Asleson v. West Branch Land: North Dakota Supreme Court Reviews MLS Listing Errors and Determines Agent's Duty to Inform of Errors
In Asleson v. West Branch Land, the Supreme Court of North Dakota addressed the issue of constructive fraud regarding an MLS listing error in the context of a buyer and seller who were both members of the MLS. The court held that a listing agent has the duty to inform MLS users of errors in a listing and that a user of the service is entitled to rely on the information found therein.
West Branch Land Co. (seller) listed unimproved property with Valley Park, a listing agent. The land was listed in the Grand Forks MLS as zoned for 35 multi-housing units. Putnam, a broker for Valley Park, saw the final plat which indicated the true zoning status (30 units) and did not correct the listing despite the fact that negotiations had commenced. Asleson, a licensed broker and president of Asleson Co., purchased the land, and computed his offer on a cost-per-unit basis for 35 units. Asleson Co. and Valley Park, both members of the Grand Forks MLS, split the commission. One year after purchase, Asleson discovered the true zoning status. Asleson claimed that the inaccurate MLS information caused damages, and sued the seller and Valley Park for constructive fraud.
The Supreme Court of North Dakota held that to establish constructive fraud there must have been a breach in a duty owed to Asleson Co. by the defendants which prejudiced Asleson Co. and gave an advantage to the defendants. The court called this case problematic because there were brokers on both sides of the transaction. However, the court stated that it was the duty of those who list property in a MLS to do so accurately and to inform users of any errors in a listing. Therefore, as the listing agent, Valley Park had the duty to make known the error in the zoning status to anyone interested in the property and to correct the information in the MLS.
The defendants tried to argue that Asleson, as sub-agent for the seller, also had a duty to discover the error. However, because Asleson merely used his license to facilitate the sale to Asleson Co., and because he did not solicit or find a purchaser, the Supreme Court of North Dakota did not consider him a sub-agent with a duty to discover the error. The court also said that Asleson's status as a broker, in itself, did not impose on him a duty to discover the listing mistake.
The Supreme Court of North Dakota used Asleson's broker status to determine if he acted reasonably in relying on the MLS information. The court found that Asleson, even though an experienced, licensed broker, made no attempt to confirm the zoning status, and relied on the MLS listing without further investigation. However, the court held that the nature of the MLS requires that users of the service be entitled to rely on material statements of fact contained in the listing without having to double check the work of the listing agent unless the user is put on notice that there is an error. The court held that even though Asleson was a broker, he acted reasonably in relying solely on the information found in the MLS, as he had no notice that there was an error in the listing. Thus, Asleson was under no duty to perform further investigation.
With regard to damages, the Supreme Court of North Dakota compromised between the "benefit of the bargain" and "out of pocket" approaches suggested by the parties, and ordered payment of $3,667.50 damages to the purchaser.
Asleson v. West Branch Land, 311 N.W.2d 533 (N.D. 1981).