Milliken v. Jacono
60 A.3d 133, 2012 WL 6684757, 2012 Pa. Super. 284 (2012)
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Rule of Law:
Psychological damage to a property, such as a murder-suicide having occurred within it, does not constitute a 'material defect' under Pennsylvania's Real Estate Seller Disclosure Law (RESDL), and therefore sellers have no legal duty to disclose it to potential buyers.
Facts:
- In February 2006, Konstantinos Koumboulis shot his wife and then himself inside the property at issue.
- In September 2006, Kathleen and Joseph Jacono purchased the property from the Koumboulis Estate at a real estate auction.
- Before listing the property, Joseph Jacono consulted with the Pennsylvania Real Estate Commission, which advised him that the murder-suicide was not a material defect requiring disclosure.
- The Jaconos' real estate agents also consulted the Pennsylvania Association of Realtors Legal Hotline and were similarly told that disclosure was not required.
- On June 17, 2007, the Jaconos entered into an Agreement of Sale with Janet S. Milliken.
- The Seller Property Disclosure Statement provided to Milliken by the Jaconos did not mention the murder-suicide.
- Before closing, Milliken received a Title Report which stated that the Jaconos had acquired the property from the 'Estate of Kostantinos Koumboulis and Estate of Georgia Koumboulis.'
- Approximately three weeks after moving into the property in August 2007, Milliken learned of the murder-suicide that had taken place there.
Procedural Posture:
- Janet S. Milliken filed a complaint against Kathleen and Joseph Jacono (Sellers) and their agents in the trial court.
- Milliken's complaint included counts for Breach of the Real Estate Seller Disclosure Law, Negligent Misrepresentation, Fraud, and violation of the Unfair Trade Practices and Consumer Protection Law.
- The Jacono Defendants filed a motion for summary judgment.
- The trial court granted the motion for summary judgment in favor of the Jacono Defendants.
- Milliken, as the appellant, appealed the trial court's order to the Superior Court of Pennsylvania (an intermediate appellate court).
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Issue:
Does a murder-suicide that occurred within a property constitute a 'material defect' that has a significant adverse impact on its value, thus requiring disclosure by the seller under Pennsylvania's Real Estate Seller Disclosure Law and common law fraud principles?
Opinions:
Majority - Ford Elliott, P.J.E.
No. A murder-suicide is a form of psychological damage to a property, which is not a 'material defect' that must be disclosed by the seller. The Real Estate Seller Disclosure Law (RESDL) lists specific categories of disclosable defects, all of which relate to the physical structure of the house, legal impairments, or hazardous materials. The legislature did not include psychological defects, and extending the law to cover them would create a 'slippery slope' of subjective disclosures with no clear standard regarding what must be revealed, how to value such a defect, or how long the disclosure obligation would last. The court rejected the reasoning of other jurisdictions that use a subjective standard of materiality, holding that in Pennsylvania, a seller is only liable for failing to reveal objective material defects. Since there was no duty to disclose, the claims for fraud, negligent misrepresentation, and violation of consumer protection laws also fail.
Dissenting - Bender, J.
Yes. A murder-suicide can constitute a 'material defect' requiring disclosure if it has a significant adverse impact on the property's value. The majority improperly limits the scope of the RESDL by focusing only on the enumerated list of physical defects. The law itself defines a 'material defect' broadly as any problem that 'would have a significant adverse impact on the value of the property.' Milliken presented expert testimony that the murder-suicide stigma reduced the home's value by nearly $100,000, which is a quantifiable economic loss, not merely ethereal 'psychological damage.' By ignoring this clear financial impact, the majority undermines the legislative intent of the RESDL and unfairly places a catastrophic loss on the buyer, rewarding the sellers' lack of integrity.
Analysis:
This decision establishes a bright-line rule in Pennsylvania that distinguishes between objective physical defects, which must be disclosed, and subjective psychological stigmas, which do not require disclosure. It firmly places the burden of discovering a property's notorious history on the buyer under the principle of caveat emptor ('buyer beware'). This ruling sets Pennsylvania apart from jurisdictions like California that have found such events to be material based on their effect on market value. The case significantly limits the scope of mandatory seller disclosures and protects sellers from liability for non-disclosure of events that do not affect the physical condition or legal status of the property.
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