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Seller's broker not liable for failure to discover and disclose to buyer that seller had invalid power of attorney
A real estate broker was not liable for negligent misrepresentation for failing to discover and disclose that a seller who signed a sales contract as "attorney in fact" did not have a valid power of attorney from the owner of record. This was the holding of the South Carolina Court of Appeals. The facts of the case disclosed that the broker took a listing from the son of the owner. The owner was an elderly woman who resided in a nursing home and whose assets were controlled by a court appointed conservator. The plaintiff learned of the listing through the local multiple listing service. The defendant-broker gave the plaintiff a standard agency disclosure form which confirmed that the broker represented the seller.
The plaintiff submitted an offer, which the seller accepted by signing as "attorney in fact" for the owner. The broker and the plaintiff later received a letter from the attorney for the conservator of the owner's estate saying that the seller did not have a valid power of attorney, and the conservator was renouncing the sale. The plaintiff then sued the broker alleging that the broker negligently misrepresented the seller's power to convey title. The court of appeals affirmed the lower court's grant of summary judgment to the broker.
The court of appeals held that the plaintiff did not introduce any admissible evidence that the broker knew that the seller's power of attorney was invalid. The court also rejected the plaintiff's argument that the broker owed the plaintiff a duty to investigate the validity of the seller's alleged power of attorney. The court's holding on this point was based in large part on the undisputed fact that the broker was acting as the seller's agent, and not the buyer's agent.
The question left unanswered by this case is whether the result would have been different if the broker was a buyer's agent, or a dual agent. The court's reliance on the absence of a fiduciary duty between the broker and the plaintiff-buyer suggests that had the broker owed a fiduciary duty to the buyer, that duty could include a duty to investigate the accuracy of a seller's representations about the seller's power to convey title. 469 S.E.2d 627 (S.C.App. 1996).
Please note that the comments and opinions contained herein are not to be construed to be legal advice by the author, Victor O. Schinnerer & Company, Inc., or the CNA/Schinnerer errors and omissions insurance program.
This information is made available to you for your risk management program. No action should be based on this information without appropriate advice from legal counsel and a review of currently applicable statutory and case law.
This article from the Risk Management Reporter, March 1997, was written by Robert D. Butters of the law firm of Arnstein & Lehr, which concentrates in the representation and defense of real estate brokers and agents.
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