Daily Development for
August 28, 1995

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

This case is the affirmance on appeal of a case reported here early in DIRT history. Let's see if brokers and lawyers agree with the today.

BROKERS; PRINCIPAL AND AGENT; LIABILITY: Even though broker negligently fails to reform disclosure documents pursuant to new information provided by client/seller, client has no claim against broker for client's liability to buyer where client has executed disclosure statement containing the error. Barta v. Kindschuh, 518 N.W.2d 98 (Neb. 1994).

Sellers became dissatisfied with their initial agent and substituted another from within the same office. During the interim between agents, leaks developed in the roof of sellers' property. Sellers' duly reported the leaks to their new agent, but the new agent neglected to change the "Property Disclosure Information" form, initially completed by the preceding agent. Prior to completing the sale of the subject property, the sellers signed the unchanged form.

Later, when buyers sued, sellers alleged in a third party petition the liability of their agent/brokers.

The court observed that an agent is normally liable for losses suffered by the agent's failure to fulfill his agency duties. However, when the principal is less than blameless or free from any wrongdoing and his behavior indicates some authorization for the acts in question, the agent will not be held liable.

While the agent/broker clearly violated a duty by not changing the form, the sellers were given the form to read and sign. This behavior acquiesced and ratified the acts of their agent. Since the law will not afford sellers protection for ignoring the obvious, the agent/broker was released from liability.

Comment: Although clearly parties should be liable for injury caused by their own negligence, how far should we go in exonerating the broker? If the broker incorrectly assured the sellers that the changes had been entered, would there have been liability? Probably so. For in such case the sellers would have been entitled to rely upon the broker's assurances. The broker, after all, is the professional they have hired to carry out these paperwork details for them.

But if this is correct, then why can't the sellers also have a right to expect that the broker will properly fill out the forms in every case? Why, therefore, should the sellers be denied a damage claim when the broker's negligence contributes substantially to their loss?

Consider whether a lawyer's client would be denied a malpractice claim based upon the lawyer's negligent failure to draft instruments as instructed where the client has relied upon the lawyer and not carefully reviewed the instruments. The client's reliance is reasonably foresseable. Unless the lawyer specifically requests that the client reviews the instruments to check for errors, it's hard to imagine that the lawyer would escape liability. Why should the broker?

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Shawn Kaminsky at the ABA. (312) 988 5260.

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