A Georgia court has considered whether a brokerage was responsible for the alleged misconduct of an independent contractor salesperson when the brokerage had no direct involvement in the transaction. Keith Johnson (“Developer”) purchased a vacant tract of land and had it rezoned. He then hired an engineering firm to design plans for a subdivision layout. The plans were approved, and so the Developer began the construction of the subdivision. Following the completion of the subdivision infrastructure, the Developer began selling individual plots. Most of the plots had not been cleared prior to sale. Michael Jenkins (“Builder”) purchased Lot 7 (“Lot”) from the Developer in 1997. The Builder cleared Lot and built a home on the property.
During construction, the Builder noticed water accumulation on the back of the Lot, and he notified the Developer and the city about the problem but no corrective action was taken. The Builder attempted to alleviate the flooding by digging a trench to divert the water, but that did not help the situation. Following the construction of the home, the Builder sold the Lot, with Frances King (“Seller”) eventually purchasing the property in 1998. In 1999, the Seller wrote a letter to the Builder, complaining about the flooding on the property. The Builder suggested that the Seller contact the Developer or the city about these problems. The Seller listed the Lot for sale with Nadine Seckinger (“Salesperson”) of Heidt Real Estate Services, Inc. d/b/a Century 21 Heidt Realty (“Brokerage”).
The Salesperson had also been the listing agent in 1998, when the Seller had purchased the Lot. Ronald and Theresa Walker (“Buyers”) negotiated to purchase the Lot from the Seller. As part of the purchase process, the Buyers received a “seller’s disclosure” statement from the Brokerage. The statement said that the Seller was unaware of any past or present drainage problems on the property. The Salesperson testified that she was aware of the property’s flooding problems, but she “probably” had not reviewed the Seller’s disclosure statement. During visits to the Lot, the Buyers had noticed fresh dirt in the backyard. They hired an inspector and they claimed that the inspector had pointed out indications of flooding on the property. However, the inspector denied this and stated that he would have referred the Buyers to an engineer if he had made such observations. Following their purchase of the Lot, the Buyers experienced flooding on the property, finding that the backyard filed with water when it rained. The Buyers discussed the problem with the Salesperson, and she told them that she would try to get the problem fixed.
The Salesperson contacted the Developer, who did nothing. The Buyers then contacted the Developer directly, and he advised them to consult with a lawyer. The Buyers filed a lawsuit against the Seller, Developer, Builder, Brokerage, and the Salesperson. The lawsuit sought to rescind the purchase contract. In addition, they alleged that the Developer had negligently constructed the subdivision and a nuisance claim. They also brought fraud and negligent misrepresentation allegations against the Brokerage and Salesperson. The trial court ruled in favor of all defendants, including determining that the Brokerage was not liable for the actions of the Salesperson because she was an independent contractor. The Buyers appealed. The Court of Appeals of Georgia affirmed the trial court’s ruling in favor of the Brokerage and Salesperson, but partially reversed the rulings in favor of the Developer. The court first considered the nuisance allegations, which stated that the Developer had created a nuisance by building the land in such a way that it increased the water flow onto the Buyer’s property. The trial court had ruled that the claim was barred by the four-year statute of limitations, as the flooding had first been discovered on the Lot in 1997 and the lawsuit was not filed until 2002. However, the court found that the allegations that the Developer had created a continuing nuisance by clearing the land adjacent to the Buyer’s property following the Buyer’s purchase was not barred by the statute of limitations and so these allegations were sent back to the trial court.
Next, the court considered the allegations against the Salesperson. The Buyers claimed that the Salesperson had concealed the Lot’s flooding from them. The purchase contract contains a provision stating that the Buyers did not rely on any statements made by the real estate licensees and that the real estate licensees were not responsible for advising the Buyers. While the Buyers argued that the disclosure statement contained a misrepresentation, the court noted that this was the Seller’s disclosure statement and was not a disclosure from the Salesperson. Thus, the court affirmed the dismissal of the claims against the Salesperson. Finally, the court considered the claims against the Brokerage. The Buyers alleged that the Brokerage failed to timely disclose all adverse material facts known by the broker and which could not be discovered by a “reasonably diligent inspection of the property by the buyer”. Even though the Buyers did not allege that the Brokerage was aware of this information, they claimed that the Brokerage was negligent in overseeing the Salesperson, who was aware of the Lot’s flooding problems.
Looking at Georgia law, there was nothing which prevented the Brokerage from entering into an independent contractor relationship with its salespeople. Because the Buyers did not dispute that the Salesperson was an independent contractor, the Brokerage would only be liable for actions by the Salesperson in which the Brokerage exercised control over. The Brokerage had no involvement in the Buyer’s transaction, as the designated broker for the Brokerage testified he had no knowledge or involvement in this transaction and the Buyers offered no contrary evidence. Thus, the court affirmed the trial court’s ruling that the Brokerage had no liability for the Salesperson’s actions. Walker v. Johnson, 630 S.E.2d 70 (Ga. Ct. App. 2006).
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