Hill v. Jones
151 Ariz. 81, 725 P.2d 1115 (1986)
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Rule of Law:
A seller of a residence has an affirmative duty to disclose to the buyer any known facts that materially affect the property's value and are not readily observable or known to the buyer, including a history of termite infestation.
Facts:
- In 1974, Ora and Barbara Jones (sellers) purchased a residence and received documentation detailing a 1963 termite treatment and existing, unrepaired damage.
- The Joneses renewed the termite guarantees annually and paid for 'booster' treatments on two separate occasions after a neighbor observed live termites.
- Mr. Jones was aware of the past termite treatments, one of which required drilling through a wood floor tile inside the house.
- In 1982, Warren and Gloria Hill (buyers) agreed to purchase the home from the Joneses.
- During a visit, Mr. Hill pointed to a 'ripple' in the wood floor and asked if it was termite damage; Mrs. Jones replied that it was water damage from a previously broken water heater.
- The Joneses never disclosed the history of termite infestation or treatments to the Hills, the realtor, or the termite inspector.
- The contractually required termite inspection report stated there was no visible evidence of infestation and failed to note past damage or treatment.
- After moving in, the Hills discovered a pamphlet about termites, learned of the past infestation from a neighbor, and found crumbling wood, which an exterminator confirmed was termite damage.
Procedural Posture:
- Warren G. Hill and Gloria R. Hill (buyers) filed a lawsuit against Ora G. Jones and Barbara R. Jones (sellers) in an Arizona trial court to rescind their home purchase agreement.
- The trial court dismissed the buyers' claim of misrepresentation, citing an integration clause in the sales contract.
- The sellers then filed a motion for summary judgment on the remaining claim of fraudulent concealment.
- The trial court granted the sellers' motion for summary judgment, finding there were no genuinely disputed issues of material fact.
- The Hills (appellants) appealed the trial court's grant of summary judgment to the Arizona Court of Appeals.
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Issue:
Does a seller of a residential property have a duty to disclose to the buyer a known history of termite damage and infestation which materially affects the value of the property?
Opinions:
Majority - Meyerson, Judge
Yes, a seller of a home has an affirmative duty to disclose known facts materially affecting the value of the property which are not readily observable and are not known to the buyer. The court rejected the traditional doctrine of caveat emptor ('let the buyer beware'), aligning with the modern trend that promotes honesty and fair dealing in business relationships. Nondisclosure of a material fact known to the seller can be equivalent to fraudulent misrepresentation. The court determined that past termite infestation and damage can be a material fact because a reasonable person would attach importance to it when deciding to purchase a property. Therefore, whether the damage was material and whether the buyers were diligent in their own inspection are questions of fact for a jury to decide, making summary judgment for the sellers improper.
Analysis:
This case represents a significant departure from the traditional doctrine of caveat emptor in Arizona residential real estate law. It establishes an affirmative duty for sellers to disclose known, latent material defects, shifting some of the inspection burden from the buyer to the seller. This decision aligns Arizona with a growing number of jurisdictions that prioritize transparency and fair dealing over the finality of transactions where information is asymmetric. The ruling effectively treats the nondisclosure of such defects as a form of misrepresentation, increasing seller liability and changing the legal landscape for real estate agents and inspectors who now operate under a heightened expectation of disclosure.
