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Ji v. Palmer

August 01, 2000

SUNG JI AND EUN JI,
PLAINTIFFS-APPELLANTS,
V.
ALEC PALMER,
DEFENDANT,
AND
DAN SMITH, INDIVIDUALLY AND T/A DAN SMITH REALTY; RALPH CATRAMBONE, INDIVIDUALLY AND T/A SHENKMAN AND CATRAMBONE REALTY,
DEFENDANTS-RESPONDENTS.



Before Judges Havey, Keefe and Collester.

The opinion of the court was delivered by: Havey, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 22, 2000

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

Plaintiffs purchased a four-unit residential property in Atlantic City. The property is in the R-2 zone, permitting only single-family dwellings. In their complaint they allege that defendants Dan Smith and Ralph Catrambone, real estate brokers, failed to obtain a Certificate of Land Use before transferring title, as required by the City's land-use ordinance, and represented at closing that the Certificate of Occupancy produced by the seller satisfied the City ordinance requirement. Plaintiffs' seven-count complaint against Smith, Catrambone and the seller, Alec Palmer, *fn1 also alleges violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -48, negligence, breach of contract, breach of implied warranty and breach of a covenant of good faith and fair dealing.

Plaintiffs now appeal the entry of summary judgment in favor of Smith, and from a judgment of involuntary dismissal in favor of Catrambone entered during a bench trial at the close of plaintiffs' case. We affirm the summary judgment in favor of Smith and reverse the judgment of involuntary dismissal in favor of Catrambone. We conclude that Catrambone's statement to plaintiffs that the Certificate of Occupancy satisfied the Certificate of Land Use requirement established a prima facie case under the under the Consumer Fraud Act, N.J.S.A. 56:8-2. We therefore remand for further proceedings as to the consumer fraud claim against Catrambone.

In 1989, plaintiff Sung Ji (Ji), noticed a "For Sale" sign in front of a four-unit property on South Kingston Avenue, Atlantic City. He contacted Catrambone, a real estate broker with whom he had previously dealt and who knew that he was looking for investment property. It is undisputed that the property is in the R-2 zone, permitting only single-family residential use.

Ji and Catrambone inspected the four-unit property. Together they evaluated the income and expense records of the property. Catrambone drafted a contract of sale dated June 1, 1989, with a purchase price of $175,000. Catrambone added to the preprinted contract several clauses, including paragraph 23, which stated, "The Seller will pay for and provide Buyers with Certificates of Occupancy and Certificate of Land Use from the City of Atlantic City and that said certificates shall reflect no violations." Smith, the listing broker, produced a Certificate of Occupancy issued by the City's Code Enforcement Administrator. The Certificate of Occupancy stated that the property had been inspected in accordance with the City's adopted BOCA Codes and was "not in violation of currently effective Municipal Property Maintenance Code." However, no Certificate of Land Use was produced by Palmer or Smith at the time of closing. Plaintiffs nevertheless closed title to the property on September 15, 1989. *fn2 In February 1993, plaintiffs were charged with violating the Atlantic City Zoning Ordinance for failing to receive an approved Certificate of Land Use for the four units. *fn3

On cross-motions for summary judgment, the complaint against Smith was dismissed in its entirety. The trial court denied Catrambone's motion to dismiss plaintiffs' consumer fraud claim, but dismissed the remaining counts, including the count alleging negligence.

During the bench trial, plaintiffs called Catrambone as their witness. Catrambone explained that he had no knowledge of the zoning restrictions affecting the property, and never stated to plaintiffs that there might be a problem operating the property as a four-unit complex. He stated that a representative of Dan Smith Realty had advised him that the property had been used as a four-unit complex since the 1960s. Catrambone conceded that he reviewed with Ji the rental income and expense history of the units, obtained from Multiple Listing and Dan Smith Realty, because Ji "wanted to know if [the property] made a profit."

The June 1, 1989 contract prepared by Catrambone contained an attorney's review clause. See New Jersey Bar Ass'n v. New Jersey Ass'n of Realtor Boards, 93 N.J. 470, 479-80 (1983). Catrambone advised Ji that he intended to send the contract to Ji's real estate lawyer, but Ji told him that he did not want an attorney. Catrambone testified that he placed several additional clauses in the contract for plaintiffs' protection, including paragraph 23, requiring the seller to produce Certificates of Occupancy and a Certificate of Land Use. He acknowledged that the certificates are separate and distinct documents, the Certificate of Occupancy certifying the habitability of a structure, and the Certificate of Land Use certifying that the present use of a property is permitted. *fn4 He had obtained Certificates of Land Use from the City of Ventnor, but did not know whether such certificates were necessary in Atlantic City. He nevertheless included paragraph 23 in the event such a certificate was required.

Catrambone explained that at closing Dan Smith Realty advised him that "they couldn't get a Certificate of Land Use, and that the City was issuing something else instead." The representative said to him, "Ralph, don't worry, the property has been four apartments for at least back to sometime in the '60s." Catrambone testified, "[W]e were told that the Certificate of Occupancy took the place of the Certificate of Land Use," and explained, "How was I not to believe that this [Certificate of Occupancy] was not acceptable?" Catrambone further testified, "I looked at [the Certificate of Occupancy] and handed it to [Ji] and said . . ., 'This is what they're giving us. This looks acceptable to me.'"

Ji testified that he did not recall seeing the Certificate of Land Use, explaining, "I didn't know what is a land use certificate, honestly." He also testified that Catrambone did not suggest that the closing be suspended to permit Ji to consult an attorney, nor did he disclose that there might be a problem with the documents submitted by the seller.

At the close of plaintiffs' proofs, the trial court entered a judgment of involuntary dismissal in favor of Catrambone. See R. 4:37-2(b). The court identified the single issue to be decided as follows:

whether Catrambone engaged in affirmative acts so as to induce plaintiffs into believing that the premises in question could be legally used as a four-family building or by remaining silent when he knew that it could not be.

The court concluded that no rational factfinder could find that Catrambone knew that the property was subject to zoning constraints because the testimony was uncontradicted that he was under the impression "as was everyone else involved in this deal, that it could be used for four units." It rejected plaintiffs' argument that a review of income and expense figures relating to the rental units constituted an "affirmative misrepresentation." It stated that "[Catrambone] went over figures that were provided by others; that's what he did," ...


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