NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4636-13T4
RICHARD CATENA,
Plaintiff-Appellant, APPROVED FOR PUBLICATION
v. August 18, 2016
RAYTHEON COMPANY, individually APPELLATE DIVISION and as successor to Air Associates, Inc. and Electronic Communications, Inc.; HONEYWELL INERNATIONAL, INC., individually and as successor to Bendix Corporation and Allied Corp.; ORIGINIT FABRICS, INC.; ORIGINIT FABRICS OF NEW YORK, INC.; COMBINATES CORPORATION,
Defendants,
and
DANIEL P. ANDERSEN; WELLS FARGO BANK, N.A., a division of which is Wachovia Bank, N.A., successor to First Fidelity Bank,
Defendants-Respondents. ___________________________________
Submitted December 16, 2015 – Decided August 18, 2016
Before Judges Alvarez, Ostrer and Haas.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1267-11. Szaferman, Lakind, Blumstein & Blader, P.C., attorneys for appellant (Janine G. Bauer, on the briefs).
Fitzgerald and McGroarty, attorneys for respondent Daniel P. Andersen (Joseph P. McGroarty and Michael J. Malinsky, on the brief).
Fox Rothschild LLP, attorneys for respondent Wells Fargo Bank, N.A. (Robert J. Rohrberger and Matthew S. Adams, on the brief).
The opinion of the court was delivered by
OSTRER, J.A.D.
This appeal requires us to apply the discovery rule to
claims of common law fraud and a violation of the New Jersey
Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. Plaintiff
Richard Catena appeals from the summary judgment dismissal of
his fraud claims against defendants David P. Andersen and Wells
Fargo Bank, N.A. (Wells Fargo). The claims were based on the
allegation that Andersen and a Wells Fargo predecessor, First
Fidelity Bank (FFB), fraudulently concealed the facts that the
Teterboro property Catena purchased from Andersen was
contaminated with hazardous waste and that they had done a
partial clean-up. The trial court held that Catena should have
discovered the fraud in June 1998, when he learned the property
was contaminated. As that was more than six years before he
filed his respective claims, the court concluded the claims were
time-barred under N.J.S.A. 2A:14-1.
2 A-4636-13T4 We disagree with the trial court's reasoning. The
limitations period began when Catena knew or through reasonable
diligence should have discovered the fraud. Under the
circumstances, Catena's discovery of contamination did not
constitute discovery that Andersen and FFB concealed their
knowledge of the contamination and their subsequent cleanup.
Even with a diligent inquiry, a reasonable person would not have
discovered the fraud more than six years before the claims were
filed against Andersen and Wells Fargo in August 2005 and May
2008, respectively. Therefore, we reverse.
I.
We discern the following facts from the record, extending
all favorable inferences to Catena as the non-movant. Brill v.
Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
Catena's fraud claims are based on alleged
misrepresentations by Andersen and FFB in connection with
Catena's purchase of the property from Andersen in 1988.
Andersen had owned the property, personally or through a
partnership, since 1983. That year, his partnership and First
National Bank, a predecessor to FFB, entered into a loan
agreement secured by a mortgage on the property. In 1986,
Andersen acquired sole title, but his partnership defaulted on
the loan in 1987. In August 1987, FFB took possession of the
3 A-4636-13T4 property without obtaining title, intending to sell the property
and keep the proceeds to satisfy the debt.
At FFB's direction, Environmental Waste Management
Associates (EWMA) conducted an environmental assessment of the
property to determine if there were any environmental problems
on the property. After taking soil samples, EWMA reported "high
levels of tetrachloroethylene," also known as perchloroethylene
(PCE), on the property. Following EWMA's recommendations, in
the fall of 1987 FFB authorized roughly eighty to 100 yards of
contaminated soils to be excavated and replaced by clean fill.
Even after the excavation, however, EWMA could not guarantee FFB
that all the contaminated soil had been removed.
FFB's attorney sent Andersen's attorney the EWMA reports in
December 1987, along with a letter stating that the
contamination impeded the bank's ability to sell the property
and that prospective buyers had "expressed concern" about the
"environmental problem" on the property. In another letter to
Andersen's attorney in March 1988, FFB's attorney wrote that FFB
expected Andersen to arrange for the removal of the excavated
soil that was still on the property.
In June 1988, Andersen and FFB agreed that Andersen would
negotiate the sale of the property and sell the property "as
is," with FFB retaining the proceeds of the sale. Their written
4 A-4636-13T4 agreement also stated that Andersen, at FFB's expense, would
remove the excavated soil evidently still being stored on the
property. Thereafter, the contaminated soil was disposed of
offsite, and replaced by clean soil onsite. EWMA opined that
the property would pass inspection under the Environmental
Cleanup Responsibility Act (ECRA). However, neither EWMA nor
FFB informed the New Jersey Department of Environmental
Protection (DEP) of the cleanup.
Catena was unaware of this contamination or remediation
when he purchased the property. The June 29, 1988 contract of
sale stated Catena was buying the property "as is." The
contract stated that Catena had inspected the premises to his
satisfaction, and no representations or warranties had been made
regarding the premises, other than those in the contract.
However, the day before the sale, FFB provided Catena's
attorney a July 31, 1987 affidavit (1987 Affidavit) Andersen had
submitted to DEP. The affidavit stated that the only occupants
of the property since 1984 were a dry wall construction
contractor, a bank, and a trucking concern. The affidavit
stated that, "on information and belief," these occupants had
not "engaged on the Subject Property in any operations which
involve the generation, manufacture, refining, transportation,
treatment, storage, handling or disposal of hazardous substances
5 A-4636-13T4 or wastes," and that, therefore, the property was not subject to
the requirements of ECRA. The letter to Catena's attorney that
accompanied this affidavit also included a "letter of
nonapplicability" (LNA) that DEP had issued based on the 1987
Affidavit.
Following execution of the June 29, 1988 contract, but
before the closing, Andersen submitted a second affidavit (1988
Affidavit) to DEP on August 12, 1988, for the purpose of
obtaining another LNA. This affidavit also stated that, "on
information and belief," the three previously identified
occupants had not "engaged on the Subject Property in any
operations which involve the generation, manufacture, refining,
transportation, treatment, storage, handling or disposal of
hazardous substances or wastes . . . ." This affidavit failed
to mention that PCE-contaminated soil had been found on the
property in 1987. Based on the 1988 Affidavit, DEP issued a
second LNA on September 1, 1988, which stated that the sale to
Catena was not subject to ECRA, with the caveat that the LNA was
not a finding as to the "existence or nonexistence of any
hazards to the environment at this location."
On November 1, 1988, Catena closed on the sale, and
acquired title from Andersen. In 1989, Catena retained
environmental consultant EcolSciences, Inc. to perform an
6 A-4636-13T4 environmental assessment. EcolSciences' March 1989 assessment
stated that past uses of the property included: "production of
aircraft parts," "assembly of mechanical electrical parts," a
"textile knitting and dyeing operation," the "manufacture of
prefabricated exterior building facades," and "a distribution
center for screen-printing inks and related supplies." The
assessment made no mention of contaminated soil or PCE, but
recommended further investigation of the possible presence of
other contaminants.
Nearly a decade later, when Catena sought to refinance the
property, the prospective lender hired Property Solutions, Inc.
(PSI) to conduct an environmental investigation. In multiple
reports completed in the spring of 1998, PSI documented
tetrachloroethylene contamination exceeding DEP cleanup
standards. In April 1998, PSI notified DEP of soil
contamination on the property.
Catena was made aware of PSI's findings as early as May 26,
1998, when he was provided PSI's May 26 report disclosing
tetrachloroethane contamination exceeding DEP cleanup standards.
In that report, which was provided to DEP, PSI sought a "No
Further Action Required" letter from DEP. This report also
stated the "likely cause" of the contamination was "the
historical use of the property in airplane related industries."
7 A-4636-13T4 By letter dated June 4, 1998, DEP advised Catena that it
would not issue the requested no-action letter. DEP's letter
stated that Catena must apply for and execute a Memorandum of
Agreement (MOA) setting forth a plan to clean up the
contamination. The letter noted that a cleanup satisfying DEP
standards could result in DEP issuing a "no further action"
letter. On June 22, 1998, Catena and DEP executed a MOA that
required him to conduct further investigation and submit a site
investigation report to DEP. In the MOA, Catena acknowledged
that hazardous wastes — specifically, PCE, toluene,
ethylbenzene, and xylene — had been "used, generated, treated,
stored, disposed or discharged" at the site.
Following Catena's submission of a site investigation
report in October 1998, DEP advised him, on December 22, 1998,
that the contaminated soil "must be addressed" and "remediated."
In July 1999, DEP notified Catena his MOA was "administratively
complete" and directed him to submit a schedule for implementing
the steps set forth in the MOA. To comply with the steps
required by the MOA, Catena once again retained EcolSciences to
further investigate the property. By letter dated March 21,
2000, EcolSciences reported to Catena the results of recent soil
sampling, writing that it had detected soil contamination
requiring additional investigation and sampling. On June 27,
8 A-4636-13T4 2000, DEP wrote to Catena that it accepted EcolSciences'
proposed work plan for additional investigation and soil and
groundwater sampling.
For reasons that are unclear, EcolSciences' work plan was
not implemented, causing DEP to terminate the MOA due to
inactivity in March 2001. Following another delay, Catena
entered into a new contract with EcolSciences in December 2003.
In a May 2004 letter, EcolSciences informed Catena that new soil
and groundwater sampling revealed a "larger area of
contamination" on the property, including ground water and
stream contamination in what was a "former oil recovery area"
used by prior owner(s). This letter also recommended that
Catena "retain an environmental lawyer to notify the prior owner
responsible for the former oil recovery area."
On August 22, 2005, Catena filed his initial complaint
against Andersen and the successors of other prior owners,
asserting claims of common law fraud and violations of the CFA
and other environmental protection statutes. The complaint
alleged that defendants committed fraud by failing to disclose
the contamination on the property. Catena took Andersen's
deposition in December 2007, at which time Andersen produced the
1987 EWMA reports and communications between his and FFB's
attorneys. These documents demonstrated that Andersen and FFB
9 A-4636-13T4 knew that PCE-contaminated soil was excavated, stored, removed,
and then replaced with clean soil.
Catena had not seen these documents before 2007. At his
deposition, Catena testified that no one informed him of any
environmental issues on the property at the time of the sale.
He conceded that, before buying the property, he did not ask
Andersen or FFB whether there were any environmental issues, or
investigate past uses of the property. Catena also asserted
that he was "under the impression that [the property] was clean"
when he bought it, and was "unaware that it was polluted."
In February 2008, Catena filed an amended complaint
asserting a more detailed claim of common law fraud against
Andersen. On May 21, 2008, he filed another amendment asserting
common law fraud and CFA claims against Wells Fargo, the
successor to FFB.
Defendants moved for summary judgment on the fraud and CFA
claims on the ground that they were brought more than six years
after they accrued, and thus were time-barred under N.J.S.A.
2A:14-1. Catena cross-moved for summary judgment. On January
16, 2009, the court granted defendants' motion and denied
Catena's motion. In a brief oral decision, the judge determined
that Catena's fraud claims accrued in June 1998, when he
executed the MOA. The judge rejected Catena's claim that he did
10 A-4636-13T4 not discover the fraud until 2007, noting that Catena first
asserted his fraud claim in 2005.
Catena appeals from the summary judgment dismissal of his
fraud claims, arguing that, under the discovery rule, the claims
did not accrue until December 2007, when he took Andersen's
deposition. Wells Fargo argues that the limitations period
began to run no later than June 1998, when Catena signed the
MOA, acknowledging the presence of contamination. Andersen
contends it began no later than December 22, 1998, when DEP
required remediation.
II.
A.
We review a grant of summary judgment de novo, applying the
same standard as the trial court. Henry v. N.J. Dep't of Human
Servs., 204 N.J. 320, 330 (2010). Whether a cause of action is
barred by a statute of limitations is a question of law, also
reviewed de novo. Estate of Hainthaler v. Zurich Commercial
Ins., 387 N.J. Super. 318, 325 (App. Div.), certif. denied, 188
N.J. 577 (2006). The application of the discovery rule is for
the court, not a jury, to decide. Lopez v. Swyer, 62 N.J. 267,
274-75 (1973).
Catena was required to bring his fraud and CFA claims
within six years of when they accrued. N.J.S.A. 2A:14-1;
11 A-4636-13T4 D'Angelo v. Miller Yacht Sales, 261 N.J. Super. 683, 688 (App.
Div. 1993). The sole issue before us is when these claims
accrued.
To determine when Catena's fraud claims accrued, we apply
the discovery rule, which delays the commencement of the
limitations period in appropriate cases. Under the rule, a
claim does not accrue until the plaintiff "discovers, or by an
exercise of reasonable diligence and intelligence should have
discovered that he may have a basis for an actionable claim."
Lopez, supra, 62 N.J. at 272. The party seeking the rule's
benefit bears the burden to establish it applies. Id. at 276.
Long before the discovery rule was applied to negligence
claims, Fernandi v. Strully, 35 N.J. 434 (1961), courts of
equity held that, in fraud cases, the limitations period does
not commence until the fraud was discovered, or through
reasonable diligence should have been discovered. See Partrick
v. Groves, 115 N.J. Eq. 208, 211 (E. & A. 1934); Giehrach v.
Rupp, 112 N.J. Eq. 296, 302-03 (E. & A. 1933); Lincoln v. Judd,
49 N.J. Eq. 387 (Ch. 1892). The application of the discovery
rule to fraud claims has also received general acceptance in our
modern court system. See SASCO 1997 NI, LLC v. Zudkewich, 166
N.J. 579, 590-92 (2001) (applying discovery rule to fraudulent
transfer claim under version of the Uniform Fraudulent Transfers
12 A-4636-13T4 Act then in effect); Belmont Condo. Ass'n v. Geibel, 432 N.J.
Super. 52, 83 (App. Div.) (applying discovery rule to CFA
claim), certif. denied, 216 N.J. 366 (2013); Simpson v. Widger,
311 N.J. Super. 379, 391 (App. Div. 1998) (applying discovery
rule to fraud); Dreier Co. v. Unitronix Corp., 218 N.J. Super.
260, 274 (App. Div. 1986) (applying discovery rule to common law
fraud claim); Fed. Ins. Co. v. Hausler, 108 N.J. Super. 421, 426
(App. Div. 1970) (applying discovery rule to fraudulent
concealment claim). Lopez, supra, the seminal case for the
statement of the rule, recognized its applicability to fraud
claims. 62 N.J. at 275 n.2.
The discovery rule is "essentially a rule of equity." Id.
at 273. While statutes of limitations "are designed to
stimulate litigants to pursue their actions diligently," the
discovery rule mitigates "the unfairness of barring claims of
unknowing parties." Mancuso v. Neckles, 163 N.J. 26, 29 (2000).
The discovery rule is designed "to avoid harsh results that
otherwise would flow from mechanical application of a statute of
limitations." Vispisiano v. Ashland Chem. Co., 107 N.J. 416,
426 (1987).
In fraud cases, the discovery rule is justified by an
additional consideration not present in negligence cases: the
victim's lack of awareness of the fraud is the wrongdoer's very
13 A-4636-13T4 object. The rule thus prevents the defendant from benefiting
from his own deceit. As the United States Supreme Court has
explained, "something different [is] needed in the case of
fraud, where a defendant's deceptive conduct may prevent a
plaintiff from even knowing that he or she has been defrauded.
Otherwise, 'the law which was designed to prevent fraud' could
become 'the means by which it is made successful and secure.'"
Merck & Co. v. Reynolds, 559 U.S. 633, 644, 130 S. Ct. 1784,
1793-94, 176 L. Ed. 2d 582, 594 (2010) (quoting Bailey v.
Glover, 88 U.S. (21 Wall.) 342, 349, 22 L. Ed. 2d 636, 639
(1875)). A defendant should "not be permitted to take advantage
of his own wrong" where it was "his fraudulent conduct" that was
"responsible for [the plaintiff's] delay in prosecuting" his
claims. Partrick, supra, 115 N.J. Eq. at 211.
In general, the date of discovery is when the plaintiff
learns or reasonably should learn "the existence of that state
of facts which may equate in law with a cause of action." Burd
v. N.J. Tel. Co., 76 N.J. 284, 291 (1978). This determination
is highly fact-sensitive, and will "vary from case to case, and
. . . from type of case to type of case." Vispisiano, supra,
107 N.J. at 434.
Yet the discovery rule does not toll the statute until the
plaintiff has "legal certainty" of an actionable claim, Lapka v.
14 A-4636-13T4 Porter Hayden Co., 162 N.J. 545, 555-56 (2000), or until the
full extent of the damage becomes apparent, Russo Farms v.
Vineland Bd. of Educ., 144 N.J. 84, 115 (1996). The claim
accrues once the plaintiff "is aware of facts that would alert a
reasonable person to the possibility of an actionable claim."
Lapka, supra, 162 N.J. at 555-56. Mere suspicion that the
plaintiff has a claim, however, is not enough. Vispisiano,
supra, 107 N.J. at 434. Thus, the plaintiff's knowledge "must
be evaluated in light of the requirements of the cause of
action" he asserts. Enertron Indus., Inc. v. Mack, 242 N.J.
Super. 83, 91 (App. Div. 1990).
Beginning with the elements of common law fraud, a
plaintiff must prove that the defendant materially
misrepresented a presently existing or past fact; the defendant
knew or believed it was false, intending that the plaintiff
would rely on the misrepresentation; and the plaintiff
reasonably relied on the misrepresentation and suffered damage
as a result. Gennari v. Weichert Co. Realtors, 148 N.J. 582,
610 (1997). In the real estate context, misrepresentation may
consist of intentional nondisclosure of a material defect not
observable by the buyer. State Dep't of Envir. Prot. v. Ventron
Corp., 94 N.J. 473, 503-04 (1983); Weintraub v. Krobatsch, 64
N.J. 445, 455 (1974). Likewise, the "unlawful practice" element
15 A-4636-13T4 of a CFA violation encompasses a knowing concealment or omission
of material fact with the intent that others rely on it.
N.J.S.A. 56:8-2; see also Gonzalez v. Wilshire Credit Corp., 207
N.J. 557, 576 (2011) (CFA violation consists of (1) an unlawful
practice, (2) an ascertainable loss, and (3) a causal nexus
between the unlawful conduct and ascertainable loss).
The date of discovery, therefore, is when the fraud was or
reasonably should have been discovered. In Belmont, supra, a
condominium association brought a CFA claim premised on
misrepresentations by the general contractor, after the building
was severely damaged from water leaks. 432 N.J. Super. at 60,
62-63. We held that the claim did not accrue until the
plaintiff "had reason to believe that it had suffered an
ascertainable loss," which we found was the point at which "the
true nature and extent of the water infiltration problem first
became evident . . . ." Id. at 83. In other words, the claim
did not accrue until the plaintiff was aware of facts
establishing an essential element of its claim.
Because the wrongdoer's mental state is an essential
element of the claim, discovery does not occur until the
plaintiff is aware of facts indicating the wrongdoer knew his
statement was false, and intended the other party to rely on its
falsity. See Merck, supra, 559 U.S. at 649, 130 S. Ct. at 1796,
16 A-4636-13T4 176 L. Ed. 2d at 597 (stating that it would "frustrate the very
purpose of the discovery rule" if the limitations period
commenced "regardless of whether a plaintiff had discovered any
facts suggesting scienter."). In determining what facts a
plaintiff knew or should have known, we will not assume the
plaintiff's knowledge of information available in public
records. Giehrach, supra, 112 N.J. Eq. at 303 (declining to
impute knowledge of facts that "might easily have been
ascertained from the public records"). Proof of industry custom
is not determinative of what inquiry a reasonable person would
make to discover the fraud, but it is relevant to the discovery
rule analysis. SASCO 1997 NI, supra, 166 N.J. at 590-91.
In applying the discovery rule, we will not require a level
of circumspection that is unreasonable under the circumstances.
The Supreme Court stated that "it would be inequitable for a
physician who has given [assurances of progress towards
recovery] to claim that a patient, in relying upon them and not
suspecting their falsity or inaccuracy, failed to exercise the
'reasonable diligence and intelligence' required by the
discovery rule." Lynch v. Rubacky, 85 N.J. 65, 75 (1981)
(applying discovery rule to medical malpractice claim) (quoting
Lopez, supra, 62 N.J. at 274). That is consistent with the
general principle in fraud cases, that "[o]ne who engages in
17 A-4636-13T4 fraud . . . may not urge that one's victim should have been more
circumspect or astute." Jewish Ctr. of Sussex Cty. v. Whale, 86
N.J. 619, 626 n.1 (1981) (rejecting argument that fraud victim's
reliance on misrepresentation was unreasonable). The same trust
that a wrongdoer exploits to perpetrate a fraud in the first
place may delay the victim's eventual discovery of the fraud.
We are persuaded by New York decisions applying their
discovery rule to fraud claims. The New York Court of Appeals
has held that "knowledge of the fraudulent act is required and
mere suspicion will not constitute a sufficient substitute."
Erbe v. Lincoln Rochester Tr. Co., 144 N.E.2d 78, 81 (N.Y.
1957); see also Sargiss v. Magarelli, 909 N.E.2d 573, 576 (N.Y.
2009); Axelrod v. CBS Publications, 185 N.J. Super. 359, 367
(App. Div. 1982) (citing Erbe, supra, 144 N.E.2d at 81). A
plaintiff is deemed to have discovered the fraud when he has
"knowledge of facts from which the alleged [fraud] might be
reasonably inferred." Erbe, supra, 144 N.E.2d at 81; see also
Sargiss, supra, 909 N.E.2d at 576; Koch v. Christie's Int'l PLC,
699 F.3d 141, 155 (2d Cir. 2012) (plaintiff "could reasonably
have inferred the fraud" from knowledge that there was "a high
probability" the wine he purchased "was in fact counterfeit").1
1 New York law also recognizes a form of "inquiry notice," which triggers the limitations period if the plaintiff knows facts (continued)
18 A-4636-13T4 B.
Applying these principles, we conclude the trial court was
mistaken in finding that Catena's claims accrued in June 1998,
when he executed the MOA.
When Catena first became aware of the contamination and the
need to remediate in 1998, he had no reason to suspect fraud,
nor had he discovered facts supporting the elements of a fraud
claim.2 His discovery of contamination was not at odds with any
prior representation by Andersen or FFB. No one had
affirmatively represented to Catena in 1988 that the property
(continued) which would lead a reasonable person to inquire into possible fraud, but fails to pursue an investigation. Koch, supra, 699 F.3d at 155-56 (internal quotation marks and citation omitted). Our Court has not adopted this adjunct to the discovery rule in New Jersey. 2 Wells Fargo misplaces reliance on cases applying the discovery rule to strict liability environmental claims and other environmental torts. In environmental torts generally, the claim accrues when the plaintiff is aware of contamination and that it was the fault of another. See, e.g. Hatco Corp. v. W.R. Grace & Co., 801 F. Supp. 1309, 1323-24 (D.N.J. 1992) (strict liability claim accrued when plaintiff was put on notice of contamination); but see SC Holdings, Inc. v. A.A.A. Realty Co., 935 F. Supp. 1354, 1368 (D.N.J. 1996) (rejecting argument that "the point at which plaintiff should know of another party's fault [is] the first instance in which the NJDEP or EPA finds the existence of contamination"). A fraud claim, however, requires proof of a knowing and intentional misrepresentation or concealment of material fact. Catena's knowledge of the contamination (even assuming he knew it was another's fault) does not constitute knowledge "of that state of facts which may equate in law with a cause of action" for fraud. Burd, supra, 76 N.J. at 291.
19 A-4636-13T4 was not contaminated. The 1987 Affidavit contained no such
representation, since Andersen omitted the crucial fact that he
had excavated and replaced contaminated soil. The discovery of
contamination in 1998 did not directly contradict any
representation that Andersen or FFB made, such that Catena
should immediately have suspected fraud. See Antelis v.
Freeman, 799 F. Supp. 2d 854, 862 (N.D. Ill. 2011) (securities
fraud claim did not accrue in 2005 where there was "no
indication that Plaintiff had any reason to even suspect fraud"
until one of the wrongdoers declared bankruptcy in April 2010);
Belmont, supra, 432 N.J. Super. at 83 (CFA claim did not accrue
until the plaintiff "had reason to believe" it had suffered
ascertainable loss).
Nor did the presence of contaminants reasonably suggest
that Andersen or FFB had withheld information from Catena.
Since the 1987 Affidavit only pertained to the activities of
occupants since 1984, it was plausible that Andersen had no
knowledge of the activities of pre-1984 occupants. It was also
plausible, from Catena's perspective, that Andersen would be
unaware of contamination caused by his own tenants, since his
1987 Affidavit stated only that, "on information and belief,"
none of his tenants discharged hazardous wastes on the property.
Indeed, given that Catena's own environmental assessment in 1989
20 A-4636-13T4 failed to uncover contamination, it was reasonable to presume
that Andersen and FFB were unaware of it. The fact that PSI's
May 1998 report stated the contamination was likely caused by
"airplane related industries" also suggested that none of
Andersen's tenants were the cause, since none of them fell into
that category. See Mancuso, supra, 163 N.J. at 37 (stating that
patient was entitled to rely on competent expert advice
regarding cause of injuries).
Given Andersen's qualified representations, Catena
reasonably could have assumed that Andersen and FFB were unaware
of the contamination when they entered into the sale contract in
June 1988. See CSAM Capital, Inc. v. Lauder, 885 N.Y.S.2d 473,
478-79 (App. Div. 2009) (significant loss in value of
investments did not put investors on notice of fraud where,
under the circumstances, they "reasonably could have assumed
that their losses were not necessarily the product of fraud.").
Because he had no reason to suspect fraud in June or December of
1998, Catena was unaware of facts suggesting a cause of action
for fraud. Therefore, he lacked a basis to plead a well-
grounded claim. It follows that his claims had not yet accrued.
See White v. Mattera, 175 N.J. 158, 164 (2003) (stating that a
claim does not accrue until "the date when the right to
21 A-4636-13T4 institute and maintain a suit first arose.") (internal quotation
marks and citation omitted).
Therefore, we must determine at what point Catena, through
the exercise of reasonable diligence, should have discovered the
alleged fraud. Partrick, supra, 115 N.J. Eq. at 211. If he can
demonstrate that reasonable diligence would not have revealed
the fraud before August 1999 in the case against Andersen, and
May 2002 in the case against Wells Fargo, his claims will not be
time-barred. We are satisfied that Catena has met this burden.
As a preliminary point, we will not impute knowledge of a
fraud to a plaintiff who "could not have discovered the fraud
through the exercise of reasonable diligence." CSAM Capital,
supra, 885 N.Y.S.2d at 479. In assessing what reasonable
diligence would reveal, we will not impute knowledge of facts
constituting fraud if a plaintiff had no "access to the relevant
information even if he had endeavored to seek it out." Antelis,
supra, 799 F. Supp. 2d at 861. "[T]he time at which a plaintiff
should discover the facts that constitute the violation cannot
take place before the plaintiff is able to discover such facts."
Ibid. (citing Merck, supra, 559 U.S. at 651, 130 S. Ct. at 1797,
176 L. Ed. 2d at 598).
Although Catena may have inferred fraud had he known about
the 1987 cleanup, he had no access to information that would
22 A-4636-13T4 have revealed that fact, since neither Andersen, FFB nor EWMA
reported the cleanup to DEP. Thus, no search of public records
would have led to discovery of the cleanup. Further, their
concealment of the partial cleanup was so effective that none of
the numerous environmental assessments commissioned by Catena
discovered evidence that eighty to 100 cubic yards of
contaminated soil had been removed and replaced with clean fill.
It follows that reasonable diligence would not have
uncovered facts suggesting fraud until Catena filed suit and had
the right to compulsory discovery. It was only through
discovery that Catena obtained the EWMA reports, which revealed
that Andersen and FFB knew about the contamination, performed a
cleanup, and withheld that information. There is no evidence
that a more diligent pre-suit investigation would have led to
discovery of the EWMA reports or other evidence of the 1987
cleanup.
Catena's delay in implementing the MOA does not change the
fact that reasonable diligence would not have uncovered evidence
of fraud before he filed suit. The question is not whether
Catena should have been more diligent in his clean-up efforts,
but rather whether "greater diligence . . . would have uncovered
the cause of action any sooner." Vichi v. Koninklijke Philips
Elecs., N.V., 85 A.3d 725, 798 (Del. Ch. 2014) (tolling the
23 A-4636-13T4 statute on fraud claim premised on undisclosed price-fixing
cartel where plaintiff was "blamelessly ignorant" of that fact).
We cannot say that it would have, since, even by the early
2000s, Catena still had no reason to suspect fraud. The mere
presence of contamination was not directly at odds with any
representations made to Catena before he purchased the property,
and there was no indication in his consultants' reports that
contaminated soil had previously been excavated and replaced,
which may have led him to suspect that Andersen or FFB withheld
information from him.
Lastly, we reject Wells Fargo's argument that Catena's
delay in asserting the fraud claim resulted in prejudice such
that the claim should be dismissed on equitable grounds. The
discovery rule accounts for the fact that a victim's belated
discovery of fraud directly results from the wrongdoer's deceit.
To give the wrongdoer the benefit of that late discovery would
convert "the law which was designed to prevent fraud" into the
"means by which it is made successful and secure." Merck,
supra, 559 U.S. at 644, 130 S. Ct. at 1793-94, 176 L. Ed. 2d at
594 (internal quotation marks and citation omitted). To the
extent defendants must cope with the loss of documents or fading
witness memories, that is the consequence of Andersen's and
FFB's calculated silence, not Catena's unreasonable delay. In
24 A-4636-13T4 any event, defendants are not "peculiarly or unusually
prejudiced," Lopez, supra, 62 N.J. at 276, as Catena, who bears
the burden of proof, must also cope with the loss of evidence.
In sum, Catena discovered or through reasonable diligence
could have discovered the facts giving rise to the fraud claims
no earlier than May 21, 2002. Therefore, his claims against
Andersen and Wells Fargo, which were filed less than six years
after this date, were not time-barred.
Reversed. We do not retain jurisdiction.
25 A-4636-13T4