State Appeals Court Allows Claim To Proceed for Failing To Comply With Property Condition Disclosure Law

Plaintiff entered into agreement o purchase home for $296,900. Seller provided Buyer with a Residential Property Condition Disclosure Statement (PCDS) Report prior to the closing. Buyer did not receive a home inspection report until after the closing though buyer personally inspected home for two hours prior to closing. 

After the closing, the plaintiff learned of a heating oil tank that had been hidden by grass, rotted wood that had been newly painted and discovered termite damage when it removed the pool house floor. Plaintiff spent approximately $38K on repairs and then sold house for $440K for profit of approximately $150K. The plaintiff then sought its out-of-pocket expenses from defendant, claiming defendant had violated the PCDS law and had committed fraud.

On motion for directed verdict, trial court found there was a genuine issue of fact if the seller had disclosed material information that it knew was false, incomplete or misleading.  In addition, the court found the plaintiff had failed to conduct a reasonable examination of the Property and that this failure to review the inspection report violated its duty to exercise reasonable diligence. The court also found the plaintiffs had failed to prove damages because plaintiff had made profit on the sale of home.

Plaintiffs then appealed the PCDS ruling. The appeals court ruled that there were material questions about the reasonableness of plaintiff's inspection and amount of damages that should have gone to the jury.  

Plaintiff made nearly $150K when it sold house 18 months after taking title.  This case seems to fall into the piggish category.  Coake v Burt, 2010 S.C. App. LEXIS 245 (Ct. App. 12/1/10)

Washington State Court Finds Seller of Home Who Was Unaware of Leak Heating Oil Tank Does Not Qualify As Innocent Party

Plaintiffs purchase home in 2000 that had 720 heating oil tank. As part of remodeling In 2004, they converted the home to natural gas and remove UST. In 2007, they discover that a return line associated with the former tank had over time leaked significant oil into the soil around the home remodel home. After incurring approximately $200K in cleanup costs, they file lawsuit against seller of home. The trial court denied the plaintiff's motion to dismiss affirmative defenses and the plaintiffs sought review of these pre-trial rulings.

In response to statutory contribution claim under the state Model Toxics Control Act (MTCA), defendant asserts innocent purchaser since they were unaware of the leaking piping and therefore did not contribute or cause the petroleum contamination. However, the court ruled that the phrase did not require knowledge and that an owner is strictly liable even where they unknowingly or unintentionally discharge hazardous substances.  Since defendants acknowledged that the fuel oil leaked during the time they operated the heating system, court ruled defendants' were not innocent purchasers.

The defendants also asserted a  "domestic use" defense on grounds that residential oil is frequently stored in USTs. However, the court ruled that the domestic use exclusion does not apply to oil leaking from defective underground piping. To hold otherwise, the court said, would do violence to the public policy underlying the MCTA to ensure impose broad strict liability for improper disposal of hazardous wastes.

On a contractual claim, the defendants asserted that the plaintiffs assumed the risk of possible contamination when they failed to object to the UST during their inspection period. The court said the RESPA statement did not expressly allocate MCTA liability  and that the Buyers only had a general right of inspection regarding hazardous materials. The court noted that the contingency pertaining to the UST was limited "solely to determining the presence or non-presence of oil storage tanks on the Property, unless otherwise agreed to in writing by Buyer and Seller".  The court said the buyer was expresslly prohibited from conducting any testing.  The inspection report did not there might have been an abandoned UST in the front yard and the Buyers confirmed with Seller that no such abandoned tank existed. Thus, the court said, the inspection report did not provide the plaintiffs with an ability to terminate the contact.   Grey v Leach, 2010 Wash. App. LEXIS 2720 (Ct. App. 12/13/10)