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CASE UPDATE: California Supreme Court Rules On Duties Of Real Estate Agents in Dual-Agent Transactions. (What does this mean for Santa Cruz real estate agents?)

In Horiike v. Coldwell Banker Residential Brokerage Co., (2016) 201 Cal.Rptr.3d 1, 383 P.3d 1094, the California Supreme Court ruled that all salespeople working under a single broker in a “dual agent” transaction owe the same fiduciary duties to both buyers and sellers that the broker does, even if different agents within the brokerage represent the buyer and seller separately.

In this case, the buyer and seller agreed to Coldwell Banker’s dual agency and signed the various disclosure forms to that effect.  The seller was represented by one Coldwell Banker agent (Cortazzo) and the buyer was represented by a different Coldwell Banker agent from another office (Namba).  The seller’s agent represented in marketing materials that the property had 15,000 SF of living area, but he knew from the residence’s building permit that only 11,000 SF was actually permitted.  The seller’s agent never clearly informed the buyer or the buyer’s agent that the 15,000 SF representation may not be accurate or that that only 11,000 SF was permitted.  Instead, he provided the buyer’s agent with a copy of the building permit, along with a form stating that the broker was not verifying square footage, that the buyer should not rely on the broker’s representations about square footage, and et cetera.  When the buyer later discovered this discrepancy in square footage, he sued both Coldwell Banker and Cortazzo for breach of fiduciary duty.

During the jury trial, at the close of the buyer’s case, the trial court granted the defendants’ request for a nonsuit and dismissed buyer’s breach of fiduciary duty cause of action against Cortazzo.  It ruled that Cortazzo did not owe a fiduciary duty to the buyer because he, Cortazzo, represented the seller exclusively and Namba represented the buyer exclusively.  The court of appeal reversed that decision, which was affirmed by the California Supreme Court.

The Supreme Court explained that, “[t]he primary difference between the disclosure obligations of an exclusive representative of a seller and a dual agent representing the seller and the buyer is the dual agent’s duty to learn and disclose facts material to the property’s price or desirability, including those facts that might reasonably be discovered by the buyer”.  It further explained that these same duties bind all of the agents/salespeople of a dual agent broker.  The Supreme Court then explained that because a broker’s agent’s authority arises exclusively from its relationship to the broker, the agent/salesperson is bound by the same fiduciary duties that apply to the dual agent broker.  Cortazzo was thus charged with carrying out Coldwell Banker’s duty to the buyer to learn and disclose to the buyer all material information affecting the value or desirability of the property.  (The case was remanded back to the trial court to determine whether Cortazzo satisfied that duty by giving the buyer’s broker a copy of the building permit.)

This decision clarifies that the agents involved in a dual-agent transaction essential stand in the shoes of the broker with respect to their fiduciary duties to both parties.  Therefore, they must disclose all material facts about the desirability or value of the property to both buyer and seller regardless of which one they are working with.

 

©2016 Miles J. Dolinger.  This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship.

Miles Dolinger

Miles Dolinger

Miles Dolinger epresents individual, business and public agency clients in a wide range of real estate, land use, and public law matters (transactional and litigation). His office is currently location in Capitola, CA and serves clients in Santa Cruz, Monterey, San Benito and Santa Clara Counties.
Miles Dolinger

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Miles J. Dolinger
Attorney at Law

314 Capitola Avenue Capitola, CA 95010
Phone: (831) 477-9193
FAX: (831) 477-9196
miles@dolingerlaw.com

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