Bortz v. Noon
556 Pa. 489 (1999)
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Rule of Law:
A real estate broker is not liable for an agent's innocent misrepresentation when the agent relays false information from an independent third party, has no reason to know the information is false, and has no duty to independently verify the third party's report.
Facts:
- Albert M. Bortz entered into an Agreement of Sale to purchase a home from the Noons, using Renee Valent of Coldwell Banker Real Estate as his agent.
- A condition for Bortz's mortgage was that the property's on-site septic system pass a dye test.
- An initial dye test, arranged by Valent, failed. The Sellers then hired their own contractor, J.J. Nolte, to perform repairs.
- Prior to closing, an employee of Suburban Settlement Services, Inc. (the Title Company) informed Valent that 'the dye test passed.'
- Valent relayed this information to Bortz, and the closing was scheduled and completed.
- At closing, a settlement officer from the Title Company also stated that the dye test had passed.
- Following the closing, Bortz discovered that the septic system had not, in fact, passed a dye test and required a costly connection to the public sewer system.
Procedural Posture:
- Albert M. Bortz (Buyer) sued Coldwell Banker, the Sellers, and the Title Company in the Court of Common Pleas of Allegheny County (trial court).
- The trial court Chancellor found in favor of Bortz and against Coldwell Banker for $15,300, concluding that Coldwell Banker, through its agent, made material misrepresentations.
- Coldwell Banker, as appellant, filed an appeal with the Superior Court of Pennsylvania (intermediate appellate court).
- The Superior Court affirmed the finding of liability against Coldwell Banker.
- The Supreme Court of Pennsylvania granted allocatur to review the limited question of whether Coldwell Banker was liable for misrepresentation.
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Issue:
Does a real estate agent commit an actionable misrepresentation by relaying false information from a third party to a buyer about a property condition, when the agent innocently believes the information to be true and has no duty to independently verify it?
Opinions:
Majority - Newman
No. A real estate broker is not liable for an agent's innocent misrepresentation made under circumstances where the agent had no reason to know her statement was false and no duty to verify a third party's report. The court analyzed liability under three theories: intentional, negligent, and innocent misrepresentation. It found no evidence of intentional misrepresentation because the Agent did not know the statement was false or act with intent to deceive. The court rejected negligent misrepresentation because the Agent owed no duty to the Buyer to independently investigate the accuracy of the dye test report provided by the Title Company, an apparently reliable third party with whom the Agent had no agency or contractual relationship. The Agent acted as an 'innocent conduit' of information. Finally, while innocent misrepresentation may support the equitable remedy of contract rescission, the court declined to extend the doctrine to establish tort liability for monetary damages.
Concurring - Saylor
No. While agreeing with the majority's result in this case, the concurrence disagrees with the broad holding that a real estate broker has no legal duty to verify factual representations absent a contractual relationship. This opinion argues that it would be unjust to allow brokers to cultivate a buyer's reliance on their expertise and profit from a sale, yet escape accountability for negligent conduct. The concurrence would not foreclose a cause of action against a broker who negligently provides false material information to a purchaser, suggesting that a duty of care can arise from the broker-buyer relationship itself, even without privity of contract.
Analysis:
This decision significantly limits a real estate agent's liability for misrepresentation in Pennsylvania by clarifying that agents are not guarantors of information provided by independent third parties. It establishes that an agent acting as an 'innocent conduit' of information they have no reason to doubt is shielded from negligence claims, placing a greater burden on buyers to conduct their own due diligence. The ruling distinguishes between the equitable remedy of rescission, which may be available for innocent misrepresentation, and tort damages, which are not. The concurrence, however, indicates judicial tension on this issue, suggesting that future courts might impose a duty of care where an agent's conduct actively cultivates a buyer's reliance on their professional expertise.
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