After a split three-judge panel of the state Superior Court ruled that a jury should decide whether the seller of a $610,000 home had a duty to disclose to the buyer that a murder-suicide had occurred in it, a divided en banc panel reversed the ruling on reargument, finding that the occurrence of a murder-suicide does not constitute a material defect to real estate that requires disclosure under the Real Estate Seller Disclosure Law.

The panel, hearing the case on reargument, ruled 6-3 to affirm a Delaware County trial court’s grant of summary judgment to the sellers and real estate agents.

The majority, led by Judge Kate Ford Elliott, said the RESDL does not require the disclosure of psychological damage to a home.

“Sellers should only be required to reveal material defects with the actual physical structure of the house, with legal impairments on the property, and with hazardous materials located there,” Ford Elliott said. “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.”

Ford Elliott was joined by Judges John L. Musmanno, Christine Donohue, Jacqueline O. Shogan, Anne E. Lazarus and Judith F. Olson.

Judge John T. Bender, joined by Judges Sallie Updyke Mundy and David N. Wecht, penned a dissenting opinion, arguing that “the financial penalty Mrs. Milliken has suffered 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 said. “Not surprisingly, it also truncates the ability of homebuyers across this commonwealth to avoid potentially catastrophic losses in purchasing a home.”

In Milliken v. Jacono, according to the court documents, plaintiff Janet S. Milliken, the purchaser of the home, alleged that she thought the sellers, Kathleen and Joseph Jacono, bought the house from a foreclosure auction. Her expert witnesses said in their reports that the murder-suicide reduced the value of the home by 10 to 15 percent.

Prior to the sale, defendant sellers Kathleen and Joseph Jacono and their real estate agents at defendant ReMax Town & Country each sought advice from various authorities as to whether the murder-suicide needed to be disclosed, according to court documents.

Joseph Jacono, who bought the property at an auction from the estate of the murder-suicide victims, called representatives of the Pennsylvania Real Estate Commission and was told the murder-suicide was not a material defect that needed to be disclosed, court documents said.

After a listing agreement was signed between the Jaconos and Milliken, the ReMax agents called the Pennsylvania Association of Realtors’ legal hotline and were told the event did not need to be disclosed, according to court documents.

Milliken closed on the property for $610,000 in August 2007, but claimed she did not learn of the murder-suicide until September 2007, according to court documents.

In August 2010, Delaware County Court of Common Pleas Judge George A. Pagano granted the defendants’ motion for summary judgment, but Bender, leading a 2-1 majority, reversed the ruling in November 2011 and remanded the case back to the court for trial.

Ford Elliott dissented, arguing that the sellers had no duty to disclose the murder-suicide under the RESDL.

In her majority opinion following reargument, Ford Elliott reiterated this point, noting that each of the mandatory disclosures under RESDL are related either to the physical structure of the property, the potential legal impairments related to the property or hazardous substances on the property.

“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,” Ford Elliott said. “Plainly, the legislature did not require disclosure of psychological damage to a property.”

Ford Elliott disagreed with Milliken’s argument that if the legislature had intended to exclude from the mandatory disclosures psychological damage to a house, it would have done so explicitly.

“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,” Ford Elliott said. “Because the legislature limited required disclosures to structural matters, legal impairments and hazardous materials, the extension suggested by the buyer would be both unwarranted and legislative in nature.”

Ford Elliott also questioned what limits would have to be placed on the mandatory disclosure of psychological damage to a house, noting that Milliken was one buyer removed from the murder-suicide.

Ford Elliott said requiring a seller to disclose psychological damage to a property would raise concerns in cases where a murder had occurred 100 years ago or there had been numerous owners of the home in the interim.

“This sort of psychological damage to a house will obviously decrease over time as the memory of the murder recedes from public knowledge,” Ford Elliott said. “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.”

Ford Elliott was also skeptical of assigning a monetary value to psychological damage to a home caused by a murder.

“The psychological effect will vary greatly from person to person,” Ford Elliott said. “There are persons for whom no amount of money would induce them to live in such a house, while others may not care at all, or even find it adventurous.”

In addition, Ford Elliott wondered what other crimes would need to be disclosed if the mandatory disclosure of murder was required by law.

“A buyer might want to know that a house has been burgled five times in the last year because that might indicate that the neighborhood is dangerous,” Ford Elliott said. “What about crimes that did not occur on the property itself? Suppose there had been a number of shootings in the neighborhood. Further, a buyer might want to know that a child molester lived in the neighborhood.”

Because the court found that Milliken had no claim under the RESDL, Ford Elliott said Milliken likewise did not have a valid claim for fraud under the Unfair Trade Practices and Consumer Protection Law.
”Sellers simply did not engage in any deceptive conduct,” Ford Elliott said. “Sellers merely declined to inform buyer about a factor of which they were under no obligation to disclose.”

But Bender argued in his dissent that the RESDL must be read in conjunction with the Residential Real Estate Transfers Law, which defines a “material defect” as 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.”

“To the extent that a reduction of almost $100,000 in value can be deemed a ‘significant adverse impact on the value of the property,’ the RRETL, considered in conjunction with RESDL, mandates that the cause of the stigma be disclosed,” Bender said.

Milliken’s attorney, Timothy Rayne of MacElree Harvey in Kennett Square, Pa., said he was disappointed with the ruling but is hopeful the state Supreme Court will take up the issue.

“I agree wholeheartedly with the reasoning of the dissenting opinion,” Rayne said.

Counsel for the Jaconos, J. Scott Watson of Glen Mills, Pa., and counsel for ReMax and its agents, Abraham C. Reich of Fox Rothschild in Philadelphia, also could not be reached.

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI.

(Copies of the 25-page opinion in Milliken v. Jacono, PICS No. 12-2428, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •