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Alaska’s highest court has considered whether a listing broker improperly marketed a property in the MLS as “active” even though the property was still under contract.
In 1998, Craig Lightle (“Salesperson”) of Realty Executives Alaska (“Brokerage”) listed a home for sale. On April 17th, the Williamses (“Buyers”) made an offer to purchase the property and the sellers accepted the offer. However, prior to the scheduled closing date of June 12th, the Salesperson learned that the Buyers’ loan application had been denied. Based on this information, the Salesperson decided to re-list the property in the multiple listing service as an active listing.
Arlene Seeley (“Seeley”), working with licensee Cheryl Ponder (“Buyer’s Representative”), saw the re-listed property and was interested. The Buyer’s Representative called the Salesperson about Seeley’s interest. During the course of the conversation, the Salesperson told the Buyer’s Representative that the original purchase agreement was “dead” and that the property was “available”. He also told her that a rescission agreement had been sent to him in the mail, but he had not yet received it. He encouraged the Buyer’s Representative to have her client submit an offer.
The Buyer’s Representative relayed this information to Seeley, and Seeley decided to submit an offer for the property. The sellers made a counteroffer. On June 8th, the Salesperson called the Buyer’s Representative to tell her that the sellers had accepted Seeley’s offer for the property. Seeley listened to the Salesperson relay this information to the Buyer’s Representative via speakerphone, and during the conversation the Salesperson assured Seeley that “she had the house” and the sellers would sign the agreement once they returned from vacation. Based on this information, Seeley canceled her existing lease, rented a moving truck, and began switching her utilities to the property.
Following this conversation, the Salesperson learned that the Buyers were still trying to obtain financing to acquire the property. On June 12th, the Salesperson sent Seeley a signed copy of her purchase agreement from the sellers but attached to the agreement a “Back-up Addendum”, which provided that the sellers were accepting her offer only as a back-up to the Buyers’ purchase agreement. Seeley refused to accept the revised purchase agreement and filed a complaint with the Alaska Real Estate Commission (“Commission”) against the Salesperson, seeking reimbursement for her losses from the real estate surety fund.
In her complaint, Seeley argued that the Salesperson had made a fraudulent misrepresentation to her and caused her damages by causing her to cancel her lease. A hearing was held, and the hearing officer found that the Salesperson had committed a fraudulent misrepresentation by leading Seeley to believe the property was available, even though the Buyers’ offer had never been rescinded. The hearing officer found that these misrepresentations were intentional and material to the transaction. The hearing officer recommended an award of damages to compensate Seeley for her losses and also the suspension of the Salesperson’s real estate license. The Commission adopted the findings of the hearing officer, and the Salesperson appealed. A trial court affirmed the Commission’s decision, and the Salesperson appealed again.
The Supreme Court of Alaska affirmed the Commission’s sanctions against the Salesperson. In order to recover from the real estate surety fund, a party must show that he/she suffered a loss in a real estate transaction because of fraud, a misrepresentation, or deceit. The Salesperson argued that he had never denied that there was a pending offer for the property and he did not believe his statements were false at the time he made them, as he honestly believed the transaction with the Buyers was essentially dead.
The court found that the Salesperson had engaged in a false representation because he only told Seeley half truths and did not fully inform her about the status of the Buyer’s agreement. In order to allege a fraudulent misrepresentation, a party must allege a misrepresentation of a fact made by another with the knowledge of its falsity for the purpose of causing the party’s reliance and the party justifiably relies upon the other’s false statement, causing the party damage. The court found that a fraudulent misrepresentation does not require that an individual act with an intent to deceive; instead, a fraudulent misrepresentation can occur when the speaker makes a statement it knows isn’t completely true with the intent that the other party will rely upon the statement.
The court found a number of statements made by the Salesperson could constitute misrepresentations. First, the Salesperson listed the property in the MLS as “active”, even though the MLS guidelines stated that an “active” property means that it is for sale, not that it is subject to a pending sale. Since the purchase contract with the Buyers was still in place and the Buyers indicated their intent to rescind the contract, the Salesperson had no basis to list the property as “active” in the MLS. The court also found that the following statements by the Salesperson could constitute misrepresentations: that the first sale was “dead”; that the rescission agreement had been sent in the mail to him; and that the sellers had accepted Seeley’s counteroffer for the property. The court ruled that the Salesperson’s failure to fully disclose the complete fact situation to Seeley prior to purporting to accept her offer constituted a fraudulent misrepresentation, since she never was fully informed that the Buyers’ contract had not been rescinded. Therefore, the court affirmed the trial court’s upholding of the Commission’s determinations.
Lightle v. Alaska Real Estate Comm’n, 146 P.3d 980 (Alaska 2006).