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Ferrell v. America’s Dream Homes, Inc.

A-1151-08T1 (N.J. Super. App. Div. 2010) (Unpublished)

DEVELOPERS; CONSUMER FRAUD ACT — For a developer to have breached its obligations under the Consumer Fraud Act by virtue of making misrepresentations, its customer must prove that the developer knew that its representations were false at the time they were made and not merely that the representations were, in fact, false.

A couple, interested in purchasing a new home looked at property in a new residential development. The backyards of the units dropped off sharply because the development was to be constructed alongside a mountain. The developer told the couple that it would build a retaining wall to enlarge the usable space of the yard. Eventually, the couple signed a contract to purchase a home for $495,595, including a $50,000 lot premium representing the cost of the retaining wall. The couple received a site plan for their property. It confirmed that the developer had designed the home on their property to allow for the most usable land area. The plan showed the slope dimensions of the backyard up to the retaining wall. Another exhibit received by the couple showed a hand-drawn chain link fence bordering the retaining wall. The developer advised the couple that their home would be constructed in accordance with the drawings. The couple twice raised concerns about the contemplated and actual construction of the retaining wall and about the yard size. The developer offered to consider returning the couple’s deposit and to void the contract, yet the couple continued to prepare for their purchase despite their concerns. The developer advised that the wall it built met the contract and municipal requirements. The municipality issued a certificate of occupancy, and the closing took place. Seven days after closing, the couple conducted a walk-through of the property and prepared a punch list of items that needed correction. The list did not refer to the rear retaining wall or the yard.

More than three years latter, the couple filed suit chiefly alleging breach of contract, equitable fraud and fraud, negligence, and violation of the New Jersey Consumer Fraud Act (CFA). The couple’s experts generally concluded that the retaining wall reduced the actual size of the yard, the chain link fence was not constructed as depicted in site plans, and the retaining wall was improperly constructed. The developer’s experts generally concluded that the rear retaining wall was structurally sound and the slope variance did not degrade the wall and could be easily remedied if desired. The developer successfully moved for summary judgment on all claims.

On appeal, the Appellate Division affirmed, upholding the lower court’s finding that the couple had waived their fraud claims with respect to the cost of the wall (the lot premium price) as they had time before executing the contract to determine if that cost was reasonable. The couple never presented competent evidence suggesting the developer misrepresented this cost, and had even continued to closing. Further, the couple was aware, for a period of time prior to closing, about the alleged disparity between the site plans and the construction of the yard and wall, but yet elected to take title.

As to a claim under the CFA, the Court concluded that the couple never presented proof that the developer knew that its representations (the site plans) were false at the time they were made. The couple failed to present competent evidence indicating that there was any actionable, affirmative act of misrepresentation. Again, the couple continued to closing, and did not include the slope, wall or other yard items on the punch list of items to be remedied. Therefore, even if they had claims under the CFA, they waived them at closing.

As to the claim of breach of contract, the Court held that the deed of conveyance constituted the final and complete contract between the parties and all rights of the parties merged in the deed. The contract also required all amendments to be in a writing signed by both parties. The Court found the lower court correctly excluded the couple’s self serving certifications of alleged oral agreements between the parties. Those contracts allegedly required the developer to level the backyard, and said that any claims would not be extinguished at closing despite clear and unambiguous terms of the contract of sale.

The Court also found the lower court correctly dismissed the negligence claim, holding that the lawsuit was a contract document dispute, and relief from a negligence claim is not appropriate where the harm suffered is to a product itself of the contract, unaccompanied by personal injury or property damage. Additionally, the couple never provided evidence that the developer owed them a duty, other than under the contract, as to the retaining walls or yard.

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