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Silicon Valley Homeowner Wins $450,000 Settlement in Real Estate Fraud Lawsuit!

Phillip Deutcher's Deposition

00001 1 SUPERIOR COURT - STATE OF CALIFORNIA 2 COUNTY OF SANTA CLARA 3 ---oOo--- 4 5 RALPH SIMPSON, 6 Plaintiff, 7 -vs- NO. 105CV053398 8 LOU RAE KAGEL, LYNN O'BRIEN, JAMES O'BRIEN, STONEHENGE 9 PROPERTIES, INC., VALLEY OF CALIFORNIA, INC. dba COLDWELL 10 BANKER, DOUGLAS REA and DOES ONE through TWENTY, inclusive, 11 Defendants. 12 ______________________________/ AND RELATED ACTIONS. 13 ____________________________/ 14 DEPOSITION OF PHILLIP G. DEUTSCHER, CRB 15 January 11, 2007 16 17 18 REPORTED BY: 19 MARION KENYON, CSR NO. 4381 20 21 22 23 TOOKER & ANTZ CERTIFIED SHORTHAND REPORTERS 24 350 SANSOME STREET, SUITE 700 SAN FRANCISCO, CALIFORNIA 94104 25 (415) 392-0650 00002 1 I N D E X 2 PAGE 3 EXAMINATION BY MR. KOSS 5 4 EXAMINATION BY MR. THOMAS 107 5 FURTHER EXAMINATION BY MR. KOSS 132 6 FURTHER EXAMINATION BY MR. THOMAS 135 7 8 E X H I B I T S 9 DEFENDANT'S 10 1 Curriculum Vitae of Phillip 10 G. Deutscher 11 Two pages of expert retainer 20 12 documentation, unsigned 13 3 Ten pages of emails 23 14 4 One page of handwritten notes 24 15 5 Eight pages of deposition 24 excerpts 16 17 --oOo-- 18 19 20 21 22 23 24 25 00003 1 DEPOSITION OF PHILLIP G. DEUTSCHER, CRB 2 3 BE IT REMEMBERED that, pursuant to Notice of 4 Taking Deposition, and on Thursday, January 11, 2007, 5 commencing at the hour of 1:15 p.m., in the Law Offices 6 of Gagen, McCoy, McMahon, Koss, Markowitz & Raines, 279 7 Front Street, Danville, CA 94526, before me, MARION 8 KENYON, duly authorized to administer oaths pursuant to 9 Section 2093(b) of the California Code of Civil 10 Procedure, personally appeared 11 PHILLIP G. DEUTSCHER, CRB, 12 called as a witness by the Defendant and 13 Cross-Complainant Lou Rae Kagel, and the said witness, 14 having stated that he would testify the truth, the whole 15 truth, and nothing but the truth, was thereupon examined 16 and testified as hereinafter set forth. 17 GREENE, CHAUVEL, DESCALSO & MINOLETTI, 951 18 Mariner's Island Boulevard, Suite 630, San Mateo, CA 19 94404, represented by PAUL G. MINOLETTI, ESQ., appeared 20 as counsel on behalf of Plaintiff Ralph Simpson. 21 GAGEN, McCOY, McMAHON, KOSS, MARKOWITZ & 22 RAINES, 279 Front Street, Danville, CA 94526, 23 represented by CHARLES A. KOSS, ESQ., appeared as 24 counsel on behalf of Defendant and Cross-Complainant Lou 25 Rae Kagel. 00004 1 LAW DIVISION OF NRT INCORPORATED WESTERN 2 DIVISION, 12657 Alcosta Boulevard, Suite 500, San Ramon, 3 CA 94583, represented by STEPHEN W. THOMAS, ESQ., 4 appeared as counsel on behalf of Defendant Valley of 5 California dba Coldwell Banker. 6 --oOo-- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00005 1 PHILLIP G. DEUTSCHER, CRB, 2 having stated that he would testify the truth, 3 the whole truth, and nothing but the truth, 4 testified as follows: 5 6 EXAMINATION BY MR. KOSS 7 MR. KOSS: Q. Will you please state your name 8 and business address. 9 A. Name is Phillip, with two l's, Gary Deutscher, 10 D-e-u-t-s-c-h-e-r. 11 Business address is 1160 Alpine Road, 12 Walnut Creek, California. 13 Q. Mr. Deutscher, I introduced myself to you 14 prior to the start of the deposition. I represent Lou 15 Rae Kagel as a defendant in a lawsuit brought by Ralph 16 Simpson arising out of the purchase by Mr. Simpson of 17 some property located on Blanchard Drive in 18 Monte Sereno. 19 And I understand, sir, that you have been 20 retained by Mr. Simpson or his counsel to render expert 21 opinion in this matter? 22 A. Yes, I have. 23 Q. Okay. 24 Have you acted as an expert witness in cases 25 prior to this? 00006 1 A. Yes, I have. 2 Q. On how many occasions would you estimate? 3 A. I have been doing it since 1990, and I think, 4 if you want engaged, probably somewhere between 150, 200 5 times. 6 Q. And you have been deposed prior to today? 7 A. Yes, I have. 8 Q. On how many occasions? 9 A. I would just guesstimate somewhere in the 10 range of 15 to 20 times. 11 Q. Would you like me to go through the rules of a 12 deposition, or you think you're familiar with them? 13 A. No, you don't need to. 14 Q. Okay. 15 Now, one of the things I asked you to do was 16 bring a number of documents with you, and I think one of 17 the first things I asked was for a CV. 18 Did you bring that with you? 19 A. Yes. 20 One of the things I did not bring, because you 21 guys moved the time up, is I had my exhibits, which I'm 22 sure Counsel here can tell you what I received. I 23 didn't have time to go home and get those. 24 Q. And I take it you looked at a whole lot of 25 documents, and you didn't bring those with you 00007 1 because -- 2 A. One set, just the exhibits. 3 Okay. You want my CV? 4 Q. Yes. 5 Thank you. 6 Before I get to your CV, I see that you've 7 brought a laptop with you. 8 A. Yes, sir. 9 Q. And you have that laptop open? 10 A. Yes, I do. 11 Q. Is there something on the screen? 12 A. Everything that I read except one deposition 13 that was supplied to me by Paul was all on ASCII disk. 14 Q. Anything else contained on your computer 15 relating to this case other than the information 16 supplied to you by ASCII disk? 17 A. Yes. 18 I just had some -- I don't know if you call 19 them notes -- some part of the material that I pasted 20 out just to keep them in front of me, and I did run a 21 copy of whatever I had on my computer for you. 22 Q. Okay. 23 Anything else on your computer besides the 24 notes and the stuff you received from counsel on ASCII? 25 A. Yes. 00008 1 I had -- I also copied the emails I received 2 from Paul's assistant that covered the ASCII depositions 3 I was sent. 4 Q. Okay. 5 And those emails were also printed out. 6 Did you bring those in hard form, too? 7 A. Yes. 8 Q. Do you need your computer open to refer to 9 those as we do this deposition? 10 A. Only in the beginning, just to note, when you 11 asked me what I read, I was going to look through and 12 find those. 13 Q. Why don't we do that now, and we can close the 14 computer, because I don't know what you're looking at. 15 A. No problem. 16 Q. Why don't we do this: Tell me what you 17 reviewed in this case to assist you in rendering your 18 opinions. 19 A. Absolutely. 20 I have reviewed the following depositions: 21 Mr. Barkan, Chandler, Ryan Iwanaga, Kagel, O'Brien, 22 Mr. Simpson, Ryan Simpson, Mr. Stroupe, and Tomasena 23 Simpson. 24 Q. And you read each one of those depositions; is 25 that true? 00009 1 A. Yes, sir. 2 Q. As you read those depositions, did you read 3 them on your laptop or in hard copy form? 4 A. I read all but -- I read all of them in hard 5 copy, but I did look -- start reading again and happen 6 to have -- actually, I brought the exhibits and left 7 the -- I have a hard copy of Mr. Simpson's, and I did 8 not bring that but I did not make any notations in that 9 at all. 10 Q. So the one hard copy of the deposition 11 transcripts, including exhibits, is you brought the 12 exhibits to Mr. Simpson's deposition? 13 A. Right. 14 Q. Okay. 15 As you read the depositions, did you make 16 notes? 17 A. Excuse me? 18 Q. As you read the deposition transcripts, did 19 you make notes? 20 A. Not really, other than I cut and pasted 21 whatever I'm going to give you a copy of, excerpts. I 22 made maybe two or three notes in there, but they're in 23 there. 24 Q. Okay. 25 And now can we close your laptop? 00010 1 A. Absolutely. 2 Q. Okay. 3 Why don't we mark this as Exhibit 1, this 4 being your CV. 5 A. Yes, sir. 6 (Whereupon, Defendant's Exhibit 1 was 7 marked for identification.) 8 MR. KOSS: Q. Looking at your CV, sir, I see 9 you have been a real estate licensee since 1973? 10 A. Yes, sir. 11 Q. And a broker since '74? 12 A. Yes. 13 Q. And you continue to hold a broker's license? 14 A. Yes. 15 Q. Have you ever been sanctioned or reprimanded 16 by the Department of Real Estate? 17 A. Absolutely not. 18 If I put my hand near my mouth, just let me 19 know. I have a tendency to do that. 20 Q. So, by looking at your resume, I would guess 21 that you graduated college in 1973 and you immediately 22 began -- immediately got your real estate license? 23 A. Yes, sir. 24 Q. And did you immediately embark on a career in 25 real estate? 00011 1 A. Yes. 2 Q. What did you initially do? 3 A. I -- well, actually, I had a career in real 4 estate prior to this, but not as a licensee, but I went 5 to work under my father's license until I got my 6 broker's license at Deutscher & Associates, which is an 7 all-broker-license firm, except for me, and began 8 training in residential sales. 9 Q. Is your father Irv Deutscher? 10 A. That's my uncle. 11 Q. Your resume doesn't really describe what you 12 did, at least as best I can tell, between 1973 and 1985. 13 Can you tell me what you were doing for that 14 time frame? 15 A. Residential -- sale of residential properties, 16 investment counseling, multiple units; hundred percent 17 time dedicated to residential sales. 18 Q. What do you mean by "multiple units"? 19 A. I also took my courses to become a CCIAM, or 20 at least the qualifications for it, which was Commercial 21 Investment Member, and I started working on selling 22 properties with more than single family, multiple units, 23 and doing some syndications and travelling oversees to 24 raise money for syndications, and I did sell some 25 commercial product at the time, too. 00012 1 I also became, during that period of time, a 2 partner in Deutscher & Associates, and I supervised 3 agents as we changed the nature of the company from a 4 brokerage company to -- being all broker to having sales 5 personnel. 6 Q. Who were the principals of Deutscher & 7 Associates? 8 A. Well, we -- some came in and out, but Gordon 9 Bolton, Doug Kroke, my father, Edward Nineo -- wow, I 10 have to go way back. 11 Gosh, there were some many -- oh, Randy 12 Grable, formerly of Grable & Associates. 13 Basic ones. 14 Q. Okay. 15 And was the business of Deutscher & Associates 16 a real estate brokerage company? 17 A. Yes, sir. 18 Q. Selling principally -- I'm sorry -- handling 19 principally residential real estate? 20 A. Yes, sir. 21 Q. Now, in 1985, is it correct you left Deutscher 22 & Associates and went to Executive Brokers? 23 A. Yes. 24 Just to be clear, about 1981, couple of my 25 partners took a more generic name -- God knows why 00013 1 because we dealt with foreign clients -- and it dealt as 2 a d.b.a. 3 In '85, July, I believe, I left and went to 4 another all-broker office, being Executive Brokers. 5 Q. Actually, I think I need to apologize. I'm 6 not very good reading your resume. 7 It does describe the time frames 1973 to the 8 present. 9 So in 1985 you went to Executive Brokers, 10 correct? 11 A. I, by ownership in Deutscher d.b.a. of 12 Horizons, bought into Executive Brokers. 13 Q. When you say "bought into," what do you mean? 14 A. For that year only, we were an all-broker 15 office but we were all under the Executive Brokers 16 license, and so I bought in as partner. 17 Then, because of the E&O crunch that happened 18 that year when I got there, naturally, we structured the 19 company so it was not under Executive Brokers, Inc. any 20 more. We all became independent. 21 Q. Are you still affiliated with Executive 22 Brokers? 23 A. Yes. 24 I now am an independent broker doing business 25 as Executive Brokers working under a service mark, being 00014 1 Executive SM and being licensed by Executive Brokers, 2 Inc., which is now de-licensed, so there is not 3 hopefully a joint liability under all us independent 4 brokers. 5 Q. Can you describe the nature of your 6 professional practice with Executive Brokers? 7 A. 99 percent of it is residential resale. 8 Q. Do you have any agents working for you? 9 A. Not at this time. 10 I have had over the last seven or eight years, 11 whenever we found somebody that would be a great new 12 associate to be with us and hadn't got their broker's 13 license, I was normally the person that took them under 14 my license while they were acquiring their broker's 15 license, anywhere from three or four years, and I would 16 supervise them. 17 Q. And in the year 2000 you were General Manager 18 for the Contra Costa Association of Realtors? 19 A. Yes. 20 Q. Can you describe to us your duties in that 21 position? 22 A. In 1999 I served my second time as President 23 of Contra Costa, and we were doing a program of trying 24 to restructure our services for our membership, and they 25 asked me if I would consider taking on the job of being 00015 1 general manager, which included supervision of all the 2 staff, except for accounting, and I was helping them 3 build their business plan, and so I made a deal with 4 Executive Brokers, that I could still -- and the board, 5 that I could still be a member of Executive Brokers at 6 the same time because of these agents to do expert 7 witnessing but only the cases I had open and I could 8 work for them at the same time. 9 Q. Was this a full-time position as general 10 manager? 11 A. Yes. 12 Q. So -- 13 A. Full in the sense that it was not an eight- to 14 ten-hour job a day, but -- and I had regular hours, but 15 I was allowed to do these other things beyond that 16 purview. 17 Q. So, in addition to being a general manager, 18 you had your own practice as a broker? 19 A. I was precluded from selling anything myself, 20 but I could supervise the people I had under my license 21 and I was allowed to do that, and I was allowed to 22 finish up any exert witness cases I had already opened, 23 but, as to going out and listing and selling property 24 exclusively myself, no. 25 Q. Why did you leave that position? 00016 1 A. Well, they wanted to get a new executive 2 officer and interviewed -- I don't know -- 50, 75 3 people, and it came down to me and another person, and 4 that person got it and I decided time to get out of 5 town. 6 Q. Do you recall who it was that they hired? 7 A. Yes. 8 Chuck Lam. 9 The last executive officer that was relieved 10 of his command last year. 11 Q. And was he given the position of general 12 manager or, you say, executive manager? 13 A. They created that position for me and it went 14 away when I left. 15 Q. And for some period of time you were 16 affiliated with a C21 office? 17 A. Right. 18 They came to me and said, "We would really 19 like you to come over. We have 200-plus agents. We 20 would like you to help us with the liability and 21 training and we would like to recruit in Lafayette." 22 And I told them I had people working for me under 23 Executive Brokers under my license. And they said, "We 24 trust you, so you can be two places at the same time, 25 you can have your own agents over at Executive Brokers, 00017 1 but if you do any business, you will do it while you're 2 working here 8:00 to 5:00 with us." 3 So they created that position with me. 4 Then my duties were expanded to reviewing all 5 the contracts in the Lafayette office for them and 6 troubleshooting any deals that came up where there might 7 be litigation. 8 Q. In essence, did you become the branch manager 9 for the Lafayette office? 10 A. I think I was designated as a DR besides -- 11 I'm not sure -- but I'm pretty sure I was. I know I 12 could sign things. 13 Q. In your position at Century 21, were you 14 engaged in listing and selling properties, or was this 15 more of a management role? 16 A. I was allowed to, but I was overwhelmed, so I 17 don't even think I put a person in my car at that time. 18 Q. And, during that time, were you listing and 19 selling properties from Executive Brokers? 20 A. I was precluded from doing that, other than my 21 agents using my broker's license. I was personally 22 precluded from doing that. 23 Q. Now, you say at some point in your career you 24 started doing expert witness work, and that was 25 approximately 1990? 00018 1 A. 1990. 2 Q. Prior to this case, have you worked for 3 Mr. Minoletti's firm in the past? 4 A. No. 5 Q. Do you know how you happened to be contacted 6 by Mr. Minoletti's firm to act as an expert in this 7 case? 8 A. I think he saw my billboard on highway -- just 9 kidding. I'm just kidding. 10 I think he might have seen me in the Northern 11 California Register for -- out of the San Francisco Bar 12 Association, but I'm not sure. 13 I don't remember him being referred to me, but 14 I could be wrong; I don't remember. 15 Q. So why do you think that's how Mr. Minoletti 16 found you? 17 A. Because that's probably where I get 50 percent 18 of the contacts I get, they see that in the body of that 19 periodical. 20 Q. And you say since 1990 you have been retained 21 as an expert witness some 200 times? 22 A. I'm guesstimating, but I would say 150 to 23 above. 24 Q. And have you testified in court? 25 A. Yes, I have. 00019 1 Q. In which counties? 2 A. San Francisco, Santa Clara, Contra Costa, 3 Alameda, that I know of. 4 I can't remember. 5 Q. Have you ever been, to your knowledge, 6 precluded from testifying as an expert witness? 7 A. Excuse me? 8 Q. To your knowledge, have you ever been 9 precluded from testifying as an expert witness? 10 A. I have never been disqualified, other than a 11 conflict -- I was called by two sides of the case, and I 12 was at a meeting, didn't recognize the names, and they 13 both decided not to use me, so I guess that's kind of 14 disqualified. 15 Q. You didn't recognize the names so you agreed 16 to serve as an expert for both sides? 17 A. I talked to both sides about the case, so that 18 was it for me. 19 Q. When were you first contacted by anyone from 20 Mr. Minoletti's firm? 21 A. I think within the last 35, 45 days. 22 Q. And how was that contact done, by phone? 23 A. My telephone. 24 Q. And was that followed up by any written 25 instructions to you? 00020 1 A. No. 2 It was, "Here's the nature of the case. Do 3 you have any conflicts with it? Is it something within 4 the purview of your expertise? Are you available on 5 certain dates," and, "Could you send me some 6 information?" 7 I sent him my CV, my fee schedule, my letter 8 of engagement, and he looked at it and said, "We'll send 9 you a check and get some material to you." 10 Q. Okay. 11 All the stuff you just described, is that in 12 the file that is in front of you? 13 A. Right here. 14 I did not bring the executed one, because I 15 didn't have time to go home and get that either, but I 16 have copies off my laptop of what he got. 17 So you've got the CV, and here are the two 18 other documents other than the cover fax that stated 19 what's being supplied accompanying it. 20 Q. Okay. 21 Why don't we mark this two-page document as 22 Exhibit 2. 23 (Whereupon, Defendant's Exhibit 2 was 24 marked for identification.) 25 MR. KOSS: Q. Showing you Exhibit 2, I guess 00021 1 this is correspondence you sent to Mr. Minoletti 2 together with your schedule of fees? 3 A. Yes, sir. 4 Q. Okay. 5 And there is a signed version somewhere; you 6 don't have it with you? 7 A. No, I don't. I didn't have time. 8 Q. Do you know the date that it was signed? 9 A. If you want me to look in my computer, I can 10 see when it was generated, because it was done right 11 after that, but -- it was probably -- it was written the 12 last 45 days, I believe. This came up pretty quick. 13 Q. At that initial conversation with -- who did 14 you talk to, Mr. Minoletti? 15 A. Yes. 16 Q. Did he ask you to undertake any work on his 17 behalf? 18 A. At that time, the scope of my assignment, I 19 believe, was to look at the standards of care and the 20 duties as they were performed by both Mr. Rea and the 21 listing agent, Kagel in this case, and see if they met 22 those standards of care and duties. 23 That was, basically, my assignment. 24 Q. And what work did you do to undertake that 25 assignment? 00022 1 A. I read the depositions that were put into 2 evidence a while ago and exhibits, and, basically, that 3 was the nature of my work. 4 Q. Did you consult any reference books or 5 anything like that, magazine articles, talk to anybody 6 else to assist you with your opinions? 7 A. Not in this case. 8 Q. Now, you indicated that you put together some 9 notes? 10 A. I -- I guess you would call them notes, but, 11 basically, I just took some -- I just took some 12 highlights out of some of the depositions that I thought 13 I might want to look at later and -- just a second here. 14 These are, by the way, the emails. 15 Q. Let me look at the emails while you're looking 16 through the rest. 17 A. I haven't had a chance to go back and look at 18 these yet. 19 (Witness handing documents to Counsel.) 20 Also in my file -- the only thing else I have 21 in my file, too, if you wish to note it, is the 22 disclosure of expert witness that I had in my file, too. 23 I had that with me. 24 Would you mind if I got a cup of coffee? 25 Q. No; no. Go right ahead. 00023 1 (Discussion off the record.) 2 THE WITNESS: He sent me nothing of material 3 fact in any of the emails, just for the record, Paul 4 Minoletti or Valerie, I believe her name is. 5 And the only other thing I left in my car and 6 that gave me the time and directions for today. 7 MR. KOSS: Q. Sure. 8 Let's turn to the emails. 9 You gave me a series of emails, and it appears 10 that, by looking at the emails, between November 21 and 11 roughly November 28th the deposition transcripts were 12 emailed to you as attachments. 13 A. Yes, sir. 14 Oh, I just found one more sheet of notes that 15 must have been when I talked to him on the phone, 16 possibly. I didn't even realize I did it. 17 But I'll put that over here, too. I just 18 happened to see that in there. 19 I'm not much of a note taker. I'm a cut and 20 paster. 21 Q. So why don't we mark your emails as Exhibit 3. 22 (Whereupon, Defendant's Exhibit 3 was 23 marked for identification.) 24 MR. KOSS: Why don't we mark your handwritten 25 notes as Exhibit 4. 00024 1 (Whereupon, Defendant's Exhibit 4 was 2 marked for identification.) 3 MR. KOSS: Why don't we mark the deposition 4 excerpts as Exhibit 5. 5 (Whereupon, Defendant's Exhibit 5 was 6 marked for identification.) 7 MR. KOSS: Q. And all that remains in your 8 file that we haven't marked as an exhibit is the 9 disclosure made by Mr. Simpson's counsel of you as an 10 expert. 11 And is there anything else in your file? 12 A. No. It's just copies of my CV all over again. 13 Q. Okay. 14 Turning first to the notes, Exhibit 4, let me 15 show you that document. 16 Are those notes of a conversation you had with 17 someone? 18 A. I got to be real frank, I'm not even sure when 19 I took them. This is probably when he might have made a 20 phone call to me. Just noting some basics about the 21 property. 22 Q. When you say "he," you mean Paul Minoletti? 23 A. Yes, sir. 24 Q. Let me go to your custom and practice. 25 When you are retained as an expert in a case, 00025 1 do you open up a file? 2 A. Other than put the initial contract in it, 3 that's about, usually, what all goes in it, my contract 4 between the attorney hiring me. 5 Q. And do you make some effort to keep track of 6 your time? 7 A. Yes. 8 Q. How do you do that? 9 A. I sit down after the deposition and log it all 10 in. 11 Q. So, as you sit here today, you haven't logged 12 in any of the time that you've spent on the file? 13 A. Mentally. I've mentally. I know how long it 14 takes me to do what I do after years of this, and there 15 is so much stop and go, so I understand how many pages I 16 read and how long it takes me to review. 17 Q. Up to this time, how much time do you have in 18 this matter? 19 A. I would say approximately 15, 18 hours. 20 Q. How do you know whether to bill 15 or 18? 21 A. I would go back and look at the pages and 22 remember what I did in my time frame. I sit in blocks. 23 I used to do stop, go, and then I finally 24 forget to turn the timer on, and I realize that I read 25 between 50 and 55 pages an hour, is what I feel my 00026 1 average is, and I look at the supporting document and I 2 have to stop and look at it, and I either do 50 or 55, 3 right in there. 4 Q. Now, showing you Exhibit 5, you say you cut 5 and pasted some deposition testimony into this exhibit, 6 correct? 7 A. Yes. 8 Q. And did you add any notes or anything along 9 those lines? 10 A. I think there's just two phrases I just put in 11 there just to -- in case I decided to look at it while 12 we're sitting here. 13 I think I put in there -- it wasn't even 14 noteworthy. 15 I put down, "Increased deposit of 1.25 16 million," just to remind me they had asked for that, and 17 I think on the first page -- I put down the address. 18 And, other than that, there are no other notes 19 besides just taking -- paraphrasing -- I mean -- not 20 paraphrasing -- but cutting and pasting. 21 Q. And what criteria did you use in terms of 22 which deposition testimony you would take and put on to 23 this exhibit, what we have now marked as 5? 24 A. I just brought some illustrative points that 25 came to mind that I might have forgotten. 00027 1 That's about it. 2 I just looked at -- I wanted to make sure that 3 I understood what Mrs. Simpson was applying (sic) to 4 when she gave her deposition. 5 I pretty well had down what Mr. Simpson said. 6 And I thought it was important for me to look 7 at Kagel a second time and take out a couple thoughts 8 she said in her deposition just to have them, nothing 9 more. 10 Q. In doing your work, have you prepared any kind 11 of written report? 12 A. No. 13 Q. As you sit here today, do you think there are 14 any other documents that you would like to look at in 15 assisting you in rendering your opinion? 16 A. Not that I'm aware of. 17 Q. Do you think there is any more work that you 18 need to do to render an opinion in this case? 19 A. As of this point, no. 20 Q. Now, you were asked to consider the standard 21 of care and duties of the real estate agents involved in 22 this case and to see if their conduct met that standard 23 of care and duty? 24 A. That was my original charge. 25 Q. Have you had a subsequent charge? 00028 1 A. I have had a relief of duty on one of them. I 2 understand that Mr. Rea he is out of that, and I was 3 asked very early that, whenever that happened, I 4 wouldn't be -- so I didn't put any time in his position 5 as an agent, and, in fact, a dual agent and that imputes 6 some of his -- well, to Coldwell Banker and to 7 Ms. Kagel, dual agents, but I didn't specifically look 8 at his and make opinions as to his conduct. 9 Q. And you have no opinion as to his conduct as 10 you sit here today? 11 A. That's a hard one. 12 It's hard not to think as I was reading that, 13 if I were there, what might have been, but I don't 14 really -- I didn't formalize any opinions. 15 Q. You do have some opinions regarding Lou Rae 16 Kagel? 17 A. Yes, I do. 18 Q. Can you describe for me those opinions? 19 A. Sure. 20 I felt that she, basically, fell down below 21 her duty of the standard in doing a proper inquiry of 22 her seller on several material facts that needed to be 23 disclosed or were disclosed but were disclosed 24 improperly. 25 Q. Anything else? 00029 1 A. Well, let me think for a second, because that 2 is pretty all encompassing. 3 I felt that her documentation on some of the 4 material facts was lacking. 5 Q. Anything else? 6 A. Some are tricky. 7 On the dual agency situation, since she is a 8 dual agent, she had duties to both buyer and the seller 9 as did Coldwell Banker, and, because of that, I had to 10 look at whether that caused her to do some of the 11 respective duties that a single agent might have done 12 for the buyer, and I looked at that, and, based on that, 13 I feel that she probably should have made some types of 14 general recommendations or recommended to her seller 15 some general recommendations be given to the buyer in 16 the nature of some of the material features of the 17 property that she didn't. 18 That was pretty compound. 19 Q. Okay. 20 As a result of this dual agency, Ms. Kagel 21 should have made some general recommendations to the 22 seller about further disclosures; am I paraphrasing 23 correctly? 24 A. Yes. 25 And also, basically, through the seller to the 00030 1 buyer or the buyer's agent. 2 Q. Now, when you say "dual agent," are you saying 3 that Ms. Kagel was a dual agent? 4 A. Yes. 5 Q. And so she had fiduciary duties to 6 Mr. Simpson? 7 A. Absolutely. 8 Q. And how did Ms. Kagel become a dual agent? 9 A. By being in the same office and under the same 10 license as Mr. Rea. There was only one broker in this 11 transaction. 12 I have to go back and look at the contract, 13 but I think that's definitely what they designated. 14 Q. And anything else -- any other opinions you 15 have regarding the standard of care or duties of 16 Ms. Kagel? 17 A. Nothing comes to mind at this time. 18 Q. Okay. 19 Let me go through these step by step, then, if 20 I could. 21 A. Please. 22 Q. One of the things you mentioned was that 23 Ms. Kagel's documentation was lacking -- 24 A. Right. 25 Q. -- and in some respect, I take it, you believe 00031 1 that Ms. Kagel failed to adequately perform her duties 2 by having inadequate documentation, correct? 3 A. It's sort of a spin-off of the fact of what 4 was represented to the buyer and what she did in her 5 materials. Some of them were very important, and I 6 think that a prudent agent would have probably made some 7 notations as to where or how they got information that 8 they used in their marketing materials and also related 9 to the buyer. 10 Q. What documentation are you referring to, 11 marketing materials? 12 A. I would think that they -- the square footage, 13 the acreage, the wiring for the Internet -- I'm losing 14 it here -- if I remember the term -- optical -- 15 Q. Fiber optics. 16 A. -- fiber optics, those were unusual. 17 And the out building, visual inspection should 18 have caused her to wonder where and how they could have 19 fitted on that property. I would have thought she would 20 have made some notes somewhere as to where she got the 21 information and how -- made a legitimate inquiry. I 22 didn't see them at all. 23 Q. I'm not sure that answered my question. 24 You said her documentation was lacking. 25 The documentation you are referring to is the 00032 1 marketing materials? 2 A. That and any type of log that would show that 3 she verified or she had related -- done a proper inquiry 4 of the seller on these issues. 5 It's all oral, and what we have now here is 6 we're in litigation and the trier of fact has to 7 determine that. 8 An agent should properly have made some good 9 notes as to where they got the information from, and I 10 didn't see it. 11 Q. You never saw any notes that Lou Rae Kagel 12 took down about conversations she had with her seller? 13 A. I read, and I don't remember any specific 14 notes, and in her deposition I don't remember her 15 referring to any, or anybody's deposition. 16 Q. So, in your opinion, she should have 17 documented in note form what the seller had told her 18 about attributes of the home? 19 A. Certain attributes. 20 Unique attributes, specialized use of the 21 property affecting the desirability and value. 22 Q. So, in your opinion, the standard of care 23 requires a real estate agent, when they're meeting with 24 their seller and the seller is describing aspects of the 25 house, that the agent must keep written notes of what 00033 1 aspects of the home are being described? 2 A. I think sometimes -- I think a prudent agent 3 would, depending on the nature of what's -- what the 4 material fact is. 5 If there's a street in front of the house and 6 it looks like it's the county that owns it, I wouldn't 7 be making a note, but if somebody told me that it was 8 privately owned and that there might even be a 9 maintenance agreement, I think I would make a note about 10 it in my log. 11 This situation we're talking about, wiring 12 that is highly unusual, we're talking about putting a 13 lot of square footage on a piece of property that 14 visually you would have to wonder where is it going to 15 go on the property, through the transaction, as somebody 16 said in the deposition, changing as they go on along, 17 going from an acre to two-thirds of an acre to less than 18 two-thirds of an acre, and the square footage of the 19 house is shrinking. I think that would be red flags to 20 ask further questions about does that affect this or 21 that, and a prudent agent would probably note these 22 things. 23 Q. You keep using the phrase "prudent agent." 24 What do you mean by that? 25 A. The prudent agent is the words you stay away 00034 1 from when I'm on the other side of the fence, which 2 means prudent agent is something you will expect an 3 agent to do on the duties. 4 So when you're on this side of the deposition, 5 the prudent means it should have been done. 6 Q. You're saying the standard of care requires it 7 to be done? 8 A. I think it's in one of the descriptions 9 indicating I believe it's 2,079. That uses the word 10 prudent. 11 Q. And agents, in a general sense, need to be 12 prudent; is that true? 13 A. Yes, sir. 14 Q. And in this case you say to be prudent 15 Ms. Kagel should have taken notes of facts told to her 16 by the seller? 17 A. Certain. Certain facts. 18 Q. And the failure to do that means that she did 19 not act prudently? 20 A. And by not acting prudently she fell below the 21 standard of care that she was required to be a prudent 22 agent documented. 23 Q. And where do you derive this standard of care 24 or the notion that a prudent agent keeps notes? Is that 25 written down somewhere or is that a standard in your 00035 1 industry; where do you get that? 2 A. It's a standard in my industry, and having had 3 some 200 agents and what their practice is and being a 4 broker and a professional and seeing what they do, and 5 being trained by one of the best agents of being a 6 prudent agent, being fair, that's standard of care. 7 Q. Can you refer me to any particular 8 publications of any trade group that you're part of, 9 anything like that, that says that the standard of care 10 requires an agent to keep notes of what they discuss 11 with the seller? 12 A. I can only talk to you about having taught 13 real estate principles and practices for seven years, 14 that part of my curriculum would be saying the standards 15 when they are getting a license is a common practice of 16 the instructor, the old phrase when in doubt disclose, 17 and if you have any doubt, put it in writing, and 18 something of a material fact you always reduced it to 19 writing. 20 Q. And is that something you carry out in your 21 practice? 22 A. Yes. 23 And, to be fair with you, my standard of care 24 is probably higher than most because of my training, but 25 I would say, still, the standard of care out there are 00036 1 rules of what a prudent agent should be. 2 Q. Maybe I misunderstood. 3 Your prior testimony, I thought what you said 4 was you don't keep notes when you talk to people. 5 A. No; no. 6 In this case, this type of work, I don't 7 because I have a very good -- I shouldn't say that -- I 8 feel I have a pretty good handle of what I read, and my 9 father also taught me not to do that, so I don't do 10 that. 11 Q. Your father taught you not to write down notes 12 as an expert witness? 13 A. Yeah. 14 Q. Why is this? 15 A. He said the only time you do that is if you 16 want them to ask you to write it and they'll ask. 17 If you want them not asking beyond what you're 18 asking. 19 So that is what he trained me. 20 In the transaction I do copious notes, I 21 document every email and everything, keep a copy, but 22 I'm not talking about practices as an expert. 23 Q. So, as a real estate professional, you would 24 keep copious notes; as an expert you don't trouble with 25 that? 00037 1 A. I will write a sheet of notes up on a very 2 complicated case and I'll keep refining it, like 3 Mr. Barkan does, I'll write down some things. 4 One thing I didn't do here -- you made me 5 close my computer. I'm very bad at names, so I don't 6 remember names, but I'm pretty good about factual 7 nature, but something complicated, I'll start doing an 8 outline of it. 9 This case, to me, isn't that complicated. 10 Q. So which facts in particular, if you have any 11 in mind, should Lou Rae Kagel have documented by notes 12 which were things she received from the seller, 13 information she received from the seller? 14 A. Inquiring of the seller as to the lot size, 15 since it ultimately didn't comply with what was used, 16 from an acre down to less than two-thirds of an acre. 17 When they started shrinking, I would probably would have 18 asked what she used for that. I would ask for per 19 seller, so if somebody asked for what the lot size is, 20 they know it didn't come from the assessor or appraiser 21 but it came directly from the seller's mouth. 22 I would think if you start putting in optical 23 wiring like that, that is expensive and so highly 24 unusual that you might say to the seller, "Do you 25 have -- who put it in? Was there a qualified expert? 00038 1 Do you have a bill for that separately, subcontractor we 2 could pass on to the buyer?" I would like that for my 3 file. That was the way I would handle inquiry 4 documenting it. 5 I think, if you put on your brochures and 6 flyers that you can build another 800 square feet of 7 living space and a pool, this you would ask your seller 8 through a diligent inquiry, "What do you base that on? 9 Have you got approvals on it?" You know, how should I 10 qualify it? I would have some measure of something that 11 important when I put it on there, I would have done a 12 really good inquiry of my seller, and then I would put 13 it in my log and make sure, to protect the seller and 14 myself, I would be handing it to any prospective buyer 15 when they got to the disclosure part of the contract. 16 So -- I think that answers your question. 17 Q. Okay. 18 So you say Ms. Kagel, to be a prudent agent, 19 should not only have kept a log of what the seller told 20 her, but that log needs to be handed to the buyer? 21 A. Not necessarily the log, but relevant 22 information, like -- if they are pulling out of their 23 hat what the square footage is, I would make sure that, 24 at a minimum, as per seller, they acknowledge acreage is 25 per seller's information, and that would have identified 00039 1 to me, as buyer's agent, "Can you give me a copy of what 2 you used for it? How did you come up with it?" 3 If the square footage was off, I would want to 4 know where the seller got it, was it from a set of 5 plans, was it off a tax record, can it be inaccurate 6 somehow? 7 Something unusual like that or something that 8 has a real -- it's a real flag to me, it should be a red 9 flag to the agent for anybody's benefit, trigger me to 10 ask questions. 11 Should I put it in a log? Yes. Did I ask 12 questions? I put it in my log to verify when I put it 13 on a flyer that I have information I would pass it on to 14 the client. I wouldn't necessarily give him the log, 15 but the log would trigger -- some of these things I 16 would have put on the broker, to be quite frank, as per 17 seller, square footage as per seller, building, pool, 18 whatever. It's too open and too broad for a layman like 19 these buyers that have never put a pool in. From my 20 knowledge of reading, I would presume that, unless there 21 was something unusual came up, that I could probably 22 build a normal pool, probably put some kind of building, 23 maybe it ends up being a barn, I know I could put 24 something on there, but because of the impervious use of 25 this property, they were already over it. 00040 1 Q. Well, let me try and focus you on maybe one 2 issue and see if I can understand what you're telling 3 me. 4 A. Absolutely. 5 Q. Do you understand that Lynn O'Brien told Lou 6 Rae Kagel that the house in question had fiber optics? 7 A. I don't understand that. 8 I understand the trier of fact is going to 9 have a hard time figuring out who gave the same 10 information. I didn't get that out of her reading. 11 Q. Did you see the testimony of Lou Rae Kagel 12 where she said the information regarding fiber optics 13 was provided to her by Lynn O'Brien? 14 A. I saw that. 15 Q. Okay. 16 Do you have any reason to believe that that 17 statement is not true? 18 A. Do I have any reason to believe -- then I 19 would have -- that would give me a reason to believe 20 that I didn't believe the seller, then, and one was 21 telling the truth and one wasn't. 22 Q. What did the seller say that caused you to -- 23 A. Could I have my original cut and pasting? 24 Q. Sure. 25 A. Let me see here real quick. 00041 1 Just one second here. I had the particular 2 thing. One second. I didn't have a chance -- because 3 of the hour, I didn't get a chance to write down who was 4 who but.... 5 Sorry. 6 Okay. 7 I'm sorry, could you repeat the question just 8 one second? 9 MR. KOSS: Can you read it back, please 10 (Discussion off the record.) 11 MR. KOSS: Q. Let me ask you, Mr. Deutscher: 12 Do you have any reason to believe that the information 13 regarding fiber optics did not come from the seller to 14 Ms. Kagel? 15 A. Yes. Based on the readings, I saw several 16 times the question was asked by, I think it was 17 Mr. Minoletti asked, and she said over and over again 18 that she never -- never told Ms. Kagel that there were 19 fiber optics, there was CADD 5, but she had never told 20 her there was fiber optics on the property. 21 And the original question was do I believe 22 Ms. Kagel, and I said then I would not be able to 23 believe Ms. O'Brien if I did that. 24 Q. Okay. 25 If Ms. Kagel did have notes indicating that 00042 1 she was told by Lynn O'Brien that, in fact, the house 2 had fiber optics, would that change your opinion? 3 A. It would change part of my opinion. 4 Q. What part would it change? 5 A. It would change that she documents something 6 that showed that it was -- that she did a proper inquiry 7 of it but she didn't pass on the information -- she did 8 not state to the potential buyer, the buyer ultimately, 9 where she got the information from. 10 Q. And why is that significant, to tell the buyer 11 where the information came from? 12 A. Because that leads them to believe one way or 13 another whether they need to do more further 14 verification. 15 Q. On the fiber optics, did you read 16 Mr. Simpson's testimony where he questioned Mr. Rea 17 certainly prior to close of escrow saying he doubted 18 there was fiber optics in the house? 19 A. I don't -- I read that deposition. 20 I don't remember him saying that he doubted, 21 but, I mean, that's not to say that he didn't say that. 22 I don't remember that specifically. 23 Q. In a situation like this where -- you 24 understand the seller was a developer? 25 A. Depending on your definition, yes, she did 00043 1 that more than once. 2 Q. And you knew the seller had built this 3 particular home, correct? 4 A. Yes, sir. 5 Q. Is Ms. Kagel entitled -- assume for the moment 6 that Ms. Kagel is told by the seller that the house has 7 fiber optics. 8 Is Ms. Kagel entitled to rely upon that 9 information from the seller without doing additional 10 investigation? 11 A. Investigation being inquiring of the seller? 12 No. 13 Going outside and hiring somebody to verify 14 it -- maybe I said that backwards. 15 She isn't required to go out and get someone 16 else to verify it, but she should do proper inquiry as 17 to who did it and how they did it, because this is -- I 18 think this is an unusual thing that I never had sold a 19 house with that. 20 Q. You've never sold a house with fiber optics? 21 A. Never. 22 I don't know if I have ever been in a house 23 with fiber optics. 24 Q. So, in your opinion, for Ms. Kagel to meet the 25 standard of care, if she had been told the house had 00044 1 fiber optics, she should have followed up and asked who 2 was the contractor who installed it and that type of 3 thing? 4 A. To ask follow-up questions, I think it would 5 be very prudent to. 6 "Do you have any materials on this? Did you 7 have a competent professional do it? Does it require 8 any kind of an extra permit or something" -- I don't 9 know enough about it to even know what -- I would have 10 to start somewhere, because I don't know anything about 11 fiber optics. 12 I have ran into this problem and other people 13 run into this problem with satellite dishes. You find 14 out they put it in the site, they don't own the 15 satellite dish. The question should be, "Did you 16 install it? Is it your own?" 17 Just because a person says they have a 18 satellite dish, it's really supposed to stay with the 19 property. 20 This is a very sophisticated thing we're 21 talking about and very expensive item. 22 Q. Using your example, if the seller says, "I 23 have a satellite dish," you might doubt that, as a real 24 estate agent, based on your experience that people don't 25 always own those -- 00045 1 A. I look at the disclosure, do you have a 2 satellite dish, and they mark that, I assume it stays 3 with the property. 4 My follow-up question would be, "Do you own 5 it?" because they'll put it down whether they own it or 6 not, and that's a very unsophisticated situation, but it 7 used to happen all the time, that people would -- all of 8 a sudden they say they're taking away the dish that 9 shows it to go with the property because it's on the 10 features sheet. 11 Q. So you're saying the seller may not know the 12 true aspects regarding the features of the house? 13 A. I think it's worthy of a proper inquiry 14 because it's unusual. 15 If I saw gravel in front of the property, I 16 would ask them, "Do you have a street agreement? Do you 17 own the street?" I wouldn't presume because they didn't 18 know to tell me. It's prudent to ask them. 19 If someone spent a fortune to wire a house 20 that is highly unusual, then I would ask questions, 21 especially if I'm going to represent to the public 22 noteworthy of a features list, I think I would have 23 asked some basic questions. 24 Q. I think I understand where you're coming from. 25 What you're saying is in this case, when the 00046 1 developer/contractor/seller says the house has fiber 2 optics, Ms. Kagel should doubt the veracity of that 3 statement and make sure further inquiry is made of 4 whether the seller knows what they're talking about? 5 A. I don't know if I would say doubt. 6 She should make further inquiry. I think I 7 would just make sure they knew what they were talking 8 about, what I was selling. 9 Q. And are you suggesting that any time a seller 10 says, "My house has fiber optics," an agent, to be 11 prudent, should doubt that statement? 12 A. Another example is I go -- 13 Q. No; no. 14 How about the question I just asked, not some 15 other example? 16 A. Okay. I'm trying to give an example. 17 Say the question again, please. 18 Q. Sure. 19 If you can read it back for me, please. 20 (Question read.) 21 THE WITNESS: I would say I change the 22 statement to be I think -- I wouldn't use the word 23 doubt. I would do a further inquiry. 24 MR. KOSS: Q. In your mind, sir, if a seller 25 says to an agent, "My house has fiber optics," that 00047 1 raises a red flag to the agent that the house really 2 doesn't have fiber optics? 3 A. It raises the fact that I would want to know 4 more about it, yes. 5 And I won't give you any examples. 6 You know, we're talking about practices in 7 this whole thing. That's the whole thing, standards of 8 practice as well as duties. It's one thing to be a 9 theoretician, but if you're out in the front lines and 10 these things come up, that's where the practice comes 11 in, and a red flag is something significant, not just a 12 water stain on the ceiling, it's something unusual. 13 Q. I agree with you, sir, and you're saying 14 Ms. Kagel needs to make a proper inquiry of things that 15 appear to be a red flag, as the agent, correct? 16 A. Yeah. I'm using probably. I shouldn't -- red 17 flag has a connotation after the Easton case that it's a 18 water stain, but I think it's something that heightens 19 your need to do further inquiry. It's just something by 20 its nature suggests you do further inquiry. 21 Q. What is the red flag in the situation where 22 the seller says, "My home has fiber optics"? 23 A. It is the fact that it's highly unusual, that 24 it's very specialized, it has a specialized purpose. 25 Without being an expert, I imagine it takes a specialist 00048 1 to put it in. I don't understand how to use it. It has 2 to be made out of glass fiber. You could have -- as far 3 as work properly, installed properly, you need to know 4 how they did it, who did it and how they did it, make 5 sure it's done right or it was even done. 6 In this case there is a dispute whether it was 7 CADD 5 or fiber optics, and most people don't know the 8 difference between the two if you asked them. 9 Q. So are you suggesting that the standard of 10 care would have required Ms. Kagel to follow up and find 11 out who installed it, the quality of installation, those 12 kinds of things? 13 A. I would have wanted to ask some qualifying 14 questions, "Did you have a certified person do it?" or 15 "Just who did it and how did they do it?" anything to 16 give me the feeling this -- number one, it was 17 definitely done, and, number two, the buyer, if they had 18 a good agent, would ask -- I think a prudent agent would 19 ask that on both sides of the coin. 20 Q. Do those follow-up questions relate to all 21 mechanical systems in the house? 22 A. I think when you hit something unusual, sure. 23 Q. Can you -- 24 A. I think an example would be radiant heat. How 25 many people put radiant heat versus a forced air? I 00049 1 would -- if I found out somebody installed a radiant 2 heating system, I would inquire to find out. 3 Q. So, to be prudent, an agent should follow up 4 to find out if the radiant heating system was properly 5 installed? 6 A. No, that's not what I'm saying. 7 I'm saying I think it would generate some 8 questions. 9 A radiant heating system was just repaired. I 10 think you would be below the standard up in Rossmoor to 11 say by whoever is a listing agent, because it takes a 12 person with certain specific knowledge how to fix it. 13 Q. That's different question because it's fixing 14 the system. 15 If somebody says, "My house has radiant heat," 16 that is a red flag for a seller's agent to follow up on? 17 A. As to radiant heat, if this holds them out to 18 is be an expert, in Rossmoor it is. 19 Q. Why in Rossmoor? 20 A. Because a lot of the old units and a lot of 21 the Eichler homes in Walnut Creek and -- I would know 22 right off the bat, if people saw radiant heat, we have 23 some issues to check out immediately, because of the 24 problems I'm aware over the years with radiant heating. 25 Q. The issue isn't simply of having radiant heat; 00050 1 the issue from your knowledge -- 2 A. If I wasn't an expert, I would definitely need 3 to ask questions about what is radiant heat and what 4 does it need to be fixed, because I didn't know. 5 In this case, it's optical fiber. How many 6 people have heard of a house having optical fiber? Who 7 puts it in? I don't know anybody. It's highly unusual. 8 Q. So, in this case, in your opinion, it's your 9 opinion, in essence, Ms. Kagel is negligent in not 10 following up with the seller to find out more about this 11 fiber optics? 12 A. I wouldn't call it negligence. 13 I would call it falling below the standard of 14 care as an agent. 15 I'm not an attorney. I'm not going going to 16 talk about negligence. 17 Q. Do you have any reason to believe Ms. Kagel 18 had any actual knowledge that the house did not have 19 fiber optics? 20 A. No more or no less than the air conditioning 21 in the third unit, the out building, which she said it 22 did. I don't really know. 23 Q. I'm not sure you answered my question. I'll 24 ask it again. 25 Do you have any reason to believe that 00051 1 Ms. Kagel knew this house did not have fiber optics? 2 A. Prior to the close of escrow? 3 Q. Yes. 4 A. No. 5 Q. Maybe we should just address these two things 6 at once, because you said documentation was lacking, 7 correct? 8 A. Yes. 9 Q. And another thing you said was proper inquiry 10 of the seller. 11 Do those kind of go hand in hand? 12 A. Yes, sir. 13 You do the latter first and the prior second. 14 Q. Right. 15 You make proper inquiry and then you document 16 that, correct? 17 A. Sure. 18 Q. One of the items that was represented to 19 Mr. Simpson was that the property had sufficient space 20 for an 800-square-foot structure. 21 Do you recall that? 22 A. Yes. 23 Q. Do you have any reason to believe that Lou Rae 24 Kagel did not get that information from the seller? 25 A. By the seller's testimony, it wasn't quite 00052 1 clear, because what she said in her deposition was "or," 2 I believe. She wasn't quite clear, but I thought I read 3 "or," "a pool or 800," so, no, I don't. 4 Q. Do you know whether or not a structure can be 5 built in the back of the Simpson property? 6 A. At this point in time -- 7 Q. Yes. 8 A. -- or at what point in time? 9 Q. At any point in time. 10 A. Are you -- with the pool -- 11 Q. Yes. 12 A. -- or without the pool? 13 Q. With the pool. 14 A. As far as my reading goes, they couldn't. 15 Q. Do you know why; what's your understanding of 16 that? 17 A. Because the impervious percentage of the 18 property has been utilized and they wouldn't be allowed 19 by the city to do it. 20 Q. Do you know if the limitations on impervious 21 surfaces are different in Monte Sereno than they are in, 22 say, Walnut Creek? 23 A. I don't know at all. I would have to go down 24 and check it out. 25 Q. Do you know what the impervious surface 00053 1 limitations are in Walnut Creek? 2 A. No. 3 Q. Do you know what they are in Danville? 4 A. No. 5 Q. Do you know if there even are such regulations 6 in either Walnut Creek or Danville? 7 A. I'm sure there are. 8 Q. Do you know what the impervious surface 9 limitations are in Monte Sereno? 10 A. I did. 11 I don't remember at this time, but I did when 12 I read it three weeks ago, I remember the percentages 13 they said. 14 Q. Do you have any reason to believe that at the 15 time this Blanchard property was being marketed that Lou 16 Rae Kagel was aware of the impervious surface 17 limitations in the City of Monte Sereno? 18 A. She was aware of them? 19 Q. Yes. 20 A. No. 21 Q. Is it your understanding that, but for the 22 impervious surface limitations, you can, in fact, build 23 another structure on Mr. Simpson's property? 24 A. I don't know if there was a setback issue; I 25 can't remember. I remember that was discussed in 00054 1 deposition. So I don't know where they would be placing 2 it. 3 As far as any kind of general restrictions, 4 I'm not aware of any. 5 Q. Assuming -- I want you to assume for the 6 moment that Ms. O'Brien told Lou Rae Kagel that the city 7 says, "Space in back sufficient for additional 8 800-square-foot structure." 9 Is Ms. Kagel entitled to rely upon what her 10 seller is telling her? 11 A. I'm sorry, the first part of the question was 12 the city told her that or the seller told her that? 13 Q. I'll try it over again. I'm trying to read 14 directly from the brochure. 15 A. I don't have very good hearing, by the way. 16 Q. If you don't hear me, you just let me know. I 17 don't want you to start answering unless you hear the 18 question. That's in one of the ground rules we didn't 19 go over. 20 Do you recall that one of the things in the 21 brochure said, "Space in back sufficient for additional 22 800-foot structure"? 23 A. Yes. 24 Q. I want you to assume that that information 25 came from O'Brien to Ms. Kagel? 00055 1 Is Ms. Kagel entitled to rely upon her seller? 2 A. Could I look at the brochure one second? 3 Q. Sure. 4 A. If that was stated to her as factual, yes. 5 Q. She could rely on that? 6 A. She could rely on the fact that -- she could 7 put it down. I would probably put down "as per seller," 8 but yes. 9 Q. And to satisfy the standard of care, would she 10 have to document somewhere that that is where that 11 information came from? 12 A. Yes. 13 Q. But she wouldn't necessarily have to show 14 that, then, documentation to a buyer that this is where 15 that information came from? 16 A. Only if she wanted to protect herself. 17 Q. And I guess that's what I'm kind of leaning 18 towards. 19 A prudent agent, to protect themselves, may 20 want to write this down so they can document later that, 21 "Hey, this idea about the city wasn't my idea, it was 22 seller's idea," they might want to document that? 23 A. Right. 24 Q. How does that protect the buyer, to document 25 that the agent has gone through the extra step to cover 00056 1 the agent's back side? 2 A. How does it protect the buyer? 3 It's just one more level of verification that 4 is factual and you don't end up -- hopefully, if you 5 have honest people, you don't end up in a situation 6 where the seller says, "I didn't say it," and the 7 listing agent says she said it. 8 Q. Well, in terms of Mr. Simpson, we don't have 9 to doubt that it was said. It was in writing, wasn't 10 it? 11 A. Yes, sir. 12 Q. So what difference does it make to Mr. Simpson 13 whether or not Lou Rae Kagel made a document notation 14 that says, "I learned this from Ms. O'Brien"? 15 A. It just proves that she did actually do it. 16 It helps to prove, at least. 17 Q. And if Ms. Kagel could establish that, in 18 fact, that information came from her seller, then 19 Ms. Kagel has met the standard of care? 20 A. Well, she has as an agent. 21 I don't know if she has as a dual agent. 22 Somebody had to strongly recommend that 23 Coldwell Banker -- or make sure they were aware that 24 they should go down as a buyer with open eyes to verify 25 this stuff. 00057 1 Q. Somebody should have advised Mr. Simpson that 2 he should have gone to the city and checked this out? 3 A. Yes. A buyer's agent has, in my opinion, that 4 duty to strongly recommend that you go down and check 5 this out with CDC, how you can use the property. 6 In this case, the buyer's agent and the 7 seller's agent are both agents for the buyer and seller, 8 they're dual agents, so I would impute that both of them 9 had that responsibility to make sure that happens 10 somehow. 11 Q. Would Ms. Kagel have satisfied her duty if she 12 had told Mr. Simpson, "You should go down and check the 13 zoning and other potential uses of this property"? 14 A. If she did adequately inquire of -- adequately 15 inquire of the seller and it happened between her and 16 Mr. Rea, I think that would satisfy it. 17 Q. Maybe I need to back up, because I thought you 18 said earlier that Ms. Kagel was entitled to rely upon 19 Ms. O'Brien's statement, if they were made, that you 20 could put this 800-square-foot structure in there. 21 Are you saying Ms. Kagel had further duties to 22 inquire? 23 A. That's where dual agency comes in. 24 She's also agent for buyer -- dual agency 25 is -- makes it more complicated, because they both are 00058 1 fiduciaries to both sides, so -- because they are under 2 the same umbrella. And what you usually do in a dual 3 agency situation is you try and divide up the babies or 4 baby and responsibilities, but it doesn't necessarily 5 relieve one baby from the other baby if the agent 6 doesn't do what they're supposed to do, but it doesn't 7 release the listing agent if the buyer's agent doesn't 8 do something they are supposed to do. They are both 9 fiduciaries, so how do you cover something? 10 (Recess.) 11 MR. KOSS: Okay. Back on the record. 12 Q. I think, as we left off, I was asking about 13 whether or not Ms. Kagel had a duty to make further 14 inquiry of the seller regarding this issue of 15 800-square-foot structure and then you said that's where 16 the dual agency comes in. 17 As a dual agent, did Ms. Kagel have a duty to 18 make inquiry? 19 A. Of who? 20 Q. I don't know. Of somebody. 21 A. I think it was reverse. 22 I was saying that, as a dual agent, she had, 23 probably, responsibility to make sure that a 24 recommendation happened on the information. 25 She already had the duty of inquiring of the 00059 1 seller to begin with. 2 Q. So once she, Ms. Kagel, gets this information 3 about the additional 800-square-foot structure that 4 supposedly could be built out there, her duties require 5 her to advise Mr. Simpson that he should what, make 6 further inquiry with the city? 7 A. That should have happened between her and 8 Mr. Rea. 9 If Mr. Rea didn't do it, she was still just as 10 responsible because they are both still duals. 11 Q. So, actually, both Mr. Rea and Lou Rae Kagel 12 should have advised Mr. Simpson to go check this out? 13 A. Well, I would have, as a dual agent, expected 14 that the buyer -- the one that was representing -- not 15 representing the buyer but took on the responsibility of 16 handling the buyer's side of it, would have done it. I 17 would have probably made sure, if I didn't see it 18 happen, that, since that's my fiduciary, I would have 19 reminded them of that, I would have made sure it was in 20 there pretty strongly, in this situation probably more 21 than just boilerplate. 22 Q. When you say do "it," you mean advise 23 Mr. Simpson he should make further inquiry? 24 A. Right. 25 Q. You would agree that the agents don't have any 00060 1 duty to go down to the city and do an investigation and 2 that sort of thing? 3 A. Not for the last 15 years. 4 Q. Did you have any reason to believe that Lou 5 Rae Kagel, in publishing these marketing flyers, had 6 actual knowledge that you could not build a 7 800-square-foot structure in the back of the property? 8 A. No. 9 Q. Do you have any reason to believe that 10 Ms. Kagel had actual knowledge that the impervious 11 surface limitations of the City of Monte Sereno would 12 make it impossible to construct improvements in the back 13 yard of the Simpson property? 14 A. I wasn't really clear whether she really 15 looked at the plans or not. 16 If she hadn't looked at the plans, no. 17 Q. If she has actual knowledge, she needs to be 18 forthright with that knowledge, correct? 19 A. Yes. 20 Q. Okay. 21 And, in your opinion, does Ms. Kagel have any 22 duty to go find plans and review plans? 23 A. No. 24 MR. KOSS: Let me turn this off. 25 (Discussion off the record.) 00061 1 MR. KOSS: Q. There is an issue in this case 2 about the square footage of the house. 3 Did you notice that? 4 A. Yes, sir. 5 Q. Did you notice that Mr. Simpson was aware of 6 the issue regarding square footage before he even made 7 an offer? 8 A. Yes, sir. 9 Q. Did you see that the agents recommended to 10 Mr. Simpson that, if this was important to him, that he 11 should go measure the property professionally? 12 A. I believe I read that somewhere. 13 Q. Do you believe that Lou Rae Kagel somehow 14 failed to meet the standard of care with regard to the 15 square footage issue? 16 A. Ultimately, no. 17 Q. I take it what you would say is initially, 18 yes? 19 A. If they had made the recommendation, because 20 they didn't get it factual a couple of times. 21 Q. You have been involved in transactions that 22 from time to time, through human error, there are 23 mistakes made in a brochure, correct? 24 A. Yes. 25 Q. That by nature is going to happen? 00062 1 A. I don't know if I would say that. 2 I know people that never get anything wrong in 3 their brochures, but it happens. 4 Q. And if there is an honest error, that could, 5 nevertheless, be below the standard of care, correct? 6 A. Yes. 7 Well, wait. 8 It depends on what you mean by "honest error." 9 If they did their job right and they misread 10 something, then that's an honest error. 11 If they didn't do it right and put it down, 12 that's not an honest -- it's an honest error, but it's 13 still below the standard of care. 14 Q. In any event, you feel comfortable that at the 15 end of the day Ms. Kagel met her standard of care with 16 respect to the square footage of the property? 17 A. And you're talking about living area? 18 Q. Yes. 19 A. I don't have a problem with that issue. 20 Q. Okay. 21 MR. THOMAS: Wait. Does that mean yes, she 22 met it or -- 23 THE WITNESS: I hate to say it, but yes. 24 MR. KOSS: Q. From your answer, are you 25 suggesting you have an issue with the square footage of 00063 1 the lot? 2 A. Yes. 3 Q. And what is your issue with that? 4 A. The issue is she kept getting it wrong, and, 5 obviously, it does affect the amount of square footage 6 that could be built on and what the value of the 7 property is to the buyer when they're basing their offer 8 and resale. 9 Q. What do you mean when you say she kept getting 10 it wrong? 11 A. I know it was originally thought to be an 12 acre, and I thought I read it was thought to be 13 two-thirds of an acre, and then I think it got to about 14 26,000-something square feet, which was not even 15 two-thirds of an acre. 16 Q. To your understanding, what is the actual 17 square footage of the lot? 18 A. I would have to look it up again, but I think 19 it's 26,000-something. 20 I figured out on my sheets something, it was 21 on the mathematical thing, it came out to 6.1 or 22 something, if not 6.66 of an acre. 23 Q. Is 26,000 approximately two-thirds of an acre? 24 A. I got to get my math -- can I use my 25 calculator? 00064 1 Q. Sure. 2 A. And if it's not, it's going to end up being 3 24. 4 (Witness using calculator.) 5 43560 divided by 26 -- I'll probably get it 6 backwards, but let's see what it is. 7 (Discussion off the record.) 8 THE WITNESS: 5.968 acres is what my 9 calculator says, on the record. 10 And I think whatever number I used -- I 11 thought I had 6.1 somewhere on that note sheet I did 12 somewhere somehow, but -- I could look it up for you. I 13 know it's in there, tells me what it was. 14 Q. In your mind, is that approximately two-thirds 15 of an acre? 16 A. No. 17 Q. It's materially different? 18 A. Yes. 19 Q. What does "approximate" mean? How far off can 20 you be and still be approximately? 21 A. I would say .66, point six- -- it's relative. 22 It's just too far off to be two-thirds -- I don't know 23 what the cutoff -- I think .26, something like that. 24 It's close. 25 When somebody asks me is -- when something is 00065 1 2500 square feet and you tell them it's 2200 square 2 feet, that's not close. If you tell me it's 24 square 3 feet or 23, I would say that's close but it's not good. 4 Q. Two-thirds of an acre is how many square feet; 5 can you do that math for me? 6 A. Absolutely. 7 (Witness using calculator.) 8 29 -- if I did this right, I used point 9 seven -- excuse me -- .67 -- 29185. 10 If you want me to do it exact right, I'll do 11 it exact right, go six six six. 12 Q. To your understanding, have you seen any 13 written representations that the property was nearly an 14 acre? 15 A. I don't remember seeing that. 16 I remember reading it somewhere, but I don't 17 remember seeing it. 18 Q. Well, you call the assertion about one acre 19 you said was Mr. Simpson, he said he saw it onn a flip 20 chart somewhere? 21 A. That's what he said. 22 Q. And you saw the brochures on the property all 23 said approximately two-thirds of an acre? 24 A. Yes. 25 Q. Were you aware that Mr. Simpson knew of this 00066 1 discrepancy before close of escrow? 2 A. I believe so. 3 Q. Did you also see that the agents, in essence, 4 advised Mr. Simpson that, if the size of the lot was 5 important to him, he should have it professionally 6 measured? 7 A. I just don't remember whether that was done 8 during the discovery period, the inspection period, or 9 at the end of the deal. 10 Q. Well, let me show it to you. 11 Let me show you deposition Exhibit 8 from 12 Mr. Simpson's deposition. 13 A. Well, I was right, 26,000. 14 You had me worried there for a minute. 15 Q. By the way, did you see that on MetroScan the 16 house was shown to be, I believe, 2800 square feet -- 17 28,000 square feet? 18 MR. MINOLETTI: You mean the lot? 19 MR. KOSS: The lot, yes. 20 THE WITNESS: I don't remember that, to be 21 quite frank, to be honest with you. 22 MR. KOSS: Q. In any event, showing you 23 Exhibit 8, do you now recollect that Mr. Simpson knew 24 well before the close of escrow there was a discrepancy 25 in the lot size as described in the building plans as 00067 1 opposed to the advertised two-thirds of an acre? 2 A. Yes. 3 This was generated by Mr. Rea? 4 Q. Either Mr. Rea or Mr. Simpson; I don't recall 5 who. 6 A. The reason I thought Mr. Rea because it didn't 7 come from the seller's side because it says Addendum to 8 Contract. Sellers don't usually create those. 9 Q. And did you see the seller's response to that 10 inquiry? 11 A. Could I see it again? 12 Q. Let me show you Exhibit 16. 13 A. I have seen these but -- 14 Q. Right. I'm just trying to refresh your 15 recollection on the evidence. 16 A. (Witness reviewing document.) 17 Q. And in number 2 it says, "Seller advises" -- 18 number 2 on Exhibit 16 says, "Seller advises buyer to 19 verify to his satisfaction all sizes concerning the 20 square footage of the buildings and the property," and 21 it goes on to refer to item B in the contract. 22 Do you see where I'm reading from? 23 A. Yeah. Yes, sir. 24 Q. You're familiar with that item B on page 6 of 25 the standard form contract? 00068 1 A. Yeah, but I still would like to look at it 2 again. 3 Q. I'm going to show you the exhibits from 4 Mr. Simpson's deposition you brought today and I'll 5 refer you to deposition Exhibit 1. 6 It's on page 666, item B, Size and Age. 7 A. Okay, I'm looking at B. 8 Oh, yes, absolutely. 9 That's what I thought it was. 10 Q. In your opinion, sir, should Ms. Kagel have 11 done anything in addition to setting forth the advice we 12 see on deposition Exhibit 16, number 2? 13 A. Done in addition? 14 She should have done her homework before this 15 even came up so this wouldn't have had to be generated, 16 but I can't speak to Mr. Rea's part of the solution to 17 this. 18 This is a reaction to what happened that 19 shouldn't have happened and it's improperly filled out, 20 same as other forms in here, but I presume it has to do 21 the subject property. 22 Q. Yes, it is. 23 A. Because there is no date, no city, no 24 identification. It's poorly written. So I guess the 25 first thing I would say is it should be written 00069 1 properly, and it's standard of care to reduce to writing 2 to protect the clients. But this is a reaction to the 3 fact that the buyer found out things late in the game 4 instead of the beginning of the game, so at that point 5 in time I don't know what they could have done except 6 wrote it properly. 7 Q. To your understanding, where did the 8 description of nearly -- or approximately two-thirds of 9 an acre, where did that come from? 10 A. It came from the brochure. 11 Q. And do you know where the information was 12 derived from to put it in the brochure? 13 A. Either at the reading of what the square 14 footage -- no, I don't know for sure. I don't remember. 15 I know the facts, but I'm not sure on that one. 16 Q. Would it be below the standard of care for a 17 seller's agent to rely upon the seller when the seller 18 advises the agent as to the square footage of the lot? 19 A. If you didn't ask the seller his source. 20 Q. Is it appropriate for the seller's agent to 21 just put down "per seller" in describing the square 22 footage of the property? 23 A. On the multiple it is and on the factual sheet 24 it would be. 25 I don't know that it would be a proper 00070 1 inquiry, but it would be appropriate. At least you 2 would be red flagging the source. Hopefully the other 3 agent would ask where they got it from. 4 Q. If in this case Mr. Simpson discovers that the 5 lot size is smaller than the approximately two-thirds of 6 an acre and he discovers that before close of escrow, 7 does he have certain remedies that he can pursue? 8 A. I would have to -- based on the cases I have 9 read, I would say that's up to an attorney, not me, to 10 opine on. 11 Q. Well, he can ask for a reduction of price 12 based on the fact he was told two-thirds of an acre and 13 it wasn't -- 14 A. I think he can do it afterwards, but I'm not 15 an attorney. 16 Q. So, in your opinion -- well, strike it. 17 You don't know because you're not an attorney? 18 A. I have read things that can go either way on 19 that, but I'm not an attorney. I could even be wrong 20 about that, the way I read them. 21 (Discussion off the record.) 22 MR. KOSS: Q. Do you have any reason to 23 believe that at the time Lou Rae Kagel put together the 24 marketing brochure she had actual knowledge that the 25 property was not approximately two-thirds of an acre? 00071 1 A. No. 2 Well, I can't remember whether she actually 3 looked at the -- the tax record. I think she did. If 4 she did, then she knew it wasn't. 5 I can't remember; I would have to go back and 6 review that. 7 Q. I need to find my brochure. 8 Here we go. 9 One of the issues in this case is the ability 10 to build a pool on the property. 11 Do you understand that? 12 A. Yes, sir. 13 Q. Do you have any quarrel with Ms. Kagel's 14 conduct with respect to that issue? 15 A. Well, you couldn't, so I would presume to have 16 a problem. I guess if you have to go back and tear out 17 what is already there and restructure just to get a pool 18 on the property, I have a problem with that. 19 Q. Well, what do you remember the representation 20 to be regarding the pool; what words were used? 21 A. "Possible." 22 Q. Possible pool? 23 A. Possible pool site. 24 Q. Isn't there a possible pool site at the 25 Simpson property? 00072 1 A. There probably is in every house if you tear 2 the existing structure down, you might get one in every 3 site. They did that in this case, they had to change 4 the driveway and get a variance from the city to do it, 5 so it became possible. I guess you can go to every 6 property, you can tear something out and get one. 7 Q. By "possible pool site," doesn't that suggest 8 there may be some difficulties or conditions or cost or 9 other things that may make it difficult, maybe even 10 impracticable? 11 A. It makes -- when I see -- normally see 12 "possible pool site," it usually means to me that you 13 probably can have a normal pool there if you go through 14 the right municipality and get approvals, unless there 15 is something that jumps up at you, not the fact that 16 you've used up all your space in the place. 17 Q. Well, we have already discussed that. 18 You don't have any reason to believe that 19 Ms. Kagel had any knowledge about impervious surfaces 20 that might obstruct improvements to the property; isn't 21 that true? 22 A. Other than the fact that if she had looked at 23 the plans, which I said wasn't her duty. 24 Q. Do you have any reason to believe at the time 25 this representation is made about a possible pool site 00073 1 that Ms. Kagel had actual knowledge that there wasn't a 2 possible pool site? 3 A. No. 4 Q. Do you have any reason to believe at the time 5 Ms. Kagel was making these representations about a 6 possible pool site that she knew that, in order to 7 construct a pool, hardscape in other areas of the 8 property needed to be removed? 9 A. No. 10 Q. And I take it you would agree that Ms. Kagel 11 had no obligation to go down and see what steps and 12 procedures and processes were going to be required by 13 the City of Monte Sereno? 14 A. No duty. 15 Q. If the agents had suggested to Mr. Simpson 16 that he ought to go down and investigate future uses of 17 the property such as installation of a pool, would that 18 satisfy their duties? 19 A. If the agent -- it would depend on what they 20 were -- okay. 21 Would you read that again? 22 Q. Sure. 23 Let me back up one other step. 24 Do you have any reason to believe that Mr. Rea 25 knew that you would have to take up hardscape in order 00074 1 to put in a pool? 2 A. No. 3 Q. Okay. 4 Would Mr. Rea have any obligation to go down 5 to the city and figure this out? 6 A. Not unless he had told the clients he would do 7 that on their behalf. 8 Q. And, as best you know, he never said that to 9 Mr. Simpson? 10 A. No, not to my knowledge. 11 Q. Certainly, if he agreed to take on that task, 12 that falls below the standard of care, doesn't it? 13 A. Yes, or get somebody else to do it for him, 14 yeah. 15 Q. To your understanding, did Mr. Simpson know 16 that, in order to put in a pool, he had to tear out 17 hardscape? 18 A. Not until after the fact. 19 Q. So then we have Mr. Simpson and the two 20 agents -- at least you're willing to concede none of 21 them knew about this issue what do the brokers need to 22 do to satisfy their standard of care concerning this 23 issue, none of them know about? 24 A. Probably if one of them had done a proper 25 inquiry of seller then the buyer could make an 00075 1 intelligent decision and it would have either heightened 2 or unheightened the value according to the city. 3 I mean, there are a lot of times people say 4 these exact same things and they don't do it because 5 they are relying on what is told to them as being 6 factual or possible and they chose not to go down and do 7 it. 8 I'm not saying the buyer doesn't have a duty. 9 I'm not here to opine on the buyer's duty because 2709 10 opines because I'm here for agents. 11 Buyers have the duty to look for themselves, 12 according to 2709. 13 Q. In your opinion, do agents satisfy their 14 duties by advising the buyer in situations like this 15 that he should go to the city and make inquiry about 16 specific uses that he intends to make of the property? 17 A. It depends. 18 Q. It depends on what? 19 A. The situation. 20 It depends on why they're doing it. It 21 depends on what's going on. 22 If -- in this situation, things come up after 23 the fact and then they make a recommendation, the buyer 24 may just be feeling they are CYA's themselves. If there 25 is a legitimate concern and the principal realizes the 00076 1 agent has some concerns, that might heighten the 2 buyer's -- it's like whether you're strongly 3 recommending, you're recommending or you're just using 4 boilerplate. It's degrees. 5 Q. Okay. 6 I need to go back. 7 To your understanding, are there any facts 8 here that suggest to you that Ms. Kagel had any doubts 9 that there was a possible pool site? 10 A. No. 11 Other than looking at the physical nature of 12 the property and wondering, if she had any experience of 13 selling houses, how much space normally a municipality 14 they would allow visually would be a red flag. 15 I haven't seen the property so I can't tell 16 you. 17 Q. Well, you saw the testimony of people -- I 18 think virtually everybody said the agents pointed out to 19 Mr. Simpson where he could put a pool and he put a pool 20 in exactly that spot. 21 Do you recall that testimony? 22 A. Yeah. That was after he made changes to the 23 property. 24 Q. I understand. 25 He changed some hardscape, didn't he? 00077 1 A. Yeah. 2 And they made an exception for him, too. 3 Q. Do you have any reason to believe that these 4 agents could have -- there was some red flags that 5 should have led them to anticipate that there would be 6 this problem? 7 A. Being -- putting a pool in, you mean? 8 Q. Yes. 9 A. I didn't see the property. I can't tell you 10 on that one. 11 Q. If there's no red flags that appear to any of 12 the agents, or, indeed, to the buyer, isn't a 13 boilerplate kind of recommendation to the buyer that, 14 "Look, you ought to go check out any future usages of 15 this property, you ought to check them out," isn't that 16 sufficient? 17 A. I would have no problem if there weren't two 18 items said at the same time. It wasn't just "or." It 19 was both. It was a pool and a distal out building. 20 That, to me, would have been, in my mind, the 21 combination a red flag. If you said to me "a pool" -- 22 and I haven't seen the property -- I might have -- I 23 don't know what I would have done. I would have to see 24 the property. 25 When you put it in a combination, it, to me, 00078 1 may signal a lot of lot space. 2 I don't know if I answered you properly. 3 Q. I'm trying to break it down, because it's 4 really the only way to deal with both problems is to do 5 them one by one. 6 A. Okay. 7 Q. And I guess what I'm looking at specifically, 8 just focusing on the pool situation, I think you're 9 agreeing with me, are you not, that there was, at least 10 to your knowledge, no red flags to either of these 11 agents that Mr. Simpson after close would incur some 12 problem with impervious surfaces? 13 A. The way you just did it, I would have to say 14 yes because of the fact of the way you framed it that 15 time, I go by the brochure, it says two things, a pool 16 site and that. 17 The question if there was only a pool site 18 would I see a red flag, maybe not, but two things, yeah. 19 Q. So you can't separate them? 20 A. Well, they're -- that's what the brochure 21 said. It didn't say and/or. It says both. 22 I don't know how I can unseparate them. It 23 was a package thing. These things you can do, so to -- 24 wow, this is a lot of stuff, red flag. 25 If you just said pool site, I would emphasize 00079 1 a little more what the agent's position to say, well, if 2 it's that close, maybe it's a municipality that is being 3 picayune, I can rely on my seller. I would have to look 4 as what was on the page together. 5 Q. Let's deal with them in conjunction. 6 What is the red flag with respect to the 7 statement that you could put in a pool and a 8 800-square-foot structure? 9 A. Well, I didn't visualize this, but it sounds 10 like a heck of a lot of stuff on one piece of property 11 anywhere that size. 12 Q. And what is the red flag? 13 A. The red flag is it looks like a lot of stuff 14 you can put on that size, and if you do a diligent 15 inquiry with the seller, like we started two hours ago, 16 and find out what you base these recommendations on, if 17 that's what the agent put in flyers and stuff, "Where 18 did you get this information?" and, "Where did you get a 19 possible pool site? How did you come up with this? Did 20 you just look in the back yard and say, 'Hey, that looks 21 good, possible pool site'?" 22 If I went to a house with a good sized lot, I 23 might not sweat it as much. 24 If you put two things, I might sweat it more. 25 Q. You haven't seen the site, have you? 00080 1 A. No. 2 Q. And, in your mind, two-thirds of an acre is 3 not big enough for these two additional structures, pool 4 and another structure? 5 A. I would have to see it. The way cities are, I 6 would have to see it. 7 Q. So maybe if you saw it, you might think there 8 is maybe not a red flag here after all? 9 A. I can't say that until I see it. 10 Q. So, in your mind, if there was a red flag, 11 what should the agent have done? 12 A. First thing would be how -- "What do you mean 13 there's a possible pool site, Mrs. Seller? Where did 14 you get that from? Did you do any preliminaries? Did 15 you have a pool company go down and talk to the city and 16 find out what they think, not get a permit but did 17 anybody do any research as to, you know, in any way, to 18 even go down for five minutes and ask them what they 19 think?" 20 Q. So where Ms. Kagel fell down is she should 21 have made further inquiry of Ms. O'Brien? 22 A. I feel so. 23 Q. Anything else she should have done? 24 A. Well, in conjunction with the buyer's agent, 25 being a dual, I probably would have, instead of 00081 1 boilerplate like, oh, you said strongly put that down on 2 a sheet like that, but, unfortunately, it happened after 3 the fact, after the fact this stuff started popping up. 4 It should be discovered in the beginning of the deal, 5 and goes down and it's part of an addendum to TDS. It 6 wouldn't be inspection but it could be addendum or 7 disclosures. 8 Q. We have tried to take these two things in 9 conjunction, documentation was lacking and proper 10 inquiry of seller. 11 I think I have gone through them all, but you 12 tell me, but have we gone through all the opinions you 13 have where Lou Rae Kagel failed to make proper inquiry 14 of the seller? 15 A. We talked about the fiber, we talked about the 16 pool, we talked about the out building. 17 Yeah, I think we talked about it all. 18 Q. Any other issues regarding documentation 19 lacking other than what you told me about? 20 A. I just noted some things that weren't squared 21 around, they were sloppy, like no date on the TDS, like 22 the numbers didn't add up on the contract itself for the 23 purchase price. Things like that. That was pretty 24 sloppy. That was below the standard of care to have the 25 amount of money put down and everything put down was 00082 1 more than the offer on the contract. 2 Q. Anything else? 3 A. As I said earlier, the addendums weren't 4 properly filled out, which that's below the standard of 5 care. 6 Q. Where did you see that the numbers on the 7 contract -- 8 A. Maybe I was just tired when I looked at it, 9 but if you add it up, it comes out to be, like, 3.4, the 10 offer was at three that Mr. Rea wrote. Add up the 11 numbers on the left side, 1.4, 400,000 deposit, 1.5 12 loan, that's 3.3, I think it totals down on the bottom 13 3 -- add up the numbers. 14 Is that a 4? 15 Q. I think that's supposed to be a "1". I think 16 he wrote a check for a hundred thousand dollars. 17 A. I thought that was a 4. 18 Q. It kind of looks like it. 19 A. Last night reviewing, I asked somebody, "Is 20 that a 4 or what?" 21 If it's a "1," she didn't make a mistake; just 22 looks like a 4. 23 Just did my reading. 24 Not trying to be picky. You just asked me. 25 Q. I want you to be picky. I want you to tell me 00083 1 everything you saw you didn't like. 2 A. And I think the TDS didn't have a date as to 3 when it was good for either. 4 It was circled, too. 5 Up at the top. 6 Q. Yeah, I'm looking for it. 7 A. I think it was just blank. 8 At least on the one I had. They may have 9 corrected it later in another set. 10 Q. In any event, have we now covered all issues 11 regarding the lack of documentation? 12 A. I believe so. 13 Q. One of the things you testified about early on 14 was you had issues about dual agency. 15 What is your opinion regarding that? 16 A. We sort of covered it. 17 It's kind of hard being only one agent, and 18 I'm not being -- I wasn't asked to look at it, but, like 19 I said earlier, they are not a listing agent and a 20 selling agent from two different companies, they are 21 both from the same company, and maybe in the eyes of the 22 buyer and seller each taking a different assignment, but 23 in the eyes of agency, they are both representing each 24 side, and so if one drops the ball, then they are really 25 both dropping the ball. If there is a function that is 00084 1 supposed to happen, like a strong recommendation to do 2 something, like you pulled out the sheet later in the 3 game on that, if one doesn't do it, the other should be 4 aware of it, because they are still duals. 5 Q. You saw where Mr. Simpson put in writing he 6 was very happy with the work of Doug Rea; you saw that? 7 A. Yeah. 8 Q. Do you have criticism of Mr. Rea's work? 9 A. I really didn't spend the time to think that 10 one through. 11 I think sometimes in these cases that one 12 party may upset a principal, another not, and the 13 principal puts on those glasses and doesn't want -- I 14 would have personally brought him in this case, I would 15 have definitely bought him in. I'm not an attorney 16 but -- I would have done that. I think it's inputted to 17 both these, both duals, there are certain things that 18 would have happened sooner than later, but I wasn't 19 really asked to form an opinion. 20 Q. And, in your opinion, Lou Rae Kagel was a dual 21 agent? 22 A. Absolutely. 23 Q. Was Coldwell Banker a dual broker? 24 A. They would be a dual agent, called a dual 25 agent also. 00085 1 Q. On what basis do you conclude that Lou Rae 2 Kagel is a dual; are there any statutes you looked at? 3 A. Can I see the contract just a minute? 4 I feel I should look again to make sure I'm 5 talking about the same case here. 6 A. Okay. 7 There you go (indicating), as per law, one to 8 four units, single family, both representing 9 buyer/seller, that is the definition of a dual agent. 10 Q. Where are you reading from? 11 A. The agency, Coldwell Banker, agency. It says: 12 Coldwell Banker, Coldwell Banker, seller's agent, both 13 buyer and seller. That is a dual; that is what a dual 14 is. 15 Q. Well, I understand it says Coldwell Banker. 16 Why do you then conclude that Lou Rae Kagel is 17 a dual? 18 A. Because they're inseparable. You impute one 19 to the other. They are both -- how can I say it better? 20 They are not a single agent because there is 21 dual agency. 22 On the buyer's side you can either be nothing, 23 because the law says that only a seller, if there is a 24 listing, has to be represented. On the listing side, 25 the seller has to be represented. 00086 1 This case, they took the most option, which is 2 we will represent both. That means both. Where it says 3 Coldwell Banker, it says both. They had only one 4 broker's license there, period. 5 I taught this. I don't know how to say it 6 clearer than that. 7 When one broker is responsible for both sides 8 of the contract, unless they designate seller 9 exclusively, then you're a dual agent. You were 10 subagents in the old days -- there are no subagents. So 11 Lou Rae Kagel is working as the arm of Coldwell Banker, 12 inseparable. And the other arm is Rea, and by 13 definition of dual. 14 I wish I had an agency form because on the 15 back it defines duals. I don't have the verbiage 16 memorized, but it says it pretty clear that that's what 17 they are. 18 Q. I am going to give you some of the disclosures 19 that were given -- strike that. 20 Any other opinions you have regarding the dual 21 agency issue? 22 A. None other than the fact that what can be 23 imputed from one can be imputed on the other. If one 24 doesn't pick up the ball, then it falls on them because 25 it's the same company. 00087 1 Q. And are there issues that you have with Lou 2 Rae Kagel as a dual that you would not have with her if 3 she was not a dual? 4 A. Well, the recommendation part on these things 5 to get the stronger inspection from her would have been 6 heightened if she had -- as a dual versus being a single 7 agent. 8 That's about all I can say. 9 Q. Well, let me show you some of the disclosures. 10 A. Sure. 11 Q. Are you familiar with -- well, let me show you 12 what is marked as Exhibit 25 to Mr. Simpson's deposition 13 and ask if you read through that document? 14 A. Several times. 15 Q. Now, when you're representing buyers, do you 16 make similar types of disclosures to buyers, the 17 preprinted type form? 18 A. I use the CAR version, which encompasses plans 19 and specifications. 20 Q. Why do you use that form? 21 A. Hopefully, it will insulate me. 22 Q. This isn't just pro forma. It's designed to 23 give important information to your buyer, isn't it? 24 A. It is, but, as I was sitting in deposition two 25 days ago, the gentleman on the other side of the table 00088 1 said, "I never read any of this stuff. They told me 2 just to sign it." That doesn't play as well in court. 3 It's even better if you have a pertinent issue 4 like square footage, initial it. That makes it 5 stronger. The other way is all encompassing, nobody 6 reads it. That's what she said in court. 7 Q. You wouldn't tell your client, "Hey, this is 8 boilerplate," but you've got to give it so you don't 9 minimize it, do you? 10 A. Me personally? 11 Q. Yes. 12 A. I would go through pertinent things and I 13 would read it carefully, but if there is something I 14 don't want coming back on me, I would have them initial 15 it or I would go through and check-mark things and show 16 I spent time. 17 As to standard of care, I don't believe people 18 do that. So I want to be fair; I don't think they do 19 what I do. 20 Q. Does the standard of care require that the 21 agent go through line by line and have people initial -- 22 A. You can say, "It's boilerplate, but please I 23 don't want you to read it. Let's sit her for a minute 24 and why don't you ask me any questions you have here 25 that you find difficult." That would be the standard of 00089 1 care, not just put it in front of them and say, "Sign 2 it." 3 Q. Well, let me start with the first disclosure, 4 and it says, "Any representations by sellers or brokers 5 regarding age of improvements, property size, building 6 size or location of property lines may not be accurate 7 and should not be relied upon." 8 A. What number are you? 9 Q. Number 1? 10 A. Oh, I see. I'm sorry. Skipped the top. 11 Right. 12 Okay. 13 Q. Certainly, sir, if an agent knows of 14 representations that are inaccurate or a broker knows of 15 any representations that are inaccurate or an agent 16 knows it, they have an obligation to give the true 17 information, don't they? 18 A. Absolutely. 19 Q. In the absence of that kind of knowledge that 20 something being represented is wrong, doesn't this 21 recommendation to a buyer satisfy the standard of care? 22 A. If you just hand it to somebody and there was 23 no conflicting visuals or anything else and they 24 actually read it or you made sure to them the importance 25 of it, probably not. 00090 1 Did I say it in the negative? 2 Q. I think you did. 3 It would satisfy? 4 A. I would agree with whatever you said, whatever 5 it was. 6 Q. This would be sufficient in the absence of 7 actual knowledge of things being wrong? 8 A. If they actually made the attempt to do this 9 and there wasn't any heightened awareness of issues. 10 Q. Maybe you mentioned something -- I remember 11 you mentioned something about a diligent visual 12 inspection, correct? 13 A. Yes. 14 Q. So what you're saying is the agent has to 15 disclose not only what they know but what they could 16 have seen but through a reasonable diligent inspection, 17 correct? 18 A. Yes. 19 Q. Are any of the things we talked about here in 20 your mind the kind of inaccuracy that could have been 21 determined by a reasonable diligent inspection? 22 A. Like I said, putting the two different -- the 23 pool and that, having not seen the property, I don't 24 really know to answer that part of it, but, other than 25 that, no. 00091 1 I think you tend to take these things also 2 into consideration when somebody makes representations 3 to you and when somebody puts a piece of paper in front 4 of you and said possible pool site and another 600-, 5 800-square-foot building there, you can either take it 6 as a grain of salt or you can take it as, wow, they must 7 know what they're talking about. So, again, it's in the 8 eye of the beholder when they look at this in this 9 situation. 10 Q. Let me direct your attention to number 2. 11 It says, "Buyer should confer with an 12 architect/city/county officials regarding present future 13 availability for permits of construction additions, 14 other building projects and current or future use of the 15 property." 16 Do you see where I'm reading from? 17 A. Yes, sir. 18 Q. That's sound advice to a buyer, isn't it? 19 A. Yes, it is absolutely sound advice whether it 20 even applies. 21 Q. For instance, in this case, when we have a 22 representation possible pool site, wouldn't that be 23 sound advice to tell your buyer, you know, "Maybe you 24 want to go check out with the city to find out what you 25 can do"? 00092 1 A. Absolutely. In fact, I would have written in 2 the addendum, and particularly if I took out a pen like 3 this and circled it, make sure they understood it, 4 absolutely. 5 Q. Does this disclose number 2 we're looking at 6 here satisfy the standard of care for advising a buyer 7 that they ought to go check things out, such as a 8 possible pool site? 9 A. Depending on the scenario, you might have to 10 go a little bit farther and make it a strong 11 recommendation. 12 I mean, this is all encompassing, this is a 13 million different things, and a lot of them isn't 14 going -- aren't going to apply -- as you were asking me 15 about strong visual inspection or other factors, there 16 are things that could make you have to memorialize it a 17 little stronger than this. 18 Q. So maybe put a red ink circle around it, 19 something like that? 20 A. If I were the buyer's agent, I would, 21 definitely. 22 If I were a dual agent, I would do it, 23 definitely, maybe a star, make sure they go over it, but 24 on the listing side, it's the weaker. 25 Q. Would putting a red star by the number 2, 00093 1 would that not satisfy agent's obligations in this case? 2 A. I would think that it would show that my 3 practices were as a prudent agent that I made them aware 4 this is something they should definitely consider, even 5 though there are twenty different things here, this is 6 obviously something you should be aware. 7 The reality is out of 20 people, how many of 8 them read that when they get it from Coldwell Banker? 9 Maybe one, two. 10 That's the reality. 11 It's not to say it's a bad form. It's just it 12 is reality. It's a trust-me kind of environment out 13 there or you guys wouldn't have business. 14 I want to make sure I can prove heightened 15 awareness of what I'm pointing out rather than just 28 16 different items. 17 You add up these forms together for a 18 principal and they get lost. 19 Q. So what are you suggesting, if the 20 principal -- if there are so many forms and the 21 principal, i.e., the buyer, doesn't read them, then they 22 can blame agents for problems that the agent didn't know 23 about either? 24 A. I would think some of the explanation is who 25 is telling the truth and who -- tell what -- if you can 00094 1 show you circled this and they initialed it, I would 2 think you have proof that you told them they should 3 check it out, especially if it's an 800-foot structure 4 and pool, that would be in a court of law better yet, 5 strongly advised, they and I decided not to, that's the 6 best way. Insurance companies are doing that now. 7 Q. Let me show you deposition Exhibit 24. 8 Have you seen this document? 9 A. Yes, sir. 10 Q. Are you familiar with this sort of document? 11 A. Yes. 12 I have a similar one that I use, too. 13 Q. And why do you use this document? 14 A. So I can circle the responsibilities of the 15 buyer and the seller on there and they can tell me I 16 didn't go over it. That's why I use it. 17 Q. One of the things you would circle is to 18 advise the buyer that the buyer should just not rely on 19 what sellers or real estate agents tell them about the 20 property? 21 A. Absolutely. 22 Q. Sometimes people could be mistaken, right? 23 A. (Witness nods head affirmative.) 24 Q. You're nodding "Yes." 25 A. Sorry. 00095 1 Yes. 2 Or they can just not be telling the truth or 3 they could be negligent or they could be not checking 4 things out. 5 Q. And you would tell them about the next 6 sentence that says, "Required written disclosures do not 7 at that time replace hiring expert inspectors to 8 evaluate the size, condition and use of the property," 9 correct? 10 A. You're right. 11 A. It's a beautifully written document. 12 Q. Is this document sufficient to satisfy the 13 agent's responsibility to advise the buyer, in this case 14 Mr. Simpson, that he should hire inspectors to do a due 15 diligence investigation of the property? 16 A. I would think that, with the kind of issues 17 that they had about out buildings and com- -- 18 combination out building and pool and fiber optics, I 19 would think he probably needs to go to the next level 20 and say, "You need to do this." 21 Q. Like something in handwriting to Mr. Simpson 22 saying, "Hey, you ought to hire some inspectors"? 23 A. Like they did later in the game. 24 Q. That's what I was going to get to. 25 You saw Exhibit 16, didn't you? 00096 1 A. I believe so. 2 That's the one with the recommendations? 3 Q. Yes. 4 And maybe I already showed that to you. 5 You saw Exhibit 16 where it says, "Brokers 6 recommend in handwriting that the buyer obtain 7 inspections," and that the buyer says he doesn't want to 8 do that? 9 A. Yes. 10 Q. And then they go on to say that's against the 11 broker's advice. 12 You saw that, too? 13 A. Yes. 14 Q. Do you have any doubt that Mr. Simpson would 15 have discovered every material aspect of this property 16 if he had simply done some due diligence? 17 A. No, I don't -- yeah, I do -- 18 I mean, I don't have any doubt. 19 Q. What more should the agents have done than 20 say, "Hey, you got to do inspections," when Mr. Simpson 21 says he doesn't want to do inspections? 22 A. Could I see that again? 23 Q. Sure. 24 A. Well, it's a tough one, because this is late 25 in the game, this is after they found out that they 00097 1 didn't represent properly the square footage. This is a 2 great -- I mean, I don't know what they could have done, 3 written this differently. 4 I also know how a buyer could take it, and I'm 5 not going to take the case to relieve him of his 6 responsibility in this case because -- that's not my 7 job. 8 But it's a good CYA at this point. 9 Q. Well, that's what I would suggest to you, sir, 10 is that doesn't this now satisfy the agents' duties in 11 this case when they specifically advise Mr. Simpson in 12 writing to get inspections and he, against their advice, 13 doesn't do that? 14 A. What really would have helped is if they still 15 did a proper inquiry right then and there based on they 16 were finding out they were getting improper information. 17 The questions they should have asked, turned 18 to the seller and asked, "Where did you get this 19 information from? What are you relying on to tell me I 20 can get a pool and building? Why am I seeing on a big 21 billboard I can do all these things? Why are you 22 putting that down there?" 23 And I would direct it -- if I wasn't going to 24 direct it to the client, I would direct the inquiry to 25 the seller through the agents. If I specifically 00098 1 represented the buyer exclusively, I definitely would 2 have got a set of questions of that along with this. 3 But it doesn't stop the duty of inquiring. 4 That's a great way of doing it, but it doesn't stop you 5 doing your job. 6 And I started this three hours ago. She 7 didn't ask the question, "Where did you get this?" And 8 now they're saying square footage is wrong and other 9 things two or three weeks after the deal going and they 10 come up with the boilerplate thing. Great. Why didn't 11 they ask the questions now of the seller, put them in 12 writing, "What do you base the fact on we can put a pool 13 in? Have you done anything about it? Have you done any 14 inquiries about it? Why are you saying I can put an 15 800-square-foot structure on here? What are you basing 16 it on?" Then they would fully disclose between the two 17 things and we wouldn't be sitting here. 18 That's great. That's the way to do it. That 19 still doesn't relieve the duty to inquire. 20 Q. Have you answered? 21 A. I think so. 22 Q. I don't think it answered my question. 23 A. The question was does that relieve them of 24 their responsibilities. 25 And I said it does not relieve them, no, 00099 1 because they still didn't fulfill the obligation of duty 2 to inquire. That's like handing a blank statement after 3 you know something else is wrong. That's good after the 4 fact that something needs to be done. 5 MR. KOSS: The court reporter tells us she 6 needs a break, so let's take a break. 7 (Recess.) 8 MR. KOSS: Back on the record. 9 Q. Mr. Deutscher, you say you have something you 10 want to clarify? 11 A. Yes. 12 In the context you were asking me about 13 whether this covers the agents and the other 14 documentation, the thing that keeps jumping out at me -- 15 MR. THOMAS: When say "this" covers, what are 16 you referring to? 17 THE WITNESS: I'm referring to the addendum. 18 It's not numbered. 19 16, Exhibit. 20 MR. KOSS: Q. Deposition Exhibit 16. 21 A. The boilerplate from Coldwell Banker. 22 What counteracts it in my mind is when I read 23 something that the unsophisticated buyer reads that 24 says, "City says space in back sufficient for additional 25 800-foot structure," that would positively reinforce me 00100 1 as a principal thinking this isn't going to be a big 2 deal, it would lower my awareness rather than heighten 3 my awareness that I need to protect myself. 4 So that kind of bothers me when you ask if 5 they put 16 in front of them and the Coldwell Banker 6 thing, whereas on the broker it implies or refers there 7 is some kind of predisposition that allows it. 8 Again, my inquiry would be, "Why did you put 9 this on? Where did you get this?" 10 Q. Let me see if I can clarify with respect to a 11 representation where the city says this is okay, this 12 kind of recommendation, disclosure, whatever you want to 13 call it, says you ought to go verify things with the 14 city, it doesn't rectify the problem? 15 A. It doesn't have the impact it would have if 16 that wasn't there. 17 Q. What about the issue of, like, possible pool 18 site; doesn't this disclosure address issues like 19 possible pool site? 20 A. It does, and if I take it in the context of 21 the whole, it looks like somebody did their homework 22 back here and talked to somebody and they're putting 23 information down that I should be able to rely on. 24 Q. Well, "possible" is not certain pool site, is 25 it? 00101 1 A. No. No. 2 Q. So, in that sense, when there is no actual 3 knowledge of difficulties in putting in the pool, which 4 we agree the agents didn't have -- right? -- and, as 5 best as you know without looking at the property, there 6 is no red flag that putting in a pool is a problem -- in 7 those sorts of cases, this kind of disclosure is 8 sufficient to satisfy the duty of the agents, that is, 9 "Please go check it out"? 10 A. It might be a stronger -- it might have a 11 stronger influence on that situation in the absence of 12 something like this in there. 13 I don't mean to get you off track. 14 Q. No. I'm happy for the clarification, because 15 I said early on you can't deal with all four or five 16 issues at once and then I try to deal with all four or 17 five issues at once. 18 A. Okay. 19 Q. Let me show you Exhibit 4, which is an 20 addendum submitted by Mr. Simpson when he made his 21 initial offer. 22 In your opinion, sir, does this lessen the 23 obligation of the agents or the seller to discover 24 issues regarding the property? 25 A. No. 00102 1 Q. Do you ever use addendums? 2 A. Yes. 3 Q. And, in your mind, what is the purpose of 4 them? 5 A. There's some -- their purpose is to try and 6 insulate you from liability from what might be 7 discovered, and they're usually used to make the buyer 8 think they are going to have to accept what you find out 9 during escrow, which turns out to be a non-reality in 10 the real estate market we have been in. 11 What I mean is people will go and offer as-is 12 and take it as a negotiating tool and when the 13 inspection thing goes through and they don't take them 14 as-is, it's not that they have material facts, they just 15 wanted to get in contract. 16 Q. So this is a tool used by buyers to try and 17 grind down price, if you will? 18 A. It could be used that way. 19 It can be the seller did the exact same thing, 20 to grind down the buyer to make sure they are not going 21 to be nickled and dimed to death also. 22 The reality of the situation is to totally 23 remove contingencies. Doesn't matter. 24 Q. And you knew also by this addendum Mr. Simpson 25 could do inspections of property, correct? 00103 1 A. Yes, absolutely. 2 Q. And if he didn't like what he saw in those 3 inspections, he could walk from the transaction, 4 correct? 5 A. Or renegotiate. 6 Q. Right. He could, in essence, say, "I have 7 found things I don't like. I'm walking unless you want 8 to work out a new deal," right? 9 A. He could have said that. 10 Q. Using an as-is clause, is it appropriate to do 11 the inspections after close and then, based upon what 12 you discover, try and get money back from the seller? 13 A. It's not the most appropriate -- it's not the 14 most desirable way, but if you find out that things were 15 misrepresented to you or you based your decisions on 16 information that wasn't fairly given, it might be the 17 only remedy. 18 Well, I shouldn't say it might -- it might be 19 a remedy. 20 Q. Directing your attention to paragraph three of 21 Exhibit 4, the last sentence, doesn't Mr. Simpson say 22 that he takes responsibility for obtaining full and 23 comprehensive inspections of the property by competent 24 professional contractors, inspectors and other experts? 25 A. Yes, sir. 00104 1 Q. Isn't he agreeing to do that by this addendum? 2 A. Yes, that's what it says. 3 Q. And, to your understanding, did Mr. Simpson 4 comply with his promise to do those type of inspections? 5 A. I don't think so. 6 Q. Does the failure of Mr. Simpson to comply with 7 his contractual obligations in the as-is addendum 8 relieve the broker's responsibilities they might have to 9 find out things about the property? 10 A. No. 11 Not the way you worded it. 12 Q. What effect does that contractual obligation 13 of his to inspect the property -- what effect does that 14 have upon the broker's obligations? 15 A. Heighten -- say that again. I'm sorry, I'm a 16 little tired. 17 Q. Sure. 18 What effect does Mr. Simpson's promise to do 19 full and comprehensive inspections -- what effect does 20 that promise have upon the broker's responsibilities? 21 A. None. 22 Q. What effect does that contractual obligation 23 of Mr. Simpson to do a full and complete comprehensive 24 inspection have upon the broker's obligations to make a 25 proper inquiry? 00105 1 A. None. 2 Q. So, in other words, in this case, when 3 Mr. Simpson fails to contractually do what he says he 4 was going to do, and that is make a comprehensive 5 inspection, he can, nevertheless, claim that the brokers 6 failed to make their own inquiry? 7 A. If they didn't do a proper -- people decide 8 what inspections to get and how far to go based on what 9 they know, and if somebody does a proper inquiry, that 10 may eliminate the need for an inspection or heighten the 11 need for an inspection. 12 Q. Okay. 13 But we've already discussed that the proper 14 inquiry would be to make further inquiry of the seller, 15 correct? 16 A. Yes, sir. 17 Q. Not to run around and go talk to the 18 government, anything like that? 19 A. Not unless they took it on themselves. 20 Q. Do you have any reason to believe that if 21 either Lou Rae Kagel or Doug Rea made further inquiry of 22 the seller, that there would have been any different 23 disclosure made in this case? 24 A. Do I have any reason to believe that by them 25 asking the seller some questions that it would have made 00106 1 any difference? 2 Q. Yes. 3 A. We'll never know. 4 Q. I think I've maybe got to the end of your 5 opinions, but let me ask it directly. 6 A. Okay. 7 Q. Any more opinions you have about the conduct 8 of either Ms. Kagel or Mr. Rea? 9 A. No, but I need to tell you that Paul -- 10 Mr. Minoletti said that he wants me to at least go look 11 at the site, so I don't know how that affects, but he 12 would like me to go see it. 13 That's the only thing I would add to what you 14 just asked. 15 Q. I take it that was a discussion you had with 16 Mr. Minoletti in the hall? 17 A. Part of it. 18 Q. And is it correct that that discussion went 19 something like if you can't tell what red flags there 20 might be in the property, you ought to go look at the 21 property? 22 A. It's implied. 23 Besides that, it's a nice drive. 24 Q. Okay. 25 Do you have any doubts in your mind that 00107 1 you're going to to see those red flags when you go out 2 to the site? 3 A. I don't have any fact other than the reason 4 that I'm going to go, take a nice ride. 5 MR. KOSS: I don't have any other questions. 6 MR. THOMAS: I do have a few questions. 7 8 EXAMINATION BY MR. THOMAS 9 MR. THOMAS: Q. I know you said you were 10 tired. 11 A. I was faking. 12 Q. You were faking it? 13 A. I was kidding. 14 Q. Just following up on the last question, are 15 you going to do anything else that you know of other 16 than go look at the property in order to determine if 17 you have any other opinions? 18 A. No, other than maybe refresh myself at some 19 point on what I've read, and that's about it. 20 Q. What you read in terms of the documents you 21 alr