Tuesday, November 22, 2016
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S.C. Holds Real Estate Salesperson to Same Duties as Broker
By a MetNews Staff Writer
A real estate salesperson owes the parties to a transaction the same fiduciary duty that his or her broker does, even when the salesperson is representing one side of the transaction and an employee of the same broker represents the other, the state Supreme Court ruled yesterday.
The court unanimously affirmed the ruling of this district’s Court of Appeal, Div. Five, which ordered a new trial on Hiroshi Horiike’s breach-of-fiduciary-duty claim against Coldwell Banker Residential Brokerage Company and salesperson Chris Cortazzo.
Horiike claims that Cortazzo breached his duty to Horiike, the buyer of a house in Malibu, by significantly overstating the property’s square footage. Horiike purchased the property in 2007 with the assistance of another Coldwell Banker salesperson, and said he did not discover the discrepancy until 2009.
A flyer put out by Cortazzo said the house had “approximately 15,000 square feet of living areas.” Horiike said he relied on the flyer, and on Cortazzo’s oral representation, until he reviewed the building permit in preparation for some improvements.
The permit indicated that the total square footage was 11,050 square feet, including the main residence, guest house, and garage. Horiike’s expert testified at trial that the actual square footage was just under 12,000 square feet, while a defense expert said it was more than 14,000 square feet.
Causes of Action
The complaint included causes of action for negligent and intentional misrepresentation, breach of fiduciary duty, unfair business practices, and false advertising. The statutory causes of action for unfair business practices and false advertising were reserved for trial to the court after the other claims were tried to the jury.
Los Angeles Superior Court Judge John Reid, who has since retired, granted nonsuit to Cortazzo on the fiduciary-duty claim. He reasoned that Cortazzo did not owe a fiduciary duty to the buyer, only to the seller.
Since the plaintiff stipulated that there was no breach of any such duty on the part of the salesperson representing him, Reid instructed the jury that Coldwell Banker could only be held liable on the fiduciary-duty claim if there was a showing that some agent of the company, other than those representing the buyer and seller, committed a breach.
At the plaintiff’s request, the judge allowed the jury to consider an additional claim, of intentionally concealment by both defendants.
By special verdict, the jury found that there was no intentional misrepresentation, that Cortazzo made a false representation of material fact but did so in the reasonable belief that the statement was true, and that there was no concealment by Cortazzo of any material fact that he knew or could have reasonably discovered, and that Coldwell Banker did not breach any material duty.
Reid then ruled that the jury’s findings resolved the statutory claims in favor of the defendants, and later denied the plaintiff’s motion for new trial.
Court of Appeal Ruling
The Court of Appeal, however, in an opinion by Justice Sandy Kriegler, said the nonsuit and the jury instructions on breach of fiduciary duty were erroneous and prejudicial.
Justice Leondra R. Kruger, writing for the high court, agreed. She cited the agent’s status as an “associate licensee,” operating under the broker’s license and functioning under the broker’s supervision, pursuant to Civil Code §2079.13.
“The disclosure statute and Real Estate Law make clear that an associate licensee who ‘owes a duty to any principal, or to any buyer or seller who is not a principal, in a real estate transaction’…stands in the shoes of the brokerage and assumes the broker’s duties,” the jurist wrote. “Accordingly, when Coldwell Banker agreed to act as a dual agent for both Horiike and the [seller] in the transaction for the sale of the Malibu residence, Cortazzo, as an associate licensee of Coldwell Banker in the transaction, assumed equivalent duties to Horiike.”
The justice rejected the view of the defendants that only the salesperson engaged by Horiike, Chizuko Namba of Coldwell Banker’s Beverly Hills office, was subject to any liability in the matter.
“[D]efendants do not explain how Namba’s purported failure to discharge her fiduciary duty would excuse Coldwell Banker from its duty to disclose material information that may have been known only to Cortazzo, who was also its agent in the transaction, Kruger wrote. “A broker cannot discharge a duty to disclose information known only to its associate licensee except through the licensee himself.”
Horiike v. Coldwell Banker Residential Brokerage Company, 16 S.O.S. 5825, was argued in the Supreme Court by Frederic D. Cohen of Horvitz & Levy for the plaintiff and Edward L. Xanders of Greines, Martin, Stein & Richland for the defendants.
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