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Lane v. Schmied

A-5222-05T1 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; FRAUD — The kind of fraud committed in a real estate transaction involves the deliberate concealment or non-disclosure of a material fact or a defect that was not observable to a buyer and, a buyer who conducts an independent investigation of the property is responsible for all that could have been reasonably discovered.

Two homeowners purchased a house and soon after experienced water drainage problems on the property. They sued their sellers, the neighboring property owners, the real estate broker, and the home inspector. At trial, one of the buyers testified that he asked one of the sellers about any prior problems involving water. According to the buyer, the seller told him there were no problems and that a flood occurred only one time as a result of a hurricane. The seller testified that the buyer never asked her about drainage on the property. She also testified that the previous owner installed a drainage system before she bought the house and this resolved any earlier drainage issues and that the buyer’s home inspector examined the drainage system. The lower court found that the seller’s statement to the buyer that she didn’t expect the buyer to encounter any water problems was more like a statement of opinion than a statement of fact and not a fraudulent or negligent misrepresentation.

On appeal, the Appellate Division noted that its review was confined to a determination of whether the lower court’s findings were supported by the evidence on the record. The Court pointed out that the kind of fraud committed in a real estate transaction involves the deliberate concealment or nondisclosure of a material fact or defect that was not observable to a buyer. It also pointed out that a buyer who conducts an independent investigation of the property is responsible for all that could have been reasonably discovered. Further, it ruled that the buyer should have known of a possible problem with the drainage based on the inspector’s examination of the property. The Court found that the lower court properly applied the law to the facts on the record and affirmed its decision, and dismissed the sellers’ cross appeal for attorneys’ fees, noting that such awards were prohibited under the circumstances.


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