Restitution – Purchaser’s Remedies Where Real Estate Broker Falsely Purports to be Owner’s Agent and Misrepresents Owner’s Minimum Price

Defendant, a licensed real estate broker, represented that he was exclusive agent for the sale of 72 acres of property. Plaintiff made him an offer to purchase at $4,000 per acre, but was later informed by defendant that the owner had rejected the offer, insisting on at least $5,000 per acre. Plaintiff then submitted an offer of $5,000 per acre, which defendant subsequently indicated that the owner had accepted. The deal was consummated with most of the papers handled through a third party employee of defendant. Plaintiff subsequently learned that defendant had never been the agent of the owner, had never presented plaintiff’s offers to the owner, had misrepresented the minimum price of the property, and instead had purchased the property himself and resold it to plaintiff at a profit of $1,000 per acre. Plaintiff brought an action for damages in the superior court against defendant broker and the third party employee for violation of a fiduciary obligation. The superior court rendered judgment against both defendants for $72,049 compensatory damages, and awarded exemplary damages of $36,000 against defendant broker individually. The district court of appeal held that although the allegation of fiduciary relationship was not sustained by the evidence, plaintiff could still recover in quasi-contract due to defendant’s unjust enrichment. The court accordingly struck out the award of exemplary damages, reversed the judgment as against the third party, and affirmed the judgment against defendant on the reduced amount. On rehearing, held, the cause should be reversed generally, one judge dissenting. No fiduciary relationship is created when a broker makes false representations to a buyer. But at the election of the defrauded party, a constructive trust may be imposed upon the wrongdoer based on unjust enrichment rather than tort. Since the plaintiff disavowed the theory of unjust enrichment, however, an affirmance of the judgment for the plaintiff upon that theory is not proper, though plaintiff will be given leave to amend his complaint. Ward v. Taggart, (Cal. App. 1958) 329 P. (2d) 320.