October 1, 2014
Steve Lupin authored an article in the October 2014 issue of PA Justice News. The article addressed the most recent permutation of Milliken v. Jacono. Below is the text of the article.
Milliken v. Jacono – Real Estate Disclosure Law
Then you ask why I don’t live here
Honey, do you have to ask?
On the Road Again, Bob Dylan
With the objective of bringing this matter full circle, but at the risk of it appearing that this columnist is a one-trick pony with a single-case repertoire, this column for a third time will address the most recent permutation of Milliken v. Jacono.
This column’s dedicated reader (or readers, if there are more than my wife) may recall that, as first reported in this column, the Milliken case arose from the sale of a residential property by Kathleen and Joseph Jacono (“Sellers”) to Janet S. Milliken (“Buyer”). The Sellers did not disclose to the Buyer that a murder/suicide had occurred at the property approximately sixteen months earlier, prior to the Sellers’ ownership, and the Buyer allegedly did not learn of that history until several weeks after settlement.
Buyer thereafter brought suit against the Sellers, Sellers’ listing agents and Buyer’s own realtors. Buyer alleged that the murder/suicide constituted a material defect of the property which should have been disclosed in the disclosure statement required under §7304 of the Real Estate Seller Disclosure Law, 68 Pa.C.S.A. §§7301, et seq. (“RESDL”) (this form is available on the Pennsylvania Real Estate Commission’s website). Buyer’s causes of action included claims for violation of the RESDL, negligent misrepresentation, fraud, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”).
Following the trial court’s grant of summary judgment in favor of the Sellers and their agents, the matter came before the Pennsylvania Superior Court (Buyer had apparently settled her claims against her own realtors during the pendency of the action). The trial court had determined that none of the disclosures delineated under §7304 of the RESDL encompass a murder/suicide. The initial three-judge panel of the Pennsylvania Superior Court disagreed with the trial court’s analysis, noting that the disclosure statement submitted by Sellers specifically stated that it covers topics “beyond the basic requirements of the Law”. The Superior Court held that it was an issue of fact for the jury as to whether a murder/suicide constituted a material defect, reversing the trial court’s grant of summary judgment.
Following the aforementioned decision, the Superior Court granted reargument en banc, and withdrew its earlier opinion. In December 2012, a majority of the Superior Court’s en banc panel reached an opposite conclusion than the previous three-judge panel, holding that a murder/suicide at a property does not constitute a “material defect” requiring disclosure to a buyer.
The Buyer sought permission for appeal from the Pennsylvania Supreme Court. The Pennsylvania Supreme Court granted allocatur limited to the issues of whether the failure to disclose the murder/suicide constituted a material defect of the property and whether the failure to disclose the events constituted negligent misrepresentation, fraud, and/or violation of the UTPCPL.
The Pennsylvania Supreme Court has now issued its opinion at Milliken v. Jacono, 2014 Pa. LEXIS 1770, 2014 WL 3579791 (Pa. July 21, 2014), holding that the Buyer could not sustain any viable causes of action against the Sellers for failure to disclose the murder/suicide. The threshold issue on which all of Appellant’s (Buyer’s) causes of action relied, was whether the murder/suicide constituted a “material defect” of the property which the Seller had a duty to disclose. It should be noted that the Court had apparently denied review of the Buyer’s RESDL claim, although the reason it denied such review is not evident from the opinion (in a concurring opinion, Madame Justice Todd took note of the fundamental issue that all of Buyer’s claims were dependent upon the definition of a “material defect” under the RESDL).
The Court first rejected the Appellant’s (Buyer’s) contention that Sellers’ voluntary use of a broader disclosure statement than required by law gave rise to a duty to disclose the events. As stated by the Court, “voluntarily revealing more than is required does not create additional involuntary requirements.” The Court further noted that if a property’s “psychological stigma” such as that resulting from the events at issue herein, was to be considered a “material defect”, attempting to define what types of events warranted mandatory disclosure would be, as the Court put it, a Sisyphean task. As the Court noted, there is an almost endless variety of violent or disturbing events that could take place on a property, that might render a home undesirable to certain buyers. These events, however, are not defects in the structure itself and do not affect the quality of the real estate. The Court also noted that the events at issue were not latent since they were well-publicized in print and on the internet, and could have been discovered by the Buyer. In sum, the Court held that “purely psychological stigmas are not material defects of property that sellers must disclose to buyers”.
Accordingly, the practitioner should be aware that the Courts of this Commonwealth will likely find that mandatory disclosures in the sale of real estate should be confined to defects affecting the actual real estate such as those specifically defined in the RESDL, rather than events causing only “psychological” damage. If potential home buyers might be disturbed by a property’s “psychological” history, they might be well advised to conduct their own independent investigation before entering into an agreement of sale.