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Daibo v. Kirsch

316 N.J. Super. 580, 720 A.2d 994 (App. Div. 1998)

EQUITABLE FRAUD—Equitable fraud ordinarily can not be based upon a statement as to the value of property because such a statement is ordinarily considered opinion, not fact.

A doctor purchased a one-third interest in a real estate investment from a developer which held the controlling interest. After a number of years, the doctor alleged he had been fraudulently induced to make the investment had paid an inflated purchase price. The lower court found that although the developer had no intention to defraud the doctor, the purchase price was in fact inflated and the doctor was entitled to receive a return of the excess amount because of equitable fraud. The Appellate Division reversed that finding. Unlike legal fraud, equitable fraud does not require proof that the representation was made with “knowledge of its falsity and an intention to obtain an undo advantage therefrom.” To recover based on equitable fraud, a plaintiff must prove reasonable reliance on a material representation of fact by clear and convincing evidence. The lower court found that the developer had no intent to defraud and made only an innocent misrepresentation by asserting a sincerely believed (but mistakenly inflated) value of the property in question. There was no contention that the developer misstated facts such as the amount of the property’s mortgage, overhead or rent. To the contrary, the lower court found only that the developer committed equitable fraud because of the grossly inflated equity estimate. The Appellate Division, however, found that the “estimate” was an expression not of fact but of opinion based on the developer’s assessment of value. Citing cases from other jurisdictions, it found that equitable fraud cannot be predicated on representations as to value. “A statement as to value of property is ordinarily considered opinion, not a statement of fact.” Consequently, where there was no “representation of fact,” there could be no equitable fraud.


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