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Joel H. Moskow and Carol Moskow v. K. Hovnanian At Jackson

August 3, 2012

JOEL H. MOSKOW AND CAROL MOSKOW, PLAINTIFFS-APPELLANTS,
v.
K. HOVNANIAN AT JACKSON, LLC,
DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-256-11.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: May 2, 2012

Before Judges Axelrad, Sapp-Peterson and Ostrer.

Putative class action plaintiff home buyers appeal from summary judgment dismissal of their complaint against the developer alleging common law fraud, negligent representation, negligence, breach of the implied covenant of good faith and fair dealing, and violations of the New Jersey Recording, Consumer Fraud, and Retirement Community Full Disclosure Acts. Plaintiffs had alleged that defendant improperly inflated the purchase price of their home based on the inclusion of upgrade decorator credits in the deed consideration, resulting in a higher tax assessment. We affirm substantially for the reasons stated by Judge E. David Millard in his written opinion appended to the order.

I.

Defendant, K. Hovnanian at Jackson, LLC, is the developer of a community known as Four Seasons at Metedeconk Lakes in Jackson, New Jersey (the community), which consists of approximately 785 single-family homes. Plaintiffs Joel and Carol Moskow*fn1 are individuals who purchased a single-family home from defendant in the community. This appeal arises out of that sale.

On or about March 6, 2006, plaintiffs entered into a contract of sale with defendant to purchase their new home. The purchase price for the property reflected in the sales agreement was $400,950. It is undisputed that defendant offered plaintiffs a sales incentive of $10,771.25, reducing the purchase price to $390,178.75. At that time, defendant agreed to give plaintiffs a $2,000 friends and family credit toward decorator selections at closing.

On October 26 and 27, 2006, plaintiffs and defendant executed three supplemental agreements to the purchase agreement: (1) an amendment; (2) a decorator selection credit addendum; and (3) a financing credit addendum. The amendment increased the $390,178.75 purchase price of the property to $429,913.75 to account for $39,735 of "decorator selections, options, custom changes, and upgrades" that plaintiffs had chosen. The amendment then excluded from the deed price nonrealty items, such as the "refrigerator, washer, dryer, [and] icemaker[,]" totaling $1460, and noted that "the purchase price to be reflected on the deed" was $428,453.75.

As reflected in the decorator selection credit addendum, defendant agreed to provide plaintiffs with a $37,735 credit toward the decorator selections and upgrades they had chosen, "[i]f Buyer satisfies all the conditions set forth in paragraph 2[.]" In pertinent part, paragraph two required plaintiffs to close title by the end of October 2006, use defendant's affiliates, K. Hovnanian American Mortgage, LLC (Hovnanian Mortgage) and Eastern Title Agency, Inc. (Eastern Title), to obtain a purchase money mortgage and title insurance, respectively.

In the financing credit addendum, the parties agreed that if plaintiffs satisfied all conditions, defendant would provide them with a $6,532.13 financing credit to be applied to closing costs. The financing credit addendum contained the same conditions as those set forth in the decorator selection credit addendum. Both the decorator selection credit addendum and the financing credit addendum provided that plaintiffs could select any lender or title company of their choice.

Plaintiffs purchased title insurance from Eastern Title and obtained a $300,000 mortgage from Hovnanian Mortgage. Plaintiffs submitted an initial mortgage application on October 6, 2006 and a final mortgage application on October 31, 2006. The uniform residential loan application submitted and signed by plaintiffs reflected the purchase price of the property was $429,913.75, and stated:

Each of the undersigned specifically represents to Lender . . . that: (1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misrepresentation of this information contained in this application may result in civil liability, including monetary damages, to any person who may suffer any loss due to reliance upon any misrepresentation that I have made on this application, and/or in criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Sec. 1001, et seq.

During the process, Hovnanian Mortgage had the property appraised by Central State Appraisal Services, LLC, which determined the value of plaintiffs' property as of October 17, 2006 was $441,000.

Plaintiffs closed title on the property on October 31, 2006. The purchase price listed on the deed and affidavit of consideration, as agreed to in the amendment to the purchase agreement, was $428,453.75. The HUD-1 uniform settlement statement signed by the parties at closing, as well as the closing statement prepared by defendant and signed by plaintiffs, reflected the contract sales price as $428,453.75, and indicated that defendant provided plaintiffs at closing with the family and friends, decorator selection, and financing credits. Joel certified that because plaintiffs were credited with $37,735, they never "paid" that amount, and they therefore paid a total of $390,718.75 for the property, exclusive of closing costs.

Joel also certified that he and his wife obtained the mortgage through defendant's affiliate "since [defendant] wanted us to close prior to the sale of our existing home and as an incentive [defendant] provided us with the financing credit. We did this for [defendant's] benefit to close on our new home before its year end." Moreover, he certified as to the events surrounding the closing:

On the date of the closing, there were more than two hundred purchasers waiting in the lobby, hallways and conference rooms at [defendant's] closing agent, Eastern Title, to close on various [defendant] properties.

The closing process was rushed to accommodate the substantial number of closings. . . . There was no opportunity for us to question the documents provided by [defendant] at the closing.

According to Joel's certification, Jackson Township performed a property tax reevaluation in 2008, and plaintiffs as well as other homeowners in the community experienced an increase in their property assessment. Moreover, he certified that defendant had occasionally included the decorator selection credit amount in the consideration for other buyers, notwithstanding that those purchasers "did not use its affiliated mortgage company and paid cash for the property but did obtain title insurance through the affiliated title company."

In January 20ll, plaintiffs filed a putative class action complaint on behalf of themselves and other current and future property owners seeking damages from defendant. They alleged that defendant's "inclusion of the credits in the Deed consideration amount is illusory and results in an artificial inflated value of the property by fictitiously representing a purchase price that includes illusory credit amounts." Plaintiffs thus alleged that the Jackson Township Tax Assessor used the "inflated and arbitrary consideration" recorded on the deeds to establish the fair market value of the properties in the community for tax assessment purposes. Accordingly, plaintiffs claimed that as a direct result of the purchase price listed in the deed, they and other members of the community had been "paying excessive property taxes on the property." Plaintiffs alleged violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-l to -20 (count one), fraud (count two), negligent misrepresentation (count three), negligently caused economic loss (count four), breach of the implied covenant of good faith and fair dealing (count five), and breach of the New Jersey Retirement Community Full Disclosure Act, N.J.S.A. 45:22A-1 to -20 (count six).

On May 6, 2011, in lieu of an answer, defendant filed a motion to dismiss plaintiffs' complaint pursuant to Rule 4:6-2(e), or in the alternative, a motion for summary judgment pursuant to Rule 4:46. Plaintiffs filed a cross-motion for partial summary judgment, seeking a determination that defendant violated the Recording Act, N.J.S.A. 46:15-1.1 to -11. At oral argument on July 8, 2011, plaintiffs' attorney argued that by including the value of the decorator credit in the purchase price on the deed, defendant inflated the price, resulting in a higher tax assessment. He claimed defendant violated the Recording Act because "the Statute clearly applies only to consideration paid or to be paid, and [defendant] was not and did not get paid anything for the credits, the decorator selection credits." Plaintiffs' attorney acknowledged that "if I cannot demonstrate that there was a violation of the Recording Act, the rest of the Counts clearly -- the consumer fraud Count, the negligence, all the other Counts after that are hinged and linked to a violation of the Recording Act."

By written opinion and order of the same date, Judge Millard denied plaintiffs' motion for partial summary judgment, granted defendant's motion for summary judgment, and dismissed plaintiffs' complaint with prejudice. Judge Millard found the value of decorator credits was within the definition of consideration, and was lawfully included in the purchase price. He thus found defendant's actions did not constitute consumer fraud, common law fraud, negligent misrepresentation, negligence, a breach of the implied covenant of good faith and fair dealing, or a violation of the New Jersey Retirement Community Full Disclosure Act. Judge Millard further held that plaintiffs were unable to show they suffered damages as a result of defendant's alleged misconduct. This appeal ensued.

On appeal, plaintiffs argue:

POINT I

THE LOWER COURT'S JULY 8, 2011 ORDER MUST BE REVERSED BECAUSE DECORATOR UPGRADES NOT PAID FOR BY THE GRANTEE DO NOT CONSTITUTE CONSIDERATION TO BE INCLUDED ON THE RECORDED DEED PURSUANT TO N.J.S.A. 46:15-5(c). POINT II

THE LOWER COURT'S JULY 8, 2011 ORDER MUST BE REVERSED BECAUSE PLAINTIFFS' COMPLAINT ASSERTS VIABLE CAUSES OF ...


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