Dual Agent Owed Buyer Duty

Read the full decision: Horiike v. Coldwell Banker Residential Brokerage Co.

California’s highest court has affirmed a lower court ruling that a listing broker for a brokerage acting as a dual agent owes a buyer an equivalent duty as the brokerage.

In 2006, the owners of a luxury residence in Malibu (“Property”) hired a real estate professional (“Listing Broker”) to sell their home. The Listing Broker, who was licensed under Coldwell Banker Residential Brokerage Company (“Brokerage”), listed the property on the MLS as offering “approximately 15,000 square feet of living areas.” The Listing Broker also prepared a flier for the property, which also listed the living area as approximately 15,000 square feet. The Listing Broker had received the public record information for the home from the MLS that included a statement that the size of the home’s living space was 9,434 square feet but had relied upon information from the property’s architect for the square footage information.

A couple made an offer on the property, and asked the Listing Broker for verification of the square footage. The Listing Broker provided the letter from the architect stating that the living area was approximately 15,000 square feet but also gave the couple a note advising them to independently confirm the property’s square footage. After that transaction fell through, the Listing Broker changed the square footage in the MLS to zero.

Meanwhile, an individual (“Buyer”) engaged another licensee working for the Brokerage (“Buyer’s Representative”) to help him locate a property. The Buyer’s Representative saw listing for the Property and arranged a showing, during which the Listing Broker gave the Buyer’s Representative a copy of the flier stating that the living space of the home was 15,000 square feet.  The dual agency disclosures for the Brokerage were made by the Listing Broker to both the Buyer and seller.

The Buyer purchased the Property. When the Buyer later discovered that the Property was significantly less than 15,000 square feet, he filed a lawsuit against the Brokerage and the Listing Broker alleging misrepresentation and breach of fiduciary duty. The appellate court reversed, finding that the trial court’s instruction to the jury that the Listing Broker did not owe the Buyer a fiduciary duty was in error. The Brokerage appealed.

The Supreme Court of California affirmed the appellate court. The court first looked at the state’s dual agency statute. The statute requires that both the buyer and seller consent to the dual agent relationship, and the dual agent owes a fiduciary duty to both clients. The dual agent’s duty for sharing confidential price information of each party is limited, but otherwise the duty is not limited. In California, a corporation can be the licensed broker like the Brokerage and the Brokerage acts through its associate licensees like the Listing Broker and the Buyer’s Representative. The question for the court was whether the Brokerage’s duties as a dual agent extended to the associate licensees.

The court ruled that the dual agent duties of the Brokerage extended to its associate licensees and so the Listing Broker owed the equivalent disclosure duty to the Buyer that the Brokerage would. Because the Listing Broker owed an equivalent disclosure duty, he was required to learn and disclose all material information affecting the value or desirability of the property under California law. Therefore, the court affirmed the appellate court’s ruling that the trial court’s jury instruction was improper and sent the case back to the lower court for a new trial.

Horiike v. Coldwell Banker Residential Brokerage Co., No. S218734, 2016 WL 6833005 (Cal. Nov. 21, 2016). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information.]