A real estate agent or broker is not only liable to a buyer for his affirmative and intentional misrepresentations to a buyer, but he is also liable for mere nondisclosure to the buyer of defects known to him and unknown and unobservable by the buyer. The underlying settled rule is that every person connected with a fraud is liable for the full amount of the damages and the wrongdoers, if any, are jointly and severally liable. Whether a matter not disclosed by a real estate broker or agent is of sufficient materiality to affect the desirability or value of the property sold, and thus make him liable for fraudulent nondisclosure, depends upon the facts of each case.
Purchasers contracted to purchase a home owned by seller and, as required by the contract, gave a deposit to the real estate agency, which was to be held in escrow on behalf of the seller. Prior to closing, however, the purchasers discovered that the house was infested with cockroaches and promptly attempted to rescind the contract. The seller rejected the recission and filed a lawsuit against the purchasers and real estate agency for damages in the amount of the deposit. The real estate agency filed a cross-claim seeking payment of its commission. The trial court granted summary judgment in favor of the seller and directed the purchasers to pay damages to both seller and real estate agency. On appeal, the court affirmed. The case was appealed to the Supreme Court of New Jersey.
Was the summary judgment proper?
The court ruled that the purchasers were entitled to a trial on the issue of whether there was fraudulent concealment or nondisclosure justifying their recission. The court held that the seller's silence regarding the roach infestation, if she was aware of it and it was found to be a material fact, could constitute fraud. Concealment of a material fact would justify the buyer's recision of the contract to purchase the house.