Weintraub v. Krobatsch

• Citation: 317 A.2d 68,64 N.J. 445
• Parties: Natalie WEINTRAUB, Plaintiff-Respondent, v. Donald P. KROBATSCH and Estella Krobatsch, Defendants-Appellants, and The Serafin Agency, Inc., Defendant-Respondent.
• Decision Date: 19 March 1974
• Court: United States State Supreme Court (New Jersey)

Page 445

64 N.J. 445

317 A.2d 68

Natalie WEINTRAUB, Plaintiff-Respondent, v. Donald P. KROBATSCH and Estella Krobatsch, Defendants-Appellants and The Serafin Agency, Inc., Defendant-Respondent.

Supreme Court of New Jersey.

Argued Nov. 20, 1973.

Decided March 19, 1974.

Charles J. Farley, Jr., Orange, for the defendants-appellants (Farley & Farley, Orange, attorneys).

Dean A. Gaver, Newark, for the plaintiff-respondent (Hannoch, Weisman, Stern & Besser, Newark, attorneys).

Roger K. Bentley, II, Hightstown, for the defendant-respondent (Zlotkin & Bentley, Hightstown, attorneys).

The opinion of the Court was delivered by

JACOBS, J.

The judgment entered in the Law Division, as modified in an unreported opinion of the Appellate Division, directed that the appellants Donald P. Krobatsch and Estella Krobatsch, his wife, pay the sum of $4,250 to the plaintiff Natalie Weintraub and the sum of $2,550 to the defendant The Serafin Agency, Inc. We granted certification on the application of the appellants. 63 N.J. 498, 308 A.2d 663 (1973).

The procedural steps below need not be dealt with at this point, other than to note that oral testimony was never taken and the matter was disposed of by summary judgment on the basis of meagre pleadings and conclusory affidavits. For present purposes we must resolve doubts in favor of the appellants and must accept their factual allegations, along with the inferences most favorable to them. See Ruvolo v American Cas. Co., 39 N.J. 490, 499, 189 A.2d 204 (1963); Frank Rizzo, Inc. v. Alatsas, 27 N.J. 400, 405, 142 A.2d 861 (1958); Heuter v. Coastal Air Lines, Inc., 12 N.J.Super. 490, 495, 79 A.2d 880 (App.Div.1951). On that approach the following appears:

Mrs. Weintraub owned and occupied a six-year-old Englishtown home which she placed in the hands of a real estate broker (The Serafin Agency, Inc.) for sale. The Krobatsches were interested in purchasing the home, examined it while it was illuminated and found it suitable. On June 30, 1971 Mrs. Weintraub, as seller, and the Krobatsches, as purchasers, entered into a contract for the sale of the property for $42,500. The contract provided that the purchasers had inspected the property and were fully satisfied with its physical condition, that no representations had been made and that no responsibility was assumed by the seller as to the present or future condition of the premises. A deposit of $4,250 was sent by the purchasers to the broker to be held in escrow pending the closing of the transaction. The purchasers requested that the seller have the house fumigated and that was done. A fire after the signing of the contract caused damage but the purchasers indicated readiness that there be adjustment at closing.

During the evening of August 25, 1971, prior to closing, the purchasers entered the house, then unoccupied, and as they turned the lights on they were, as described in their petition for certification, 'astonished to see roaches literally running in all directions, up the walls, drapes, etc.' On the following day their attorney wrote a letter to Mrs. Weintraub, care of her New York law firm, advising that on the previous day 'it was discovered that the house is infested with vermin despite the fact that an exterminator has only recently serviced the house' and asserting that 'the presence of vermin in such great quantities, particularly after the exterminator was done, rendered the house as unfit for human habitation at this time and therefore, the contract is rescinded.' On September 2, 1971 an exterminator wrote to Mr. Krobatsch advising that he had examined the premises and that 'cockroaches were found to have infested the entire house.' He said he could eliminate them for a relatively modest charge by two treatments with a twenty-one day interval but that it would be necessary to remove the carpeting 'to properly treat all the infested areas.'

Mrs. Weintraub rejected the rescission by the purchasers and filed an action in the Law Division joining them and the broker as defendants. Though she originally sought specific performance she later confined her claim to damages in the sum of $4,250, representing the deposit held in escrow by the broker. The broker filed an answer and counterclaim seeking payment of its commission in the sum of $2,550. There were opposing motions for summary judgment by the purchasers and Mrs. Weintraub, along with a motion for summary judgment by the broker for its commission. At the argument on the motions it was evident that the purchasers were claiming fraudulent concealment or nondisclosure by the seller as the basis for their rescission. Thus at one point their attorney said: 'Your honor, I would point out, and it is in my clients' affidavit, every time that they inspected this house prior to this time every light in the place was illuminated. Now, these insects are nocturnal by nature and that is not a point I think I have to prove through someone. I think Webster's dictionary is sufficient. By keeping the lights on it keeps them out of sight. These sellers had to know they had this problem. You could not live in a house this infested without knowing about it.'

The Law Division denied the motion by the purchasers for summary judgment but granted Mrs. Weintraub's motion and directed that the purchasers pay her the sum of $4,250. It further directed that the deposit monies held in escrow by the broker be paid to Mrs. Weintraub in satisfaction of her judgment against the purchasers. See Oliver v. Lawson, 92 N.J.Super. 331, 333, 223 A.2d 355 (App.Div.1966), certif. denied, 48 N.J. 574, 227 A.2d 133 (1967). It denied the broker's summary judgment motion for its commission but held that matter for trial. On appeal, the Appellate Division sustained the summary judgment in Mrs. Weintraub's favor but disagreed with the Law Division's holding that the broker's claim must await trial. It considered that since the purchasers were summarily held to have been in default in rescinding rather than in proceeding with the closing, they were responsible for the commission. See Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 558--562, 236 A.2d 843 (1967). Accordingly, it modified the Law Division's judgment to the end that the purchasers were directed to pay not only the sum of $4,250 to Mrs. Weintraub but also the sum of $2,550 to the broker.

Before us the purchasers contend that they were entitled to a trial on the issue of whether there was fraudulent concealment or nondisclosure entitling them to rescind; if there was, then clearly they were under no liability to either the seller or the broker and would be entitled to the return of their deposit held by the broker in escrow. See Keen v. James, 39 N.J.Eq. 527, 540 (E. & A. 1885) where Justice Dixon, speaking for the then Court of last resort, pointed out that 'silence may be fraudulent' and that relief may be granted to one contractual party where the other suppresses facts which he, "under the circumstances, is bound in conscience and duty to disclose to the other party, and in respect to which he cannot, innocently, be silent." 39 N.J.Eq. at 540--541. See also Grossman Furniture Co. v. Pierre, 119 N.J.Super. 411, 420, 291 A.2d 858 (Essex Co.Ct.1972); Heuter v. Coastal Air Lines, Inc., Supra, 12 N.J.Super. at 495--497, 79 A.2d 880; 12 Williston, Contracts § 1498 (3d ed. 1970); Prosser, Torts 695--99 (4th ed. 1971); Keeton, 'Fraud--Concealment and Non-Disclosure,' 15 Tex.L.Rev. 1 (1936); Goldfarb, 'Fraud and Nondisclosure in the Vendor-Purchaser Relation,' 8 Wes.Res.L.Rev. 5 (1956).

Mrs. Weintraub asserts that she was unaware of the infestation and the Krobatsches acknowledge that, if that was so, then there was no fraudulent concealment or nondisclosure on her part and their claim must fall. But the purchasers allege that she was in fact aware of the infestation and at this stage of the proceedings we must assume that to be true. She contends, however, that even if she were fully aware she would have been under no duty to speak and that consequently no complaint by the purchasers may legally be grounded on her silence. She relies primarily on cases such as Swinton v. Whitinsville Sav. Bank, 311 Mass. 677, 42 N.E.2d 808, 141 A.L.R. 965 (1942), and Taylor v. Heisinger, 39 Misc.2d 955, 242 N.Y.S.2d 281 (Sup.Ct.1963). Taylor is not really pertinent since there the court found that the seller had 'no demonstrated nor inferable knowledge of the condition complained of.' 242 N.Y.S.2d at 286. Swinton is pertinent but, as Dean Prosser has noted (Prosser, Supra at 696), it is one of a line of 'singularly unappetizing cases' which are surely out of tune with our times.

In Swinton the plaintiff purchased a house from the defendant and after he occupied it he found it to be infested with termites. The defendant had made no verbal or written representations but the plaintiff, asserting that the defendant knew of the termites and was under a duty to speak, filed a complaint for damages grounded on fraudulent concealment. The Supreme Judicial Court of Massachusetts sustained a demurrer to the complaint and entered judgment for the defendant. In the course of its opinion the court acknowledged that 'the plaintiff possesses a certain appeal to the moral sense' but concluded that the law has not 'reached the point of imposing upon the frailties of human nature a standard so idealistic as this.' 42 N.E.2d at 808--809. That was written several decades ago and we are far from certain that it represents views held by the current members of the Massachusetts court. See Kannavos v. Annino, 356 Mass. 42, 247 N.E.2d 708, 711 (1969). In any event we are certain that it does not represent our sense of justice or fair dealing and it has understandably been rejected in persuasive opinions elsewhere. See Obde v. Schlemeyer, 56 Wash.2d 449, 353 P.2d 672 (1960); Loghry v. Capel, 257 Iowa 285, 132 N.W.2d 417 (1965); Williams v. Benson, 3 Mich.App. 9, 141 N.W.2d 650 (19...