Opinion
DOCKET NO. A-3714-13T4
05-14-2015
WILLIAM S. LAUFER AND DAGNA LAUFER, Plaintiffs-Appellants, v. RICHARD A. FANUCCI, JR. AND CHRISTINA C. FANUCCI, BANK OF YORK, as Trustee for the Certificate Holders CWALT, Inc., Alternative Loan Trust 2006-17T1, Mortgage Pass-Through Certificate, Series 2006-17T1; JOHN L. HAGAN, LINDA S. HAGAN, SEAVIEW CORPORATION, MICHAEL W. HYLAND ASSOC., P.A., LANDAMERICA COMMONWEALTH, COMMONWEALTH LAND TITLE INSURANCE COMPANY OF NEW JERSEY, THE TITLE COMPANY OF ATLANTIC COUNTY, DESIGN LAND SURVEYORS, THOMAS N. TOLBERT, Jointly, Severally and in the Alternative, Defendants-Respondents.
Miller, Gallagher & Grimley, attorneys for appellants (George K. Miller, Jr. and Brittany J. Camp, on the briefs). McCrosson & Stanton, attorneys for respondents John L. Hagan and Linda S. Hagan (Dorothy F. McCrosson, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer, Hayden and Sumners. On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-4030-10. Miller, Gallagher & Grimley, attorneys for appellants (George K. Miller, Jr. and Brittany J. Camp, on the briefs). McCrosson & Stanton, attorneys for respondents John L. Hagan and Linda S. Hagan (Dorothy F. McCrosson, on the brief). PER CURIAM
Plaintiffs William and Dagna Laufer appeal from the trial court's September 19, 2013, order denying their motion to reconsider the court's June 11, 2013, order granting summary judgment dismissal of their complaint alleging common law and statutory fraud against defendants John and Linda Hagan. The suit arises out of the Laufers' January 2007 purchase of the Hagans' residential property in Egg Harbor Township. The Laufers allege the Hagans withheld information that a neighbor's driveway encroached upon the purchased property pursuant to a purported easement. Having considered plaintiffs' arguments in light of the record and the applicable principles of law, we reverse.
I.
We discern the following facts from the record, extending to plaintiffs all favorable inferences. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). The easement was described in a 1998 subdivision plan. The easement was depicted as a cross-hatched corridor along the northwest and northern edge of the property the Laufers purchased. The area was labeled "PROPOSED ACCESS AND UTILITY EASEMENT[.] PROPOSED LOT 33 FROM LOT 32[.]" However, the deed transferring title to William Laufer described in detail only a "sanitary sewer easement." The November 24, 2006, purchase contract between the Laufers and Hagans described the property as consisting of 1.25 upland acres and .96 acres of riparian grant, for a total of 2.21 acres. The property, minus the encroachment, consisted of 2.18 acres.
We note that the deed is to "William S. Laufer, a married man," while both William and his wife were parties to the purchase contract.
The purchase contract stated that the sale was "subject to easements and restrictions of record . . . and such state of facts as an accurate survey might disclose." The Laufers "agree[d] to order title insurance commitment (title search) and survey if necessary and to furnish copies to [the Hagans]." The Laufers were empowered to void the purchase if a survey disclosed an easement or restriction that "substantially interfere[d] with the use of the [p]roperty for residential purposes."
The Hagans knew the driveway encroached on their property before their transaction with the Laufers. Their neighbor, Richard Fanucci, originally began to install it sometime in 2003, in conjunction with the construction of his house. The Hagans protested. They relied on their February 4, 2000, deed from Seaview Corporation, which referred in detail only to a sanitary sewer easement. It did not refer to an access easement.
Mr. Fanucci and his wife were also named as defendants in the Laufers' action. However, the claim against them was resolved and is not before us. Although the property may have been jointly owned by both Fanuccis, for convenience we will refer to Mr. Fanucci as the property owner.
The Seaview-to-Hagans deed described the metes and bounds of the conveyed property, and generally referred to the subdivision plan, stating:
BEING KNOWN AS Lot 32, Block 9502 as shown on "Proposed Minor Subdivision, Tax Lots 31 and 33, Block 9502, Egg Harbor Township, Atlantic County, New Jersey", as prepared by Michael W. Hyland Associates, said plan dated 8/12/97, last revised 01/27/98 bearing Drawing No. H-4726 and duly filed with the Clerk of Atlantic County.The deed then referred to the easement, stating, "THE ABOVE DESCRIBED PREMISES subject to a sanitary sewer easement to the benefit of adjoining Lot 33, Block 9502 and described as follows[.]"
After providing the metes and bounds of the easement area, the deed specifically referred only to a sanitary sewer easement, stating: "THE ABOVE DESCRIBED being a sanitary sewer easement to the benefit of Lot 33, Block 9502, located on Lot 32, Block 9502 and as illustrated on the aforementioned proposed Minor Subdivision prepared by Michael W. Hyland Associates and bearing Drawing No. H-4726."
In response to the Hagans' inquiry, Fanucci asserted he was entitled to construct the driveway. The Hagans did not challenge Fanucci's interpretation of his rights. Rather, they filed a claim against their title insurer, Lawyers Title Insurance Corporation. Their title policy included no reference to the subdivision plan, or the access easement.
We express no opinion as to whether the easement did in fact grant the neighbor the right to erect a driveway along its path. The parties do not address whether the "access" easement was limited to the utility's ability to service its facilities within the easement, as opposed to granting the neighbor a right to access and construct a driveway along the easement — which conceivably could impede the utility's access.
Relying on an expert appraisal, the Hagans contended the access easement lowered their property's value by $250,000. The Hagans resolved their long-pending dispute with their title insurer on the eve of their sale to the Laufers. The Hagans accepted $83,000 in settlement of their claim two weeks before the closing.
Prior to selling the property, the Hagans did not disclose to the Laufers or the Laufers' attorney their title insurance claim, its settlement, or the fact that the Fanucci driveway was actually situated within the boundary of the Hagan property. Linda Hagan was a licensed real estate agent and served as the listing agent in the sale transaction. Neither of the Hagans, nor anyone on their behalf, expressly informed the Laufers of the purported access easement.
We acknowledge that Linda Hagan asserted in discovery that while touring the property with William Laufer, she orally disclosed to him that the driveway was located on her property. However, inasmuch as Laufer denies the conversation, we presume his version for summary judgment purposes.
The Hagans-to-Laufer deed included, virtually verbatim, the description of the property and easement found in the Seaview-to-Hagans deed. In other words, it referred explicitly and at length to a sanitary sewer easement. It was silent on the existence of an access easement. It included only a non-specific reference to the subdivision plan.
In advance of their closing, the Laufers received two title insurance commitments, one from Surety Title Agency of Atlantic County, effective December 1, 2006, and a second from LandAmerica Commonwealth originally dated December 29, 2006, but then dated January 31, 2007. Both commitments repeated the property description found in the deeds, expressly mentioning the sanitary sewer easement. Neither one expressly referred to an access easement.
The Surety Title commitment included an explicit exception for "encroachments . . . affecting title which would be disclosed by an accurate survey. . . ." The LandAmerica commitment did not. Instead, a survey was performed. The February 2, 2007, title insurance policy issued to William Laufer by Commonwealth Land Title Insurance Company, through its agent, the Title Company of Atlantic County, expressly excepted from coverage a "[p]ortion of concrete driveway erected over sanitary sewer easement" as "shown on a survey made by Thomas N. Tolbert, dated January 8, 2007." However, the Laufers alleged that Tolbert's survey did not accurately locate the easement, and only depicted a small section of Laufer's own driveway within the easement, and none of Fanucci's driveway.
Apparently, LandAmerica Commonwealth and Commonwealth Land are related entities. The Laufers also asserted claims against them, and Tolbert, which were settled and dismissed in February and March 2013. The Laufers also asserted a claim against the Title Company of Atlantic County, which was dismissed with prejudice in April 2014.
William Laufer noticed the reference to the sanitary sewer easement at the closing. He asked his attorney if he should be concerned about it. His attorney reassured him that the easement was not an issue.
The Laufers first learned that the driveway encroached upon their property several months after the purchase. They had hired an architect for a significant renovation of the home and landscaping. The architect's plans apparently depicted the Fanucci driveway on the easement.
In their July 2010 complaint, the Laufers asserted claims against the Hagans of common law fraud, equitable fraud, and violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to - 198. The Laufers alleged that the Hagans had a duty to disclose the encroachment of the driveway; they knowingly withheld that information; they did so with the intent to induce the Laufers to purchase the property; and the Laufers relied on that omission to their detriment. The Laufers sought compensatory and punitive damages and attorney's fees.
They also sought rescission of the sale, but they appear to have abandoned that claim.
After a period of discovery, the court granted the Hagans' motion for summary judgment dismissal. The court held that even if the Hagans failed to disclose the encroachment and their settlement with LandAmerica, the Laufers could not prevail on their common law fraud claim because the subdivision plan referred to the proposed access and utility easement, and the driveway was in place and readily observable. With respect to the common law claim, the court held, "Even assuming the scienter element of fraud had been established, the Court is not satisfied there was 'justifiable reliance' upon the omission." The Court noted the agreement of sale "was subject to easements and restrictions of record." The court also found that the Laufers were contractually obligated "to make a reasonable and diligent search of title records that would disclose liens and claims affecting the property."
In dismissing the CFA claim, the court held that it was "not convinced that the omission[] . . . was made 'knowingly with the intent that others rely upon such an omission' as required by N.J.S.A. 56:8-2." The court denied the Laufers' motion for reconsideration.
On appeal, the Laufers present the following issues for our consideration.
I. THE COURT BELOW MADE A MISTAKE OF LAW IN DENYING PLAINTIFFS CLAIM FOR VIOLATIONS OF THE CONSUMER FRAUD ACT, N.J.S.A. 56:8-2, AGAINST DEFENDANT LINDA HAGAN, A LICENSED REALTOR.
II. THE COURT BELOW MADE A MISTAKE OF FACT IN FINDING THAT THE OBSERVABLE NATURE OF THE DRIVEWAY WAS COMMENSURATE WITH THE EASEMENT AND ENCROACHMENT ALSO BEING OBSERVABLE.
III. THE COURT BELOW ERRED IN APPLYING THE LAW FOR COMMON LAW FRAUD TO THE [UNDISPUTED] FACTS OF THE CASE.
IV. THE COURT BELOW ERRED IN APPLYING THE LAW FOR INTENTIONAL BREACH OF DUTY TO DISCLOSE TO THE UNDISPUTED FACTS OF THE CASE.
V. THE COURT BELOW ERRED IN APPLYING THE LAW FOR FRAUDULENT CONCEALMENT TO THE UNDISPUTED FACTS OF THE CASE.
II.
We review the trial court's grant of summary judgment de novo, applying the same standard as the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). We determine whether the moving party has demonstrated the absence of genuine issues of material fact, and whether the trial court has correctly determined that movant is entitled to judgment as a matter of law, owing no deference to the trial court's legal conclusions. N.J. Dep't of Envtl. Prot. v. Alloway Twp., 438 N.J. Super. 501, 507 (App. Div. 2015).
The Laufers' common law and statutory claims are governed by well-settled principles. The elements of common law fraud are: "(1) a 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 (1997).
"The suppression of truth, the withholding of the truth when it should be disclosed, is equivalent to the expression of falsehood." Strawn v. Canuso, 140 N.J. 43, 62 (1995) (quoting Berman v. Gurwicz, 189 N.J. Super. 89, 94 (Ch. Div. 1981), aff'd o.b., 189 N.J. Super. 49 (App. Div.), certif. denied, 94 N.J. 549 (1983)), superseded by statute, L. 1995, c. 253, as recognized in Nobrega v. Edison Glen Assocs., 167 N.J. 520, 529 (2001); see also N.J. Econ. Dev. Auth. v. Pavonia Rest., Inc., 319 N.J. Super. 435, 446 (App. Div. 1998) ("Deliberate suppression of a material fact that should be disclosed is equivalent to a material misrepresentation (i.e., an affirmative false statement).").
Reliance must be actual and justifiable under the circumstances. Walid v. Yolanda for Irene Couture, 425 N.J. Super. 171, 181 (App. Div. 2012). "One who engages in fraud . . . may not urge that one's victim should have been more circumspect or astute." Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619, 626 n.1 (1981). On the other hand, one who chooses to investigate the facts for himself, and discovers the omission or the falsity of a representation, may not assert reliance on the omission or misrepresentation. Walid, supra, 425 N.J. Super. at 182.
To state a claim under the CFA, a plaintiff must allege unlawful conduct, an ascertainable loss, and a causal relationship between the unlawful conduct and the loss. Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., 192 N.J. 372, 389 (2007). Unlawful conduct includes 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." N.J.S.A. 56:8-2. It is undisputed that the CFA governs the Hagans-to-Laufer sale because Linda Hagan acted as a licensed real estate agent in the transaction. Vagias v. Woodmont Props., 384 N.J. Super. 129 (App. Div. 2006).
For purposes of this appeal, we accept the Laufers' allegation that the Hagans withheld information about the purported access easement and the driveway encroachment. However, we recognize that the issue is subject to a genuine dispute, inasmuch as Linda Hagan asserted in deposition that she orally disclosed the encroachment.
We also assume the Hagans withheld the information knowing the omission created a false impression of the property, intending that the Laufers rely on the omission. The Laufers presented sufficient circumstantial evidence to prove the prerequisite scienter. See Millison v. E.I. Du Pont de Nemours & Co., 101 N.J. 161, 196 (1985) (stating that proof of knowledge may be by circumstantial evidence). This circumstantial evidence included the Hagans' apparent awareness of the omission in the Seaview-to-Hagans deed, and their failure to amend the Hagans-to-Laufer deed.
The Hagans asserted a claim against their title insurer. They obviously attached great value to the omission, as they claimed $250,000 in damages and ultimately accepted $83,000 in settlement. Given that settlement, the Laufers established for summary judgment purposes that the omission was material, and their reliance resulted in damages or an ascertainable loss.
We recognize that the Hagans' damages may have been significantly greater than the Laufers', as a component of their damages was the visual degradation of their property resulting from the installation of the driveway. The Laufers were aware the driveway existed. Whether it was located on the other side of the property line may not have had a significant visual impact.
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The Hagans essentially ground their request for summary judgment on the claim that the Laufers' reliance on the omission was not reasonable. In support, they assert the driveway was visible; the sale was subject to encroachments that a survey could disclose; the Laufers agreed to obtain a title search; and they had constructive notice of the access easement based on the reference to the subdivision plan in the deed and the title commitments. The Hagans also assert that the Laufers could have discovered the encroachment had they obtained an accurate survey before closing.
We are unpersuaded. The Hagans may not escape liability for their omission by invoking the contract provision that the sale was subject to easements and such state of facts as an accurate survey might disclose. The Hagans had knowledge of the encroachment. Presumably, an accurate survey may have disclosed it. However, the Hagans may not avoid liability for their intentional omission by relying on the buyers' failure to discover it.
Nor may they avoid liability by resting on a contractual provision that absolves the sellers of responsibility for omissions that the sellers could have discovered by an accurate survey. "[A] party to an agreement cannot, simply by means of a provision in the written instrument, create an absolute defense . . . in an action based on fraud in the inducement to contract." Bilotti v. Accurate Forming Corp., 39 N.J. 184, 204 (1963) (internal quotation marks and citation omitted). Similarly, a "no representations" clause does not preclude introduction of earlier explicit misrepresentations, if the facts were "peculiarly within that party's knowledge and were, in fact, intentionally misrepresented." Walid, supra, 425 N.J. Super. at 185-86.
The Laufers complied with their contractual obligation to obtain title commitments. One of the insurers obtained the Tolbert survey; however, it apparently failed to disclose the encroachment. Thus, this is not a case where a plaintiff's own investigation disclosed the truth. Nor did the general, non-specific reference to the subdivision plan result in actual notice to the Laufers of the "access and utility easement." There is no evidence the Laufers viewed the subdivision plan. Moreover, the reference to the subdivision plan was made only in describing the property in general, and in describing the source of the sanitary sewer easement. There was no indication in the deed that the plan included additional restrictions on the use of the property.
On the other hand, the title commitment and deed specifically identified and described a sanitary sewer easement. It was silent on the purported right of the neighboring property owner to erect and maintain a paved driveway within the boundary of the purchased property. William Laufer asserted that he was aware of the partial disclosure of a sanitary sewer easement, and relied on assurances that the easement, so limited, was not a matter of concern.
It is of no moment that the driveway was in place when the Laufers agreed to purchase the property. While the driveway was visible, its location within the boundary of the Hagans' property was not discernable to the naked eye. It is the location of the driveway within the easement that was withheld.
In sum, we are satisfied that the Laufers have presented sufficient and competent evidence to permit a jury to find that they have established the elements of common law fraud by omission, and an unlawful practice causing an ascertainable loss under the CFA.
Reversed and remanded. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION