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Nickerson v. Quaker Group

July 3, 2008

DONALD NICKERSON AND LISA NICKERSON, HUSBAND AND WIFE, PLAINTIFFS-APPELLANTS,
v.
THE QUAKER GROUP, THE QUAKER GROUP GLOUCO II, L.P., K. HOVNANIAN COMPANIES, AND HOVNANIAN ENTERPRISES, INC., DEFENDANTS-RESPONDENTS, AND RYNO MARKETING, JOSEPH FUSCELLOW, SANG LEE, AND PAULA MILLER, DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, L-2141-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 21, 2008

Before Judges Cuff, Lihotz, and King.

I.

Plaintiffs purchased a new home from Quaker Group Glouco II, a limited partnership of the Quaker Group. Ryno Marketing was the sales agent. Not long after the start of actual construction, the assets of Quaker's various limited partnerships including Quaker Group Glouco II were sold to the Hovnanian group. Hovnanian thus assumed responsibility for completing construction. There were several construction defects which plaintiffs tried to have the builder repair before they brought this action. Plaintiffs claimed fraud, negligent misrepresentation, consumer fraud, negligence that resulted in construction deficiencies, and other torts, no longer in dispute. The Quaker defendants and the Hovnanian defendants cross-claimed for contribution.

Plaintiffs settled with the Hovnanian defendants for an amount equal to their estimate for the cost of repairing the construction defects, and they did so shortly before the court granted the Hovnanian defendants' motion for summary judgment. The court granted summary judgment to the Quaker defendants as well, but it also granted plaintiffs' motion for leave to amend the complaint to add a claim of breach of contract against the Quaker defendants for the construction deficiencies.

The Quaker defendants moved to dismiss the contract claim, which the court granted in part by dismissing the portion that had been the subject of plaintiffs' settlement with the Hovnanian defendants. Plaintiffs then settled the remainder of the contract claim with the Quaker defendants and settled with Ryno Marketing, which later declared bankruptcy. Plaintiffs now appeal the dismissal of their fraud and consumer fraud claims, but only as against the Quaker defendants.

II.

This is the procedural background. On December 23, 2004 plaintiffs filed a complaint against the Quaker Group, Quaker Group Glouco II, L.P. (Glouco II), K. Hovnanian Companies, Hovnanian Enterprises, Inc., Ryno Marketing (Ryno), Joseph Fuscellow, Sang Lee, and Paula Miller. The parties and the trial judge generally referred to the Quaker and Hovnanian defendants as "Quaker" or "Hovnanian," with the specification of a particular entity as incidental. We will do the same. Plaintiffs alleged common-law fraud (count one), negligent misrepresentation (count two), consumer fraud (count three), and negligent construction of their home (count four). Plaintiffs' claims for intentional and negligent infliction of emotional distress (counts five and six), are not at issue on appeal.

Quaker filed a denial. It also raised cross-claims for contribution against Hovnanian and Ryno. Hovnanian also filed a denial and cross-claims for contribution, as did Ryno.

On March 13, 2006 Hovnanian moved for summary judgment. Quaker cross-moved for summary judgment, although not on plaintiffs' negligence claim (count four).

On June 5, 2006 plaintiffs entered into a settlement with. Hovnanian. The settlement recited that plaintiffs had received $36,586 as "full payment" for releasing them from "[a]ny and all claims arising from" this lawsuit.

On June 27, 2006 the judge issued an opinion and order in which he dismissed the complaint against Hovnanian. He also dismissed the complaint against Quaker except for count four, which he reserved upon until Quaker specifically moved to dismiss that count.

On July 13, 2006 plaintiffs moved for leave to amend their complaint by adding a claim against Quaker for breach of contract (count seven). On July 17, 2006 Quaker moved to dismiss count four on summary judgment. On July 19, 2006 plaintiffs moved for reconsideration of the grants of summary judgment to both Hovnanian and Quaker on counts one, two, and three.

On August 18, 2006 the judge denied plaintiffs' motion for reconsideration. The judge granted Quaker's motion to dismiss count four, relying on the grounds for which it had dismissed that count against Hovnanian. However, concomitant with that dismissal, the judge granted plaintiffs' motion for leave to amend the complaint to add count seven.

On September 20, 2006 plaintiffs filed a motion for discovery that would identify "all entities trading as the Quaker Group," and for leave to file a second amended complaint naming them as defendants. On October 6, 2006 the judge denied the motion. That same day, Quaker moved for summary judgment on count seven. On December 11, 2006 plaintiffs settled with Ryno. On December 15, 2006 the judge partially granted and partially denied Quaker's motion. The judge dismissed plaintiffs' claims for the construction deficiencies that were the subject of plaintiffs' first expert report and for some of the items that plaintiffs claimed as consequential damages. However, the judge denied dismissal of plaintiffs' claims for the construction deficiencies identified after the first expert valuation and for the remaining consequential damage items.

On February 28, 2007 plaintiffs moved again for reconsideration of the grant of summary judgment on counts one, two, and three. On March 16, 2007 the judge denied the motion.

On June 19, 2007 the judge entered judgment on plaintiffs' conditional settlement of the contract claim with Quaker of count seven without prejudice to this appeal for $10,000. The order stayed enforcement of that settlement pending this appeal of the grant of summary judgment to Quaker and of the denial of plaintiffs' first motion for reconsideration. Only the plaintiffs' fraud and consumer fraud claims against Quaker Group remain in this appeal.

Plaintiffs thereafter filed their notice of appeal. Plaintiffs' claims on appeal are addressed only against Quaker.

III.

A. The Factual Background about Quaker

Quaker's predecessor was established in 1952. The trade name "Quaker Group" was first used in the 1970s. Quaker formed limited partnerships, such as Glouco II, each time it acquired property for development. According to Sara Gowing, who had been Quaker's chief executive officer since 2003, it was industry practice to use limited partnerships in that manner while using the trade name for advertising and brochures. She was not sure that any particular Quaker entity "had been in existence for 45 years" as of 1999.

Gowing further explained that the limited partnerships did not construct houses; instead, Quaker paid the subcontractors from the common accounts, with ledger entries indicating that the payments were being made on behalf of the corresponding partnership. All of the partnerships formed for New Jersey residential projects were based in Quaker's offices in Montgomeryville, Pennsylvania. They did not have their own employees or even separate phone lines to distinguish them from other Quaker entities.

B. Plaintiffs' Purchase Decision

Plaintiffs wanted a house built by a "quality builder" with a "good reputation." They had heard "horror stories" about certain builders who failed to repair defects that the buyers did not discover until they occupied the house. They also wanted a location near Washington Township in order to remain near Lisa Nickerson's mother. One development had no lots available; another had lots that were too small.

Plaintiffs had not heard of Quaker before they drove past the Equestrian Estates development in Washington Township. They met Sang Lee, an employee of Ryno, the sales agent. Lee gave them brochures for other developments by Quaker, which asserted "the quality of the homes" and "the quality of the builder," but Donald Nickerson did not recall if the brochures elaborated on the "quality" assertion in any way.

Plaintiffs asked Lee about Quaker's quality, and whether it ever failed to fix problems promptly before turning its attention to its next development. Lee responded that such problems did not occur because Quaker was a builder of good quality and had been in business for about fifty years with a reputation for service. Plaintiffs went to look at houses in a Quaker development in Hainesport; the record does not indicate that any representations were made to them there.

An undated promotional flyer for Equestrian Estates, which named only the Quaker Group, stated that "Quaker combines old-time craftsmanship with contemporary quality standards, then guarantees it." Gowing said that Quaker's sales materials used the word "quality" to indicate a new home with contemporary features and materials that some other builders were not providing.

C. The Agreement of Sale for Plaintiffs' House

On August 31, 2001, plaintiffs entered into an agreement of sale which named Glouco II as the seller of a two-story, single-family house to be constructed in Equestrian Estates. The contract price was $279,490, with a 5% cash deposit due in two equal installments, one upon execution and the other forty-five days later.

A contemporaneous addendum to the agreement similarly named Glouco II as the seller, but the section on title insurance also referred to Equestrian Estates as "this Quaker Group Development." Lisa acknowledged the designation of Glouco II as the seller, but she understood the naming of any Quaker entity to mean the Quaker Group; they were all the same to her.

The agreement of sale contained disclaimers about the scope of the seller's representations. One was that the buyers had decided to purchase by relying on "the attached brochure and standard features list[,] and not by any representation made by Seller or any selling agent or any other agent of Seller." The seller would "not be responsible, or liable for any agreement, condition or stipulation not specifically set forth in this Agreement relating to or affecting the said property."

The agreement did not refer to the deposit as refundable or nonrefundable, other than to state that the seller's inability to complete the house within 365 days following the buyers' selection of custom features would compel the seller to refund the deposit "promptly." The agreement required the buyers to obtain the seller's approval before assigning their rights and obligations, but it did not impose any such constraint on the seller, and it declared that all its terms would "bind the . . . successors and assigns of the respective parties."

The agreement incorporated a limited ten-year warranty, which entitled plaintiffs to present lists of "items requiring attention in accordance with the standards of the warranty," at thirty days after closing and again at twelve months after closing. The seller would then "promptly correct the deficiencies noted, in accordance with the standards of the warranty."

The agreement concluded with an integration clause, which declared as follows:

Entire Agreement. This writing contains the entire Agreement between the parties and no agent[,] representative, salesman or officer of the parties hereto has the authority to make or has made any statement, agreement, representation or contemporaneous agreement, oral or written, in connection herewith modifying, adding to or changing the terms and conditions herein. This written agreement shall supercede [sic] any prior dealings, discussions, or communication between the parties. No modification of this Agreement shall be binding unless such modification shall be in writing and signed by the parties hereto.

On December 8, 2001 plaintiffs executed a modification to the sales agreement that changed the model of their house. It increased the contract price by $20,000.

Plaintiffs asserted in their interrogatory responses that they had been rushed into putting a deposit on their home. Lee told them that a lot had unexpectedly become available but that they needed to reserve it because others were also interested. She allegedly said that the deposit would be refundable. However, at some later time, when plaintiffs felt misled by Lee's contradictory statements about whether they could change ...


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