Kruse v. Miller

California Court of Appeal Aug 3, 1956 No. Civ. 5150Published

Before: Mussell

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Holding. A real estate subagent who makes unauthorized false representations to a buyer and fails to disclose those statements to his principal is liable for fraud and the resulting damages incurred by the principal.

Issues

Whether a real estate subagent's unauthorized false representations and failure to disclose them to his principal constitute actionable fraud.
Whether the principal's action for fraud against the subagent is barred by the statute of limitations.
Whether the principal is entitled to recover damages resulting from the subagent's fraudulent conduct.

Disposition. affirmed

Quotations verified verbatim against the opinion

“In the instant case Miller violated his duty to plaintiffs, his principals, by not informing them of the representations he had made to the Carters that the lot was not a filled lot, and thereby perpetrated a fraud upon the confidence bestowed”

“Since Miller was not authorized to make the false representations to the Carters, he subjected the plaintiffs to liability because of his fraudulent acts and was chargeable with the loss which resulted therefrom.”

MUSSELL, J.

On October 11, 1950, plaintiffs, who owned a house and lot on Whitman Street in San Diego, listed their property for sale with one G. T. Garrity, a licensed real estate broker. The defendant, who was also a licensed real estate broker, with the permission and at the request of Garrity, showed the property to George 0. Carter and his wife. The Carters were interested in buying the house if it could be enlarged and on or about October 11, 1950, after they had inspected the interior of the building, Carter asked Miller if the lot was a “filled lot” and Miller said “No.” Carter then told Miller that he intended to build on and make it an ideal home. Relying upon Miller’s statement that the lot was not “filled,” the Carters purchased the property and moved into the house on or about October 27, 1950. The house, in fact, was on a filled lot and some time prior to October 1, 1951, it began to sink, and the Carters then discovered the fact that it was built on a filled lot. On October 11, 1951, Carter served notice of rescission of the contract of purchase on plaintiffs on the ground that Miller had falsely represented to him that

[658]

the lot was not a filled lot. Plaintiffs were not aware of the statement made by Miller to the Carters and when they asked Miller, through their attorney and through Garrity, if he had made such a representation, he denied it. Plaintiffs, then relying on Miller’s statement, refused to rescind the contract of sale, whereupon a suit for rescission of the contract and for damages was filed by the Carters against plaintiffs herein and, again relying on Miller’s denial that he had made the false representation, plaintiffs contested the action. The Carters obtained a judgment against the Kruses in that action for $6,691.97 and this judgment was satisfied on or about May 14, 1953, by payment of said sum to the Carters. After the satisfaction of this judgment and the rescission, the Gray’s Mortgage and Loan Corporation, which had sold the property to the Kruses, entered into a compromise settlement with them in which the corporation took the property back and paid plaintiffs the sum of $3,500 net, in cash, therefor.

On March 1, 1954, the present action was commenced by plaintiffs to recover from Miller the following sums:

$3,191.97 (Amount paid on Carter judgment after deducting $3,500 received from Gray’s Mortgage and Loan Company.)

Kruse v. Miller

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MUSSELL, J.

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