Local commercial broker sued, accused of negligence in $4M Manatee County real estate deal

After months of delay, Gary Adams' 40-acre property in Manatee County finally sold to a developer in 2019 for the sizable sum of $4 million.

Less than 24 hours later, it sold again -- for $7 million.

Those transactions have become the focus of a courtroom fight between the seller and his real estate broker amid accusations of betrayal and negligence.

First, the real estate broker's brokerage sued Adams when he withheld nearly $250,000 in commission on the first sale after learning of the second deal at 75% more than Adams received. Then Adams later sued the real estate agent, Stanley Rutstein, claiming negligence and breach of fiduciary duty.

At issue in Gary Adams' lawsuit is whether his commercial real estate agent was bound to look after Adams' best financial interests or — as in the vast majority of real estate transactions in the Sunshine State — the agent was merely acting as a facilitator.

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The average buyer or seller might be surprised to learn that real estate agents are not generally bound to look out for their clients' best interests, except in strict circumstances.

In that sense, real estate agents in Florida are less like a stockbroker or financial planner and more like mediators between buyers and sellers of property.

While the first lawsuit was resolved after Adams released the commission, the other is still pending in Manatee County Circuit Court.

Fiduciary responsibility?

Gary Adams says he had just gone through the worst months of his life before he hired Stanley Rutstein to represent him in the sale of a tract of land near Bradenton.

His youngest son had colon cancer.

His wife had undergone chemotherapy for breast cancer.

And his oldest son and business partner had died of pancreatic cancer, leaving behind four children.

Adams owned land in Manatee County along Prospect Road he and his oldest had planned to develop together. The property no longer interested him. He wanted to sell it, he said.

"Needless to say, you’re just mentally and physically shook," Adams said of the cancers that tore through his family. "I went a month without eating. I couldn’t sleep.”

Adams said that in his emotionally vulnerable state, he needed somebody who would solely represent him in the transaction, somebody he could trust.

That's not what he got when he entered into a listing agreement with Rutstein, he alleges in a lawsuit filed in late August.

Adams has sued Rutstein and his company over the handling of the sale of the roughly 40 acres of property in the 7000 block of Prospect Road, alleging professional negligence, breach of fiduciary duty, misrepresentation and breach of contract.

He owned a total of 45 acres, but kept five and still lives on the property.

The lawsuit alleges Rutstein told Adams the most he could ever get for his property was the $4 million offered by the eventual buyer.

But that buyer then sold the property to a national home builder for $7 million less than 24 hours after Adams' transaction closed, according to the lawsuit and property records.

Rutstein, according to Herald-Tribune archives, is one of Re/Max Alliance Group's top commercial agents, having been named as the real estate firm's top Florida commercial agent multiple times.

The Herald-Tribune left messages with Rutstein's office and contact numbers from his real estate marketing materials and left a message for his attorney seeking comment. Rutstein did not respond. His lawyer returned a phone call to say that Rutstein did not have involvement in the $7 million sale to KB Homes.

In late October, Rutstein filed a response to Adams' lawsuit, denying any wrongdoing and denying that he established the "single agent" relationship that would have created a fiduciary duty to Adams in the transaction.

The response goes further in saying that Adams "waived his right to seek any relief from Mr. Rutstein" as Adams "ultimately authorized, ratified and/or approved the actions taken that resulted in the closing of the sale …."

A check of Rutstein's real estate broker license found no complaints have been filed against him since the license was issued in 2002, according to the Florida Department of Business and Professional Regulation.

Defining the relationship

In Florida, every real estate agent's role begins as a "transactional broker" relationship unless stated in writing, according to Florida statutes.

"It shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer," the statute reads.

A single agent relationship is rarely used in the industry and creates a fiduciary duty to the real estate agent's client.

A review of the listing agreement attached to the lawsuit does not indicate Rutstein and Adams had established the single agent relationship. However, since Adams is suing Rutstein for allegedly breaking fiduciary duty, Adams indicates he believes a single agent relationship had been established.

Adams said he and Rutstein met at his property sometime in late 2017. In that meeting, Adams said he made it clear that he needed someone who would represent him and his wife exclusively in the transaction.

Real estate sales often are the single largest transaction of a person's lifetime. Despite real estate agents being often contracted as "exclusive" listing agents, they for the most part facilitate the buying and selling of property — and are not, by law, representing either party's best interests in the transaction.

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Both a single agent and transactional broker have statutory duties that include: dealing honestly and fairly; accounting for all funds; using skill, care and diligence; disclosing all known facts not readily observable to the buyer and presenting all offers and counteroffers in a timely manner.

However, the single agent relationship has added responsibilities in addition to creating the fiduciary relationship.

While a transactional broker has limited confidentially, according to statute, a single agent has full confidentially.

A single agent also owes a client full disclosure, obedience and loyalty, which are not statutory requirements owed by a transactional broker to a client.

Delays before sale

Within a few months after the first meeting between Adams and Rutstein, Rutstein identified a buyer, one he told Adams had the financial ability to close the transaction.

However, when it came time to close, the buyer, Bellaire Capital Group, wanted to extend the contract. Adams, according to the lawsuit, asked Rutstein whether he should be financially compensated for the extension.

Rutstein told Adams he was being "greedy," the lawsuit alleges.

Adams said he later learned from his personal attorney that contract extensions often come with financial compensation in commercial sales.

According to the lawsuit, Adams had told Rutstein about a small lot within his property that he didn't own and that Rutstein should secure. Rutstein did not attempt to secure the property, the lawsuit alleges.

After another extension request, Rutstein told Adams that Bellaire Capital Group owned or controlled that property and that Adams would never be able to sell to anyone besides Bellaire since they controlled it.

"Rutstein later advised Adams that since BCG (Bellaire Capital Group) owned, or would soon own, 7380 Prospect Road, Adams could never sell the Property to anyone except BCG, because no one else would ever want to buy the Property, attempting to strong arm Adams into consummating the sale to BCG," according to the lawsuit.

Adams said at that moment, he knew that Rutstein wasn't looking out for his interests.

"I totally trusted Stan. He's going to make a lot of money on this. He has no reason not to do the right thing," Adams said. "It went from total trust to, this guy isn't on my side at all."

After the second extension, Adams said he met Rutstein and the buyers. He says he observed that Rutstein sat at the end of the table with the buyers.

Adams said that during that meeting, the buyers told him that until all development rights were secured on the property, they couldn't close for several more months, and Adams had to wait through the development planning phases.

“We spent months and months and months. Keep in mind, I hired Stan because I didn’t want to have to get involved in all of this," Adams said. "If we were going to do the development, we would have had a much different contract at a much higher price.”

Adams' lawsuit also alleges that Rutstein did not disclose an offer from national home builder D.R. Horton, before the property went under contract to Bellaire.

In Rutstein's response to the lawsuit, he denies this allegation.

After the property sold in fall of 2019, Bellaire flipped the property to KB Homes for nearly $3 million more than Adams had received.

In Rutstein's response to the lawsuit, the long-time real estate broker's attorney denies that he did anything wrong.

Either way, Adams still feels he was bamboozled.

When asked how he felt after learning the property was sold for nearly $3 million more than what he was paid less than 24 hours after he closed the transaction, he didn't directly respond but indicated it doesn't sit well with him.

"How would you feel?" he asked.

This article originally appeared on Sarasota Herald-Tribune: Broker Stan Rutstein sued in $4 million real estate deal in Manatee FL