DOCKET NO. A-3635-12T1
Daniel S. Jahnsen argued the cause for appellant (Bolan Jahnsen Dacey, attorneys; Mr. Jahnsen, on the briefs). Michael J. Convery argued the cause for respondents (Convery Law Firm, attorneys; Mr. Convery, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz, Maven and Hoffman. On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-832-09. Daniel S. Jahnsen argued the cause for appellant (Bolan Jahnsen Dacey, attorneys; Mr. Jahnsen, on the briefs). Michael J. Convery argued the cause for respondents (Convery Law Firm, attorneys; Mr. Convery, on the brief). The opinion of the court was delivered by MAVEN, J.A.D.
Plaintiff Suzanne Torres Dalmazio appeals from the trial court order granting summary judgment in favor of defendant Daniel Rosa (Rosa) and Dan Rosa Contracting (collectively defendants) and dismissing her complaint with prejudice. Plaintiff also appeals the September 19, 2012 order denying her motion for reconsideration. We reverse the grant of summary judgment dismissing plaintiff's common law fraud claim, but otherwise affirm.
Viewing the facts in the light most favorable to plaintiff, this action arises out of a real estate transaction between plaintiff and Rosa for a single-family residence (the property) located in the Leonardo section of the Township of Middletown. Rosa, an experienced, licensed builder and home remodeler, purchased the property with the initial intent to demolish and build a new house for his personal use. When it became apparent that environmental and construction approvals would be difficult and costly to obtain, he decided to renovate the residence.
At deposition, Rosa testified he oversaw the renovations to the house. He was on site every day and hired the subcontractors. He and two co-workers did the masonry and foundation work. As part of the renovations, Rosa created a new first floor on the lower level. To do so, the house was raised with jacks and while the house was suspended, Rosa and his crew built new foundation walls upon the existing foundation floor with cement blocks to a height of thirteen feet. Rosa then installed wooden girders on top of the foundation walls to support the house when it was lowered back onto the new foundation walls. Rosa also took down a concrete sun room attached to the back of the house to make way for a new addition of a garage and breezeway. He extended the foundation under the old sun room by installing a four inch slab of concrete to create the new floor, and applied tar that extended below ground to the foundation to create a waterproof barrier.
Rosa stated he sought clarification of the height requirements for the garage addition because the property is located in a floodplain zone. He testified he posed his inquiry to the assistant building inspector for a structure in the "Leonardo section," purposely so as not to identify his property. He stated he was told the requirement to build one foot above the floodplain height was no longer in effect.
Rosa did not have a construction permit for the foundation work "because we didn't know what we were doing. We knew we were raising the house, so plans weren't done because you don't know what you [are] doing. . . . It's a lot of things you don't know until the house is raised and plans come in[.]" According to Rosa, his architect, Catherine Franco (Franco), did not give him exact drawings, but she gave him sketches.
Rosa stated no municipal inspections were required, except for backfilling of the foundation walls where they were extended. He claimed he called the Township for an inspection of the block foundation and the Township conducted an inspection. However, he said the building inspector did not recall the inspection. Rosa provided no evidence of any Township inspection during discovery.
Ted Dalmazio, plaintiff's husband (Dalmazio), and Sandra Rosa, Rosa's wife, were both realtors with REMAX Paradigm Realty Group (REMAX) in Fair Haven. In 2004, Sandra showed Dalmazio the property while it was still under contract to Rosa. In June 2005, Rosa gave Dalmazio a tour of the property, to see the renovations and improvements he had made. Toward the end of the tour, Dalmazio expressed an interest in the property and told Rosa that if he ever considered selling the property to let him know. A day or two later, Rosa contacted Dalmazio to inform him he was interested in selling the property. At that time, Rosa told Dalmazio that since he was renovating the home for "his own personal use," the property was not listed on the multiple listing service.
Dalmazio and Rosa began to negotiate a contract in June 2005, and in December, 2005, plaintiff and Rosa executed the New Jersey Association of Realtors Standard Form of Real Estate Contract (the Contract), drafted by Dalmazio, whereby plaintiff agreed to purchase the property for $999,500. Section 20 of the Contract contained the inspection contingency clauses, including subsection (c), Buyer's Rights To Inspections:
Dalmazio testified he alone negotiated the Contract with Rosa. Plaintiff had no direct contact with Rosa or his attorney, with whom Dalmazio discussed the negotiations and attorney review issues. According to Dalmazio, the Contract listed plaintiff as the sole purchaser because they had always "done everything in my wife's name."
The Buyer acknowledges that the Property is being sold in an "AS-IS" condition and that this Agreement is entered into based upon the knowledge of the Buyer as to the value of the land and whatever buildings are upon the Property, and not on any representations made by the Seller, the named [b]roker(s) or their agents as to the character or quality. Therefore, the Buyer, at the Buyer's sole cost and expense, is granted the right to have the dwelling and all other aspects of the Property, inspected and evaluated by "qualified inspectors" (as the term is defined in paragraph (f) below) for the purpose of determining the existence of any physical defects or environmental conditions such as outlined above. If Buyer chooses to make the inspections referred to in this paragraph, such inspections must be completed, and written reports must be furnished to the Seller . . . and [b]rokers
. . . within n[ /]a calendar days after the end of the Attorney Review Period. . . . If Buyer shall fail to furnish such written reports to the Seller and [b]roker(s) within the time period specified in this paragraph, this contingency clause shall be deemed waived by Buyer, and the Property shall be deemed acceptable by Buyer.
The Contract reflects the insertion of "na" in the space provided on the pre-printed form.
In accordance with the attorney review provision, Rosa's attorney informed plaintiff's attorney that Rosa found the Contract "unacceptable," and proposed an addendum supplementing the Contract with the following relevant provisions:
1. [I]f there is any conflict between the Contract and this Addendum, this Addendum shall prevail. . . . The Contract and this Addendum shall be read together and constitute the entire agreement between the parties.
. . . .
8. As[-]Is Condition. The subject property is being sold in its "AS[-]IS" condition in all respects.
. . . .
11. Handrails & Bal[u]sters: Seller will install handrails and bal[u]sters around existing stairways inside the dwelling prior to closing.
. . . .
14. Renovations: The Seller represents and the Buyer acknowledges that the subject property was recently renovated. The Seller
has completed all renovations which it plans to complete as of the signing of this Contract except for the installation of the handrails and [balusters] located inside the dwelling. The balance of the renovations will be the Buyer's responsibility. The Purchaser acknowledges that the entire interior of the subject premises, but for the walls having been studded, needs to be completed, which includes, but is not limited to, insulation, sheet rock, plumbing, electrical, flooring, painting, trim, et cet[era], of (sic) which shall all be the Purchaser's responsibility to bring the condition of the premises to a final inspection for purposes of a Certificate of Occupancy. Therefore, the purchaser is buying this property strictly in "As[-]Is" condition as of the signing of this Addendum.On January 10, 2006, the parties signed the Addendum, and the closing took place on June 21.
As a realtor, Dalmazio knew the standard real estate contract included provisions that allowed for inspection of the subject property. Although he acknowledged he could have inspected the property if he wanted to, neither he nor plaintiff ever requested or arranged with Rosa to do so prior to closing. Dalmazio explained because Rosa intended to sell the property "as-is" he agreed that "[t]he contract with [Rosa] was no inspections. It was a straightforward deal. Property was under construction." Dalmazio explained inspection was not an issue because
[u]nder section 20 inspection contingency clause line 251 is where you insert the number of calendar days after the end of attorney review period within which you can inspect the property, and I put in N/A in there because it's not applicable. Because the deal with [Rosa] was that we bought it at the state that it was at no inspections because we do not get a C[ertificate] of O[ccupancy] because the house was unfinished.
Plaintiff was aware the Contract, prepared by her husband, included a provision giving them the right to inspect the property, but she understood that as part of the negotiations Rosa requested no inspections be done. She also understood they were buying the property "as-is" and, because they really wanted the property, they agreed to no inspections because "we wanted to finish the house ourselves."
Shortly after closing, the Dalmazios hired Franco to design an addition for the house "because she had been Rosa's architect." During their first meeting and walk-through of the property, Franco noticed several problems and commented that the property was not constructed in accordance with the design plans she had prepared. Sometime later, after receiving design plans for their proposed additions, Dalmazio sought construction bids from a contractor who told him the foundation was unusable and it was apparent to him that no inspections of the foundation had been completed. On the contractor's suggestion, Dalmazio contacted the Township to inquire if there had been any inspections on the property. He was told the Township had no record that the two required inspections of the foundations had been done. Dalmazio arranged for an inspection of the property by the Township and with Franco. During this inspection Franco noticed deficiencies in the foundation system.
In a January 2007 letter to a Township official supporting Dalmazio's request to demolish the property, Franco described several concerns with the structure, including that "there were only two anchor bolts connecting the sill to the foundation wall and a broken sill strap." She listed several code violations and unacceptable building practices. She opined "[i]t is impossible to repair or remediate the violations because of the manner in which the construction was done and the location of the violations." Franco characterized the construction method used to join the wood frame to the foundation as "unorthodox." Franco testified the defects with the property were open and not concealed. She stated the problems would have been evident upon inspection by a "good" home inspector or an engineer.
The Dalmazios also hired Harry S. Braich, P.E., a structural engineer, to check upon the property's "general structural adequacy in view of the structural deficiencies in the construction of the house." After inspecting the property in 2007 and again in 2008, Braich issued a "Structural Engineering Inspection" report concluding the property had multiple structural deficiencies too extensive and costly to repair. Braich based his conclusions upon reports from an excavation company and a land surveyor, as well as his review of Franco's letter and a report prepared by Rosa's engineer.
The excavator focused along the rear of the home and dug test pits to determine the existence of foundation under the addition. The excavation report verified the existence of waterproofing below the foundation. Braich testified the results of the invasive test pits showed "there are no foundations under the walls of the addition" and "the walls rested [on] a slab left from some concrete patio in the original house." He further concluded the four inch slab for the addition "ha[d] almost no foundation capacity."
The survey of the property revealed, among other things, the house was neither horizontal nor level. Moreover, the back of the house was several inches longer than the front. Braich explained the differential in elevation "[could] be corrected somewhat by jacking up the house, [however,] correcting it for being out-of-square is almost impossible." He agreed with Franco that demolishing and rebuilding the house properly would be the best option.
Plaintiff brought suit against defendants alleging various theories of fraud, fraudulent inducement, breach of contract, breach of the duty of good faith and fair dealing, breach of the implied warranty of habitability, and violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. Rosa denied the allegations and asserted a counterclaim seeking to recover on the $350,000 note plaintiff executed at closing for a portion of the purchase price of the property.
Upon completion of discovery, Rosa moved for summary judgment. He argued (1) the "as-is" nature of the sale precluded plaintiff's contract-based claims; (2) there was insufficient evidence of either common law fraud or violation of the Consumer Fraud Act (CFA); (3) defendant purchased the property in his personal capacity and, therefore, the CFA was inapplicable; and (4) Dan Rosa Contracting, Inc. was not a party to the transaction.
Plaintiff opposed the motion, arguing the "as-is" provision pertained only to the enumerated uncompleted work items; Rosa intentionally concealed the structural defects; and the CFA was applicable because a sufficient nexus existed between Rosa and his corporation through which he buys, renovates and sells homes. Plaintiff also asserted a factual dispute existed as to whether inspection of the property was permitted, and if so, whether the structural defects would have been observed.
The court granted Rosa's motion and issued a comprehensive written decision. On the contract claims, the court determined the "as-is" provision of the Contract was "unambiguous" and "[p]aragraph 11 delineates the parties' understanding about what is and what is not completed; it provides no guarantees about the [p]roperty's quality." The court concluded the "as-is" provision relieved Rosa of the obligation to disclose any defects in the property. The court further determined plaintiff failed to establish that Rosa frustrated the goals of the Contract. The trial court rejected plaintiff's claim for breach of the implied warranty of habitability because the Contract contemplated that the property was uninhabitable, in its incomplete state.
On the claim of common law fraud, the court acknowledged the parties disagreed on whether the Contract granted plaintiff the right to inspect the property. Nevertheless, viewing the facts in the light most favorable to plaintiff, the court determined plaintiff was not permitted to inspect the property. Accepting Franco's opinion, the court determined the alleged defects were reasonably observable. The court concluded plaintiff failed to show Rosa knowingly misrepresented the property's condition in an effort to induce plaintiff to purchase it.
With respect to the CFA claim, the trial court determined "Rosa's uncontroverted purposes in purchasing the property was to maintain it as his residence," and Dalmazio's testimony corroborated Rosa's intention. The court concluded plaintiff's CFA cause of action could not be sustained because Rosa bought and sold the property in his individual capacity, not as a commercial seller.
The court entered the order dismissing the complaint. Thereafter, plaintiff moved for reconsideration, rearguing that the CFA applied because Rosa sold the property as a commercial entity rather than as a private seller. In support of the motion, plaintiff submitted "newly discovered" evidence that purported to demonstrate that as part of his business practice, Rosa routinely represented to financial institutions his intention to reside in the properties he constructed in order to receive beneficial lending rates. Rosa opposed the motion and, in a cross-motion, moved for the court to disregard the evidence because the information had not been submitted in accordance with Rule 4:17-7. The court denied plaintiff's motion for reconsideration and granted defendants' application. It held the information was not newly discovered and plaintiff failed to establish why the information had not been submitted in accordance with Court Rules or in the response to defendants' motion for summary judgment.
On April 13, 2012, defendants voluntarily dismissed the claims against third party defendants Franco Architect, XL, and Franco, individually, without prejudice. Defendants reserved the right to vacate the dismissal and reinstate the claims against those parties if the order of summary judgment is vacated on appeal.
Rule 4:17-7 provides that "if a party who has furnished answers to interrogatories thereafter obtains information that renders such answers incomplete or inaccurate, amended answers shall be served not later than twenty days prior to the end of the discovery period." The party must submit a certification "that the information requiring the amendment was not reasonably available or discoverable by the exercise of due diligence prior to the discovery end date." Ibid.
On April 3, 2010, the court entered a consent judgment against plaintiff on defendant's counterclaim in the amount of $450,000, subject to post-judgment interest. The court also ordered plaintiff to execute a deed for the property to be held in escrow pending the outcome of this appeal.
Plaintiff raises four arguments for our consideration.
THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S CLAIMS UNDER THE CONSUMER FRAUD ACT.
THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S COMMON LAW FRAUD CLAIMS.
THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S CONTRACT AND IMPLIED WARRANTY CLAIMS.
THE TRIAL COURT ERRED IN DENYING PLAINTIFF'S MOTION FOR RECONSIDERATION AND STRIKING THE NEWLY DISCOVERED EVIDENCE.
After carefully considering the record, and oral argument before us, we are satisfied that the judge correctly granted summary judgment to Rosa on plaintiffs' contract, implied warranty of habitability, and CFA claims. We affirm substantially for the reasons expressed by the motion judge in the May 22, and September 19, 2012 written opinions. We add the following brief comments regarding those dismissed claims.
We agree with the motion judge that the Contract clearly evidences the plaintiff's intent to purchase the property in its unfinished condition, with the intent of completing the construction according to her own design plan. The Contract's delineation of the renovations yet to be completed indisputably indicated the property was not in a livable state. Thus, we conclude the court correctly dismissed the implied warranty of habitability claim. Moreover, the Dalmazios received the property in its unfinished condition for the express purpose of completing the work themselves. In that regard, plaintiff failed to establish Rosa breached the contract or otherwise frustrated the purposes of the transaction.
As for the CFA claim, the information plaintiff submitted on reconsideration included deposition testimony of the Rosas and the Dalmazios, as well as documents concerning another property owned by Rosa. As the court found, this was not new evidence but, rather, information that should have been submitted as an amendment to answers to interrogatories. The court did not mistakenly exercise its discretion by disregarding the late submission. R. 4:17-7. Our review of a trial court's evidential ruling is limited to examining the decision for abuse of discretion. Hisenja v. Kuehner, 194 N.J. 6, 12 (2008). As there was no credible evidence presented that Rosa acquired and sold the property for other than personal reasons, the CFA claim was properly dismissed. In reviewing the record on this issue, we discern no abuse of discretion by the judge.
We now turn to the dismissal of the common law fraud claim. In our de novo review of the motion's judge's grant of summary judgment, on the common law fraud claim, we employ "the same standard that governs trial courts in reviewing summary judgment orders." Davis v. Brickman Landscaping, Ltd., 219 N.J. 395, 406 (2014). Our task is to determine whether there are genuinely disputed issues of fact sufficient to defeat summary judgment and submit the resolution of the dispute before the trier of fact. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46-2. In undertaking that task, we "view the evidence in the light most favorable to the non-moving party . . . ." W.J.A. v. D.A., 210 N.J. 229, 238 (2012), without owing any special deference to the "trial court's interpretation of the law and the legal consequences that flow from established facts[.]" Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
In order to prevail on a fraud claim, plaintiff must prove (1) material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1996); Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619, 624 (1981). Plaintiff must prove each element by "clear and convincing evidence." Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div. 1989), certif. denied, 121 N.J. 607 (1990).
In the context of a real estate sale, a sufficient misrepresentation occurs if the seller fails to disclose "on-site defective conditions if those conditions were known to them and unknown and not readily observable by the buyer." Strawn v. Canuso, 140 N.J. 43, 59 (1995). The Court's subsequent decision in Gennari makes it clear that common law fraud requires proof in addition to violation of the duty to disclose — proof that the defendant "acted knowingly and with an intent to deceive"; in Gennari, the Court affirmed a judgment in favor of the defendant realtors on a claim of common law fraud because their conduct was not shown to be intentional. 148 N.J. at 610-11.
Plaintiff contends the court misconceived the effect of the "as-is" provision on Rosa's duty to disclose the defective condition of the foundation, and contends whether Rosa knew of the defects or purposefully concealed the defects are matters within the province of a jury. We agree.
Whether a legal duty to disclose the condition of the property exists is a matter of law. See Strawn v. Canuso, 271 N.J. Super. 88, 100 (App. Div. 1994). The Court has determined that in the sale of real estate the seller has a duty to disclose "on-site defective conditions if those conditions "[are] known to them and unknown and not readily observable by the buyer." Strawn, supra, 140 N.J. at 59. This affirmative duty relates to any known latent defective conditions that are material to the transaction. Weintraub v. Krobatsch, 64 N.J. 445, 449 (1974); Correa v. Maggiore, 196 N.J. Super. 273, 281 (App. Div. 1984). Accordingly, a contract that purports to sell real property "as is" or in its "present condition," is nevertheless subject to rescission or monetary damages where the seller fails to disclose or conceals material defects in the property which are actually known or constructively known to the seller, but not readily apparent to the buyer. Weintraub, supra, 64 N.J. at 454; Correa, supra, 196 N.J. Super. at 281. With these principles in mind, we conclude it was error to relieve Rosa of any responsibility to disclose the condition of the property based on the "as-is" provision.
There is sufficient evidence in the record from which a fact-finder can reasonably find that Rosa knew or should have known that the foundation was structurally infirm. The undisputed evidence establishes that Rosa, an experienced builder, oversaw the renovations to the property. He and his crew installed the foundation walls and concrete slab in the property without approved construction plans. Rosa knew the height requirements for the floodplain zone yet installed the girders at an improper height. Rosa knew the code required inspections of the foundations by the Township construction officials yet there is no proof of the inspections having occurred.
Plaintiff further claims that genuinely disputed issues exist on whether structural defects were observable or latent. Plaintiff relies on Correa to support her contention that Rosa's purposeful concealment of the defects warrant rescission of the Contract. On this, plaintiff contends Rosa had knowledge of or should have known of the alleged structural defects when he sold the house to plaintiff, and concealed the latent defect. However, viewing the facts in the light most favorable to plaintiff, we conclude there is sufficient evidence in the record from which a jury can reasonably infer that Rosa knew that structural defects existed.
The Braich report indicated visible and discernible signs that the house was "out-of-square" and neither level nor horizontal. Those observations tend to prove the foundation was not effectively supporting the house. Determining the extent of the defects to the structural system of the property required subterranean inspections. The undisputed evidence established that Franco and the building inspector discovered the structural damage after going into the crawl space under the house. The engineer's reported deficiencies were detected through excavation around the foundation of the property and invasive test pits. We are satisfied, based on these facts, that genuine issues of material fact exists as to whether the alleged structural defects in the property were "latent and not reasonably observable to the purchaser." Ibid. (citing Weintraub, supra, 64 N.J. at 455-56).
Next, we consider whether Rosa purposely and deliberately concealed the defects in the foundation. The evidence reveals Rosa has over thirty years of new construction and renovation experience. His testimony indicated a knowledge of construction code and building requirements. He inquired about the required floodplain height with the building inspector while in the course of constructing the foundation walls and floor. He intentionally sought the information by referring generally to the "Leonardo section" without disclosing the address for the property. Further, he stated he spoke to a construction official about the required foundation inspections, and that the inspections were conducted by the Township. These claims are not supported by the evidence in the record. A reasonable jury could infer from Rosa's conduct that he was being evasive with Township officials to avoid inspections of the property, all in an effort to deliberately conceal the defective condition of the foundation.
There is no "single, unavoidable resolution of the alleged disputed issue[s] of fact" that underlie the parties' contradictory assertions regarding these issues. Brill, supra, 142 N.J. at 540. Our review of the record convinces us that the evidence presented was sufficient to establish genuine issues of material fact as to the common law fraud claim. Accordingly, the order of the trial court dismissing the complaint as to the fraud claim is reversed. We reverse the grant of summary judgment on that claim and remand for further proceedings. We affirm the remaining provisions of the orders entered May 22, 2012 and September 19, 2012.
Affirmed in part, reversed in part and remanded. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION