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Nobrega v. Edison Glen Associates

May 22, 2001

EILEEN NOBREGA, FRANK AND ANNA SCALISE, SALVATORE APUZZIO, JR., DORIS AND KWONG AU, SAMUEL BASKINGER, BONNIE BERTUCCI, BRUCE AND RACHEL BINKOWITZ, WILLIAM BLUESTONE, YVONNE BRIX, PATRICIA BUSH, ROLAND AND BETTY CHANG, JIM AND CHUEN CHU, ALICJA CIOBANU AND PAUL SZOTT, CORNELL AND FRAN COCO, DAN AND CONNIE COLON, ROSE MARY CORRALES, ALAN AND BARBARA COSCARELLI, SCOTT AND CHRISTY DAVIS, ELAINE DELORENZO, DIANE DIGIULIO, ARLENE AND BARRY FINK, STEVEN AND KATHLEEN FUSCHETTI, ELIZABETH GOMEZ, WORSELEY AND ULA GREENIDGE, HARRY GRIEFER, MICHAEL AND TERESA HAMMALAK, ANDRE AND MERITTA HERSCOVICI, MARILYN AND GEORGE HIGGINS, LINDA IONTA, STEPHEN E. AND AMY S. KANE, ARLENE KAPLAN, IRWIN, BARRY AND MURIEL KESHNER, CAROLYN B. KILPONEN, BILL AND TERRY KONCAR, FRANK KOWALEWSKI, ALBERT AND JEAN KUCHINSKAS, THERESA LEONARDIS, JOHN AND PHYLLIS MAFFUCCI, JOSEPH AND CELIA MANDEL, NATHAN AND MOLLY MARKO, ESTHER MULLALY, TERESA O'HARA, LEONARD OLEN, VICTORIA MONTANINO ORTIZ, OSCAR AND LOIS PANNELLA, AUDREY PRESS, SUSAN PUHAN, DONNA RANDO, YVES ROC, SCOTT ROSMARIN, KENNETH G. SABLE, MARK AND MIRTA SMOLAR, ZAIDA AND ANGEL SOTOLONGO, KATHRYN STANCO, STEWART THOMPSON, VINCENT AND CAROLYN VARCA, ANDREW AND CAROLYN VITTORIA, LARRY AND ARLEEN WEISENSTEIN, DANA ZAIFERT AND EDWARD ZIMMERMAN, PLAINTIFFS-RESPONDENTS,
v.
EDISON GLEN ASSOCIATES, A NEW JERSEY PARTNERSHIP, ARIE HALPERN, DAVID HALPERN, FRED HALPERN, JACK HALPERN, MURRAY HALPERN, SAM HALPERN, JOSEF PARADIS, HENRY STEIN, ESTATE OF HARRY WILF, JOSEPH WILF, ERIC ROSENBAUM AND PAUL VISSER, DEFENDANTS-APPELLANTS,
AND JOHN DOES A-S, DEFENDANTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 327 N.J. Super. 414 (2000).

The opinion of the court was delivered by: Stein, J.

Argued January 16, 2001

Plaintiffs are ninety homeowners who purchased condominium units from Petitioners Edison Glen Associates and its individual partners (Edison Glen), the developers and sellers of those units. We granted certification to decide whether the New Residential Real Estate Off-Site Conditions Disclosure Act ("Disclosure Act" or "Act"), N.J.S.A. 46:3C-1 to -12, authorizes lawsuits against Edison Glen under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -85, for knowingly failing to disclose to plaintiffs the existence of toxic waste sites in close proximity to the condominium development, and whether the provisions of the Act that exonerate sellers from liability for non-disclosure of off-site conditions prior to the Act's effective date may be applied retroactively in this case.

I.

This action initially was dismissed in the Law Division on the basis of a Rule 4:6-2(e) motion to dismiss that was converted into a motion for summary judgment, Rule 4:46-2, by the submission of certifications, with the result that the facts are relatively undeveloped. Viewed in a light most favorable to plaintiffs, the non-moving party, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), the relevant facts are as follows. Respondent Eileen Nobrega is president of the Edison Glen Condominium Association and one of the purchasers of sixty residential units in the Edison Glen complex acquired between February 1987 and September 1991. The complex contains 315 units and is located on U.S. Route 1 in Edison Township, Middlesex County. Edison hosts at least three "Superfund" sites included on the U.S. Environmental Protection Agency's (EPA) National Priorities List (NPR) pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C.A. § 9601 to 9675. Two of those sites are located within two miles of the Edison Glen complex. The first, a site formerly used by Renora, Inc., was placed on the Superfund list in 1982, prior to the construction of the Edison Glen complex, as a result of the EPA's determination that its storage containers for hazardous waste had deteriorated, permitting the discharge of lethal toxins into the soil and groundwater. The second, formerly owned by Chemical Insecticide Corporation, was placed on the Superfund list in 1990 after the EPA determined that arsenic and other hazardous substances had leached into the soil and groundwater after being dumped illegally on the property.

Edison Glen began developing and selling units in the complex in 1987. Plaintiffs allege that Edison Glen knew or should have known about the nearby Superfund sites, and of the hazardous substances that discharged into the surrounding soil and groundwater, but failed to disclose that information to plaintiffs before the condominiums were purchased. Nobrega stated in her certification that she did not become aware of the existence of the Superfund sites until 1992 or 1993. She added that around 1993 or 1994 she discovered that several homeowners in the development were experiencing difficulty selling their units, and that around the same time Edison Glen ceased selling the remaining units, electing instead to reserve them for rental. In November 1996, an appraisal agency hired by plaintiffs issued a report in which it concluded that, based on a preliminary analysis of sales between 1988 and 1995, the market value of the Edison Glen units declined by 40 percent, presumably as a result of the proximity of the Superfund sites to the units. Plaintiffs contend that the report made them aware for the first time that they suffered actual damages as a result of the Superfund sites.

After negotiations between plaintiffs and Edison Glen proved futile, plaintiffs brought suit in May 1997, alleging common law claims of negligence, fraud and misrepresentation, breach of contract, breach of warranty, and violation of the Consumer Fraud Act. Edison Glen moved to dismiss on the ground that each of the claims were barred by the Disclosure Act. The Law Division granted Edison Glen's motions with respect to the common law claims, but ruled initially that the Consumer Fraud Act claims survived the Disclosure Act. The court reversed itself, however, on Edison Glen's motion for reconsideration, concluding that Section 10 of the Disclosure Act precluded plaintiffs' Consumer Fraud Act claims.

The Appellate Division reversed. Nobrega v. Edison Glen Associates, 327 N.J. Super. 414 (App. Div. 2000). We granted certification, 165 N.J. 137 (2000).

II.

Plaintiffs claim that Edison Glen owed them a duty under the common law and Consumer Fraud Act to disclose the existence of the two nearby Superfund sites, and that Edison Glen's breach of that duty caused them damages. Edison Glen defends by arguing that the Disclosure Act, which was passed after the properties in this case were conveyed, applies retroactively to bar plaintiffs' claims. The Appellate Division did not address the retroactivity issue, holding instead that the Disclosure Act did not bar Consumer Fraud Act claims for intentional failure to disclose off-site conditions affecting the value of properties. 327 N.J. Super. at 420-26.

In Strawn v. Canuso, 140 N.J. 43 (1995), we addressed claims by over 150 families seeking damages because the new homes they purchased were constructed near a hazardous waste dump site, and the defendants – builders and brokers of the multi-home development – failed to inform the plaintiffs of the existence of the site. Id. at 49. The plaintiffs in Strawn based their claims on common law principles of fraud and negligent misrepresentation, and the Consumer Fraud Act. Ibid.

In relevant part, the Consumer Fraud Act declares as an unlawful practice the knowing "concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any . . . real estate." N.J.S.A. 56:8- 2.

In Strawn, Justice O'Hern, writing for a unanimous Court, held that pursuant to the Consumer Fraud Act and corollary common law principles, the defendants were subject to a duty to disclose off-site conditions affecting the value of the properties:

[A] builder-developer of residential real estate or a broker representing it is not only liable to a purchaser for affirmative and intentional misrepresentation, but is also liable for nondisclosure of off-site physical conditions known to it and unknown 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. [Id. at 65.]

Five months after we decided Strawn, the Legislature enacted the Disclosure Act. L. 1995, c. 253 (eff. Sept. 12, 1995). Section 2 of the Act, entitled "Legislative findings and declaration," provides:

The Legislature finds and declares that the purchase of a residence involves a substantial portion of the average household's net worth, and the decision to purchase a particular residence requires consideration of a wide range of factors concerning the area in which the residential real estate is located; that the professionals who engage in the business of selling newly-constructed residential real estate can facilitate prudent decision-making with respect to the purchase of residences by advising purchasers of the availability of information concerning factors which can reasonably be determined to exist and which may affect the value of the residence; that the due diligence responsibilities of purchasers and the disclosure duties of sellers of residential real estate are mutually interdependent and, therefore, ambiguity in the definition and assignment of the sellers' disclosure duties may inadvertently diminish the due diligence efforts of purchasers, or unnecessarily increase the costs of residential real estate transactions; and that there currently exists ambiguity concerning the disclosure duties of the sellers of residential real estate.

The Legislature therefore determines that it is in the public interest to define the entirety of the disclosure duties of the sellers of newly-constructed residential real estate and to create a public repository of relevant off-site conditions which may be accessed by purchasers of such real estate. [N.J.S.A. 46:3C-2 (emphasis added).]

The Act creates a disclosure scheme requiring persons who own, lease or maintain potentially dangerous off-site conditions as enumerated by the Act to provide the municipal clerk of each municipality in which the conditions exist a list of those conditions and their location, and to update the list annually. N.J.S.A. 46:3C-5.*fn1

In addition, the Commissioner of the Department of Environmental Protection is required to provide all municipal clerks with lists of off-site conditions that are located within their respective jurisdictions. N.J.S.A. 46:3C-6. The Act requires the seller of new real estate construction to provide the prospective purchaser with a notice, as prescribed by the Act, of the availability of the lists of off-site conditions in the municipal clerk's office and of the buyer's right to cancel the contract within five days after its execution. N.J.S.A. 46:3C-8 to -9.

Several portions of the Disclosure Act provide clearly that a seller satisfies its disclosure obligation by furnishing notice of the availability of the lists pursuant to Section 8 of the Act. As noted, the statement of legislative findings indicates that the Legislature intended to "define the entirety of the disclosure duties of the sellers of newly-constructed residential real estate." N.J.S.A. 46:3C-2. Section 10(a) of the Act states that "[b]y providing the purchaser with the notice of the availability of the lists, as required by [the Act], the seller . . . shall be deemed to have satisfied fully the seller's disclosure duties pursuant to New Jersey law." N.J.S.A. 46:3C- 10(a). Similarly, Section 10(b) provides that "[a] seller's responsibility to disclose those conditions that may materially affect the value of the residential real estate, but which are not part of the project, shall be fully met when notice is provided in accordance with the provisions of [the Act]." N.J.S.A. 46:3C-10(b). The furnishing of notice "shall be available to the seller as a defense to any claim that the seller failed to disclose any conditions which are not part of the project." Ibid.

Notwithstanding those provisions, Section 10(d) provides that the Act

shall not be interpreted to affect the disclosure requirements for conditions off- site contained in "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c. 419 (C. 45:22A-21 et seq.), the ?Air Safety and Zoning Act of 1983,' P.L.1983, c. 260 (C. 6:1-80 et seq.) or in any other statutory provision. [N.J.S.A. 46:3C-10(d) (emphasis added).]

That the Act was intended to bar non-statutory claims is clear. Plaintiffs contend, however, and the Appellate Division held, that the phrase "any other statutory provision" in Section 10(d) includes the Consumer Fraud Act. In support of its holding, the Appellate Division relied on two statements by then-Governor Christine Todd Whitman respecting the bill that became the Disclosure Act. Nobrega, supra, 327 N.J. Super. at 422. Prior to the passage of the bill, Governor Whitman issued a statement in which she noted "the need for consumers to know of the existence of off-site conditions and the need for sellers to know the extent of their duty to disclose," and stated that "the bill accomplishes this, I am assured by both sponsors and all interested parties, without interfering with any remedies that may be available in appropriate cases to prospective buyers under the Consumer Fraud Act . . . or any other relevant statute." Ibid. Governor Whitman reiterated that view in a press release issued on the day she signed the bill: "In a statement of intent, Governor Whitman said that the bill does not interfere with any remedies available to prospective buyers under the Consumer Fraud Act." Ibid.

Those statements, in addition to "this State's long-standing public policy of affording consumers protection from unconscionable commercial practices," id. 423, persuaded the Appellate Division to construe the phrase "any other statutory provision" in Section 10(d) to include the Consumer Fraud Act. The court stated:

[I]t is only the applicability of common-law causes not comprehended by the Consumer Fraud Act that the Legislature intended to abrogate by passing the Disclosure Act. It is well settled that while the Consumer Fraud Act imposes liability both for affirmative misrepresentations and for omissions or failures to disclose, ordinarily only affirmative misrepresentations may be actionable if not made knowingly. Omissions of disclosure, to the contrary, are actionable only if . . . the failure to disclose was intentional. We are satisfied that it was preservation of the element of intent, which results in imposition of a more ...


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