>
>Daily Development for Wednesday July 16, 2008
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Husch Blackwell Sanders
>Kansas City, Missouri
>dirt@umkc.edu
>
>Note two cases here: Good news and bad for brokers.
>
>BROKERS; MISREPRESENTATION: Seller broker’s overstatement of square footage in home on MLS listing is actionable as broker misrepresentation where it shows no independent source for the information; and question of whether buyers relied on misrepresentation is a jury question notwithstanding that buyers had signed a form indicating that they were not relying on any information supplied by the “REALTOR.”

>
>Pleasant v. Bradford, 2008 Westlaw 2544814 (Tex. App. 6/26/08)
>
>Listing Broker listed a house for sale and prepared an MLS sheet that disclosed the square footage of the house as approximately 1850 sq. ft.  She obtained this information from the local county assessor.  It was the custom to put square footage information in MLS listings, although not required.  It was also the custom to reveal in the listing the source of the information, e.g. “per Bell County Assessor’s Office.”  But in this case, allegedly because of a scrivener’s error by an employee of the broker’s office, this qualification did not appear next to the square footage information on this particular MLS sheet.  The computerized MLS listing automatically computed a “per square footage” price that was part of the information on the sheet.

>
>You can guess, of course, what happened next.  Buyers looked at the house with a selling broker, and, one way or another, got the selling broker’s MLS listing sheet, which was also not an unusual event.   Buyers maintained at trial that they were attracted to the house because, although it needed repair, it was substantially lower per square foot than other houses in the neighborhood. 

>
>Because Sellers were anxious to close the deal and because Buyers were could not get a loan until they received confirmation of the husband’s residency contract at a local hospital, the parties executed a contract that permitted Buyers to occupy the home on a rental basis before closing, during which time they did substantial repairs and renovation.  When they did get the confirmation and applied for a loan, however, the bank appraisal indicated (accurately, unfortunately) that the house was in fact 1571 square feet.  Buyers closed on the house and sued broker for the difference between the value of the house at its true size and the value of the house at the size represented.  A jury found for Buyers and awarded them the difference of about $2500.  Plus Buyers got attorney’s fees.  Broker appealed.

>
>Held: Affirmed.
>
>Broker first argued on appeal that Buyers had not relied on the broker’s representation because there was evidence that Buyers had indeed checked the assessment department’s website on their own and saw the (erroneous) square footage report.  The court conceded that indeed there was Texas authority that said that there must be evidence of reliance, and that if a party, after receiving a misrepresentation, independently checks out the facts, there may be no factual link between the representation and the actual reliance.  In this case, however, there was evidence that Buyers, encouraged by their broker, had gone to the website not to check the square footage but to look for any evidence of defects in the property so that they could understand why the per square foot price was so much less than other houses.  They incidentally saw the square footage information, but the purpose of their checking the website was not to verify that information.  Consequently, the jury could have foun

d that they were still relying, at least in part, on the selling broker’s representation.
>
>Broker next pointed out that Buyers had signed a document provided by the selling broker that contained the following statement:

>
>“The Buyer is advised to verify all information important to him/her and to ask the appropriate questions of the appropriate authorities himself/herself or through an attorney with respect to important issues such as ... size of structure.... Any statements with respect to problems or with respect to the availability or existence of any of these items which were made by the REALTOR and his/her associates were made based on information given to the REALTOR by the Seller/Owner and/or government agencies, and/or others, and there is no intention that the Buyer rely on the statements of the REALTOR and his/her associates, and the Buyer is urged to confirm any such statements on his/her own.

>
>Having read the foregoing disclaimer, I/we, the prospective Buyer(s), by my/our signature(s) below, state that I/we have not relied upon any statement given to me/us by the REALTOR and/or his/her associates with regard to the property, and my/our decision to make an offer on the property and to subsequently purchase the property is based on my/our independent decision with or without legal counsel.”

>
>The court ruled that it was a jury issue whether this constituted a statement that Buyers were not relying upon the *listing broker’s* representations, as opposed to the only the representations made by their selling broker. The court noted that the statement quoted above did not constitute a waiver of a right to make a claim or bring a lawsuit, and at best could only be construed as an assertion of non-reliance.  To this extent, the question was properly before the jury.    The jury, of course, had found for the Buyers on the point. 

>
>Comment 1: To a certain extent, the case is “plain vanilla;” but the interplay between the Buyers’ inquiry of the assessor’s office and the conclusion of reliance certainly is interesting.  The selling broker testimony here assisted the buyers.  They were wise not to sue her. 

>
>One supposes that if Buyers had not checked the appraiser’s office - few do - their case would have been stronger on this point.  We can hear the seller broker’s teeth grinding when the Buyers claimed that they in fact were relying on the broker’s misrepresentation.  But the broker made the original error when the MLS listing document went out without attributing the square footage to the assessor’s office. 

>
>The editor suspects that the local MLS form may now been amended to indicate that, except as noted otherwise, square footage is as per the assessor’s office.

>
>The editor admits that the problem of the appraiser’s office having the wrong square footage is a common one, and probably the specific documentation that the broker is merely passing on the square footage information ought to be honored.  But the selling broker here dropped that ball, but still tried to get the down played over.

>
>BROKERS; MISREPRESENTATION: Broker’s representation that property is a “three family” property is not actionable as a misrepresentation, even when zoning records show that the property is not lawful, because broker has no duty to verify zoning.  Quinlan v. Clasby, 71 Mass.App.Ct. 97, 879 N.E.2d 703 (Mass. App. 2008)

>
>In the early 90's Clasby converted his property from a four family house to a three family house.  Although Clasby first applied for a variance for this purpose, he discovered that a 20 year old zoning ruling relating to the house that permitted use as a three family dwelling, but required that no more than one unit be located on the second floor.    Upon discovering this ruling, Clasby elected not to tug on Superman’s cape and withdrew his variance request and just went ahead with the conversion, substantially upgrading the property when he did so.  But he put two of the three apartments on the second floor.    Several subsequent city inspection records indicated that the property was a lawful three family property, although apparently it wasn’t.

>
>When Clasby listed the property for sale with Broker five years later, Broker was aware that the property has been a four family property at one time, and that in fact it was being taxed as a four family property.  But Broker listed it as a three family property, which is how it was physically conformed, of course.  Broker did not check the zoning record of the property, and was unaware of the requirement for two downstairs apartments.  (Remember, the requirement was imposed in 1974, but the conversion didn’t occur until 1993.)  There had been a property assessment change from R-4 to R-3 at about this time, but it is unclear from the record what this meant, and it did not appear that the change meant that the taxing authorities viewed the property as a lawful three family residence. 

>
>Based upon the listing of the property as a three family property, Quinlan bought the property from Clasby in 1998.  A few years later, Quinlan elected to sell the property, and at this time it became clear to everyone that the property was not a lawful three family property, and Quinlan lost two successive buyers when he was unable to get the property approved as a three family property.  Ultimately he sold it for $30,000 less than the highest of these two lost contracts, and sued Clasby for breach of contract and misrepresentation and sued Broker breach for of the state’s deceptive trade practices act which apparently was the equivalent of a negligent misrepresentation claim. 

>
>The trial court granted summary judgment to Clasby on the misrepresentation claim, presumably because Clasby, although aware of the problem from the time he made the conversion, made no representation to Buyer.  But trial proceeded on the breach of contract claim and the deceptive trade practice claim against Broker.

>
>At trial Broker’s agent testified that she typically checks tax records, but not zoning records.  Quinlan introduced no evidence that it was the custom and practice in the area for brokers to check zoning records.

>
>Although the jury found for both defendants, the trial court issued a judgment notwithstanding the verdict as to the Broker, finding that if the Broker listed the property as a three family property, Broker should have made certain that it was such a property, physically and legally, and, of course, the information was in the zoning records, albeit somewhat obscurely, if the Broker had checked.  Amicus local Board of Realtors objected on appeal that it was not appropriate to hold brokers responsible for understanding zoning.  The trial judge commented that the Broker was free to say nothing about the zoning status of the house, just describing the number of rooms, but if the Broker said “three family building,” the Broker had the responsibility to be reasonably in establishing the truth of that statement. 

>
>On appeal, the appeals court granted that an deceptive trade practice claim may be based upon a non-willful, negligent misrepresentation.  But it found that Broker had not made such a misrepresentation here.  Broker, it ruled, had no duty to check zoning for the Buyer, and its representation that the property was a three family house was not a representation that it was lawfully a three family house.  It was up to Buyer to verify that.

>
>The court cited a 1995 case in the same appeals district, Fernandes v. Rodrigue, 646 N.E.2d 414, that held that where a broker made a specific representation that listed property was 4 acres, relying upon assessor’s records, and did not disclose to the buyer that it was relying upon public records, it was not making an actionable misrepresentation.  Again, the court ruled, the buyer had no right to rely on broker’s statement, but ought to have checked itself.  

>
>Comment 1: Obviously, this case is a far cry from the Texas case reported under the same heading, Pleasant v. Bradford, 2008 Westlaw 2544814 (Tex. App. 6/26/08), where a broker that didn’t disclose that information concerning size came from a public record was held liable when the representation was incorrect.  For another  case finding liability, like the Texas case for such a misrepresentation, see Shaeffer v. Earl Thacker Co., 716 P.2d 163 (Haw. 1986).  For one that, like the instant case, lets the broker off, see Hoffman v. Connell, 736 P. 2d 242 (Wisc. 1987).  Of course, many of these issues are now covered by statute.  In general, the broker is liable for affirmative misrepresentations, even innocent ones, but generally is able to escape by statutory or contractual provisions exculpating it for any information it passes on from the client seller.  It appears that in this case Clasby had said nothing to Broker about the three family status, which Clasby knew to be unlawful.

 Clasby was exonerated by the jury from the misrepresentation claim.
>
>Comment 2: Another interesting point is the failure of the disclaimer language to protect the listing broker.  Obviously, the language of the disclaimer that purports to extend to the “REALTOR and/or his/her associates” could be read to include other brokers involved, through MLS, with the marketing of the property.  Perhaps the court was wise, however, to leave this question to the jury.  It was, after all, a consumer instrument whose language was totally out of the control of the Buyers.  How many buyers would be sophisticated enough to exclude from the disclaimer information that they in fact were relying upon and that the broker in fact represented to them? 

>
>As to the amount of damages, the jury was permitted to accept the bank appraiser’s valuation as to the value of the house at its actual size, and the bargained for price as evidence of the valuation at the misrepresented larger size. 

>
>
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