With Deception, Comes Consequence

For transactions with a middleman that deceives both the seller and buyer, section 3543 of California’s Civil Code can break the tie where both parties are negligent, stating where one of two innocent persons must suffer by the act of a third (i.e., middleman), he, by whose negligence it happened, must be the sufferer. Huh? What does not mean in simple English?

In other words, if both parties are negligent in closing a sale after being deceived by the middleman, the one who is more responsible for the loss must suffer and bear the loss. That appears easier to understand, but the application of section 3543 depends on the facts.

First, being the victim of deception can be interpreted as negligence or unreasonable conduct, a rather sad commentary on our internet society that almost demands that you mistrust, confirm and verify everything you may be told. So it may not be enough to prevail by claiming there was no resisting the false promises or conduct of the middleman.

Section 3543: Case in Point

In the Miller case, the agent suggested that the buyer should purchase the real property based upon his false descriptions of the property. The agent then also represented the sellers, encouraging them to sell without telling them he had lied to the buyer. A classic middleman scam with both sides in the dark as to the true events. The expected remedy is to undo the transaction. However, it may not be possible to have both sides perfectly restored to their previous situation.

The Miller case turned on the fact that the buyer had deposited $7,000 into escrow and $5,500 of that sum was kept by the agent as his commission. When the buyer attempted to rescind or undo the sale, the court refused to award the buyer the $5,500 from the seller, finding that the buyer was the cause of the loss of the commission by depositing that amount after being deceived by the agent into making the offer. Although the seller accepted the offer, it was the buyer who set in motion the chain of events resulting in the loss of the commission.

It is better to not be involved in a transaction that leads to a lawsuit, but if you are, careful consideration of section 3543 may be a tie-breaker and game saver.

For information only by Craig B. Forry, attorney, broker, expert witness/consultant, and no retainer agreement is intended or created. For more information or if you have questions, please contact:

15501 San Fernando Mission Blvd., Suite 309
Mission Hills, CA 91345
Office: (818) 361-1321
Fax: (818) 365-6522
Monday – Friday 9:00 am to 5:00 pm
Saturday – Sunday By Appointment

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