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Gennari v. Weichert Co. Realtors

April 15, 1997

ROXANNE GENNARI, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT,V. WEICHERT CO. REALTORS, INDIVIDUALLY AND AS AGENT OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND TIMBERLINE PROPERTY DEVELOPMENT, INC., A CORPORATION OF THE STATE OF NEW JERSEY AND ALLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., AND WEICHERT REALTORS, AND VAN NOTE-HARVEY ASSOCIATES AND J.E.M. HEATING AND COOLING, DEFENDANTS, AND ELLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND WEICHERT CO. REALTORS, THIRD PARTY-PLAINTIFF,
v.
J.E.M. HEATING AND COOLING, INC. AND RICK INGS, THIRD PARTY-DEFENDANTS. JAMES NESTOR AND JOAN NESTOR, PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS, V. WEICHERT CO. REALTORS, INDIVIDUALLY AND AS AGENT OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND TIMBERLINE PROPERTY DEVELOPMENT, INC., A CORPORATION OF THE STATE OF NEW JERSEY AND ALLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., AND WEICHERT REALTORS, AND VAN NOTE-HARVEY ASSOCIATES AND J.E.M. HEATING AND COOLING, DEFENDANTS, AND ELLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND WEICHERT CO. REALTORS, THIRD PARTY-PLAINTIFF, V. J.E.M. HEATING AND COOLING INC., AND RICK INGS, THIRD PARTY-DEFENDANTS. RAJAN S. MATHEWS AND GRACE MATHEWS, PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS,V. WEICHERT CO. REALTORS, INDIVIDUALLY AND AS AGENT OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND TIMBERLINE PROPERTY DEVELOPMENT, INC., A CORPORATION OF THE STATE OF NEW JERSEY AND ALLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., AND WEICHERT REALTORS, AND VAN NOTE-HARVEY ASSOCIATES AND J.E.M. HEATING AND COOLING, DEFENDANTS, AND ELLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND WEICHERT CO. REALTORS, THIRD PARTY-PLAINTIFF, V. J.E.M. HEATING AND COOLING INC., AND RICK INGS, THIRD PARTY-DEFENDANTS. RAYMOND LACHAPELLE AND JANET LACHAPELLE, PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS,V. WEICHERT CO. REALTORS, INDIVIDUALLY AND AS AGENT OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND TIMBERLINE PROPERTY DEVELOPMENT, INC., A CORPORATION OF THE STATE OF NEW JERSEY AND ALLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., AND WEICHERT REALTORS, AND VAN NOTE-HARVEY ASSOCIATES AND J.E.M. HEATING AND COOLING, DEFENDANTS, AND ELLEN RUMBERG, INDIVIDUALLY AND AS PRINCIPAL, AGENT OR EMPLOYEE OF TIMBERLINE PROPERTY DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-RESPONDENT, AND WEICHERT CO. REALTORS, THIRD PARTY-PLAINTIFF, V. J.E.M. HEATING AND COOLING INC., AND RICK INGS, THIRD PARTY-DEFENDANTS.



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 288 N.J. Super. 504 (1996).

The opinion of the Court was delivered by Pollock, J. Chief Justice Poritz and Justices Handler, O'hern, Garibaldi, Stein and Coleman join in Justice POLLOCK's opinion.

The opinion of the court was delivered by: Pollock

(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).

Roxanne Gennari v. Weichert Co. Realtors, et al. (A-75/76/87-96)

Argued December 2, 1996 -- Decided April 15, 1997

Pollock, J., writing for a unanimous Court.

The primary issue in this appeal is whether Weichert Co. Realtors (Weichert), as the sales agent of a residential real estate developer, is liable under the Consumer Fraud Act (the Act), for affirmative misrepresentations to purchasers of new homes from the developer.

Roxanne Gennari, James and Joan Nestor, Rajan and Grace Mathews, and Raymond and Janet LaChapelle (collectively, purchasers) purchased homes in a Lawrence Township development known as Squire's Runne. Timberline Property Development (Timberline), a corporation owned by Allen and Ellen Rumberg, built the houses, which suffered from substantial defects. Timberline is now bankrupt. It is alleged that Weichert made misrepresentations about Allen's qualifications as a builder and the quality of his workmanship.

Ellen Rumberg was a sales associate in Weichert's East Brunswick office and was the Weichert sales representative at Squire's Runne. She was also married to the builder of the Squire's Runne development, Allen Rumberg. As a Weichert agent, Ellen had been the listing broker for Allen's initial building effort, a four-lot development in Holmdel, New Jersey. That development foreshadowed the problems that arose at Squire's Runne. The Holmdel houses suffered from numerous defects: shoddy workmanship, inadequate heating systems, roof problems, uninsulated pipes, improper foundation waterproofing, uneven floors, inadequate air conditioning systems and delayed completion.

At Squire's Runne, Weichert was intimately involved with Allen Rumberg in the sale of houses to the purchasers. Weichert maintained a trailer and signs at the development, several Weichert agents joined Ellen Rumberg at the site, and Weichert's East Brunswick manager approved marketing strategy and advertisements for the development. In addition, it was through Weichert that the purchasers learned about Allen. Weichert's representations led the purchasers to believe that Weichert agents were familiar with Allen and the quality of his workmanship. In the sale of the houses, Ellen Rumberg and other Weichert representatives informed the purchasers that Allen was an experienced builder who had built hundreds of quality homes throughout New Jersey. Unfortunately, that was not true: Allen had always worked under the supervision of others, primarily his brother-in-law, and his workmanship was poor.

The purchasers were induced to close on homes that were poorly built. Experts hired by the purchasers discovered serious problems with insulation, infiltration of cold air into the home, water damage and water leakage, poor quality lumber, inappropriate framing and support beams and the use of certain substandard materials.

The purchasers sued Weichert, Timberline, the Rumbergs, and others, alleging, among other things, a violation of the Consumer Fraud Act, common-law consumer fraud and negligence. At the Conclusion of a consolidated, liability-only trial, the Law Division found Weichert liable as the sole proximate cause of the purchasers' losses. The court observed that Ellen Rumberg, her manager, and other Weichert agents knew of the problems at Holmdel yet represented that Allen Rumberg built quality homes. According to the court, the houses at Squire's Runne were defective, Weichert was responsible for the acts of its agents, and Weichert was accountable under the Act. .

The Appellate Division affirmed the decision of the trial court, agreeing that Weichert made material misrepresentations that were relied on by the purchasers and were the proximate cause of the damages sustained by the purchasers for the structural, functional and appearance defects in their homes at Squire's Runne. The Appellate Division also imposed liability Allen and Ellen Rumberg under the Act and for common law fraud, and found that the Rumbergs were subject to punitive damages.

The Supreme Court granted motions for leave to appeal by Weichert, Ellen Rumberg and the purchasers.

HELD:

Weichert Co. Realtors, as the sales agent of a residential real estate developer, is liable under the Consumer Fraud Act for affirmative misrepresentations to purchasers of new homes from the developer.

1. Under the Act, one who makes an affirmative misrepresentation is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence or the intent to deceive. Although there is proposed legislation that would amend the Act, this case must be decided under the Act's present form, which does not require proof of knowledge that the statement made by Weichert was false. (pp. 29-32)

2. Weichert made affirmative misrepresentations about the builder's experience and qualifications, as well as the quality of his homes. Weichert's misrepresentations about the builder and the houses were material, false, and made to induce the purchasers to buy at Squire's Runne. Weichert's liability arises from the Act and, therefore, does not require proof of reliance. Weichert is liable for misrepresentations whether any person has in fact been misled, deceived or damaged thereby. (pp. 32-34)

3. The Rumbergs and Weichert are both proximate causes of the purchasers' damages and, as such, are jointly liable in damages. Joint liability requires a consideration of the apportionment of damages between the parties. Under the Act, injured parties may recover three times their ascertainable damages (treble damages). In addition, the Comparative Negligence Act enables the trier of fact to determine the extent, in the form of a percentage, of each party's negligence or fault. The Comparative Negligence Act extends beyond negligence to other kinds of fault. (pp. 34-35)

4. The Appellate Division held that Weichert was entitled to indemnification from Allen because of his joint liability. Thus, the purchasers could recover the excess portion of damages under the Act entirely from Weichert, and Weichert would then have to seek indemnification from the builder. Because Allen is judgment proof, however, the effect of that holding is to require Weichert pay all damages. A reading of both the Act and the Comparative Negligence Act leads to the Conclusion that the parties causing an injury should be liable in proportion to their relative fault. Accordingly, at a trial on damages, if Weichert is more than sixty percent at fault, the purchasers may recover from Weichert all of the treble damages. If Weichert is less than sixty percent at fault, it would be liable only for the percentage of the treble damages that comport with its percentage of fault. (pp. 35-36)

5. Ellen Rumberg is also liable under the Act. She was integral to the acquisition of the Lawrence Township property and to the marketing and sales of the homes at Squire's Runne. In addition, both Rumbergs are liable for common law fraud. Allen and Ellen knew that Allen's experience and qualifications were not as they represented. They induced the purchasers to rely on their false representations that Allen had many years of experience, finished construction on schedule and was a craftsman. The purchasers relied on those misrepresentations to their detriment. Because both are liable for common law fraud, they are also subject to punitive damages. Because of the concern for the duplication of damages, however, the trial court's finding that Weichert is not liable for common law fraud is left undisturbed. Moreover, the trial court did not err in dismissing the negligence claim against Weichert. Furthermore, absent a clear expression of legislative intent changing the common-law rule, the Court will not read the Act to encompass non-economic losses. (pp. 36-42)

As MODIFIED, the judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN, GARIBALDI, STEIN and COLEMAN join in JUSTICE POLLOCK's opinion.

The opinion of the Court was delivered by

POLLOCK, J.

The primary issue is whether defendant, Weichert Co. Realtors ("Weichert"), as the sales agent of a residential real estate developer, is liable under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (the "Act"), for affirmative misrepresentations to purchasers of new homes from the developer. After a trial on liability only, the Law Division found Weichert liable as the sole proximate cause of the purchaser's losses. In affirming the imposition of liability on Weichert, the Appellate Division also imposed liability on the builder, Allen Rumberg, and his wife, Ellen, under the Act and for common law fraud. Finally, the court held that the Rumbergs were subject to punitive damages. We granted motions for leave to appeal by Weichert, Ellen, and the purchasers. We modify and affirm the judgment of the Appellate Division.

I.

Plaintiffs Roxanne Gennari, James and Joan Nestor, Rajan and Grace Mathews, and Raymond and Janet LaChapelle are purchasers of homes in a thirty-five house development in Lawrence Township known as Squire's Runne. Timberline Property Development ("Timberline"), a corporation owned by Allen and Ellen Rumberg, built the houses, which suffered from substantial defects. Timberline is now bankrupt. Underlying this case are Weichert's misrepresentations about Allen's qualifications as a builder and the construction of the defective homes. This appeal arises from the trial of a consolidated action involving claims asserted by the purchasers against Weichert, Timberline, the Rumbergs and others.

Weichert is a real estate broker with offices throughout the United States. Ellen Rumberg was a sales associate in Weichert's East Brunswick office and the Weichert sales representative at Squire's Runne. Weichert maintained a trailer and signs at the development. Joining Ellen Rumberg at the site was Weichert agent Ruth Skonieczny, now deceased. Another Weichert agent, Nancy Healey, also was active in selling homes at Squire's Runne. In Weichert's East Brunswick office, the manager, Thomas Glick, approved marketing strategy and advertisements for the development.

In a liability trial that extended for thirty-four days over eight months, the Law Division heard testimony about Weichert's representations to purchasers and the defects in the homes. Perhaps because the trial was so protracted, the Law Division did not make detailed factual findings on all issues. The Appellate Division, however, filled in many missing details. To avoid unnecessary duplication, we draw on the factual findings of both courts.

The most direct link between Weichert, Allen Rumberg, and Timberline is Ellen Rumberg, Allen's wife and a Weichert agent. Ellen's dual role on behalf of the builder and the realtor is at the crux of this case. As a Weichert agent, Ellen had been the listing broker for Allen's initial building effort, a four-lot development in Holmdel, New Jersey. With Ellen's help, Allen and Thomas Glick negotiated the listing agreement for the Holmdel property. At Holmdel, as at Squire's Runne, Weichert paid for all advertising, brochures, newspaper advertising, and communications with other brokers. Foreshadowing the problems at Squire's Runne, the Holmdel houses suffered from numerous defects: shoddy workmanship, inadequate heating systems, roof problems, uninsulated pipes, improper foundation waterproofing, uneven floors, inadequate air conditioning systems, and delayed completion.

At Squire's Runne, Allen again negotiated with Glick for a listing agreement concerning the advertising and marketing of the houses. Weichert agreed to provide a sales trailer at the site and to pay for advertising, telephone costs, and a sales brochure. Robert Albrecht, a Weichert regional vice-president, and Paul Christman, a senior vice-president, approved the arrangement for Weichert. The trial court concluded:

Here, high Weichert management made a determination to spend considerable funds that would boldly display its name in the signage at the construction site, in advertising, in brochures, and in the presence of its sales agents. Weichert was proclaiming the excellence of the

project.

In brief, Weichert was intimately involved with Allen Rumberg in the sale of houses to the purchasers at Squire's Runne. Weichert, however, did not verify the information provided by Allen. Nor did Weichert establish a procedure to confirm its agent's representations to prospective purchasers. Weichert, moreover, was the means through which the purchasers learned about Allen. Weichert's representations led the purchasers to believe that Weichert agents were familiar with Allen and his workmanship.

The Law Division characterized the trust that the purchasers placed in Weichert's representations by referring to the purchasers' "beliefs through the activities of Weichert that their homes would be of high quality. . . . In essence, they were led to believe that Rumberg was an exacting and demanding builder of real substance. They were misled."

The Law Division also found:

Plaintiffs purchased at Squire's Runne because of the focused and highly specific misrepresentations made by Weichert agents, and in part, by the equally misleading literature as to the quality of construction. Weichert is the reason plaintiffs signed on with Allen Rumberg.

In the sale of the houses, Ellen Rumberg, Ruth Skonieczny, and Nancy Healey represented that Allen was an experienced builder who had built hundreds of quality homes throughout New Jersey. The facts were to the contrary. Generally speaking, he had always worked under the supervision of others, primarily his brother-in-law, Philip Kayne. His workmanship, moreover, was disastrous.

In meticulous detail, the Appellate Division expanded on the Law Division's more general fact-findings concerning defective construction and Weichert's role in the sale of the houses:

Roxanne Gennari was the first of the four plaintiffs to contract for a new home in Squire's Runne. Gennari, a full-time real estate agent, was active in Mercer County since 1980. In April 1986, Nancy Healey, Gennari's neighbor and a Weichert agent, told her about a new development Weichert was marketing. Although Gennari was not looking for a new home, she was impressed with Healey's description of both the builder and the development because Healey was someone whose opinion Gennari respected. She and Healey were business partners, and had purchased a lot in a Windsor Township development on which they intended to have a house built and then to sell it.

Healey told Gennari that Squire's Runne was to be constructed by a North Jersey builder who had built hundreds of homes and was a person of detail and craftsmanship. If they acted quickly, they could get in at pre-construction prices. In Healey's opinion, this represented a wonderful investment. Gennari was interested and excited not only because of her friend's opinion but because she knew Weichert was a large and reputable firm and was behind the development. At the site, Gennari first met Ellen Rumberg. She confirmed that her husband had built hundreds of homes, demanded excellent quality, and that he built homes in Mendham. She said he has five engineering degrees and that he was "timely."

Prior to Gennari's May 14, 1986 contract signing, Healey invited her to attend a meeting at Weichert's Princeton office with the builder. At that meeting, Rumberg claimed he had a father and son team who would be working on this project and who had been working with him for years, and that he was so particular only one man in the whole State could do Rumberg's stucco work. He produced a portfolio with a number of photos of homes. Healey told Gennari that Rumberg ...


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