## Facts

- Francis and Wanda Divita listed their home for sale through Old Colony Company, the sellers’ listing broker.
- Donald and Charlotte Teter negotiated to purchase the home and dealt with Old Colony in investigating the property.
- During inspection, the Teters discovered a crack in a backyard retaining wall and requested an engineering evaluation.
- Old Colony retained Kelley, Gidley, Blair & Wolfe, Inc., a civil engineering firm, to inspect the wall and home.
- Kelley, Gidley reported the wall was in satisfactory condition and identified no structural problems affecting safety or stability.
- Relying on these assurances, the Teters purchased the property.
- Several years later, a landslide occurred; the retaining wall collapsed and caused substantial damage.
- A later engineering investigation attributed the failure to fill dirt behind the wall that increased the load; the dangerous condition existed at the time of the earlier inspection.
- The Teters sued Old Colony and Kelley, Gidley for, among other claims, broker misrepresentation/nondisclosure and negligent inspection.

## Issues

1. Under what circumstances may a seller’s real estate broker be liable to a purchaser for material misrepresentation or nondisclosure of defects substantially affecting value or habitability.
2. What degree of control is required to establish an agency or master–servant relationship for respondeat superior liability.
3. Whether the evidence, viewed most favorably to the plaintiffs, was sufficient to deny directed verdict motions and sustain the jury’s verdict against Old Colony and Kelley, Gidley.

## Decision

- The Supreme Court of Appeals of West Virginia affirmed the judgment for the Teters.
- The court held a vendor’s real estate broker may be liable to a purchaser for material misrepresentations about fitness or habitability, or for failing to disclose latent defects substantially affecting value or habitability, when the broker knows or reasonably should know of the condition, the purchaser is unaware and would not discover it by reasonably diligent inspection, and the misrepresentation or concealment substantially induced the purchase.
- The court reaffirmed that agency requires some degree of control by the principal over the agent and identified factors relevant to a master–servant relationship for respondeat superior.
- The court concluded the plaintiffs presented sufficient evidence to submit the claims to the jury and to support the verdict; directed verdict was properly denied.

## Legal Principles

- A vendor’s real estate broker may be liable to a purchaser for:
  - material misrepresentations regarding fitness or habitability; or
  - nondisclosure of defects/conditions substantially affecting value or habitability,
  when the broker is aware or reasonably should be aware of the condition, the purchaser is unaware and would not discover it by reasonably diligent inspection, and the broker’s misrepresentation or concealment was a substantial factor inducing the purchase.
- An agency relationship requires some degree of control by the principal over the agent’s conduct and activities.
- In distinguishing master–servant from other relationships for respondeat superior, relevant factors include: (1) selection/engagement, (2) payment, (3) power of dismissal, and (4) power of control (most significant).
- A directed verdict is appropriate when the plaintiff’s evidence, viewed in the light most favorable to the plaintiff, fails to establish a prima facie right of recovery.

## Conclusion

The court affirmed a jury verdict holding a listing broker and an engineering firm liable where purchasers relied on assurances about a retaining wall later shown to be dangerously defective, and it clarified that broker liability for misrepresentation or nondisclosure turns on the broker’s actual or constructive knowledge, the defect’s material effect on value or habitability, the buyer’s inability to discover the condition through reasonable diligence, and inducement of the purchase.


Teter v. Old Colony Co., 441 S.E.2d 728 (W. Va. 1994)