In 1999, a Louisiana appellate court recently considered whether a relocation company could be considered a seller of real estate.
Thomas and Virginia Bruns ("Sellers") were transferred from Louisiana to Ohio by Thomas's employer. As part of the relocation agreement with his employer, the Sellers exercised a provision which allowed them to receive the appraised value of their home ("Property") from Boatman's Relocation Company ("Relocation Company"). To effectuate this provision, the Sellers executed a Power of Attorney form giving the Relocation Company the power to enter into a sales agreement for the Property. Eventually, the Relocation Company entered into a sales agreement with Donald and Kathryn Long ("Buyers").
After moving into the Property, the Buyers discovered that the Property had serious structural defects which made it uninhabitable. They brought a lawsuit against the Sellers, who then made claims against the Relocation Company and the builders of the house. Eventually, the Sellers and the builders were dismissed from the lawsuit, leaving only the Buyers and the Relocation Company as parties. The trial court ruled in favor of the Relocation Company, and the Buyers appealed.
The Court of Appeal of Louisiana, Second Circuit, affirmed the trial court decision. The court first considered the Buyers' claims that the Relocation Company was the seller of the Property. The Relocation Company argued that it was only the Sellers' agent, and therefore an action to void the sale of the Property could not be brought against it because such an action can only be between buyers and sellers. The court agreed with the Relocation Company, ruling that it was only acting as the Sellers’ agent and therefore could not be the subject of this kind of lawsuit. The court reached its conclusion by looking at the agreement between the Sellers and the Relocation Company. The language in that agreement established an agency relationship between the Relocation Company and the Sellers. Also, the court commented that at no time did the Relocation Company possess title to the Property. Additionally, the court found that all the risk of a sale price less than the appraised value of the property was with the Sellers' employer, not the Relocation Company. Finally, all of the documents executed at the closing listed the Sellers as the owners of the Property, not the Relocation Company.
The Buyers argued that two earlier Louisiana court decisions required the court to rule in its favor. In each of these cases, other Louisiana appellate courts had found the relocation company was the seller of the property. The court distinguished these decisions. In one of the cases, the court had never considered whether the relocation company was the actual seller of the property because the parties had assumed this. In the other case, the relocation company had actually held the title to the property. Since these cases had different facts and issues, the court did not find these decisions persuasive.
The court next considered the Buyer’s allegations of negligent misrepresentation. The Buyers argued that if the Relocation Company was the agent of the Sellers, it could be liable for failing to disclose the serious structural defects which existed on the Property. In Louisiana, a party acting as an agent can be liable to a third party for negligent misrepresentations in the sale of real estate if the agent fails to disclose to the purchasers defects on the property which the agent has knowledge, unless the defects are discoverable by the purchaser during a routine inspection. The court ruled that the Buyers had an opportunity to inspect the Property prior to purchase, and there was testimony that the cracks in the foundation were visible on the exterior. Thus, since the defect was not hidden and the Buyers had an opportunity to inspect the property prior to purchasing, the court ruled that the Relocation Company was not liable for negligent misrepresentations and affirmed the trial court decision.
Long v. Bruns, 727 So. 2d 664 (La. Ct. App. 1999).