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In Gennari v. Weichert Co. REALTORS®, the Appellate Division of the Superior Court of New Jersey addressed common law fraud and Consumer Fraud Act claims by homebuyers against a builder and a real estate brokerage. The court found that the builder was directly liable under both claims; it also used agency principles to find the brokerage liable under both claims for the misrepresentations of its agents.
Rumberg (Builder) was a co-owner of Timberline Property Development, which developed a subdivision called “Squire’s Runne.” Prior to this project, Builder had worked on several similar ventures located in Holmdel, Florham Park, and Mendham. However, Builder’s role in those projects was limited to a supervisory, not general contractor, position. As part of the Squire’s Runne project, Builder contracted with Weichert Co. REALTORS® (Weichert) to market the development. Builder’s wife, Ellen, was a co-owner of Timberline and a Weichert sales agent. Healey and Skoniezcy were also Weichert agents.
The disputed sales activity began in early 1986, when Healey informed her neighbor, Gennari, that the Squire’s Runne was being built by a builder who had constructed hundreds of homes and was a person of detail and craftsmanship. Healey also said that if Gennari acted quickly, she could get in at pre-construction prices. Gennari was impressed that Weichert, a large and reputable firm, was behind the development. When Gennari met Ellen, she was told that Builder had built hundreds of homes, demanded excellent quality, that he built homes in nearby Mendham, and that he was timely. Gennari also met with Builder who informed her that he built hundreds of homes and had recently finished a development in Mendham. On Gennari’s request, Healey went to see the homes in Mendham and reported that they were beautiful. In May 1986, Gennari signed a contract with Builder.
Three other families, the LaChappelles, the Mathews, and the Nestors had similar pre-signing activities. They were introduced to the development through Wiechert agents Ellen or Skoniezcy. They were told that Builder had built hundreds of homes, that he was detail oriented and used only the finest materials, and that he closed on time. They were also given an opportunity to view homes at the other developments which Builder allegedly constructed.
After signing, each of the four families experienced significant problems with their homes. None of the four closings was timely, major heat system problems existed in the homes, inferior grades of wood and windows were installed, floors were installed improperly and buckled, and water drainage and septic problems were present. The four families sued Builder and Wiechert alleging common law fraud and Consumer Fraud Act violations. At trial, Weichert was found liable for the Consumer Fraud Act claim. The court dismissed all other claims. Weichert appealed its liability and the plaintiffs appealed on the other claims.
The appellate division noted that real estate brokers and agents are subject to the Consumer Fraud Act, which allows for treble damages and attorney fees. The Act prohibits “deception, fraud, misrepresentation, or the knowing concealment, suppression, or omission of any material fact with intent that others rely upon [it], in connection with the sale or advertisement of . . . real estate, . . . whether or not any person has in fact been misled, deceived or damaged thereby. . . .” The court noted that when the alleged wrong is an omission or failure to disclose, the plaintiff must show knowledge on the part of the defendant, as intent is an element of that type of fraud. However, “where a broker or merchant makes an affirmative misrepresentation, the Act does not require a showing of knowledge of falsity or intent to deceive in order to hold the offender liable to the purchaser.” Further, the misrepresentation must be a material statement of fact, found to be false, made to induce the buyer to make the purchase. Thus, a real estate broker is strictly liable for any material misrepresentation of fact made to a purchaser.
The appellate division affirmed Wiechert’s liability under the Consumer Fraud Act, but reversed the lower court’s dismissal as to Builder. The appellate division noted that the plaintiffs were misled by Wiechert agents Healey, Ellen, and Skonieczy, as each made untrue affirmative statements regarding Builder’s reputation, experience, and qualifications. The court also note that there was no requirement that the plaintiffs investigate the qualifications and experience of Builder because they were entitled to rely upon Wiechert’s representations about Builder. Thus, the court held that Wiechert was liable under the Act and allowed treble damages.
The appellate division also addressed the dismissal of the common law fraud claims against Wiechert and Builder. Common law fraud in New Jersey requires: (1) material misrepresentation of . . . 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 damage. The court found Builder and Weichert liable for their misrepresentations and awarded compensatory damages against both. The court also addressed punitive damages, stating that to warrant a punitive award, the defendant’s conduct must have been wantonly reckless or malicious. It found that this element was lacking as to Weichert, but allowed consideration of punitive damages against Builder and Ellen.
Gennari v. Weichert Co. REALTORS®, 672 A.2d 1190 (N.J. Super. Ct. App. Div. 1996), aff'd, 691 A.2d 350 (N.J. 1997).
Editor's Note:
To see pre-1990 Broker Liability cases organized by jurisdiction, click here.
To see cites to pre-1990 cases applying State Consumer Protection Acts to Broker Liability, click here.