Bank of America misled a couple about the condition of a property the pair was buying, then claimed that an "as is" clause in the sales contract allowed the bank to escape responsibility for the deception.
Wrong, a state Court of Appeals panel said in a decision released Wednesday. The court upheld a $50,000 compensatory award made to a woman who bought the property after the bank falsely claimed it did not know much about its condition.
The bank originally acquired the Menomonee Falls property at issue through foreclosure, according to the Second District Court of Appeals decision written by Judge Lisa S. Neubauer.
A fire department report prepared the day before the bank's realtor visited the home said that:
Through front window, you could see ceilings that had fallen in family room.… Found ceilings down throughout first floor with pooling throughout. Plumbing fitting in the ceiling appeared to have given way. Second floor had similar wet floors, especially in master bath.… Basement had moderate amount of water leaking down and soaked floors.
A quarterly water bill showed that 246,500 gallons of water were used at the property, according to the decision.
The realtor had the house cleaned and some repairs and mold remediation done, but informed the bank that the repair work was not satisfactory and the remediation was not complete. The bank listed the property for sale and sold it to Catherine Fricano for $175,111. Fricano knew there still was some mold in the basement, but did not think there was any in the main living areas in the house, according to the opinion.
Fricano signed an "as is" agreement that included language stating the bank did not guarantee any mold remediation work.
The bank also stated that it had “little or no direct knowledge about the condition of the [p]roperty.”
Shortly after closing on the house, Fricano "discovered mold 'saturated' throughout the house," according to the opinion. "As a result, the house was stripped down to the studs, the mold and water damage was remediated, and the interior of the house was reconstructed."
Fricano sued and won. The bank appealed the Waukesha County Circuit Court case tried before Circuit Judge Patrick C. Haughney, but the Appeals Court ruled that the "as is" clause did not exempt it from complying with the state law prohibiting deceptive trade practices. The bank also argued, among other things, that its false statement about not knowing the condition of the property did not induce Fricano to buy the property.
"There is more than sufficient credible evidence to believe that had the Bank not misrepresented its knowledge of the condition of the property, Fricano would not have gone forward," the Appeals Court said.
Gretchen Schuldt is executive director of the Wisconsin Justice Initiative.
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