HORIIKE v. COLDWELL BANKER RESIDENTIAL BROKERAGE COMPANY (To be called and continued to the September 2016 calendar.)

Respondents’ Petition for Review

Cal.May 20, 2014

>$218734 (cat “SUPREME COURT oNmo) FILED IN THE SUPREME COURT oe MAY 20 2014 OF THE STATE OF CALIFORNIA HIROSHI HORIIKE, Plaintiff and Appellant, Vv. COLDWELL BANKER RESIDENTIAL BROKERAGE COMPANY,a California Corporation, and CHRIS CORTAZZO,an individual, Defendants and Respondents. Frank A. McGuire Clerk Deput B246606 pay (Los Angeles County Super. Ct. No. $C110477) PETITION FOR REVIEW KLINEDINST PC Neil Gunny, Esq., Bar No. 76639 777 S. Figueroa Street, Suite 2800 Los Angeles, California 90017 Telephone: (213) 406-1100 Facsimile: (213) 406-1101 ngunny@klinedinstlaw.com GREINES, MARTIN,STEIN & RICHLAND LLP Kent L. Richland, Esq., Bar No. 51413 *Edward L. Xanders, Esq., Bar No. 145779 David E. Hackett, Esq., Bar No. 271151 5900 Wilshire Boulevard, 12th Floor Los Angeles, California 90036 Telephone: (310) 859-7811 Facsimile: (310) 276-5261 krichland@ gmsr.com Attorneys for Petitioners, Defendants and Respondents Coldwell Banker Residential Brokerage Companyand Chris Cortazzo No. S IN THE SUPREME COURT OF THE STATE OF CALIFORNIA HIROSHI HORIIKE, B246606 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. SC110477) V. COLDWELL BANKER RESIDENTIAL BROKERAGE COMPANY,a California Corporation, and CHRIS CORTAZZO,an individual, Defendants and Respondents. PETITION FOR REVIEW KLINEDINST PC Neil Gunny, Esq., Bar No. 76639 777 S. Figueroa Street, Suite 2800 Los Angeles, California 90017 Telephone: (213) 406-1100 Facsimile: (213) 406-1101 ngunny@klinedinstlaw.com GREINES, MARTIN,STEIN & RICHLAND LLP KentL. Richland, Esq., Bar No. 51413 *Edward L. Xanders, Esq., Bar No. 145779 David E. Hackett, Esq., Bar No. 271151 5900 Wilshire Boulevard, 12th Floor Los Angeles, California 90036 Telephone: (310) 859-7811 Facsimile: (310) 276-5261 krichland@ gmsr.com Attorneys for Petitioners, Defendants and Respondents Coldwell Banker Residential Brokerage Company and Chris Cortazzo TABLE OF CONTENTS ISSUE PRESENTED INTRODUCTION STATEMENT OF THE CASE A. Buyer Horiike Retains A Coldwell Salesperson To Locate A Residential Property To Purchase. The Buyer And His Salesperson Consummate A Sale With The Seller And The Seller’s Salesperson, Another Coldwell Salesperson From A Different Office. The Seller’s Salesperson And The Buyer Never Agree To Any Agency Relationship Between Them. The Buyer Sues Coldwell And The Seller’s Salesperson (But Not His Own Salesperson), Claiming The Seller’s Salesperson Falsely Represented The Home’s Square Footage. The Trial Court Holds That The Seller’s Salesperson Owed NoFiduciary Duty To The Buyer; It Grants Nonsuit To The Seller’s Salesperson On The Fiduciary-Duty Claim And Instructs The Jury That Coldwell Cannot Be Liable For Breach Of Fiduciary Duty Based On That Salesperson’s Acts. The Jury Finds For The Defendants On All Submitted Claims; The Court Enters A Defense Judgment. In A First-Impression Published Decision, The Court Of Appeal Reverses The Judgment, Holding Civil Code Section 2079.13, Subdivision (b), Makes The Seller’s Salesperson A Fiduciary Of The Buyer. Page TABLE OF CONTENTS (Continued) WHY REVIEW SHOULD BE GRANTED I, II. THIS COURT SHOULD GRANT REVIEW BECAUSE THE OPINION’S NEWFOUND IMPOSITION OF FIDUCIARY DUTIES IMPLICATES IMPORTANT STATEWIDE PUBLIC POLICY ISSUES THAT IMPACT ALL CALIFORNIA BUYERS AND SELLERS OF RESIDENTIAL PROPERTY AND THEIR AGENTS. A. Residential Sales Frequently Have Different Salespersons From The Same Brokerage On Opposite Sides. Prior To The Opinion, SalespersonsIn Intra-Firm Transactions Already Owed Substantial Non-Fiduciary Duties To Non-Principal Buyers OrSellers. The Opinion’s Newly-Imposed Fiduciary Duties Severely Harm The Interests And Expectations Of Buyers AndSellers. The Opinion Exposes Brokerage Firms And Their Salespersons To Conflicting Duties That Will Engender Chaos And Increased Litigation/Liability Exposure. Public Policy Is Best Served In Intra-Firm Transactions By The Current System Of Separate Salespersons Exclusively Representing The Buyer Or Seller And Owing Fiduciary Duties Solely To That Client. THE COURT SHOULD GRANT REVIEW TO RESOLVE IMPORTANT QUESTIONS REGARDING DUAL AGENCY AND THE PROPER CONSTRUCTION OF CIVIL CODE SECTION 2079.13. A. The Opinion Diverges From Settled Agency Law By Imputing A Principal’s Duties Downward ToIts Agents. il Page 13 13 13 15 16 21 23 25 26 TABLE OF CONTENTS (Continued) B. The Opinion Further Diverges From Settled Agency Law By Forcing Salespersons To Become Fiduciaries OfIndividuals They Never Agreed To Represent. C. The Opinion Presents Important Issues Of Statutory Construction On Which This Court Is The Final Arbiter. 1. The plain language and legislative history of the pertinent statutes demonstrate that the Legislature was not addressing intra-firm transactions. 2. The only logical construction of Civil Code section 2079.13, subdivision (b)—backed bythe language,legislative history, settled agency law and public policy—is that the statute codifies that a principal-agent relationship exists between a broker andassociate licensees, and therefore a licensee’s acts/duties are those of the broker. I. CONCLUSION CERTIFICATE OF COMPLIANCE iit Page 28 29 29 32 35 37 TABLE OF AUTHORITIES Cases: Ebnerv. Sheehan (1950) 99 Cal.App.2d 860 Holmes v. Summer (2010) 188 Cal.App.4th 1510 Lekko v. Comerstone Building Inspection Service (2001) 86 Cal.App.4th 1109 Michel v. Palos Verdes Network Group,Inc. (2007) 156 Cal.App.4th 756 Montoya v. McLeod (1985) 176 Cal.App.3d 57 Moserv. Bertram (1993) 115 N.M. 766, 858 P.2d 854 Naify v. Pacific Indemnity (1938) 11 Cal.2d 5 Rental Housing Owners Assoc.v. City of Hayward (2011) 200 Cal.App.4th 81 Resnik v. Anderson & Miles (1980) 109 Cal.App.3d 569 Rivkin v. Century 21 Teran Realty LLC (2008) 887 N.E.2d 1113, 858 N.Y.S.2d 55 Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903 iv Page 26 15 15 15-17, 21 35 27 28 28 35 31 26 TABLE OF AUTHORITIES (Continued) Page California Statutes: Business & Professions Code, § 17200 7 Business & Professions Code, § 17500 7 Civil Code, § 2079 et seq. 10, 29 Civil Code, § 2079.13 1, 3, 4, 10, 11, 29, 31-35 Civil Code, § 2079.14 10, 29 Civil Code, § 2079.16 7,15 Civil Code, § 2079.21 18 Civil Code, § 2079.24 10, 29 Civil Code, § 2330 26 Federal Statutes: 26 U.S.C. § 1031 19 Qut-Of-State Statutes: Alaska Stat., § 08.88.600(d) 24 AlaskaStat., § 08.88.640 24 Colo. Rev. Stat. §§ 12-61-803(6) 24 Conn. Gen.Stat., § 20-3251 24 Del. Code Ann.tit. 24, § 2933(c)(1) 24 Del. Code Ann.tit. 24, § 2936(a) 24 TABLE OF AUTHORITIES (Continued) Out-Of-State Statutes: Ga. Ann. Code §§ 10-6A-13 Idaho Code, § 54-2084(2)(d) Idaho Code, § 54-2088 225 Ill. Comp.Stat. 454 / 15-50 Ind. Code, § 25-34.1-10-6.5 Ind. Code, § 25-34.1-10-7.8 Ind. Code, § 25-34.1-10-12.5(a) Iowa Code § 543B.59 Kan.Stat. Ann., § 58-30,109 Kan. Stat. Ann., § 58-30,113 Ky. Rev.Stat., § 324.010(4) Ky.Rev.Stat., § 324.121 32 Me. Rev.Stat., § 13271 32 Me.Rev.Stat., § 13278 Mass. Gen. Laws Ann., ch. 112, § 87aaa 3/4, subd.(c) Mich. Comp.Laws, § 2517 21 N.C. Admin Code 58A.0104 N.D. Cent. Code, § 43.23-06.1 N.D. Cent. Code, § 43.23-12.3 vi Page 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 TABLE OF AUTHORITIES (Continued) Out-Of-State Statutes: N.H.Rev.Stat., § 331-A:2, subd. (1-b.) N.H.Rev.Stat., § 331-A:2, subd. (IV-a.) N.H.Rev.Stat., § 331-A:25-e N.M.Code R., § 16.61.1.7(R) N.M.Code R., § 16.61.19.10(A)(3) Neb.Rev.Stat., § 76-2413 Neb.Rev.Stat., § 76-2427 Nev. Rev.Stat., § 645.252(d)(1) Nev.Rev. Stat., § 645.253 Ohio Rev. Code, § 4735.51 Ohio Rev. Code, § 4735.53 Ohio Rev. Code, § 4735.70 Or. Rev.Stat., § 696.815(4) Or. Rev.Stat., § 696.815(5) 63 Penn.Stat., § 455.606e R.C.W. § 18.86.020(2) R.I. Gen. Laws § 5-20.6-5 S.C. Code, § 40-57-137 Tenn. Code. § 62-13-406(a) Vii Page 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 TABLE OF AUTHORITIES (Continued) Page Out-Of-State Statutes: Va. Ann. Code, § 54.1-2139.1 24 Other Authorities: Comparison of Residential Real Estate Franchises (July/Aug. 2011) REALTOR,at pp. 28-29 [as of May 15, 2014] 14 2 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 3:12 10, 17, 27, 28 National Association of Realtors, Code of Ethics and Standards of Practice (Jan. 2014) Standard of Practice 16-13 22 Pendergrass, The Real Estate Consumer’s Agency And Disclosure Act: The Case Against Dual Agency (1996) 48 Ala. L. Rev. 277 13, 17, 23 RE/MAX LLC,Press Release, Study Confirms: RE/MAX Sells More Real Estate (July 25, 2013) [as of May 1, 2014]> 14 Rest.3d Agency, § 1.01 28 Rest.3d Agency, § 7.01 27 Sichelman, Berkshire Hathaway To Shake Up Real Estate Franchise Landscape, September 20, 2013, Los Angeles Times 14 Vill TABLE OF AUTHORITIES (Continued) Other Authorities: Szto, Dual Real Estate Agents And The Double Duty Of Loyalty (2002) 41 Real Est. L.J. 22 10 West’s Ann. Civ. Code (2010) §§ 2079.14-2079.24 10A West’s Ann. Civ. Code (Supp. 2014) §§ 2373-2382 3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 130 1X Page 13, 24 30 29, 34 26 ISSUE PRESENTED Whenthe buyerand the seller in a residential real estate transaction are each independently represented by a different salesperson from the same brokerage firm, does Civil Code section 2079.13, subdivision (b), make each salesperson (without their consent) the fiduciary of both the buyer and the seller, with the duties to provide undivided loyalty, confidentiality and counseling to both their own client and the opposing side? INTRODUCTION! Forthe first time in California history, a published opinion (Second Appellate District, Division Five) holds that when the buyerandthe seller in a California residential real estate transaction are each independently represented by a different salesperson from the same brokerage, each salesperson becomesa “dual agent’”—thefiduciary to both the buyer and the seller—by operation of law and withoutregard to the intentions of the parties or their salespersons. Of course, salespersons and their clients have long enjoyed the freedom to choose dual agency in a given transaction. ' Multiple agencyrelationships arise in real estate sales: (1) a salesperson, commonly knownasa real estate agent, has an agency relationship with the client, i.e., the buyeror seller; (2) the broker with whom the salespersonis licensed oraffiliated has an agency relationship with the salesperson’s client; and (3) the salesperson has an agency relationship with the broker. Asa result, references to “agent” and “principal” in real estate statutes and cases can be unclear. For clarity, we describe the parties as salespersons, broker and client (or buyerorseller), and avoid the terms “real estate agent,” “listing agent”or “selling agent.” 1 Dual agencyat the salesperson level has proven workable where the interests of the buyer andseller are well-aligned. Thetrial court had held—in accordance with settled agency-law principles and longstandingreal estate practice inside California and across the country—that whenthe buyerand seller have each chosento hire their ownsalesperson, it is only the brokerage, not the individual salespersons, that owes fiduciary duties to both parties. Thus, absent contrary agreement, the seller’s salesperson is not a dual agent butis, instead, only a fiduciary to his client—theseller. Reversing the trial court, the opinion up-ends California law and creates a public-policy nightmare for prospective buyers andsellers of California residences. Given the prevalence of national and regional brokerage firms, salespersons from the same firm often end up on opposite sides of residential transactions. By transforming each salesperson into the fiduciary of both parties, the opinion deprives buyers andsellers in intra- firm transactions of their choice of having the undivided loyalty of an exclusive agent. The salespersons will owe fiduciary duties to parties whoseinterests inherently conflict. The opinion will force salespersonsto harm their original client by disclosing to the other side sensitive information about the client’s motivations or the salesperson’s personal beliefs. For example, a seller’s salesperson would haveto disclose to the buyerthat the seller needs to close a sale quickly orthat the seller has financial difficulties, and the buyer’s salesperson would haveto disclose to the seller his opinion that he thinksthe seller is getting a bad deal. 2 Also, because fiduciaries owe duties to research and investigate their clients’ needs, and to counsel their clients, the opinion forces salespersons to ferret out sensitive information from, and provide counsel to, complete strangers—all against everyone’s will. The result is perverse, as this case exemplifies. Here, the opinion transformsthe seller’s salesperson into the buyer’s fiduciary, even though they met only once, spoke only a few words to each other, andliterally do not even speak the same language. The opinion will be deeply disruptive. Because compliance with fiduciary duties to one client will frequently entail a breach of fiduciary duties to the other, salespersons risk being sued no matter what they do. The opinion inevitably will trigger an increasein litigation that will cause a concomitant increase in insurance premiums. Alternatively, large firms may avoid intra-firm transactions altogether, which would shut buyers and sellers off from huge portions of the market. The opinion fails to address any of these important public policy issues. Instead, the holding rests entirely on a highly questionable interpretation of Civil Code section 2079.13, subdivision (b). The opinion construes that subsection as providing that a brokerage firm’s duties to the buyerandthe seller are imputed to the firm’s salespersons. But the notion that the Legislature intended that result is particularly dubious,in light of the fact that the opinion’s construction diverges starkly from settled agency law in two crucial respects: (1) it effectively imposes a heretofore unknown doctrine of respondeatinferior by imputing the broker’s duties as principal downwardto its agent-salespersons; and (2)itforces the salespersons and non-principal buyer/seller into an agency relationship againsttheir will, even though agency law requires consent. In fact, the legislative historyis clear that the legislative goal was to require informational disclosures about existing agency law, not to announcea revolution in that law. The opinionrests on a single sentence buried in Civil Code section 2079.13, subdivision (b), a subsection that merely provides definitions for other statutes. The only logical construction of that sentence—backed by the overall statutory context and language,the legislative history, settled agency law and public policy—is that the Legislature intended to confirm that a principal-agent relationship exists between a broker and associate licensees and therefore the licensee’s duties are also those of the broker. Thus,as the trial court found, a salesperson’s fiduciary duties to the client are imputed to the brokerage firm, as are the salesperson’s non-fiduciary duties (of honesty and fair dealing) owed to the non-client. But the Legislature never intended that an independent salesperson should magically transform into a fiduciary of a non-client simply because a salesperson from the same brokerage firm ends up on the otherside. The Legislature did not intend the chaotic public-policy disaster the opinion will engender. The Court should grant review to resolve these important issues. STATEMENT OF THE CASE A. Buyer Horiike Retains A Coldwell Salesperson To Locate A Residential Property To Purchase. Plaintiff Hiroshi Horiike retained Chizuko Namba,a salesperson for defendant Coldwell Banker Residential Brokerage Company (“Coldwell’’), to locate a residential property to purchase in California. (Opinion [“Opn.”], 3.) Horiike resides in Hong Kong. (6RT 2542-2543.) Horiike speaks Mandarin Chinese and Japanese; he cannot speak English fluently and reads only “very simple” English words. (6RT 2544.) Salesperson Namba’s first language is Japanese and she spoke with Horiike only in Japanese. (QRT 3332.) During the previous four years, Horiike had worked exclusively with Nambaas a salesperson, viewing 40 to 50 luxury homeswith her for potential purchase. (QRT 3332-3333.) B. The Buyer And His Salesperson Consummate A Sale With The Seller And The Seller’s Salesperson, Another Coldwell Salesperson From A Different Office. Salesperson Nambasawa listing for a Malibu residence that was exclusively listed by another Coldwell salesperson, Chris Cortazzo. (Opn. 2-3.) The owners had retained Cortazzo to sell their property; he listed it on a multiple listing service. (Opn.2.) Nambawasaffiliated with Coldwell’s Beverly Hills office. (QRT 3335.) Cortazzo wasaffiliated with Coldwell’s Malibu West office. (8RT 3159-3160.) Nambaarranged for Cortazzo to show the property to Horiike. (Opn. 3.) Horiike visited the property on one day only; this was the only time he and the seller’s salesperson, Cortazzo, ever met or spoke. (Opn. 3; 5RT 2275; 7RT 2823.) It was also the first time that the two Coldwell salespersons (Namba and Cortazzo) had ever met. (ORT 3335.) Cortazzo does not speak Mandarin or Japanese. (6RT 2465.) He spoke only briefly with Horiike during the house tour. (SRT 2271-2272.) During the tour, Cortazzo handed Hortike a flier describing the property and a visual inspection disclosure. (Opn. 3-4; 7RT 2753; 9RT 3338.) Their brief conversations that one day, and those two documents, constituted the full extent of Cortazzo’s direct contact with Horiike during the entire transaction. (SRT 2275.) Horiike and Nambadrew up a purchaseoffer the night of the house visit, before Horiike returned to Hong Kong. (QRT 3343-3344.) Escrow opened shortly thereafter and successfully closed within a month. (SRT 2274, 2295-2296.) C. The Seller’s Salesperson And The Buyer Never Agree To Any Agency Relationship Between Them. Cortazzo represented the seller only. (6RT 2471-2472; ORT 3388- 3389.) He was neverasked and never agreed to represent buyer Horiike. 6 (6RT 2471-2472; 7RT 2823; 9RT 3338-3389.) Horiike admitted that he never asked Cortazzoto act as his real estate agent, and that he “had nothing to do with” Cortazzo and “only met him once.” (7RT 2823.) Nosales or other documentlisted Cortazzo as an agent for Horiike or as a “dual agent.” (E.g., [AA 17-23 [purchase offers/agreements].) Horiike andthe seller both signed a “Confirmation Real Estate Agency Relationships” form that identified Coldwell as the agent of both the buyer and seller; Cortazzo signed for the seller’s agent and Nambasigned for the buyer’s agent. (LAA 154.) Horiike also signed a “Disclosure And Consent For Representation Of More Than One Buyer OrSeller” form that identified the potential dual agent as Coldwell (LAA 159), and statutorily- required “Disclosure Regarding Real Estate Agency Relationships” form that identified Coldwell as the agent. (LAA 156; Civ. Code, § 2079.16.) D. The Buyer Sues Coldwell And The Seller’s Salesperson (But Not His Own Salesperson), Claiming The Seller’s Salesperson Falsely Represented The Home’s Square Footage. Several years after purchasing the property, buyer Horiike filed a complaint against Coldwell and Cortazzo for intentional and negligent misrepresentation, breach of fiduciary duty, unfair business practices in violation of Business and Professions Code section 17200, and false advertising in violation of Business and Professions Code section 17500. (Opn. 5.) Helater added a claim for intentional concealment. (/bid.) 7 Each claim rested on the same allegations: Cortazzo had misrepresented the home’s actual square footage, causing Horiike to pay a higher price than warranted. (Opn. 5; [AA 1-12.) Horiike claimed no wrongdoing by his own salesperson, Namba. (Opn.5.) E. The Trial Court Holds That The Seller’s Salesperson Owed NoFiduciary Duty To The Buyer; It Grants Nonsuit To The Seller’s Salesperson On The Fiduciary- Duty Claim AndInstructs The Jury That Coldwell CannotBe Liable For Breach Of Fiduciary Duty Based On That Salesperson’s Acts. Thetrial court concluded that Cortazzo owed nofiduciary duty to the buyer. (Opn. 2, 5.) It therefore granted nonsuit to Cortazzo on the claim for breach of fiduciary duty. (/bid.) Buyer Horiike stipulated that he was not seeking recovery based on any acts of his own salesperson, Namba. (Opn. 5.) The court therefore instructed the jury that Coldwell could be liable for breach of fiduciary duty only if the jury found that some representative of Coldwell other than Cortazzo and Nambabreacheda fiduciary duty to the buyer. (/bid.) F. The Jury Finds For The Defendants On All Submitted Claims; The Court Enters A Defense Judgment. Byspecial verdict, the jury ruled in favor of Coldwell and Cortazzo on the claims for intentional and negligent misrepresentation, intentional concealment, and breach offiduciary duty (regarding Coldwell only). (Opn.5.) It found underthe negligent misrepresentation count that Cortazzo made a misrepresentation of material fact but that he “honestly believed, and had reasonable groundsfor believing, the representation was true when he madeit.” (Opn. 5.) The jury also “found no concealment, because Cortazzo did notintentionally fail to disclose an important or material fact that Horiike did not know andcould not reasonably have discovered.” (Opn. 5-6.) The parties had stipulated that the trial court could rule on the two Business and Professions Code claimsafter the jury trial. (Opn. 5.) The court concludedthat “(t]he jury’s findings of no actionable misrepresentation or concealment” mandated judgmentfor the defendants on those claims. (2AA 239:10-12.) It therefore entered judgmentin favor of Coldwell and Cortazzo. (Opn.6.) G. In A First-Impression Published Decision, The Court Of Appeal Reverses The Judgment, Holding Civil Code Section 2079.13, Subdivision (b), Makes TheSeller’s Salesperson A Fiduciary Of The Buyer. The buyer appealed, arguing the trial court erred in finding Cortazzo owed nofiduciary duty to the buyer. (Opn. 2, 6.) The Court of Appeal agreed in a published decision, reversing the judgment and remanding for a new trial. (Opn.2.) The published opinion holds, as an issue offirst impression, that “when a brokeris the dual agent of both the buyer andthe sellerin a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer andtheseller as the broker.” (Opn. 2.) It therefore concluded that Cortazzo, the seller’s salesperson, owed the buyer the samefiduciary duty that Coldwell (and the buyer’s salesperson) owed the buyer. (Opn. 7-8.) The opinion does not rely on case law or any legal doctrine, such as the law of agency, respondeatsuperior, or vicariousliability.” Instead, the opinionrelies on statutory construction, concluding “[t]he duties of brokers and salespersonsin real property transactions are regulated by a comprehensive statutory scheme”set forth in Civil Code section 2079 et seq. (Opn. 7.) Ultimately, the holding rests on the court’s interpretation of onestatute, Civil Code section 2079.13, subdivision (b). (Opn 7-8.) That statute defines the term “associate licensee” for purposes of sections 2079.14 to 2079.24: “Associate licensee” means a person whois licensed asa real estate broker or salesperson . . . and whois either licensed under a broker or has entered into a written contract with a brokerto act as the broker’s agent in connection with acts requiring a realestate license and to function under the broker’s supervision in the capacity of an associate licensee. The agentin the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent. * The opinion quotes isolated treatise language about a misunderstanding by salespersons. (Opn. 8, quoting 2 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 3:12, pp. 68-69.) But the treatise cites no authority and the commentis unclear. (See ibid.) 10 Whenanassociate licensee owes a duty to any principal, or to any buyeror seller whois not a principal, in a real property transaction, that duty is equivalent to the duty owedto that party by the broker for whom the associate licensee functions. (Civ. Code, § 2079.13, subd. (b).) The opinion concludes that because Cortazzo(the seller’s salesperson) and Namba(the buyer’s salesperson) were associate licensees of Coldwell, Coldwell was a “dual agent” of the buyerandseller, and Coldwell thus owed fiduciary duties to both the buyer andseller. (Opn. 7- 8.)° The opinion then holds that Cortazzo, by operation of section 2079.13, subdivision (b), owed notjust the seller a fiduciary duty, but also the buyer: UnderCivil Code section 2079.13, subdivision (b), the duty that [the seller’s salesperson] Cortazzo owed to any principal, or to any buyer who wasnot a principal, was equivalent to the duty owedto that party by [broker Coldwell]. [Coldwell] owed a fiduciary duty to [buyer] Horiike, and therefore, Cortazzo oweda fiduciary duty to Horiike. (Opn.8.) Thetrial court, the opinion holds, therefore erred in granting nonsuit to Cortazzo on the fiduciary-duty claim and in instructing the jury that Coldwell could not be liable for breach of fiduciary duty based onhisacts. cee> Underthestatutes, an “‘[a]gent’ means a person acting under provisions of [the general agencystatutes] in a real property transaction, and includes a person whois licensed as a real estate broker . . . and under whoselicensea listing is executed or an offer to purchase is obtained.” (Civ. Code, § 2079.13, subd. (a).) In turn, a “‘[d]Jual agent’ meansan agentacting,either directly or through an associate licensee, as agent for both the seller and the buyer in a real property transaction.” (/d., subd. (d).) Under California common law,dual agents have fiduciary duties to both clients—the buyerand seller. (Opn.7.) 11 (Opn. 8.) The opinion thenrelates the broad scope of Cortazzo’s purported fiduciary duties to his non-client, the buyer: ““TA] broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty. [Citations.] “The broker as a fiduciary has a duty to learn the material facts that may affect the principal’s decision. Heis hired for his professional knowledge and skill; he is expected to perform the necessary research and investigation in order to know those important matters that will affect the principal’s decision, and he has a duty to counsel and advise the principal regarding the propriety and ramifications of the decision. The agent’s duty to disclose material information to the principal includes the duty to disclose reasonably obtainable material information.’” (Opn.9, citation omitted.) The opinion concludes that even though—asthe jury properly found on the non-fiduciary-duty-related claims—Cortazzo honestly believed, and had reasonable groundsfor believing, his square-footage representations to the buyer and he lacked fraudulent intent and did notintentionally conceal anything,he still could be potentially liable for breach of fiduciary duty to the buyer. (Opn. 9-10.) Defendants moved for rehearing solely on the groundthat the remand instructions were unclear. The petition was denied. 12 WHY REVIEW SHOULD BE GRANTED I. THIS COURT SHOULD GRANT REVIEW BECAUSE THE OPINION’S NEWFOUND IMPOSITION OF FIDUCIARY DUTIES IMPLICATES IMPORTANT STATEWIDE PUBLIC POLICY ISSUES THAT IMPACT ALL CALIFORNIA BUYERS AND SELLERS OF RESIDENTIAL PROPERTY AND THEIR AGENTS. A. Residential Sales Frequently Have Different Salespersons From The Same Brokerage On Opposite Sides. There are two types of dual agencyin the real estate industry: (1) an individual represents both the buyer andthe seller in the same transaction, and (2) different salespersons from the samereal estate brokeragefirm represent the buyer andtheseller, i.e, “intra-firm transactions” where the firm itself is a dual agent but there are separate, independent salespersons—the context here. (Pendergrass, The Real Estate Consumer’s Agency And Disclosure Act: The Case Against Dual Agency (1996) 48 Ala. L. Rev. 277, 279 fn. 8 [“Agency/Disclosure Act’].) Intra-firm transactions are common;in somebrokeragefirms, they comprise over 50% of the transactions. (Szto, Dual Real Estate Agents And The Double Duty OfLoyalty (2002) 41 Real Est. L.J. 22, 43-44 [“Dual Agents’|.) There are an estimated thirty-two national and regional real estate franchise brands operating across the country; over half of the 13 nation’s realtors work under a franchise banner. (Sichelman, Berkshire Hathaway To Shake Up Real Estate Franchise Landscape, September20, 2013, Los Angeles Times .) By someestimates, the five largest firms alone (RE/MAX, Coldwell Banker, Keller Williams, Century 21 and Prudential) control almost 31% of the U.S marketin terms of transaction sides (buyeror seller). (RE/MAX LLC, Press Release, Study Confirms: RE/MAX Sells More Real Estate (July 25, 2013) [as of May 1, 2014]>.) Amongthat top five, the numberof associate licensees and offices nationwide is gargantuan (2011 figures): Century 21: 119,206 associates among 7,864 offices; RE/MAX:89,628 licensees among 6,259 offices; Coldwell: 87,203 associates among 3,202 offices; Keller Williams: 77,672 licensees among 701 offices; and Prudential: 55,000 associates among 1,700 offices. (Comparison ofResidential Real Estate Franchises (July/Aug. 2011) REALTOR,at pp. 28-29 [as of May 15, 2014].) Accordingly, intra-firm transactions are a recurring, important issue across California and the entire country. 14 B. Prior To The Opinion, Salespersons In Intra-Firm Transactions Already Owed Substantial Non-Fiduciary Duties To Non-Principal Buyers OrSellers. In any real estate transaction, the seller’s salesperson and the buyer’s salesperson owetheir respective client a fiduciary duty “of utmostcare, integrity, honesty, and loyalty.” (Civ. Code, § 2079.16; accord, Lekkov. Cornerstone Building Inspection Service (2001) 86 Cal.App.4th 1109, 1116.) Salespersons generally owe a fiduciary duty only to their client (their principal in the agencyrelationship) and do not owefiduciary duties to the buyeror seller whois not their principal. (Holmes v. Summer(2010) 188 Cal.App.4th 1510, 1528 (Holmes); Michel v. Palos Verdes Network Group, Inc. (2007) 156 Cal.App.4th 756, 762 (Michel).) Salespersons, however, also owe non-fiduciary duties to the buyer or seller whois not their principal. Those duties include the “[d]iligent exercise of reasonable skill and care in performanceof the [salesperson’s] duties,” a duty “of honest and fair dealing and goodfaith,” and a “duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not knownto, or within the diligent attention and observation of, the parties.” (Civ. Code, § 2079.16; accord, Holmes, supra, 188 Cal.App.4th at pp. 1523-1524, 1528; Civ. Code, § 2079, subd. (a) [salespersons representing or cooperating with sellers owe prospective buyers duty “to conduct a reasonably competent and diligent visual inspection of the property” and disclose “all facts materially affecting 15 the value or desirability of that property that an investigation would reveal”].) This balance—salespersons owing fiduciary duties to their client but owing non-fiduciary duties of honesty and fairness to the buyer or seller on the other side—furthers California public policy. A party has the absolute fidelity of its own salesperson and duties of honesty and fairness from any other salesperson. The opinion scuttles that balance in intra-firm transactions by transforming that exclusive salesperson into a dual agent owing fiduciary duties to both sides. This is a seismic shift in California law. The fiduciary duties that salespersons oweclients fundamentally differ from the non-fiduciary duties owed non-principals. (Michel, supra, 156 Cal.App.4th at p. 762.) As shownbelow,this seismic shift is a public-policy disaster. C. The Opinion’s Newly-Imposed Fiduciary Duties Severely Harm TheInterests And Expectations Of Buyers And Sellers. The opinion’s revolutionary holding contravenes the interests and expectations of any prospective buyerorseller of a California residence. Sellers and buyers depend uponan individual salesperson who owes them the fiduciary duty of undivided loyalty. Each party to a transaction benefits by having a representative exclusively in that party’s corner who can bargain on that client’s behalf with undiluted loyalty. In an intra-firm transaction, the brokerage firm achievesthat goal if separate salespersons 16 independently represent the buyer andthe seller and each is designated the fiduciary of that party only. But the opinion destroys that ability by making each salesperson in an intra-firm transaction a dual fiduciary. This leaves consumers with “divided loyalty and nonexclusive representation” since the salespersons owethe same duties to both parties. (Agency/Disclosure Act, supra, 48 Ala. L. Rev. at p. 295.) It deprives consumersof their choice of having an exclusive agent owing undivided loyalty. The opinion also destroys the ability of buyers andsellers in intra- firm transactions to share sensitive information with their salesperson. By transforming each salespersoninto the fiduciary of both the buyer and seller, the opinion requires each salesperson to disclose to both parties “all information it possesses that is material to [each] principal’s interests.” (Michel, supra, 156 Cal.App.4th at p. 762.) Where a dual agent “knows confidential information regarding oneprincipalthat is information material to the second principal, there is no common law protection against the duty to disclose this information to the second principal.” (2 Miller & Starr, supra, Agency, § 3:16, p. 83.) “An agent whorepresents both principals must makea full and complete disclosure of all material facts to both parties regarding any matter that would affect either principal’s decision to buy, and the price and terms of such purchase, even thoughthe facts relate to confidential information of the other party.” (/bid., emphasis in original, fn. omitted.) 17 Moreover,a fiduciary’s disclosure duty is not limited to previously- knowninformation. For example, the opinion follows case law that eeefiduciaries must “‘perform the necessary research and investigation in order to know those important matters that will affect the principal’s decision’” eeeand must “‘counsel and advise the principal regarding the propriety and 999ramifications of the decision.’” (Opn.9, citation omitted, emphasis added.) Thus, not only will the opinion force salespersons in intra-firm transactions to disclose known information to the other side, each salesperson must arguably investigate what the other salesperson knowsor should know. The public-policy impactis particularly severe because dual agents mustdisclose everything other than the buyer’sor the seller’s ultimate position on price. (Civ. Code, § 2079.21 [“A dual agent shall not disclose to the buyer that the seller is willing to sell the property at a price less than the listing price, without the express written consentof the seller. A dual agentshall not discloseto the seller that the buyer is willing to pay a price greater than the offering price, without the express written consentof the buyer.”]; ibid. [“This section does not alter in any way the duty or responsibility of a dual agent to any principal with respect to confidential information other than price” (emphasis added)].) The opinion thus creates a nightmare for buyers and sellers. Most transactions involve sensitive non-price information that buyers andsellers wanttheir salesperson to keep confidential. Salespersons almost always possess information abouttheir client’s motivations andinterests that can harm bargaining leverage if disclosed to the other side. Yet, the 18 opinion—bytransforming each salesperson into a fiduciary of both parties—forces salespersons to makedisclosures to the other side that will severely harm the principal-client. For example, seller’s salespersons in intra-firm transactions will have to harm theseller’s interests by disclosing to the buyerthat: e the seller is highly motivated to sell quickly (e.g., because it already purchased another homeorthe seller needs to raise cash immediately because of a pending divorce); * acomparable homeis selling nearby for substantially less; ¢ the salesperson believes the property is worth less than thelist price; e the seller has financial difficulties; e the seller is willing to throw in extras (e.g., furnishings) or make concessions on non-price terms(e.g., escrow periods, financing terms, contingencies, cost allocations). Buyers and their salespersons fare no better. The opinion will force a buyer’s salespersonto discloseto the seller that: ¢ The buyer needs to close quickly (e.g., to consummate an exchangesale under 26 U.S.C. § 1031); ¢ the buyer prefers the homeover others in the neighborhood; ¢ the buyer is amenable to non-price concessions; e the buyer hasfinancial difficulties; e the salesperson believesthe list price is too low. 19 This topsy-turvy world flatly contradicts the expectations of California consumers. When anindividual(not a brokeragefirm) is the dual agent, the parties can easily perceive the potential risk—therisk of sharing sensitive information is obvious. Butintra-firm transactions fundamentally differ. Even if Horiike and the seller understood that Coldwell was a dual agent and the deep pocketultimately responsible for any fiduciary default by their salesperson, Horiike did not perceive the seller’s salesperson Cortazzo to be his agent (indeed, they met only once and did not speak the same language). Nordid the seller perceive Namba to be its agent. Worse, given the nature of real estate transactions, the opinion’s transformation of salespersons from exclusive agents into dual fiduciaries occurs dangerously midstream. When a prospective buyerorseller retains a salesperson, no one knows who will end up on the other side. Yet, under the opinion, if the other side ends up having an agent from the same brokerage firm, the exclusive agency transforms into a dual agency and the parties lose protection of any confidential non-price information shared with their salesperson. The buyer’sor seller’s only options are to: (1) agree to this nightmare; (2) forgo the sale or purchase they wanted to consummate;or (3) fire their salesperson and retain one from a different brokerage, which would force the seller to pay two listing commissions and force the buyer to pay out of pocket for a new salesperson with the original one being paid from the purchase proceeds. 20 The opinion contravenes the expectations, interests and needs of California buyers andsellers. D. The Opinion Exposes Brokerage Firms And Their Salespersons To Conflicting Duties That Will Engender Chaos AndIncreasedLitigation/Liability Exposure. The opinionis not just a nightmare for buyers andsellers. It creates chaos for brokerage firms and their salespersons, which will further harm consumers. A fiduciary’s failure to disclose any material fact that might affect “the principal’s decision, which is known(or should be known)to the fiduciary, may constitute constructive fraud.” (Michel, supra, 156 Cal.App.4th at p. 763, internal quotation marks omitted.) Thus, the opinion leaves salespersonsin intra-firm transactionsin the situation of owing inherently conflicting duties where they risk being sued no matter what they do. If aseller’s salesperson fails to disclose to the buyer a material fact aboutthe seller, the buyer might sue. But if the salesperson discloses the material fact, the seller might sue. Compliance with fiduciary duties to one side will frequently constitute breach of fiduciary duties to the other. Salespersons are “damned if they do, and damnedif they don’t.” Other compliance issues abound. If both salespersonsin intra-firm transactions are now fiduciaries of both parties, each salesperson must research and investigate to determine the important matters that will affect either party’s decision and provide counselto both parties. So, if Cortazzo 21 wasHoriike’s fiduciary, as the opinion holds, Cortazzo needed to determine Horiike’s needs and provide him counsel—even thoughthey had no prior relationship and do not speak the same language. The opinion forces salespersonsinto fiduciary relationships with parties they never chose to represent. To avoid being sued for breach of fiduciary duty, each salesperson must essentially duplicate the other’s services to someone who may be a complete stranger. Salespersons face doublethe fiduciary duty and doublethe liability risk, all against their own will—and,as explained below,utterly contrary to fundamentalprinciples of agency law. The opinion also subjects salespersonsto duties that are virtually impossible to follow without violating ethical rules. Salespersons are not supposedto directly contact individuals represented by another salesperson absent consent, or provide substantive services to parties to exclusive representation agreements. (See Nat. Assn. of Realtors, Code of Ethics and Standards of Practice (Jan. 2014) Standard of Practice 16-13.) Yet the opinion will force salespersons to engage in such communications and services to avoid being sued for breach offiduciary duty. And yet by doing so they risk suit for breaching ethical duties. This chaos will trigger an explosionin litigation, as lawyers seize advantageof these new conflicting duties. The increasedlitigation and liability exposure will trigger increases in insurance premiums. Transaction costs inevitably will rise—all to the detriment of California consumers. And somebrokerage firms and salespersons may chooseto forsake intra- firm transactions altogether, which would further harm California 22 consumers. Reducingthe availability of intra-firm transactions would mean “buyers are limited in their market choices because they have fewer homes to choose from,andsellers are limited in their market exposure because their home is shown to fewer buyers, which translates into lowerselling prices.” (Agency/Disclosure Act, supra, 48 Ala. L. Rev. at p. 295.) The opinion’s public-policy impactis not just troubling—itis the exact opposite of what sound public policy would mandate. E. Public Policy Is Best Served In Intra-Firm Transactions By The Current System Of Separate Salespersons Exclusively Representing The Buyer Or Seller And Owing Fiduciary Duties Solely To That Client. From a public-policy standpoint, the current regime—the one followed bythe trial court—is plainly the soundest approach: Where two different salespersons from the same brokerage firm represent the buyer and the seller, each owesa fiduciary duty exclusively to his or her respective client; and the brokerage firm owesa dual fiduciary duty to ensure the salespersons do not breach their duties and to provide a deep pocketin the event of a breach. This approach tracks standard agency law and how brokerage firms always operated in California before this opinion. It is also the standard view of how intra-firm transactions work: [B]Jecause many brokerage firms dominate their marketplace with hundredsoflistings, consumers cannot avoid using the services of licensees within the same brokerage. A seller or buyer may severely 23 limit their choices of potential buyers or homesif they refuse dual agencyin this scenario. In this situation each agent is supposed to be the fiduciary ofa different principal and the brokerage erects a ‘Chinese wall’ to protect confidential information between the two agents. (Dual Agents, supra, 41 Real Est. LJ. at p. 43, emphasis added,fn. omitted.) Indeed, across the country, twenty-eight states have enacted legislation that expressly accommodatesintra-firm transactions by providing for separate licensees to represent the buyer and the seller and owefiduciary duties solely as to their respective client.* As explained below,although California’s statutes do not expressly so provide, the Court of Appeal erred in interpreting those statutes as precluding this common- 4 See Alaska: Alaska Stat. §§ 08.88.600(d), 08.88.640(a), 08.88.640(b); Colorado: Colo. Rev.Stat. §§ 12-61-803(6)(a)-(c); Connecticut: Conn. Gen. Stat. § 20-3251; Delaware: Del. Code Ann.tit. 24, §§ 2933(c)(1), 2936(a); Georgia: Ga. Ann. Code §§ 10-6A-13(a)-(b); Idaho:Idaho Code §§ 54-2084(2)(d), 54-2088; Illinois: 225 Il]. Comp.Stat. 454 / 15-50; Indiana: Ind. Code §§ 25-34.1-10-6.5, 25-34.1-10-7.8, 25-34.1-10-12.5(a); Iowa: Iowa Code § 543B.59(1)-(2); Kansas: Kan.Stat. Ann. §§ 58-30,109(b)(1), 58-30,109(b)(4), 58-30,113; Kentucky: Ky. Rev. Stat. §§ 324.010(4), 324.121(1), 324.121(2); Maine: 32 Me. Rev.Stat. §§ 13271, 13278; Massachusetts: Mass. Gen. Laws Ann., ch. 112, § 87aaa 3/4, subd. (c); Michigan: Mich. Comp. Laws §§ 2517(11)(d), 2517(7), 2517(8); Nebraska: Neb. Rev. Stat. §§ 76-2413, 76-2427; Nevada: Nev. Rev. Stat. §§ 645.253, 645.252(d)(1); New Hampshire:N.H.Rev.Stat. §§ 331-A:25-e, 331-A:2, subd. (I-b.), 331-A:2, subd. (IV-a.); New Mexico: N.M.Code R. §§ 16.61.1.7(R), 16.61.19.10(A)(3); North Carolina: 21 N.C. Admin Code 58A.0104(i)-(); North Dakota: N.D. Cent. Code §§ 43,23-12.3, 43.23-06.1; Ohio: Ohio Rev. Code §§ 4735.51, 4735.53(B), 4735.53(C), 4735.70; Oregon: Or. Rev.Stat. §§ 696.815(4), 696.815(5); Pennsylvania: 63 Penn.Stat. §§ 455.606e(a)(1), 455.606e(b)(1); Rhode Island: R.I. Gen. Laws § 5-20.6-5(b)-(f); South Carolina: S.C. Code §§ 40-57-137(P)(1), 40-57-137(P)(2), 40-57-137(P)(4); Tennessee: Tenn. Code. § 62-13-406(a); Virginia: Va. Ann. Code §§ 54.1-2139.1, 54.1-2139.1(A); Washington: R.C.W.§ 18.86.020(2). 24 sense approach—the only approach that comports with settled agency principles. Il. THE COURT SHOULD GRANT REVIEW TO RESOLVE IMPORTANT QUESTIONS REGARDING DUAL AGENCY AND THE PROPER CONSTRUCTION OF CIVIL CODE SECTION2079.13. As shownbelow,the opinion radically diverges from settled agency law: It imputes the broker’s duties as principal downwardto the salesperson as the broker’s agent andit forces a fiduciary relationship on salespersons and their clients without their consent. These fundamental departures from settled law create important public policy issues in their ownright. But they also confirm that the opinion raises important issues of statutory interpretation. Had the Legislature intended the sea changethat the opinion adopts, it certainly would have doneso in crystal clear fashion, rather than the contorted fashion found by the Court of Appeal. In point of fact, the legislative history makesclear that in enacting this legislation the Legislature intended to preserve, not change, existing agency law. These important agency-law andstatutory-interpretation issues cry out for review by this Court. 25 A. The Opinion Diverges From Settled Agency Law By Imputing A Principal’s Duties Downward To Its Agents. The opinion’s holding that Coldwell’s duties to the buyer and the seller can be imputed downward to its salespersons, and each salesperson therefore is a fiduciary of both parties, contravenessettled agency law. Under long-established agency-law principles, imputation flows one way only—from agentto principal, not from principal to agent. All liabilities and duties that accrue to an agent (here, salespersons Namba and Cortazzo) accrue equally to the principal (here, Coldwell): An agentrepresents the principal for all purposes within the scope of the agent’s actual or ostensible authority. Within thatlimit, all rights andliabilities that accrue to the agent from transactions the agent enters into on his or her own accountaccrueto the principal. (3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 130, p. 175.) The Legislature codified this fundamental rule over 140 years ago, in Civil Code section 2330. There is no reciprocal doctrine that imputes a principal’s liabilities onto its agents by operation of law. An agentis notliable for the principal’s nonperformanceor breachesof duties, contractual or otherwise: “The relationship ofprincipal and agent works the other way — the principalis bound by the acts of the agent, if the agency covers the act in question.” (Ebner v. Sheehan (1950) 99 Cal.App.2d 860, 863-864, emphasis added; accord Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903, 929.) Just as agents are not responsible for the duties imposed upon principals, agents are not responsible for their principal’s breaches of those 26 duties. There is no doctrine of respondeatinferior: “The [real estate] agent is only liable to third persons for his or her own wrongful acts or omissions. While a principal may be vicariously liable for the wrongful acts of an agent, .. . absent fault, an agent cannot be vicariously liable for the wrongful acts of the principal.” (2 Miller & Starr, Cal. Real Estate, supra, § 3:36 at p. 212; accord Rest.3d Agency, § 7.01, com.d. [“An agentis not subjectto liability for torts committed by the agent’s principal that do not implicate the agent’s own conduct; there is no principle of ‘respondeat inferior.”’].) For example, in Moser v. Bertram (1993) 115 N.M. 766 [858 P.2d 854], the New Mexico Supreme Court held (under standard agency law and contrary to the opinion here) that wheretheseller’s salesperson and the buyer’s salesperson work for the samereal estate brokerage firm, the seller’s salesperson does not owea fiduciary duty to the prospective buyer. eesThe Supreme Court rejected the buyer’s argumentthat “‘all salespeople employed by a given broker must be boundbyal] of the fiduciary relationships of that broker’”; it recognizedthat “liability simply does not flow between coagents”and that while each salesperson’s fiduciary duty to its client will extend to the broker, the salespersons are notliable for the other salesperson’s fiduciary duty that may be imputed to the broker. (115 N.M.at pp. 767-768 [858 P.2d at pp. 855-856].) Here, under standard agency-law principles, the fiduciary duties that Namba owed buyer Horiike and that Cortazzo owedthe seller could be imputed to Coldwell as principal, and Coldwell’s deep pocket could be 27 liable for Namba’s and Cortazzo’s respective breaches; but the fiduciary duties that Namba and Cortazzo each owedtheir respective client would not flow up to Coldwell as principal and then downto the other salesperson. The opinion contravenessettled agency law. B. The Opinion Further Diverges From Settled Agency Law By Forcing Salespersons To Become Fiduciaries Of Individuals They Never Agreed To Represent. The opinion also diverges from settled agency law in another key respect: It forces salespersons, buyers, and sellers into fiduciary relationships without their consent. Cortazzo and Horiike never agreed to any agency relationship, nor did Nambaandtheseller. But the opinion imposes onebyoperation of law. Undersettled agencylaw,a real estate agent “cannot be burdened with [fiduciary] obligations against his or her will.” (2 Miller & Starr, Cal. Real Estate, supra, § 3.5, at p. 16.) The creation of an agencyrelationship requires consent: “Agencyis the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consentssoto act.” (Rest.3d Agency, § 1.01, emphasis added; accord, Naify v. Pacific Indemnity (1938) 11 Cal.2d 5, 12 [“actual agency must rest on agreement or consent]; Rental Housing OwnersAssoc. v. City ofHayward (2011) 200 Cal.App.4th 81, 91 [Absent mutual consent. . . there can be no agency’’].) 28 Understandard agency law, Cortazzo could not be a fiduciary of Hortike because he and Horiike never agreed to an agencyrelationship; for the same reason, Namba could notbethe seller’s fiduciary. The opinion, however, forces Cortazzo and Namba to become agents of a non-principal without their consent andforces the buyerand theseller to relinquish their choice of having an exclusive agent. For this additional reason, the opinion flouts settled agency law and again infringes on California public policy. C. The Opinion Presents Important Issues Of Statutory Construction On Which This Court Is The Final Arbiter. The opinion does not discuss agency law. Instead, the holding that the two salespersons owedual fiduciary duties rests on the court’s construction of Civil Code section 2079 et seq., in particular section 2079.13, subdivision (b). Asthe final arbiter of statutory interpretation, only this Court can resolve this issue. As shown below,there are multiple, overwhelming reasons for this Court to conclude that the opinion’s interpretation is dead wrong. 1. Theplain languageandlegislative history of the pertinent statutes demonstrate that the Legislature wasnot addressing intra-firm transactions. Civil Code section 2079.13, subsection (b), is part of a statute that merely defines terms for purposes of Civil Code sections 2079.14 to 2079.24. These statutes were originally enacted by a 1986 bill that became operative in 1988. (See LOA West’s Ann. Civ. Code (Supp. 2014) §§ 2373- 29 2382,historical and statutory notes.) In 1995, the statutes were repealed and re-codified—without change—attheir current location. (See 10 West’s Ann.Civ. Code (2010) §§ 2079.14-2079.24, historical and statutory notes.) Accordingly, the 1986 bill’s legislative history is the pertinent one. Petitioners are submitting that history through a concurrent request for judicial notice (“RJN’”). The legislative history reveals the following: ¢ The Legislature and the bill’s sponsor (the California Association of Realtors) enacted the statutes to ensure that real estate agents disclosed to prospective buyers andsellers the existing agencyrules, not to change existing law by expanding or diminishing the duties of agents, brokers or licensees. (RJN 45, 86 [“the bill is not intended to create any new liability’], RJN 53 [the bill “attempts to enunciate existing law’’]; RJN 54 [the bill “does not mandate sellers, buyers or real estate brokers to accept or function in any particular agency relationship, but maintains the options now available and the constraints now applicable under California law (primarily evolved by the courts)’”’].) ¢ The bill’s focus was to ensure that buyers andsellers received informational disclosures about the types of agency relationships to reduce confusion and to minimizethe rescission of real estate sales based on misunderstandings regarding whom an agent represented. (RJN 44-45, 52- 54, 57-62, 81-86, 96-98.) Listing agreements often made any agenta seller sub-agent, which resulted in buyers inadvertently sharing confidential information with a seller’s agent or a dual agent. (RJN 62, 82, 97.) 30 e There was no focus or discussion on intra-firm transactions. Moreover, consistent with this legislative history, the enacted statutes do not address intra-firm transactions. They focus only on an individual person acting as agent. Section 2079.13, subdivision (a), defines an “agent” to be “a person acting under[the general agencystatutes] in a real property transaction, and includes a person who islicensed asa real estate broker. ..”’ (Emphasis added.) Subdivision (b), in turn, provides that “[t]he agent in the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent.” (Emphasis added.) Thus, when subdivision (d) defines a “dual agent’ as “an agent acting, either directly or through an associate licensee, as agent for both the seller and the buyer,”it is referring to a person representing both sides, not a brokerage firm that has separate salespersons independently representing each side. Theintra-firm transactions at issue here were not on the Legislature’s radar. (See Rivkin v. Century 21 Teran Realty LLC (2008) | 887 N.E.2d 1113, 1118-1119 [858 N.Y.S.2d 55, 60-61] [concluding that when the New York legislature adopted a particular real estate disclosure requirement, its concern was consumerconfusion over whether an individual brokeror salesperson was acting for the seller, the buyer, or both, not whether a brokeragefirm might be representing multiple parties—the disclosure statute speaks “in terms of an ‘agent,’ defined as ‘a person who is licensed as a real estate broker or real estate sales associate,” instead of 31 saying ‘“‘any person, firm, limited liability company or corporation” (emphasisin original)].) The opinion ignores this distinction. It re-writes and distorts the statute by stating that “[u]nder this scheme, an ‘agent’ is a licensed real estate broker ‘under whoselicensea listing is executed or an offer to purchaseis obtained.’” (Opn. 7, emphasis added.) That’s not what the statute says. Underthe statutes, an agent is a person. The 1986 bill was not aboutintra-firm transactions. 2. The only logical construction of Civil Code section 2079.13, subdivision (b)—backed by the language, legislative history, settled agency law and public policy—is that the statute codifies that a principal- agentrelationship exists between a broker and associate licensees, and therefore a licensee’s acts/duties are those of the broker. The opinion compoundsthe confusion by construing section 2079.13, subdivision (b), as meaning that “the duty that Cortazzo owed to any principal, or to any buyer who wasnota principal, was equivalent to the duty owedto that party by [Coldwell]” and therefore “Cortazzo owed a fiduciary duty to Horiike” because Coldwell “owed a fiduciary duty to Horiike.” (Opn. 8.) Even ignoring (as the opinion does)that subdivision (b)’s reference to “agent” actually refers to a person, something Coldwell is not, the opinion’s construction is illogical and contrary to the only reasonable reading ofthe statute. 32 Subdivision (b)’s last sentenceis not artfully written. But the opinion’s constructionis illogical and renders portions nonsensical. The critical sentencein the statute states: “When an associate licensee owes a duty to any principal, or to any buyerorseller whois not a principal, ina real property transaction, that duty is equivalent to the duty owedto that party by the broker for whom the associate licensee functions.” (Civ. Code, § 2079.13, subd. (b), emphasis added.) Fiduciary duties are not owed to non-principals; as explained previously, salespersons only owe non- fiduciary duties of honesty and fair dealing to buyers/sellers who are not principals. A broker (like Coldwell) representing both the buyer and the seller, however, owes dual fiduciary duties. The opinion thus reads the statute as imputing Coldwell’s dual fiduciary duties downwardto both salespersons. But that means,in the context of intra-firm transactions where separate salespersons represent the buyerandtheseller, that the statute would effectively read as follows: Whenan associate licensee owes a non-fiduciary duty to the buyer or seller whois not a principal, that non-fiduciary duty is equivalent to thefiduciary duty owed bythe brokerto that party. If the Legislature had meant to change the type of duty owed by the associate licensee by imputing the broker’s duty downward,its use of the word “equivalent” wasillogical. Equivalent meansthat the duties on both sides of the equation are equal, not that one duty is transformedinto a different one. Nor does it make sense to assumethat the Legislature intended, through such ambiguousterms, to diverge radically from settled 33 agencylaw byforcing associate licensees to becomefiduciaries of a non- principal buyer/seller without anyone’s consent and to impute a broker- principal’s duties downwardto its salesperson-agents. Instead, the only reasonable reading ofthe statute is that the Legislature merely intended to confirm that associate licensees and their brokers are in an agencyrelationship, and therefore whatever duty the licensee owesto a particular buyeror seller is imputed to the broker. The statutory language, read as a whole, supports that construction. The sentence that immediately precedes the “equivalent duty” sentencestates: “The agentin the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent.” (Civ. Code, § 2079.13, subd. (b).) In this light, the next sentence logically reads that the broker—asthe principal in the agencyrelationship with its associate licensees—is responsible for the licensee’s duties and acts. That interpretation, unlike the opinion’s construction, comports with settled agency law andpublic policy. It also comports with the legislative history: The Legislature stated, in enacting the 1986 bill, that it intended to “/m]ake clear that associate real estate licensees act as agents of brokers under whom they are licensed, and who,in turn, are agents of buyers, sellers or buyers andsellers in residential real property transactions coveredbythis act.” (LOA West’s Ann. Civ Code (Supp. 2014) Historical and Statutory Notes to former § 2373, emphasis added.) 34 And,as noted above,the legislative history also showsthat the Legislature intended to require disclosures of existing agency law, not to diverge from it by imposing new duties. At the time of the 1986 bill, real estate salespersons were considered agents of brokers, making their duties and acts—in legal effect—the duties and acts of the brokers. (See,e.g, Resnik v. Anderson & Miles (1980) 109 Cal.App.3d 569, 572-573 [a real estate salesperson “‘is strictly the agent of the broker under whom heis licensed”; “a principal-agent relationship” exists]; Montoya v. McLeod (1985) 176 Cal.App.3d 57, 63 [salesperson was an agent of her employing broker and thus “her acts as agent were, in legal effect, his acts as principal’’].) Likewise, undersection 2079.13, subdivision (b), the duties of the associate licenseesare, in legal effect, the duties of the broker. The opinion’s contorted construction finds no support in case law,the legislative history, agency principles or public policy. Ii. CONCLUSION. Absent review,the opinion’s deleterious impact will be immediate. The opinion will be binding in all California trial courts, forcing brokerage firms and salespersons to comply with its mandate orelse risk inordinate liability exposure. This case tees up the issues in a particularly straightforward fashion. The plaintiff-buyer never sued his own salesperson (who undeniably owed a fiduciary duty) and stipulated that his salesperson did nothing wrong. The 35 seller’s salesperson—now deemedto owefiduciary duties to the buyer—only metthe buyer once, had virtually zero communications with him, and does not even speak the same language as the buyer. And the two salespersons workedfor different offices and never metbefore this transaction. This case presents the perfect vehicle for resolving the important public-policy and statutory-interpretation issues presented bythis petition. Review should be granted. Dated: May 19, 2014 Respectfully submitted, KLINEDINST PC Neil Gunny GREINES, MARTIN, STEIN & RICHLAND LLP Kent L. Richland Edward L. Xanders David E. Hackett wy. Edvard LXnde Edward L. Xanders Attorneys for Petitioners, Defendants and Respondents Coldwell Banker Residential Brokerage Company and Chris Cortazzo 36 CERTIFICATE OF COMPLIANCE Counsel of Record hereby certifies, pursuant to California Rules of Court, rule 8.504(d)(1), that the PETITION FOR REVIEWcontains 8,358 words, not including the tables of contents and authorities, the caption page, signature blocks, or this Certification page. Dated: May 19, 2014 E duvarel ( . Xance — Edward L. Xanders 37 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California. I am overthe age of 18 and nota party to the within action; my business address is 5900 Wilshire Boulevard, 12th Floor, Los Angeles, California 90036. On May19, 2014,I served the foregoing document described as: PETITION FOR REVIEWontheparties in this action by serving: Victor Nathaniel Pippins, Jr David W. Macey 401 West “A” Street Law Offices of David W. Macey,P.A. Suite 2600 135 San Lorenzo Avenue, PH-830 San Diego, California 92101 Coral Gables, Florida 33146 Appellate Counsel for Plaintiff Appellate Counsel for Plaintiff Robert J. Shulkin Hon. John H. Reid The Law Department Los Angeles County Superior Court Coldwell Banker Residential Brokerage Company 1725 MainStreet 5161 California Avenue, Suite 250 Santa Monica, California 90401-3299 Irvine, California 92617 [LASC Case No. SC110477] Co-Counsel for Defendant/Respondent Clerk of the Court California Court of Appeal Second Appellate District, Division Five 300 South Spring Street Los Angeles, California 90013 [Court of Appeal Case No. B 246606] (X) BY MAIL: Asfollows: I am “readily familiar” with this firm’s practice of collection and processing correspondence for mailing. Under that practice, it would be deposited with United States Postal Service on that same day with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. I am awarethat on motion of party served, service is presumedinvalid if postal cancellation date or postage meter date is more than 1 day after date of deposit for mailing in affidavit. Executed on May 19, 2014, at Los Angeles, California. (X) (State) I declare under penalty of perjury under the lawsof the State of California that the foregoing is true and correct. Sunita xd. Ce Anita F. Cole Filed 4/9/14 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATEDISTRICT DIVISION FIVE HIROSHI HORIIKE, Plaintiff and Appellant, V. COLDWELL BANKER RESIDENTIAL BROKERAGE COMPANYet al., Defendants and Respondents. B246606 (Los Angeles County Super. Ct. No. SC110477) APPEALfrom ajudgment of the Superior Court of Los Angeles County, John H. Reid, Judge. Reversed and remanded. Victor N. Pippins and David W. Maceyfor Plaintiff and Appellant. Klinedinst PC and Neil Gunny for Defendants and Respondents. A broker represented both the buyerand theseller in a real property transaction through two different salespersons. The buyer brought several claims against the broker and the salesperson wholisted the property for sale, including breach offiduciary duty. Thetrial court granted a nonsuit on the claim for breach of fiduciary duty against the salesperson on the groundthat the salesperson wholisted the property did not have a fiduciary duty to the buyer. The court also instructed the jury that the broker had no liability for breach of fiduciary duty based on the salesperson’s acts. The jury returned a verdict in favor of the defense on the remaining causes of action. The buyer contendsthat the salesperson had a fiduciary duty equivalent to the duty owed bythe broker, andthetrial court incorrectly granted the nonsuit and erroneously instructed the jury. We agree. Whena brokeris the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the samefiduciary duty to the buyer and the seller as the broker. The buyer was prejudiced by the erroneousrulings, because the jury’s findings of fact did not resolve the omitted issues concerning breachoffiduciary duty. Therefore, we reverse the judgment and remandfor a newtrial. FACTS Defendant Chris Cortazzo is a salesperson for defendant Coldwell Banker Residential Brokerage Company (CB). In 2006, the ownersofa residential property in Malibu engaged Cortazzoto sell their property. The building permit lists the total square footage of the property as 11,050 square feet, including a single family residence of 9,224 square feet, a guest house of 746 square feet, a garage of 1,080 square feet, and a basement of unspecified area. Cortazzo listed the property for sale on a multiple listing service (MLS) in September 2006. Thelisting service provided Cortazzo with public record information for reference, which stated that the living area of the property was 9,434 square feet. The listing that Cortazzo created, however, stated the home“offers approximately 15,000 square feet of living areas.” Cortazzo prepared flier for the property whichstated it “offers approximately 15,000 square feet of living areas.” In March 2007, a couple madean offer to purchase the property. They asked Cortazzo for verification of the living area square footage. Cortazzo provided letter from the architect stating the size of the house under a current Malibu building department ordinance was approximately 15,000 square feet. Cortazzo suggested the couple hire a qualified specialist to verify the square footage. The couple requested the certificate of occupancyandthe architectural plans, but no architectural plans were available. In the real estate transfer disclosure statement, Cortazzo noted from his visual inspection that adjacent parcels were vacant and subject to development. He repeatedhis advice to hire a qualified specialist to verify the square footage of the home,stating that the broker did not guarantee or warrant the square footage. Whenthe couple learned architectural plans were not available, they requested a six-day extension to inspect the property. The sellers refused to grant the extension and the couple cancelled the transaction at the end of March 2007. In July 2007, Cortazzo changed the MLSlisting to state that the approximate square footage was “0/O.T.,” by which he meant zero square feet and other comments. Plaintiff Hiroshi Horiike was working with CB salesperson Chizuko Namba to locate a residential property to purchase. Namba saw Cortazzo’s listing for the Malibu property and arranged for Cortazzo to show the property to Horiike on November1, 2007. Cortazzo gave Horiike a copyofthe flier stating the property had 15,000 square feet of living areas. Escrow opened on November9, 2007. Cortazzo sent a copy of the building permit to Namba. Nambaprovided a copy of the permit to Horiike with other documents. | The parties to the transaction signed a confirmation of the real estate agency relationships as required by Civil Code section 2079.17. The document explained that CB,as the listing agent and the selling agent, was the agent of both the buyer andseller. Cortazzo signed the documentas an associate licensee ofthelisting agent CB. Namba signed the documentas an associate licensee of the selling agent CB. Horiike also executed a form required under Civil Code section 2079.16 for the disclosure of three possible real estate agency relationships. First, the form explained the relationship ofa seller’s agent acting under listing agreement with the seller. The seller’s agent acts as an agent for the seller only and has a fiduciary duty in dealings with the seller. The seller’s agent has obligations to both the buyer andthe seller to exercise reasonable skill and care, as well as a duty of fair dealing and goodfaith, and a “duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observationof, the parties.” The second type ofrelationship, whichis not at issue in this case, involves the obligations of an agent acting for the buyer only. An agent acting only for a buyer has a fiduciary duty in dealings with the buyer. A buyer’s agent also has obligations to the buyer andseller to exercise reasonable care, deal fairly and in good faith, and disclose material facts. Thethird relationship described was an agent representing both the seller and the buyer. “A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer.” An agent in a dual agencysituation has a fiduciary duty to both the seller and the buyer, as well as the duties to buyer andseller listed in the previoussections. Horiike signed the disclosure form as the buyer and Cortazzo signed as an associate licensee for the agent CB. In the visual inspection disclosure that Cortazzo provided to Horiike, he noted adjacent vacant lots were subject to building development. He did not add a handwritten note of advice to hire a qualified specialist to verify the square footage of the home,as he had in the previous transaction. Horiike completed the property transaction. In preparation for work on the property in 2009, Horiike reviewed the building permit. He asked Cortazzo to verify that the property had 15,000 squarefeet of living areas. Horiike’s expert testified at trial that the living areas of the hometotaled 11,964 square feet. The defense expert testified the home’s living areas totaled 14,186 square feet. PROCEDURAL BACKGROUND On November23, 2010, Horiike filed a complaint against Cortazzo and CB for intentional and negligent misrepresentation, breach of fiduciary duty, unfair business practices in violation of Business and Professions Code section 17200, and false advertising in violation of Business and Professions Code section 17500. The parties agreed that the claims based on violations of the Business and Professions Code would be determined by the court following the jurytrial. After the presentation of Horiike’s case to the jury, Cortazzo moved for nonsuit on the cause of action for breach of fiduciary duty against him. Thetrial court granted the motion on the ground that Cortazzo had no fiduciary duty to Horiike. Horiike stipulated that he was not seeking recovery for breach of fiduciary duty based on any action by Namba. Therefore, the court instructed the jury that in order to find CB liable for breach of fiduciary duty, the jury had to find some agent of CB other than Namba or Cortazzo had breached a fiduciary duty to Horiike. The court granted Horiike’s request to submit an additional cause of action to the jury for intentional concealment against both defendants. The jury returned a special verdict in favor of Cortazzo and CB. The jury found Cortazzo did not makea false representation of a material fact to Horiike, so there was no intentional misrepresentation. However, the jury made a contrary finding in considering the claim for negligent misrepresentation, finding that Cortazzo had madea false representation of material fact to Horiike. There wasnoliability for negligent misrepresentation, because the jury found Cortazzo honestly believed, and had reasonable grounds for believing, the representation was true when he madeit. The jury found no concealment, because Cortazzo did not intentionally fail to disclose an important or material fact that Horiike did not know and could not reasonably have discovered. Lastly, the jury found that CB did not breachits fiduciary duty to Horiike. Thetrial court determined the jury’s findings resolved the remaining claims in favor of Cortazzo and CB. Therefore, on October 30, 2012, the court entered judgment in favor of Cortazzo and CB. Horiikefiled a motion for a newtrial on the ground the verdict was internally inconsistent, which the court denied. Horiike filed a timely notice of appeal. DISCUSSION Standard of Review “A nonsuit in a jury case or a directed verdict may be granted only when disregarding conflicting evidence, giving to the plaintiffs’ evidence all the value to which it is legally entitled, and indulging every legitimate inference which may be drawn from the evidencein plaintiffs’ favor, it can be said that there is no evidence to support a jury verdict in their favor. [Citations.]’ [Citation.]” (Hernandez v. Amcord, Inc. (2013) 215 Cal.App.4th 659, 669.) “In reviewing a grant of nonsuit, the appellate court evaluates the evidence in the light most favorable to the plaintiff. [Citation.] The judgment of nonsuit will be affirmed if a judgmentfor the defendantis required as a matter of law, after resolvingall presumptions, inferences and doubts in favorofthe plaintiff. [Citation.] The review of a grant of nonsuit is de novo. [Citation.]” (Hernandez v. Amcord, Inc., supra, 215 Cal.App.4th at p. 669.) “‘The existence and scope of duty are legal questions for the court.’ [Citations.]” (Coldwell Banker Residential Brokerage Co. v. Superior Court (2004) 117 Cal.App.4th 158, 163.) However, “No judgmentshall be set aside, or new trial granted, in any cause, on the ground of misdirection ofthe jury . . . or for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage ofjustice.” (Cal. Const., art. VI, § 13.) Duty of a Salesperson Acting for a Dual Agent Horiike contends that Cortazzo, as an associate licensee of CB, owed a fiduciary duty to him equivalent to the fiduciary duty owed by CB. Weagree. The duties of brokers and salespersonsin real property transactions are regulated by a comprehensive statutory scheme. (Civ. Code, § 2079 et seq.) Under this scheme, an “agent” is a licensed real estate broker “under whoselicense listing is executed or an offer to purchase is obtained.” (/d., § 2079.13, subd. (a).) An “associate licensee” is a licensed real estate broker or salesperson “whois either licensed under a broker or has entered into a written contract with a brokerto act as the broker’s agent in connection with acts requiring a real estate license and to function underthe broker’s supervision in the capacity of an associate licensee.” (/d., subd. (b).) “‘Dual agent’ means an agent acting, either directly or through an associate licensee, as agent for both the seller and the buyer in a real property transaction.” (/d., subd.(d).) “The agent in the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent. When an associate licensee owes a duty to any principal, or to any buyeror seller whois not a principal, in a real property transaction, that duty is equivalent to the duty owedto that party by the broker for whom the associate licensee functions.” (Civ. Code, § 2079.13, subd. (b).) “TA] broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty. [Citations.]” (Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, 25.) “[A] dual agent has fiduciary duties to both the buyerand seller.” (Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 414.) CBacted as the dual agent of the buyer andtheseller in this case, as was confirmed on the disclosure forms provided to Horiike. The disclosure form explicitly stated that a dual agent hasa fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with either the seller or the buyer. (See Assilzadeh v. California Federal Bank, supra, 82 Cal.App.4th at p. 414.) Cortazzo executed the forms on behalf of CB as an associate licensee. Under Civil Code section 2079.13, subdivision (b), the duty that Cortazzo owed to any principal, or to any buyer who wasnota principal, was equivalent to the duty owedto that party by CB. CB oweda fiduciary duty to Horiike, and therefore, Cortazzo owed a fiduciary duty to Horiike. Miller & Starr explains: “When there is one broker, and there are different salespersons licensed under the same broker, each salesperson is an employee of the broker and their actions are the actions of the employing broker. ... [{] When one salesperson obtainsthe listing and represents the seller, and another salesperson employed by the samebroker represents the buyer, they both act as employeesofthe same broker. That broker thereby becomes a dual agent representing both parties.” (2 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 3:12, p. 68, fns. omitted.) Miller & Starr notes: “Salespersons commonlybelieve that there is no dual representationif one salesperson ‘represents’ one party to the transaction and another salesperson employed by the same broker ‘represents’ another party to the transaction. The real estate industry has sought to establish salespersons as ‘independent contractors’ for tax purposes(see § 3:18), and this concept has enhanced the misunderstanding of salespersonsthat they can deal independently in the transaction even though they are negotiating with a different salesperson employed by the same broker whois representing the other party to the transaction.” (/d. at pp. 68-69.) Cortazzo, as an associate licensee acting on behalf of CB, had the same fiduciary duty to Horiike as CB. The motion for nonsuit should have been denied and the cause of action against Cortazzo for breach of fiduciary duty submitted to the jury. The jury was also incorrectly instructed that CB could not be held liable for breach of fiduciary duty based on Cortazzo’s actions. Cortazzo and CB contend that Horiike cannot show prejudice as a result of the erroneousrulings, because the jury’s findings on other claimsresolve the claim for breach of fiduciary duty in favor of the defense. (Paterno v. State ofCalifornia (1999) 74 Cal.App.4th 68, 107 [a plaintiff cannot show prejudice based on the elimination of a properlegal theory if the jury’s verdict on a different theory negates an element ofthe omitted theory].) This is incorrect. The jury’s findings that Cortazzo did not provide false information to Horiike, or provided false information that he reasonably believed to be true, and did not intentionally conceal information, does notsatisfy his duty to Horiike as a fiduciary. “<'A] broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty. [Citations.] ‘The broker as a fiduciary has a duty to learn the material facts that may affect the principal’s decision. Heis hired for his professional knowledge andskill; he is expected to perform the necessary research and investigation in order to know those important matters that will affect the principal’s decision, and he has a duty to counsel and advise the principal regarding the propriety and ramifications of the decision. The agent’s duty to disclose material information to the principal includes the duty to disclose reasonably obtainable material information.’” (Assilzadehv. California Federal Bank, supra, 82 Cal.App.4th at pp. 414-415, quoting Field v. Century 21 Klowden-Forness Realty, supra, 63 Cal.App.4th at pp. 25-26.) “A fiduciary musttell its principal of all information it possesses that is material to the principal’s interests. [Citations.] A fiduciary’s failure to share material information with the principal is constructive fraud, a term of art obviating actual fraudulent intent. [Citation.]” (Michel v. Palos Verdes Network Group, Inc. (2007) 156 Cal.App.4th 756, 762.) “Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship.’ [Citation.] [f]... Most acts by an agentin breach ofhis fiduciary duties constitute constructive fraud. The failure of the fiduciary to disclose a material fact to his principal which might affect the fiduciary’s motivesor the principal’s decision, which is known (or should be known)to the fiduciary, may constitute constructive fraud. Also, a careless misstatement may constitute constructive fraud even though there is no fraudulentintent.’ [Citation.]” (Salahutdin v. Valley ofCalifornia, Inc. (1994) 24 Cal.App.4th 555, 562.) In this case, the jury’s findings do not resolve whether Cortazzo breached his fiduciary duty to Horiike. A trier of fact could conclude that Cortazzo was aware of material informationthat he failed to provide Horiike, even though he did not have a fraudulent intent. Cortazzo knew the square footage of the property had been measured andreflected differently in different documents. When a potential purchaser soughtto confirm the square footage, Cortazzo gave handwritten advice to have the square footage verified by a specialist. He subsequently changedthe listing for the property to reflect that the square footage required explanation. He did not explain to Horiike that contradictory square footage measurements existed. A trier of fact could concludethat although Cortazzo did not intentionally conceal the information, Cortazzo breachedhis fiduciary duty by failing to communicateall of the material information he knew about the square footage. He did not even provide the handwritten advice given to other potential purchasersto hire a specialist to verify the square footage. The jury’s verdict did not necessarily decide the cause of action for breach of fiduciary duty based on Cortazzo’s actions. The jury’s findings are inconsistent on the threshold issue of whether Cortazzo madea false representation about the square footage of the living areas. Therefore, we must reverse the judgment and remandfora newtrial. 10 DISPOSITION The judgmentis reversed. Appellant Hiroshi Horiike is awarded his costs on appeal. KRIEGLER,J. Weconcur: TURNER,P.J. MOSK,J. 11