Hill v. Jones - Brief

Hill v. Jones COURT AND DATE: Arizona Court of Appeals (1986) PROCEDURAL HISTORY: The trial court granted summary judgment for sellers, and both parties appealed. ISSUE: Whether a seller of real property has the duty to disclose facts which materially affect the value of the property that are known to the seller but not readily observable to or known by the buyer. TRIGGER FACTS: In 1982, Warren and Gloria Hill (buyers) (plaintiffs) entered into an agreement to purchase the residence of Ora and Barbara Jones (sellers) (defendants). The purchase agreement required sellers to pay for and place in escrow a termite inspection report stating that the property did not have a termite infestation. Before executing the purchase agreement, buyers visited the residence on multiple occasions. During one visit, buyers noticed a small “ripple” in the wood floor that they believed could be termite damage but were assured by sellers it was water damage. When completed, the termite inspection report said that no visible evidence of termite infestation existed, and the realtor informed buyers that the property passed termite inspection. Buyers executed the purchase agreement and moved into the residence. After moving in, however, buyers learned that sellers had actually experienced termite infestation on several prior occasions, and had paid for several termite infestation treatments. A neighbor also pointed out several examples of termite damage throughout the residence and the surrounding fence. Finally, on a second inspection, a termite inspector confirmed evidence of termite infestation. Sellers did not share any of this information with buyers, the realtor, or the termite inspector. Buyers brought suit alleging that sellers made misrepresentations and failed to disclose material facts to them about termite damage. The trial court granted summary judgment for sellers, and both parties appealed. PLAINTIFF’S MAIN ARGUMENTS: DEFENDANT’S MAIN ARGUMENTS: Assuming the existence of a duty to disclose, summary judgement was proper because the record shows that their silence did not induce or influence the buyers. This is so because Mr Hill stated in his deposition that he intended to rely on the termite inspection report. RULE (the law): Where a seller of real property knows of facts that materially affect the value of the property and are not readily observable and known to the buyer, the seller has a duty to disclose these facts to the buyer. HOLDING + REASONING: Yes. Buyers should have an opportunity to present to the jury the question of whether the existence of termite infestation is a material fact affecting the value of the property such that sellers had a duty to disclose it to buyers. Where a seller of real property knows of facts that materially affect the value of the property and are not readily observable and known to the buyer, the seller has a duty to disclose these facts to the buyer. A fact is material if it is one which a reasonable person would find important in determining his choice of action in a particular transaction. Unless reasonable minds could not differ, the materiality of a fact is a question which must be determined by the trier of fact. The existence of previous termite infestation and damage is a fact known to sellers but allegedly unobserved and unknown by buyers. Thus, if this is determined to be a material fact, sellers violated their duty to disclose the information to buyers and can be held liable for misrepresentations and nondisclosure. Buyers should be permitted to present the question of materiality to the trier of fact, or jury. Additionally, the jury should be permitted to consider factual issues such as whether sellers’ silence on the termite issue improperly influenced buyers to purchase the residence, and whether buyers were put on notice of termite damage through their many visits to the residence prior to the purchase agreement such that they should be charged with the knowledge that would be gained by a thorough investigation of the premises. Summary judgment for sellers on these issues is inappropriate, and the case is reversed and remanded.