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Strawn v. Canuso

April 25, 1995

JOANNE STRAWN, GERALD L. STRAWN, TRACEY A. STRAWN AND BRANDON M. STRAWN, BY THEIR GUARDIAN AD LITEM JOANNE STRAWN, RUSSELL C. BURTON, AND BRETT C. BURTON, BY HIS GUARDIAN AD LITEM RUSSELL C. BURTON, ANTHONY ALVAREZ, RITA ALVAREZ, LISA ALVAREZ, JOHN M. GAVEN, SR., ANNETTE M. GAVEN, AND JOHN M. GAVEN, JR., YOUNG D. KIM, JULIA S. KIM AND PATRICK KIM AND ROY KIM, BY THEIR GUARDIAN AD LITEM YOUNG D. KIM, ALBERT WILLIAMS, EVELYN WILLIAMS AND STEPHEN WILLIAMS, PLAINTIFFS-RESPONDENTS, AND MARIE C. INCOLLINGO, ANTHONY F. INCOLLINGO, MICHELLE M. INCOLLINGO, NANCY ANN INCOLLINGO, FRANK CARNOT, RAFFAELA CARNOT, WILLIAM DENNIS, JACQUELINE DENNIS, NICOLE M. DENNIS AND FARRAH D. DENNIS, BY THEIR GUARDIAN AD LITEM JACQUELINE DENNIS, MICHAEL POWELL, DOROTHY POWELL, AMY POWELL AND MOLLY POWELL, BY THEIR GUARDIAN AD LITEM DOROTHY POWELL, MICHAEL J. VITARELLI, SR., LOIS A. VITARELLI, AND JACQUELINE VITARELLI, LESLIE VITARELLI, MICHAEL VITARELLI, JR. AND ANTHONY VITARELLI, BY THEIR GUARDIAN AD LITEM LOIS VITARELLI, CHRISTOPHER CONTI, ELAYNE CONTI, DANA MARIE CONTI AND GINA CHRISTINE CONTI, BY THEIR GUARDIAN AD LITEM ELAYNE CONTI, EUGENE E. JARON, ANN T. JARON, KATHLEEN A. JARON, STEPHEN M. JARON, PAUL M. KRAMER, PATRICIA G. KRAMER, DREW KRAMER AND LAUREN KRAMER, BY THEIR GUARDIAN AD LITEM PATRICIA G. KRAMER, SANDY OBLENA, ESTRELLA OBLENA, NATHANIEL OBLENA AND MICHAEL OBLENA, BY THEIR GUARDIAN AD LITEM SANDY OBLENA, WILLIAM HELBLING, ANTHONY CHAPMAN, CATHARINE CHAPMAN, DAVID CHAPMAN AND ADRIANE CHAPMAN, BY THEIR GUARDIAN AD LITEM CATHARINE CHAPMAN, JAY AGNES, JACQUELINE AGNES, ROBERT LEWIS, CELINE LEWIS AND STEPHANIE LEWIS, BY HER GUARDIAN AD LITEM ROBERT LEWIS, TRUDY BECMER, EDMUND BECMER, DEBRA MURACA, FRANK MURACA, DAVID BARD, RUTH BARD, HOWARD FRIEDMAN, DEBRA FRIEDMAN AND MICHELLE FRIEDMAN, BY HER GUARDIAN AD LITEM DEBRA FRIEDMAN, MARIANO A. PINIZZOTTO, ROSEMARY J. PINIZZOTTO, AND MARIE ROSE PINIZZOTTO BY HER GUARDIAN AD LITEM MARIANO A. PINIZZOTTO, CHESTER A. RIDDICK, JR., CARMELITA D. RIDDICK, TODD RIDDICK, AND ALLEN RIDDICK, BY HIS GUARDIAN AD LITEM, CARMELITA D. RIDDICK, MARTIN V. GOLDSTEIN, PARTRICIA M. CORSON, FREDERICK E. CHINK, MARIA P. CHINK, MARIO CHINK AND CHRISTINA CHINK, BY THEIR GUARDIAN AD LITEM, FREDERICK E. CHINK, RICHARD J. NELSON AND MARY ANN NELSON, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
JOHN B. CANUSO, SR., JOHN B. CANUSO, JR., CANETIC CORPORATION, CANUSO MANAGEMENT CORPORATION, AND FOX & LAZO INC., DEFENDANTS-APPELLANTS, AND JOCAN, INC., WEICHERT REALTORS, JOHN DOE (ONE) THROUGH JOHN DOE (TWENTY), AND DOE CORPORATION (ONE) THROUGH DOE CORPORATION (TWENTY), DEFENDANTS.



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 271 N.J. Super. 88 (1994).

The opinion of the Court was delivered by O'hern, J. Chief Justice Wilentz and Justices Handler, Pollock, Garibaldi, and Stein join in this opinion. Justice Coleman did not participate.

The opinion of the court was delivered by: O'hern

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

JOANNE STRAWN, ET AL. V. JOHN B. CANUSO, SR., ET AL. (A-56/57-94)

Argued January 4, 1995 -- Decided April 25, 1995

O'HERN, J., writing for a unanimous Court.

The issue on appeal is whether a builder-developer of new homes and the real-estate brokers marketing those homes have a duty to disclose to prospective buyers that the homes have been constructed near an abandoned hazardous-waste dump.

Over 150 families, who purchased new homes in Voorhees Township, are seeking damages against the builder-developers of the homes and the brokerage firm that is the selling agent for the development. These families are seeking damages because the new homes they purchased were constructed near the Buzby Landfill, a hazardous-waste dump site.

Twenty-six plaintiff-families filed a class-action suit on behalf of all of the purchasers of the homes in the development sold by defendants. Plaintiffs base their claims on common-law theories of fraud and negligent misrepresentation and the New Jersey Consumer Fraud Act.

Between 1966 and 1978, large amounts of hazardous materials and chemicals were dumped at the Buzby Landfill. Toxic materials escaped contaminating the groundwater and air. The federal Environmental Protection Agency recommended that the site be considered for a Superfund cleanup.

Plaintiffs allege that the developers knew of the Buzby Landfill before they considered the site for residential development and that, although specifically aware of the existence and environmental hazards of the landfill, they failed to disclose those facts to plaintiffs when they purchased their homes.

The trial court denied class certification, finding that plaintiffs had failed to establish the predominance of common issues sufficient to warrant certification.

On defendants' motions for summary judgment against the individual plaintiffs, the trial court ruled that the landowner did not owe a duty to prospective purchasers to disclose conditions of the property but that the seller could be liable for affirmative misrepresentations. Based on its holding, the trial court granted summary judgment dismissing all of the claims of seven plaintiff-families who did not assert affirmative misrepresentations in their complaint. The nineteen families who did assert such claims were granted jury trials on common-law fraud and Consumer Fraud Act claims.

The seven plaintiff-families sought leave to appeal to the Appellate Division, which was granted. The Appellate Division reversed the decision of the trial court, ruling that the builders and brokers of the development had a duty to disclose to potential buyers the existence of the nearby, closed landfill. The court also concluded that class certification should have been granted to redress the common legal grievance asserted by plaintiffs.

The Supreme Court granted defendants' motion for leave to appeal.

HELD: A builder-developer of residential real estate or a broker representing the builder-developer is not only liable to the purchaser for affirmative and intentional misrepresentations, but is also liable for nondisclosure of off-site physical conditions known to it and unknown to and not readily observable by the buyer if the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore, render the property substantially less desirable or valuable to the objectively reasonable buyer.

1. According to the doctrine of caveat emptor, a seller is not liable to the buyer or others for the condition of the land existing at the time of the transfer, unless there is an express agreement dictating otherwise. That doctrine has been eroded over the years to require the seller to disclose to the buyer certain facts in regard to the sale of the property. Other jurisdictions have limited the doctrine of caveat emptor and have imposed duties on brokers through consumer-protection laws. (pp. 10-18)

2. This Court previously has held that a seller of real estate or a broker representing the seller would be liable for nondisclosure of on-site defective conditions if those conditions were known to them and unknown and not readily observable by the buyer. The principal factors relied on by the Court to shape that duty guide the Court here. Those factors include the difference in bargaining power between the professional seller of residential real estate and the buyer, and the difference in access to information between the seller and the buyer. Based on those factors, it is reasonable to extend to professional sellers of residential housing and the brokers representing them a similar duty to disclose off-site conditions that materially affect the value or desirability of the property. (pp. 18-20)

3. Commercial sellers of real estate and brokers engaged in selling real estate are subject to the Consumer Fraud Act. The omission of any material fact with intent that others rely on that omission in connection with the sale of real estate is an unlawful practice under the Act. A material fact is not confined to conditions of the premises. Here, the silence of defendants created a mistaken impression on the part of the purchasers and the promotional sales information misled the purchasers. (pp. 20-25)

4. A duty to disclose off-site conditions that materially affect the value or desirability of the property is consistent with the development of the law and is supported by statutory policy. There is reliable evidence that the value of property may be materially affected by adjacent or nearby landfills. Whether a matter not disclosed by a builder or broker is material, and unknown and not observable to the buyer, will depend on the facts of each case. (pp. 25-29)

5. To qualify for certification as a class, there must be: 1) numerosity; 2) commonality; 3) typicality; and 4) adequacy of representation. The core of this case concerns common issues of fact and law. Moreover, a class action is a superior method for adjudication of consumer-fraud claims. Thus, class certification is necessary here. (pp. 29-33)

Judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, and STEIN join in JUSTICE O'HERN'S opinion. JUSTICE COLEMAN did not participate.

O'HERN, J.

Because this case arises from a motion for summary judgment, we must view the facts that may be inferred from the pleadings and discovery in the light most favorable to plaintiffs. In that light, the issue in this case is whether a builder-developer of new homes and the brokers marketing those homes have a duty to disclose to prospective buyers that the homes have been constructed near an abandoned hazardous-waste dump. The Appellate Division held that such a duty exists. We agree and affirm the judgment of the Appellate Division primarily for the reasons stated in its opinion.

I

The facts of the case are set forth in the reported opinion of the Appellate Division. Strawn v. Canuso, 271 N.J. Super. 88, 95-100, 638 A.2d 141 (1994). The case concerns the claims of more than 150 families seeking damages because the new homes that they bought in Voorhees Township, New Jersey, were constructed near a hazardous-waste dump site, known as the Buzby Landfill. The complaint named as defendants John B. Canuso, Sr., and John B. Canuso, Jr., and their companies: Canetic Corporation and Canuso Management Corporation. Fox & Lazo Inc. (Fox & Lazo), the brokerage firm that was the selling agent for the development, was also named as a codefendant.

Plaintiffs base their claims on common-law principles of fraud and negligent misrepresentation, and the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -66. The twenty-six plaintiff-families filed a class-action lawsuit on behalf of all of the purchasers of the homes in the development sold by defendants. Those families purchased their homes between 1984 and 1987.

The Buzby Landfill consists of two tracts of property, a nineteen-acre portion owned by RCA and a contiguous thirty-seven-acre parcel now owned by Voorhees Township. Those two tracts were the site of a landfill from 1966 to 1978. Although the Buzby Landfill was not licensed to receive liquid-industrial or chemical wastes, large amounts of ...


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