Jan 13, 2009
Court of Appeal rules real estate broker’s known dual representation did not breach its fiduciary duty

Amber Hotel Company v. Shawn Chen, et al. (2009) 2009 Cal.App. Unpub. LEXIS 253 (California Court of Appeal, Second Appellate District, Division Seven) [unpublished]. Defendants listed their hotel for sale with GMSR’s client, a commercial real estate broker, and promised to pay a commission on sale. The broker procured a ready, willing and able buyer at the full asking price. Defendants nevertheless refused to go through with the sale, asserting that they never intended to sell the hotel and that the broker knew they were just testing the waters. The trial court disbelieved defendants’ story, found them liable for fraud and breach of contract, and awarded damages in the amount of the agreed-upon commission plus interest and attorney’s fees. On appeal, defendants argued that the broker was not entitled to a commission because it was representing both buyer and seller in the transaction without defendants’ prior consent. The Court of Appeal rejected the argument, explaining that in a commercial real estate transaction a broker’s duty is not to obtain consent to dual representation before an offer is made but rather before the sale is completed, and in this case the broker fully disclosed the dual representation in the buyer’s full-price offer as well as in previous offers by other potential buyers. The Court held, moreover, that defendants were estopped to complain of the dual representation and of other alleged deficiencies in the terms of the buyer’s offer and proposed escrow instructions because defendants failed to object at a time when the deficiencies could have been corrected.