This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The plaintiffs purchased a home from the defendants, who were general contractors, without knowing that the home was constructed without the required permits under the Construction Industries Licensing Act (CILA). The home exhibited defects, including foundation issues, prompting the plaintiffs to investigate and discover the lack of permits and a certificate of occupancy. The plaintiffs alleged fraud, negligent misrepresentation, breach of warranty, rescission, and unfair trade practices against the defendants, including subcontractors and a public utility company (paras 2-6).
Procedural History
- District Court, Union County: Granted summary judgment in favor of the defendants on all claims except for the breach of warranty claim against the general contractors (para 6).
Parties' Submissions
- Plaintiffs-Appellants: Argued that the defendants failed to disclose the lack of permits and compliance with CILA, constituting fraudulent nondisclosure, negligent nondisclosure, and breach of warranty. They also sought rescission of the purchase agreement and claimed violations of the Unfair Practices Act (paras 6-8, 19-20, 30-31).
- Defendants-Appellees (Fords): Asserted that they made no affirmative misrepresentations and that the purchase agreement disclaimed liability for the home's condition. They argued that the Unfair Practices Act does not apply to real estate sales and denied any duty to disclose under the circumstances (paras 7-8, 15-16).
- Defendant-Appellee (Holland): Contended that he obtained the necessary permits and inspections for his work and denied liability for breach of warranty or negligence (paras 19-27).
- Defendant-Appellee (PNM): Claimed that its actions in connecting utilities did not violate CILA and that the plaintiffs' alleged economic harm was not the type of harm the statute intended to prevent (paras 30-32).
Legal Issues
- Did the defendants commit fraud by affirmative misrepresentation or fraudulent nondisclosure?
- Was there a valid claim for negligent nondisclosure?
- Should the plaintiffs' claim for rescission of the purchase agreement be reinstated?
- Does the Unfair Practices Act apply to the sale of real estate?
- Did the subcontractor breach a warranty or act negligently in failing to comply with CILA?
- Was the public utility company liable for negligence per se under CILA?
Disposition
- Summary judgment on the fraudulent nondisclosure and rescission claims was reversed (para 18).
- Summary judgment on the fraud by affirmative representation, negligent nondisclosure, and Unfair Practices Act claims was affirmed (para 18).
- Summary judgment in favor of the subcontractor was conditionally affirmed, with a remand to consider the plaintiffs' motion to amend their complaint (para 29).
- Summary judgment in favor of the public utility company was affirmed (para 32).
Reasons
Per Alarid J. (Sutin and Castillo JJ. concurring):
Fraud by Affirmative Representation: The plaintiffs failed to establish that the defendants made any false affirmative representations. The warranty in the purchase agreement referred to approval by the Secretary of Veterans Affairs, not CILA compliance, and was not rendered false by the lack of permits (para 7).
Fraudulent Nondisclosure: The defendants did not address this claim in their motion for summary judgment, failing to meet their burden of establishing a prima facie case. The claim was reinstated (paras 8-9).
Negligent Nondisclosure: The court held that negligent nondisclosure is inconsistent with the state of mind required for nondisclosure in arm's-length transactions, which requires actual knowledge. The claim was dismissed (paras 10-14).
Rescission: The court found that contractual disclaimers do not preclude rescission in cases of fraudulent or material nondisclosure. The claim was reinstated (para 15).
Unfair Practices Act: The court held that the Act does not apply to real estate sales, as a completed house is not considered "goods" or "services" under the statute (paras 16-17).
Subcontractor's Liability: The plaintiffs failed to provide sufficient evidence to dispute the subcontractor's compliance with CILA. However, the court remanded for consideration of the plaintiffs' motion to amend their complaint to include claims related to mechanical permits (paras 19-29).
Public Utility's Liability: The court held that the plaintiffs' economic harm was not the type of harm the CILA intended to prevent, affirming summary judgment in favor of the utility company (paras 30-32).