Citation. 867 P.2d 128 (Colo. Ct. App. 1993)
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Gladys Messler, (Plaintiff) sued Sandra Phillips, (Defendant) for fraud, negligence and theft resulting from a real estate transaction. The trial court ruled in favor of Plaintiff. Defendant appeals.
Synopsis of Rule of Law.
Even though an agent does not formally contract to represent a party in a real estate transaction, she may nevertheless be held responsible for violation of an assumed duty of care in representing said party’s interests.
Facts.
Defendant contracted with Plaintiff to act as her listing broker for the sale of her home and subsequent purchase of a townhouse. The townhouse was owned by developer John Lockely, (Lockley), who also retained Defendant as a broker. The liens and encumbrances were not released, no title insurance coverage was procured, and no deed was delivered or recorded.
Lockely cashed the proceeds from the sale and left the state. Plaintiff sued defendant and Lockley. The trial court determined that defendant was negligent and breached a fiduciary duty she owed to plaintiff as her broker. In addition, Defendant negligently misrepresented what she could or would do on Plaintiff’s behalf by failing to disclose she was representing both parties and asserting she would represent Plaintiff’s interests at both closings.
Issue.
Whether Defendant negligently breached a duty of care to the plaintiff.
Held.
Yes. Defendant negligently breached a duty of care to the plaintiff.
Discussion.
In order for a real estate broker to represent both the seller and buyer in a transaction, the broker must put the agency agreement in writing and the seller and purchaser must both sign it. If this agreement is not made, the agent is considered only the agent of the seller. Therefore, no fiduciary duty arises between Plaintiff and Defendant in this case.
However, real estate brokers have been held accountable for failure to deal fairly and honestly with a purchaser while serving as the seller’s agent. Defendant’s negligent misrepresentation of her ability to represent plaintiff’s interests constitutes a violation of the broker’s duty of honesty and fair dealing.
Even though defendant did not formally contract to act as plaintiff’s agent for the purchase of the townhouse, she is responsible for violating an assumed duty of care in representing plaintiff’s interest in the townhouse closing. The assumed duty arose when Defendant told Plaintiff and her relatives that she would look after Plaintiff’s interests and assured Plaintiff’s relative they need not attend both closings. The trial court did not err in determining that Defendant assumed a duty of care to Plaintiff by her promises and subsequently breached that duty.
