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Lopata v. Miller: Maryland Court Holds That Subagents of Seller Did Not Have Duty to Verify for Buyers Acreage Information Provided By Seller

A 1998 Maryland case, Lopata v. Miller, stemmed from a discrepancy in the actual acreage of the property from what had been communicated to the buyers. Marcia and Edward Lopata (the “Buyers”) had asked two social acquaintances of theirs who were real estate salespeople (the “Salespeople”), to help them find a waterfront home with a variety of requirements, such as a deep-water slip for their sailboat. The Salespeople located a potential property, and acting as subagents of the seller, showed it to the Buyers and relayed information to them from the MLS, including that it contained three acres of land. After two years of negotiations, the Buyers purchased the property. The contract did not specify the size of the lot. They lived there for three years before discovering that it contained less than two acres, whereupon, contending that they had suffered damages in the amount of $600,000, they sued the Salespeople, claiming negligent misrepresentation, negligence and strict liability. The trial court ruled for the Salespeople and dismissed all of the claims against them.

The Buyers appealed that decision. They claimed that the Salespeople had owed them a duty of care which they breached by not verifying the accuracy of the information contained in the MLS. The Court of Special Appeals of Maryland noted that the trial court had stated that the duty to the general public imposed on real estate licensees by the Maryland license law does not necessarily create tort “duties of care for purposes of negligence cases.” The lower court also had stated that since it was an irregularly shaped and wooded lot, it would have been excessive to require the Salespeople “to take independent steps to ascertain the lot size for the buyer’s benefit, while not requiring at least the same of the buyer himself.”

Negligent misrepresentation is a form of negligence, and under Maryland law, in order to succeed on a negligence claim, four elements must be shown by the plaintiff: a duty owed to the plaintiff, a breach of the duty, a causal link between the breach and the injury, and damages. The appellate court pointed out that the Salespeople, who were acting as subagents of the seller, did not have an agency relationship with the Buyers which would have given rise to their owing fiduciary duties to the Buyers. The court also found no special circumstances in this case which would have required the Salespeople to conduct an independent investigation of the acreage to verify the information given to them by the seller. The court said it would not “interpolate a duty of the breadth and effect urged by [the Buyers] into the licensing and ethical provisions of the Maryland Code.” Finding no duty on the Salespeople’s part to verify the lot size information, the court ruled in their favor. Since there had been no duty, they could not have been negligent.

The Buyers also maintained that Maryland public policy permits a strict liability claim against a real estate licensee who “makes affirmative, ‘non-innocent’ misrepresentations” to property buyers. The Buyers claimed that this argument was supported by the Maryland Consumer Protection Act (the “MCPA”), the NATIONAL ASSOCIATION OF REALTORS® Code of Ethics and Standards of Practice, and Maryland license law. To the contrary, the MCPA expressly exempts real estate licensees from its coverage. The court also examined the NAR Code, Article 9, and SOP 9-8, and the Maryland license law provisions pointed to by the Buyers.

Instead of drawing the conclusion advanced by the Buyers, that it is Maryland public policy that a licensee may be held strictly liable for any “affirmative factual representation that turns out to be false or incorrect,” the court interpreted these sources to mean that real estate licensees are prohibited from “making affirmative misrepresentations and omissions of fact that the [licensee] knows or has a duty to discover.” Since the court found that the Salespeople did not have a duty to independently verify the acreage information, their communication of the incorrect acreage information did not constitute a misrepresentation or an omission of a fact that they knew, or had a duty to discover under the circumstances. The court therefore upheld the lower court’s dismissal of the strict liability claim.

Lopata v. Miller, 122 Md. App. 76, 712 A.2d 24 (Md. Ct. Spec. App. 1998).