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Horiike v. Coldwell Banker Residential Brokerage Company (2016)

November 21, 2016

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In this California Supreme Court proceeding, Horvitz & Levy LLP successfully represented appellant Hiroshi Horiike in an action seeking to establish that in a real estate transaction in which a brokerage firm represents both the buyer and the seller, the individual salespeople working on the sale owe fiduciary duties to both the buyer and the seller.

Mr. Horiike purchased a home in Malibu. Both he and the seller were represented by salespeople who worked for Coldwell Banker. After purchasing the home, Mr. Horiike discovered that the square footage of the property was smaller than Chris Cortazzo, the seller’s salesperson, had claimed. He filed suit against Coldwell Banker and Cortazzo, alleging causes of action that included breach of fiduciary duty.  The parties agreed that because Coldwell Banker represented both the buyer and the seller, it was a “dual agent” and owed fiduciary duties to both parties. However, Cortazzo, who had worked exclusively with the seller, filed a motion for nonsuit on Horiike’s cause of action for breach of fiduciary duty on the ground he owed a fiduciary duty only to the seller. The trial court granted the motion, ruling that Cortazzo exclusively represented the seller in the transaction and therefore did not owe a fiduciary duty to Horiike. The Court of Appeal reversed and the Supreme Court granted review.

Mr. Horiike retained Horvitz & Levy to represent him in the Supreme Court.  Horvitz & Levy persuaded the Court to affirm the Court of Appeal’s ruling. The relationship between the parties to a real estate transaction is governed by a series of provisions in the Civil Code. Civil Code section 2079.13, subdivision (b) provides that “[w]hen an associate licensee owes a duty to any principal, or to any buyer or seller who is not a principal, in a real property transaction, that duty is equivalent to the duty owed to that party by the broker for whom the associate licensee functions.” The Court agreed with our position that under this statute and the rules that typically govern principal/agent relationships, salespeople owe to the parties the same duty that is owed by the brokerage firm for which they work. Because Coldwell Banker owed a fiduciary duty to both parties, both of the salespeople also owe fiduciary duties to both parties.