June 30, 2011
SCOTT DE POMPE, PLAINTIFF-APPELLANT,
WEICHERT REALTORS AND JEAN TOZZI, DEFENDANTS-RESPONDENTS, AND ACCU-SEARCH, INC., DATA TRACE, LLC, AND DANIEL TULLO, DEFENDANTS, AND TRANSAMERICA FLOOD HAZARD DETERMINATION, INC. AND TRANSAMERICA FINANCE CORPORATION, THIRD-PARTY DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1834-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 2, 2011
Before Judges Axelrad and R. B. Coleman.
Plaintiff Scott De Pompe appeals from (1) a June 16, 2009 order dismissing his claim against defendants Weichert Realtors (Weichert) and Jean Tozzi, a licensed realtor working with Weichert, for violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and (2) a January 27, 2010 order denying plaintiff's motion for reconsideration. After careful consideration of the relevant case law and the record, we reverse the order entered by the trial judge dismissing the CFA count and remand for further proceedings.
I. In April 2004, Daniel Tullo, the owner of a single family residence in Washington Township, (the property) entered into a real estate listing agreement and commission agreement with Weichert and Tozzi. In connection with the agreements, Tullo provided Tozzi with (1) a "Multiple Listing System Property Profile Sheet," which indicated that the property was not in a flood zone; (2) a "Seller's Property Disclosure Statement" where Tullo disclosed that he was not aware of any flooding problems affecting the property; and (3) a federal emergency management agency standard flood hazard determination prepared by third-party defendant Transamerica Flood Hazard Determination, Inc. (Transamerica), dated June 12, 2000, which indicated the property was not in a flood hazard area. Based on these representations and disclosures, Weichert submitted the listing to the Garden State Multiple Listing System, representing that the property was not in a flood zone.
In May 2004, plaintiff entered into a contract with Tullo to purchase the property and acquired a flood hazard determination from defendant Accu-Search, Inc. (Accu-Search), confirming that the property was not in a flood hazard area. On June 29, 2004, plaintiff purchased the property.
Two years after purchasing the property, while in the process of
refinancing his mortgage, plaintiff obtained an updated flood hazard
determination from Charles Jones, Inc. (Charles Jones). The report
from Charles Jones indicated that the property was located in a flood
hazard area. Plaintiff submits that the receipt of the Charles Jones
flood search is the first time he was made aware that the property is
in a flood zone. Defendant Data Trace, LLC (Data Trace)*fn1
thereafter confirmed that the property was in a flood hazard area. By letter
dated November 29, 2006, Mike Lidestri, a business analyst/flood
administrator for Data Trace admitted that after rechecking the flood
hazard status of the property, Data Trace had concluded the June 2,
2004 determination by Accu-Search was incorrect and the lot is in a
special flood hazard area.
Thereafter, on June 23, 2009, plaintiff filed a complaint against Tullo for rescission (count one); Weichert, Tullo and Tozzi, for common law fraud (count two); against Weichert and Tozzi for violation of CFA (count three); and against Accu-Search and its successor, Data Trace for negligence (count four). Weichert, Tozzi, Accu-Search and Data Trace filed answers, separate defenses and crossclaims. Tullo filed an answer and third-party complaint against Transamerica, settled that claim, and in March 2009, filed a stipulation of dismissal without prejudice.*fn2 On May 15, 2009, Weichert and Tozzi filed a motion to dismiss the third count of the complaint for failure to state a cause of action. By letter dated May 21, 2009 addressed only to counsel, plaintiff demanded Weichert and Tozzi withdraw their motion to dismiss pursuant to Rule 1:4-8 (Frivolous Litigation), arguing that the case on which Weichert and Tozzi relied, Neveroski v. Blair, 141 N.J. Super. 365 (App. Div. 1976), had been superseded by statutory amendment in 1976, N.J.S.A. 58:8-2, and that real estate salespersons were subject to the CFA.*fn3
On June 16, 2009, the trial judge, in a written opinion, granted Weichert and Tozzi's motion to dismiss count three with prejudice for failure to state a cause of action under the CFA. In the attached statement of reasons, the judge explained the services rendered by Weichert and Tozzi fell under the "learned professions" exception to the CFA and that real estate salespersons were exempt from the CFA as articulated in Neveroski.*fn4
On January 12, 2010, plaintiff filed a cross-motion for reconsideration of the June 16, 2009 order dismissing count three. The trial judge denied the cross-motion, explaining:
The reasons cited by the Plaintiff do not sufficiently establish that the court has expressed its decision upon a palpably incorrect or irrational basis. The court did not overlook the fact that the Neveroski case was written before the words "real estate" were added to the definition of "merchandise" in the Consumer Fraud Act. The court decided the issue of whether the learned profession exemption under the Consumer Fraud Act applied to realtors, and in deciding this issue, the court did not base its decision on incorrect reasoning. Moreover, the Plaintiff's motion for reconsideration is untimely under R. 4:49-2.*fn5
On June 17, 2010, plaintiff filed a notice of appeal from the orders entered on June 16, 2009 (dismissing the CFA claim) and January 27, 2010 (reconsideration). On November 5, 2010, Weichert and Tozzi filed a motion for summary disposition. We denied the motion on December 22, 2010.
II. The CFA makes the following acts unlawful, in connection with sale or advertisement of merchandise or, as here, real estate:
The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or 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 merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice.[N.J.S.A. 56:8-2 (emphasis added).]
The CFA was amended in January 1976 to include the phrase "or real estate" alongside the term "merchandise." N.J.S.A. 56:8-1(c).
Contrary to the above amendment, we held in Neveroski, supra, 141 N.J. Super. at 378-80, that real estate brokerage services did not fall within the scope of the CFA. There, a sale of a private home occurred before the CFA was amended to include the phrase "real estate." Id. at 369, 377. Without considering the amendment, we reviewed the definition section of the CFA, including the phrase, "or anything offered, directly or indirectly to the public for sale" N.J.S.A. 56:8-1(c), and concluded this phrase did not include real estate. Id. at 378. While recognizing that a broker provides "services," which are included in the Act, we explained that a broker's "semi-professional status" protects him from the CFA's coverage. Id.
at 379-80. The "learned professions" exception to the CFA was recognized as a result:
A real estate broker is in a far different category from the purveyors of products or services or other activities. He is in a semi-professional status subject to testing, licensing, regulations and penalties through other legislative provisions. Although not on the same plane as other professionals such as lawyers, physicians, dentists, accountants or engineers, the nature of his activity is recognized as something beyond the ordinary commercial seller of goods or services -- an activity beyond the pale of the act under consideration.
Certainly no one would argue that a member of any of the learned professions is subject to the provisions of the Consumer Fraud Act despite the fact that he renders "services" to the public. And although the literal language may be construed to include professional services, it would be ludicrous to construe the legislation with that broad a sweep in view of the fact that the nature of the services does not fall into the category of consumerism. [Id. at 379 (citations omitted).]
Significantly, in a footnote, we explained that we did not take into consideration the added amendment of the words "real estate" to the statute:
We note that on January 19, 1976, § 2 of the Consumer Fraud Act was . . . amended to provide that the use of any of the prohibited tactics "in connection with the sale or advertisement of any merchandise or real estate" shall constitute an unlawful practice bringing into play the statutory penalties. The Statement annexed to the bill reads:
This bill, which could be called the Truth in Real Estate Advertising Act, would correct the present omission of "real estate" from coverage under current statutes which provide effective procedures and penalties against misleading, deceptive or fraudulent advertising.
We do not consider this statement or the sponsor's statement as significant or persuasive on the question of the interpretation of the act prior to said amendment. Nor do we express any opinion as to the construction of the act as amended. [Id. at 377 n.3.]
Plaintiff argues that the trial court erred in relying on Neveroski as its basis to dismiss the CFA claim since it had been superseded by the statutory amendment. As a result of our review, we agree with plaintiff that the court erred as a matter of law in determining that the real estate services provided by Weichert and Tozzi are exempt from liability under the "learned professions" exception of the CFA.
The purpose of the CFA, to protect consumers against unconscionable "commercial" practices, clearly applies to professional brokers and agents who, regardless of whether their clients are professional sellers, are acting in a professional, "commercial" capacity. Byrne v. Weichert Realtors, 290 N.J. Super. 126, 131-32 (1996) (applying the CFA to real estate agents involved in the sale of property where termite infestation of a property was misrepresented).
In Blatterfein v. Larken Associates, 323 N.J. Super. 167, 171 (App. Div. 1999), we held that an architect's activity as a real estate seller is subject to the CFA. As part of a real estate merchandising scheme, an architect made misrepresentations about building materials to induce the purchase of a house. Ibid. We found that though he was an architect, he was operating as a real estate salesperson, which subjected him to the CFA. Id. at 183. We explained:
As remedial legislation, [the CFA] is to be liberally construed in favor of consumers.
With respect to the sale of real estate, notwithstanding our observations in Neveroski and in the light of the 1975 amendment of N.J.S.A. 56:8-2, the scope of the Act has been gradually broadened in the process of construal to apply to different persons and entities engaged in the sale of real estate, especially those involved in the sale of new homes. [Id. at 179 (internal citations omitted).]
In Blatterfein, we concluded that the plaintiffs made a prima facie showing sufficient to survive a motion for summary judgment concerning the architect's involvement in the marketing and sales efforts regarding the real estate they purchased. Id. at 183.
The Supreme Court held in Strawn v. Canuso, 140 N.J. 43, 60 (1995), superseded by statute on other grounds by N.J.S.A. 46:3C-1 to -12, that real estate brokers, agents and salespersons representing professional sellers of real estate were subject to the provisions of the CFA. Additionally, years ago the Court, in Gennari v. Weichert Co. Realtors, 148 N.J. 582, 606-13 (1997), found Weichert liable under the CFA, holding that N.J.S.A. 56:8-2 makes a New Jersey real estate broker strictly liable for any material misrepresentation of fact made to a purchaser.
In Hampton Hospital v. Bresan, 288 N.J. Super. 372, 379 (App. Div. 1996), we noted that "Neveroski was subsequently rendered obsolete by a statutory amendment that included within the Act deceptive practices in the sale of real estate." See also Finderne Mgmt. Co. v. Barrett, 402 N.J. Super. 546, 569 (App. Div. 2003) (holding that an insurance agent and accountant who acted as financial planners were not protected by the "learned professionals" exception to the CFA); Arroyo v. Arnold Baker & Assoc. Inc., 206 N.J. Super. 294, 296-97 (Law Div. 1985) (holding that Neveroski is no longer the law and that real estate brokers, agents and salespersons are subject to the CFA);
Gilmore v. Berg, 761 F. Supp. 358, 375-76 (D.N.J. 1991) (holding that a lawyer and an accountant acting outside of their professional capacity were answerable under the CFA for efforts to "sell" real estate).
Summary judgment is appropriate if "there is no genuine issue as to any material fact challenged and . . . the moving party is entitled to a judgment or order as a matter of law."
R. 4:46-2(c). See also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). As we have often recognized, an appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46. Ponte v. Overeem, 337 N.J. Super. 425, 427 (App. Div. 2001), rev'd on other grounds, 171 N.J. 46 (2002). "In determining whether there is a genuine issue of material fact for summary judgment purposes, the court must ascertain 'what reasonable conclusions a rational jury can draw from the evidence . . . .'" Ibid. (citation omitted).
Applying that standard here, we conclude that the trial court's grant of summary judgment was in error. Since Neveroski expressly failed to consider the 1976 amendment to the CFA, we believe that it is inapplicable to the facts at hand. By relying upon inapplicable case law, the trial court improperly found that the "learned professions" exception extends to Weichert and Tozzi and that they were entitled to summary judgment as a matter of law.
The "learned professions" exception to the CFA is still a limitation to the CFA, however, Weichert and Tozzi were unable to point to any post-Neveroski case applying the exception to agents or brokers of real estate. Weichert and Tozzi's contention, relying on Macedo v. Dello Russo, 178 N.J. 340 (2004), that the Act does not apply to real estate professionals, is misplaced. Macedo concluded that our jurisprudence and the Legislature differentiate between real estate professionals and members of the learned professions, such as medicine, dentistry, accounting, law and engineering.
Id. at 344. The Court observed that although the CFA has not been "amended to encompass the advertising of professionals[,] . . . the only major substantive change" to the substance of the CFA was a 1976 amendment that included "the sale of real estate in the definition of 'merchandise.'" Ibid. The term "sale" is, of course, defined broadly by the CFA to "include any sale, rental or distribution, offer for sale, rental or distribution or attempt directly or indirectly to sell, rent or distribute."
N.J.S.A. 56:8-1(e). Thus, Macedo affirms the viability of the "learned professional" exemption to the CFA, yet did not apply the exception to real estate brokers. Id. at 345-46.
Weichert and Tozzi, as professional sellers of real estate, are subject to the CFA for "affirmative misrepresentations even in the absence of knowledge of the falsity of the misrepresentation, negligence or intent to deceive." Gennari, supra, 148 N.J. at 605. Weichert is a real estate brokerage firm and Tozzi is a real estate salesperson and as such, the law in New Jersey does not support dismissing a CFA claim for acting in their professional capacity. Accordingly, the trial judge erred.
In light of the foregoing, we reverse the trial court's dismissal of the CFA count and remand for further proceedings.
Reversed and remanded.