Wednesday, February 22, 2012

Failure To Disclose Claim Allowed To Proceed in Lackawanna County Residential Real Estate Transaction Case

In his recent February 8, 2012 decision in the case of Brown v. Jones, No. 11-Civil-5253 (C.P. Lacka. Co. Feb. 8, 2012 Nealon, J.), Judge Terrence R. Nealon of the Lackawanna County Court of Common Pleas addressed Preliminary Objections in the nature of a demurrer filed by the Defendants against the Plaintiff’s causes of action for violation of the Real Estate Seller Disclosure Law, 68 Pa. C.S. §7301 et. seq., and common law fraud.

According to the Opinions, in April of 2010, the Plaintiffs and the Defendants executed an Agreement of Sale related to the Plaintiff’s purchase of the Defendant’s residential property.

In connection with the real estate transaction, the Defendant prior homeowner provided the Plaintiff new homeowner with an original Property Disclosure Statement along with a Supplemental Disclosure Statement which the original homeowner had prepared and signed in compliance with the above-stated law.

In that documentation, the original homeowner represented that the property’s roof had never leaked during the court of their ownership nor were they aware of any leakage, accumulation, dampness in the basement or any repairs to control any water or dampness problem in the basement. The original homeowner also denied any knowledge or any water damage or drainage issues on the property. Based upon these representations, the new homeowners closed on the property and purchased the same.

Thereafter, during a significant rainfall in the Fall of 2010, the new homeowners sustained extensive water damage to their finished basement allegedly due to considerable water leakage in four separate areas of the basement.

After the water damage persisted with each ensuing rainfall or snow melt, the new homeowners took remedial action by removing the drywall and carpeting in the basement. That allegedly revealed that the water damages were of a “historic nature."  There was also allegedly evidence that the foundation had been previously treated which allegedly indicated knowledge of a leakage problem by the prior owners.  According to the Opinion, the basement floor continued to become covered with water with each additional rainfall.

The new homeowners also alleged other water damage as a result of a leaking roof. The new homeowners asserted that, after the purchase of their home and after noticing water damage from the leaking roof, they discovered plastic sheeting on the attic floor along with absorbing carpeting which lead them to believe that the prior homeowners were also aware of leaking water from the roof area.

Based on these recurring issue, the new homeowners filed suit.

In their demurrer to the Plaintiff's Complaint, the Defendants asserted that the Plaintiffs had failed to allege with any particularity the specific allegedly fraudulent representations made by the original homeowners. The Defendants asserted that it appeared that the Plaintiffs were simply concluding that because the property sustained water damages, the original homeowners may have known about leaks and failed to disclose them.

According to the Court, it appeared that the gist of the Defendant's argument in support of their demurrer was that the requisite intent to defraud could not established under Pennsylvania law by circumstantial evidence.

After reviewing the case presented and providing a detailed analysis of the Real Estate Seller Disclosure Law, Judge Nealon found that the Plaintiff’s Complaint stated sustainable causes of action under that law as well as under a claim of fraudulent misrepresentation. In so ruling, Judge Nealon also pointed out that the scienter component of a fraud claim “may be established by circumstantial evidence.”  
Accordingly, the Court overruled the Defendants’ Preliminary Objections and allowed the Plaintiff’s claim to proceed.

Anyone desiring a copy of this Decision by Judge Nealon in the case of Brown v. Jones may contact me at dancummins@comcast.net.

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