Ethics, Professional Conduct, and Legal Aspects of Real Estate Real estate professionals in California are constantly faced w i t h d e c i s i o n s t h a t r e q u i r e e t h i c a l a n d p rofessional responses; a n d t h i s i s n o t a n e a s y t a sk . E v e r y r e a l e st at e t ra n s a ct i o n i s u n i q u e , a n d r e a l e s t a t e p r o f e s s i o n a l s m u s t b e " f a s t o n t he i r f e e t " i n o r d e r t o c o n s u m ma t e r e a l e s t a t e t r a n s a c t i o n s a n d i n s t i t u t e r e a l e s t a t e l o a n s . I n s o d o i n g , r e a l estate professionals must create t h e s e " d e a l s " w i t hi n a n e t h i c a l f r a me w o r k . T h i s f r a me w o r k i s delineated through Business and Professions Code Sections 10176 a n d 1 0 1 7 7 . I t i s a l s o c o v e r e d w i t h i n relevant case law that will be presented at the end of this course.

Business and Professions Code Section 10176 T h e c o m mi s s i o n e r ma y , u p o n h i s o w n mot i o n , a n d s h a l l , u p o n t h e v e r i f i e d c o mpl a i n t i n w r iting of any person, investigate t h e a c t i o n s o f a n y p e r s o n e n g a g e d i n t he b u s i n e ss o r a ct i n g i n t he c a p a c i t y o f a r e a l e s t a t e l i c e n s e e w i t h i n t h i s st a t e , a n d h e ma y t e mp o r a r i l y s u s p e n d o r p e r m a n e nt l y r e v o k e a r e a l estate license a t a n y t i me w h e r e t h e l i c e ns e e , w hi l e a r e a l e s t at e l i c e n s e e , i n p e r f o r mi n g o r a t t e m p t i n g t o p e r fo r m a n y o f t h e a c t s w i t h i n t h e s c o p e o f t h i s c h a pt er h a s b e e n g u i l t y o f a n y o f t h e fol l o w i n g : ( a ) M a k i n g a n y s u b s t a n t i a l mi s r e p r e s e n t a t i o n . ( b ) M a k i ng a n y f a l s e p r o mi s e s o f a c h a r a c t e r l i ke l y t o i n f l u e n c e , persuade or induce. ( c ) A c o n t i n u e d a n d f l a g r a n t co u r s e o f mi s r e p r e s e n t a t i o n o r ma k i n g o f f a l s e p r o mi s e s t h r o u g h r e a l e s t a t e a g e n t s o r s a l e s me n . ( d ) A ct i ng fo r mo r e t h a n o ne p a rt y i n a t r a n sa ct i o n w i t ho u t t he knowledge or consent of all parties thereto. ( e ) C o m m i n g l i n g wi t h h i s o w n mo n e y o r p r o p e r t y t h e m o n e y o r other property of others which is received and held by him. ( f ) C l a i m i n g , d e m a n d i n g , o r r e c e i v i n g a f e e , c o mpe n s a t i o n o r c o m mi s s i o n u n d e r a n y e x c l u s i v e a g r e e me n t a u t h o r i z i n g o r e mp l o y i n g a l i c e ns e e t o p e r f o r m a n y a c t s s e t f o r t h i n S e c t i o n 1 0 1 3 1 f o r c o mp e n s a t i o n o r c o m mi s s i o n w h e r e s u c h a g r e e me n t

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d o e s n o t c o n t a i n a d e f i n i t e , s p e c i f i e d d a t e o f f i n a l a n d c o mp l e t e t e r mi n a t i on . ( g ) T h e c l a i mi n g o r t a ki n g b y a l i c e n s e e o f a n y s e c r e t or u n d i s c l o s e d a mo u n t o f c o mp e n s a t i o n , c o m mi s s i o n o r p r o f i t o r t h e f a i l u r e o f a l i c e n s e e t o r e v e a l t o t h e e mp l o y e r o f s u c h l i c e n s e e the full amount of such licensee's compensation, commi ssion or p r o f i t u n d e r a n y a g r e e me n t a uthorizing or employing such l i c e ns e e t o d o a n y a c t s f o r w h i c h a l i c e n s e i s r e q u i r e d u n d e r t h i s c h a p t er fo r c o mp e n s a t i o n or c o m mi s s i o n p r i or t o o r c o i n c i d e nt w i t h t he s i g n i n g of a n a g r e e me nt e v i d e n c i n g t h e me e t i n g o f t he mi n d s o f t h e c o n t r a c t i n g p a r t i e s , r e g a r d l e s s o f t h e f o r m o f s u c h a g r e e me n t , w h e t h e r e v i d e n c e d b y d o c u me n t s i n a n e s cr ow o r b y any other or different procedure. ( h ) T h e us e b y a l i c e n s e e o f a n y p r o vi s i o n a l l ow i n g t h e l i c e ns e e a n o p t i o n t o p u r c ha s e i n a n a g r e e me n t a u t h or i z i n g o r e m p l o y i n g s u c h l i c e n s e e t o s e l l , b u y , o r e x c hange real estate or a business o p p o r t u n i t y f o r c o m p e n s a t i o n o r c o m mi s s i o n , e x c e p t w h e n s u c h l i c e ns e e p r i o r t o o r c o i nc i d e n t w i t h e l e ct i o n t o e x er ci s e s u ch option to purchase reveals in wr i t i n g t o t h e emp l o y e r t h e fu l l a mo u n t o f l i c e n s e e 's p r o f i t a n d o b t a in s t h e w r i t t e n c o n s e n t o f t h e e mp l o y e r a p p r o v i n g t h e a mo u n t o f s u c h p r o f i t . (i) Any other conduct, whether of the same or a different c h a r a ct e r t h a n s p e ci fi e d i n t h i s s e c t i on , w h i c h c o n s t i t u t es fr a u d or dishonest dealing. (j) Obtaining the signature of a prospective purchaser to an a g r e e me n t w h i c h p r o v i d e s t ha t s u c h pr o s p e c t i v e p u r c h a ser s h a l l e i t h e r t r a n s a c t t h e p u r c h a si ng , l e a si n g , r e n t i n g o r e x c h a n g i n g o f a b u s i n e s s o p p o r t u n i t y p r o p e r t y t h ro u g h t h e b r o k e r o b t a i n i n g s u c h s i g n a t u r e , o r p a y a c o mp e n s a t i o n t o s u c h b r o k e r i f s u c h p r o p e r t y i s p u r c h a s e d , l e a s e d , r e n t e d o r e xc h a n g e d w i t h o u t t h e b r o k e r f i r s t h a v i n g o b t a i n e d t h e w r i t t e n a u t horization of the owner of the p r o p e r t y c o n c e r n e d t o o f f e r s u c h pr ope r t y for s al e , l e as e , exchange or rent.

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10176.1. (a) ( 1 ) Wh e n e v e r t he c o m mi s s i o n e r t a k e s a n y e n f o r c e me n t o r d i s c i pl i n a r y a c t i o n a g a i n st a l i c e ns e e , a n d t he e n f o r c e me n t o r d i s c i pl i n ar y a c t i o n i s r el at e d t o e s c r o w s e r v i c e s provided p u r s u a n t t o p a r a g r a p h ( 4 ) o f s u b d iv i s i o n ( a ) o f Se c t i o n 1 7 0 0 6 o f t h e F i n a n c i a l C o d e , u p o n t h e action becomi ng final the c o m mi s s i o n e r s h a l l n o t i f y t h e I n s u r a n c e C o m mi s s i o n e r a n d t h e C o m mi s s i o n e r o f C o r p o r a t i o n s o f t h e a c t i o n o r a c t i o n s t a k e n . T h e p u r p o s e o f t h i s not i fi c at i on i s t o a l e rt t he d e p a rt m e n t s t h a t e n f o r c e m e n t o r d i sc i p l i n a r y a c t io n h a s b e e n t a k e n , i f t h e l i c e n s e e s e e k s o r o b t a i n s e mp l o y me n t wi t h e n t i t i e s r e g u l a t ed b y t h e d e p a r t me n t s .

( 2 ) T h e c o m mi s s i o n e r s h a l l p r o v i d e t h e I n s u r a n c e C o m mi s s i o n e r a n d t h e C o m mi s s i o n e r o f C o r p o r ations, in addition to the notification of the action taken, with a copy of the written a c c u s a t i on , s t a t e me n t o f i s s u e s , o r o r d e r i s s ue d o r f i l e d i n t h e ma t t e r a nd , a t t he r e q u es t o f t h e I n s u r a n c e C o m mi s s i o n e r o r t h e C o m mi s s i o n e r o f C o r p o r a t i o n s , w i t h a n y u n d e r l y i n g f a c t u a l ma t e r i a l r e l e v a nt t o t h e e n f o r c e me n t o r d i s c i p l i na r y a c t i o n. A n y c o n fi d e n t i a l i n for ma t i o n p r ovi d e d b y t h e c o m mi s s i o n e r t o t h e I n s u r a n ce C o m mi s s i o n e r or t h e C o m m i s s i o n e r o f C o r p o r a t i o n s shall not be ma d e public p ur s u a n t to this s e c t i o n. Notwithstanding any other provision of law, the disclosure of any u n d e r l y i n g f a c t u a l ma t e r i a l t o t h e I n s u r a n c e C o m m i s s i o n e r o r t h e C o m mi s s i o n e r o f C o r p o r a t i o n s s h al l n o t o p e r a t e a s a w a i v e r o f c o n f i d e n t i a l i t y o r a n y p r i v i l e g e t h a t t he c o m mi s s i o n e r ma y a s s e r t . ( b ) T h e co m mi s s i o n e r s h a l l e s t ab l i s h a n d ma i n t a i n , o n t h e We b s i t e ma i n t a i n e d b y t h e D e p a rt me n t o f R e a l E s t at e , a database of its licensees, including those who have been subject to any e n f o r c e m e n t o r d i sc i p l i n a r y a c t io n t h at t ri g g e r s t h e n o t i fi c a t i o n r e q u i r e me n t s o f t h i s s e c t i o n . T he d a t a b a s e s h a l l a l s o c on t a i n a direct link to the databases, described in Section 17423.1 of the Financial Code and Section 12414.31 of the Insurance Code and r e q u i r e d t o b e ma i n t a i n e d o n t h e We b s i t e s o f t h e D e p a r t me n t o f Corporations and the Departme nt o f I n s u r a n c e , r e s pe c t i ve l y , o f persons who have been subject to enforcement or disciplinary a c t i o n f o r ma l f e a s a n c e o r mi s c o n d u c t r e l a t e d t o t h e e s c r o w i n d u s t r y b y t h e I n s u r a n c e C o m m i s s i o n e r a n d t h e C o m mi s s i o n e r o f Corporations.

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(c) There shall be no liability on t h e p a r t o f , a n d n o c a u s e o f a c t i o n o f a n y n a t u re s h a l l ari s e a g a i nst , t h e S t at e o f C a l i fo r n i a , t h e D e p a r t me n t o f R e a l E s t a t e , t he Real Estate Co mmissioner, any o t h e r s t a t e a g e n c y , o r a n y o f f i c e r , a g e n t , e mp l o y e e , c o n s u l t a n t , o r c o n t r a c t o r o f t h e s t a t e , f o r t h e r e l e a s e of a n y f a l s e or u n a u t h o r i z e d i n f o r ma t i o n p u r s u a n t t o t h i s s e c t i o n , u n l e s s t h e r e l e a s e o f t h a t i n f o r ma t i o n w a s d o n e w i t h k n o w l e d g e a n d ma l i c e , o r fo r t he fa i l u re t o re l eas e a n y i nfo r ma t i o n p u r s u a nt t o t hi s section. 1 0 1 7 6 . 5 . ( a ) T h e c o m mi s s i o n e r ma y , u p o n h i s o r h e r o w n mot i o n , a n d s h a l l u p o n r e c e i v i n g a ver i f i e d c om p l a i n t i n w r i t i n g f r o m a n y p e r s o n , i n v e s t i g a t e a n a l l e g ed violation of Article 1.5 ( c o m me n c i n g w i t h S e c t i o n 11 0 2 ) o f C h a p t e r 2 o f T i t l e 4 o f P a r t 4 of Division 2 of the Civil Code b y a n y r e al e st a t e l i c e n s ee w i t h i n t h i s st a t e . T h e c o m mi s s i o n e r ma y s u s pe n d o r r e v o k e a l i c e n s e e 's l i c e ns e i f t h e l i c e n s e e a c t i n g u n d e r t he license has willfully or repeatedly violated any of t h e p r o v i s i o n s o f A r t i c l e 1 . 5 ( c o m me n c i n g w i t h S e c t i o n 11 0 2 ) o f C h a p t e r 2 o f T i t l e 4 o f P a r t 4 of Division 2 of the Civil Code. (b) Notwithstanding any other provision of Article 1.5 ( c o m me n c i n g w i t h S e c t i o n 11 0 2 ) o f C h a p t e r 2 o f T i t l e 4 o f P a r t 4 of Division 2 of the Civil Code, and in lieu of any other civil r e me d y , s u b d i v i s i o n ( a ) o f t h i s s e c t i o n i s t h e o n l y r e me d y available for violations of Se c t i o n 1 1 0 2 . 6 b o f t h e C i v i l C o d e b y a n y r e al es t a t e l i c en s e e w i t hi n t h i s st a t e .

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Business and Professions Code Section 10177 1 0 1 7 7 . T h e c o m mi s s i o n e r ma y s u s p e n d o r r e v o k e t h e l i c e n s e o f a r e a l e s t a t e l i c e n s e e , o r ma y d e n y t h e i s s u a n c e o f a l i c e ns e t o an a p p l i c a n t , w h o h a s d o n e a n y o f t he f o l l o w i n g , o r ma y s u s p e n d o r r e v o k e t h e l i c e n s e o f a c o r p o r a ti o n , o r d e n y t h e i s s u a n c e o f a l i c e n s e t o a c o r p o r a t i o n , i f a n of f i c e r , d i r e c t o r , o r p e r s o n o w n i n g o r c o n t r o l l i n g 1 0 p e r c e n t o r m o r e o f t he c o r p o r a t i o n 's s t o c k h a s done any of the following: ( a ) P r o c u r e d , o r a t t e mpt e d t o p r o cur e, a r e al est at e li cense or l i c e n s e r e n e w a l , f o r h i ms e l f o r herself or any salesperson, by f r a u d , mi s r e p r e s e n t a t i o n , o r d e c e it , o r b y ma k i n g a n y m a t e r i a l mi s s t a t e m e n t o f f a c t i n a n a p p l i ca t i on f o r a r e a l e s t a t e l i c e n se, l i c e ns e r en e w a l , o r r e i n st a t eme n t . ( b ) E nt e r e d a pl e a of g u i l t y or n o l o c on t e n d e r e t o , o r be e n f o u n d g u i l t y o f , o r b e e n c o n v i c t e d o f , a f e l o n y o r a c r i me i n v o l v i n g mo r a l t u rp i t u d e, a n d t h e t i me f o r a p p e a l h a s e l a p s e d o r t he j u d g me n t o f c o n v i c t i o n h a s b e e n a f f i r me d o n a p p e a l , i r r e s p e c t i v e of an order granting probation following that conviction, s u s p e n d i ng t h e i mp o s i t i on o f s e n t e n ce , o r o f a s u b s e q u e n t o r d e r u n d e r S e c t i o n 1 2 0 3 . 4 o f t h e P e n a l C od e a l l o w i n g t h a t l i c e n s e e t o w i t h d r a w h i s o r he r p l e a of g u i l t y a n d t o e nt e r a p l ea o f n o t g u i l t y , or d i s mi s s i n g t h e a c c us a t i o n or i n f o r ma t i o n . ( c ) K n o w i n g l y a u t h o r i z e d , d i r e c t ed, connived at, or aided in the p u b l i c a t i o n , a d v e r t i s e me n t , d i s t r i b u t i o n , o r c i r c u l a t i o n o f a n y mat e r i al fal s e st at ement o r r e p r e s e n t a t i o n concerning his or her b u s i n e s s , o r a n y b u s i n e s s o p p o r t u n ity or any land or subdivision (as defined in Chapter 1 (commencing with Section 11000) of P a r t 2 ) o ff e r e d f o r s a l e . ( d ) Wi l l fu l l y di s re ga r d e d or v i o l at e d t h e R e a l E s t a t e L a w ( P a rt 1 ( c o m me n c i n g w i t h S e c t i o n 1 0 0 0 0) ) o r C h a p t e r 1 ( c o m me n c i n g with Section 11000) of Part 2 or the rules and regul a t i o n s o f t h e c o m mi s s i o n e r f o r t h e a d mi n i s t r a t i o n a n d e n f o r c e me n t o f t h e R e al Estate Law and Chapter 1 (commencing with Section 11000) of Part 2. ( e ) Wi l l fu l l y u s e d t h e t e r m " r e a l t or " o r a n y t r a d e n a me o r i n s i g n i a o f me mb e r s h i p i n a n y r e a l e st a t e o r g a n i z a t i o n o f w h i c h t h e l i c e ns e e i s n o t a me m b e r .

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( f ) A c t e d o r c o n d u c t e d h i ms e l f o r herself in a manner that would have warranted the denial of hi s o r h e r a p p l i c a ti o n f or a r e al e s t at e l i ce n s e , o r ha s e i t he r h a d a l i c e n s e d e n i e d o r h a d a l i c e n s e i s s u e d b y a n o t h e r a g e n c y o f t h i s s t a t e , a n o t he r s t a t e , o r t h e f e d e r a l g o v e r n me n t r e v o k e d o r s u s pe n d e d f o r a c t s t h a t , i f d o n e b y a r e a l e s t a t e l i c e n se e , w o u l d b e grounds for the suspension or r e v o c a t i o n o f a C a l i f o rn i a r e a l e s t a t e l i c e n s e , i f t h e a c t i o n o f denial, revocation, or suspension by the other agency or entity w a s t a k e n o n l y a f t e r g i v i n g t h e l i ce n s e e o r a p pl i c a n t f a i r n o t i c e o f t h e c h a r g e s , a n o p p o r t u n i t y for a hearing, and other due p r o c e s s pr o t e c t i o n s c o mp a r a b l e t o t he A d mi n i s t r ative Procedure A c t ( C h a p t e r 3 . 5 ( c o m m e n c i n g wi t h S e c t i o n 1 1 3 4 0 ) , C h a p t e r 4 ( c o m me n c i n g w i t h S e c t i o n 1 1 3 7 0 ) , a n d C h a p t e r 5 ( c o m m e n c i n g w i t h S e c t i o n 1 1 5 00 ) o f P a r t 1 o f D i v i s i o n 3 o f T i t l e 2 o f t h e Governme nt Code), and only upon an express finding of a violation of law by the agency or entity.

( g ) D e mo n s t r a t e d ne g l i g e nc e o r i nc o m p e t e n c e i n p e r f o r m i n g a n y a c t f o r w h i c h h e o r s h e i s r e qui r e d t o ho l d a l i c en s e . ( h ) A s a br o k e r l i cen s e e , f a i l e d t o e xe r c i s e r e a s on a b l e s u pe r v i si o n over the activities of his or her salespersons, or, as the officer d e s i g n a t e d b y a c o r p o r a t e b r o k e r l i c e n s e e , fa i l e d t o e x e r c i s e reasonable supervision and control of the activities of the corporation for which a real estate license is required. ( i ) H a s u s e d h i s o r h e r e mp l o y men t b y a g o v e r n me n t a l a g e n c y i n a c a p a c i t y g i v i n g a c c e s s t o r ec o r d s , o t he r t h a n pu b l i c r e c or d s , i n a ma n n e r t h a t vi o l a t e s t he c on f i d e n t i a l n a t u r e o f t h e r e c o r d s . ( j ) E n g a g e d i n a n y o t h e r c o n d u c t , w h e t h e r o f t h e s a me o r a d i f f e r e n t c h a r a c t e r t h a n s p e c i f i ed i n t h i s s e c t i on , w h i c h constitutes fraud or dishonest dealing. ( k ) V i ol at e d a n y o f t h e t e r ms , c o n d i t i o ns , r e st r i c t i o n s , a n d l i mi t a t i o n s c o n t a i n e d i n a n y o r d e r g r a n t i n g a r e s t r i c t e d l i c e n s e . ( l ) S o l i ci t e d o r i n d uc e d t h e s al e , le a s e , o r l i s t i n g f o r s a l e or l e a s e o f r e s i d e n t i a l p r o p e r t y on the ground, wholly or in part, of loss of v a l u e , i n c r e a s e i n c r i me , o r d e cl i n e o f t h e q u a l i t y o f t h e s c h o o l s due to the present or prospective e n t r y i n t o t h e n e i g h b o r h o o d o f a p e r s o n o r p e r s o n s o f a n o t h e r r a c e , color, religion, ancestry, or national origin.

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( m) V i o l a t e d t h e F r a n c h i s e I n v e s t me n t L a w ( D i v i s i o n 5 ( c o m me n c i n g w i t h S e c t i o n 31 0 0 0 ) o f T i t l e 4 o f t h e C o r po r a t i o n s C o d e ) o r r e g u l a t i o n s o f t h e C o m mi s s i o n e r o f C o r p o r a t i o n s pertaining thereto. ( n ) V i o l a t e d t h e Co r p o r a t e Securities Law of 1968 (Division 1 ( c o m me n c i n g w i t h S e c t i o n 25 0 0 0 ) o f T i t l e 4 o f t h e C o r po r a t i o n s C o d e ) o r t h e r e g u l a t i o n s o f t h e C o m mi s s i o n e r o f C o r p o r a t i o n s pertaining thereto. ( o ) F ai l ed t o di sc l o s e t o t h e buyer of real property, in a transaction in which the licensee is an agent for the buyer, the n a t u r e a nd e x t e nt o f a l i c e n s e e 's d i r e c t o r i n d irect ownership i n t er e s t i n t h a t r ea l property. The direct or indirect ownership i n t er e s t i n t h e pr ope r t y b y a p er s o n r e l at e d t o t h e l i cens e e b y b l o o d o r ma r r i a g e , b y a n e n t i t y i n w h i c h t h e l i c e n s e e h a s a n ownership interest, or by any o t h e r p e r s o n w i t h w h o m t h e licensee has a special relationship shall be disclosed to the buyer. ( p ) V i o l a t e d S e c t i o n 1 0 2 2 9 . I f a r ea l e s t a t e b r o k e r t h a t i s a c o r p o r a t i o n h a s n o t d o n e a n y o f t he f o r e g o i n g a c t s , ei t h e r d i r e c t l y o r t h r o u g h i t s e mp l o y e e s , a g e n t s , o f f i c e r s , d i r e c t o r s , o r p e r s o n s o w n i n g o r c o n t r o l l i n g 1 0 p e r c e n t o r more of the corporation's stock, the commis sioner may not deny the issuance of a real e s t at e l i ce n s e t o , or s u s p e n d o r r e v o ke t h e r e al e s t a t e l i ce n s e o f , t h e c o r p o r a t i o n , p r o v i d e d t h a t a ny offending officer, director, or stockholder, who has done any of the foregoing acts individually and not on behalf of the corporation, has been completely d i s a s s o ci at e d fr o m a n y a ffi l i a t i o n o r o w n e r s h i p i n t h e corporation.

1 0 1 7 7 . 1 . T h e c o m mi s s i o n e r ma y , w i t h o u t a h e a r i n g , s u s p e n d t h e l i c e n s e o f a n y p e r s o n w h o p r o c u r e d t he i s s ua n c e o f t h e l i c e n s e t o h i ms e l f b y f r a u d , mi s r e p r e s e n t a t i on, deceit, or by the making of a n y ma t e r i a l mi s s t a t e me n t o f f a c t i n h i s a p p l i c at i o n for s u c h l i c e n s e . T h e p o w e r o f t h e c o m mi s s i o n e r u n d e r t h i s s e c t i o n t o o r d e r a s us p e n s i o n o f a l i c e ns e s h a ll e x p i r e 9 0 d a y s a f t e r t h e d a t e o f i s s u a n c e o f s a i d l i c e ns e a nd t h e s u spe n s i o n i t s e l f s h a l l r e ma i n i n e ffe c t o n l y u n t i l t h e effe c t i v e d a t e o f a d e c i s i on o f t h e c o m mi s s i o n e r a f t e r a h e a r i n g c o n d u c t e d p u r s u a n t t o S e c t i o n 1 0 1 0 0 a n d t h e p r o v i s i o n s o f t h i s s e c t i o n . A s t a t e me n t o f i s s u e s a s defined in Section 11504 of the G o v e r n me n t C o d e s h a l l b e f i l e d and served upon the respondent wi t h t h e o r d e r o f suspension.

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S e r v i c e b y c e r t i f i e d o r r e g i st e r e d ma i l di r e c t e d t o t h e r e s p o n d e n t 's c u r r e n t a d d r e s s o f r e c o r d o n f i l e w i t h t he c o m mi s s i o n e r s h a l l b e e f f e c t i v e service. The respondent shall have 30 days after service of the order of suspension and s t a t e me n t o f i s s u e s i n w h i c h t o fi l e w i t h t he c o m mi s s i o n e r a w r i t t e n r e q u e s t f o r h e a r i n g o n t h e s t a t e me n t o f i s s u e s f i l e d a g a i n st h i m . T h e c o m mi s s i o n e r s hall hold a hearing within 30 d a y s a f t e r r e c e i p t o f t h e r e q u e st therefor unless the respondent s h a l l r e q ue s t o r a g r e e t o a c on t i n u a n c e t h e r e o f . I f a h e a r i ng i s n o t commenced within 30 days after receipt of the request for hearing o r o n t h e d a t e t o w h i c h c o n t i n u e d w i t h t h e a g r e e me n t o f respondent, or if the decision of the commissioner is not rendered w i t h i n 3 0 d a y s a f t e r c o mpl e t io n o f t h e h e a r i n g , t h e o r d e r o f s u s p e n s i on s h a l l be v a c a t e d a n d s e t a s i d e . A h e a r i n g c o n d u c t e d under this section shall in all respects, except as otherwise expressly provided herein, conf o r m t o t h e s u b s t a n t i v e a n d p r o c e d u r a l p r o v i s i o n s o f C h a p t er 5 ( c o m m e n c i n g w i t h S e c t i o n 1 1 5 0 0 ) o f P a r t 1 o f D i v i s i o n 3 o f T i t l e 2 o f t h e G o v e r n me n t C o d e a p p l i c a b l e t o a h e a r i n g o n a s t a t e me n t o f i s s u e s .

1 0 1 7 7 . 2 . T h e c o mmi s s i o n e r ma y , u p o n h i s o r h e r o w n mo t i o n , and shall, upon the verified comp l a i n t i n w r i t i n g o f a n y p e r s o n , i n v e s t i g a t e t h e a c t i o n s o f a n y l i c e n s e e , a n d h e o r s h e ma y s u s p e n d o r r e v o k e a r e a l e s t a t e l i c e n s e a t a n y t i me w h e r e t h e l i c e n s e e i n p e r f o r mi n g o r a t t e m p t i n g t o p e r fo r m a n y o f t h e a c t s w i t h i n t h e s c o p e o f S e c t i o n 10 1 3 1 . 6 h a s b e e n g ui l t y o f a ny o f t h e f o l l o w i n g a c t s: ( a ) H a s u s e d a f a l s e o r f i c t i t io u s n a me , k n o w i n g l y ma d e a n y f a l s e s t a t e me n t , o r k n ow i n g l y c o n c e a l e d a n y ma t e r i al f a c t , i n a n y a p p l i c a t i o n f o r t h e r e g i s t r a t i o n o f a m o b i l e h o me , o r o t h e r w i s e c o m mi t t e d a f r a u d i n t h a t a pp l i c a t i o n . (b) Failed to provide for the delivery of a properly endorsed c e r t i fi c a t e o f o w n e r s h i p o r c e r t i fi c a t e o f t i t l e o f a m o b i l e h o me from the seller to the buyer thereof. ( c ) H a s k n o w i n g l y p a r t i c i p a t e d i n the purchase, sale, or other a c q u i si t i on o r d i s p os a l o f a s t o l e n mo b i l e h o me . ( d ) H a s s u b mi t t e d a c h e c k , d r a f t , o r mo n e y o r d e r t o t h e D e p a r t me n t o f H o u s i n g a n d C o m mu n i t y D e v e l o p me n t f o r a n y

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obligation or fee due the state and it is thereafter dishonored or r e f u s e d p a y me n t u p o n p r e s e n t a t i o n .

1 0 1 7 7 . 4 . ( a ) N o t w i t h s t a n d i n g a n y o th e r p r o v i s i o n o f l a w , t h e c o m mi s s i o n e r ma y , a f t e r h e a r i n g i n a c c o r d a nc e w i t h t h i s p a r t r e l a t i n g t o h e a r i n g s , s u s p e n d o r r e v ok e t h e l i ce n s e o f a r e a l e s t a t e l i c e n s e e w h o c l a i ms , d e m a n d s , o r r e c e i v e s a c o m mi s s i o n , f e e , o r o t h e r c o n s i d e r a t i o n , a s c o mp e n s ation or inducement, for referral o f c u s t o m e r s t o a ny e s c r o w a g e n t , s t r u c t u r a l pe s t c o n t r o l f i r m, h o me p r o t e c t i o n c o mpa n y , t i t l e i ns u r e r , c on t r o l l e d e s c r o w c o mp a n y , o r u n d e r wr i t t e n t i t l e c o mp a n y . A l i c e n s e e ma y n o t b e d i s c i p l i n e d u n de r a n y p r o v i s i o n o f t h i s p a r t f o r r e p o r t i n g t o t h e c o m mi s s i o n e r v i o l a t i o n s o f t h i s s e c t i o n b y a n o t h e r l i c e n s e e , unl e s s t h e l i c e ns e e ma k i n g t h e r e p o r t h a d g u i l t y k n o w l e d g e o f , o r c o m mi t t e d o r p a r t i c i p a t e d i n , t h e v i o l a t i o n o f this section. ( b ) T h e t e r m " o t h e r c o n si d er a t i o n " as used in this section does not include any of the following: (1) Bona fide payments for goods or facilities actually furnished b y a l i c e n s e e o r f o r s e r v i c e s a c tu a l l y p e r f o r m e d b y a l i c e n s e e , p r o v i d e d t h e s e p a yme n t s a r e r e a so n a bl y r el a t e d t o t h e va l u e o f the goods, facilities, or services furnished. ( 2 ) F u r n i s h i n g o f d o c u me n t s , s e r v i c e s , i n f o r m a t i o n , a d v e r t i s i n g , e d u c a t i o na l ma t e r i al s , o r i t ems o f a l i k e n a t u r e t h a t a re cus t o ma r y in the real estate business and that relate to the product or s e r v i ce s of t h e fu r n i s h e r a n d t ha t a r e a v a i l a b l e o n a s i mi l a r a n d e s s e n t i a l l y e q u a l b a s i s t o a l l c u st ome r s o r t h e a g e n t s o f t h e c u s t o me r s o f t h e f u r n i s h e r . ( 3 ) M o d e r a t e e x p e n s e s f o r f o o d , me als, beverages, and similar i t e ms f u r n i s h e d t o i n d i v i d u a l l i c e ns e e s o r g r o u p s o r a s s o c i a t i o n s of licensees within a context of customary business, educational, o r p r o mo t i o n a l p r a c t i c e s p e r t a i ning to the business of the furnisher. ( 4 ) I t e ms o f a c h a r a ct e r an d ma g n i t u d e s i mi l a r t o t ho s e i n p a r a g r a p hs ( 2 ) a n d ( 3 ) t h at a r e p r o m o t i o n a l o f t h e f u r n i s h e r 's b u s i n e s s c u s t o ma r y i n t he r e a l e st at e b u s i n e s s , a n d a v a i l a b l e o n a s i mi l a r a nd e s s e n t i al l y e q u al b a s i s t o a l l c u st o m e r s , o r t he a g e n t s o f t h e c us t o me r s , o f t h e fu r n i s h er . (c ) N o t h i ng i n t h i s s e c t i on shall relieve any licensee of the obligation of disclosure otherwise required by this part.

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1 0 1 7 7 . 5 . W h e n a f i n a l j u d g me n t i s obtained in a civil action against any real estate licensee upon grounds of fraud, mi s r e p r e s e n t a t i o n , o r d e c e i t w i t h reference to any transaction for w h i c h a l i c e n s e i s r e q u i r e d u n d er t h i s d i v i s i o n , t h e c o m m i s s i o n e r ma y , a f t e r h e ar i n g i n a c c o r da n c e w i t h the provisions of this part r e l a t i n g t o h e a r i n g s , s u s p e n d o r r evoke the license of such real estate licensee. A s y o u ma y h a v e n o t i c e d , ma n y o f t h e r e g u l a t i o n s u n d e r B&P Code 10176 and 10177 can relate t o t h e s a me a c t i o n s b y t h e b r o k e r o r s a l e s p e r s o n . T h e f o l l o w i n g t h r e e c a s e s r e l a t e ma n y o f t h e e t h i c a l i s s u e s pr e s e n t e d i n t h e B u s i n e s s a n d P r o f e s s i ons C o d e 10176 and 10177.

CASE #1 : BRIAN GALL OP , ET AL., Pl aintiffs and Appellants, v. CAS A GRANDE, ET AL. (Called Br oker A), Defendants and Respondents. B143366, COURT OF A P P E A L O F C A L I F O R N I A , SECOND APPEL LATE DISTRICT, DIVISION THR EE, filed February 28, 2002. Judges: Croskey, with Klein and Kitching concurring. This case arises from the sale of residential real property. P l a i n t i f f s L a u r i e G a l l o p a n d B r i an G a l l o p ( " pl a i n t i f f s " ) a r e t h e b u y e r s . Th e y s u e d t h e s e l l e r , t h e r e a l e s t a t e a g e n c y t h a t r e p r e s e n t e d b o t h s e l l e r a n d p l a i n t i f f s , a n d t h e h o me i n s p e c t i o n c o mp a n y t h a t i n s pe c t e d t h e pro p er t y o n b e h a l f o f p l a i n t i f f s . P l a i n t i f f s a p p e a l f r o m a j u d g me n t e n t e r e d a g a i n s t t h e m a n d i n fa v o r t h e s e l l e r , B et t y C a l d we l l ( " C a l dw e l l " ) , a ft e r a j ur y t r i al . P l a i n t i f f s c o n t e n d t h e t r i a l c ourt should have granted their m o t i o n s f o r n e w t r i a l a n d p a r t i al j u d g m e n t n o t w i t h s t a n d i n g t h e v e r d i c t a s t o C a l d w e l l b e c a u s e the jury found in favor of p l a i n t i f f s o n a l l e l e me n t s o f t h e i r c a u s e o f a c t i o n a g a i n st C a l d w e l l f o r b r e a c h o f c o n t r a c t . P la i n t i f f s c o n t e n d s h e b r e a c h e d t h e s a l e c o n t r a c t b y f a i l i n g t o d is c l o se t o t h e m t h a t t h er e we r e f o u n d a t i o n , s t r u c t u r a l a n d o t h e r d e fe c t s i n t h e h o u s e t h a t ma k e i t w o r t h s u bs t a n t i a l l y l e s s t ha n t h e p r i ce t h e y p a i d for i t .

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P l a i n t i f f s ' c o mp l a i n t , w h i c h w a s f i l e d o n N o v e m b e r 6 , 1998, asserted causes of action fo r b r e a c h o f c o n t r a c t , f r a u d , n e g l i g e n t mi s r e p r e s e n t a t i o n , a n d n e g l i g e n c e a g a i n s t a l l defendants, as well as breach of fiduciary duty against Broker A. T h e h o me i n s p e c t i o n d e f e n d a n t s e n t e r e d i n t o a g o o d f a i t h s e t t l e me n t w i t h p l a i n t i f f s i n t h e a mo u n t o f $ 6 3 , 0 0 0 . T h a t s e t t l e me n t , h o w e v e r , d i d n o t s p e c i f y h o w muc h o f i t w a s a t t r i b u t a bl e t o pl a i nt i f f s ' c l a i me d e c o n o mi c d a m a g e s a n d h o w m u c h , i f a n y , t o t h e i r c l a i me d n o n - e c o n o mi c d a m a g e s . The case was tried to a jury and concluded on May 4, 2000. On the various causes of action against Caldwell, the jurors found that (1) plaintiffs and Ca ldwell enter e d i nt o a c o n t r a c t f o r t h e p u r c h a s e o f C a l d w e l l 's h o me , ( 2 ) p l a i n t i f f s p e r f o r me d u n d e r t h e c o n t r a c t , ( 3 ) C a l d we l l c o nc e a l e d o r s u pp r e s s e d a ma t e r i a l f a c t , ( 4 ) s h e di d n o t i nt e n t i o n a l l y c o n c e a l or s u p p r e s s i t w i t h t he intent to defraud plaintiffs, (5) she did not breach the sale contract, and ( 6 ) s h e wa s n o t n e g l i g e n t . The jurors found Broker A was negligent and its negligence was a cause of damage to plaintiffs. Plaintiffs were found to be d a ma g e d i n t h e a mo u n t o f $ 1 1 0 , 0 0 0 . T h e j u r y a l s o f o u n d t h a t plaintiffs were contributoril y negligent (43%) and their n e g l i g e n c e w a s a c a u s e o f t h e i r d a ma g e s . C o l l e c t i v e l y , t h e B r o k e r A defendants were found to be 57% negligent. O n t h e f r a u d a n d c on c e a l me n t c a u s e o f a c t i o n a g ai n s t Broker A, the jury found that defendant agent Joseph D. did not c o n c e a l or s u p p r e s s a ma t e r i a l f a c t , b u t d e f e n d a n t B r o k e r A d i d . The jury found, however, they did not do so with an intent to defraud plaintiffs.

P l a i n t i f f s ' a p p e a l a n d B r o k e r A 's c r o s s - a p p e a l f o l l o w e d .

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ISSUES Plaintiffs contend: ( 1 ) t h e i r m o t i o n s f o r J N O V ( j u d g me n t n o t w i t h s t a n d i n g t h e verdict) and new trial should have been granted, ( 2 ) t h e t ri a l c o u rt er r e d i n a pp ly i n g t hei r s et t l e m e n t w i t h t h e h o me i n s p e c t i o n d e f e n d a n t s a s a n o f f s e t t o t h e j u r y 's a w a r d o f d a ma g e s a g a i n s t B r o k e r A , ( 3 ) b e c a us e t h e y pre v a i l e d i n t h e i r s u i t a g a i n st B r o k e r A , t h e y a r e e n t i t l e d t o t h e i r c os t s , a n d ( 4 ) t h e t ri a l c o u rt er r e d i n n ot i nstructing the jury on their cause of action against Broker A fo r b r e a c h o f f i d u c i a r y d u t y . I n i t s c r o s s - a p p e a l , B r o k e r A c o n t e n d s t h e r e i s i ns u f f i c i e n t e v i d e n c e t o s u p p o r t t h e j u r y 's f i n d in g t h a t i t w a s n e g l i g e n t i n t h e sale transaction. B r o k e r A a l s o c o n t e n d s i t s mot i o n f o r n e w t r i a l s h o u l d h a v e b e e n g r a nt e d b e c a us e : ( 1 ) i t w a s e r r o r t o pe r mi t p l a i n t i ffs t o as s e r t pe r so n a l i nj u ry i n a n " e c o n o mi c i n j u r y " c a s e s u c h a s t h i s , ( 2 ) B r o k e r A s h o u l d h a v e b e e n p e r mi t t e d t o p r e s e n t e v i d e n c e about an arbitration clause, ( 3 ) B r o k er A w a s e n t i t l e d t o c o s t s , a n d ( 4 ) t h e s pe c i al v e r di c t f o r m f o r t h e n e gl i g e n ce c ou n t w a s p r e j u di c i a l l y h a r m f u l b e c a u se i t n ame d a f i c t i t i o u s e n t i t y a s a defendant. Plaintiffs engaged the services of defendant Joseph D. to h e l p t h e m l o c a t e a h o me i n L a M i r a d a . J o s e p h D . t o l d p l a i n t i f f s a b o u t C a l d w e l l 's h o u s e , w h i c h h a d b e e n l i s t e d f o r s a l e b y a n o t h e r a g e n t i n J o s e p h D 's o f f i c e . P l a i ntiffs offered Caldwell $ 220,000 f o r h e r h o u s e a n d s h e a c c e pt e d t h e o f f e r . S h e h a d l i v e d i n t h e house for 22 years. C a l d w e l l s i g n e d a t r a n s f e r d i s c l o s u r e st a t e me n t . I n i t , s he l i s t e d t w o t h i n g s i n t h e h o u s e t h a t w e r e p r o b l e ms - - a c r a c k i n t h e floor of the garage and the fact that the spa was not working. She t e s t i f i e d t h e c r a c k a p p e a r e d wh i l e s h e l i v e d a t t h e h o u s e a n d i t g o t l a r g e r o v e r t h e c o u r s e o f t i me . S h e h e r s e l f f i l l e d i t i n w i t h c e me n t b e c a u s e " i t w a s w h e r e y o u w a l k a n d i t di d n 't l o o k g o o d , " h o w e v e r , " o v e r t i m e i t r e a p pe a r e d again." Caldwell said it would b e h a r d t o n o t s e e t h e c r a c k i f y o u w e n t i n t o t h e g a r a g e . Sh e

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considered it a significant defect in the garage. T h e t r a n s fe r d i s c l o sur e s t a t e me n t a s k e d C a l d w e l l w h e t h e r s h e w a s " a w a r e o f a n y s i g n i fi c a n t defects/ma lfunctions in any of t h e f o l l o wi n g , " a n d t h e n l i s t e d i nt e r i o r w a l l s , c e i l i n g s , f l o o r s , e x t e r i o r wa l l s , i n s u l a t i o n , r o ofs, windows, doors, foundation, slab, driveways, sidewalks, wa l l s / fe n ce s , e l ec t ri c a l s y st em, p l u mb i n g / s e w e r / s e p t i c / a n d o t h e r s t r u c t u r a l c o mp o n e n t s . C a l d w e l l a n s w e r e d " n o . " S h e a l s o a n s we r e d " n o " t o t h e q u e s t i o n , o n t h e t r a n s f e r di s c l o s ur e s t a t e me n t , w h e t h e r sh e w a s a w a r e o f " a ny settling from any cause, slippage, sliding, or other soil p r o b l e ms . " A t t r i a l , C a l d w e l l w a s a s k e d w h e t h e r she w a s a w a r e , w h e n s e l l i n g h e r h o u s e , t h a t s h e w o u l d h a v e t o " d i s c l o s e i t e ms t h a t s h e f e l t mi g h t h a v e s o m e i mp a c t o n t h e h ou s e . " S h e a n s w e r e d that she was aware of that obligation. She also testified she showed her agent, that the sunroom s h e h a d a d d e d o n t o t h e h o u s e i n t h e l a t e 1 9 8 0 's h a d s e p a r a t e d from the house, but she did not list the separation on the d i s c l o s u r e s t a t e me n t . A s k e d i f s h e b e l i e v e d , w h e n s h e w a s s e l l i n g t h e h o u s e , t h a t t h e s e p a r a t i o n w a s s o me t hi n g s h e s h o u l d d i s c l o s e t o h e r a g e n t , g i v e n h e r d i s c l os u r e o b l i g a t i o n s , s h e a n s w e r e d " y e s . " S he s t a t e d he r a g e nt t o l d h e r n ot t o w o r r y a b o u t i t b e c a u s e i t w a s n o t a t t a c h e d t o t h e f o u n d at i o n . H e r a g e n t t e s t i f i e d h e d i d n o t r e c a l l a n y c o n v e r s a t i o n w i t h Caldwell about the sunroom. He stated the sunroom is at the rear of the house. Caldwell testified the separation was visible from t h e o u t s i d e , a n d w h i l e p l a n t s c o v e r e d u p t h e s e p a r a t i o n , " y o u co u l d s e e i t u p a b o v e t h a t . " S h e n e v e r s p o k e t o p l a i n t i f f s a b o u t t h e s u n r o o m. T h e t r i a l c o u r t a sk e d h e r w h e t h e r s h e ha d e v e r d e t e c t e d a slant in any of the floors in her house, and she stated she had not, but when the court asked if she had ever dropped anything on the floor and had it roll to a corner, she stated that had happened "in t h a t w a s hr o o m w h e r e t h e w a t e r r a n d o w n , " a p p a r e n t l y me a n i n g t h e l a u n d r y r o o m w h e n t h e wa s h e r o v e r f l o w e d . Caldwell testified that right after she moved into the house i n 1 9 9 6 , s h e h a d " s h i ms " ( w e d g e s o f w o o d ) i n s t a l l e d s o t h a t t h e f l o o r s i n t w o r o o ms t o w a r d s t h e r e a r o f h e r h o u s e ( l i v i n g r o o m a n d d i n i n g r o o m) w o u l d s t o p s q u e a ki n g . S h e a l s o h a d s o me o f t h e d o o r s i n t h e h o u s e s h a v e d b e c a us e s h e h a d c a r p e t i n s t a l l e d throughout the house and some doors would not close because the carpet "was too high." Additionally, the dining room door would

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n o t s t a y o p e n . I t mo v e d t o w a r d s t h e r e a r o f t h e h o u s e . S h e testified at her deposition that water in the laundry room ran "towards the door." Asked if she felt the floor was uneven, she s t a t e d t h a t mos t f l o o r s a r e u ne v e n a n d i f y o u s p i l l w a t e r , t h e w a t e r r u n s o n e w a y o r a n o t h e r an d s h e d i d n o t b e l i e v e t h e f l o o r s were uneven in her house. Kip Kennedy, a building inspector for the city of Los A n g e l e s w h o h a d b e e n e mp l o y e d i n t h a t p o s i t i o n s i n c e D e c e mbe r 1 9 8 8 , a n d w h o h a d b e e n a g e n e r a l c o n t r a c t o r b e f o r e a s s u mi n g t h a t position, testified at trial that he had inspected in excess of 1 0 , 0 0 0 h o me s , t h a t h e c a n t e l l o l d d a ma g e f r o m n e w d a ma g e , a n d h e b e l i e v e d t h e s h i ms i n t h e s u b j ect house had been in place from o n e t o e i g h t y e a r s , n o t t h e 2 0 - s o me y e a r s t h at C al d w e l l st at e d they had been there. R e g a r d i n g t h e p l ai n t i ffs ' d a ma g e s , T a l l as M a r g ar ve t e st i fi e d h e i s a n e n g i n e e r i n g a n d b u i l d ing contractor and a licensed land s u r v e y o r a n d h i s c o m p a n y s t a b i l iz e s a nd l e v e l s bu i l d i n gs t h a t h a v e f a i l e d . H e t e s t i f i e d i t wo u l d c o s t a p p r o x i ma t e l y $ 1 0 8 , 0 0 0 t o d o s u c h w o r k o n p l a i n t i f f 's h o u s e a n d t h e n r e p l a c e t h e c o n c r e t e a r e a s o f t h e h o u s e t h a t h a d t o b e r e mo v e d . P l a i n t i f f B r i a n G a l l o p testified that if he had known of t h e t h i n g s h e w a s n o t t o l d a b o u t b y C a l d w e l l o r h e r a g e n t s ( s h i ms u n d e r t h e h o u s e , w a t e r r u n n i n g toward rear of house, separation of sunroom from rest of house) he would not have purchased the house. Appelate Court Opinion: A s n o t e d a b o v e , t h e j u r o r s specifically found that: (1) plaintiffs and Ca ldwell enter e d i nt o a c o n t r a c t f o r t h e p u r c h a s e o f C a l d w e l l 's h o me , ( 2 ) p l a i n t i f f s p e r f o r me d u n d e r t h e c o n t r a c t , a n d ( 3 ) C a l d we l l c o nc e a l e d o r s u pp r e s s e d a ma t e r i a l f a c t . T h e f i r s t t w o f i n d i n g s w e r e i n t h e s p e c i a l v er d i c t f o r t h e br e a c h o f c o n t r a c t cause of action, the third was in the special verdict for the fraud cause of action. Based on these findings, and on the fact that the jury found p l a i n t i f f s s u f f e r e d d a ma g e s i n c o n n e c t i o n w i t h t h e p u r c h a s e o f t h e h o u s e , p l a i n t i f f s c o n t e n d o n ap p e a l t h a t t h e e l e me n t s o f a c a u s e o f a c t i o n f o r b r e a c h o f t h e p u r c ha s e a g r e e me n t w e r e f o u n d b y t h e j ury a n d t h e re fo r e t h e j u r y 's a d d i t i o na l fi ndi n g t h at C a l d w e l l d i d n o t b r e a c h t h e c o n tr a c t i s n o t s u p p or t e d b y t he e v i d e n c e . W e a g r e e . I n t h e p ur c h a s e a g r e e me n t , t h e r e i s a n

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i mp l i e d p r o mi s e b y C a l d w e l l t h a t s he w o u l d n o t c o n c e a l ma t e r i a l i n f o r ma t i o n a b o u t t h e h o u s e s h e was selling to plaintiffs. P a r a g r a p h 9 o f t h e p u r c h a s e a g r e e me n t s i g n e d b y C a l d w e l l s t a t e s i n p a r t : " W h e t h e r o r n o t s e l l er w a r r a n t s a n y a s p e c t o f t h e property, seller is obligated to disclose known material facts and t o ma k e o t h e r d i s c l o s u r e s r e q u i r e d b y l a w . " B y t h i s e x p r e s s a c k n o w l e d g e me n t o f h e r d u t y t o d i s c l o s e k n o w n ma t e r i a l f a c t s , C a l d w e l l i mp l i e d l y p r o mi s e d t o do so. Moreover, paragraph 6 of t h e p u r c ha s e a g re eme n t r e q u i r e d C a l dw e l l t o dis c l o s e t o p l a i nt i f f s , p r i o r t o c l o s e o f e sc ro w , a n y ma t e r i a l i n a c c ur a c i e s i n d i s c l o s u r e s ma d e t o t h e m, i n c lu d i n g ma k i n g d i s c l o s u r e s i n t h e t r a n s f e r di s c l o s ur e s t a t e me n t . C a l d w e l l 's t e s t i mo n y s h o w s t h a t when she sold the house to plaintiff she had personal knowledge o f t h e ma n y f a c t s t h a t i n di c a t e d t h e h o u s e mi g h t n o t b e l e v e l . C a l d w e l l a d mi t t e d a t t r i al s he k n e w s h e h a d t o di s c l o se "i t e ms t h a t [ s h e ] f e l t mi g h t h a v e s o m e i mp a c t o n t h e h o u s e i t s e l f . " Wh e t h e r C a l d w e l l i n t e nt i o n al l y c o n ce al e d i n fo rma t i o n t o d e fr a u d plaintiffs (and the jury found she did not), is of no relevance to t h e c a u se o f a c t i o n f o r b r e a c h o f c o n t r a c t . P l a i n t i f f s n o t e t h a t w h e n a b r e a c h o f c o n t r a c t i s a l l eg e d , t he l a w d o es n o t r e q ui r e t h a t t h e b r e a c h b e i n t e n t i o n a l b e f ore a plaintiff ma y recover. ( L i n d e n P a r t n e r s v. W i l s h i r e L i n d e n P a r t n e r s ( 1 9 9 8 ) 6 2 C a l . A p p . 4 t h 5 0 8 , 531-532.) C i v i l C o d e s e c t i o n 1 1 0 2 e t s eq . a l s o r e q u i r e d C a l d w e l l t o p r o v i d e p l a i n t i f f s w i t h a t r a n s fe r d i s c l os u r e s t a t e me n t t h a t d i s c l o se d t h e ma t t e r s a d d r e s sed i n s u c h s t a t e me n t , i n c l u di n g s e t t l i n g , s o i l p r o b l e ms a n d s l ippage and sliding. Section 1102.4 p r o v i d e s t h a t a s e l l e r s u c h a s C a l d w e l l i s n o t l i a bl e " fo r a ny e r r o r , i n a c c u r a c y , o r o mi s s i o n o f a n y i n f o r ma t i o n d e l i v e r e d p u r s u a n t t o [ t h e t r a n s f e r d i s c l os u r e st a t e me n t s t at u t e s ] i f t h e e r r o r , i n ac c u r a c y , or o mi s s i o n w a s n o t w i t h i n t h e p e r s o n a l k n o w l e d g e o f t h e [ s e l l e r ] . " S e ct i o n 1 1 0 2 . 1 3 s t a t e s t h a t a " p e r s o n w h o w i l l fu l l y o r neg l i g e nt l y v i o l at e s or fa i l s t o p e r fo r m a n y d u t y prescribed by any provision of [the transfer disclosure statutes] s h a l l b e l i a b l e i n t h e a mo u n t o f a c t u a l d a ma g e s s u f f e r e d b y a purchaser." T h u s , t h e t r i a l c o u r t s h o u l d h av e g r a n t e d p l a i n t i f f s ' mo t i o n f o r a p a r t i a l J N O V ( j u d g me n t n o t w i t h s t a n d i n g t h e v e r d i c t ) a s t o C a l d w e l l o n t h e b r e a c h o f c o n t r a c t cause of action against her. W e s h a l l r e ma n d t h i s c a s e a n d d i r e c t t h a t a j u d g me n t n o t w i t h s t a n d i n g t h e v e r d i c t b e e n t e r e d a ga i n s t C a l d w e l l , a n d i n f a v o r o f

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p l a i n t i f f s , i n t h e a mo u n t o f $ 1 1 0 , 0 0 0 , t o g e t h e r wi t h c o s t s . S e t o f f f r o m t h e g o o d f a i t h s e t t l e me n t b et w e e n p l a i n t i f f s a n d t h e h o me i n s p e ct i o n d e fe n d a n t s i s n ot an i s s u e w i t h C a l d w el l b e ca u s e s u c h d e f e n d a n t s a r e n o t c o - o b l i g o r s o n t he c o n t r a c t be t w e e n p l a i n t i f f s and Caldwell. ( Code Civ. Proc., §§ 877 & 877.6.) T h e j u r y f o u n d C a l d w e l l w a s n o t negligent. On appeal, plaintiffs assert that the very conduct of Caldwell that gives rise to a breach of contract cause of a c t i o n a g a i n s t h e r a l s o s u p p o r t s t h e i r c a u se o f a c t i on a g a in s t h e r f o r n e g l i g e n c e . O n e o f p l a i n t i f f s ' c a u s e s a g ain st B r o k e r A w a s f o r b r e a c h o f f i d u c i a r y d u t y , w h e r e i n t h e y a l l e g e d that by acting as plaintiffs' a g e n t f o r p u r p o s e s o f p u r c h a s i n g t h e su b j e c t pr ope r t y , B r oke r A a s s u me d a f i d u c i a r y r e l a t i o n s h i p with plaintiffs and thus owed p l a i n t i f f s t h e d u t i e s o f a f i d u c i a ry . Pl a i n t i f f s a l l e g e d t h a t B r o k e r A b r e a c h e d i t s f i d u c i a r y d ut y b y a d v i s i n g p l a i nt i f f s t o p u r c h a s e p r o p e r t y t h a t c o n t a i n e d n u me r o u s d e f e c t s a n d h a d a v a l u e f a r l e s s than what plaintiffs paid, and by a d v i s i n g p l a i n t i f f s t o h i r e a n i n s p e c t i o n c o mp a n y t h a t l a c k e d t he e x p e r t i s e t o p r o p e r l y i n s p e c t t h e s u b j e c t p r o p e r t y a n d d i s c o v e r th o s e d e f e c t s . Pl a i n t i f f s a l l e g e d that by this breach of duty, Broker A caused them to pay s u b s t a n t i al l y mo r e f o r t h e pr op e r t y t h a n i t w a s w o r t h a n d t o i n c u r f u t u r e c o ns i d e r a bl e e x p e n s e w h e n p l a i nti f f s ma k e t h e n e c es sa r y r e p a i r s a n d mo d i f i c a t ions to the property.

I n i t i a l l y , t h e t r i al co u r t r ej e ct e d plaintiffs ' request to have t h e j ur y i n s t r u ct e d o n b r e a c h o f f i d u c i a r y d u t y , s a y i n g b r e a c h o f f i d u c i a r y d u t y i s n o t a s e p a r a t e c a u se of action but rather is "the result of the violation of some o t h e r r i g h t w h e r e t h e r e i s a r e l a t i o n s h i p o f c o n f i d e n c e a n d t r u st ." C a l d w e l l 's a t t or n e y a s k e d : " S o w o u l d n 't i t j u s t b e a s t a n d a r d n e g l i ge n c e v e r di c t w i t h a h i g h e r s t a n d a r d o f c a r e t h a t c a n be argued?" The court responded that it did not believe the standard of care was higher but the d u t y o f a f i d u c i a r y i s h i g h e r . T h e c o u r t s a i d t ha t " w h e t h e r i t 's a n o r d i n a r y d u t y o r a f i d u c i a r y d u t y , a b r e a c h i s a b r e a c h a nd t h e c o n s e q u e n t i a l d a m a g e s a r e t h e co n s e qu e n t i a l d a ma g e s . B r e a c h o f a fi d u c i a ry d u t y c ou l d l e a d t o t h e i mp o s i t i on o f e x e mp l a r y d a ma g e s . B u t , h e r e , t h e r e i s a t o t al a b se n c e o f a n y w i l l fu l , r e c k l e s s d i s r e g a r d , a n y o f t h e h o r r ibles that are paraded in 13.95 . . . o p p r e s s i o n , ma l i c e . T h a t 's t o t a l l y a b s e n t . " P l a i n t i f f s ' a t t o r n e y r e p l i e d t h a t " i t c a n l e a d t o r e c o v e r y o f g e n e r a l d a ma g e s t h o u g h . " T h e c o u r t a g r e e d . P l a i n t i f f s ' a t t or ne y t he n s t a t e d h e b e l i e v ed

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breach of fiduciary duty is a separate cause of action and p l a i nt i f f s w e r e e n t i t l e d t o i n s tr u c t i o n o n a d i f f e r e n t s t a n d a r d , n a me l y a n o b l i g a t i o n t o u s e " u t mo s t c a r e , h o n e s t y a n d i n t e g r i t y . " B r o k e r A ' s a t t or n e y s t a t e d t ha t i f " w e c a n g e t a n instruction on w h a t a f i d u c i a r y d u t y i s , t h a t c a n i n st r uc t t h e j u r y a s t o w h a t t h at i t e m i s o r t h a t c o nce p t i s , a nd t h e n t h e y c o u l d a p p l y t h a t t o e i t h e r n e g l i g e nc e o r f r a u d. " T h e c ou r t s t a t e d t h a t " w i t ho u t a n i n s t r u c t i o n o f w h a t i t i s , i t 's h a r d t o f i n d a r e me d y . " P l a i n t i f f s ' c o u n s e l s t a t e d h e wo u l d f i n d a n i n s t r u c t i o n b e c a u s e h e h a d " a l l t h e c a s e s h e r e . " T h e c o u r t suggested he look in BAJI. O n a p p e a l , p l a i nt i ffs a r g u e t he j u r y w a s n o t p e r mi t t e d t o c on s i d e r w h e t h e r t h e C e n t u r y 2 1 d e f e n d a n t s b r e a c h e d t he i r f i d u ci a r y d u t i e s t o p l ai n t i ffs . P l a i n t i ffs c i t e c as e s w h e r ei n t h e c o ur t s at l ea st i mp l i e d l y r e c o g n i z e d c a u s e s o f a ct i o n f o r b r e a c h o f f i d u c i a r y d u t y ( F i e l d v . C e n t u r y 2 1 K l o w d e n - F o r n e s s R e a l t y (1998) 63 Cal.App.4th 18, 20-23 [suit against real estate broker for n e g l i g e n c e , n e g l i g e n t mi s r e p r e s entation and breach of fiduciary d u t y , a n d t h e " c a s e w a s s u b m i t t e d t o t he j u r y w i t h i n s t r uc t i o n s r e g a r d i n g n e g l i g e n c e , a n d n e g l i gent mi srepresentation based on f i d u c i a r y r e l a t i o n s h i p ] ; W y a t t v . Union Mortgage Co . ( 1 9 7 9 ) 2 4 Cal.3d 773, 157 Cal. Rptr. 392, 598 P.2d 45). I n W y at t , t h e c o u r t s t a t e d r e a l e st a t e a g e n t s h a ve t h e s a me o b l i g at i o ns t o w a r d s t h e i r c l i en t s a s t r u st e e s h a ve t o w a r d s t h e i r beneficiaries to exercise undivided service and loyalty, to act in the highest good faith, to not o b t a i n a n y a d v a n t a g e o v e r t h e c l i e n t , a n d t o ma k e t h e f u l l e s t d i s c l o s u r e o f ma t er i a l f a c t s a b o u t t h e r e a l e s t a t e t r a ns a c t i o n s uc h a s mi g h t i mp a c t t h e c l i e n t 's d e c i s i o n . ( W y a t t , at p. 782.) I n F i e l d, t h e c o u r t s a i d t h i s c o m mo n l a w f i d u c i ar y duty of b r o k e r s t ow a r d s t h ei r cl i e nt s was not changed by the duties t o w a r d s p r o s p e c t i v e b u y e r s t h a t s e c t i o n 2 0 7 9 o f t h e C i v i l Co d e p l a c e s o n a s e l l e r 's a g e n t a n d b r o k e r , a nd t h a t t h e c o m m o n l a w d u t y i s " s u b s t a n t i a l l y mor e e x t e n s i v e t h a n t h e nonfiduciary d u t y codified in section 2079." P l a i n t i ffs c i t e t ri a l e v i d e n c e w h i c h t h ey c o n t e n d d e mo n s t r a t e s B r o k e r A 's b r e a c h o f f i d u c i a r y d ut y, a n d t h e y c o n t e n d t h a t i f t h e j u r y h a d be e n g i v e n t h e o p p o r t u n i t y t o r e n d e r a v e r d i c t o n a b r e a c h o f f i d u c i a r y c l a i m, " t h e i s s u e o f a p p o r t i o n e d f a u l t w o u l d l i k e l y h a v e b e e n s i gnificantly different." Broker A responds that there was no conflict of interest in its dealings with p l a i nt i f f s b e c a u s e :

17

( 1 ) p l a i n t i f f s s i g n e d t h e p o r t i o n o f t h e p u r c h a s e a g r e e me n t w h e r e i t s t a t e d t h a t B r o k e r A r e p r e se n t ed both Caldwell and plaintiffs, and ( 2 ) C a l d we l l a n d p l a i n t i f f s h a d s e p a r a t e a g e n t s fr o m B r o k e r A w h o w e r e s k i l l e d r e a l t o r s . B r o k e r A a l so a r g u e s t h a t plaintiffs did n o t p r e s e n t e x p e r t t e s t i mo n y o n t h e s t a n d a r d o f c a r e o f a r e a s o n a b l y p r u d e n t r e a l t o r , a n d t h a t t he r e w a s no fa i l u r e t o disclose defects. Plaintiffs r e s p o n d b y a r g u i n g t h a t a s e p a r a t e d i s c l o s u r e o f d u a l a g e n c y w a s r e q u ir e d , t h a t e x p e r t t e s t i mo n y w a s not needed, and that defects in the property were not disclosed.

Wh i l e i t i s p o s s i b l e t h a t r e s o l ut i o n o f t h i s i s s u e mi g h t h a v e r e s t e d o n t h e f a c t s o f B r o k e r A 's d u a l r e p r e s e n t a t i o n o f t h e b u y e r a n d s e l l e r, a p r o c e du r a l ma t t er w i l l a c t u a l l y d ec i d e t h e i s sue . T h a t p r o c e d u r a l ma t t e r i s pl ai nt i ffs' fai l ure t o p ur s u e t h e i s s u e o f a jury instruction on breach of fiduciary duty after the trial court l e f t t h e d o o r o p e n t o t h e m. T h e d i s c u s s i o n a b o u t t h a t i s s u e e n d e d w i t h t h e co u r t i n di ca t i n g i t n ee d e d a n i ns t r u ct i o n o n w h a t a fiduciary duty is from the common law. " ' Wh e r e a d u t y i s fo u n d t o e x i s t , a r e a l e s t a t e a ge n t mus t f u l f i l l i t b y e x hib i t i n g t h e d e g r e e o f c a r e a n d s k i l l or d i n a r i l y e x hi b i t e d by professionals in the industry. [Citations.] The degree of care a n d s k i l l re q u i r e d t o fu l fi l l a p r o fe s s i on a l d u t y or d i n a ri l y i s a q u e s t i o n o f f a c t a n d ma y r e q u i r e testimony by professionals in t h e fi e l d i f t h e ma t e r i s w i t hi n t h e k n o w l e d g e o f e x p e r t s o n l y . ( P a d g e t t v. P h a r i s s ( 1 9 9 7 ) 5 4 C a l . A p p . 4 t h 1 2 7 0 , 1 2 7 9 . ) D u t i e s t o S e l l e r: C a l d w e l l , t h e s el l er i n t h i s r e al e s t a t e t ra n s a c t i o n , w a s r e p r e s e n t e d b y B r o k e r A , w h i c h a c te d a s b o t h l i s t i n g a g e n t a n d s e l l i n g a ge n t . U n d er t h e C i vil Co d e , a s C a l d w e l l 's a g e n t , Br o k e r A had several duties to plaintiffs. They are as follows. S e c t i o n 2 0 7 9 o f t h e C i v i l C o d e r e q u i r e s a s e l l e r 's b r o k e r t o " c o n d u c t a r e a s o na b l y c o mpe t e n t an d di l i ge n t v i su a l i n s pe c t i o n o f the property," and to "disclose to [the] prospective purchaser all fa c t s ma t e r i al l y a ffe c t i n g t h e v a l ue o r d e s i r a b i l i t y o f t h e p r o p e r t y t h a t a n i n v e s t i g a t i on w o u l d r e v e a l . " S e c t i o n 2 0 7 9 . 2 s t a t e s t h e b r o k e r 's s t a n d a r d o f c a r e " i s t h e d e g r e e o f c a r e t ha t a r e a s ona b l y p r u d e n t r e a l e s t a t e l i c e n s e e w o u l d e x e r c i s e a n d i s me a s u r e d b y t h e d e g r e e o f k n o w l e d g e t h r ou g h e d u c a t i o n , e x p e r i e n c e , a n d e x a mi n a t i o n , r e q u i r e d t o o b t a i n a l i c e n s e . " T h e b r o k e r i s n o t

18

r e q u i r e d t o i n s p e c t a r e a s " t h at a r e r e a s o n a b l y a n d n o r ma l l y i n a c c e s s i bl e t o s uc h a n i n s p e c t i o n . " ( § 2 0 7 9 . 3 . ) S e c t i o n 2 0 7 9 . 1 7 r e q u i r e d B r o k e r A t o disclose to plaintiffs t h a t i t w a s a c t i n g a s a g e n t f or both plaintiffs and Caldwell. B r o k e r A c o mp l i e d w i t h t h i s d i s c l o s u r e d u t y b y f i l l i n g i n n e c e s s a r y i n f o r ma t i o n i n t h e r e s i d e nt i al p u r c h a s e a g r e e me n t . S u b d i v i s i o n ( d ) o f s e c t i o n 2 0 7 9 . 1 7 s tates that such disclosure "shall be in addition to the disclosure required by Section 2079.14." (Italics added.) Section 2079.14 required Broker A to g i v e p l a i n t i f f s a d o c u me n t t h a t s e t s o ut t h e nature of the o b l i g a t i o n s o f a g e n t s w h o r e p re s e n t onl y t h e s el l e r , o n l y t h e b u y e r , a n d b o t h t h e b u y e r a n d s e l l e r , as such obligations are described in section 2079.16 ( d i s c u s s e d n e x t ) . Se c t i o n 2 0 7 9 . 1 4 states the form is to be both given to, and signed by, the buyer a n d t h e s e l l e r . C a l d w e l l t e s t i fi e d s h e s i g n e d t h e s e c t i o n 2 0 7 9 . 1 6 for m. Ho wever, t h e f o r m w a s n o t g i v e n t o p l a i n t i f f s . The broker for the Broker A office stated he did not believe his office was r e q u i r e d t o u s e t h a t f o r m f o r C a l d w e l l 's s a l e o f h e r h o u s e b e c a u s e the form is dated 1997 and the sale occurred in February 1998. (These statutes were enacted in 1995.) Plaintiffs contend they were also not given page six of the s i x - p a g e r e s i d e n t i a l p u r c h a s e a gr e e me n t , w h i c h i s t h e " b u y e r 's inspection advisory" for m. This f o r m a d v i s e s b u y e r s t o " c o n d u c t a thorough inspection of the Property, personally and with p r o f e s s i o n a l s . " I t i s me n t i o n e d i n t h e p u r c h a s e a g r e e me n t u n d e r " o t h e r t erms a n d c o n d i t i o ns . " E a c h o f t h e s i x p a ge s o f t h e p u r c h a s e a g r e e me n t i n d i c a t e s i t i s " p a g e 1 ( o r 2 , 3 , 4 , 5 o r 6 ) o f 6 p a g e s . " As k e d w h e t h e r h e t o l d h i s a g e n t t h a t p a g e s i x w a s mi s s i n g f r o m t h e p u r c h a s e a g r e e me n t , p l a i nt i f f B r i a n G a l l op t e s t i f i e d h e d i d n o t a n d h e " n e v e r read the documents." This was i n c o n t r a s t t o d e f e n d a n t J o s e p h D 's t e s t i mo n y t h a t h e w e n t o v e r e a c h p a g e o f t h e p u r c h a s e a g r e e me nt w i t h t h e pl a i n t i f f s , i n c l u d i n g p a g e s i x , t h e b u y e r 's i n s p e c t i o n ad v i s o r y f o r m/ p a g e , w h i c h c o me s a f t e r t h e s i g n a t u r e p a g e o f t h e p u rc h a s e a g r e e me n t . T h i s f o r m i s t h e o n l y p a g e i n t h e p u r c h a s e a gr e e me n t t h a t w a s n o t s i g n e d o r initialed by plaintiffs . T h i s f o r m a l s o s e t s o u t t h e s e c t i o n 2 0 7 9 d u t i e s o f a s e l l e r 's a g e n t a n d i d e n t i f i e s t h e m a s d u t i es o f a " b r o k e r , " t h u s g i v i n g t h e f a l s e i mp r e s s i o n t h a t a b r o k e r w h o a c t s a s b o t h t he s e l l e r 's a g e n t a n d b u y e r 's a g e n t h a s o n l y s e c t i o n 2 0 7 9 d u t i e s a n d n o t f i d u c i a r y d u t i e s t o t h e b u y e r . T h e c o mp a n i o n p o r t i o n o f t h e p u r c h a s e

19

a g r e e me n t a l s o g i v e s s u c h i m p re s s i o n . A s d i s c u s s e d a b o v e , s u c h i s n o t t h e c a s e . U n d e r b o t h c a s e l a w a n d C i v i l Co d e s e c t i o n 2079.16, Broker A owed plaintiffs certain fiduciary duties.

D u t i e s O we d t o a R e a l E s t a t e P u r c h a s e r b y H i s o r H e r O wn Broker B r o k e r A a l s o a c t e d a s t h e pla i n t i f f s ' o w n a g e n t . S e c t i o n 2079.16 states that in such a dual capacity, Broker A owed to plaintiffs (and Caldwell) "a fid u c i a r y d u t y o f u t m o s t c a r e , i n t e g r i t y , h o n e s t y a n d l o y a l t y i n i t s dealings with plaintiffs," t o g e t h er w i t h t h e "di l i ge n t exe r c i se o f r e a s o n a ble s k i l l a nd c a r e i n p e r f o r ma n c e o f i t s d u t i e s , " " a d u t y o f h o n es t a n d f a i r d e a l i n g a n d g o o d f a i t h , " a n d " a d u t y t o d i sclose all facts known to the a g e n t ma t e r i al l y a ffe c t i n g t h e v a l ue o r d e s i r a b i l i t y o f t h e p r o p e r t y that are not known to, or within the diligent attention and observation of, the parties."

W e n o t e t h a t s e c t i o n 2 0 7 9 a p p e a rs to conflict with section 2 0 7 9 . 1 6 . T h e f o r me r s t a t e s t h e s e l l e r 's a g e n t h a s a d u t y t o p r o s p e c t i v e p u r c h a s e r s " t o c o n d u c t a r e a s o n a b l y c o mpe t e n t a n d d i l i ge n t vi s u a l i n s pe c t i o n o f t h e p r o p ert y " a n d "to disclose to that p r o s p e c t i v e p u r c h a s e r a l l f a c t s ma t e r i a l l y a f f e c t i n g t h e v a l u e o r desirability of the property that an investigation would reveal." T h e l a t t e r s e c t i o n i m p o s e s o n t he s e l l e r 's a g e n t a d u t y t o t h e b u y e r t o " d i s c l o s e a l l f a c t s k no w n t o t h e a g e n t ma t e r i a l l y a f f e c t i n g t h e v a l u e o r desirability of the property that are not known to, or within the diligent attention and observation of, the p a r t i e s . " P e r h a p s t h e c o n fl i ct i s re s o l ve d , a t l e a st fo r o u r purposes, by the admonition in section 2079.16 that "an agent is not obligated to reveal to e i t h e r p a r t y a n y c o n f i d e n t i a l i n f o r ma t i o n o b t a i n e d f r o m t h e o th e r p a r t y t h a t d o e s n o t i n v o l v e t h e a f f i r m a t i v e d u t i e s s e t f o r t h ab o v e , " a n d o n e o f t h o s e d u t i e s i s a f i d u c i a r y d u t y t o e x e r c i s e t h e " u t mo s t c a r e , i n t e g r i t y , h o n e s t y a n d l o y a l t y i n h i s o r h e r d e a l in g s w i t h t h e b u y e r a n d s e l l e r . A s discussed, we find that the separation of the sunroom from the h o u s e f i t s w i t h i n t h e d e s c r i p t i o n o f ma t t e r s t h a t B r o k e r A h a d t o disclose to plaintiffs.

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Under the common law, which was not changed by section 2 0 7 9 , t h e b u y e r 's a g e n t " i s h i r e d f o r h i s p r o f e s s i o n a l k n o w l e d g e and skill; he is expected to perform the necessary research and i n v e s t i g a t i o n i n o r d e r t o k n o w th o s e i m p o r t a n t ma t t e r s t h a t w i l l a f f e c t t h e p r i n c i p a l 's d e c i s i o n , a n d h e h a s a d u t y t o c o u n s e l a n d advise the principal regarding th e p r o p r i e t y a n d r a mi f i c a t i o n s o f t h e d e c i s i o n . [ H e m u s t] d i s c l o s e r e a so n a b l y o b t a i n a b l e mat e r i a l information . " ( F i e l d v . C e n t u r y 2 1 K l o w d e n - F o r n e s s R e a l t y, s u p r a , 6 3 C a l . A p p . 4 t h a t p . 2 5 , i t a l i cs a d d e d . ) H e mus t a l s o " 'r e f r a i n f r o m ma k i n g r e p r e s e n t a t io n s of f a c t s ma t e r i a l t o t h e c l i e n t 's d e c i s i o n t o b u y t h e p r o p e r t y w i t h o u t a d v i s i n g t h e c l i e n t t h a t h e i s me r e l y p a s s i n g o n i n f o r m a t i o n r e c e i v ed f r o m t h e s e l l e r w i t h o u t ve r i f y i n g i t s a c c u r a c y . ' " ( I d. a t p . 2 6 . ) I n A s s i l z ad e h v . C a l i f o r ni a Fe d e r a l B an k (2000) 82 C a l . A p p . 4 t h 3 9 9 , 4 1 4 , t h e c o u r t s t a t e d that a dual agent (broker a c t i n g o n b e h a l f o f b o t h s e l l e r an d b u y e r ) h a s f i d u c i a r y d u t i e s t o b o t h , a n d t h a t Field's d i s c u s s i o n o f f i d u c i a r y d u t i e s i s " i n f o r ma t i v e a s t o t h e s c o p e o f f i d u c i a r y d u t y . " L i a b i l i t y c a n b e i mp o s e d o n a n a g e n t o r b r o k e r for b o t h a n a ffi r ma t i v e a n d i n t en t i o n al mi s r e pr e s e n t a t i o n o f m a t e r i a l f a c t s , a n d f o r n o n d i s c l o s u r e o f t h e m, s i n c e n o t d i s c l o s i n g i n f o r ma t i o n " 'a mo u n t s t o a r e p r e s e n t a t i o n o f t h e n o n e x i s t e n c e o f t h e f a c t s w h i c h h e h a s fa i l e d t o d i s cl os e [c i t at i on ]. ' " ( P a d g e t t v . Ph a r i s s , supra, 54 Cal.App.4th at p. 1286.)

T h e I s s u e o f t h e "As I s " P r o v i s i o n i n t h e P u r c h a s e A g r e e m e n t Broker A contends there is insufficient evidence to support a f i n d i n g f a v o r a b l e t o p l a i n t i ff s o n t h e f i r s t t w o e l e me n t s o f a c a u s e o f a c t i o n f o r n e g l i g e nc e - - d u ty a nd b r e a c h o f d u t y . I t r e l i e s o n c e r t a i n l a n g u a g e i n t h e p u r c h a s e a g r e e me n t . T h e p u r c ha s e a g r e e me n t s t a t e s t h a t b u ye r a n d s e l l e r a gr e e that the broker does not guarantee the condition of the property a n d w i l l no t b e r e s po n s i b l e f or d ef e c t s t h a t a r e n ot k n o w n t o t h e b r o k e r a nd n o t v i sib l y o b s e r v a b l e i n r e a s o n a b l y a c c e s si b l e a r e a s o f t h e p r op e r t y . T h e p u r c h a s e a gr e e me n t a l s o s t a t e s t h a t t h e p r o p e r t y w a s b e i n g s o l d " a s i s " i n i t s pr e s e n t phy s i c al c o nd i t i o n a n d t h e r e w e r e n o w a r r a n t i e s " e xc e pt a s s p e c i f i e d b e l o w , a n d e l s e w h e r e i n t h i s a gr e e me n t . " B r o k e r A c o n t e n d s t h a t w h e n t h e r e is an "as is" sale, "there can be no negligence verdict." Broker A r e l i e s o n L o u g h r i n v . Superior Court (1993) 15 Cal.App.4th 1188.

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I n L o u g h r i n, t h e r e a l e s t a t e s a l e c o n tract stated the property was b e i n g s o l d i n a n " a s i s " c o n di t i o n , t h e s e l l e r ma d e n o w a r r a n t y with respect to the condition of the property, and the buyer relied s o l e l y o n h i s i n s p e c t i o n o r h i s c o n t r a c t o r i n d e t e r mi n i n g t h e condition of the property. The L o u g h r i n c o u r t st a t e d t h a t e xc e p t i n c a s e s of f r a u d o r mi s r e p r e s e n t a t i o n w h e r e t h e s e l l e r i n t e nt i o n al l y c o n ce al s ma t e r i al d e f e c t s n o t o t h e r w i s e o b s e r v a b l e or visible by the buyer, a sale of property in an "as is" condition i s a s al e of i t i n i t s p r e s e n t c on d i t i o n a nd r e l i e v e s t h e s el l er o f liability for defects in that condition. (At p. 1192.) Later, the court stated that "an added provision in the waiver clause, such as contained in this case, indicat i n g t h e b u y e r r e l i e s o n h i s o w n inspection of the property, presuma b l y w a i v e s a n y o b l i g a t i o n t h e s e l l e r o r h i s b r o k e r ma y o t h e r w i se h a v e t o i n s p e c t t h e p r o p e r t y f o r d e f e c t s , a n d h e n c e ma y a v o i d a c l a i m f o r n e g l i g e nt f a i l u r e t o k n o w o f a n d a d v i s e o f s u c h d e f e c t s . " ( At p . 1 1 9 5 . ) Wh i l e B r o k e r A r e l i e s i n t hi s a n a l y si s i n L o u g h r i n t o support its assertion that there is no substantial evidence to s u p p o r t a j u r y 's f i n d i n g s i n f a v o r of plaintiffs on the first two e l e me n t s o f a c a u s e o f a c t i o n f o r n e g l i g e n c e , B r o k e r A n e g l e c t s t o me n t i o n c e r t a i n t h i n g s . F i rst, the Loughrin court a l s o s t ate d i n i t s v e r y n e x t b r e a t h t h a t a u g me n t i n g a n " a s i s " c l a u se w i t h a cl a u s e t h a t t h e bu y e r r el i es o n h i s o w n i n s p e c t i o n o f t h e p r o p e r t y , " d o e s not address the issues of: ( 1 ) i n t e n t i o n a l mi s r e p r e s e n t a t i o n , ( 2 ) f r a u d u l e n t c o n c e a l me n t , o r e v e n ( 3 ) n e g l i ge n t c o n c ea l me n t n o t r el a t e d t o fa i l u r e t o i n s p e ct ." Second, the Legislature stated in Civil Code section 1102.1 t h a t " t h e d e l i v e r y o f a r e a l e s t a t e t r a ns fe r d i s cl o su r e s t at eme n t ma y n o t b e w a i v e d i n a n 'a s i s ' s a l e , a s h e l d i n Loughrin v . Superior Court ( 1 9 9 3 ) 1 5 C a l . A p p . 4 t h 1 1 8 8 . " T h i r d , s e c t i o n 1 1 0 2 .1 s t a t e s t ha t a g e nt s s h o u l d p l a c e t h e i r s e c t i o n 2 0 7 9 d i s c l o s u r e s i n t h e t r a n s f e r d i s c l o s ur e s t a t e me n t . F o u r t h , s e c t i o n 1 1 0 2 s t a t e s t h a t w a i v e r s o f t h e r e q u i r e me n t s o f t h e t r a n s f e r d i s c l o s u r e st a t e me n t s t a t u e s a r e voi d a s a g a i n s t public policy. Therefore, "as is" clauses and "buyer relies on his own i n s p e ct i o n" a r e n ot e ffe c t i v e t o r e l i e v e s e l l e r s a nd t h e i r a ge n t s fr o m t h e i r d u t i e s u nd e r t h e t ra n s fe r d i sc l o s u r e s t a t e me n t s t a t u t e s . Here, of course, Broker A did not d i s cl o s e , i n t he t r a n s fer d i s c l o s u r e s t a t e me n t , t h e fa c t o f t h e s u n r o o m s e p a r a t i o n .

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B r o k e r A ' s c i t a t i o n t o A s s i l z ad e h v . C a l i f o r ni a Fe d e r a l Bank , s u p r a , 8 2 C a l . A p p . 4 t h 3 9 9 , 4 1 7 w h e r e i n t h e c o u r t s t a t e d t h a t a b u y e r p u r c h a s i n g r e s i d e nt i al p r ope r t y i n an " a s i s" c o n d i t i o n h a s " a d u t y t o i n v e s t i g a t e t o d e t e r mi n e t h e a c t u a l condition of the property," adds nothing to the discussion. Plaintiffs do not deny that they we r e u n d e r a d u t y t o i n v e s t i g a t e . T h e i r d u t y d o e s n o t a f f e c t B r o k e r A 's o w n o b l i g a t i o n s . P l a i n t i f f s ' d u t y j u st f o r ms t h e b a s i s o f t h e c o mpa r a t i v e ne g l i g e n c e f i ndi n g s t h a t t h e j u r y ma d e , h o l d i n g plaintiffs 43% negligent. T h e F i n d i n g T h a t B r o k e r A W a s Negligent Is Supported by Substantial Evidence C a l d w e l l 's a g e n t h ad a d u t y t o p l a i nt i ffs t o i n s p ec t t h e s u b j e c t p r o p e r t y a n d d i s c l o s e t o p l a i n t i f f s f a c t s ma t e r i a l l y a f f e c t i n g i t s v a l u e o r d e s i r a bi l i t y . C a l dw e l l t ol d h e r a g e nt t h a t t h e s u n r o o m h a d s e p a r a t e d f r o m t h e h o u s e . C a l d w e l l 's a g e n t bre a c h e d his duty to plaintiffs. Plaintiffs' agent, defendant Joseph D., had a duty to d i s c l o s e , t o p l a i n t i f f s , r e a s o n ab l y o b t a i n a b l e i n f o r ma t i o n . G i v e n t h a t t h e se l l e r 's a g e n t w a s f r o m t h e s a m e r e a l e s t a t e o f f i c e as J o s e p h D . , J o s e p h D . h a d r e a d y a c c e ss t o i n f o r ma t i o n t h a t C a l d w e l l 's a g e n t k n e w a b o u t t h e s u b j e c t p r o p e r t y , s u c h a s t h e s u n r o o m s e p a r a t i o n . F r o m t h e fa c t t h a t J o s e p h D . d i d n o t t e l l plaintiffs about the separation, it can reasonably be inferred that h e d i d n o t a s k C a l d w e l l 's a g e n t w he t h e r t h e r e w e r e a n y ma t e r i a l facts about the property that he should convey to plaintiffs, or t h a t h e a sk e d C a l dw e l l 's a g e n t b u t t he a g e n t d i d n o t t el l hi m a b o u t t h e s u n r o o m s e p a r a t i o n , o r t h a t C a l d w e l l 's a g e n t t o l d J o s e p h D . b u t t h e l a t t e r d i d n o t p a s s t he i n for ma t i o n o n t o p l a i nt i f f s . A l l t h r e e s c e n a r i o s r e p r e se n t a b r e a c h o f d u t y b y Broker A. S u c h i n f o r ma t i o n w a s c e r t a i n l y ma t e r i a l , a s i t w o u l d i n d i c a t e t h e r e mi g h t b e a p r o b l e m w i t h t h e f o u n d a t i o n , s e t t l e me n t , s o i l c o mpa c t i o n , e t c . Broker A does not cite us to e v i d e n c e t h a t s u c h se p a r a t i o n s a r e o r di na r y e v e nt s. C l e a r l y B r o k e r A ' s f a i l u r e t o d i s c l o s e t he fact of the separation is a ma t e r i a l br e a c h o f i t s s t a t u t ory a n d c o m m o n l a w d u t y . N o e x p e r t t e s t i mo n y w a s r e q u i r e d t o h e l p t he j u r y d r a w s u c h a c o n c l u s i o n . This breach of duty, coupled with plaintiffs' evidence that had t h e y k n o w n t h e t r u e f a c t s a b out t h e c o ndi t i o n o f t h e h o u s e , t h e y w o u l d n o t h a v e p u r c h a s e d i t , c o mpr i s e s u f f i c i e n t e v i d e n c e t o support finding of negligence.

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B r o k e r A a r g u e s t h a t p l a i n t if f s k n e w t h e s u n r o o m d o o r w a s n o t o p e r a b l e b e c a us e t h e i n s p e c t i o n r e p o r t p r o vi d e d b y t he h o u s e i n s p e c t i o n d e f e n d a n t s r e v e a l e d t h a t p r o b l e m. H o w e v e r , t h a t i s n o t t h e s a me t h i n g a s k n o w i n g t h a t a s t r u c t u r e t h a t h a d b e e n a t t a c h e d to the house was now unattached. Moreover, Broker A is not r e l i e v e d o f i t s s t a t u t o r y a n d c o m mo n l a w d u t i e s o f d i s c l o s u r e me r e l y b e c a u s e a pro f e s s i o n a l i n s p e c t i on o f t h e h o u s e w a s undertaken by plaintiffs. P l a i n t i f f s a n d B r o k e r A r a i se o t h e r ma t t e r s w h i c h t h e y a s s e r t i mp a c t t h e q u e s t i o n o f B r o k e r A ' s n e g l i ge nc e . T h e s e include the effect of the El Nino rains on the crack in the garage floor, discrepancies found by pl a i n t i f f 's e x p e r t w i t n e s s g e o t e c h nic a l e n gi n ee r r e s pe c t i n g t h e d ep t h o f c o m p a c t e d fi l l r e p o r t e d i n t h e " o r i g i n a l r e p or t s " ma d e w h e n t h e h o u s e w a s b u i l t in or about 1960, and whether Ca l i f o r n i a r e g u l a t i o n s r e q u i r e d B r o k e r A ' s b r o k e r t o i n s p e c t t he s u b j e c t p u r c h as e a g r e e me n t . G i v e n t h a t t h e n o n d i s c l o s u r e t o p l a i n t i ff s o f t h e s u n r o o m s e p a r at i o n c o n s t i t u t e s s u ffi c i e n t e v i denc e t o s u pp o r t t he j u r y 's f i n d i n g t h a t B r o k e r A w a s n e g l i g e nt , w e d e c l i n e t o a d d r es s t h e s i g n i f i c a n c e o f a n y o f t h e s e o t h e r ma t t e r s . T h e j u d g me n t i n f a v o r o f C a l dw e l l a n d a g a i n st pl a i nt i ffs i s r e v e r s e d a n d t h e t r i a l c o u r t i s d i r e c t e d t o e n t e r a j u d g me n t notwithstanding the verdict, in fa v o r o f p l a i n t i f f s a n d a g a i n s t C a l d w e l l , i n t h e a mo u n t o f $ 1 1 0 , 0 0 0 , t o g e t h e r wi t h a n a w a r d o f c o s t s f o r p l a i nt i f f s . T h e t r i a l c o u rt i s f u r t h e r d i r e c t e d t o a me n d t h e j u d g me n t i n f a v o r o f p l a i n t i f f s a n d a g a i n s t t h e B r o k e r A defendants in the amount of zero dollars by deleting the directive that the Century 21 defendants and the plaintiffs "shall bear their o w n c o s t s a n d d i s b u r s e me n t s o n t h e n e g l i g e n c e c l a i m, " a n d inserting, in its place, an award of costs for plaintiffs. Plaintiffs s h a l l r e c ov e r c o s t s o n a p p e a l f r o m t h e B r o k e r A d e f e n d a n t s a n d C a l d w e l l , w h o s h a l l a l l b ea r t h e i r o w n c o s t s o n a p p e a l .

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CASE #2 : FSR BROKE RAGE, INC. et a l . ( c a l l e d B r o k e r F ) , Petitioners, v. The Superior Court of Los Angeles County, Respondent; Michael Chernuchin et al,. Real Parties in Interest. B156982, COURT OF APPEAL O F C A L I F O R N I A , S E C O N D APPELLATE DISTRICT, DI VISI ON ONE, filed April 16, 2002. Judges: Vogel, with Spencer and Mallano concurring. In June 1998, Michael Chernuchin and Janis Diamond p u r c h a s e d r e a l p r o p e r t y o n Be n e d i c t C a n y o n D r i v e f r o m J o r d a n Ostrow. Plaintiffs, as buyers, were represented by Broker F; Ostrow, as seller, was represented by Broker C. I n M a y 2 0 0 1 , P l a i n t i f f s f i l e d a n a me n d e d c o mp l a i n t a g a i n s t Ostrow, Broker C, Broker F, and others included in our references to Broker C and Broke r F , a l l e g i n g n i n e s e p a r a t e causes of action for breach of contract, fraud, breach of fiduciary d u t y , a n d n e g l i g e n c e . A mo n g o t h e r t hi n g s , P l a i n t i f f s a l l e g e t h a t O s t r o w fa i l e d t o d i sc l o s e t h a t : • • • •

a g a t e w a s b r o k e n a n d i n n e e d o f r e p l a c e me n t ( w h i c h a l l e g e d l y c o s t mor e t h a n $ 1 0 , 0 0 0 ) , t h a t t h e he a t e r d i d n't w o r k a n d h a d t o b e r e p a i r e d ( w h i c h allegedly cost about $ 770), t h a t t h e s w i mmi n g p o o l a n d a k o i p o n d l e a k e d a n d t h e p o o l heater was broken (which toge t h e r c o s t a b o u t $ 9 , 9 0 0 t o repair), and t h a t t h e c h i mn e y h a d s u f f e r e d e a r t h q u a k e d a ma g e ( w h i c h allegedly cost about $ 6,900 to repair).

A s a g a i n s t O s t r o w , P l a i n t i f f s c l a i m d a m a g e s f o r t h e s e a l l e ge d n o n - d i s c l o s u r e s o n t h e o r i e s of b r e a c h of c o n t r a c t , f r a u d , a n d n e g l i g e n t mi s r e p r e s e n t a t i o n . A s a ga i n s t B r o k e r F, P l a i n t i f f s c l a i m d a ma g e s f o r b r e a c h o f f i d u c i a r y d u t y a n d f r a u d b a s e d o n a l l e g e d mi s r e p r e s e n t a t i o n s a b o u t a n e a s e me n t a n d a b o u t c o n s t r u c t i o n o n a d j a c e nt pr o p e r t y . As against Broker F and Broker C, Plaintiffs also claim d a ma g e s f o r f r a u d b a s e d o n t h e R e a l t or s' a l l e g e d fa i l ur e t o d i s c l o s e a l l k n o w n d e f e c t s i n t h e p r o p e r t y , i n c l u d i n g t h e fa c t t h a t t h e r e " w a s a s i g n i f i c a n t a mo u n t o f d i r t t o u c h i n g w o o d o n t h e s i d e w a l l a d j a ce n t t o t h e r e t ai n i n g w al l b u t t re s s i n g a ga i n s t t h e h i l l si d e s l o p e o f t h e p r o p e r t y . " A c c o r d i n g t o P l a i n t i f f s ' f i r s t a me n d e d c o mpl a i n t , " r e a l e s t a t e a g e n t s i n L o s A n g e l e s k n o w , o r s h o u l d k n o w , t h a t d i r t t o u c h i n g w o o d i s a s e r i o u s p r o b l e m, b e c a u s e i t

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p e r mi t s d e s t r u c t i v e p e s t s a n d o r g a n i s ms t o a t t a ck t h e s t r uc t u r e ." Wi t h r e g a r d t o d a ma g e s , P l a i n t i f f s a l l e g e t h a t D i a mo n d " h a s e x p e r i e n c e d e x t r e m e h e a l t h pr o b l e ms d u e t o a s t h ma a n d a l l e r g i e s . H e r p r o b l e ms b e c a me s o s e v e r e t ha t she h a d t o b e h o s p i t a l i z e d . S i n c e h e r h o s p i t a l i z a t i o n , s h e h a s e x p e r i e n c e d c h r o n i c a s t h ma a n d a l l e r g y p r o b l e ms t h a t r e q u i r e h e r t o t a k e s t e r o i d s a n d o t h e r me d i c a t i o n . P r i o r t o p u r c h a s i n g t h e p r o p e r t y , D i a mo n d n e v e r e x p e r i e n c e d a n y e p i s o d e s o f a s t h ma o r a l l er g i es ." M o r e s p e c i f i c a l l y , P l a i n t i f f s a l l e g e t h a t D i a mo n d ' s " c o n d i t i o n s e e me d t o b e e x a c e r b a t e d w h e n s he e n t e r e d t h e s i d e c o r n e r r o o m, which has as its outside wall, t h e p l ac e w h e r e t he d i r t w a s t o u c h i n g w o o d . . . . " A c o n t r a c t o r hired by Plaintiffs discovered a d i r t - f i l l e d " h o l e be t w e e n t he o u t s i d e a n d t h e i n s i d e o f t h e h o u s e " w h i c h w a s a " c o n d u i t for p e s t s a n d o r g a n i s ms t o e n t e r i n t o t h e i n s i d e o f t h e h o u s e f r o m t he o u t s i d e . " T h e c o n t r a c t o r fo u n d " mo l d , s p o r e s , f u n g u s , r a t e x c r e me n t a n d o t h e r d e t r i t u s . " H a d P l a i n t i f f s k n o w n a b o u t t h i s p r o b l e m, t h e y w o u l d n o t h a v e p u r c h a s e d t h e h o u s e . B a s e d o n t h e mol d p r o b l e m, P l a i n t i f f s c l a i m d a ma g e s f o r f r a u d , c o n s t r u c t i v e f r a u d , n e g l i g e n t mi s r e p r e s e n t a t i o n , a n d n e g l i g e n c e. A t s o me p o i n t , P l ain t i ffs mo v e d o u t o f t h e B e n e d i c t C a n y o n h o u s e a n d i n t o a f u r n i s h e d a pa r t me n t o n O c e a n A v e n u e . Defendants answered and discovery ensued, including a request by Broker F to inspect and test both the Benedict Canyon Drive r e s i d e nc e a n d P l a i nti f f s ' c u r r e n t O c e a n A v e n u e a p a r t me n t . I n i t s d e ma n d t o i n s p e c t t h e t w o r e s i d e nc e s , B r o k e r F e x p l a i n e d t h a t i t s p u r p o s e w a s " t o p h o t o g r a p h a n d i n s p e c t t h e p r o p e r t y , t e s t for t h e p r e s e n c e o f mo l d a n d o t h e r c o n t a mi n a n t s a t t h e p r o p e r t y . . . a n d a l s o t o sam p l e t h e a i r b ot h i n s i d e a n d o u t s i d e t h e i mp r o v e me n t s o n t h e p r op e r t y . T h e t e s t i n g w i l l be n o n- d e s t r u c t i v e . " P l a i nt i ffs o b j e c t e d t o t h e d e m a n d t o i n spe c t t he O c e a n A v e n u e r e s i d e n c e , c l a i mi n g t h e i n s p e c t i o n w o u l d b e " i r r e l e v a n t a n d n o t c a p a b l e o f l e a d i n g t o r e l e va n t e v i d e n c e ," t ha t i t wo u l d c o n st i t ut e a n i n v a s i o n o f p r i v a c y , a n d t h a t i t w o u l d b e b u r d e n s o me a n d h a r a s s i n g . B r o k e r F f i l e d a mo t i o n f o r a n o rd e r c o m p e l l i n g P l a i n t i f f s t o a l l o w t h e i n s p e c t i o n o f t h e Oc e a n A v e n u e p r o p e r t y . B r o k e r F e x p l a i n e d t h a t s i n c e D i a mo n d 's " i n j u r i e s h a v e s u b s t a n t i a l l y a b a t e d si nc e s h e l e f t t h e B e n e d i c t Canyon residence, if testing of Plaintiffs new residen c e a l s o f i n d s mo l d , t h e i r c l a i ms t h a t m o l d w a s t h e ca u s e o f D i a mo n d 's s y mp t o ms w i l l b e s ub s t a n t i a l l y

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d i s c r e d i t e d . " E l s e wh e r e i n i t s mo t i o n , B r o k e r F p u t i t t h i s w a y : " B r o k e r F i s a t t e mp t i n g t o e s t a b l i s h t h e p o s s i b l e s o u r c e s o f P l a i n t i f f s ' a l l e ge d i n j u r i e s , e i t h e r b y e xc l u s i o n o f t h e . . . O c e a n A v e n u e r e s i d e n c e a s a p o t e n t i a l so u r c e o r o t h e r me a n s . C l e a r l y , i t i s h i g h l y r e l e v a n t i f t h e s a me s o r t s o f m o l d a r e p r e s e n t a t P l a i n t i f f s ' c u r r e nt r e s i d e n c e t h a t are alleged to have caused their i n j u ri e s at t h e i r for me r r e s i d e n c e . P l ain t i ffs s a y t h e i r s y m p t o ms h a v e i mp r o v e d s i n c e t h e y l e f t t he p r i o r r e s i d e nc e . N e e d l e s s t o s a y , i f t h e y a r e s t i l l b e i n g e x p o s e d t o t h e s a me m o l d s , t he n t h e re i s a n o t h e r s o u r c e f o r t h e i r p r o b l e ms . "

P l a i n t i f f s o p p o s e d t h e mo t i o n , c o n t e n d i n g t h a t B r o k e r F w a n t e d t o i mp o s e o n t h e i r p r i v a c y b y c o n d u ct i n g t e s t s o n p r o p e r t y t h a t i s n o t t h e s u b j e c t o f t h i s l i t i g a ti o n . P l a i n t i f f s c l a i me d , w i t h o u t a u t h o r i t y , t h a t B r o ke r F 's mo t i o n f a i l s be c a u s e i t d o e s n o t sh o w " a n y p r o b a b i l i t y t h a t P l a i n t i ff s ' c u r r e n t r e s i d e n c e c o n t a i n s t h e s a me t y p e o f mol d " a s t h e B e n e d i c t C a n y o n p r o p e r t y . N e i t h e r s i d e o f f e r e d a n y e x p e r t t e s t i mo n y a b o u t m o l d . T h e t r i a l c o u r t d e n i e d B r o k e r F 's m o t i o n , c o m m e n t i n g t h a t " t h e r e a r e s o ma n y d i f f e r e n t k i n d s o f mo l d " t h a t t h e p r o p o s e d i n s p e c t i o n of the Ocean Avenue property was n o t r e l e va n t , a n d t h a t t h e r e h a d t o " b e s o me r e a s o n t o d o i t o t he r t ha n j u s t a me r e s t a t e me n t t h a t t h e r e mi g h t b e m o l d t h e r e . " T h e a p p e l a t e c o u r t s t a t e d t h e B r o k e r F ' s mo t i o n s h o u l d h a v e b e e n granted. Broker F had only to show that its proposed inspection was r e l e va n t , w h i c h i t i s i f t h e r es u l t s o f t he i n s p e ct i o n w o u l d t h e ms e l v e s b e a d mi s s i b l e or i f t h e i n s pe c t i o n a pp e a r s r e a so n a b l y c a l c ul a t ed t o l e a d t o t h e d i sc ove r y o f a d mi s s i b l e evi d e n c e . A s F S R e x p l a i n e d , a n i n s p e c t i o n t h a t r e v e a l s mol d a t t h e O c e an A v e n u e a p a r t me n t t h a t i s si m i l ar t o t he mol d a l l eg e d l y p r es e n t at the Benedict Canyon house is relevant to Plaintiffs' claim that her s y mpt o ms w e r e c a u s e d b y mo l d - - p a r t i c u l a r l y s i n c e h e r c o n d i t i o n h a s i mp r o v e d s i n c e s h e mo v e d o u t o f t h e B e n e d i c t C a n y o n h o u s e . A t a mi n i m u m, s u c h e v i d e n c e w o u l d t e n d t o p e r s u a d e t h e t r i e r o f f a c t t h a t D i a mo n d ' s c o n d i t i o n w a s n o t c a u s e d b y t h e mo l d . ( S e e M a n z e t t i v . S u p e r i o r C o u r t (1993) 21 Cal.App.4th 373.) I f n o mol d i s f o u n d , B r o k e r F ma y d e c i d e t o r e e v a l u a t e i t s c a s e .

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I n s h o r t , fi s h i n g e x p e d i t i o n s a r e p e r mi s s i b l e , a n d t h e d i s c o v e r y s t a t u t e s mus t b e l i b e r a l l y c o n s t r u e d . F i n a l l y , we r e j e c t P l a i n t i f f s ' s u g g e s t i o n t h a t t h e i n s p e c t i o n a n d t e s t i n g w i l l i n va d e t h e i r p ri v acy . T h e y h a v e n o t e x p l a i n e d h o w this would occur, and they have not offered any authority to s u p p o r t t h e i r c o n c l u s o r y a s s e r t io n s . A s a r e s u l t , t h e y h a v e abandoned this objection. ( People ex rel. 20th Century Ins. Co. v . B u i l d i ng P e r m i t C o n s u l t a nt s , I n c . (2000) 86 Cal.App.4th 280, 284.) T h e p e t i t i o n i s g r a n t e d , a n d a p e r e mpt o r y w r i t s ha l l i s s u e commanding the trial court (1) to vacate its order of February 27, 2 0 0 2 , i n s o f a r a s t h a t o r d e r d e n ie s F S R 's mot i o n t o c o mpe l i n s p e c t i o n a n d t e st i n g o f t h e O c e a n A v e n u e p r o pe r t y , ( 2) t o e n t e r a n e w o r d e r g r a n t i n g F S R 's m o t i o n t o i n s p e c t a nd t e s t , ( 3 ) t o s c h e d u l e t h e i n s p e c t i o n f o r a t i me mu t u a l l y c o n ve n i e n t fo r F S R 's e x p e r t a n d P l a i n t i f f s , a n d ( 4 ) t o s et a n e w t r i al d a t e . O u r s t a y order, dated March 15, 2002, is vacated. Broker F was awarded i t s c o st s of t h e s e w r i t p r oc e e di n g s .

CASE #3: STEVEN LARNER AS Co- Tr u s t e e , e t c . , e t a l . , P l a i n t i f f s a n d A p p e l l a n t s , v. VIRGINIA CLINE, Et Al., D e f e n d a n t s a n d R e s p o n d e n t s . B148497, COURT OF APPEAL OF CALIFORNIA, SECOND APP ELLATE DISTRICT, DIVISION S I X , f i l e d D e c e mb e r 1 0 , 2 0 0 1 . J u d g e s : C o f f e e , w i t h G i l be r t a n d Yegan concurring. Appellants purchased property which they later learned was a d j a c e nt t o a n a b a nd o n e d l a ndf i l l . T h e y f i l e d a c o mpl a i n t a g a i n st the realtors who sold them the property for allegedly failing to d i s c l o s e t h i s d e f e c t . T h e r e a l t o r s mo v e d f o r s u m ma r y j u d g me n t o n t h e g r o u nd t h a t t h e y h a d n o k n o w l ed g e o f t h e l a n d f i l l , t h us w e r e u n d e r n o d u t y o f d i s c l o s u r e . T h e t r i a l c o u r t g r a n t e d t h e mot i o n . We affi r m. S t e v a n a nd C h r i s t i ne L a r n e r a s t r u st e e s o f t h e L a r n e r F a mi l y T r u s t s ( a p p e l l a n t s ) , f i l e d a c o mp l a i n t f o r d a ma g e s a g a i n s t r e a l t o r s Ke n K . , V i r g i n i a C . , J i m B . a n d B r o k e r B ( r e s p o n d e n t s ) .

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A l l t h r e e r e a l t o r s we r e e mp l o y e d b y B r o k e r B . A p p e l l a n t s w e r e r e p r e s e n t e d i n t h e t ra n s a c t i o n b y K e n K . T h e s e l l e r , J o h n G r i me s , w a s r e p r e s e n t e d i n t h e t r a n s a ction by Virginia C. and Jim B. A p p e l l a n t s p u r c h a s e d a 1 3 3 - a c r e c a t t l e r a n c h f r o m G r i me s , i n t e n d i n g t o c o n v e r t i t t o a v i n e y a r d a n d w i n e r y . O n e mo n t h a f t e r e s c r o w c l o s e d , a n a r t i c l e a p pe a re d i n t h e S a n t a B a r b a r a Ne w s Press concerning an abandoned landfill located across the road fr o m a p p e l l a nt s ' p r o p e r t y . T h e a r t i c l e s ug g e s t e d t ha t t h e l a nd fi l l , which was closed in 1969, might be polluting the groundwater. O n e y e a r b e f o r e a pp e l l a nt s pur c h a s e d t h e p r o p e r t y , G r i me s h a d l i s t e d i t w i t h Ke n t T . o f B r o k e r C a n d a n o t h e r a g e n t , T . H . T h a t t r a n sa c t i o n f a i l e d f o r r e a s o n s u n r e l a t e d t o t h e l a n d f i l l . A t t h a t t i me , G r i me s h a d fi l l e d o u t a t r a ns fe r d i s cl o s u r e s t a t e me n t t h a t r e v e al e d t h e e xi s t e nc e o f t h e a b a n do n e d l a n dfi l l . G r i me s s h o w e d V i r g i n i a C . a c o p y o f t h e t r a n s f e r d i s c l o s u r e s t a t e me n t f r o m t h e f a i l e d t r a n s a c ti o n . I t w a s a n i l l e g i b l e c a r b o n c o p y t h a t h a d l i t t l e w r i t i n g on i t . G r i me s c a l l e d h i s p r e vi ou s l i s t i n g a g e n t , K e n t T . , t o o b t a i n a better copy, but Kent T. i n d i c a t e d t h a t h e h a d l o s t t h e f i l e . V i r g i n i a C . g a v e G r i me s a b l a n k t r a n s f e r d i s c l o s u r e s t a t e me n t , w h i c h h e c o m p l e t e d w i t h o u t d i s c l o s i n g t h e e x i s t e n c e o f t h e l a n d f i l l. After appellants had p u r c h a s e d t h e p r o p e r t y , t h e o r i g i na l d i sc l o s u r e s t a t e me n t w a s r e c o v e r e d . I t w a s i n t h e p o s s es s i o n o f t h e b u y e r 's a g e n t i n t h e failed transaction. T h e e x i s t e n c e o f t he l a n d fi l l c o u l d n o t b e d e t e r m i n e d b y v i s u a l i n s p e c t i o n be c a u s e t he p ro p e r t y l o o k e d l i k e a f i e l d c o v e r e d w i t h g r a s s. T h e r e a l e s t a t e p u r c h a s e a g r e e me n t s i g n e d b y t h e p a r t i e s s pe c i f i e d t ha t t h e r e a lt o r s w o u l d n o t i n v e s t i g a t e t h e e x i s t e n c e o f e n v i r on me n t a l ha z a r d s a nd n u i s a n c e s , i n c l u di n g w a t e r a n d s o i l c o n t a mi n a t i o n . T h e p a r t i e s w e r e a d v i s e d t o c o n d u c t their own investigations. After consulting with a wine expert, a p p e l l a n t s c o n d u c t e d w a t e r a n d s oi l t e s t s a n d o r d e r e d a p h y s i c a l i n s p e ct i o n o f t h e p ro p e r t y . A ft e r t h e i n spe c t i o ns , t h e y r el e as e d a l l c o n t i n g e nc i e s i n t he p u r c h a se a g r e e me n t . F o l l o w i n g p u b l i c a t i o n o f t h e n ew s p a p e r a r t i c l e , a p p e l l a n t s f i l e d t h e i r c o mpl a i n t . T h e y c o n t e n d e d t h a t r e s p o n d e n t s h a d f a i l e d t o d i s c l o s e t h a t t h e p r o p e r t y w a s l o c a t e d a d j a c e n t t o a f o r me r s o l i d w a s t e d u mp. T h i s i n f o r ma t i o n , t h e y a r g u e , s h o u l d h a v e b e e n d i s c o v e r e d b y r e s p o n d e n t s i n t h e co u r s e o f t h e p e r f o r ma n c e o f

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their fiduciary duties. R e s p o n d e n t s mo v e d f o r s u m m a r y j u d g me n t o r , i n t h e a l t e r n a t i v e , s u m ma r y a d j u d i c a t io n . T h e t r i a l c o u r t g r a n t e d t h e m o t i o n , r u l i n g t h a t i t w a s u n d i s p u te d t h a t n o n e o f t h e r e a l t o r s w e r e a w a r e o f t h e e x i s t e nc e of t h e l a n df i l l. Thus, they had no d u t y t o i nv e s t i ga t e i t s e xi s t en c e o r o b t a i n t h e p r i o r d i s c l o s u r e s t a t e me n t .

M o t i o n f or S u m m ar y J u d g m e n t (Appelate Court response) I n t h e i r m o t i o n f o r s u m m a r y j u d g me n t , r e s p o n d e n t s a r g u e d t h a t a r e a l t o r i s o n l y r e q u i r e d t o ma k e d i s c l o s u r e s b a s e d o n a visual inspection of the property. They contended that there were no facts that would have triggered a duty to investigate a p r e v i o u s l i s t i n g a n d o b t a i n a p r i o r t r a ns f e r d i s c l o s u r e s t a t e me n t . A t t a c h e d t o r e s p o n d e n t s ' mo t i o n w e r e t h e d e c l a r a t i o n s o f Ken. K., Virginia C. and Jim B. T h e y g a v e d e t a i l e d d e s c r i p t i o n s of the real estate transaction and disavowed any knowledge of the c l o s e d l a ndfi l l . K e n K . d e c l a re d t h a t t he mul t i p l e l i s t i n g c o n c e r n i n g t h e G r i me s ' p r o p e r t y d i d n o t me n t i o n a l a n d f i l l . Virginia C. was unaware of any communications from the County o f S a n t a B a r b a r a t o t h e r e a l e st at e c om m u n i t y d i s c l o si n g t h e p r e s e n ce o f a l a n d fi l l . A l s o at t a c he d w a s t h e d ecl a r at i o n of Marvin B. Starr, co-author of M i l l e r a nd S t a r r 's t r e a t i s e o n C a l i fo r n i a R e a l E s t at e l a w . It w a s S t a r r 's e x p e r t o p i n i o n t h a t respondents were not required to obtain the prior transfer d i s c l o s ur e s t a t e me n t . I n t h e i r o p p o s i t i o n t o t h e mot i o n f o r s u m m a r y j u d g me n t , appellants claim that respondents breached their fiduciary duty b e c a u s e Vi r g i ni a C . f a i l e d t o i n f o r m t h e m t h a t s h e h a d s e e n t h e c a r b o n c o p y o f t h e p r i o r t r a n s f e r d i s c l o s u r e s t a t e me n t . B e c a u s e t h i s i n f o r ma t i o n w a s i n e x i s t e n c e , a p p e l l a n t s r e a s o n , r e s p o n d e n t s w e r e u n d e r a d u t y t o q u e s t i o n t h e ir f e l l o w a g e n t s c o n c e r n i n g t h e contents of the prior disclosure.

Duty of Disclosure A real estate broker is under a duty to conduct a reasonably c o mpe t e n t a n d d i l i ge n t i n s pe c t io n o f t h e p r o p e r t y . H e mu s t d i s c l o s e t o t h e p u r c h a s e r s a n y fa c t s r e v e a l e d b y t h e i n v es t i g a t i o n t h a t ma t e ri a l l y a ffe c t t h e va l u e o r d e sir a b i l i t y o f t h e p r o p er t y . (

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E a s t o n v . S t r a s s b u r g e r (1984) 152 Cal. App. 3d 90, 102, 199 Cal. Rptr. 383.) There is no duty of disclosure, however, where a realtor lacks knowledge of a defect or of facts giving rise to a d u t y t o i n q u i r e f u r t h e r . ( P a dge t t v . P ha r i s s (1977) 54 C a l . A p p . 4 t h 1 2 7 0 , 1 2 8 6 r e a l t o r h ad no knowledge of pending litigation concerning construction defects.) I n o p p o s i t i o n t o t h e mot i o n f o r s u m ma r y j u d g me n t , a p p e l l a n t s f i l e d a s e p a r a t e s t a t e me n t o f d i s p u t e d a n d u n d i s p u t e d f a c t s , c h a l l e n g i n g r e s p o n d e n t 's a l l e g a t i o n s . F o l l o w i n g a r e t h r e e o f t h e d i sp u t e d s t a t e me n t s : 1 ) R e s p o n d e n t s a l l e g e d t h e y h a d n e ver seen a completed copy of a t r a n s f e r di s c l o s ur e s t a t e me n t f r o m t h e p r e v i o u s l i s t i n g a g e n t t h a t d i s c l o se d t h e p r e se nc e o f a l an d fi l l . A p p e l l a nt s di s p u t e d t hi s s t a t e me n t , c l a i mi n g t h a t V i r g i n i a C . t e st i f i e d s h e k n e w w h e r e t h e d i s c l o s u r e f r o m t h e p r e v i o u s e s c r o w mi g h t b e l o c a t e d . T h e y c o n t e n d t h a t s h e did n o t t el l t h e m a b o u t t h e i l l e gi b l e di s c l o s u r e s t a t e me n t a n d fa i l e d t o e x p l ain t h a t i t co u l d l e a d t o a c o mp l e t e d i s c l o s u r e b y K e n t T . a n d t he b u y e r 's a g e n t i n t h e f a i l e d t r a n s a c t i on . V i r g i n i a C . r e c o u n t e d i n h er deposition that Grimes had a t t e mp t e d t o o b t a i n a mo r e l e g i b l e c o p y o f t h e d i s c l o s u r e s t a t e me n t f r o m K e n t T . , b u t h e h a d l o st t h e fi l e . V i r g i n i a C . t e s t i f i e d t h a t s h e h a d n o t a s k ed G r i me s i f t h e r e we r e o t he r r e a l t o r s wh o mi g h t h a v e h a d a c o p y o f t h e c o mpl e t e d T r a n s f e r D i s c l o s u r e S t a t e me n t . A l t h o ug h s h e w a s a w a r e t ha t T . H . w a s a co-listing agent with Kent T., it did not occur to her to contact h i m. C o n t r a r y t o a p p e l l a n t s ' c ha r a c t e r i z a t i o n o f t h i s e v i de nc e , C l i n e d i d n o t t e s t i fy t h a t s h e k n e w t h e p o s s i b l e l o c a t i o n o f t h e p r e v i o u s d i s c l o s u r e s t a t e me n t , o n l y t h a t s h e h a d s e e n a n i l l e g i b l e copy. 2 ) R e s p o n d e n t s a l l e g e d t h a t V i r g i n i a C. and Jim B. (listing agents at Broker B) had no knowledge of the landfill before the close of e s c r o w . A p p e l l a n t s d i s p u t e d t h i s s t at e me n t , a s se r t i n g t h a t Virginia C. held herself out a s k n o w i n g t h e S a n t a Y n e z V a l l e y b e c a u s e sh e w a s b o r n a n d r a i s e d t h e r e . T h e y c l a i me d t h a t B e c k e r t e s t i f i e d a t h i s d e p o s i t i o n t h a t h e c o u l d n o t r e me m b e r w h e n h e l e a r n e d o f t h e p r e v i o u s d i s c l o s u r e s t a t e me n t , b u t t h a t V i r g i n i a C . h a d i n f o r me d h i m o f i t s e x i s t e n c e .

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T h e p o r t i o n o f V i r g i n i a C 's d e p o s i ti o n i n c l u d e d i n t h e r e c o r d d o e s not contain any reference to he r b a c k g r o u n d o r h e r k n o w l e d g e o f t h e S a n t a Y n e z V a l l e y . B e c k er t e st i fi e d t h a t V i r gi n i a C . t ol d h i m o f a n i n c o m p l e t e a nd i l l e g i b l e s t at e me n t fr o m t h e fa i l e d t r a n s a c t i o n . H e d i d n o t r e c a l l w he n t h i s c o n v e r s a t i o n o c c u r r e d . T h e r e i s n o f a c t u a l s u p p o r t f o r a p p el l a n t s ' a l l e g a t i o n t h a t V i r g i n i a C . h a d s p e c i a l k n o w l e d g e o f t h e S a n t a Y n e z V a l l e y . J i m B 's k n o w l e d g e o f a n i l l e g i b l e d i s c l o s u r e s t a t e me n t d o e s n o t s h o w t h a t h e h a d k no w l e d g e of t h e l a n dfi l l . 3) Respondents alleged that there was no evidence that Ken K. (appellants' agent at Broker B), knew about the landfill. A p p e l l a n t s d i s p u t e d t h i s s t a te me n t , c o n t e n d i n g t h a t t h i s i n f o r ma t i o n w a s " c o m mo n k n o w l e d g e i n t h e R e a l E s t a t e C o m mu n i t y a n d h a d b e e n p u t i n t o t he M u l t i pl e L i s t i n g Bo o k a n d D a t a B a s e b y Wa y n e N . " Real estate agent Wayne N. testified that he provided i n for ma t i o n c o n c e rn i n g t h e l a n d fi l l t o t h e S a n t a Y n e z M u l t i p l e L i s t i n g S e r v i c e ( M LS) . T h e s t a t e me n t , " C o n t a c t a g e n t r e ga r d i n g l a n d fi l l " w a s i n s e rte d i n t h e M L S d a t a s h e e t . A t t h a t t i me , T . H . w a s t h e l i s t i n g a g e n t f o r t h e r a n c h . Wa y n N . d i d n o t c o m m u n i c a t e w i t h T . H . c o n c e r ni ng t h e l a n dfi l l . A p p el l a nt s fa i l t o a l l e g e fa c t s t o s h o w t h a t K e n K . h a d d i r ec t o r i mp u t e d k n o w l e d g e o f t h e c o n t e n t s o f t h e M L S o r i n f o r m a t io n i n t h e r e al e st a t e c o m m u n i t y c o n c e r ni ng t h e l a n dfi l l . Respondents had no fiduciary duty to investigate the c i r c u ms t a n c e s s u r r o u n d i n g t h e p r e v i ou s d i s c l o s u r e s t a t e me n t . I n short, they were not required to obtain a prior disclosure s t a t e me n t f r o m a d i f f e r e n t a g e n t r e l a t i ng t o a s e pa r a t e t r a n s ac t i on . A p p e l l a n t s h a v e fa i l e d t o ra i s e a t ri ab l e i s s ue o f fa c t t h a t r e s p on d e n t s k ne w o f t h e e x i s t e n c e o f t h e l a nd fi l l b e fo r e t h e c l o s e o f e s c r o w . W e n e e d n o t r e a c h a p pe l l a nt s ' a r g u me n t s c o n c e r ni ng d u a l a g e n c y , t h e f e e d i s put e o r t h ei r ob j e c t i o n s t o t h e declaration of respondents' expert. T r i a l c o u r t 's o r d e r g r a n t i n g s um m a r y j u d g me n t i s a f f i r me d . Costs on appeal are awarded to Respondents. E t h i c s i n r e a l e s t a t e t r a n sa c ti o n s a r e a n i mp o r t a n t p a r t o f the practice of real estate in California. The previous cases e mp h a s i z e t h e u r g e n c y r e g a r d i n g d i s c l o s u r e o f b o t h p h y s i c a l defects as well as agency relationships.

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