Holt v. Brock
Facts: A co-owner of a property files a partition action to sell the property and distribute the proceeds to the individual owners. The court appoints a broker to market and sell the property. One of the co-owners submits an offer to purchase the property including a provision reducing the broker’s fee in the listing agreement, which the broker initially agrees to, but before court confirmation withdraws acceptance of the reduced fee. Due to the co-owner’s intent to purchase the property, the court appoints a receiver to manage and approve the sale between co-owners. The co-owner submits an offer to purchase the second co-owner’s half interest in the property, and the second co-owner submits a higher offer to purchase the co-owner’s interest. The receiver accepts the second co-owner’s more competitive offer and the sale is closed. The bought-out co-owner makes a demand on the broker for money losses based on the greater price they would have received from the initial abandoned offer.
Claim: The bought-out co-owner claims the broker breached their fiduciary duties owed to the co-owner since the broker breached their agreement to accept a reduced fee in an offer to buy the property submitted by the co-owner which would have produced greater net proceeds.
Counterclaim: The broker claims they owe no fiduciary duties to the co-owner since the court is their client, not the co-owner.
Holding: A California appeals court holds the broker did not breach their fiduciary duties since they were acting as an agent for the court, not an agent for the co-owners, and the court receiver approved the sale. [Holt v. Brock (2022) 85 CA5th 611]
Related Reading:
Legal Aspects of Real Estate Chapter 8: Listings as employment – Employed to act as an agent
Chapter 35: Forcing co-owners out
Watch:
Word-of-the-Week: Fiduciary duty
