Supreme Court Grapples With Real Estate Broker’s Dual Agency Duty

11819116_lCortazzo, a licensed real estate agent working for Coldwell Banker Residential Brokerage, a real estate broker, listed a home in Malibu for sale. Namba, another agent working for the same broker, found a buyer, Mr. Horiike. The public records showed the property had 9,434 square feet, while the building permit listed the property as having a 9,224 square foot residence with a 746 square foot guest house and a 1,080 square foot garage. Nevertheless, Cortazzo, after interviewing the architect, prepared a listing that stated the home “offers approximately 15,000 square feet of living areas.” The architect had included patios and potential building area in his definition of “living areas,” but Cortazzo admittedly had not asked him how he defined the term.

After escrow closed, Horiike discovered that the house did not have 15,000 square feet. He filed a law suit against Cortazzo and Coldwell Banker—but not Namba—including claims for breach of fiduciary duty. At trial, Horiike stipulated that Namba did not breach any duties to him. Horiike lost after the trial judge ruled that neither the listing agent nor the broker owed Horiike a fiduciary duty. The Court of Appeal reversed, holding that when a broker is the dual agent of both the buyer and seller, salespersons working for the broker owe the same fiduciary duty to the buyer and seller as the broker. The case attracted a great deal of attention, and the Supreme Court agreed to consider it and held oral argument on September 7.

At oral argument before the Supreme Court, the attorney arguing for Cortazzo and Coldwell Banker drew a line between the duties owed by Cortazzo and Coldwell Banker and the duties owed by Namba and Coldwell Banker, noting that since Namba represented Horiike, he was the one who owed Horiike the fiduciary duty, and since Horiike agreed Namba had not breached a duty, Horiike could not sue Coldwell Banker for breach of fiduciary duty. The attorney for Horiike argued that because Namba was acting on behalf of Coldwell Banker, suing Coldwell Banker was enough to obtain the relief Horiike wanted. The Court seemed to struggle with where to draw the line between the broker’s duties under the circumstances, paying particular attention to California Civil Code Section 2079.13, which states, in part: “When an ‘associate licensee’ owes a duty to any principal…that duty is equivalent to the duty owed to that party by the broker for whom the associate licensee functions.” Several large real estate brokerage firms and the California Association of Realtors®, which sponsored the statutes under consideration, filed “friend of the court” briefs.

A decision is expected within 90 days and will be reported in a later issue of The Dirt.