Court Awards Attorney Almost $100,000 Less Than He Requested In New Jersey Consumer Fraud Act Case

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Legal fees (pd)I recently wrote about Garmeaux v. DNV Consepts, Inc., a case in which the Appellate Division held that, under New Jersey's Consumer Fraud Act, successful plaintiffs can, in certain circumstances, recover legal fees they incurred in connection with both the prosecution of their affirmative claims and the defense against any counterclaims. If the facts relevant to a counterclaim are "inextricably caught up with," and related to the common core of, the facts relevant to an affirmative CFA claim, then legal fees can be awarded for both claims. In another recent decision, Riccardi v. Bruno, the Appellate Division addressed a similar issue but arrived at a result that was less favorable to plaintiff than the result in Garmeaux.

In Riccardi, plaintiff purchased a home from one of the defendants. The home had been damaged in a fire and required "extensive renovations" before being put on the market. (Although it was not listed as having been fire damaged, the certificate of occupancy issued by the township at the closing noted "rehab after fire.") After the closing, plaintiff allegedly discovered numerous problems with the house, including mold, burnt and fractured joists, and damaged foundation walls. He sued the seller and several related entities (architect, contractor, home inspector, etc.), alleging breach of contract and a violation of the CFA.

Default was entered against several defendants for failing to answer the complaint, and the claims against several others were dismissed either by summary judgment or at the close of plaintiff's case in chief. The jury then determined that the two remaining defendants — the prior owners of the property — violated the CFA. The jury's verdict was based on a "knowing concealment, suppression, or omission of a material fact with the intent that other would rely upon that fact." (The decision does not identify the fact that was omitted.) The jury found no cause of action under the CFA based on an unconscionable commercial practice, fraud, false pretense, false promise , or misrepresentation. And, it awarded plaintiff only $4,500, which was "attributable to the cost to repair a damaged window frame and to dispose of buried construction litter."

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When Was The Last Time You Sent A Letter Via Telegram?

Telegram (PD)
I have never sent a telegram and would not know how to send one even if I wanted to. But, if you are so inclined, there is a somewhat quirky provision of New Jersey real estate law that would allow you to dust off your telegram machine and send one. This provision was the subject of a recent Appellate Division decision, Conley v. Guerrero, that attracted significant attention from the real estate community and may end up before the New Jersey Supreme Court. 

Anyone who has bought or sold real estate in New Jersey is familiar with "attorney review." When you buy or sell a house, you sign a contract that is almost always prepared by a broker. The contract must contain a standard provision stating that the buyer and seller have the right to have an attorney review the contract. This "attorney review" period lasts three days. The contract becomes legally binding if, at the end of that three-day period, neither the buyer's nor the seller's attorney disapproves of the contract. If either side disapproves, their attorney must notify the other side's broker by "certified mail, telegram or by delivering it personally." The attorney must also notify the other attorney (or the party itself if they are not represented), but the law does not specify the manner in which this notice must be delivered. (Stay tuned for more on this later!)

In Conley, plaintiffs signed a form contract to purchase a condominium unit from sellers. It contained the standard "attorney review" provision. After signing the contract, but during the attorney review period, sellers received competing offers to purchase the property and eventually entered into a new contract to sell it to a new buyer for a higher price. Sellers' attorney therefore sent a disapproval of plaintiffs' contract to both plaintiffs' counsel and the broker (who was a duel agent represented both plaintiffs and seller). He sent the notice of disapproval via email, which plaintiffs' counsel and the agent acknowledged receiving within the attorney review period. Nonetheless, plaintiffs argued that the notice was ineffective because it was not sent in the proscribed manner — by certified mail, telegram, or hand delivery.

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Appellate Division Holds That Buyer Can Sue Seller’s Broker For Failing To Relay Offer To Seller

by: Peter J. Gallagher (@pjsgallagher)

In a decision issued earlier this week, the Appellate Division reinstated a lawsuit against a real estate broker who failed to relay an offer from the buyer to its client, the seller. If you are thinking, as I was, "of course the court would do this, why wouldn't you be able to sue" then read on because the facts of the case make the trial court's decision to dismiss the complaint even more unbelievable. (Of course, at this point in the case, all we have are plaintiff’s allegations, which the court had to assume were true for purposes of evaluating the trial court’s decision on the motion to dismiss.)

In D'Agastino v. Gesher LLC, plaintiff wanted to buy a home in Jackson, New Jersey. The home, which had been foreclosed, was owned by the lender and was being offered for sale at $184,900. Plaintiff instructed his broker to contact the seller's broker and make an offer of $150,000. After receiving no response, plaintiff's broker faxed a written offer to the seller's broker, sent a confirming email to the broker, and eventually tried to contact the seller directly to confirm that the offer was received. None of these efforts were successful.

Seller's broker eventually responded and told plaintiff that the seller had lowered its price to $129,000 and suggested that plaintiff lower its bid. Plaintiff's broker said this "sounded fishy" and advised plaintiff not to lower the bid. Plaintiff took his broker's advice.

 

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When Do Condominium Associations Have Standing To Sue Under The Consumer Fraud Act?

by:  Peter J. Gallagher

In a recent decision, the Appellate Division restated and clarified the rules regarding when a condominium association has standing to sue a developer.  In Belmont Condominium Association v. Geibel, an association sued the sponsor/developer/contractor of the Belmont, a seven-story, thirty-four unit condominium in Hoboken, asserting common law fraud and negligence claims along with statutory claims under both the New Jersey Consumer Fraud Act (“CFA”) and The Planned Real Estate Development Full Disclosure Act (“PREDFDA”).  The claims arose out of the allegedly faulty construction of the Belmont, and certain pre-construction statements from the developer, including that it had “overseen the building and renovation of Over 400 Single Family & Condominium Homes.”  (Although largely irrelevant to the issues addressed by the Appellate Division, it turned out that the Belmont was actually the first building that the developer’s owner and general manager had ever constructed.)  As it relates to the faulty construction, the association alleged that the building was “plagued by water leaks” almost immediately after construction was complete.  These leaks impacted both the individual units and the common elements.  After years of repairs that did not correct the problem, the association sued the developer.  The association argued that construction defects were the cause of the water filtration, while the developer blamed the problems on poor and inadequate maintenance.        

Among other things, the developer in Belmont argued that the association lacked standing to bring claims under the CFA.  At the outset, the Appellate Division observed that New Jersey courts take a liberal approach to standing, and  have historically given wide recognition to suits by condominium associations.  It then analyzed the language of the New Jersey Condominium Act (“NJCA”) to determine whether the association had standing.  As it related to claims arising out of damage to the common elements, the Appellate Division held that the association had standing to sue because the NJCA vests condominium associations with the “exclusive right”(emphasis in original) to sue a developer for defects pertaining to the common elements, and generally prohibits individual unit owners from doing so. 

The Appellate Division rejected the developer’s argument that the association lacked standing because it could not demonstrate reliance by the original purchasers on any of the alleged misstatements.  On this point, the Appellate Division noted that reliance is not an element required to sustain a claim under the CFA.  The Appellate Division also rejected the developer’s argument that the association could only recover damages for the unit owners who actually sustained damage as a result of the developer’s alleged misrepresentations.  The Appellate Division held that because the NJCA allows associations to sue for damages to the common areas sustained by “any or all” of the unit owners, it was entitled to recover all of the damages necessary to repair any damages, not a prorated amount based on the number of unit owners who identified damages. 

However, the Appellate Division held that the association lacked standing to sue for damages to the individual units because the NJCA only vests it with authority to sue or be sued in connection with damages to common elements.  In Belmont, the damages associated with individual units all related to the windows, which the Appellate Division held were “personal to the unit owners,” and therefore not part of the Belmont’s common elements.  On this point, the Appellate Division reviewed the definition of common elements contained in both the NJCA and the master deed for the Belmont, neither of which identified windows as common elements.  Once the Appellate Division concluded that the windows were unit elements, not common elements, its decision on standing was a simple one because it had already concluded that an association has standing to sue for damage to common elements, but lacks standing to sue for unit elements.