Thursday, February 7, 2013

Caveat Emptor - on Crack?

Legal rules sometimes serve a logic that is not readily evident and can seem downright cruel. It's likely that is what a Pennsylvania homeowner is thinking today. Janet Milliken purchased a Thornton, Pa. house for herself and her children in June 2007 for $610,000 from the Jocono family.  The Joconos had owned the house for about a year, having purchased it from the estate of Konstantinos Koumboulis - about 8 months after Koumboulis murdered his wife in the house and then committed suicide there.  The Joconos knew of the murder-suicide, but neither they nor their real estate agent ever disclosed the incident to Milliken.  While the incident was well publicized in Thornton, Milliken had moved from California and had no knowledge of the history of the house.  The case raises issues similar to those found in the well-known Rye, NY haunted house case of Stambovsky v. Ackley - except for the result.  In a split decision, an appellate panel of the Pennsylvania Superior Court ruled that caveat emptor applied.

The court first reviewed statutorily mandated disclosures and determined that murder-suicide was not among the categories of required disclosures. The court then dispatched with the common law fraud claim by determining that the fact was not "material." Because the defect was essentially a matter of  the psyche for which a monetary value could only be subjectively determined, it could not be considered a material defect.

In making a pragmatic decision applying a logical desire to limit the law to matters of certainty and objectivity, the court seems to ignore the very human elements of the case. As a result, the law looks unreasonable and its legitimacy to the public eye is compromised.  And while the court may have justified the result on legal reasoning, it could just as easily have found the other way with sufficient legal precedent (the court rejected persuasive precedent from Ohio on similar facts) as was pointed out by the dissent.

The majority did mention in a footnote that their support of caveat emptor was in some way justified given that the tragic incident would likely have turned up on an internet search.  Unfortunately, the house address was never given in the decision so I could not repeat the search to see what turned up. The court did not specifically tie the internet search rationale to the justifiable reliance element of fraud, but referred to it generally as an argument to ameliorate the apparent harsh effects of caveat emptor.

Connecticut has a statute that covers this situation, but it hardly seems more helpful to the innocent buyer.  The statute puts the burden on the buyer to notify the seller in writing that the fact that someone has died in the house is a material fact. Failing to do so is conclusive in shielding the Seller from a fraud claim for failure to disclose. At least the statute gives the buyer a chance. Apparently, in Massachusetts the fact of commission of a homicide  in a house is defined by statute as not being a material fact.

The Thornton, PA house:

PHOTO: Janet Milliken filed a "petition for allowance of appeal" to the Supreme Court of Pennsylvania this month, saying the seller of her home should have disclosed a murder-suicide took place in the house in 2006.

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