Do brokers representing sellers have a duty to disclose the only way a transaction will close is with approval of a "short sale" from the lender(s)? One court said Sellers yes but their broker NO!! ??? Here is a snip of that ruling:
At the hearing on the brokers‟ demurrer to the buyers‟ original complaint, the court asked why the seller had not been named as a defendant in the case. The buyers expressed doubt that the seller could pay a judgment. The court stated that the complaint lacked any allegation of personal knowledge on the part of the brokers, and suggested that the buyers‟ real claim was against the seller. It sustained the demurrer to the original complaint, with leave to amend.
At the hearing on the demurrer to the first amended complaint, the court concluded: “Well, I said this last time, and I repeat it this time. I think you‟ve got a great lawsuit against the seller of the property, but the seller of the property is not a named defendant in this case. I‟m guessing that the seller, because the seller is upside down in this, is basically judgment proof. And so you‟re searching around for a deep pocket. The deep pocket is the brokerage. But the brokerage appears . . . under the circumstances to have done nothing that breached any duty to your client, certainly did not engage in fraud that you allege. Basically I think the ruling in sum is that you picked the wrong target
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here.” It then sustained the demurrer to the first amended complaint without leave to amend.
As the foregoing shows, the court never stated that the seller was an indispensable party. Rather, the court said that the brokers had breached no duty to the buyers. At the same time, the court indicated a certain amount of sympathy for the buyers and suggested that they pursue an action against the seller—the party that had agreed to convey title free and clear for $749,000 and then failed to do so. This is not the same as saying that the demurrer was sustained without leave to amend for failure to join an indispensable party. The buyers simply misread the reporter‟s transcript. Consequently, we need not address their authorities concerning indispensable parties.
When I first read this, my gut was tied up in a big knot. If you follow my writings you are very aware of my position on disclosure so likely will understand my feelings of dismay.
Thank goodness there is an appeal process.
On the appeal, the higher court stated:OParticularly in these days of rampant foreclosures and short sales, “[t]he manner in which California‟s licensed real estate brokers and salesmen conduct business is a matter of public interest and concern. [Citations.]” (Wilson v. Lewis (1980) 106 Cal.App.3d 802, 805-806.) When the real estate professionals involved in the purchase and sale of a residential property do not disclose to the buyer that the property is so greatly overencumbered that it is almost certain clear title cannot be conveyed for the agreed upon price, the transaction is doomed to fail. Not only is the buyer stung, but the marketplace is disrupted and the stream of commerce is impeded.
My faith in justice has been restored. But I still have to ask, "what was that lower California court thinking?
For the entire Ruling on the appeal http://www.courtinfo.ca.gov/opinions/documents/G041906.PDF
By the way, Larry and Sheila, here ya go. Donne, this is your State. Thanks for the encouragement you guys.
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