Leo v. Neill: Alabama Supreme Court Holds That Purchasers Must Prove Reasonable Reliance to Recover Damages for MLS Errors and/or Fraud

In Leo v. Neill, the Supreme Court of Alabama addressed the issue of reliance in the context of MLS errors. The court concluded that where purchasers do not reasonably rely on MLS information, they may not recover damages, even though the information is actually in error.

On April 12, 1979, Neill (buyer) purchased a house in Huntsville, AL. Mary Leo, d/b/a The Leo Agency, was the listing broker. Erwin, a real estate salesman and friend of Neill, showed the house to Neill. Erwin showed Neill a MLS book which listed the living area at 2,300 square feet and the garage area at 390 square feet.

Prior to signing the sales contract, Neill inspected the house on four or five occasions. Neill visited the house another four or five times prior to closing and was given a key, so he had unlimited access to the house. In addition to making thorough inspections of the house, Neill actually measured several of the rooms. Neill measured the master bedroom because, he said, "the master bedroom didn't look as large as what it indicated in the book." Erwin accompanied Neill on his visits to the house and assisted Neill with the measurements. Erwin testified that they measured the master bedroom and the garage. Erwin stated that he offered to check on the square footage with Leo and told Neill to satisfy himself as to the suitability of the house, including square footage. Neill responded "No, I like the house. Let's go on with it."

In July 1984, Neill discovered that the house contained 1,976 square feet of living area and 332 square feet of garage area. Soon after, he sued Leo, alleging that Leo fraudulently misrepresented the square footage of the house. Neill based these allegations on the information from the MLS book.

The Supreme Court of Alabama held that there was no fraudulent misrepresentation by Leo. The court defined fraud as: (1) a misrepresentation; (2) of a material fact; (3) on which the plaintiff relies; and (4) is damaged by as a result. The court further defined the element of reliance by stating there must be a material fact on which the plaintiff (a) has a right to rely, (b) and does rely. The court held that there was no evidence to show that Neill relied upon the incorrect MLS information. The court concluded that Neill relied on his own meticulous inspection of the property.

The Supreme Court of Alabama further held that even if the reliance element was supported on the record, such reliance would not be justified under the facts. The following facts were determinative: (1) Neill was given every opportunity to inspect and measure the house; (2) his access was unlimited; (3) he inspected the house on numerous occasions and measured at least a portion of the house because he was suspicious about the square footage listing; and (4) he was learned in real estate transactions, having previously purchased residential rental property. Thus, the court concluded that Neill did not rely on the information in the MLS book.

Leo v. Neill, 480 So. 2d 572 (Ala. 1985).