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Wong v. Mercado

Decided: February 7, 1991.

STEVEN WONG (AMENDED TO THE ESTATE OF STEVEN WONG) AND DORIS WONG, SUSANNE BINGHAM REALTIES, INC., A NEW JERSEY CORPORATION, PLAINTIFFS,
v.
GONZALO MERCADO AND MARIA MERCADO, DEFENDANTS



Martin J. Kole, J.A.D. (retired and temporarily assigned on recall).

Kole

[248 NJSuper Page 219] This is an action by the sellers of a one-family house and their broker for damages against an alleged defaulting purchaser.

Plaintiffs Wong and defendants Mercado entered into a contract dated July 15, 1987 under which Mercado purchased from Wongs the latter's one-family house at 357 Park Avenue, Rutherford, New Jersey for $200,000. The contract, after revisions by the parties' attorneys, provided for a $15,000 deposit and allowed the Mercados to have a home inspection made. The Wongs agreed to pay up to $500 for "repairs required to roof, gutters, basement, electrical, heating and/or plumbing systems, or to correct a deficiency in the structure of the premises." If such excess was above $500 the Wongs could either correct or repair the deficiency or structure before the closing or cancel the contract. They were required to notify the Mercados in writing "immediately upon receipt of the report" as to which option they were exercising. The Mercados, however, could waive the results of the inspection report and close title. The contract provided for a broker's commission of $12,000 to be paid by the Wongs to plaintiff Susanne Bingham Realtors, Inc.

No mention was made in the contract of radon or inspection therefor in the house. Indeed, none of the parties, including the broker, was then aware of any radon problem or had knowledge of the degree of health hazard associated with radon -- i.e., what was or was not actually hazardous.

In August 1987, the Wong's attorney, James Ely, Jr. received a copy of the home inspection report prepared by American Home Inspection Corporation (American), dated August 14, 1987. He sent it to the Mercado's attorney, Alan Zark. The report showed repair problems relating to a lead pipe, electrical fixtures and exposed asbestos. It also had a "Special Note" reading as follows:

Special Note

Due to the possibility of radioactive RADON gas within the structure, it is recommended that a Radon Certification Test be conducted to insure that a hazardous and unsafe level does not presently exist. Please contact the office so that suitable testing can be arranged.

The Wong's attorney, Ely, offered to have them pay a total of $500 to cover all repairs. He received no answer from Zark. Zark later requested an extension of the mortgage commitment date provided in the contract, which was granted by Ely. Neither the Mercados nor their attorney then mentioned anything about radon, even though the Mercados, by that time, had ordered a radon test suggested by the special note in the inspection report.

A notice of settlement was filed by the Mercados on September 24, 1987.

The title closing was set for October 16, 1987. On the day of closing but before the closing itself, the Mercados telephoned American and learned from American orally that the radon test had been conducted and the reading was 2.9 pCi/L. Immediately after receipt of this oral advice, the Mercados called the New Jersey DEP. They asked whether a 2.9 pCiœ level was safe. They were told that the DEP did not use the word "safe" but that it recommended action beyond 4.0 pCi/L. None of this information was imparted to Ely or to the Wongs until the actual closing, although Zark, on the day before the closing, had advised Ely that there might be a repair problem, without mentioning radon.

At the closing on October 16, 1987, Zark informed the Wongs' attorney, for the first time, that there was a radon reading of 2.9 pCi/L. Both attorneys then knew that some level of radon required remedial work and that there was also a level at which a house could be untenantable. But neither knew the effect that a 2.9 pCiœ reading had in this respect. Additionally, both parties agreed that the Mercados would be given a $500 credit to cover all repairs, other than those required for radon. The Mercados wanted to have a three-day radon test performed.

Accordingly, the parties closed title in escrow and entered into a handwritten agreement of October 16, 1987 (hereinafter the "supplemental agreement") adjourning the closing for two weeks and providing:

1. Closing adjourned maximum of 2 weeks subject to receipt of 3 day Radon test by purchaser at their expense.

2. If Radon test discloses the home is untenantable -- i.e., not repairable then buyer may elect to cancel contract and deposit monies are returned.

3. If some Radon repair work is necessary to clear a low level of Radon, title shall close and costs to clear shall be split 50/50.

4. Other than the above, the parties agree to close and pay according to RESPA figures shown on statement signed today (i.e., all other home inspection repair items are settled for the 500 credit given on RESPA.)

For some reason only known to the parties, the 2.9 pCiœ level was not mentioned at all in this supplemental agreement.

On October 17, 1987, the day after the closing, the Mercados received American's written report, which stated the following:

The Radon screening test conducted at the above referenced property indicated a level of 2.9 pCiœ within the structure.

The EPA recommended remedial action level for Radon is one that exceeds 4.0 pCi/L. Your radon level is below this.

As a precautionary measure, because an active level of Radon was detected, it is recommended that the structure be tested on an annual basis to insure that there is no change in the Radon level that would require immediate remedial action.

In some fashion, after October 16, 1987, the Mercados discovered that American had conducted a three-day radon test. In any event, they did not have another test performed as contemplated at the closing. Nor did they seek any further advice from American or any expert. Instead, they requested their son, a student at Stevens Tech, to obtain literature for them on radon. They reviewed the documents received. All of them indicated that a level 4.0 pCiœ was a threshold of concern and that remedial action might not be necessary if the reading was 4 or less. There was ample evidence before the Mercados from these documents to warrant a reasonable person to conclude that no remedy or repair was required for a level of 4 or less -- here 2.9 -- and that a reading of 4 or less did not make the house untenantable.

Indeed, one of the documents upon which they relied -- the Consumer Report -- stated that there is no level at which radon can be called completely safe, that outdoor radon readings are

0.1 to 0.2 pCi/L, and that the average indoor radon level of 1.5 pCiœ resulted in estimated lung cancer deaths of 3 to 13 per 1000. It further asserts that at " 4 pCi/L, the EPA's "action level " for indoor radon, the estimated rate is 13 to 50 deaths from lung cancer for every 1,000 people exposed . . . . [As] many as 8 million [single-family houses] are believed to have radon levels greater than the EPA's action level of 4 pCi/L. " Emphasis supplied. It also states:

If the reading is 5 pCiœ or less, the risk is proportionately lower. While any steps to reduce the reading will be beneficial, your average radon level may be close enough to the irreducible outdoor background level to make a large reduction difficult.

The trickiest situation occurs when a reading is between 5 and 20 pCi/L. In CU's judgment, that calls for follow-up testing, preferably of the areas in which the family spends the most time. Since correction isn't urgent in this intermediate radon range, we recommend using alpha-track detectors. Their three-to-six month sampling give a more-exact picture of how much radon you're actually being exposed to in the long term. [Emphasis supplied]

The Consumer Report additionally states that ventilation "can suffice if initial readings are "below about 50 pCi/L." Such a remedy, it states, includes fan-forced ventilation costing no more than $150, with $100 a year for electricity. Where radon levels are above 40 pCi/L, it says, there are remedies that could cost up to $2,000 to $2,500 to install, with additional electricity costs. It also cites a recommendation of the American Society of Heating, Refrigeration and Air Conditioning Engineers to use "ventilation" systems to keep the levels below 2 pCi/L.

Another document the Mercados reviewed, "Facts and Recommendations on Exposure to Radon," published by the New Jersey Department of Health, contained essentially the same information. Among other things, it stated that if the radon level exceeds 4 pCi/L, "we urge you to take action to reduce these concentrations or to minimize time spent in areas with the highest concentration." It further states, as to concentrations below 4 pCi/L:

Although these are considered acceptable concentrations, we encourage residents to take all practical steps to reduce or keep radon concentrations as low as possible.

The Department of Health booklet also said that there was a health risk even at low levels, since no level was without risk; that the typical home had a 1 pCiœ level; and that below 4 was acceptable but residents were encouraged to take all practical steps to reduce and keep radon concentrations as low as possible.

The EPA Radon Reduction Methods booklet, which the Mercados received, among other things, stated that "you should ventilate the lowest level of your house, where it is in direct contact with the primary source of radon: the soil. If you have a basement . . . that is the area to ventilate." A remedial method of block-wall ventilation, requiring installation of exhaust pipes in an unfinished basement "would cost about $2,500," with operating costs about $140 or less per year.

The Mercados also relied on a State DEP letter with an enclosed booklet, "A Citizens' Guide to Radon," received after October 16, 1987. The letter referred to a program of confirmatory monitoring for individuals whose home radon test indicated a level greater than the 4 pCiœ "guidance level recommended by the EPA" and advised:

If you have a radon test done in your home and the measured value is 4 pCiœ or greater, please call . . . to arrange for confirmatory monitoring . . . at no cost to you. . . . Our experience . . . shows that radon is a naturally occurring problem that can be controlled.

The enclosed Citizens Guide to Radon stated the following, which was of concern to the Mercados: "It contained a Radon Risk Evaluation Chart showing that between 2 and 4 pCi/L, the comparable lung cancer risk over a lifetime is 200 chest x-rays per year. Exposures in the range of 4 pCiœ or lower are considered average or slightly above average for residential structures. Although exposure in this range does present some risk of lung cancer, reductions of levels this low may be difficult, and sometimes impossible, to achieve." Emphasis supplied. It continues: "Since radon concentrations tend to be greater in the lower levels of a home, a person who sleeps in

the basement is likely to face a greater risk than a person who sleeps in a second-floor bedroom."*fn1

It should also be noted that after October 15, 1987, the Mercados received from the broker and from Ely a document which stated that the EPA "has set the safe level of exposure to Radon gas in the home to be any level under 4.0 pCi/L. The results of your test indicated that the level of radon gas which you are exposed to is in the safe range. Therefore, the EPA would recommend that no remedial action be taken." However, it then presents a "Radon Risk Evaluation Chart," published by the EPA -- Office of Radiation Programs, showing that between 2 and 4 pCi/L, the comparable lung cancer risk over a lifetime is 200 chest x-rays per year. (This is the same chart that was contained in the Citizens Guide to Radon, already discussed.) It also asserts that radon levels in basements are typically two-to-three times higher than in the upper floors. It should be recalled that the Citizens Guide also indicated that concentrations of radon would be greater in the basement.

It was this type of information that concerned the Mercados, particularly since they had intended that 2 of their 5 children would have bedrooms in the basement. Thus, Mrs. Mercado informed Zark, after receipt of all of the information, that 2.9 pCiœ was too high for them, stating that one of the reviewed documents indicated that anything over 2.0 pCiœ was a hazard to health.

After receipt and consideration of all of this data, the Mercados discussed the matter with their son at Stevens.

Meanwhile, Ely and plaintiffs Wong had also received data relating to radon, including American's report. Ely telephoned

the DEP. Plaintiffs concluded that, in view of the 4 pCiœ level, no remedial action, by way of repairs or otherwise, was necessary and that the house was tenantable with that radon level.

Accordingly, Ely wrote Zark a letter of October 22, 1987, with a copy to the Mercados, making time of the essence for a closing "on or before October 30th." This letter stated:

This will confirm the above matter was to close in your office on Friday, October 16th, and at said time all parties were present and the closing documents executed and held in escrow basically for two reasons:

1. Purchaser was unable to have PM Mortgage funds available but expected same early this week, and

2. The matter was held in escrow because purchasers had on their own obtained a Radon inspection but had only received an oral inspection report indicating a Radon level of 2.9 pCiœ which they indicated they had been told was an unsafe level. At the time you and I as attorneys for the parties indicated that we did not know what was a safe level therefore the matter was held in escrow for a maximum period of two (2) weeks in accordance with the terms of the handwritten escrow agreement executed that day.

Under the above escrow agreement your client was then to obtain a three-day Radon test (believing it had not been done) and that you and I would arrange to ascertain a safe level for Radon and if an unsafe condition ...


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