EILEEN NOBREGA, FRANK and ANNA
SCALISE, SALVATORE APUZZIO, JR.,
DORIS and KWONG AU, SAMUEL BASKINGER,
BONNIE BERTUCCI, BRUCE and RACHEL
BINKOWITZ, WILLIAM BLUESTONE, YVONNE
BRIX, PATRICIA BUSH, ROLAND and BETTY
CHANG, JIM and CHUEN CHU, ALICJA CIOBANU
and PAUL SZOTT, CORNELL and FRAN COCO,
DAN and CONNIE COLON, ROSE MARY CORRALES,
ALAN and BARBARA COSCARELLI, SCOTT and
CHRISTY DAVIS, ELAINE DeLORENZO, DIANE
DIGIULIO, ARLENE and BARRY FINK, STEVEN
and KATHLEEN FUSCHETTI, ELIZABETH GOMEZ,
WORSELEY and ULA GREENIDGE, HARRY GRIEFER,
MICHAEL and TERESA HAMMALAK, ANDRE and
MERITTA HERSCOVICI, MARILYN and GEORGE
HIGGINS, LINDA IONTA, STEPHEN E. and
AMY S. KANE, ARLENE KAPLAN, IRWIN, BARRY
and MURIEL KESHNER, CAROLYN B. KILPONEN,
BILL and TERRY KONCAR, FRANK KOWALEWSKI,
ALBERT and JEAN KUCHINSKAS, THERESA LEONARDIS,
JOHN and PHYLLIS MAFFUCCI, JOSEPH and CELIA
MANDEL, NATHAN and MOLLY MARKO, ESTHER
MULLALY, TERESA O'HARA, LEONARD OLEN,
VICTORIA MONTANINO ORTIZ, OSCAR and LOIS
PANNELLA, AUDREY PRESS, SUSAN PUHAN, DONNA
RANDO, YVES ROC, SCOTT ROSMARIN, KENNETH G.
SABLE, MARK and MIRTA SMOLAR, ZAIDA and ANGEL
SOTOLONGO, KATHRYN STANCO, STEWART THOMPSON,
VINCENT and CAROLYN VARCA, ANDREW and CAROLYN
VITTORIA, LARRY and ARLEEN WEISENSTEIN, DANA
ZAIFERT and EDWARD ZIMMERMAN,
Plaintiffs-Appellants,
v.
EDISON GLEN ASSOCIATES, a New Jersey
Partnership, ARIE HALPERN, DAVID
HALPERN, FRED HALPERN, JACK HALPERN,
MURRAY HALPERN, SAM HALPERN, JOSEF
PARADIS, HENRY STEIN, ESTATE OF HARRY
WILF, JOSEPH WILF, ERIC ROSENBAUM,
and PAUL VISSER,
Defendants-Respondents.
Argued October 19, 1999 - Decided January 21, 2000
Before Judges Pressler, Landau and Ciancia.
On appeal from the Superior Court of New Jersey,
Law Division, Middlesex County.
Dennis A. Estis argued the cause for appellants
(Greenbaum, Rowe, Smith, Ravin, Davis & Himmel,
attorneys; Mr. Estis, of counsel and on the
brief; Jessica R. Mayer, on the brief).
Frederick B. Polak argued the cause for respondents
(Post, Polak, Goodsell & MacNeill, attorneys;
Mr. Polak, of counsel; Christopher O. Eriksen,
on the brief).
John J. Farmer, Jr., Attorney General, filed a
letter memorandum at the request of the court
(Eileen P. Kelly, Deputy Attorney General, on
the letter memorandum).
The opinion of the court was delivered by
PRESSLER, P.J.A.D.
In Strawn v. Canuso,
140 N.J. 43 (1995), the Supreme Court
imposed upon residential developers and their agents the
obligation, both as a matter of common-law duty and under the
Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, to disclose to
prospective purchasers of new residential construction those
adverse off-site conditions known to them but not readily
observable to buyers that materially affect the subject of the
sale. In response to Strawn and less than five months after the
opinion was issued, the Legislature adopted the New Residential
Construction Off-Site Conditions Disclosure Act, N.J.S.A. 46:3C-1
to -12 (Disclosure Act), which severely limits the scope of the
disclosure obligation and applies those limitations retroactively
to all real estate transactions consummated before its effective
date except those in which a claim of actionable non-disclosure was
made prior to the date Strawn was decided. The Disclosure Act,
however, expressly excepts from its reach the obligation to make
those disclosures respecting off-site conditions that are imposed
by the Planned Real Estate Development Full Disclosure Act,
N.J.S.A. 45:22A-21 to -56; the Air Safety and Zoning Act of 1983,
N.J.S.A. 6:1-80 to -88; and "any other statutory provision."
N.J.S.A. 46:3C-10d. The primary issue before us is whether "any
other statutory provision" includes the provisions of section 2 of
the Consumer Fraud Act, N.J.S.A. 56:8-2. Since we conclude that it
does and hence that the Disclosure Act preserves intact the rights
of real estate purchasers afforded by the Consumer Fraud Act, we
need not decide in this action whether the retroactivity provision
of the Disclosure Act passes constitutional muster.
Because this action was dismissed on the basis of a motion
made under R. 4:6-2(e) (failure to state a claim upon which relief
can be granted), only minimally converted into a summary judgment
action under R. 4:46-2 by the submission of certifications, and
since no discovery had ever been apparently engaged in, much of the
factual background has remained undeveloped. The facts, as they
come before us, viewed indulgently to plaintiffs, see, e.g.,
Printing Mart-Morristown v. Sharp Electronics, Corp.,
116 N.J. 739,
746 (1989); Brill v. Guardian Life Ins. Co. of Am.,
142 N.J. 520,
540 (1995), may, therefore, be briefly stated. Plaintiffs are the
purchasers of condominium units in a condominium project in Edison,
New Jersey, known as Edison Glen Terrace and developed and
sponsored by defendant Edison Glen Associates, a New Jersey
partnership. The individually named defendants are the partners or
the estates of deceased partners. The plaintiffs bought their
respective units directly from the developer-sponsor between 1987
and 1991, the bulk of the sixty units here in issue having been
purchased between 1987 and 1989.
The condominium property is located in close proximity,
namely, within two miles, of two sites contaminated by hazardous
substances and, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980,
42 U.S.C.A.
§9601
to 9675, listed by the United States Environmental Protection
Agency (EPA) on the National Priority List for cleanup, rendering
them so-called Superfund sites. The first, a site formerly used by
Renora, Inc., was placed on the Superfund list in 1982, prior to
the construction of the condominium project, as the result of EPA's
determination that its storage containers for hazardous waste had
deteriorated, permitting the discharge of lethal toxins into the
soil and groundwater. The second site, owned by Chemical
Insecticide Corporation, was placed on the Superfund list in 1990,
after EPA determined that arsenic and other hazardous substances
used in its manufacturing processes had leached into the soil and
groundwater as a result of its illegal dumping of these materials
on the property.
Plaintiff Eileen Nobrega, the purchaser of one of the units
and the president of the condominium association, asserted that
sometime in 1992 or 1993, she first began to hear rumors of
contamination on the nearby industrial sites. She further asserted
that sometime in 1993 or 1994, she had information that some of the
unit owners who wished to sell were experiencing untoward
difficulties in doing so. At about that time, she claims, not only
had the resale of units come "to a virtual halt," but also
defendants had removed the remaining unsold units, about one
hundred, from the sales market, resorting to the strategy of
reserving them for rental to transients. The damages claim is
based on the substantial depreciating effect on the value of the
condominium units resulting from the proximity of the two Superfund
sites, a depreciation estimated by their appraiser as an average of
forty percent of what the market value should reasonably have been.
After futile discussions and negotiations with defendants,
plaintiffs finally consulted counsel, and this complaint was filed
in May 1997.
The gravamen of the complaint is simply that defendants knew
of the existence of the two Superfund sites, that plaintiffs did
not, and that defendants owed them the duty of disclosure of that
material fact before they bought their respective units. Five of
the six counts of their initial complaint were based on apparent
common-law causes of fraud and misrepresentation variously pleaded.
The remaining count pleaded a cause of action under the Consumer
Fraud Act, alleging that "[t]he Defendants have employed
unconscionable commercial practices and/or fraud or other unlawful
acts in connection with the sale and/or advertising of the units at
the Condominium in violation" of the Act.
Defendants' motion to dismiss on the pleadings was based on
their assertion that under the Disclosure Act, they were immunized,
and retroactively so, from all liability for non-disclosure of
hazardous off-site conditions. They relied on the scheme of the
Disclosure Act, which is to require persons who own, lease or
maintain a potentially dangerous off-site condition as enumerated
by the ActSee footnote 11 to provide the municipal clerk of each municipality in
which such a condition exists a list of those conditions and their
location on a form to be adopted by the Commissioner of Community
Affairs by September 1996, i.e., within one year after the
effective date of the Act, and to update the list as of August 31
of each succeeding year. N.J.S.A. 46:3C-5. In addition, the
Commissioner of Environmental Protection is required to provide the
municipal clerks with lists of such off-site conditions that are
within its jurisdiction and within the same time periods. N.J.S.A.
46:3C-6. The sole obligation of the seller of new residential
construction is to provide the prospective purchaser with a notice,
in a statutorily prescribed formulation, of the availability of
lists of off-site conditions in the municipal clerk's office and
the buyer's right to cancel the contract within five days after its
execution. N.J.S.A. 46:3C-8 and -9. The seller is, moreover,
completely immunized from liability for non-disclosure provided the
statutory notice is given notwithstanding the fact that the lists
have not yet been compiled by the municipal clerk, the municipal
clerk has not yet received the lists or made them available, or
there is any error or omission in the list. N.J.S.A. 46:3C-10a.
Finally, N.J.S.A. 46:3C-10c contains the retroactivity provision we
have referred to, and N.J.S.A. 46:3C-10d contains the exception for
the other statutes to which we have also referred.
Although the trial judge agreed with defendants that the
Disclosure Act effectively barred the plaintiffs' common-law
claims, he was initially of the view that the consumer fraud claims
survived. He reversed himself, however, on defendants' motion for
reconsideration, concluding that not having been specifically
referred to by N.J.S.A. 46:3B-10d, the Disclosure Act was intended
to override the Consumer Fraud Act. Plaintiffs appeal. We
reverse.
We recognize that an ambiguity respecting the Disclosure Act's
intended scope may result from the verbiage of N.J.S.A. 46:3C-10d,
which provides in full that:
The provisions of P.L.1995, c. 253
(C.46:3C-1 et seq.) shall not be interpreted
to affect the disclosure requirements for
conditions off-site contained in "The Planned
Real Estate Development Full Disclosure Act,"
P.L. 1977, c. 419 (C. 45:22A-21 et seq.), the
"Air Safety and Zoning Act of l983," P.L.1983,
c. 260 (C.6:1-80 et seq.) or in any other
statutory provision.
That is to say, while the Planned Real Estate Development Full
Disclosure Act and the Air Safety and Zoning Act are specifically
excepted, the general exception for "any other statutory provision"
may be subject to interpretation. In construing that phrase, we
note first that within the framework of the statutory provision as
a whole, the text may be restated, as was obviously intended by the
Legislature, to read "any other statutory provision requiring
disclosure of off-site conditions." And, as we discuss hereafter,
Strawn leaves no doubt that the Consumer Fraud Act, N.J.S.A. 56:8
2, is such a provision. On its face, then, it would clearly appear
that the Consumer Fraud Act is within the exception accorded other
statutory provisions imposing off-site disclosure obligations. We
are convinced, moreover, that this facial appearance is exactly
what the Legislature meant.
We base this conclusion not only on a parsing of the statutory
section and both legal precedent and public policy considerations
we discuss hereafter, but also, and primarily, on the clear and
unequivocal Statement of Governor Christine Todd Whitman in signing
the bill that became the Disclosure Act. After noting that the
purpose of the Act was to balance "the need for consumers to know
of the existence of off-site conditions and the need for sellers to
know the extent of their duty to disclose," the Governor states
that "[m]ost important, the bill accomplishes this, I am assured by
both sponsors and all interested parties, without interfering with
any remedies that may be available in appropriate cases to
prospective buyers under the Consumer Fraud Act, N.J.S.A. 56:8-1 et
seq., or any other relevant statute. Based on these assurances, I
have signed the bill." This overriding theme of preservation of
remedies afforded under the Consumer Fraud Act is reiterated by the
News Release issued by the Office of the Governor on September 18,
1995, which reviews several pieces of legislation she either signed
or vetoed on that date. In a short statement referring to the
Disclosure Act, signed that day by the Governor, the News Release
explains that "[i]n a statement of intent, Governor Whitman said
that the bill does not interfere with any remedies available to
prospective buyers under the Consumer Fraud Act."
In our view, nothing could be plainer or more unequivocal as
an exposition of legislative intent as understood by the Chief
Executive and as accepted by her in signing the bill into law. And
we rely on the Governor's Statement and the News Release issued by
her office first because such statements are customarily viewed as
legislative history appropriately considered by the court in
informing its statutory construction. See, e.g., Smith v.
Whitaker,
160 N.J. 221, 245 (1999); State v. Eisenman,
153 N.J. 462, 473 (1998); Cornblatt vs. Barow,
153 N.J. 218, 235 (1998);
State v. Brimage,
153 N.J. 1, 8 (1998). But we also rely on it
because the Governor's understanding of the Disclosure Act as
preserving home buyers' remedies under the Consumer Fraud Act is
consistent with this State's long-standing public policy of
affording consumers protection from unconscionable commercial
practices, with the extension of those protections to buyers of new
residential construction as part of the continuing and enlightened
recognition of the unjust consequences of the archaic doctrine of
caveat emptor as applied to real estate transactions, and with this
State's strong commitment to environmental safety and its affording
of redress to those who innocently suffer both personal and
economic loss as the result of environmental pollution.
It is readily demonstrable that these threads have been firmly
woven into the fabric of the economic and social consciousness and
expectations of the community by both the Legislature and the
courts. The courts have made it clear that as a matter of justice
and fair dealing, the buyers of new homes are entitled to the
benefit of an implied and far-reaching warranty of habitability,
see McDonald v. Mianecki,
79 N.J. 275 (1979); Schipper v. Levitt &
Sons, Inc.,
44 N.J. 70 (1965), and that sellers who have knowledge
of on-site conditions adversely affecting value have the duty of
disclosure thereof, Weintraub v. Krobatsch,
64 N.J. 445 (1974), and
that sellers are liable for making direct and affirmative
misrepresentations regarding such off-site conditions, Curtiss
Warner Corp. v. Thirkettle,
101 N.J. Eq. 279 (E. & A. 1927). The
Legislature, nearly a quarter of a century ago, significantly and
dramatically advanced the legitimate interests of home purchasers
by amending N.J.S.A. 56:8-2 of the Consumer Fraud Act to include
within its remedial scope, unconscionable commercial practices
involving the sale and advertisement of real estate. L. 1975, c.
294. And see generally Gennari v. Weichert Co. Realtors,
148 N.J. 582, 604-605 (1997). Moreover, the disclosures required by the two
statutes specifically referred to in N.J.S.A. 46:3C-10d were
expressly intended to protect certain classes of home buyers,
including purchasers of condominium and cooperative units, who have
little bargaining power against developer-sponsors. And the entire
complex of environmental protection laws and their liberal
interpretation by the courts evinces both the recognition of and
commitment to environmental safety and the redress of victims of
environmental contamination. See generally Citizens for Equity v.
Dep't of Env. Protection,
126 N.J. 391 (1991); Ayers v. Tp. of
Jackson,
106 N.J. 557 (1987).
It is in the context of this framework that we consider Strawn
and the responsive Disclosure Act. Strawn involved a claim for
damages by more than one hundred and fifty families who bought new
homes in close proximity to a hazardous-waste dump site, basing
their claims on "common-law principles of fraud and negligent
misrepresentation, and the New Jersey Consumer Fraud Act...." 140
N.J. at 49. In reviewing the development of the law affording
remedies to home purchasers, and particularly the purchasers of new
homes from professional sellers, i.e., builder-developers and their
agents, the Court concluded that an action would lie under both the
common law and the Consumer Fraud Act not only "for affirmative and
intentional misrepresentation" but also "for nondisclosure of off
site physical conditions known to it and unknown and not readily
observable by the buyer if existence of those conditions is of
sufficient materiality to affect the habitability, use, or
enjoyment of the property and, therefore, render the property
substantially less desirable or valuable to the objectively
reasonable buyer." Id. at 65.
In reaching this holding, the Court expressly rejected the
argument of the builder-developer-defendants that their liability
should be limited, vis-a-vis disclosure of off-site conditions, to
conduct constituting unconscionable commercial practices within the
Consumer Fraud Act,See footnote 22 concluding that nondisclosure would be
actionable as well under common law principles. We are persuaded
that it is only the applicability of common-law causes not
comprehended by the Consumer Fraud Act that the Legislature
intended to abrogate by passing the Disclosure Act. It is well
settled that while the Consumer Fraud Act imposes liability both
for affirmative misrepresentations and for omissions or failures to
disclose, ordinarily only affirmative misrepresentations may be
actionable if not made knowingly. Omissions of disclosure, to the
contrary, are actionable only if the defendant "acted with
knowledge," that is, the failure to disclose was intentional.
Gennari v. Weichert Co. Realtors, supra, 148 N.J. at 605; Chattin
v. Cape May Greene, Inc.,
243 N.J. Super. 590, 603 (App. Div.
1990), aff'd o.b.,
124 N.J. 520 (1991). We are satisfied that it
was preservation of the element of intent, which results in
imposition of a more fairly certain and ascertainable obligation of
the seller, that was the Legislature's primary concern. Indeed, it
so implied in its statement of findings and declaration, N.J.S.A.
46:3C-2, which reads in full as follows:
The Legislature finds and declares that
the purchase of a residence involves a
substantial portion of the average household's
net worth, and the decision to purchase a
particular residence requires consideration of
a wide range of factors concerning the area in
which the residential real estate is located;
that the professionals who engage in the
business of selling newly-constructed
residential real estate can facilitate prudent
decision-making with respect to the purchase
of residences by advising purchasers of the
availability of information concerning factors
which can reasonably be determined to exist
and which may affect the value of the
residence; that the due diligence responsi
bilities of purchasers and the disclosure
duties of sellers of residential real estate
are mutually interdependent and, therefore,
ambiguity in the definition and assignment of
the sellers' disclosure duties may
inadvertently diminish the due diligence
efforts of purchasers, or unnecessarily
increase the costs of residential real estate
transactions; and that there currently exists
ambiguity concerning the disclosure duties of
the sellers of residential real estate.
The Legislature therefore determines that
it is in the public interest to define the
entirety of the disclosure duties of the
sellers of newly- constructed residential real
estate and to create a public repository of
relevant off-site conditions which may be
accessed by purchasers of such real estate
[Emphasis added].
We are also satisfied that limiting the professional seller's
obligations and liability to those embraced and defined by the
Consumer Fraud Act meets its stated concerns and fully accommodates
the legislative purpose of striking a balance between the interests
of the new home purchaser and the builder-developer-seller.
We are mindful that the Disclosure Act, by its terms, does not
purport to address seller obligations respecting on-site
conditions. Nor does it purport to address affirmative misrepre
sentations respecting both on- and off-site conditions. Since
failure of disclosure is its sole subject, these matters do not
come within the ambit of the Disclosure Act. Thus the only
question is whether an intentional and knowing failure to disclose
material off-site conditions actionable under the Consumer Fraud
Act, as opposed to an innocent or negligent failure, is embraced by
the immunity of the Disclosure Act. We are convinced that an
intentional and knowing omission, so clearly constituting an
unconscionable commercial practice, was not intended by the
Legislature to be immunized. Such an immunization runs counter to
the jurisprudence and public policy that have consistently guided
the courts and the Legislature for more than a quarter of a century
in defining and expanding the rights of consumers and patently
constitutes a protection for unconscionable conduct that our
Legislature cannot reasonably be assumed to have intended.
We have thus come around full circle. The Governor understood
the Disclosure Act as preserving the remedies available to home
purchasers under the Consumer Fraud Act. For the reasons we have
stated, we are persuaded that that reading is consistent both with
the text of the Disclosure Act and its legislative purpose and
intent.
Plaintiffs have also challenged the retroactivity provision of
N.J.S.A. 46:3C-10d, arguing that it both impairs vested rights and
constitutes a manifest injustice. See Phillips v. Curiale,
128 N.J. 608 (1992). We need not address these arguments for two
reasons. First, survival of the Consumer Fraud Act claim
substantially blunts both prongs of the argument since plaintiffs
are not deprived of a remedy. Beyond that, the essential theory of
the claim that they advance, despite its disparate pleading, is in
essence consumer fraud, unaffected by the Disclosure Act. We
cannot, however, but note that if the Consumer Fraud Act were not
preserved, it would be anomalous indeed, if not draconian, that a
piece of legislation that purports to recognize the rights to and
expectations of new home buyers to fair dealing by the seller
developer and that purports to accommodate those rights to the
legitimate commercial needs of seller-developers would nevertheless
leave buyers whose transactions were consummated either before the
effective date of the Disclosure Law or whose transactions were
consummated prior to the date fixed therein for compilation and
distribution of the required lists with absolutely no remedy at
all, not even the limited remedy fashioned by the Disclosure Act.
Obviously such a result would not be an accommodation of competing
interests but rather the total disregard of the interests of a
substantial segment of one of the interest groups, the new home
purchasers. We do not believe that this is what the Legislature
intended.
As we have pointed out, there has not yet been any meaningful
discovery by which plaintiffs can attempt to demonstrate, at least
prima facie, the intent and knowledge of defendants in concealing
from them the close proximity to the condominium project of a
Superfund site, a fact which clearly adversely and materially
affected the use, enjoyment and value of their homes. They must
have that opportunity now. As Strawn suggests, defendants'
promotional materials, the facts surrounding their land use
applications to governmental boards and bodies, and the pertinent
communications between defendants and the New Jersey Departments of
Environmental Protection and Community Affairs, will, among other
avenues of inquiry, be highly relevant.
The summary judgment dismissing the count of the complaint
pleading a cause of action under the Consumer Fraud Act is reversed
and the matter remanded for further proceedings. In all other
respects the judgment appealed from is affirmed.
Footnote: 1 1N.J.S.A. 46:3C-3 defines the nine off-site conditions to which the Act is applicable as Superfund sites, hazardous discharge sites listed by the New Jersey Department of Environmental Protection, certain overhead transmission lines, electrical transformer substations, underground gas transmission lines, certain sewer pump stations and sewer trunk lines, sanitary landfills, public wastewater treatment facilities, and airport safety zones. Footnote: 2 2In restating the defendants' argument, the Strawn Court noted the congruence between the unconscionable commercial practices interdicted by the Consumer Fraud Act and conduct "shocking to the ethical sense of the community," within the intendment of Restatement (Second) of Torts § 551(2)(e) comment 1 (1977). Ibid. at 60-61.