Hiroshi Horiike, a retired Chinese millionaire, bought a Malibu house in 2007 for $12.25 million cash. The advertised square footage was 15,000 square feet, but the actual square footage was under 9,500. Horiike sued the listing agent, Chris Cortazzo, and Coldwell Banker, the broker, for violating fiduciary duties.
- Malibu agent Chris Cortazzo and Coldwell Banker are being sued for violating fiduciary duty to the buyer, Hiroshi Horiike.
- A jury originally found in favor of Cortazzo and the broker, but an appeals court found them in violation. The case is pending.
- Cortazzo allegedly misinformed Horiike of the exact square footage of the home he was purchasing as a foreign cash buyer.
Hiroshi Horiike, a retired Chinese millionaire, bought a Malibu house in 2007 for $12.25 million cash. The advertised square footage was 15,000 square feet, but the actual square footage was under 9,500.
Horiike sued the listing agent, Chris Cortazzo, and Coldwell Banker, the broker, for violating fiduciary duties.
A jury found that neither Cortazzo or Coldwell Banker were at fault.
Horiike appealed the jury’s findings and prevailed. Justices wrote, “A trier of fact could conclude that although Cortazzo did not intentionally conceal the information, Cortazzo breached his fiduciary duty by failing to communicate all of the material information he knew about the square footage.”
Earlier this year, the court determined the listing agent had the same fiduciary duty as the broker because the broker was also represented by the buyer’s agent.
Did the agent commit fraud, or did the broker violate fiduciary duty to Horiike?
“Once upon a time, everybody represented the seller,” said Nick D’Ambrosia, principal broker for Long & Foster. “Buyers were customers. The fiduciary responsibility was to the seller. The only thing they owed the buyer was to be honest and reveal the material facts that they knew.”
But then came buyer agents, followed shortly thereafter with the muddy waters of dual agency and brokers.
Two cases that set precedent in the early ’90s were Dismuke vs. Edina Realty, Inc. and Bokusky vs. Edina Realty, Inc. Both of these cases highlighted the fiduciary duty of the broker and the lack of transparent disclosure regarding the dual capacity with which it was acting.
A study conducted by Royce de R. Barondes and Carlos V. Slawson Jr. and published by the Oregon Law Review in 2005 outlines how dual agency transactions present the grey area of fiduciary duty.
“The thing is, everybody wants to get a transacted settled. The seller wants to sell the house for the best price they can get. The buyer wants to buy it for the best value they can get it,” D’Ambrosia said, explaining that dual agency laws, although differing state to state, can allow for a smooth transaction if handled professionally and ethically.
In Horiike’s case, he believes he overpaid for what he otherwise thought was a 15,000 square foot house. Because Malibu has placed specific limitations on measurable square footage to prevent construction, otherwise blank spaces can be measured for inclusion. (It was later determined in the architect’s deposition that the added space was measured in the garage and a barbecue area.)
The California Association of Realtors filed a brief asking the Supreme Court to reject the appellate ruling.
“Dual agency transactions should be outlawed,” said Douglas R. Miller, executive director of Consumer Advocates in American Real Estate. Miller was also responsible for starting the Dismuke vs. Edina Realty, Inc. class action lawsuit.
“Realtors should be treated just like other professionals who proclaim to be fiduciaries. To allow Realtors to abuse this is to make them predatory fiduciaries — something that is far worse than predatory lenders,” he said.