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Strawn v. Incollingo

ELR Citation: 24 ELR 20774
Nos. No. A-4764-91T3, 638 A.3d 141/(N.J. Super. Ct. App. Div., 02/22/1994)

The court holds that the developer-seller of residential housing and its broker had a duty to disclose to potential buyers the existence of a nearby closed landfill, which was unknown to the buyers, was known or should have been known to the seller and/or its broker, and based on reasonable foreseeability, might have materially affected the value or the desirability of the property. In reversing the lower court's summary judgment for the seller and the broker, the appellate court holds that a jury could reasonably find that before the homes were sold to plaintiffs, the developer knew or should have known of the existence of the landfill and that it might contain hazardous waste. Eyewitnesses saw tankers dumping chemicals at the landfill, state officials observed leachate seeping from the landfill into a downstream lake, state and county investigators concluded that methane from the landfill had migrated to the backyards of some of the proposed or built homes, and the U.S. Public Health Service determined that the landfill poses a public health hazard. Relying on New Jersey precedent, case law from other states, and §551(2)(e) of the Restatement (Second) of Torts, the court holds that both the seller and the broker had a duty to disclose the existence of the landfill. The court holds that because the broker is an agent of the seller, its duty to the purchasers is at least coextensive with that of the seller. The court holds that imposing a duty of disclosure on the seller and the broker comports with modern notions of justice, fair dealing, and the sound public policy of protecting home buyers in large developments, who have limited bargaining power. The court notes that home buyers also tend to rely on the seller's and broker's knowledge concerning factors affecting the market value. The court holds that nondisclosure of a material fact where there is a duty to speak constitutes fraudulent concealment, and is equivalent to an expression of a falsehood. Consequently, the nondisclosure involved here is to be treated the same as an affirmative false statement insofar as claims for compensatory damages are concerned. The court notes that the developer and the broker also had a duty to disclose because they chose to use the environment beyond the boundary lines of the developments to sell or enhance the salability of the homes. The court rejects defendants' claim that plaintiffs should be charged with constructive knowledge of the landfill because its existence was open and notorious. The seller and the broker were experienced business people who, through the exercise of reasonable care, could have informed these relatively inexperienced buyers of the existence of the landfill. The court also notes that regulations of the New Jersey Real Estate Commission required disclosure by the brokers. The court notes that the determination of whether the seller and the broker breached their duty of disclosure and whether that breach materially affected the desirability or value of the homes are jury issues.

The court next reverses the lower court's summary judgment dismissing plaintiffs' claims of concealment, suppression, and omission based on the New Jersey Consumer Fraud Act. The court, however, affirms the lower court's dismissal of plaintiffs' claims under the Act alleging that the broker's brochures, newspaper advertisements, and fact sheets contained affirmative misrepresentations. The court affirms the lower court's dismissal of claims against the developer's officers because the record contains no evidence that the officers directed, participated, or cooperated in the misrepresentation. The court affirms the dismissal of one plaintiff's claims of common-law fraud and consumer fraud based on nondisclosure of the landfill, because the claims are covered by a release he signed. The court reverses the lower court's denial of class certification, and directs the trial judge to use the trial jury as an advisory jury on the Consumer Fraud Act claims.

[Counsel not available at this printing.]