Wednesday, May 1, 2013

FYI: Cal App Ct Rules Servicer Could Be Liable in Premises Liability Action, Based on Alleged Notice to Listing Agent of Dangerous Condition

Reversing the lower court's grant of summary judgment, the California Court of Appeal, First District, recently ruled that evidence presented in a premises liability case against a loan servicer that owned foreclosed property and the listing agents hired to market the property raised a triable issue as to whether the servicer or the listing agents knew or should have known that a stairway ladder on the property was a concealed danger. 


In so ruling, the Court reasoned that liability to the injured third party hinged on whether the loan servicer or listing agents had actual or constructive knowledge of the concealed danger in light of a property inspection report that listed the stairway ladder as an item that should be removed and replaced.


A copy of the opinion is available at:


Defendant loan servicer ("Servicer") owned a house that was foreclosed upon and listed the property for sale through defendants listing agents ("Listing Agents").   The house was equipped with a pull-down stairway ladder that allowed access to a room in the attic.  An inspection of the house was conducted shortly after the house was listed for sale, and the resulting inspection report listed more than 50 items needing repair under a heading entitled "Health and Safety Required Repairs – Group 1."  The list consisted of cosmetic and minor items, as well as items specifically related to health and safety.  One of the entries on the list was "Stair-Remove and replace attic stair."  Copies of the report were sent to individuals connected to the property, including the Listing Agents, one of whom reviewed it.   


After cautioning prospective home buyers about the ladder, a real estate salesperson climbed the stairway, but the ladder gave way, causing the salesperson to fall and fracture a leg and injure her knees.  She and her husband (collectively, "Plaintiffs") filed suit against Servicer and the Listing Agents for negligence, premises liability, and loss of consortium.  


Listing Agents and Servicer moved separately for summary judgment, arguing that the undisputed facts showed that they had no notice or knowledge of a defect in the stairway ladder.  The lower court granted the motions.   Plaintiffs appealed.


The Appellate Court began its analysis by examining the duties of property owners and their agents to notify people of known but concealed dangerous conditions.  Noting in part that property owners are required to maintain land in their possession and control in a reasonably safe condition, the Court explained that to establish liability on negligence and premises liability claims, a plaintiff-invitee must not only prove breach of a duty owed, causation, and damages, but also that the owner or occupier of the property "must have either actual or constructive knowledge of the dangerous condition or have been able by the exercise of ordinary care to discover the condition, which if known to him, he should realize as involving an unreasonable risk to invitees on his premises"  Ortega v. Kmart Corp., 26 Cal.4th 1200, 1206 (2001).  


The Appellate Court also explained that the listing agreement between Servicer and the Listing Agents hired to market the property, as well as principles of agency, defined the legal relationship between the parties.  Accordingly, the Court noted that under agency law, agents owe a duty of care to all persons, including third persons, within the area of foreseeable risk, the extent of that duty being determined according to whether a reasonable person would have foreseen an unreasonable risk of harm and whether the agents exercised ordinary care in light of that risk.


After reviewing relevant case law, the Appellate Court pointed out that notice or knowledge of a fact to a principal or an agent is deemed notice as to the other party, and determined that real estate agents, such as the Listing Agents here, have a duty to notify visitors of marketed property of concealed dangerous conditions of which they have actual or constructive knowledge. See Cal. Civ. Code § 2332; § 2338; § 2343. See also Merrill v. Buck, 58 Cal.2d 552 (1962).


Turning to the specific facts here, the Court examined whether evidence was presented to show that either Servicer or the Listing Agents knew or should have known that the stairway ladder was unsafe because it was in disrepair.  In so doing, the Court noted that the inspection report identified the stairway ladder as an item that should be replaced under the heading "Health and Safety Required Repairs-Group 1" despite some ambiguity as to whether the recommendation to replace the stairway was based on aesthetics.  Accordingly, the Appellate Court concluded that neither Servicer nor the Listing Agents could claim that they had no reason to believe the stairway ladder might be dangerous. 


In light of this evidence, the Appellate Court ruled that summary judgment was improper, because evidence had been presented that created a triable issue as to whether Servicer and Listing Agents knew or should have known that the stairway ladder was a concealed danger.


Accordingly, the Appellate Court reversed and remanded.




Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
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Mobile: (312) 493-0874


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