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JNM Holdings, Inc. v. Matrix Engineering, Inc.

A-1298-06T3 (N.J. Super. App. Div. 2007) (Unpublished)

LOANS — Where a consultant’s services are provided solely for the benefit of a borrower’s lender, neither the borrower nor any successor to the borrower may make a claim against the consultant for a breach of contract or negligence based on the contents of the consultant’s report itself.

A business purchased a commercial building and financed its purchase. The lender retained a professional engineering company to perform an environmental assessment. Its retainer agreement provided that the report was for the sole benefit of the lender. The report, in accordance with the scope of the work as required by the lender, indicated that no remedial action was required even though there was a drain in the garage leading to a septic system that had been covered with concrete twenty-years prior to the purchase by the business. The report indicated that the drain presented only a slight environmental risk.

Several years later, the business sold the property. An environmental assessment prepared for the buyer reported that the property was contaminated. Both contracting parties agreed to share the cost of the required remediation, and brought a joint action against the earlier professional engineering company for breach of contract and negligence. Neither provided an expert report. The lower court granted summary judgment as to the original environmental consultant.

On appeal, the Appellate Division affirmed the lower court’s ruling, noting that neither the current nor the former owners of the commercial property never had a contract with the original lender’s consultant. The Court held that the consultant’s services were provided solely for the benefit of the former owner’s lender. It agreed with the lower court that a negligence action by the current owner could not prevail as the current owner knew of the environmental problem before it completed the purchase of the property, and could have withdrawn from the purchase contract. The Court further observed that neither complainant could prove that the original environmental consultant breached any duty of care as no expert report was submitted describing an applicable professional standard and how the consultant might have breached that standard.

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