Salespersons Acting Under the Broker Have the Same Fiduciary Duty to the Buyer and the Seller as the Broker When a Broker is a Dual Agent of Both the Buyer and the Seller in a Real Property Transaction

Jun 04 2014

Horiike. v. Coldwell Banker Residential Brokerage Co. 2014 WL 1384226 (Cal.App. 2 Dist.)

By: Richard H. Glucksman, Jon A. Turigliatto, and David A. Napper
June 4, 2014

The Second District Court of Appeal held that when a broker is the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer and the seller as the broker.

In 2006, a salesperson at Coldwell Banker Residential Brokerage Company (“Coldwell Banker”) listed a Malibu property on a multiple listing service. The salesperson stated the home offered approximately 15,000 square feet of living areas and created a flier stating the same. In March of 2007, a couple made an offer to purchase the property. The salesperson provided a letter from the architect stating the size of the house was approximately 15,000 square feet and suggested the couple hire a qualified specialist to verify the square footage. The deal eventually fell through when the seller would not extend the time for an inspection of the property. The salesperson subsequently changed the approximate square footage of the living areas to be “0/O.T.” meaning zero square feet and other comments.

The same salesperson then showed the property to Plaintiff Hiroshi. Horiike, gave him a copy of the flier stating the property had 15,000 square feet of living areas, and did not suggest that Horiike hire a qualified specialist to verify the square footage. Horiike agreed to purchase the property and the parties to the transaction executed a disclosure document explaining that Coldwell Banker, as the listing agent and selling agent, was the agent of both the buyer and seller. Horiike later discovered in 2009 that the property did not contain 15,000 square feet of living area and sued the salesperson and Coldwell Banker.

The Second District Court of Appeal found that Coldwell Banker acted as the dual agent of the buyer and seller in this case as was confirmed on the disclosure forms provided to Horiike. Under California Civil Code 2079.13, subdivision (b), the duty that the salesperson owed to any principal, or to any buyer who was not a principal, was equivalent to the duty owed to that party by Coldwell Banker. As a result, Coldwell Banker owed a fiduciary duty to Horiike, and therefore, the salesperson owed a fiduciary duty to Horiike. Despite the jury’s findings that the salesperson did not provide false information to Horiike, did not provide false information that he reasonably believed to be true, and did not intentionally conceal information, the court held that the salesperson did not satisfy his fiduciary duty to Horiike.

Horiike helps protect both purchasers and sellers in real estate transactions where a dual agent may be tempted to be biased towards one of the two participating parties. The fiduciary duty placed on dual agents imposes the highest standard on these individuals thereby promoting a necessary level of trust between agents and their clients. Horiike should force brokers to ensure that they are properly overseeing their salespeople in the field. Most importantly however, is the continued protection by the Court of the consumer from misleading information, misrepresentation and fraud in the real property arena.