
                   B. Auer’s Failure-to-Supervise Argument
       {¶ 26} Even Auer herself does not ask us to support the court of appeals’
bright-line liability rule. During oral argument, this court asked Auer’s counsel




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whether we should adopt the court of appeals’ ruling that a broker is always liable
as a matter of law for the actions of a rogue agent. He said no.
       {¶ 27} Instead, Auer asks this court to affirm on the grounds that “the
facts in this case were so egregious” and “the lack of supervision was so
apparent.”   This was a theme that ran throughout Auer’s briefing and oral
argument; Auer repeatedly asked this court to find Home Town liable because
Home Town failed to supervise Paliath. These assertions, however, no matter
how true, are beside the point. The only claim against Home Town was for
vicarious liability. Vicarious liability by its very terms attaches to the principal
through the agent’s actions, not through the principal’s own actions. Comer v.
Risko, 106 Ohio St.3d 185, 2005-Ohio-4559, 833 N.E.2d 712, ¶ 20-22. Home
Town’s direct conduct is irrelevant to a vicarious-liability cause of action. And
because the jury was not properly instructed on how to find vicarious liability, we
cannot affirm the judgment against Home Town.
                                    Conclusion
       {¶ 28} Home Town’s vicarious liability depended on whether Paliath’s
tortious actions lay within the scope of Paliath’s agency. That determination was
an issue of fact for the jury to decide. Because the trial court’s instructions
precluded the jury from making this scope-of-agency determination, the
instructions were erroneous and constituted reversible error. Accordingly, we
vacate the jury verdict and remand this case to the trial court for further
proceedings on the issue of Home Town’s liability.
                                                                   Judgment reversed
                                                              and cause remanded.
       O’CONNOR, C.J., and O’DONNELL, LANZINGER, and KENNEDY, JJ., concur.
       PFEIFER and O’NEILL, JJ., dissent.
                             ____________________




                                         10
                                January Term, 2014




        PFEIFER, J., dissenting.
        {¶ 29} I agree with the majority that the jury instructions could have been
better worded, and I agree that the instruction suggested by the majority is better
than that which was given to the jury. No one sentence of a jury instruction,
however, stands alone—even though that is what the majority appears to
believe—and no civil defendant is entitled to a perfect trial, see Moretz v.
Muakkassa, 137 Ohio St.3d 171, 2013-Ohio-4656, 998 N.E.2d 479, ¶ 125
(Pfeifer, J., dissenting).
        {¶ 30} The majority opinion states, “[T]he jury instruction should have
stated, ‘If you find that Defendant Jamie Paliath committed fraud, and if you find
that Paliath committed this fraud within the scope of her agency, then Home
Town is vicariously liable.’ ” (Emphasis sic.) Majority opinion at ¶ 17. The
majority concludes that because the italicized language was omitted, the
instruction was incorrect because “[a] principal is not vicariously liable unless its
agent acted within the scope of her agency when committing a tort.” Majority
opinion at ¶ 17. That last principle is unassailably true—and was well explained
in plain language in the three previous sentences of the jury instruction.
        {¶ 31} Three sentences before the imperfect sentence in the jury
instructions, the trial court stated, “Vicarious liability means that the broker * * *
is bound by action taken on its behalf by a realtor * * * while acting within the
scope of her authority.” Two sentences before the imperfect sentence, the trial
court stated, “A real estate agent is not within the scope of her agency when she
clearly and completely departs from the services or jobs that she was hired to do.”
One sentence before the imperfect sentence, the trial court stated, “When an agent
acts solely for her own benefit or solely for the benefit of a person other than her
broker, she does not act within the scope of her agency and the broker is not liable
for the agent’s act.”




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                             SUPREME COURT OF OHIO




       {¶ 32} Although the imperfect sentence could have been better worded,
that sentence does not exist in a vacuum.        The three sentences immediately
preceding it contained the plain-language definition—that vicarious liability does
not attach unless the agent was acting within the scope of employment—that the
majority opinion claims is lacking in the instructions.
       {¶ 33} I have the utmost respect for the juries in this state. I do not
assume, as the majority opinion does, that this jury focused exclusively on one
sentence that could have been better worded. Instead, I assume that the jury read
the entirety of the jury instructions, including the three sentences immediately
preceding the less than perfect sentence. When read in pari materia, the jury
instructions plainly state that vicarious liability attaches only when the agent is
acting within the scope of his or her employment.
       {¶ 34} This court is remanding the case for a new trial at which the parties
will present the same evidence and the judge will issue the same instructions, with
one small unnecessary if helpful addition. So much for judicial economy.
       {¶ 35} I would affirm the court of appeals. I dissent.
       O’NEILL, J., concurs in the foregoing opinion.
                             ____________________
       Lasky & Scharrer and Laurence A. Lasky; and Gregg Law Office and
Stephen D. Gregg, for appellee.
       Pyper & Nordstrom, L.L.C., and Thomas H. Pyper, for appellant.
       Baker Hostetler, John H. Burtch, and Robert J. Tucker, urging reversal for
amicus curiae Ohio Association of Realtors.
       Ralph W. Holmen and Katherine R. Johnson, urging reversal for amicus
curiae National Association of Realtors.
                          _________________________




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