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Negligence Battles Reaching Courtrooms: Overview of Case Law, Wemyss V. Moldenhauer – Part 8

Posted on 25 Oct'14 Tags: , , , , , , in Litigation and Dispute Resolution, Real Estate, Real Estate Blog Series

Continuing on with our Real Estate Blog Series on the Real Estate Agents’ Duty of Care: Legal Framework, part 8 focuses on case law with reference to negligence claims reaching the courtroom.

* Wemyss V. Moldenhauer – [2003] O.J. No. 38

Facts and Decision

In this case, the plaintiff Wemyss brought an action against Moldenhauer and Sutton Group Fox Realty for damages in negligence and a breach of fiduciary duty, which arose from a real estate transaction.

Wemyss wanted to purchase a home and hired Moldenhauer as his real estate agent; Moldenhauer was employed by Sutton. Wemyss became interested in a particular property, but was concerned about possible problems with its septic system. Moldenhauer drafted an agreement containing an inspection clause.

Offers were then exchanged between Wemyss and the vendor. Eventually, Wemyss accepted an offer of $980,000 for the property and, at Moldenhauer’s direction, initialed all handwritten changes made to the agreement by the vendor. The inspection revealed a problem with the septic system, priced at approximately $10,000 to repair. When he sought to terminate the deal and recover his $50,000 deposit Wemyss discovered that the inspection clause had been amended to limit its application to structural defects. He argued that Moldenhauer had not brought this amendment to his attention when he was asked to initial the changes to the agreement.

Moldenhauer maintained that he had specifically drawn Wemyss’s attention to the clause and had explained what it meant. The Court did not accept Moldenhauer’s arguments and held him liable for Wemyss’s loss.

The action went through; Moldenhauer was held liable to pay Wemyss the $50,000 deposit which he forfeited as the transaction was incomplete. Once again, the court held that Moldenhauer did not meet the standard of care expected of a real estate agent: Moldenhauer had failed in his duty to mention the amendment of the inspection clause to Wemyss. Moldenhauer had statutory and fiduciary obligations to advise Wemyss that the clause had been fundamentally altered, and that Wemyss would be unable to get out of the transaction if the inspection revealed a problem with the septic system.

Considering the contractual relationship between Wemyss and Moldenhauer, contributory negligence principles weren’t applicable to this situation. In any event, Wemyss was not negligent for having failed to read the inspection clause, nor for not having obtained legal advice before signing the agreement. In these circumstances he was entitled to rely upon Moldenhauer’s expertise. Wemyss made extensive efforts to persuade the vendor to return the deposit and was not obligated to pursue litigation. It was also not unreasonable for Wemyss to have decided not to close the deal and pay for the repairs.

Disclaimer: The above article is not a legal opinion as every case is different and is only for general awareness. Please contact us for specific questions and legal advise.