A Pennsylvania couple’s claim that a realtor negligently misrepresented the condition of the septic system of a house they purchased has survived preliminary objections following a Lawrence County judge’s ruling.
Prudential Preferred Realty had argued on preliminary objections that language in the standard agreement of the sale of real estate barred recovery for a negligence claim, but Court of Common Pleas Judge J. Craig Cox said Pennsylvania law protects consumers from a seller’s use of a contract’s integration clause as a liability shield where defective conditions aren’t “readily ascertainable from routine inspection.”
In the case of Wassel v. Heitzenrater, the defect at issue was underground; the defendant seller told plaintiffs James and Gail Wassel they would fix problems with the property’s septic system for a small increase in the home’s price tag. However, after the Wassels purchased the house, problems with the septic system — waste water draining into their basement, sinkholes and gray water spurting onto their neighbors’ property, for example — persisted.
They filed suit against the Fombell, Pa., home’s former owners, Eric and Bonnie Heitzenrater, and PPR Realty.
Cox’s December 10, 2012, ruling stems from PPR Realty’s preliminary objections to claims of negligence and unfair trade practices against it. While the judge sustained PPR’s preliminary objections to the fraud claims, finding the plaintiffs were not specific enough in their averments of fraud, he allowed the negligent misrepresentation claim to proceed.
Key in Cox’s holding was that Pennsylvania case law preserves a negligent misrepresentation claim when a speaker fails to reasonably investigate the truth of his or her words, as opposed to outright knowing they were false (intentional misrepresentation). Meanwhile, the plaintiffs did not know of the defects of the septic tanks until they moved in, experienced problems and hired an excavator to dig up their property, allowing them to skirt the parol evidence rule under court-crafted limitations on the law’s applicability to real estate contracts, where it is alleged a buyer was induced into purchasing a property.
“Clearly, the defective condition of the septic system could not be ascertained by merely inspecting the property, as it would require excavating around the septic tanks to inspect the condition of that system,” Cox said. “Thus, the plaintiffs are not barred by the parol evidence rule from presenting evidence of any alleged misrepresentations regarding the condition of the septic tanks that induced them into purchasing the residence.”
Parol evidence is barred in Pennsylvania when parties sign a contract, unless there is evidence of fraud or a mistake, Cox said.
In LeDonne v. Kessler, the Pennsylvania Superior Court carved out a balancing test for determining whether the parol evidence rule applies to oral representations that coincide with a real estate sale contract that has an integration clause.
The court held the parol evidence rule could be powered down in cases where the seller says something that induces the buyer to enter the contract.
That decision gained traction in Myers v. McHenry, in which the Superior Court restated the balancing test between the party’s knowledge of an objectionable condition derived from a reasonable inspection against the coverage of the contract’s integration clause, in order to determine whether the party could justifiably rely on oral statements without knowing to demand more contractual protection.
In that case, the plaintiffs were told about the “slow recovery well” that would be providing water to their home, but the court noted the well’s limitations were not readily ascertainable in deciding to admit parol evidence from the plaintiffs about the sellers’ alleged misrepresentations.
In Wassel, the current case, the sellers told the plaintiffs there was water leakage in the basement, problems with the septic system and other foundational issues.
The plaintiffs’ mortgage lender required repairs to the septic system before the house could be sold. After the repairs, the price went from $137,000 to $140,000.
When the Wassels moved in, they noticed waste water draining into the basement after showers, rain water and gray-colored water flowing into the basement, and sinkholes developing near the new septic tank that came with the pre-sale repairs.
After employing an excavator, the Wassels discovered that pipes connecting their new septic tank to the old one were leaking.
The old tank was also damaged.
The court held those defects, considering the fact that the Wassels thought the system was fixed, were not readily ascertainable.
“It must be noted that the standard agreement of the sale of real estate contains clauses limiting defendant PPR Realty’s liability,” Cox said. “However, in accordance with LeDonne and Myers, integration clauses cannot be utilized to shield a seller of real estate from liability for defective conditions that are not readily ascertainable from routine inspection.”
“Clearly, the defective condition of the septic system could not be ascertained by merely inspecting the property, as it would require excavating around the septic tanks to inspect the condition of that system,” he added.
Richard W. Kelly of Kelly Law in Pittsburgh represented the Wassels and was not available for comment.
James P. Sommers of the Sommers Law Office in Sewickley, Pa., represented PPR Realty and was also not available.
(Copies of the 14-page opinion in Wassel v. Heitzenrater, PICS No. 13-0072, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •