The Pennsylvania Supreme Court on Monday issued its opinion in Milliken v. Jacono, holding that a home's seller didn't have to disclose a murder/suicide that occurred in the house because it didn't affect the price of the house. A grisly fact pattern to be sure, but the Supreme Court rooted its opinion in the more prosaic world of real estate.
The Thornton Horror
In 2006, Konstantinos Koumboulis killed his wife, then himself, in his Thornton, Pennsylvania house, reported Philly.com. Seven months later, the Jaconos purchased the house at an auction. They renovated it and put it on the market. They -- and their realtor -- knew about the murder/suicide, and after consulting attorneys and the Pennsylvania Real Estate Commission, everyone agreed that the Jaconos had no duty to disclose the murder/suicide to buyers.
Janet Milliken bought the property in 2007. The sale closed and everything was swell until she learned about the murder/suicide from a neighbor. Milliken filed a lawsuit seeking rescission of the purchase contract under a theory of fraud and misrepresentation, claiming that if she had known about the murder/suicide, she wouldn't have bought the house.
Is it a Defect?
The real question being decided here was whether summary judgment was proper at the trial court level. The Supreme Court believed it was, because the only issue was whether a murder/suicide could be considered a "material defect." If it's not a material defect, there's no duty to disclose as a matter of law, and the Jaconos are entitled to summary judgment.
In Pennsylvania, 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." Milliken argued that "psychological stigma" was a material defect because it might affect a buyer's decision to buy a house, and thus affect the value of the property.
Disclosing Traumatizing Events 'a Sisyphean Task'
The Pennsylvania Supreme Court, however, rejected this argument. Even if psychological stigma did affect a buyer's decision, whatever caused the stigma isn't categorically a defect. This is because, said the court, "Efforts to define those [traumatizing events] that would warrant mandatory disclosure would be a Sisyphean task. One cannot quantify the psychological impact of different genres of murder, or suicide -- does a bloodless death by poisoning or overdose create a less significant 'defect' than a bloody one from a stabbing or shooting?"
The court was simply not comfortable with setting a standard for psychological stigma relating to material defects because it would be too subjective to define, encompassing many variables. Grisly events could even increase a home's value to people interested in the property as a curiosity, the court said.
Perhaps the most important lesson from this case -- aside from making sure no one was murdered in the house your client wants to buy -- is that material defects pertain to "defects in the structure itself." Other events, which don't affect the structure of the house and are too subjective to value, don't count.
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