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Horiike v. Coldwell Banker

Case Comment: Horiike v. Coldwell Banker - Reaffirming the Broker-Agent Relationship

Tom Jacobson

Tom Jacobson concentrates his practice on real estate and environmental matters throughout California and in Utah. During his career he has represented brokers, Associations of REALTORS", commercial landlords and developers. Tom is a graduate of the University of Utah College of Law. In addition to practicing full time, Tom is a certified instructor for Utah real estate continuing education.

 I.  INTRODUCTION

The California Supreme Court's (the "Court") review of Horiike v. Coldwell Banker Residential Brokerage Company1 provoked substantial speculation and conjecture prior to the Court's decision, published November 21, 2016. Scholars and real estate professionals voiced their concerns about the repercussions of the anticipated decision.2  Depending on one's perspective, the decision was either a sign of relief or an unfortunate outcome. Despite considerable anticipation, in the end the Court did nothing more than reiterate existing law, leaving in place all of the advantages, drawbacks, conflicts, issues, and other labels affixed to California's dual agency balancing act.

Our colleague and learned member of our bat, Rafael Chodos, recently published in the Journalan excellent article on the perspective of the Horiike case.  Chodos emphasized that scholars may ask certain questions about the case, including why the Court even took the case given the direction of its decision and concurrence with the Court of Appeal. Chodos provided an insightful analysis of constructive fraud and fiduciary duty, and questioned why the Court did not address issues of constructive fraud.5 Chodos also provided an excellent analysis of dual agency and the inherent conflict of interest many lawyers perceive with the scheme adopted by the legislature.6 

In practice, attorneys who advise brokers, buyers, and sellers do not have the luxury of knowing what was in the minds of the Court justices.  Though there was much anticipation surrounding the outcome of the Horiike case and many who thought the days of dual agency might be over, the Court left the law of dual agency untouched and simply based its decision on existing law and precedent.  This article details the facts of the Horiike case and analyzes the Court's decision and its ramifications.

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HORIIKE V. COLDWELL BANKER

HORIIKE V. COLDWELL BANKER-WHAT DOES IT MEAN FOR THE FUTURE OF DUAL AGENCY?

On November 21, 2016 the California Supreme Court announced the long awaited decision in Horiike v. Coldwell Banker. Though there was grave concern the Court might use the opportunity to seriously impair California's dual agency law allowing brokers to represent both buyers and sellers in real estate transactions, the decision was decided on the narrow issue of whether an associate agent working for the seller owes the same fiduciary duty to the buyer that a broker owes to both parties. The court held the associate agent owes the same fiduciary duty to the buyer as the broker owes to the buyer even though the associate agent is representing only the seller in the transaction.

This case arises from the sale of a property in Malibu, California. The property was originally listed by Chris Cortazzo, a salesperson in the Malibu West office of Coldwell Banker. As Cortazzo prepared to list the property, he obtained public record information from the tax assessor's office, which stated that the property's living area was 9,434 square feet, and a copy of the residence's building permit, which described a single-family residence of 9,224 square feet, a guest house of 746 square feet, a garage of 1,080 square feet, and a basement of unspecified area. When Cortazzo listed the property on the MLS in September 2006, however, the listing stated that the property "offers approximately 15,000 square feet of living areas." Cortazzo also prepared and distributed a flyer making the same representation about the property's square footage.

In early 2007, a couple working with another Coldwell Banker salesperson made an offer to purchase the property. By a handwritten note in the disclosures he prepared, Cortazzo informed the couple that Coldwell Banker did not "guarantee or warrant" the square footage of the residence, and he advised them "to hire a qualified specialist to verify the square footage." When the couple requested documentation of the square footage, Cortazzo gave them, through the salesperson, a letter from the architect of the residence stating that "[t]he size of the house, as defined by the current Malibu building department ordinance is approximately 15,000 square feet." In a cover note, however, Cortazzo again cautioned them that they should "hire a qualified specialist to verify the square footage." The couple requested an extension of time to inspect the property, which the trust refused to grant. In March, the couple canceled the transaction.

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