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Reyes v. Egner

April 8, 2010

HERMES REYES AND LEONOR REYES, PLAINTIFFS-APPELLANTS,
v.
HARRY C. EGNER, HOLLY EGNER, AND PRUDENTIAL FOX & ROACH REALTORS, DEFENDANTS-RESPONDENTS, AND HARRY C. EGNER AND HOLLY EGNER, DEFENDANTS/THIRD-PARTY PLAINTIFFS, AND COLUMBIA REYES, THIRD-PARTY DEFENDANT/ FOURTH-PARTY PLAINTIFF,
v.
PRUDENTIAL FOX & ROACH REALTORS, FOURTH-PARTY DEFENDANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 404 N.J. Super. 433 (2009).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In Hopkins v. Fox & Lazo Realtors, the Supreme Court recognized the existence of a duty of care between a real estate agent conducting an open house to attract potential homebuyers and a member of the public who attended that open house. The issue before the Court in this case is whether the Hopkins duty of care should extend to the short-term lease of a summer rental facilitated through the services of a real estate agent.

In March of 2003, Columbia Reyes (Columbia) decided to rent a house at the Jersey Shore. She intended to occupy, along with her parents and other guests, the shore rental for a two-week period over the Labor Day holiday. Through the services of real estate broker, Prudential Fox & Roach (Prudential), Columbia leased a three-bedroom, two-bathroom single family home in Stone Harbor. Columbia did not visit the property before deciding to lease the property nor did she look at pictures or take a virtual tour. The home was owned by Harry and Holly Egner, who had listed their home with Prudential. Columbia and the Egners entered into a one-page lease typed on a Prudential form, entitled "Seasonal Short Term Lease Agreement." The lease specified that the property would be rented from August 23, 2003 through September 6, 2003. The rent was $4,050, payable in three advance installments. Prudential charged the Egners a commission of twelve percent, or $486.

The rental home has an elevated rear deck adjacent to the master bedroom that is approximately four-feet wide and leads to a six-step stairway connected to the ground below. The deck is accessible through sliding glass doors in the master bedroom, which open to a small wooden platform on the top of the deck. The platform is about seven inches below the bottom of the sliding glass door. There is another six-and-a-half-inch drop from the platform to the deck. The wooden boards of the deck and the platform run in the same direction and are essentially the same color, which is similar to the wood floor coloring in the master bedroom. There are no signs cautioning guests about the drop from the sliding door to the platform or from the platform to the deck. In addition, there are no handrails attached to either the platform or the deck. Neither the Egners nor Prudential inspected the property for dangerous conditions before the property was advertised for rental.

On the ninth day of their stay at the house, Columbia's father, Hermes Reyes (Reyes), opened the sliding glass doors to, for the first time, go out on the deck. Unaware of the drop and having no handrail to grab onto, Reyes lost his balance and fell down the stairs onto the ground, severely and permanently injuring his back.

Reyes and his wife (plaintiffs) filed suit against the Egners and Prudential, alleging negligence, breach of the implied warranty of habitability, and violations of the Consumer Fraud Act (CFA). The Egners filed a third-party complaint against Columbia, seeking defense and indemnification. Columbia filed a fourth-party complaint against Prudential, seeking contractual indemnification, as well as indemnification based on alleged breaches of fiduciary duty and CFA violations.

During the course of discovery, plaintiffs obtained the report of an engineering expert who concluded that there was a "lack of conspicuity" between the platform and the deck that created a dangerous condition. In addition, the expert opined that the lack of handrails also created a dangerous condition because there was no ability to use the handrail to abort the fall. In addition, plaintiffs' real-estate expert opined that Prudential had an obligation to examine the property to assure that the dwelling was safe and habitable, a duty that Prudential had breached. Prudential provided an expert report from a past chair of the Ocean County Board of Realtors who opined that Prudential had no obligation to conduct an inspection and that the rental agreement with the Egners did not impose such a duty. The Egners did not obtain expert opinion.

Several pre-trial motions by the parties were filed with the trial court. Prudential and the Egners filed motions for partial summary judgment on the issue of causation and plaintiffs cross-moved, seeking a determination by the court that the deck platform and the lack of handrails each constituted dangerous conditions. The judge denied the motions, finding that both the issues of causation and the existence of dangerous conditions were for the jury. On additional motions later filed, the trial court found that, as a matter of law, neither Prudential nor the Egners owed a duty of care to conduct a reasonable inspection of the property.

On the issue of the broker's duty of care to plaintiffs, the Appellate Division affirmed the decision of the trial court dismissing plaintiffs' claim against Prudential, finding that the Hopkins duty of care did not extend to the short-term lease of a summer rental facilitated through the services of a real estate agent. The appellate panel construed Hopkins as imposing a duty to warn of reasonably discoverable dangerous conditions only to potential homebuyers visiting during an open house. In declining to impose a duty on Prudential, the panel noted that Reyes had "raised several policy arguments for why a broker should be liable in tort for failing to perform an adequate inspection of rental property." The panel deferred to the Supreme Court to determine whether the duty found in Hopkins should be extended to short-term rentals.

The Supreme Court granted certification limited to the issue of the duty of care owed to the short-term lessee of a summer rental.

HELD: The members of the Supreme Court being equally divided, the judgment of the Appellate Division is AFFIRMED. The Hopkins duty of care to warn of any reasonably discoverable dangerous condition in the home does not extend to a real estate agent facilitating a short-term lease of a summer rental.

JUSTICE LaVECCHIA filed a separate CONCURRING opinion, in which CHIEF JUSTICE RABNER and JUSTICE RIVERA-SOTO join, stating that she and her concurring colleagues would affirm the judgment of the Appellate Division substantially for the reasons expressed in Judge Sabatino's thoughtful opinion. The disinclination to adopt an extension of Hopkins in this case arises not from a conviction that Hopkins must be limited strictly to the factual context of an open house to sell real property, as no such limiting determination need be made to resolve this case. Rather, her affirmance of the grant of summary judgment to Prudential hinges on the specific facts, the most central of which is that the Reyes family resided in the summer home for nine days before the injury to Hermes Reyes. Hopkins established the proposition that realtors owe a duty of care to protected invited visitors to a marketed piece of property from physical conditions that the nature and duration of their visit might not afford them the opportunity t o recognize for themselves. Here, a nine-day actual occupancy offered ample opportunity to the occupants to inspect and discern physical defects of the property. The facts of this case simply do not compel an extension of the Hopkins duty of care to plaintiffs' cause of action. Justice LaVecchia also takes issue with the dissents' suggestion that an extension of the Hopkins duty to inspect under the circumstances presented here would not impair the short-term rental market in New Jersey. To the contrary, expected increases in insurance premiums that would follow from an extension of the duty would impact the cost of short-term rentals.

JUSTICE ALBIN filed a separate DISSENTING opinion, in which JUSTICES LONG and WALLACE join, stating that the discordant results in this case and Hopkins are difficult to reconcile. The real estate broker, when holding an open house, has a duty to warn of dangerous conditions, even if receiving no financial benefit from the visitor, but has no corresponding duty to a short-term renter from whom a financial profit is made. This cannot be the result the Court had in mind in Hopkins. The failure to place on brokers a reasonable duty of care in the present case is a sharp departure from our evolving common law standards. Tort law does more than allocate costs among responsible tortfeasors; it also is aimed at reducing the number of preventable accidents. Simple economics, moreover, suggests that when imposing a duty of care results in fewer accidents, there will be fewer insurance payouts, which ultimately should lead to an overall reduction in insurance premiums. In short, imposing a duty of care should have no adverse financial impact on the short-term rental market. The logic and commonsense of Hopkins lead to an imposition of a duty on brokers to warn of reasonably discoverable dangerous conditions in the homes they are leasing to short-term renters. Moreover, whether Hermes Reyes had "ample opportunity" to discover the defect, or should have known of the defect, has nothing to do with Prudential's duty to warn. Rather, whether Hermes should have discovered the danger implicates the doctrine of comparative negligence, not duty, and therefore would be a question for the jury to determine. Justice Albin and his dissenting colleagues would impose a duty on brokers, like Prudential, to inspect and warn short-term renters of reasonably discoverable dangers on the premises.

Judgment of the Appellate Division is AFFIRMED.

JUSTICE LaVECCHIA filed a separate concurring opinion in which CHIEF JUSTICE RABNER and JUSTICE RIVERA-SOTO join. JUSTICE ALBIN filed a separate dissenting opinion in which JUSTICES LONG and WALLACE join. JUSTICE HOENS did not participate.

Per curiam.

Argued October 27, 2009

The members of the Supreme Court being equally divided, the judgment of the Appellate Division is affirmed.

JUSTICE LaVECCHIA filed a separate concurring opinion, in which CHIEF JUSTICE RABNER and JUSTICE RIVERA-SOTO join. JUSTICE ALBIN filed a separate dissenting opinion, in which JUSTICES LONG and WALLACE join. JUSTICE HOENS did not participate.

JUSTICE LaVECCHIA, concurring.

In Hopkins v. Fox & Lazo Realtors, 132 N.J. 426, 448 (1993), we recognized the existence of a duty of care between a real estate agent conducting an open house to attract potential homebuyers and a member of the public who attended that open house. Recognition of that duty of care was intended to ensure the safety of the visitors to the open house tour, limited to alerting open-house attendees "only to defects that are reasonably discoverable through an ordinary inspection of the home undertaken for purposes of its potential sale." Ibid. In the instant matter, the Appellate Division determined that the Hopkins duty of care did not extend to the short-term lease of a summer rental facilitated through the services of a real estate agent. Reyes v. Egner, 404 N.J. Super. 433, 466-67 (App. Div. 2009). We issued a limited grant of certification to review that determination, 199 N.J. 130 (2009), and now an evenly divided Court affirms the judgment of the Appellate Division that granted summary judgment to the agent. I, and the justices joining this concurrence, would affirm the judgment of the Appellate Division, substantially for the reasons expressed in the thoughtful opinion by Judge Sabatino, and briefly add the following to amplify why we decline to embrace, on these facts, the extension of the Hopkins duty of care that our dissenting colleagues would apply.

I.

Initially, we note, as did the Appellate Division, that plaintiffs*fn1 must obtain an extension of the duty of care that was announced in Hopkins in order to succeed in their action against the real estate agent in this matter. As Hopkins arose in the specific context of an open house conducted in connection with the sale of real property, to recognize a similar duty where a short-term tenant already has taken occupancy of a rental property plainly requires an extension of Hopkins. Our disinclination to adopt such an extension in this case arises not from a conviction that Hopkins must be limited strictly to the factual context of an open house to sell real property, as we need make no such limiting determination in order to resolve this case. Rather, our affirmance of the grant of summary judgment to the real estate agent ...


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