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Katz v. Schachter

Decided: November 1, 1991.


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County.

Michels, O'Brien and Havey. The opinion of the court was delivered by O'Brien, J.A.D.


Plaintiffs appeal from a judgment in favor of defendants Michael and Sharon Gilman, Barry and Betty Ann Kantrowitz, and Norman and Eleanor Mirne. We affirm in part and reverse and remand in part.

Defendants Norman Mirne, Michael Gilman and Barry Kantrowitz are realtors, who in 1974 and 1975 were associated under the firm name of Norman Mirne & Associates (Mirne). Plaintiffs Jerome and Margaret Katz are the owners of a house at 1322 Maple Avenue, Wanamassa, Ocean Township, New Jersey, which they purchased in December 1979*fn1 from defendants David and Linda Schachter. The Schachters had purchased the home from defendants John and Melinda Bentley in March 1979. The Bentleys had purchased the house from defendants Richard and Maureen Hakim in July 1975. Mirne was involved as real estate broker in the sale of the house from the Hakims to the Bentleys.

In 1974, the Hakims had purchased a new home and were endeavoring to sell the property at 1322 Maple Avenue, without success. In order to assure the Hakims that this house would be sold, Michael Gilman, Barry Kantrowitz and Norman A. Mirne, individually, entered into a contract (which is undated) with the Hakims to purchase 1322 Maple Avenue, with a closing date fixed for June 30, 1975, at a purchase price of $32,000. The contract is also signed by defendants Eleanor Mirne, Sharon Gilman and Betty Ann Kantrowitz. As part of the arrangement, Mirne, Gilman and Kantrowitz leased the property from the Hakims in a lease dated May 1974, at a monthly rental of $3,264.36, which recited that the tenant would purchase the property by July 1, 1975 under the terms of the separate contract. The lease contained a certification and warranty that the property had no termite infestation or damage and that if, after an inspection, any deficiencies were found, the Hakims would be responsible to repair the same up until July 1, 1974, after which the tenant assumed that responsibility. The Mirne Group arranged for a termite inspection by defendant Allstate Exterminating Company, Inc., trading as Atlas Exterminating

Co. (Allstate), whose principal was defendant Leslie Bloomfield. Allstate treated the house and billed Hakim $495.75, but was paid $393.71 by Mirne on July 17, 1974, as full payment of the bill.

During the pendency of the lease and contract to purchase between Hakim and Mirne, Mirne found the Bentleys as purchasers for the property. Michael and Sharon Gilman, Barry and Betty Ann Kantrowitz, and Norman and Eleanor Mirne, as sellers, entered into a contract with the Bentleys, as purchasers, dated April 16, 1975, for the purchase of the property at $38,000. However, the Mirne defendants never took title to the property, but rather reassigned their contract to purchase back to the Hakims, who conveyed title directly to the Bentleys. Nevertheless, since the Mirne group had contracted to purchase the property from the Hakims at $32,000, and the Bentleys purchased it for $38,000, the Mirne group made the profit of $6,000. It does not appear whether Mirne received a real estate commission.

The Bentleys obtained a termite inspection of the premises from Abalene Fumigating & Exterminating Co., Inc., which issued a report dated June 26, 1975 to the Bentleys' attorney. Although observing that treatment for the extermination of termites had been performed prior to its inspection, Abalene stated that damage caused by the infestation had not been corrected. Its report set forth the damage which it found to be visible, estimating the cost to repair this damage at between $1,200 and $1,800. Abalene suggested that Allstate be contacted to ascertain what guarantee had been given.

The Bentleys' attorney advised the Mirne group of this report and the estimated cost of treatment and repair. At the insistence of the Bentleys' attorney, Mirne made repairs to the property, which the trial judge found were "cosmetic" in nature. Mirne argues that the repairs were made as real estate agents to sell the property, not as contractors. In addition, Allstate granted a six-month extension of its one-year termite

warranty and the Bentleys, apparently satisfied, closed title with the Hakims in July 1975. Thereafter, the Bentleys continued to receive termite inspections and reports from Allstate by Bloomfield, with no report of any termite infestation or termite damage.

In January 1979, the Bentleys entered into a contract with the Schacters for the sale and purchase of the property. During the pendency of this contract, a new termite inspection and report was obtained from Allstate, which affirmatively stated there was no active termite infestation or damage. The closing between the Bentleys and the Schachters took place on March 30, 1979. Shortly thereafter, because of matrimonial difficulties, the Schachters contracted to sell the property to the Katzes. Again, a termite inspection was performed by Allstate, through Bloomfield, which issued a favorable report and warranty to Katz. Allegedly, Katz was assured directly by Bloomfield there were no termite problems. The Katzes also had a relative of theirs, who was a construction code official in a neighboring town, inspect the property. Thereafter, title closed from Schachter to the Katzes and they became the owners of the property.

While attempting to remodel the house, plaintiff discovered termite infestation concealed behind plaster, which was so extensive that emergency measures had to be taken to avoid collapse, for which Katz alleges he expended $10,000. ...

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