April 24, 2009
NICHOLAS BOZINE AND VERONICA BOZINE, PLAINTIFFS-APPELLANTS,
CRAIG D'ORAZIO, CENTURY 21 HEARST REALTY, JASON LEPORE, CALABRESE HOMES, INC., STEPHEN CALABRESE AND GERALD DEMARCO, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-107-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 29, 2009
Before Judges Parrillo, Lihotz and Messano.
Plaintiffs Nicholas and Veronica Bozine appeal from summary judgment entered in favor of defendants Century 21 Hearst Realty (Century 21) and Jason Lepore, and from the order denying plaintiffs' request for reconsideration. Plaintiffs argue sufficient evidence was presented demonstrating the existence of material factual disputes, making the grant of summary judgment inappropriate. Following our review of the record, we are persuaded by plaintiffs' arguments and reverse.
We recite the facts derived from evidence submitted by the parties in support of and in opposition to the motion for summary judgment, viewed in a light most favorable to plaintiffs. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995).
On October 31, 2001, Craig D'Orazio contracted with defendant Calabrese Homes, Inc., owned by defendant Stephen Calabrese (collectively Calabrese), to build a single-family residence at 1 Lansbrook Court in Washington Township (the home). Unfortunately, D'Orazio lost his job. He contacted Century 21 to sell the uncompleted home. Lepore was D'Orazio's Century 21 agent. Plaintiffs saw a multiple listing service (MLS) description for the home stating it was a "Brand-New, One of a Kind Custom Built Home!" in "average condition" and "ready for delivery." The listing also stated the home was not part of a homeowner's association. Plaintiffs contacted Century 21 agent Lonnie Chiavo regarding the home. Century 21 disclosed the house was initially constructed at D'Orazio's request and it was acting as the listing broker.*fn1 Guided by Chiavo, plaintiffs viewed the home.
During the walk-through, plaintiffs saw water in the basement. Plaintiffs questioned Lepore, who suggested the water likely resulted from the basement windows being left open or from workers hosing down the basement floor. Lepore agreed he would check with the contractor. Lepore later confirmed that what he surmised as the water's source was correct. In a second walk through, evidence of basement water remained present. Plaintiffs again questioned Lepore and spoke to Calabrese, who stated the water resulted from work on the septic system and any water problem would be corrected.
A proposed Contract for Sale of Real Estate (the contract) was circulated. The contract, as originally proposed, was specifically amended at plaintiffs' request to include a comprehensive addendum. One paragraph of that addendum stated:
The dwelling shall be constructed in accordance with the Architect's Sealed Blue Prints A-1 through A-8, inclusive, prepared by John W. Bishop ARA, copies of which are attached hereto as Exhibit "A". The dwelling shall be further constructed and contain those features as set forth in the Multiple Listing Service provided by Century 21 Hearst Realty, Inc., a copy of which is attached hereto as Exhibit "B".
Following Calabrese's review of the addendum, he telephoned Lepore. Calabrese issued an undated memo to Lepore confirming:
Item 2: The contract will include a reduced set of the blueprints unsealed. The prints are owned by the architect and are not the possession of the seller or the builder. Also the home was not constructed exactly as the blueprints show. This is due to on-site decisions made by the builder, change orders, options, truss manufacture[']s interpretation of the prints. None of the variations of the prints ha[ve] changed the home to the extent that the home is not structurally sound.
Lepore did not relate the contents of Calabrese's memo to plaintiffs. On February 18 and 19, 2003, plaintiffs and D'Orazio executed the contract, which included the addendum, as witnessed by Lepore.
Plaintiffs commissioned a home inspection report from Aardvark Home Inspections, issued on March 12, 2003. The Aardvark inspector, Sam Flamma, conducted a visual investigation of easily accessible areas of the home. Flamma's report identified the following areas as unsatisfactory: grading away from house; concrete walks and driveways; condition of the roof, including flat valleys and exposed nails; carbon monoxide detectors; and extreme signs of wetness in the basement. The report also listed five areas labeled as "Major Deficiencies." These included: "roof"; "structural issues"; "safety items such as, but not limited to handrails and/or guards, steps that are dangerous, CO detector, etc."; "concrete spalling"; and "grading is probably the water problem."
Plaintiffs submitted to Century 21 a copy of the inspection report and a written request for repair of the items. Lepore assured plaintiffs the items "would be taken care of." Lepore and Calabrese made repeated representations that the basement water problem would be corrected and other items identified by the home inspector would be repaired by the date of closing.
After a second inspection, Flamma prepared another report dated March 29, 2003. Construction was not yet complete and again, Flamma identified major construction deficiency areas. The first three had not changed from his prior report. He also identified a need to fire seal all holes etc., correct the grading, and now added "plumbing and electrical issues." Flamma's report also noted standing water was in the basement. He recommended plaintiffs hire a structural engineer to provide a more thorough analysis of the areas of deficiency he identified.
Lepore told plaintiffs, "Calabrese fixes everything." Assured by these representations, plaintiffs consented to schedule closing.
Immediately prior to the April 7, 2003 closing, plaintiffs again walked through the home. Although no water was visible, obvious water stains were in the basement. Calabrese did not attend closing but was contacted by telephone. Lepore represented Calabrese remediated most major items and gave plaintiffs Calabrese's signed "punch list." Lepore stated the items Calabrese completed were initialed, and the remainder would be completed within thirty days. The parties agreed to escrow $5,000 pending Calabrese's completion of the outstanding items on the repair punch list.
Within thirty days of closing, water seeped into the basement. Plaintiffs commissioned a structural engineering evaluation of their home from Preferred Property Inspections & Engineering, Inc. The evaluation identified various structural deficiencies and concluded the home had not been constructed in accordance with the architect's plans, as required by the contract addendum. Noted defects included:
(1) faulty waterproofing of the exterior foundation, a sinkhole created where the garage meets the basement due to improper backfill, and flawed exterior grading caused water seepage into the home; (2) construction of the home's foundation failed to comply with the architectural drawings and the standards promulgated by the Council of American Building Officials, necessitating the foundation's reinforcement; (3) floor joists over the basement were installed contrary to "good industry practice"; and (4) the layout and design of the pre-engineered roof trusses did not comply with the manufacture's specifications. Plaintiffs' repair estimate totaled $519,190.
Plaintiffs filed a sixteen count complaint against Lepore, Century 21, D'Orazio, Calabrese, and Calabrese's subcontractor, defendant Gerald DeMarco. Following discovery, Lepore and Century 21 filed for summary judgment. Also, D'Orazio filed a separate motion for summary judgment. The Law Division judge denied D'Orazio's motion and granted summary judgment in favor of Lepore and Century 21. Thereafter, the judge denied reconsideration motions filed by D'Orazio and plaintiffs. Plaintiffs and D'Orazio settled. Default judgment was entered against Calabrese with damages fixed at $983,823.14.*fn2 Plaintiffs filed this appeal seeking to reinstate their claims for fraud, violations of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -184, and negligent misrepresentation against Lepore and Century 21.*fn3
Plaintiffs argue the motion judge erred when she determined neither Lepore nor Century 21 made an "affirmative misrepresentation of any material fact that induced [plaintiffs] to make this purchase." Further, the court concluded because plaintiffs undertook an independent investigation of the home's condition, they were aware of the property's condition and did not rely on any representation, negligent or otherwise, made by defendants.
In support of their position, plaintiffs first suggest the initial MLS listing was misleading because the home was not completed, the unfinished basement was not usable due to the water seepage problem, and the home was subject to assessment as part of a homeowner's association. Second, plaintiffs identify Lepore's failure to disclose Calabrese's deviation from the identified architect design plans as a fraudulent omission and cite his repeated representations regarding completion of identified deficiencies, including correction of the cause of the water seepage problem, namely, workman hosing down the floor or open basement windows, were false.
Our review requires we use the same standard as the trial court in deciding a summary judgment motion. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.) (citing Antheunisse v. Tiffany & Co., 229 N.J. Super. 399, 402 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989)), certif. denied, 154 N.J. 608 (1998). Dismissal of a complaint on summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); Brill, supra, 142 N.J. at 528-29. "Genuine" means "only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c).
In determining whether there is a genuine issue of material fact for summary judgment purposes, the trial court must ascertain "what reasonable conclusions a rational jury can draw from the evidence[.]" Brill, supra, 142 N.J. at 535. To make that determination, the judge "'must accept as true all the evidence which supports the position of the party defending against the motion and must accord him [or her] the benefit of all legitimate inferences which can be deduced therefrom[.]'" Ibid. (quoting Pressler, Current N.J. Court Rules, comment 1 on R. 4:40-2 (2009)). If reasonable minds could differ, the motion must be denied. Ibid. In light of these standards, we conclude summary judgment was improvidently granted.
We review the basic elements of plaintiffs' stated causes of action. To successfully prove common-law fraud plaintiffs must show: (1) a material misrepresentation of fact; (2) knowledge of its falsity; (3) an intention that the unknowing party rely on the false misrepresentation; (4) the reliance was reasonable; and (5) resultant damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (citing Jewish Ctr. of Sussex County v. Whale, 86 N.J. 619, 624-25 (1981)).
A claim under the CFA is shown when a consumer identifies any material misrepresentation or unconscionable commercial practice and a causal nexus between the unlawful conduct and the consumer's ascertainable loss. International Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., 192 N.J. 372, 389 (2007). Reliance is not required.
Real estate brokers and agents are subject to the provisions of the CFA. Vagias v. Woodmont Props., L.L.C., 384 N.J. Super. 129, 136 (App. Div. 2006). A real estate broker's affirmative misrepresentations that mislead a home purchaser to execute a contract of sale may trigger CFA liability. Gennari, supra, 148 N.J. at 609. Also, CFA liability may result for non-disclosure of a defective condition if the condition was known to the broker, not readily observable to the buyer, and the defective condition was material to the transaction. Strawn v. Canuso, 140 N.J. 43, 59 (1995); Mango v. Pierce-Coombs, 370 N.J. Super. 239, 254 (App. Div. 2004).
Finally, a cause of action for negligent misrepresentation, which is "'[a]n incorrect statement, negligently made and justifiably relied on, . . . may be the basis for recovery of damages for economic loss . . . sustained as a consequence of that reliance.'" McClellan v. Feit, 376 N.J. Super. 305, 317 (App. Div. 2005) (quoting H. Rosenblum, Inc. v. Adler, 93 N.J. 324, 334 (1983)). Century 21 and Lepore, as agents for D'Orazio, owed plaintiffs a duty to exercise reasonable care in communicating facts material to the condition of the home, which affected plaintiffs' decision to purchase the realty. Weintraub v. Krobatsch, 64 N.J. 445, 455-56 (1974). If made without a determination of their accuracy, Lepore's varied explanations for the cause of the wet basement and his affirmations regarding correction of noted problems, may serve as a basis for breach of that duty. Ibid.
Examining the facts at bar, we agree with the motion judge that for the most part, the MLS listing describing the property was incapable, as a matter of law, of establishing fraud or inducing plaintiffs to purchase the property. The plaintiffs' walk-through readily displayed the unfinished nature of the home. The statements that the home was a "One of a Kind Custom Built Home[,]" which was in "average condition" and "ready for delivery" merely represent unactionable opinion rather than actionable factual misrepresentations. Rodio v. Smith, 123 N.J. 345, 351 (1991); Daibo v. Kirsch, 316 N.J. Super. 580, 589-91 (App. Div. 1998). Also, based on this record, we cannot discern the materiality, in forming plaintiffs' decision to purchase the home, of the incorrect representation regarding the existence of the homeowner's association.
Therefore, summary judgment would have been appropriate had plaintiffs' complaint been grounded solely on the MLS listing. However, we view differently the claims bottomed on (1) the deviation from the architect's design plan; (2) the nonconformity with the manufacturer's installation of the roof trusses; (3) and the representations regarding correction of the water seepage and other major deficiencies. The proofs surrounding these issues implicate the real estate agent's duty to disclose material facts shaping a buyer's decision to purchase a home.*fn4
The contract contained specific representations that the home would be constructed in accordance with the architectural plans drawn by John Bishop. The inclusion of this express clause in the addendum by plaintiffs shows it was a motivating factor in plaintiffs' decision to purchase this home. Additionally, Calabrese, although uncertain, believed he discussed the plan deviations with Lepore and then specifically mentioned the changes, including changes in the recommended truss installation, in the memorandum he sent to Lepore. Further, Calabrese admitted some of these changes modified the structure of the home.
Contrary to the motion judge's finding, a deviation from the stated plans would not have been revealed in plaintiffs' home inspections. Thus, a finding of Lepore's silence on this issue evinces a fraudulent representation and a failure of an implicit condition of the sale. Moreover, a finding of Lepore's willful failure to disclose that the home's construction was not as represented, prior to the execution of the contract, establishes an essential element of the alleged causes of action for fraud and consumer fraud. See Tobin v. Paparone Constr. Co., 137 N.J. Super. 518, 526 (Law Div. 1975) (a purchaser may establish a common-law claim by showing the seller's or broker's nondisclosure of material facts induced the purchaser to buy); see also N.J.S.A. 56:8-2; Cox v. Sears Roebuck & Co., 138 N.J. 2, 18 (1994) (if consumer fraud consists of an omission, a plaintiff must show a defendant acted with knowledge). Consequently, the extent and nature of Lepore's knowledge of the deviations was critical to determine plaintiffs' causes of action. Resolving such a factual dispute, along with the determination of whether the design deviations resulted in the structural flaws that caused plaintiffs' ascertainable loss, remain for the fact finder.
Additionally, it is for a jury to determine whether Lepore made specific representations to plaintiffs regarding Calabrese's claimed correction of the defective conditions, including water seepage into the basement, along with whether those representations were false and had the "capacity to mislead" plaintiffs. Cox, supra, 138 N.J. at 17. The depositions of Lepore, Calabrese and plaintiffs reveal factual differences in what Calabrese claims he told Lepore and what Lepore reported to plaintiffs. Lepore denies he made any representations regarding the completion of the repairs during closing in direct conflict to plaintiffs' assertions, necessitating presentation with a jury.
We conclude the evidence submitted by the parties on the motion, after giving plaintiffs all legitimate inferences therefrom, sustain triable issues of fact favoring submission to a jury. R. 4:46-2(c). Accordingly, we reverse and remand the matter to the Law Division for trial on plaintiffs' causes of action.
Reversed and remanded.