On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-5930-92.
The opinion of the court was delivered by: Gilroy, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Coburn, R. B. Coleman and Gilroy.
Plaintiffs, Port Liberte Homeowners Association and Port Liberte Condominium Association I, appeal from the November 24, 2004, order of the Law Division granting defendant Dryvit Systems, Inc.'s (Dryvit) motion for summary judgment. The question presented is whether plaintiffs, non-profit corporations charged with controlling and maintaining a condominium's common elements, formed after the misrepresentations or omissions complained of were made, have standing to assert common law and consumer fraud claims against the manufacturer of a product used by the developer in the construction of the common elements. Because we conclude that plaintiffs have sufficient standing, we reverse.
Port Liberte is a residential condominium development in Jersey City, comprised of single-family detached homes, townhomes, and mid-rise buildings, established pursuant to the New Jersey Condominium Act, N.J.S.A. 46:8B-1 to -38. The developer and original sponsor of Phase I of the development was Port Liberte Partners (PLP). Defendant Dryvit is a corporation in the business of manufacturing and selling Exterior Insulation Finish System (EIFS)*fn1 barriers, the cladding used on the Phase I buildings. Defendant Sordoni Construction Company (Sordoni) was the general contractor for the project. Defendant Novingers, Inc. (Novingers), was the subcontractor engaged by Sordoni that installed the Dryvit EIFS on the buildings.
PLP began construction of Phase I in January 1986, when it hired Sordoni as its general contractor. On May 30, 1986, PLP registered the project with the Department of Community Affairs (DCA). In July 1986, PLP chose to install Dryvit's EIFS barrier on the exterior of the Phase I buildings, and on July 17, 1986, Sordoni executed a subcontract with Novingers to install the EIFS. Novingers commenced installation of the EIFS in November 1986, and upon completion a year later, Dryvit issued a three-year warranty on the EIFS cladding.
In the interim, on or about February 26, 1987, PLP filed copies of its Master Deed and Declaration of Covenants with the DCA. On March 10, 1987, the Master Deed and Declaration of Covenants were recorded in the Hudson County Clerk's Office, marking the creation of the plaintiff associations.
Prior to January 1991, PLP had been in complete control of the project. On January 25, 1991, PLP filed for Chapter 11 bankruptcy protection and relinquished control of the project to the associations before 75% of the units had been sold, N.J.S.A. 46:8B-12.1d. After gaining control, plaintiffs discovered defects in the EIFS products, which allegedly had caused significant water and structural damage to the buildings. As a result, plaintiffs commenced this action in June 1992 against Sordoni and other parties who had participated in the construction of the common elements.
After eleven years of litigation, six amended complaints, and eight years of mediation, plaintiffs settled with all parties except Dryvit. On June 23, 2003, plaintiffs filed a motion for leave to file a seventh amended complaint to assert claims for common law fraud and consumer fraud. Plaintiffs alleged that prior to Dryvit negotiating and agreeing to supply the EIFS, it had falsely advertised and represented to PLP and/or Novingers that its EIFS was a complete water barrier system when, in fact, it had knowledge that the EIFS products were defective and would not remain water-impermeable when installed over a non-masonry substrate, even when installed in strict conformity with installation specifications; that Dryvit had made false and misleading misrepresentations knowing that Novingers and PLP would rely thereon in recommending, selecting and purchasing Dryvit's products; and that plaintiffs were third-party beneficiaries of the contract between Dryvit and Novingers. On July 21, 2003, Dryvit filed a cross-motion for summary judgment, seeking dismissal of plaintiffs' sixth amended complaint. Both motions were granted.
On September 24, 2004, Dryvit filed a motion for summary judgment, seeking dismissal of plaintiffs' seventh amended complaint for various reasons, including "that since plaintiffs had not yet even been formally 'established,' they could not have been recipients of Dryvit's alleged misrepresentations or omissions, and therefore, they could not have participated in the decision to utilize Dryvit's EIFS at Porte Liberte." On November 24, 2004, the motion judge granted the motion stating:
Nonetheless, in the case at bar, there is and can be no proof offered to establish that Dryvit intended that anyone other than PLP or Sordoni rely upon its representations regarding the EIFS, nor is there or can there be any proof either that the injured party here, . . . plaintiffs, reasonably relied on those representations or sustained damages as a result of such reliance. The wrongdoing complained of here is that Dryvit allegedly made misrepresentations to PLP or Sordoni in order to induce them to use the EIFS. However, there is no proof before the court, nor can there be, to substantiate plaintiffs' claim that the misrepresentations made by Dryvit were made with the intention that they be communicated to others (there are no "others") for the purpose of inducing the "others" to rely upon them. If by "others" plaintiffs have referenced themselves, then certainly, in the context of the case at bar, there is no proof, nor can there be, to substantiate the necessary elements of a claim for common law fraud that Dryvit made a misrepresentation about the EIFS to PLP or Sordoni with the intent that the misrepresentation would then be communicated to the Association, which did [not] even exist at the time, for the purpose that of having this non-existent association rely upon the misrepresentation and then use the EIFS in the construction of the project.
On appeal, plaintiffs argue that the trial court erred in granting summary judgment, determining that plaintiffs did not have standing to pursue fraud claims under the common law and Consumer Fraud Act (CFA)*fn2 against the manufacturer of an allegedly defective product used in the construction of the common elements of the condominium. Plaintiffs contend that upon PLP's filing for bankruptcy protection and turnover of the condominium, plaintiffs immediately stepped "into the shoes" of PLP. Plaintiffs assert that any misrepresentations and/or omissions of facts made to, or withheld from, PLP are as if they were made to or withheld from plaintiffs, PLP's successors, who are the end-users of the EIFS, and the parties adversely affected by Dryvit's fraud. Dryvit counters that the trial court properly dismissed plaintiffs' ...