## Facts

- Albert M. Bortz agreed to purchase Patrick and Virginia Noon’s home; Coldwell Banker Real Estate, Inc. acted through its agent, Renee Valent, as the selling broker.
- The buyer needed a mortgage commitment, which required the on-site septic system to pass a dye test before closing.
- A dye test performed before closing failed; Valent learned of the failure and informed Bortz.
- The sellers hired a contractor to repair the septic system.
- Valent later received information from the settlement/title company’s representative that the septic system had passed the dye test; Valent relayed that statement to Bortz.
- At closing, a settlement/title company representative again stated that the dye test had passed; no one requested written confirmation of the test results.
- After closing, the title company informed Bortz it had never actually performed the dye test; a subsequent test failed, the system was deemed irreparable, and Bortz incurred roughly $15,000 to connect to public sewer.

## Issues

1. Whether a real estate broker is liable for fraudulent misrepresentation when its agent repeats a third party’s statement that a septic system passed a dye test, without reason to know the statement is false.
2. Whether a broker or its agent has an independent duty to verify the accuracy of a third party’s report before repeating it for purposes of a fraud claim.

## Decision

- The Supreme Court of Pennsylvania reversed the order affirming liability against Coldwell Banker for fraudulent misrepresentation.
- The court held the broker could not be liable for an “innocently made” misrepresentation where the agent had no reason to know the statement was false and no duty to verify the third party report.
- The court concluded the evidence did not establish the scienter element required for fraudulent misrepresentation.

## Legal Principles

- Fraudulent misrepresentation requires: (1) a misrepresentation; (2) a fraudulent utterance (scienter); (3) intent to induce action; (4) justifiable reliance; and (5) damages proximately caused.
- Scienter requires knowledge of falsity or reckless disregard (conscious ignorance of the truth); negligence is insufficient to prove fraudulent misrepresentation.
- A broker who merely communicates information supplied by a reputable independent professional is not liable in fraud absent reason to suspect falsity.
- A broker has no general duty, for purposes of a fraud claim, to independently investigate or verify third-party representations in a transaction absent indicators of inaccuracy; otherwise the broker would function as an insurer of others’ information.

## Conclusion

The court relieved the broker of fraud liability because the agent only repeated a reputable third party’s assurance that the septic system passed the dye test, lacked knowledge or reckless disregard of falsity, and had no independent duty to verify the report to satisfy the scienter requirement for fraudulent misrepresentation.


Bortz v. Noon, 729 A.2d 555 (Pa. 1999)