| Meyers v Rosen |
| 2010 NY Slip Op 00354 [69 AD3d 1095] |
| January 14, 2010 |
| Appellate Division, Third Department |
| William E. Meyers et al., Appellants-Respondents, v MarleneRosen, Respondent-Appellant. |
—[*1] Mark A. Schneider, Plattsburgh, for respondent-appellant.
McCarthy, J. Cross appeals from an order of the Supreme Court (Ryan, J.), enteredSeptember 11, 2008 in Clinton County, which, among other things, partially granted defendant'smotion for summary judgment dismissing the complaint.
This dispute arises from plaintiffs' discovery of defects in the residential property thatplaintiffs purchased from defendant. On September 3, 2005, plaintiffs received defendant'sProperty Condition Disclosure Statement (hereinafter PCDS) pursuant to Real Property Lawarticle 14 and the parties executed a purchase and sale agreement. As relevant to this appeal, thePCDS gave notice of defendant's actual knowledge of a kerosene leak on the property, anddenied actual knowledge of any rodent infestation or damage, any basement seepage resulting instanding water, or any material defect in the heating system. While defendant did not respond tothe portion of the PCDS regarding defendant's knowledge of any material defect in the septicsystem, the PCDS did disclose that the system was 16 years old. The purchase and saleagreement contained an inspection contingency clause and conveyed the building and certainpersonal property in "as is" condition. Prior to the closing, [*2]plaintiffs visited the property several times and had the propertyinspected by a licensed engineer who was experienced in inspecting septic systems. The fewissues raised by the inspection were addressed to plaintiffs' satisfaction.
Immediately upon taking possession of the property, plaintiffs discovered gray water in thebasement and an investigation revealed that the septic system had failed. Shortly thereafter, theydiscovered that the heating system suffered from an undersized propane supply line, debris hadbeen left on the property, the dishwasher had to be replaced, kerosene had spilled in thebasement, and the house was infested with mice. Plaintiffs then commenced this action, allegingonly that the foregoing defects were not disclosed on either the PCDS or otherwise, and that theyrelied on the disclosure in the PCDS in purchasing the property. Plaintiffs' verified bill ofparticulars alleged, upon information and belief, that defendant had knowledge of the defects byvirtue of living at the property for approximately 16 years and knowingly failed to disclose thedefects. Supreme Court, noting that plaintiffs alleged only a cause of action based on failure todisclose defects on the PCDS, granted defendant's motion for summary judgment in part,dismissing the complaint except with respect to the claims regarding rodent infestation andmaterial defects in the heating system. Both parties appeal.
In New York, the doctrine of caveat emptor traditionally "impose[d] no duty upon a vendorto disclose any information concerning the property in an arm's length real estate transaction"(Stoian v Reed, 66 AD3d1278, 1279 [2009], quoting Bethka v Jensen, 250 AD2d 887, 887-888 [1998]).Legal and equitable exceptions to the doctrine exist, however, imposing a duty on a seller, incertain circumstances, to disclose certain conditions affecting the property (see e.g.Agriculture and Markets Law § 310 [1]; Real Property Law § 242 [1] [a]; §333-c [1]; Energy Law § 17-103 [1] [a]; General Business Law § 352-e [1]; Kerusa Co. LLC v W10Z/515 Real EstateLtd. Partnership, 12 NY3d 236, 244-245 [2009]; Boyle v McGlynn, 28 AD3d 994, 995 [2006]). In 2002, RealProperty Law article 14 was enacted to codify a seller's disclosure obligations for certain realproperty transactions and promote the informed negotiation of real estate contracts (seeL 2001, ch 456, § 1). The mechanism for disclosure is the PCDS form, the particulars ofwhich are mandated by statute (see Real Property Law § 462 [2]). A seller's failureto comply with the requirement to complete, sign and deliver a PCDS to the buyer prior to thesigning of a binding contract has two consequences: it compels a credit of $500 against thepurchase price in favor of the buyer when title is transferred (see Real Property Law§ 462 [1]; § 465 [1]) and, more importantly, it puts the buyer on notice that theseller is unwilling to make representations with respect to the property conditions specificallyenumerated in the PCDS form, thus emphasizing the buyer's need to "beware" (see Bishop v Graziano, 10 Misc 3d342, 346 [2005]). Real Property Law article 14 does not inhibit the transfer of property "asis" or relieve a buyer from his or her obligation to pursue appropriate inspections and testing ofthe property and review public records affecting the property (see Real Property Law§ 462).
Where a seller does deliver a PCDS to the buyer, the seller may also be liable, under thestatutory remedy available to the buyer, to the extent of the buyer's actual damages resultingfrom the seller's willful failure to perform the requirements of Real Property Law article 14(see Real Property Law § 465 [2]). This remedy is "in addition to any otherexisting equitable or statutory remedy" (Real Property Law § 465 [2]). The disclosuresrequired on the PCDS are based solely on the seller's "actual knowledge" (Real Property Law§ 461 [3]; § 462 [2]). Accordingly, a claim under Real Property Law § 465(2) must allege the seller's willful failure to comply with one or more of the obligations imposedon the seller under article 14, resulting in the buyer's damages, and a claim for [*3]willful failure to disclose under this provision must allege that theseller had actual knowledge of a condition that was misrepresented by the disclosure containedin the PCDS.
Here, plaintiffs do not seek relief under Real Property Law § 465 (1) for defendant'sfailure to complete the PCDS with respect to the septic system. Defendant's silence regardingknowledge of any material defect affecting the septic system provided no basis for a remedyunder Real Property Law § 465 (2).[FN*]Consequently, plaintiffs' claim for damages in connection with replacing the septic system wasproperly dismissed.
Regarding water seepage in the basement, defendant did disclose to plaintiffs, outside of thePCDS and prior to the closing, that the sump pump would run every four hours during a heavyrain and that the basement had flooded only once, as a result of an ice storm. Defendant admittedin her affidavit and deposition testimony that the basement had water seepage when the housewas first built 16 years earlier and that the sump pump was installed as a result. Even if thisinformation could reasonably be construed as contradicting defendant's representation on thePCDS that the basement did not have seepage resulting in standing water, the record does notsupport a claim that the representation on the PCDS resulted in actual damages. This isparticularly evident in light of the fact that plaintiffs were advised that the sump pump would runduring a rain storm, and they proceeded to close on the property with that knowledge.
As to plaintiffs' claim that improper sizing of the propane line feeding the furnaceconstituted a material defect, plaintiffs failed to raise any factual issue regarding defendant'sactual knowledge of this purported defect. We disagree with Supreme Court's finding that theevidence required a determination on defendant's credibility at trial. Defendant deniedknowledge of a material defect in the heating system on the PCDS and she stated in her affidavitthat if she knew of any problems with the heat, she would have disclosed it on the PCDS. Shetestified that the furnace was original and that, other than having the gas company fix the pilotlight on one occasion, she had not had any problems with it and the furnace was working at thetime of the closing. Plaintiffs' testimony that a post-closing inspection by plaintiffs' heatingcontractor prompted plaintiffs to have a larger propane line installed fails to create an issue offact regarding defendant's actual knowledge of the purported defect. Nothing in the recordsuggests that defendant had any special knowledge of heating systems in general and, asplaintiffs' own pre-closing inspection of the house failed to identify the purportedly undersizedpropane line, any conclusion that defendant knew the line to be undersized prior to closing isspeculative at best. To hold otherwise would graft a constructive knowledge standard onto RealProperty Law § 465 (2) when disclosures under Real Property Law § 462 areexpressly limited to the seller's actual knowledge (see Real Property Law § 461[3]). We note that proposed legislation similar to Real Property Law [*4]article 14 was vetoed by the Governor, in part, because itincorporated a constructive knowledge standard (see proposed legislation to amend RealProperty Law, Veto Jacket, Veto 73 of 2000). Accordingly, this claim should have beendismissed.
Supreme Court properly dismissed plaintiffs' claims with respect to debris left on theproperty and a defective dishwasher because the PCDS contained no misrepresentations withrespect to either of these conditions. Supreme Court also properly dismissed the claim withrespect to the alleged kerosene leak in the basement. Plaintiffs failed to raise any factual issuewith respect to causation on this claim. Even assuming that there was a kerosene spill inside thebasement and that defendant had actual knowledge of the spill, defendant's disclosure on thePCDS of a kerosene spill on a particular date requiring involvement by the Department ofEnvironmental Conservation put plaintiffs on notice of this condition. We note that, although thesale was contingent upon plaintiffs' receipt of the reports from the Department of EnvironmentalConservation regarding the spill, they did not read them until after the closing. In any event,plaintiffs repeatedly visited the property and conducted an unobstructed inspection, yet theyfailed to detect any kerosene spill inside the basement despite knowledge of a kerosene leakfrom a fuel tank located outside the foundation wall. The evidence does not suggest thatdefendant's disclosure somehow thwarted plaintiffs' ability to discover and avoid any damageresulting from kerosene in the basement.
Finally, Supreme Court properly denied defendant's motion with respect to the alleged miceinfestation. Plaintiffs' real estate agent testified that she may have noticed mice during theirwalk-through inspection, but the record does not indicate whether she brought the issue toplaintiffs' attention. Defendant's testimony, in which she admitted that she found mousedroppings in the house and employed mouse traps a couple of years prior to the sale but nevernoticed a problem with mice because she had cats, was sufficient to raise an issue of fact as towhether she had actual knowledge of an infestation when she denied same on the PCDS.
Spain, J.P., Rose, Malone Jr. and Kavanagh, JJ., concur. Ordered that the order is modified,on the law, without costs, by reversing so much thereof as denied defendant's motion dismissingplaintiffs' claim for damages relating to the heating system; motion granted to said extent andsaid claim dismissed; and, as so modified, affirmed.[Prior Case History: 22 Misc 3d1129(A), 2008 NY Slip Op 52667(U).]
Footnote *: Because plaintiffs failed toallege an intent to deceive and conduct that thwarted plaintiffs' ability to discharge their duty toproperly inspect the property, plaintiffs' "active concealment" argument is unavailing. Moreover,plaintiffs submitted no evidence to substantiate or elaborate on the non-particularized claim intheir verified bill of particulars that defendant made affirmative statements about the septicsystem being in good working order (see CPLR 3016 [b]).