On certification to the Superior Court, Appellate Division.
For affirmance -- Chief Justice Wilentz, and Justices Sullivan, Pashman, Clifford, Schreiber, Handler and Pollock. For reversal -- None. The opinion of the court was delivered by Sullivan, J.
[81 NJ Page 392] The appeal herein by plaintiffs, on certification granted by this Court, 79 N.J. 486 (1979), involves basically the issue whether a covenant against encumbrances in a deed is breached when the grantor conveys real property on which is located a stream culvert inadequate in size and constructed in violation of state agency requirements. Plaintiffs, for the first time on appeal, also argued that the grantor's alleged failure to disclose this
known violation to the grantee constitutes actionable concealment.
In 1960, title to the property in question was in the name of the Lilline Corporation, a family owned entity. The property, located on the east side of Route 17 in Mahwah, was the site of the family's auto body parts business. Masonicus Brook runs along the westerly side of the tract adjacent to the easterly side of Route 17. The property was, and still is, subject to slope and drainage easements granted to the State of New Jersey in regard to the brook.
In January 1960, the corporation, in order to provide for improved access to its property from Route 17, retained an engineering firm which submitted a letter and preliminary drawings to the New Jersey Bureau of Water for the placing of a culvert in the brook. The proposal contemplated the complete enclosure of the brook in a pipe which was to be covered over thereby providing the improved access desired. After receiving the proposal, the Bureau, in a letter dated February 10, 1960 and sent to the engineering firm, stated that the proposed nine-foot diameter steel pipe culvert did not provide adequate capacity for the stream in a flood stage and that a 16' X 5.5' culvert would be required. Despite the Bureau's letter, a nine-foot diameter pipe was installed and covered over.
At the time, the defendant K. Elizabeth Wulster was the president of Lilline Corporation. The trial judge described her as the "titular head" and found that she had no personal knowledge of the installation.*fn1 Following the installation of the culvert, the premises were conveyed to Mrs. Wulster by the corporation by deed dated October 14, 1960.
In September 1969, plaintiffs Fahmie offered to purchase both the auto parts business and the property from Mrs. Wulster. A purchase price having been agreed on, the Fahmies, who were represented by counsel, elected neither to enter into a contract, nor have a title search made prior to closing. In lieu thereof, at the closing held on October 1, 1969, the Fahmies insisted on, and received from Mrs. Wulster, a warranty deed which included a covenant that the grantees "shall have quiet possession of the said land free from all encumbrances" and a covenant of general warranty. The deed also recited that the conveyance was made subject to the slope and drainage easements relating to Masonicus Brook previously granted to the State of New Jersey.
In March 1973, plaintiffs entered into negotiations with Food Services Properties Corp. regarding the sale of the former Wulster property and an adjoining lot acquired by one of the plaintiffs from Manuel and Barbara Freire, for use as a Burger King restaurant. In conjunction with the transaction, plaintiffs and Food Services filed an application with the Department of Conservation and Economic Development, Division of Water Policy and Supply, for a stream encroachment in Masonicus Brook for the purpose of constructing a riprap and headwall in and along the brook. In response, the applicants were notified that the existing culvert pipe in the stream on plaintiffs' property was inadequate in size and would have to be replaced.
In August 1974, the application was finally granted after plaintiffs agreed to replace the existing pipe with a box culvert 20' X 8' in size.*fn2 Following installation, plaintiffs filed the instant suit seeking to collect the expense for the new culvert from Mrs. Wulster on the ground that her conveyance of the property to plaintiffs on which was located the old steel pipe, installed in violation of Bureau of Water Control requirements,
constituted a violation of the general warranty covenant in the deed that she would warrant and forever defend the title of the lands against any and all persons claiming the same or any part thereof.*fn3 (At trial plaintiffs also ...