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Court Sanctions Buyer for Filing Frivolous Failure to Disclose Action

Civil Litigation Defense, Non-Disclosures Disputes, Real Estate Law, and Real Estate Law Litigation by Simon Offord, Esq.

The recent case of Peake v. Underwood will hopefully deter frivolous claims against real estate agents.

Peake purchased a home from Underwood.  Long after the sale closed, Peake filed suit against Underwood and his agent, claiming Underwood and his agent failed to disclose defective subflooring.   During the course of the litigation, Peaked admitted that, during escrow, Underwood’s agent provided Peake with photographs and reports disclosing the defective subflooring.  In light of these disclosures the agent contended he had satisfied his duty to the buyer.

After several months of litigation the agent filed a CCP 128.7 Sanctions Motion, seeking sanctions and dismissal of the claims against the agent.  The Motion contended that the Plaintiff’s claim was frivolous.  The agent argued that since Peake was on ACTUAL notice of the subflooring issues, the agent had satisfied his duty to the buyer (this was especially true as the agent did not represent the buyer).  The trial court agreed with the agent and dismissed the case.  The Court also ordered Peake pay sanctions in the amount of $60,000.00.  The appellate court affirmed.

The appellate court emphasized that it was not suggesting that sanctions should be routinely issued, but that in this instance they were appropriate.  The court reasoned that the ADMITTED facts in evidence unequivocally established that Peake was aware of the subflooring issues before closing escrow.  As a result Peake, or his counsel, could not have had an honest or reasonable belief in the validity of the claim.

This is a welcome relief for real estate agents and their defense attorneys.  Courts tend to be reluctant to dismiss claims outright, no matter how baseless they may seem.  However, this court was not afraid to make the tough decision to dismiss the case and sanction Plaintiff for continuing to advance an obviously baseless claim.  In this instance, the Court found that Peake had notice of the issues complained of but apparently had buyer’s remorse.  In my opinion, the court rightfully dismissed the baseless claim.

Hopefully future courts will follow in this court’s footsteps when approached with similar requests.  The CCP 128.7 motion is an underutilized litigation tool.  However, this case and our own experience have shown that it can be very effective.  Our office understands the benefit of this lesser-known motion and has had success in the past getting cases dismissed this way.

Brewer Offord & Pedersen LLP has extensive experience dealing with failure to disclose cases and are here to help.  If you have any questions about this issue, or any real estate legal issue, please contact us at (650) 327-2900, or on the web at www.BrewerFirm.com.

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