In a case against a Corporate Real Estate Broker, and the designated broker for that corporation, the designated officer may not be held vicariously liable under traditional agency principles for the tortious conduct of agents he or she is responsible for supervising. In Sandler vs. Sanchez, the Sandlers made a loan of $600,000.00 to the owners of an eight unit apartment building for the purpose of converting them to condos. Their real estate agent represented to them that after conversion, the project would be worth more than $5 million. The holder of the first deed of trust foreclosed on the project after the borrower defaulted, and the Sandlers then sued the officer and broker of record for a corporate real estate broker, under Business & Professions Code section 10159.2, which requires the designated officer of the corporation to supervise the corporate broker’s employees and agents. However, the court held that this duty of supervision was a duty owed to the corporation, not to third persons who are damaged by the negligence of a salesperson. Therefore, the broker of record for a corporate Real Estate Broker may not be sued by a third party for negligence in failing to supervise the agents working for the
corporate real estate broker.