California Civil Jury Instructions (CACI) (2017)

4109. Duty of Disclosure by Seller’s Real Estate Broker to Buyer

Download PDF
4109.Duty of Disclosure by Seller’s Real Estate Broker to Buyer
A real estate broker for the seller of property must disclose to the buyer
all facts known to the broker regarding the property or relating to the
transaction that materially affect the value or desirability of the
property. A broker must disclose these facts if he or she knows or
should know that the buyer is not aware of them and cannot reasonably
be expected to discover them through diligent attention and observation.
The broker does not, however, have to disclose facts that the buyer
already knows or could have learned with diligent attention and
observation.
New December 2013
Directions for Use
This instruction should be read after CACI No. 400, Negligence—Essential Factual
Elements, if a seller’s real estate broker’s breach of duty of disclosure to the buyer
is at issue. A broker’s failure to disclose known material facts to the buyer may
constitute a breach of duty for purposes of a claim for negligence. Causation and
damages must still be proved. This instruction may also be used with instructions
in the Fraud and Deceit series (CACI No. 1900 et seq.) for a cause of action for
misrepresentation or concealment. (See Holmes v. Summer (2010) 188 Cal.App.4th
1510, 1528 [116 Cal.Rptr.3d 419].)
For an instruction on the fiduciary duty of a real estate broker to his or her own
client, see CACI No. 4107, Duty of Disclosure of Real Estate Broker to Client. For
an instruction on the duty of the seller’s real estate broker under Civil Code section
2079 to conduct a visual inspection of the property and disclose to the buyer all
facts materially affecting the value or desirability of the property that an
investigation would reveal, see CACI No. 4108, Failure of Seller’s Real Estate
Broker to Conduct Reasonable Inspection—Essential Factual Elements.
Sources and Authority
• “ ‘[W]here the seller knows of facts materially affecting the value or desirability
of the property which are known or accessible only to him and also knows that
such facts are not known to, or within the reach of the diligent attention and
observation of the buyer, the seller is under a duty to disclose them to the
buyer. [Citations.]’ When the seller’s real estate agent or broker is also aware of
such facts, ‘he [or she] is under the same duty of disclosure.’ A real estate agent
or broker may be liable ‘for mere nondisclosure since his [or her] conduct in
the transaction amounts to a representation of the nonexistence of the facts
which he has failed to disclose [citation].’ ” (Holmes, supra, 188 Cal.App.4th at
pp. 1518–1519, original italics, internal citations omitted.)
• “The real estate agent or broker representing the seller is a party to the business
945
0025
transaction. In most instances he has a personal interest in it and derives a profit
from it. Where such agent or broker possesses, along with the seller, the
requisite knowledge . . . , whether he acquires it from, or independently of, his
principal, he is under the same duty of disclosure. He is a party connected with
the fraud and if no disclosure is made at all to the buyer by the other parties to
the transaction, such agent or broker becomes jointly and severally liable with
the seller for the full amount of the damages.” (Lingsch v. Savage (1963) 213
Cal.App.2d 729, 736 [29 Cal.Rptr. 201], footnote omitted.)
• “A breach of the duty to disclose gives rise to a cause of action for rescission
or damages.” (Alfaro v. Community Housing Improvement System & Planning
Assn., Inc. (2009) 171 Cal.App.4th 1356, 1383 [89 Cal.Rptr.3d 659].)
• “The ‘elements of a simple negligence action [are] whether [the defendant]
owed a legal duty to [the plaintiff] to use due care, whether this legal duty was
breached, and finally whether the breach was a proximate cause of [the
plaintiff’s] injury. [Citations.]’ We have already stated that the buyers alleged
facts sufficient to impose a legal duty on the brokers. Furthermore, they have
alleged facts sufficient to show a breach of that duty. Finally, the buyers alleged
that the breach caused them harm. In short, the buyers stated facts sufficient to
constitute a cause of action on a negligence theory. Our cursory analysis of this
one theory is enough to demonstrate that the trial court erred in sustaining the
brokers’ demurrer without leave to amend, but is not meant to preclude the
buyers’ pursuit of their other [fraud] theories.” (Holmes, supra, 188 Cal.App.4th
at p. 1528, internal citation omitted.)
• “Despite the absence of privity of contract, a real estate agent is clearly under a
duty to exercise reasonable care to protect those persons whom the agent is
attempting to induce into entering a real estate transaction for the purpose of
earning a commission.” (Holmes, supra, 188 Cal.App.4th at p. 1519.)
• “[A] seller’s agent has no affirmative duty to disclose latent defects unless the
agent ‘also knows that such facts are not known to, or within the reach of the
diligent attention and observation of the buyer.’ ” (Peake v. Underwood (2014)
227 Cal.App.4th 428, 445 [173 Cal.Rptr.3d 624], original italics.)
• “[W]hen a real estate agent or broker is aware that the amount of existing
monetary liens and encumbrances exceeds the sales price of a residential
property, so as to require either the cooperation of the lender in a short sale or
the ability of the seller to put a substantial amount of cash into the escrow in
order to obtain the release of the monetary liens and encumbrances affecting
title, the agent or broker has a duty to disclose this state of affairs to the buyer,
so that the buyer can inquire further and evaluate whether to risk entering into a
transaction with a substantial risk of failure.” (Holmes, supra, 188 Cal.App.4th
at pp. 1522–1523.)
• “[W]e do not convert the seller’s fiduciary into the buyer’s fiduciary. The
seller’s agent under a listing agreement owes the seller ‘[a] fiduciary duty of
utmost care, integrity, honesty, and loyalty . . . .’ Although the seller’s agent
CACI No. 4109 BREACH OF FIDUCIARY DUTY
946
0026
does not generally owe a fiduciary duty to the buyer, he or she nonetheless
owes the buyer the affirmative duties of care, honesty, good faith, fair dealing
and disclosure, as reflected in Civil Code section 2079.16, as well as such other
nonfiduciary duties as are otherwise imposed by law.” (Holmes, supra, 188
Cal.App.4th at p. 1528, internal citation omitted.)
• “Real estate brokers are subject to two sets of duties: those imposed by
regulatory statutes, and those arising from the general law of agency.” (Coldwell
Banker Residential Brokerage Co. v. Superior Court (2004) 117 Cal.App.4th
158, 164 [11 Cal.Rptr.3d 564].)
• “In enacting section 2079 [see CACI No. 4108], the Legislature did not intend
to preclude a real estate agent’s liability for fraud. However, because a seller’s
agent has no fiduciary relationship with a buyer, the courts have strictly limited
the scope of an agent’s disclosure duties under a fraudulent concealment
theory.” (Peake,supra, 227 Cal.App.4th at p. 444, intenral citation omitted.)
Secondary Sources
5 Witkin, Summary of California Law (10th ed. 2005) Torts, § 794
12 Witkin, Summary of California Law (10th ed. 2005) Real Property, § 473
Greenwald & Asimow, California Practice Guide: Real Property Transactions, Ch.
2-C, Broker’s Relationship And Obligations To Principal And Third Parties,
¶¶ 2:164, 2:172 (The Rutter Group)
California Real Property Sales Transactions (Cont.Ed.Bar 4th ed.) §§ 2.132–2.136
3 California Real Estate Law and Practice, Ch. 63, Duties and Liabilities of
Brokers, §§ 63.20–63.22 (Matthew Bender)
10 California Forms of Pleading and Practice, Ch. 103, Brokers, § 103.31 (Matthew
Bender)
BREACH OF FIDUCIARY DUTY CACI No. 4109
947
0027