PAUL G. SKLODOWSKY,

Plaintiff,

v.

AMERICAN DEVELOPERS OF

NEW JERSEY,

Defendant/Third Party

Plaintiff-Appellant/

Cross-Respondent,

v.

JOHN F. LUSHIS, JR.,

TALLMAN HUDDERS & SORRENTINO,

Third-Party Defendants-

Respondents/Cross-Appellants,

and

JOANNE SKLODOWSKY,

Third-Party Defendant.

__________________________________________________

Argued April 23, 2008 - Decided

Before Judges Sapp-Peterson, Messano and

King.

On appeal from the Superior Court of New

Jersey, Law Division, Hunterdon County,

Docket No. L-459-04.

John R. Lanza argued the cause for

July 16, 2008

of New Jersey (Lanza & Lanza, attorneys; Mr.

Lanza, on the brief).

George M. Vinci, Jr. argued the cause for

respondents/cross-appellants John F. Lushis,

Jr., Tallman Hudders and Sorrentino (Spector

Gadon & Rosen, P.C., attorneys; Amy B.

Goldstein, on the brief).

PER CURIAM

Defendant, third-party plaintiff, American Developers of

New Jersey, LLC (ADNJ), appeals 1) from the motion judge's March

21, 2006, order that granted summary judgment to third-party

defendants John F. Lushis, Jr., and his law firm, Tallman

Hudders & Sorrentino (THS), on ADNJ's claim of fraud; 2) from an

interlocutory order of April 21, 2005, that dismissed with

prejudice ADNJ's claim for negligent misrepresentation against

Lushis and THS; and 3) from an interlocutory order entered on

December 23, 2005, that denied ADNJ's request for discovery from

plaintiff, Paul G. Sklodowsky, and Lushis, on the basis that it

was subject to the attorney-client privilege. We have

considered the arguments raised in light of the record and

and THS on cross-appeal, i.e., the denial of their motion to

file a fourth-party complaint.

I.

This lawsuit arose out of an aborted real estate

transaction. In November 2003, ADNJ contracted to purchase some

forty-two acres of land in Kingwood Township (the property) from

plaintiff, the sole record owner. ADNJ tendered its initial

deposit of $35,000 and proceeded to conduct the necessary predevelopment

tests during the contract's 180-day due diligence

period. Plaintiff retained Lushis to represent him, and ADNJ

was represented by Alan Wohl.

During the due diligence period, it was revealed that an

area of the property included wetlands upon which development

was prohibited, and further that there was a house located in

that area. There is a dispute in the record as to which party

first proposed a possible solution that envisioned a "carve out"

of the house and the surrounding wetlands from the sale.

Nevertheless, on May 11, 2004, Lushis sent a letter to Wohl that

referenced a title commitment previously furnished to ADNJ.

Lushis wrote,

In reviewing the commitment, we noted that

[it] indicates that a deed from "[plaintiff]

and spouse, if applicable" will be required.

[Plaintiff] is married; the property was

purchased during the time of his marriage;

and the home on the property has been used

by Mr. and Mrs. Sklodowsky as their marital

residence. As you know, however, the deed

for the property is only in [plaintiff's]

name and the Contract of Sale with [ADNJ]

only has [plaintiff] as the selling party.

As I indicated, whether Mrs. Sklodowsky will

execute the deed is unclear.

Although the contract contained an affirmative representation by

plaintiff that "no tenants ha[d] any rights to the [p]roperty,

and the conveyance and possession [would] be free of any

occupancy rights of any tenants or occupancy rights of others,"

and further permitted ADNJ to cancel the contract and have its

deposit returned, it nevertheless decided to proceed to closing.

On June 9, 2004, Wohl sent a letter to Lushis and plaintiff

indicating that ADNJ was waiving the due diligence contingency,

setting an anticipated closing date, and remitting the

additional deposit balance of $50,000. Although ADNJ argues it

did so because of the significant money it had already invested

in the property, Wohl's letter did not indicate such, nor did it

express any particular reservation of rights by ADNJ.

On August 30, 2004, Wohl sent Lushis a letter fixing a

"time of the essence closing date" in accordance with the

contract's terms for September 30, 2004. On that date,

plaintiff's wife, third-party defendant Joanne Sklodowsky,

failed to appear at the closing, and the parties did not

first name, and we intend no disrespect by this informality.

Plaintiff then filed suit claiming ADNJ had breached the

contract. ADNJ counterclaimed alleging that plaintiff had

breached the agreement and negligently misrepresented his

marital status. It sought an adjustment of the purchase price

based upon Joanne's retention of her marital rights to the

property. In a third-party complaint, ADNJ alleged that Lushis

had "fraudulently and willfully withheld" and negligently

misrepresented information regarding plaintiff's marital status.

ADNJ also claimed that Lushis had "violat[ed] [] his obligations

as an attorney," and "violated a duty of good faith that he owed

complaint to name THS as a third-party defendant alleging it was

vicariously liable for Lushis' conduct.

Lushis and THS moved to dismiss prior to answering. The

judge granted the motion as to the negligent misrepresentation

count but denied it as to ADNJ's fraud and Petrillo claim. In

an extensive written opinion, the judge concluded that ADNJ's

negligent misrepresentation claim must fail because, pursuant to

§ 5.06 of the contract, its sole remedy was limited to

cancellation of the agreement absent "the breach of [a]

all parties as a "Petrillo claim." Petrillo v. Bachenberg, 139

N.J. 472 (1995).

representation or warranty [that] was knowingly and willfully

falsely made."

Lushis and THS then answered and discovery ensued, during

which ADNJ moved 1) to compel plaintiff to testify regarding his

communications to Lushis; and 2) to compel the production of

certain documents over which Lushis had asserted a claim of

privilege. Lushis and THS also moved to compel production of

Wohl's file and to amend their answer and file a fourth-party

complaint against Wohl and his firm. The judge granted Lushis'

and THS's motion to compel discovery, denied their motion to

file an amended pleading, and denied ADNJ's motion to compel.

In a thorough written opinion, the judge reasoned that

"information about fraud by [plaintiff] can be obtained through

a less intrusive source, that avoids a breach of the [attorneyclient]

privilege, namely the deposition testimony of Joanne []

and [plaintiff]." He permitted ADNJ to depose plaintiff and

Joanne and ask the following questions:

(1) Whether Joanne [] advised [plaintiff]

that she refused to sign the [d]eed relating

to the sale of the subject property, and, if

so, when the discussion took place;

(2) Whether Joanne [] advised Lushis of any

such conversation with [plaintiff] and when.

[ADNJ] may not ask about the substance of

any such conversation.

When discovery concluded, Lushis and THS moved for summary

judgment. They argued that ADNJ could not prevail on its fraud

claim because Lushis never made a misrepresentation regarding

plaintiff's marital status, did not know that Joanne would

refuse to execute a deed, therefore did not misrepresent her

willingness to do so, and actually disclosed plaintiff's marital

status four months prior to the closing, before ADNJ tendered

the additional deposit and waived its due diligence contingency.

As to ADNJ's Petrillo claim, Lushis and THS argued that they did

not make any representations or misrepresentations that induced

ADNJ's reliance. They noted that Wohl testified in his

deposition that he reviewed the title binder which disclosed a

1988 mortgage on the property indicating plaintiff was married,

that he never inquired as to whether the house located on the

property was a marital residence, and that he never raised a

title objection pursuant to the contract.

ADNJ opposed the motion for summary judgment and crossmoved

for summary judgment. It argued that Lushis and THS knew

and had a duty to disclose that plaintiff was married before

allowing plaintiff alone to execute the contract for sale. ADNJ

also argued that it had established all the necessary elements

of fraud.

In a comprehensive written opinion issued on March 10,

2006, Judge Peter A. Buschsbaum concluded that Lushis and THS

"summary judgment [was] not appropriate with respect to a number

of the elements of fraud" because of disputed facts, he

nevertheless concluded that "[ADNJ] ha[d] not demonstrated any

reasonable reliance on non-disclosure and thus [wa]s unable to

prove fraud." In sum, he concluded,

Under these circumstances, given what was

made known in the title report, the physical

status of the property, the hiring of []

Wohl to review title, and [ADNJ's] own

reaction to the timely, formal pre-closing

disclosure of the marital status, [ADNJ's]

claim that it was defrauded into reasonably

relying on [plaintiff's] silence about his

marital status is unsustainable as a matter

of law.

He rejected ADNJ's Petrillo claim "[f]or the same reason." He

noted that usually, "an attorney owes [a] duty only to his

client, not to the other side's client." Distinguishing the

facts presented from those in Petrillo, the judge concluded

"Lushis and THS made no affirmative representation concerning

plaintiff's marital status whatsoever," and did nothing "to

induce Wohl to discontinue his own investigation of title, such

as lulling Wohl to sleep concerning [plaintiff's] marital

status, i.e., by saying 'don't worry, [Joanne]'ll sign'. . . ."

He entered an order denying ADNJ's cross-motion for summary

Joanne's motion for summary judgment.

judgment, and granting Lushis' and THS's motion for summary

judgment. The judge also granted plaintiff's and Joanne's

motion for summary judgment as to ADNJ's fraud and

settlement with plaintiff and Joanne, and subsequently filed

this appeal.

II.

When reviewing a grant of summary judgment, we employ the

same standards used by the motion judge. Atlantic Mut. Ins. Co.

v. Hillside Bottling Co., Inc., 387 N.J. Super. 224, 230 (App.

Div.), certif. denied, 189 N.J. 104 (2006). We first determine

whether the moving party has demonstrated there were no genuine

disputes as to material facts; we then decide whether the motion

judge's application of the law was correct. Id. at 230-31. In

this case, while the motion record reveals certain disputed

facts, there are none with respect to the critical issue of

ADNJ's reasonable reliance. The judge decided the issue as a

purely legal question, and therefore, we owe no particular

deference to his conclusion. Id. at 231 (citing Manalapan

Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378

(1995)).

A.

ADNJ contends that the judge erred in dismissing its

Petrillo claim because he based his conclusion upon "the fact

that Lushis did not issue an affirmative misrepresentation." We

think this entirely misstates the basis for the judge's

decision.

In Petrillo, the Supreme Court held that

[A]ttorneys may owe a duty of care to nonclients

when the attorneys know, or should

know, that non-clients will rely on the

attorneys' representations and the nonclients

are not too remote from the

attorneys to be entitled to protection. The

Restatement[] [of the Law Governing

Lawyers's] requirement that the lawyer

invite or acquiesce in the non-client's

reliance comports with our formulation that

the lawyer know, or should know, of that

reliance.

[Petrillo, supra, 139 N.J. at 483-84.]

However, in Lyons, Doughty & Veldhuis, P.C. v. Powers, 331 N.J.

Super. 193, 196 (App. Div. 2000), we declined to extend

Petrillo's reach to a situation in which the non-client failed

to demonstrate reasonable reliance upon the attorney's nondisclosure.

See Hewitt v. Allen Canning Co., 321 N.J. Super.

178, 186 (App. Div.)(holding duty to non-client "inapplicable"

where there was no misrepresentation and no reliance), certif.

denied, 161 N.J. 335 (1999).

We note that ADNJ never asserted Lushis made a material

representation about either plaintiff's marital status or the

willingness of Joanne to execute a deed. Although the evidence

demonstrates that Lushis likely knew at the time the contract

was executed that plaintiff was married, there is no proof in

the record that Lushis knew Joanne would not sign the deed until

he met with her in June 2004. His deposition testimony

indicated that he did not speak to her about the issue until

then, and Joanne's deposition testimony revealed that she never

told Lushis whether she would or would not execute the deed

until then.

Judge Buchsbaum did not base his decision upon the lack of

an affirmative misrepresentation from Lushis to ADNJ. Rather,

he concluded, and we agree, as a matter of law ADNJ could not

demonstrate it reasonably relied upon Lushis' failure to

disclose plaintiff was married. ADNJ could not demonstrate that

it was "lulled" by Lushis into believing Joanne was willing to

execute the deed at closing. Therefore, under all the attendant

circumstances, the judge correctly concluded ADNJ could not

demonstrate it reasonably relied upon a misrepresentation or

material omission made by Lushis. Summary judgment was

appropriate on the Petrillo claim.

With respect to the dismissal of its fraud claim, ADNJ

argues that questions of fact existed that foreclosed the grant

of summary judgment on the issue of reliance. In particular,

ADNJ contends that when Lushis finally disclosed plaintiff's

marital status, in May 2004, it had already expended significant

monies in pre-development activities, and therefore, its

decision to proceed to closing was not evidence of any lack of

reliance. Rather, it was an attempt by ADNJ to "close the

deal."

To prove a common law fraud claim, ADNJ must demonstrate

(1) a material misrepresentation made by Lushis of a presently

existing or past fact; (2) Lushis' knowledge or belief of its

falsity; (3) an intention that ADNJ rely on it; (4) reasonable

reliance thereon by ADNJ; and (5) resulting damages. Gennari v.

Weichert Co. Realtors, 148 N.J. 582, 610 (1997). The fact that

Lushis made no affirmative misrepresentation is not fatal to

ADNJ's claim because, "[t]he '[d]eliberate suppression of a

material fact that should be disclosed' is viewed as 'equivalent

to a material misrepresentation (i.e., an affirmative

misrepresentation),' which will support a common law fraud

action." Winslow v. Corporate Exp., Inc., 364 N.J. Super. 128,

140 (App. Div. 2003)(quoting N.J. Econ. Dev. Auth. v. Pavonia

Restaurant, Inc., 319 N.J. Super. 435, 446 (App. Div. 1998)).

We agree with Judge Buchsbaum that ADNJ cannot demonstrate

reasonable reliance after Lushis' May 2004 letter, and any

argument it makes regarding prior reliance is unavailing. We

assume arguendo that Lushis knew plaintiff was married and

failed to disclose that fact when the contract was signed. We

further assume that omission was material because plaintiff

represented that no tenants had "any rights to the [p]roperty"

of argument, Wohl's admitted failure to adequately review the

title report, although under section seven of the agreement, had

he done so, ADNJ could have cancelled the agreement without

incurring the costs it claims forced its decision to proceed to

closing. Despite all of these assumptions, the undisputed facts

are that ADNJ, once fully advised of the situation, decided to

complete the transaction. To the extent it now claims economic

concerns motivated its decision, the contract provided ADNJ the

ability to recoup the losses it allegedly incurred before the

May 2004 "disclosure," but it chose not to. Therefore, it

proceeded to tender its second deposit, waive the due diligence

contingency, and set a closing date no longer relying upon a

misrepresentation made by Lushis, but rather based upon its own

residing at the property or that she had acquired marital rights

to it.

business judgment. We find no basis to reverse the grant of

summary judgment.

B.

ADNJ also appeals from the interlocutory order that

dismissed its claim for negligent misrepresentation against

Lushis and THS. It argues the judge erred in applying § 5.06 of

the contract, which limited ADNJ's claim for damages to those

instances in which plaintiff "knowingly and willfully falsely"

breached a contract representation or warranty. ADNJ argues

that the contract language applied only to plaintiff, and that

the judge's reliance upon it to dismiss ADNJ's claim against

Lushis and THS was error.

We affirm the dismissal of ADNJ's negligent

misrepresentation claim, but for a different reason than that

expressed by the motion judge. Home Properties of N.Y. v.

Ocino, 341 N.J. Super. 604, 616 (App. Div. 2001). While the

motion to dismiss was brought before any discovery took place,

we now have the benefit of the significant discovery that

followed.

In Banco Popular N. Am. v. Gandi, 184 N.J. 161, 182-86

(2005), the Supreme Court limited such a claim when brought

against an attorney by a non-client to situations in which there

was an actual misrepresentation made, and reliance as a result,

equating such negligent misrepresentation claims to those made

in Petrillo. For the reasons expressed above, ADNJ failed to

demonstrate Lushis or THS made an actual misrepresentation and

that it reasonably relied upon it to its detriment.

C.

Lastly, ADNJ argues it was mistakenly denied the ability to

"pierce the attorney-client privilege" between plaintiff and

Lushis so as to access Lushis' file and all communications he

had with plaintiff. We conclude that we need not reach the

merits of the issue because ADNJ has failed to articulate how

the potential discovery would have permitted it to avert summary

judgment.

Judge Buchsbaum permitted ADNJ a less-intrusive way to

obtain the information by deposing plaintiff and Joanne. The

critical information was not whether the parties were married;

rather, it was whether Lushis knew that Joanne would not

cooperate in the sale of the home. The testimony adduced at

plaintiff's and Joanne's depositions indicates that neither told

Lushis, if indeed they ever actually spoke to each other about

the issue.

ADNJ has furnished a complaint plaintiff subsequently filed

in October 2007 in which he named Lushis, THS and others as

defendants. However, even assuming the allegations plaintiff

now makes in the complaint were true, they perhaps support a

claim of legal malpractice against Lushis regarding the advice

he gave to plaintiff, but they do not support ADNJ's claims of

fraud or negligent misrepresentation against Lushis and THS, and

they do not serve to overcome ADNJ's failure to demonstrate

reliance as we have discussed above.

Therefore, we conclude that even if the interlocutory order

was entered in error, further discovery would not have resulted

in ADNJ's ability to stave off the summary judgment motion or

the earlier motion to dismiss.

Affirmed.