Real estate broker Hildegard Merrill was the listing agentfor a condominium. A licensed real estate agent since 1967 and a broker since1981, Merrill is very experienced with condominium sales, referring to herselfas the “condo queen.” She is also a mortgage broker.
John Warren visited Merrill’s condominium open house andexpressed an interest in buying the unit. With his permission, she checked hiscredit and found his FICO (Fair Isaac Corp.) score was very low. Warren toldMerrill he had only $50,000 for a down payment, but she agreed to loan him her$27,000 sales commission to make a 20 percent down payment.
Purchase Bob Bruss reports online.
When Warren said he didn’t have a co-borrower with a betterFICO score, Merrill suggested her daughter, Charmaine, would become a co-borrowerin return for $10,000. Warren agreed to the broker’s plan, and Merrill filledout her daughter’s loan application, showing Charmaine earned $7,500 monthly asa waitress in Aspen, Colo.
The mortgage was approved. Shortly before the closing,Merrill obtained Warren’s signature on an amendment to the sales contract tovest title to the condominium in Charmaine’s name alone. After the sale closed,Warren moved into the condominium. But Charmaine never signed the promisedquitclaim deed to Warren, even after he repaid the $27,000 borrowed fromHildegard Merrill.
Soon thereafter, Warren checked into the Betty Ford Centerin Palm Springs for substance abuse. He fell behind in the mortgage andcondominium fee payments, but Hildegard Merrill paid them to preventforeclosure.
She then obtained an eviction judgment against Warren,obtained a writ of possession, and evicted him from the condominium. When heleft the Betty Ford Center, Warren learned of his lock-out from thecondominium, which Merrill had since rented to tenants.
Warren then sued Hildegard Merrill for breach of fiduciaryduty and fraud, seeking quiet title to the condominium in his name, plusnon-economic and punitive damages.
If you were the judge would you award Warren title to thecondominium plus damages?
The judge said yes!
A real estate broker has a fiduciary duty as a trustee tohis/her client, the judge began. The evidence shows broker Hildegard Merrillviolated that duty and defrauded her buyer, John Warren, by misleading him, hecontinued.
By taking title to the condominium in her daughter’s namewith a promise to give Warren a quitclaim deed later and failing to deliverthat quitclaim deed even after he repaid the $27,000 borrowed from Merrill, shefraudulently violated her fiduciary duty, the judge explained.
“From the beginning of the transaction, she did notintend to perform her promise of placing his name on title,” the judgeemphasized. Therefore, imposition of a “constructive trust” isjustified to return the condominium to its rightful owner, John Warren, heruled.
Title to the condominium shall be quieted in Warren’s name,and non-economic damages of $15,000, plus $50,000 punitive damages, are imposedon broker Hildegard Merrill, the judge concluded.
Based on the 2006 California Court of Appeal decision in Warrenv. Merrill, 49 Cal.Rptr.3d 122.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News