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No Harm, No Foul
by Lynda A. Gutierrez

Charges of foul play in the sale of a California shopping center have proven unsuccessful for a potential buyer of the property.

The shopping center is Canyon Center in Santa Clarita, and the previous owner had decided to sell the facility several years ago if he received a suitable offer. A partnership subsequently made an offer through a broker of $18,150,000, but the owner rejected that offer. Negotiations continued, however.

The partnership later dissolved, and one of the former partners agreed to pay the remaining two former partners $100,000 if they would step aside from the shopping center sales negotiations. The owner seemed unsure of the next deal offered, however. As a result of an apparent failure to communicate with the single former partner, the shopping center owner sold the facility to the other two who were involved in the partnership.

The rejected potential buyer later discovered that the shopping center sold for $18,150,000, the same amount he had earlier offered. He then sued the broker and his former partners, charging them with, among other things, breach of duty, constructive fraud, and breach of contract.

Specifically, the potential buyer pointed out that the broker represented not only him, but also the other two partners. That representation, he added, was a clear violation of the agent’s duty of loyalty. Moreover, he said, the broker withheld information that would have been helpful to his offer to buy the shopping center.

In response, the broker argued that the center’s owner had expressed serious doubts about the financial and technical abilities of the rejected potential buyer. But the owner later also said, “Well, I would have entertained [the rejected buyer’s] offer.”

A California court ruled in favor of the broker and the center’s previous owner, concluding that there was no evidence that any breach caused any damage to the potential buyer. The judge explained that the potential buyer “must prove that but for the alleged [conduct of the broker], the harm [to him] would not have happened.”

On appeal of that ruling, a California appellate court also decided in favor of the broker and the center’s owner, stating, “In order to prove he was damaged, [the rejected buyer] must first establish that, but for the breach, he would have acquired the property. However, the undisputed evidence established that he could not have acquired the property, regardless of the broker’s conduct, because the seller had determined that he would not sell to him.” (Samuels v. Grubb & Ellis Company, 2009 WL 975794 [Cal.App. 2 Dist.])

Decision: April 2009
Published: May 2009



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