Court flips silent fraud ruling on home purchase

­By Thomas Franz
BridgeTower Media Newswires
 
DETROIT — A Michigan Court of Appeals panel reversed a Macomb County Circuit Court ruling that granted summary disposition to the sellers of a home that had significant mice issues but failed to disclose that to a purchaser.

In Kondrat v. Servitto, the panel of Judges Colleen A. O’Brien, Kathleen Jansen and Amy Ronayne Krause ruled that the plaintiff sufficiently pleaded his claim of silent fraud.

“(The trial court) seemed to take a more skeptical juror perspective rather than viewing the evidence in the light most favorable to the nonmoving party,” said plaintiff’s attorney Paul J. Zalewski of The Zalewski Law Firm in Warren.

The defendants lived at their home for 30 years before deciding to move for medical reasons. The plaintiff walked through the home in August 2015 with his family and found it to be well maintained.

According to the COA’s unpublished opinion, the sellers executed a Seller Disclosure Statement on Aug. 11, 2015. They answered “no” when asked if there had been any evidence of water in the basement or crawlspace and gave the same answer when asked if there was a history of infestation.

On Sept. 2, 2015, the plaintiff purchased the home from the defendant for $175,000, and closing occurred Oct. 15, 2015.

Before closing, the plaintiff had an inspector tour the home, and that report indicated that the roof had no major system safety or function concerns and was in good condition. Inspection of the basement was limited because of insulation cover and finished walls.

After purchasing the home, the plaintiff started to remove insulation from the basement walls to upgrade electrical wiring. During that process, the plaintiff found about 50 mouse carcasses in addition to 30 mouse poison boxes, traps and chewed-up baits. The plaintiff hired an exterminator and had another inspection of the home completed.

The plaintiff’s real estate agent then contacted the defendant’s real estate agent to alert them of the mice issue and possible legal action. The defendants eventually admitted that the infestation could have begun from a basement craft project involving acorns.

The infestation was not disclosed prior to closing. Additionally, the age of the roof disclosed was inaccurate as records were found that showed it was eight to nine years old instead of five to six years old.

The plaintiff found on Oct. 21, 2015, that the defendants made an insurance claim for water damage on Feb. 12, 2015, which was not disclosed. The plaintiff learned that the claim was a result of ice damming that came from the second floor to the first floor.

Kondrat argued that the trial court erred in granting summary disposition because the plaintiff sufficiently pleaded a cause of action for silent fraud by establishing genuine issues of material fact regarding his reliance on the seller’s disclosure statement.

The court opened its analysis by agreeing with Kondrat that the trial court ruled improperly on the silent fraud claim. It cites several statutes and cases to show that there must be a legal duty of disclosure for the suppression of such information to constitute silent fraud.

“To establish silent fraud, the plaintiff must prove more than the seller was aware of a hidden defect, and failed to disclose it,” the court wrote. “A misleadingly incomplete response to an inquiry can constitute silent fraud.”

In analyzing the plaintiff’s complaint, the panel concluded that Kondrat satisfied the requirements for pleading silent fraud.

Zalewski said highlighting the facts of the case along with evidence and testimony went a long way at the appeals level since the trial court did not view in the light most favorable to the plaintiff.

He said the most significant part of the case’s fact pattern was the admissions made by the defendant regarding the mouse infestation during their deposition.
“When you have opposing party admissions regarding the adverse condition that exists that is subject to litigation, that always helps you,” Zalewski said.

He added the testimony of Kondrat during depositions was also critical.

“When the COA looked at the testimony of my client in the proper context of a summary motion, they found ample issues of material fact,” Zalewski said.

“Highlighting his testimony and creating issues of fact in that regard was the most significant piece of evidence, outside of the law itself, which was also in my favor.”

Defense attorney Joseph C. Pagano did not respond to requests for comment on this case.
 

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