Case Law Summaries

Ji v. Palmer

• Opinion Date: August 1, 2000
• Real Property Law
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CONSUMER FRAUD; BROKERS; MISREPRESENTATIONS —To show a broker’s violation of the Consumer Fraud Act, it is not necessary to show knowledge of falsity or an intent to deceive; all that is needed is to show an affirmative misrepresentation, i.e., one that is material to the transaction.

A buyer purchased a four-unit residential property located in a zone that permitted only single-family dwellings. The contract was prepared by a real estate broker, without use of an attorney. The broker included a provision in the contract requiring the seller to produce a Certificate of Occupancy and a Certificate of Land Use. A Certificate of Occupancy certifies the habitability of a structure and a Certificate of Land Use certifies that the present use of a property is permitted. The seller’s broker delivered the Certificate of Occupancy, but advised the buyer’s broker that “they couldn’t get a Certificate of Land Use, and the City was issuing something else instead.” The seller’s broker also reassured the buyer’s broker by saying, “don’t worry, the property has been four apartments for at least back to sometime in the ‘60s.” After the closing, the municipality charged the buyer with violating the zoning ordinance by failing to receive an approved Certificate of Land Use for the four units. The buyer sued both brokers alleging violations of the Consumer Fraud Act. Under the Act, consumer fraud may consist of affirmative acts or acts of omission. “One who makes an affirmative misrepresentation is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive.” Here, the buyer’s broker added a provision to the contract requiring the seller to produce both certificates. The broker testified that he knew the conceptual difference between the two and that he expected the seller to produce the Certificate of Land Use. At closing, however, he gave the Certificate of Occupancy to the buyer and stated to him, “This is what they’re giving us. This looks acceptable to me.” It is not necessary to show the broker’s knowledge of the falsity of his statement or an attempt to deceive; all that is needed is to show that the affirmative misrepresentation is “one which is material to the transaction and which is a statement of fact, found to be false, made to induce the buyer to make the purchase.” A statement or matter is material if a reasonable person would attach importance to its existence or the maker knows or has reason to know that the recipient regards or is likely to regard the matter as important, although a reasonable person would not so regard it. The Appellate Division remanded the matter to the lower court to determine whether the buyer’s broker’s statement was material. As to the seller’s broker, the Court pointed out that the Consumer Fraud Act prohibits the unlawful conduct “by any person ... in connection with the sale or advertisement of any merchandise or real estate ... .” Accordingly, the buyer was given the right to pursue a consumer fraud claim against the seller’s broker, despite the fact that the seller’s broker was not acting in a representative capacity as the buyer’s broker. For reasons related to procedure and evidence, the seller’s broker was granted a summary judgment in its favor.

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