Decided: December 17, 1993.
WARREN ABRAHAMSEN, JOYCE ABRAHAMSEN, FERRIS ANTOON, DEANNA ANTOON, JEFFREY ANTOON, ROBERT BARRY, MICHAEL BASSO, DEBORAH BASSO, VERONICA BATTAGLIA, JACKSON BLAIR, MARGARET BLAIR, JEFFREY BONNER, RICHARD BRUSCA, JOSEPHINE BRUSCA, DIANE CALIFANO, JOHN COFFEY, KENNETH COLEMAN, MARY COLEMAN, JOSEPH COLETTI, ELAINE COLETTI, ALFRED CONHAGEN, III, BARBARA CONHAGEN, HARALAMBOS DAKAS, MARIA DAKAS, LORI DARS, CHAUNCEY DAVIS, WILLIAM DEMETER, HERMINA DEMETER, ROBERT FARRELL, ROSEMARY FARRELL, HOWARD FISHER, ANN FISHER, ANTHONY FOTI, MARGARET FOTI, MICHAEL FRIEDMAN, CANDY FRIEDMAN, JAMES GARRAHAN, FRANCES GERMAINE, ELLEN GERMAINE, MARIE GILLESPIE, MORRIS GLIKLICH, BETTY GLIKLICH, ROBERT GOLDEN, GALE GOLDEN, TED GRAY, COLEEN GRAY, DENNIS GRIBBEN, ALAN GUTKOWSKI, ROBERT HESSLEIN, JAMES HIGGINS, CHRISTINE HOIE, DEREK JANOWICZ, BARBARA JANOWICZ, CRAIG KAHL-WINTER, DYANNA KAHL-WINTER, JACQUELINE KAST, JAMES KULAGA, MAUREEN KULAGA, JOSEPH LAPRESTI, BILLIE LAPRESTI, ALLISON LEHMAN, FREDERICK LEONG, JOHN LITOWINSKY, CARMINE LOMANTO, ROBERT MAGNARELLI, THOMAS MAHER, GEORGE MANUEL, PATRICIA MARRA, FAE MARTOCCI, JOSEPH MASSARO, LOUIS MASSARO, MAE MASSARO, SALVATORE MASSARO, ANNMARIE MASSARO, SALVATORE MASSARO, JR., EMMA MENZZOPANE, DAVID MILLER, CYNTHIA MILLER, EDWARD MINISTRI, EDWARD MONSAERT, DORIS MONSAERT, TOM MOTTO, FRANCESCO A. MUSSORRAFITI, ANGELINA C. MUSSORRAFITI, JOSEPH MUSSORRAFITI, ROBERT NEGRA, HENRY NEWTON, SHIRLEY NEWTON, JOSEPH PALLITTO, YIN PAN, HELEN PRIDE, GUY RAYNER, MARIE REBALKO, JAMES REESE, WAYNE RICKARD, KATHERINE RICKARD, DOLORES ROBINSON, HENRY ROBINSON, STEVEN ROCHE, DONNA RUDDY, ANGELA SCOTTI-CHESWICK, DAVID STEIN, EDWARD T. TOGNOLA, PATRICIA A. TOGNOLA, GUY VANDERVLIET, NANCY VANDERVLIET, FRANK VERANO, EDITH VERANO, LLOYD WALLING, GAIL WALLING, PATRICIA WARDELL, PAUL WEINSTEIN, THOMAS WHITE, RONALD WOLLNER, THERESA YOURIE, CHARLES ZEBROWSKI, MICHAEL ZILLY, PATRICIA ZILLY, PLAINTIFFS,
LAUREL GARDENS LIMITED PARTNERSHIP, A NEW JERSEY LIMITED PARTNERSHIP, EATONTOWN-LAUREL ASSOCIATES, INC., A NEW JERSEY CORPORATION, HARBEN MANAGEMENT CO., INC., HARRY B. BRAUNSTEIN, BENJAMIN B. BRAUNSTEIN, STANLEY BENOWITZ, BERNICE KAHN, LAUREL GARDENS CO-OP, INC., A NEW JERSEY CORPORATION, POUGHKEEPSIE SAVINGS BANK, FSB, RIVERDALE TIMBER RIDGE, INC., STEPHEN H. SCHUSTER AND NETWORK APPRAISAL COMPANY, INC., JOHN DOES 1-10 AND ABC CORPS. 1-10, DEFENDANTS.
CLARKSON S. FISHER, JR., J.S.C.
This case involves the interpretation and construction of New Jersey's Planned Real Estate Development Full Disclosure Act ("PREDFDA"),*fn1 an act which has been rarely examined by our courts. One hundred eighteen owners (plaintiffs) in a cooperative real estate development known as "Laurel Gardens" in Eatontown, New Jersey, claim that the developers, successor developers, and certain principals involved in the Laurel Gardens project made, or had knowledge of, material misrepresentations in a Public Offering Statement in violation of PREDFDA. Defendants Poughkeepsie Savings Bank (the Bank) and Riverdale Timber Ridge, Inc. (Riverdale) now move to dismiss the Second Amended
Complaint for failure to state a claim upon which relief may be granted. This motion requires this court to determine the validity of the novel arguments raised by plaintiffs as to the reach of PREDFDA to lenders and successor developers.
Plaintiffs' version of the facts, as set forth in their Second Amended Complaint, must be deemed true for purposes of this motion to dismiss. Printing Mart v. Sharp Elec., 116 N.J. 739, 746, 563 A.2d 31 (1989). Plaintiffs, of course, are entitled "to every reasonable inference of fact." Id. Accordingly, the court must "search the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." Di Cristofaro v. Laurel Grove Memorial Park, 43 N.J. Super. 244, 252, 128 A.2d 281 (App. Div. 1957).
In compliance with the governing standard, the court will rely upon the Second Amended Complaint for an accurate dissertation of the relevant facts.
In or about November 1985, defendant Laurel Gardens Limited Partnership (the limited partnership) purchased the Laurel Gardens two hundred thirty six unit garden apartment complex. Second Amended Complaint, P 16. The Bank extended a loan to the limited partnership and placed a first mortgage against the property in the amount of $6,765,000.00. Id.
Thereafter, the limited partnership prepared and filed a public offering statement and plan of conversion for the development of the project. The plan, as amended in August 1987, was filed with
the Division of Housing and Urban Development of the New Jersey Department of Community Affairs. That plan called for the sale of the property to Laurel Gardens Co-Op, Inc. (LGCI), in September 1987, for 89,600 shares of stock and an $11,000,000 wrap-around purchase money mortgage loan. Id. at P 17.
In the summer of 1987, the marketing and sale of shares of the project commenced. Id. at P 18. In the summer or early fall of 1987, the tax assessor of the Borough of Eatontown advised the limited partnership that the future real estate taxes set forth in the public offering statement had been substantially underestimated. The limited partnership, it is alleged, thereafter proceeded to sell shares in LGCI without amending the public offering statement, or otherwise advising purchasers, of the underestimation of real estate taxes. In December 1988, plaintiffs were notified of an increase in their maintenance fees of more than twenty-two per cent as a result of the substantial increase in real estate taxes.
One year later the Bank lent the limited partnership an additional $280,000. Sometime in 1990 the limited partnership defaulted in its obligations to the Bank. Subsequently, the Bank and representatives of the cooperative entered into a "work-out" of the defaulted loan, whereby the Bank and its wholly-owned subsidiary (Riverdale) purchased the remaining unsold shares of the cooperative. In ...
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