Understanding Fiduciary Duty: Dual Agency

Issue: When a broker acts as a dual agent, representing both buyer and seller in a real property transaction – does the salesperson acting under the broker have the same fiduciary duty to buyer and seller as the broker?

Case: Horiike v. Coldwell Banker Residential Brokerage Company, et al. (2014) 225 Cal.App.4th 427.

Facts:

Here, Buyer – working with a Coldwell Banker salesperson (“Coldwell Banker Selling Salesperson”), purchased a large property in Malibu. A Coldwell Banker salesperson (“CB Listing Salesperson”) in another office listed the same property. Buyer insisted he was misled about the property’s square footage. Supposedly, these facts were fully disclosed, but apparently Buyer never read the information. Buyer sued CB Listing Salesperson pleading the CB Listing Salesperson, and Coldwell Banker – as broker (“Broker CB”), breached their fiduciary duty and failed to advise Buyer to hire a third party to verify the actual square footage.

Procedure History:

The trial court determined the jury’s findings resolved the remaining claims in favor of CB Listing Salesperson and Broker CB. Buyer filed a timely notice of appeal. Here, Court of Appeal reverses. Supreme Court heard oral arguments on September 7, 2016.

Law:

Broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty. A dual agent has fiduciary duties to both buyer and seller.

When there is one broker, and there are different salespersons licensed under the same broker, each salesperson is an employee of the broker and their actions are the actions of the employing broker․ When one salesperson obtains the listing and represents the seller, and another salesperson employed by the same broker represents the buyer, they both act as employees of the same broker. That broker consequently becomes a dual agent representing both parties.

Salespersons often think there is no dual representation if one salesperson represents one party to the transaction and another salesperson employed by the same broker represents another party to the transaction. The real estate industry has sought to establish salespersons as independent contractors for tax purposes. This concept has enhanced the misunderstanding of salespersons. Salespersons believe they may work independently in the transaction when they are negotiating with a different salesperson employed by the same broker who is representing the other party to the transaction. This is simply not true.

Analysis:

Here, Broker CB acted as the dual agent of buyer and seller. The disclosure form expressly stated a dual agent has a fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with either the seller or the buyer.

In addition, listing salesperson executed the forms on behalf of broker as a salesperson. Under Civil Code section 2079.13, subdivision (b), the duty the listing agent owed to seller, or any buyer, was equivalent to the duty owed to that party by Broker CB. Broker CB owed a fiduciary duty to buyer and thus, CB Listing Salesperson owed a fiduciary duty to buyer.

Holding:

Yes, in conclusion, a salesperson has the same fiduciary duty as the broker.

Fiduciary Duty

Hughes Marino

Michael J. Libutti is a Broker and Attorney at Class Realty Group’s San Diego office. Reach him by email at mlibutti@classrealtygroup.com or by phone at 858-220-4295.

By |2017-05-08T23:44:33+00:00March 3rd, 2017|Learn the Law with Libutti|0 Comments

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