Dillhyon v Dunn (WI)

Summary: Where the Real Estate Condition Report and an initial home inspection indicated possible problems with the house, but the buyer chose not to investigate, the buyer cannot later bring claims against the seller when structural defects are found.

Disclosure; Fraud

Dillhyon v Dunn, 2011 AP 1175 (Wis Ct App, 2012).

Facts: In December 2005, Michael and Ilene Dillhyon (the Dillhyons) purchased a house from Patricia Dunn. The Dillhyons were provided with a Real Estate Condition Report, prepared by Dunn, which disclosed defects in the basement of the house, including damage done by tree roots that Dunn had corrected by installing steel rods and concrete, backfilling the area with gravel and removing trees and stumps. The Report stated that it was not a warranty or a substitute for an inspection and advised the Dillhyons to obtain a professional inspection. The Dillhyons did commission a home inspection but did not commission an inspection that was designed to reveal latent or concealed defects. The home inspector noted some dampness and stains in the basement but concluded that there were no major defects. The Dillhyons did not obtain an inspection by a qualified independent inspector to look into the possible problems with the basement. The Dillhyons went ahead with the purchase of the house.

In 2010 the Dillhyons noticed two cracks in a wall of the basement. They hired a professional engineer to look at the wall, who told them that the wall was tilting inward and would need to be reinforced. The engineer also told them that in his opinion Dunn had been aware of structural problems with the basement but had concealed them.

The Dillhyons then filed suit on a number of claims against Dunn including false advertising, breach of warranty, intentional misrepresentation and statutory fraud. Dunn made a motion for summary judgment, arguing that the Dillhyons could not have reasonably relied on the Real Estate Condition Report and should have further investigated the problems in the basement discovered during their home inspection prior to the sale. The trial court granted summary judgment in favor of Dunn and the Dillhyons appealed.

 Holding:  Affirmed.

The Wisconsin Court of Appeals concluded that the Dillhyons should have been aware that there were potential problems with the basement and they could have further investigated them. It was not reasonable to rely on the Condition Report as a warranty that there were no problems with the basement. The court held that “[a] buyer who has the right to discover the ‘true nature’ of a disclosed defect cannot later complain when he or she foes ahead with the purchase after giving up a right under the contract to discover the defect’s ‘true nature’”. The Dillhyons were “required to exercise reasonable diligence and cannot close their eyes to means of information readily accessible to ascertain the facts.” The Dillhyons had a right under the contract for the sale of the house to get another inspection that could have specifically investigated the basement and likely would have revealed the structural problems; therefore their claims against Dunn were not valid.

Opinion Year: 
By: ATG Underwriting Department | Posted on: Mon, 04/30/2012 - 1:25pm