Despite the “as is” clause in a home mortgage contract, the Wisconsin appeals court ruled that Bank of America’s (BOA) deceptive representation of a home induced plaintiff Catherine Fricano to make a purchase she would not have made otherwise.
Shortly after closing on the property, Fricano proceeded with upgrades house when she discovered mold “saturated” throughout the home.
This required Fricano to strip the house down to studs and have the entire interior reconstructed because of the extensive water and mold damage.
Fricano filed a fraudulent misrepresentation suit under WIS. STAT. §100.18. She alleged BOA misrepresented the condition of the home, and claimed that since it acquired the home by foreclosure it had “little or no direct knowledge regarding the condition of the home.” Her broker stated the "we know nothing!" language was very common with foreclosures.
The bank argued Fricano’s claims were barred by the state statute, evidence was legally insufficient to prove Fricano was materially induced to purchase, and that it was the bank’s intent to induce her.
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When the bank acquired the home, the listing agent notified Bank of America of the “severe water damage.” The same agent conducted an inspection and warned that mold may develop. A water bill showed that 246,500 gallons of water in February. A pipe burst causing the entire house to flood, and ceilings to cave in.
There were reports and pictures showing visible mold in several parts of the home including the living room ceiling, kitchen, and basement. Seven months later BOA approved mold and remediation work, but the agent informed the bank the work was unsatisfactory.
BOA proceeded with listing the home for sale and potential buyers started viewing the property.
Fricano participated in several walk-throughs of the home. Fricano, her fiancé, and real estate agent admitted to seeing mold in the basement and noticed a musty smell.
Before closing Fricano hired an inspector who conceded mold was present in the basement and many walls had been replaced throughout the house. He recommended she consult an environmental specialist about mold removal.
Because the specialist did not report damage in the livable areas of the home, Fricano proceeded with the closing.
Under the Wisconsin fraudulent misrepresentation statute, a party is not relieved from liability of deceptive practices by making statements in a contract disclaiming knowledge of defects.
As a buyer Fricano was entitled to “rely upon and expect full and fair disclosure of all material facts related to the property.” Bank of America made affirmative misrepresentations about the condition of the home, thus the court stated an “as is” clause is not a complete bar when a claim is based on affirmative misrepresentations.
The statute states that the misrepresentation must be made to a member of the public. BOA argued because Fricano made an offer on the home she was no longer a member of the public but instead shared a “particular relationship.” However, the court held there was no contract between the plaintiff and bank when the bank misrepresented its knowledge of mold issues.
The banks remaining arguments were without merit and it did not matter that Fricano had notice of the issues through home inspections. The court stated, “in some cases a plaintiff’s believe of a defendant’s representations are unreasonable as a result the plaintiff’s reliance is also unreasonable.”
This case is Catherine Fricano v. Bank of America NA , Appeal No. 2015AP20, State of Wisconsin Court of Appeals District II