Case Study: Agent Failure to Disclose All Documents

Case Study:

This week will start a series of emails that will continue over the next several weeks where we will analyze Louisiana Court cases dealing with the duties of real estate agents and how agents breached their duties in some of those cases.

Hopefully, the readers of this email will learn more about what duties are placed on Louisiana real estate agents and how not to breach those duties.

This week, we will discuss below a Louisiana 1st Circuit Court of Appeals case dealing with an agents’ failure to disclose all documents provided to her by her client.

Hughes vs. Goodreau, 836 So.2d 649 (La. App. 1 Cir., December 31, 2002).

In November 1995, the Goodreaus (sellers) sold their house to the Hughes (buyers). The house was located in the Beau Chene subdivision in Mandeville, Louisiana.  Both parties were represented by Prudential real estate agents.

Less than six months after the buyers moved into their new home, between one-half and one inch of water flooded the downstairs of the house following a heavy rain.

Buyers filed the lawsuit naming the sellers as defendants, averring the property contained a redhibitory defect, and seeking rescission of the sale or, alternatively, reduction of the purchase price.

Sellers answered the lawsuit and filed a third party demand against Prudential alleging negligent misrepresentation by the real estate agents.  Ultimately, the lawsuit between the sellers and buyers was settled.

The remaining battle was between the sellers and Prudential.

At the heart of this dispute was a disclosure addendum form, which the parties introduced into evidence.  Seller testified that when filling out Prudential’s disclosure form, seller indicated with an affirmative response that the house and the lot had flooded and provided his agent with six letters further explaining the nature of the flooding problem. His agent wrote at the bottom of the form, “See attached documents,” but failed to attach all the letters.  The sellers’ agent only attached two of the letters.

In considering whether to purchase a house that had flooded in the past, the two letters provided to the buyers led the buyers to believe the house flooded one time, the problem that caused the flood was the 100-year flood, and the ditch behind the house had been corrected and the problem no longer existed.

The four letters that were not disclosed to the buyers contained information that the home might be subject to additional flooding due to poor drainage in the area.  Had the buyers seen the other four letters, buyers unequivocally stated they would not have purchased the property.

According to the 1st Circuit Court of Appeals, an agent has a duty to disclose to a buyer a known material defect regarding the condition of real estate of which the broker or salesperson has knowledge.  Failure to disclose a known material defect is a breach of the agent’s fiduciary duty.

The 1st Circuit Court of Appeals held that by failing to provide all six letters to the buyers, the real estate agents failed to disclose to buyers a known material defect.  Accordingly, the real estate agents violated La. R.S. 37:1455A(27), thereby breaching its fiduciary duty to exercise reasonable care and skill in the performance of its duties as real estate agents.

A couple of quick points about this case:

  1. Sellers agent testified she placed the six letters in Prudential’s office file, but buyers’ agent, apparently, did not check the office file to ensure she had all the letters;
  2. Sellers’ agent hand-wrote “See Attached Documents,” but failed to hand-write how many documents were being attached.  Maybe if the sellers’ agent wrote “See Attached Six Documents” this case would not have occurred.

 

For any questions concerning this email, please contact me at rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.