Asleson v. West Branch Land Co.

• Decision Date: 23 October 1981
• Docket Number: No. 9958,9958
• Citation: 311 N.W.2d 533
• Parties: Gary K. ASLESON and Mary M. Asleson, his wife, and the Asleson Company, a North Dakota Corporation, Plaintiffs and Appellees, v. WEST BRANCH LAND CO., a North Dakota Corporation, and Century 21AAA Valley Park Real Estate, Inc., a North Dakota Corporation, Defendants and Appellants. Civ.
• Court: North Dakota Supreme Court

Page 533

311 N.W.2d 533

Gary K. ASLESON and Mary M. Asleson, his wife, and the Asleson Company, a North Dakota Corporation Plaintiffs and Appellees, v. WEST BRANCH LAND CO., a North Dakota Corporation, and Century 21AAA Valley Park Real Estate, Inc., a North Dakota Corporation, Defendants and Appellants.

Civ. No. 9958.

Supreme Court of North Dakota.

Oct. 23, 1981.

Mack, Moosbrugger, Ohlsen & Dvorak, Grand Forks, for defendants and appellants; argued by Shirley A. Dvorak, Grand Forks.

Longmire & Unruh, Grand Forks, for plaintiffs and appellees; argued by George Longmire, Grand Forks.

PAULSON, Justice.

This is an appeal from a judgment of the District Court of Grand Forks County, sitting without a jury, in favor of Gary K. Asleson and Mary M. Asleson, his wife, and The Asleson Company, a North Dakota corporation, plaintiffs-appellees. The judgment awarded the plaintiffs $7,335 from defendants-appellants, West Branch Land Company (West Branch) and Century 21AAA Valley Park Real Estate, Inc. (Valley Park), both North Dakota corporations. The plaintiffs' claim for damages arose from their purchase of a tract of unimproved land for construction of multi-housing units. The land was sold to the plaintiffs by the defendant, West Branch, through its realtor, Valley Park. The property was listed in a listing by the Multiple Listing Service (MLS) of Grand Forks to be zoned for 35 units when, in fact, it was zoned for 30 units. The plaintiffs' claim for damages was based upon false representation and constructive fraud which resulted in damage to the plaintiffs. The judgment is modified and, as modified, affirmed.

The dispute centers around the sale of a piece of property described specifically as:

Lot Eighteen (18), Block One (1), Kuster's Addition to the City of Grand Forks, County of Grand Forks, State of North Dakota

Defendant West Branch was the fee owner. West Branch listed the property for sale with Valley Park, which was owned and operated by William W. Putnam. Putnam was also at the time the president of West Branch, but he owned no stock in it. Valley Park is a member of the MLS in Grand Forks.

The plaintiff, The Asleson Company, was also a member of the MLS in Grand Forks. Plaintiff, Gary K. Asleson, president of The Asleson Company, is a licensed real estate broker. The Asleson corporation primarily engages in building construction and land development. It does not engage in real estate sales but uses its real estate broker's license primarily for selling the houses it constructs.

When West Branch listed the property for sale through Valley Park, Mr. Putnam prepared a listing for the lot which was published in the MLS listing sheet which advertised the property and which was distributed to all the real estate agency subscribers of the MLS in Grand Forks. The MLS listing sheet advertised the property as "zoned multi for 35 townhouses". In fact, the property consisted of 3.04 acres and was zoned for 10 units per acre, rendering the property suitable for 30 units.

The error in the listing arose from the following sequence of events. The property was zoned for a density of 10 units per acre. Prior to preparing the listing for the property, Putnam called the firm of Richmond Engineering, which had been hired by West Branch to do the surveying and engineering of the Kuster Addition. He spoke to a "Gary", an employee of Richmond, and asked how much land there was in Lot 18, and Gary responded that there was approximately three and a half acres. On that information Putnam listed the lot as zoned for 35 townhouses.

It was not until the final plan was drawn up by Richmond Engineering that the true acreage available was known. The final plat map and the zoning ordinance affecting Lot 18 became effective on June 20, 1977, and the plat map would have been available at the city planner's office in Grand Forks since that time. The final plat map indicated that Lot 18 consisted of 3.04 acres and was zoned for 10 units per acre. Mr. Putnam stated that he did not update the listing after the final plan was approved effective June 20, 1977.

In June of 1977, Asleson received a copy of the listing of the property in question owned by West Branch. Upon receipt of the listing, Asleson prepared an offer computing it on a cost-per-unit basis for 35 units. The amount of this first offer was $52,500. Valley Park countered with an alternative offer of $65,000, which Asleson accepted. On August 30, 1977, The Asleson Company entered into an earnest money contract to purchase the property for $65,000 from West Branch. The earnest money contract made no mention of the acreage or zoning status of the lot. The deed signed on August 18, 1978, listed West Branch as the grantor and Gary K. Asleson and Mary M. Asleson as grantees. The Asleson Company, however, was to pay for the property.

The commission for the sale of the property was split between Valley Park, as the listing agent, and The Asleson Company, as the selling agent, each party receiving a check for $1,950. Asleson contends that the check for $1,950 was a discount on the purchase price which is normally given to real estate agents when they buy property from another real estate agent. Defendants, on the other hand, argue that the check was strictly for the purpose of a commission.

Mr. Asleson first became aware of the error in the listing in April, 1979. He had some plans for townhouses that he was going to put on the property and his draftsman had a difficult time getting the number of units on the property. Asleson then contacted the Grand Forks city planner's office and was informed that the property was zoned for 30 units, and not 35 units. On the same day he telephoned Mr. John Moosbrugger, the secretary of West Branch, in order to notify him of the error and to seek an adjustment in the price of the property. He also wrote Moosbrugger a letter regarding this matter, but Moosbrugger did not respond to Asleson's letter following the telephone call to him.

There being no response to his communications, Mr. Asleson sought the help of an attorney, Mr. George M. Unruh, who also wrote a letter to Mr. Moosbrugger, as well as attempted to reach him by telephone. Mr. Moosbrugger did not return any of his phone calls or respond to Mr. Unruh's letter. Hence, the initiation of this lawsuit.

The defendants, West Branch and Valley Park, were originally served with a summons and complaint by Gary K. Asleson and Mary M. Asleson and The Asleson Company, alleging actual fraud in the sale of the property. The defendants answered and counterclaimed and served a third-party summons and complaint on Century 21 TAC Real Estate Corporation, as a successor in interest to The Asleson Company. Prior to the hearing, plaintiffs moved to amend their complaint from actual fraud to constructive fraud.

On January 17, 1980, the trial judge issued a memorandum decision granting the Aslesons' motion to amend the complaint, denying both the plaintiffs' and defendants' motions for summary judgment, and granting Century 21 TAC Real Estate Corporation's (third-party defendant's) motion to dismiss the third-party complaint against it.

The defendants in the main action, West Branch and Valley Park, third-party plaintiffs, alleged that Century 21 TAC Real Estate Corp. was a necessary party to the action because it is a successor in interest to The Asleson Company. The third-party plaintiffs alleged that the selling agent at the time the property was sold was The Asleson Company and its successor in interest is now Century 21 TAC Real Estate Corp. Third-party plaintiffs maintained that under the laws of the Multiple Listing Service and the laws of agency, the third-party defendant, Century 21 TAC Real Estate Corporation, acted as the agent of the defendant, Valley Park and thus had a duty to inquire as to zoning regulations, lot size, and other pertinent matters pertaining to the sale of said property. Third-party plaintiffs alleged that this duty was breached by Century 21 TAC Real Estate Corp. and damages resulted. Therefore, they sought relief of contribution or indemnity for any and all sums which may be adjudged against them for actions of the third-party defendants.

The trial judge dismissed the third-party defendant and ordered West Branch and Valley Park to make any claims they had for indemnification to be made by way of a counterclaim against The Asleson Company. The defendants thereupon counterclaimed against Gary Asleson and The Asleson Company for indemnification and that counterclaim was subsequently dismissed by the trial court.

The case was tried without a jury and concluded on June 19, 1980. ¹ The trial judge concluded, among other things, that the defendants made, expressly and verbally, a material misstatement of fact and that the plaintiffs relied on it and that the defendants' acts amounted to constructive fraud.

The trial judge concluded that the plaintiffs were damaged under the benefit of the bargain rule and computed damages as follows, stating, at the close of the trial:

"For the damages, I have noted the prayer for relief in the plaintiff's amended complaint which is also summarized ... (in) his Brief. By multiplying out 35 times 1857.14, I come up with a total of $64,995 for 35 units; and, if you multiply 30 times 1857.14, you come up with 55,714 and if you subtract that from 64,995, the result is 9,281, and if the commission of 1,950 is subtracted from 9,281, the result is $7,335."

Defendants, West Branch and Valley Park, essentially attack as error the trial court's findings of fact and conclusions that both corporations were liable under a theory of constructive fraud. They further attack the trial court's damages award and they appeal from the dismissal of its counterclaim for indemnification.

Initially, we must consider whether the misrepresentations made by the defendant, Valley Park, amounted to constructive fraud under § 9-03-09, N.D.C.C.; and whether...