PENNSYLVANIA RECORD

A Pennsylvania Superior Court panel has affirmed a trial court decision that a home seller

and a real estate agent did not engage in any deceptive conduct when they did not inform a homebuyer that a murder-suicide had taken place in a house the buyer was interested in purchasing.

The appellate judges ruled to uphold an Aug. 9, 2010, Delaware County Common Pleas Court decision in Janet S. Milliken v. Kathleen Jacono and Joseph Jacono et al. that determined the sellers were not required to inform the buyer that such a crime had occurred on the premises.

“Accordingly, having found that the occurrence of a murder/suicide on a property does not constitute a material defect to real estate such that a seller must disclose that fact under theories of liability predicated on the RESDL, fraud, negligent, misrepresentation, and the UTPCPL, we find that the trial court properly entered summary judgment,” the Superior Court judges wrote in their Dec. 26 decision.

The case had its roots in the 2007 sale of a house to Milliken, the plaintiff, without the sellers or agents disclosing to Milliken that a murder-suicide of a husband and wife had occurred in the home during the previous year.

Milliken filed suit against Kathleen and Joseph Jacono, as well as two real estate firms – Cascia Corp., trading as Re/Max Town & Country, and Fox & Roach LP, trading as Prudential Fox & Roach Realtors – and the agents involved in the transaction, Fran Day and Thomas O’Neill, who were the listing agents representing the Jaconos, and John Restrepo, who represented the plaintiff.

Milliken’s complaint contained allegations of fraud and misrepresentation regarding the sale of the Delaware County property without disclosing the death of the couple who owned the home prior to the Jaconos purchasing it.

The suit contained counts of breach of the Real Estate Seller Disclosure Law, negligent representation, fraud, and violations of the Unfair Trade Practices and Consumer Protection Law.

The trial court subsequently granted the Jaconos' motion for summary judgment in the summer of 2010.

Milliken then appealed the decision to the Superior Court.

According to the court record, Konstantinos Koumboulis allegedly shot his wife to death before turning the gun on himself on Feb. 11, 2006.

The Jaconos bought the property from the Koumboulis estate during an auction in September of that year.

Then, in June 2007, an agreement of sale for the home was signed between the Jaconos and Milliken.

The June 17, 2007, seller property disclosure statement did not disclose the murder-suicide as a known material defect.

Milliken alleged that she was unaware of the tragedy that occurred in the home until three weeks after she moved into the property, which she had closed on for $610,000 in early August 2007.

In her appeal to the Superior Court, Milliken asserted that the trial court erred in granting summary judgment to the defendants on the claim of a violation of the Real Estate Disclosure Law because a material issue of fact existed as to whether the murder-suicide constituted a “material defect” because it had a “significant adverse impact on the value of the property.”

The plaintiff also contended that the trial court erred on the fraud claim because a material issue of fact existed as to whether the defendants’ intentional concealment and non-disclosure of the murder-suicide led to a viable claim for fraud, because a material issue of fact existed as to whether Milliken had a viable claim for negligent misrepresentation, and because a material issue of fact existed as to whether Milliken had a viable claim for common law fraud which would lead to a claim under the statute.

According to the judicial opinion, in each instance, Milliken put forward as the offending defect, certain “psychological damage to the property occasioned by the murder/suicide of Konstantinos and Georgia Koumboulis.”

The judges wrote that if the tragedy could not be considered a defect legally, or if the sellers were under no legal obligation to reveal the alleged defect, there could be no liability predicated upon the failure to inform.

“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,” the ruling states. “Thus, each of Buyers’ issues on appeal must fail.”

According to the ruling, a requirement that sellers of real estate reveal that a murder once occurred on the property goes to the reputation of the property and not its actual physical structure.

The legislature, the judges wrote, did not require disclosure of psychological damage to a property.

Milliken argued that if the legislature had intended to exclude a murder-suicide as a material defect it would have done so by express language excluding psychological damage.

“We disagree,” the panel states. “Rather, psychological damage is so different from the physical and legal defects listed that it is plain that the Legislature intended not to include it.

Because the Legislature limited required disclosures to structural matters, legal impairments, and hazardous materials, the extension suggested by Buyer would be both unwarranted and legislative in nature.”

The panel went on to discuss the other problems with Milliken’s arguments, such as how recent the murder would have occurred.

“This sort of psychological damage to a house will obviously decrease over time as the memory of the murder recedes from public knowledge,” the decision reads. “Requiring a seller to reveal this information may force the seller to sell the house under market value and allow the buyer to realize a windfall when the house is resold 10 years later and memories have faded. The passage of time has no similar curative effect on structural damage, legal impairments, or hazardous materials.”

The judges also questioned how monetary value could be assigned to psychological damage to a house caused by a murder, and whether the disclosure would be limited to murder or would it have to include disclosure of other crimes.

“If psychological defects must be disclosed then we are not far from requiring sellers 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,” the opinion states. “Indeed, one could identify numerous psychological problems with any house.”

The judges wrote that to allow consideration of possible psychological defects opens a “myriad of disclosures that sellers will need to reveal, and starts a descent down a very slippery slope.”

Superior Court Judge John T. Bender filed a dissenting opinion that was joined by Judges Mundy and Wecht.

In the dissent, Bender wrote that the financial penalty suffered by Milliken – she sustained a six-figure economic loss – was “entirely avoidable had the sellers from whom she bought her home merely exercised a little more integrity and a little less greed.”

“The Majority’s ruling, which deprives Milliken of any legal remedy, rewards those sellers and short-circuits the legislative intent of the Real Estate Seller Disclosure Law,” Bender wrote. “Not surprisingly, it also truncates the ability of homebuyers across this Commonwealth to avoid potentially catastrophic losses in purchasing a home.”

Bender said the circumstances of this specific case raise questions of fact that are best resolved at trial.

Bender wrote that contrary to the majority’s assertion that the Residential Real Estate Transfers Law only requires disclosure of structural defects on the property, legal impairments or hazardous substances, one section of the law reveals that a “material defect” is a “problem with a residential real property or any portion of it that would have a significant adverse impact on the value of the property or that involves an unreasonable risk to people on the property.”

In this case, the adverse impact of the murder-suicide on the value of Milliken’s home, Bender wrote, is documented in the reports of two expert appraisers, one of whom opined that the stigma attached to the home reduced the value of the property by 10 to 15 percent of the $610,000 sale price.

Bender wrote that he would have vacated the trial court’s award of summary judgment and remanded the matter for trial.

The majority opinion was written by President Judge Emeritus Kate Ford Elliott.