Murder-suicide not a material defect, PA court rules

January 3, 2013
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Police crime scene“Today, we find that psychological damage to a property cannot be considered a material defect in the property which must be revealed by the seller to the buyer,” said Superior Court President Judge Emeritus Kate Ford Elliott writing for the majority in an opinion filed December 26, 2012. Short of the Pennsylvania Supreme Court reversing the decision, this should settle the question of whether issues related to so-called “stigmatized properties” must be disclosed in Pennsylvania.

The case, Milliken v. Jacono, involves a 2006 incident where a property owner shot his wife and then himself in the property. Seven months later, the Jaconos bought the property at a real estate auction and, seven months thereafter, sold it to the plaintiff, Janet Milliken. The Jacanos did not mention the murder/suicide in the seller disclosure statement given to Milliken, who found out about the horrid incident three weeks after settlement. Milliken later sued the sellers and the involved brokers.

The procedural history of the case is somewhat unusual and is the subject of two articles previously published in PARJustListed. What is most remarkable about the procedural history is that the Superior Court, which had reversed a trial court’s dismissal of the suit and had sent it on for trial, reconsidered its panel’s decision (three judges) and took a second look. This time the outcome was far different: a seven-to-three decision in favor of the sellers. The PAR Legal Action Fund supported the filing of an amicus curiae brief in support of the broker’s position that disclosure was not required.

Why did the Superior Court find that a murder/suicide need not be disclosed in the absence of a direct inquiry? After analyzing the types of disclosures mandated by law, the court noted that “psychological damage is so different from the physical and legal defects listed that it is plain that the legislature intended not to include it.” The court also noted the problems that such disclosure could create.

First, how recent must an event be to require disclosure? Must a 100-year-old murder be disclosed or one that happened many owners ago?

Second, what monetary value should be assigned to such stigma? “There are persons for whom no amount of money would induce them to live in such a house, while others may not care at all, or even find it adventurous . . . [T]he monetary value of such a psychological defect will dissipate with the passage of time as the memory of the murder recedes.”

Third, would crimes other than murder have to be disclosed? What about burglaries or even crimes that did not occur on the property but elsewhere in the neighborhood?

Milliken v. Jacono not only resolves the question of whether the Pennsylvania Seller Disclosure Law requires disclosure of a murder/suicide, but also whether such crimes constitute objective material defects that must to be revealed under Pennsylvania common law. “While the murder/suicide may have been subjectively material to Buyer’s decision, we hold that under common law fraud a seller of real estate is only liable for failing to reveal objective material defects. Psychological damage to real estate does not constitute a defect that the law is presently prepared to recognize as material.” Likewise, Milliken’s claim for negligent misrepresentation also failed.

As stated, the implications of this decision go well beyond murder/suicide. If psychological defects were to be disclosed, how far down the slippery slope would we draw the line? Would we be required to reveal that a next-door neighbor is loud and obnoxious, or on some days you can smell a nearby sewage plant, or that the house was built on an old Indian burial ground? Indeed, one could identify numerous psychological problems with any house.

The Superior Court made clear that the doctrine of caveat emptor (buyer beware) is alive, and modern technology has only strengthened the argument for a buyer’s duty of its own due diligence. Certainly, in the age of the Internet the modern home buyer has a powerful tool to uncover the notorious history of a house or neighborhood.

About James L. Goldsmith, Esq.:
Jim Goldsmith, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline.
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7 Responses to Murder-suicide not a material defect, PA court rules

  1. James Goldsmith on January 10, 2013 at 9:00 am

    Good point, Scott. For a reversal by the Supreme Court, an appeal would have to be filed (no knowledge if the aggrieved buyer has done so); the Court would have to agree to hear it (discretionary), and then the Court would have to come to a different conclusion. My guess: unlikely; but we’ll keep alert.

    Walter, the Superior Court did not conclude that a murder/suicide was immaterial to a purchaser’s decision. It concluded that it, a psychological issue, is not the type of condition that a seller must disclose. It is relatively easy to learn of such stigma and a concerned buyer has that obligation to himself/herself.

    I believe that notorious events will be disclosed by sellers because they understand that the buyer will learn anyway. If you listed a “Dahmer home” and the seller refused to allow you to disclose, by all means walk from the listing.

    Remember, there are conditions that, by law, have to be disclosed and those that don’t. A buyer’s due diligence should not be limited to what is on the disclosure form but may include what has happened in the neighborhood, the builder’s reputation, the quality of the schools, municipal infrastructure and financial status, traffic issues, factory or agricultural smells…..etc. These may be important though we don’t require the seller to investigate or even disclose. There needs to be an understandable line as to those conditions that a seller will reveal and those that a buyer will investigate. The Superior Court, having analyzed the disclosure law, has concluded that physical defects and legal impediments known to the seller are to be disclosed. The other factors that may influence a reasonable buyer, including psychological stigma, need not be disclosed; they are within the scope of investigation left to the buyer.

  2. Scott M. Waldman on January 9, 2013 at 10:06 am

    In addition to the great advice given above by Jim Goldsmith, something else to keep in mind is that the buyer in this case might attempt to appeal the Superior Court’s decision to the PA Supreme Court. If an agent is going to discuss this case with a seller, I would be sure to let the seller know that while the disclosure of “psychological damage” is not presently required, until the Superior Court’s ruling becomes final there is a possibility that the PA RESDL could be interpreted by the PA Supreme Court to require such disclosures, so the seller needs to consider that risk.

  3. Walter Lewis on January 5, 2013 at 12:34 am

    While I understand the court’s decision, I’m not sure any one would agree if the property was Jeffrey Dahmer’s home. Obviously, most situations are not as definitive. As a listing agent disclosure might be adverse to your seller, but so is a lawsuit. I have faced this situation more than once and concluded that as a listing agent, it seemed appropriate with the seller’s approval to disclose the events. As not to deter interest in the listing, disclosure was made after an offer was received prior to going to contract. In each case there were multiple buyers that were not deterred.

  4. Marion Gaeta on January 4, 2013 at 4:03 pm

    Lisa, I’m thinking that only material defects have to be disclosed from either side. I have been asked that question before, as I am sure many of us have. My response is “I have no knowledge of anything, but feel free to talk to the neighbors and do some research if its a concern.”

  5. James L Goldsmith on January 3, 2013 at 12:11 pm

    Great question. The buyer agent in the case actually settled out and the question wasn’t addressed by the court. But….my opinion is that if the agent is aware of a buyer’s aversion to purchasing a house with this stigma, the agent should inform buyer that neither the seller nor seller’s agent is duty-bound to disclose. It would be up to the buyer or her agent, as they may agree, to investigate. The prudent buyer agent should always inform the buyer that the disclosure form is limited to the property (not the neighborhood, etc) and only to the KNOWN physical/legal defects that are the subject of the disclosure form. The form does not replace the need for buyers to consider conducting their own due diligence. A good buyer agent will make clear what he/she will investigate (be careful agents) and what the buyer or buyer’s experts will undertake in terms of investigation.

  6. Richard Smeltz on January 3, 2013 at 11:31 am

    If I had such a property, I would encourage the seller to allow me to disclose the fact up front. It would have saved a lot of time, aggravation and money. That way we sell it to someone who does not care about the tragic past. If the buyer had discovered the fact the day of settlement I am sure they would have refused to settle. Then litigate over the deposit. Then try to find another buyer. Not worth the trouble.

  7. Lisa Sanderson on January 3, 2013 at 8:00 am

    Ok, the seller and his agent are off the hook. What about a buyer’s agent? Wouldn’t fiduciary duty demand revealing of psychological defects?

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