ALEXANDRA PETROSINO v. KEVIN VENTRICE

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

ALEXANDRA PETROSINO and

LOUIS PETROSINO,

Plaintiffs-Appellants/Cross-

Respondents,

v.

KEVIN VENTRICE and GRACE VENTRICE,

Defendants-Respondents,

and

KIMBERLY MULLIGAN, COLDWELL BANKER

REAL ESTATE, LLC, CHRISTIAN GIAMANCO

and BETTER HOMES REALTY,

Defendants-Respondents/Cross-

Appellants.

_______________________________________

August 27, 2015

Argued September 23, 2014 Decided

Before Judges Fisher, Accurso and Manahan.

On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No.

L-409-12.

Michael Schottland argued the cause for appellants/cross-respondents (Lomurro, Munson, Comer, Brown & Schottland, LLC attorneys; Michael J. Fasano, on the brief).

Patrick A. Robinson argued the cause for respondents Kevin and Grace Ventrice (Robinson Burns, LLC, attorneys; Mr. Robinson, of counsel and on the brief; Jennifer M. Bruder, on the brief).

Marc C. Singer argued the cause for respondents/cross-appellants Kimberly Mulligan and Coldwell Banker Real Estate, LLC (Saiber LLC, attorneys; Mr. Singer, on the brief).

Richard J. Angowski, Jr. argued the cause for respondents/cross-appellants Christian Giamanco and Better Homes Realty (Schwartz, Simon, Edelstein & Celso, LLC, attorneys; Stefani C. Schwartz, of counsel; Mr. Angowski and Jennifer L. Moran, on the brief).

PER CURIAM

Plaintiffs Alexandra and Louis Petrosino appeal from a final order dismissing their complaint in its entirety based on their spoliation of evidence.

Plaintiffs purchased a $2,275,000 home in Colts Neck from defendant-sellers Kevin and Grace Ventrice in November 2011. The sellers used their daughter, defendant Kimberly Mulligan, and her employer, defendant Coldwell Banker Real Estate, L.L.C., as their broker in the transaction. The house had an elevator. When Mulligan and Kevin Ventrice were showing the home to Louis Petrosino, he asked Mulligan whether the elevator was safe. Plaintiffs had four children between the ages of two and eight and wanted to make sure the elevator posed no risk to them. Ventrice told Petrosino the elevator was safe and demonstrated its operation. On the explicit advice of Coldwell Banker, Ventrice did not tell Petrosino that two little girls of almost the same ages of his children had died horrible deaths in the elevator after getting trapped between the cab and the wall of the elevator shaft nine years before. Mulligan, who had put the question to Coldwell Banker about whether her parents were obligated to disclose the tragedy to potential buyers and received the response that no disclosure was necessary, even if buyers asked, stood by and said nothing.

Plaintiffs thereafter agreed to buy the house. Six days after the closing, their broker, defendant Christian Giamanco of defendant Better Homes Realty, called to tell them he had just learned of the elevator's tragic history. Giamanco contacted a local elevator company on plaintiffs' behalf and arranged for a mechanic to examine the elevator. The elevator mechanic conducted an inspection and told plaintiffs what he knew of the accident, which had received widespread media coverage when it happened, and explained to them how it had occurred. He also apparently told them that, in his opinion, the cab had never been replaced and was the same one that had crushed the little girls.

Although the mechanic closed and disabled the elevator at plaintiffs' request, they remained so concerned that a similar accident could befall their own children that they moved out of the house and filed this suit. In their complaint filed in January 2012, they alleged they were completely unaware that two little girls had been crushed and killed by the elevator when they purchased the house, that they had specifically inquired of the sellers as to the safety of the elevator, that the sellers falsely represented that the elevator was safe, that at no time prior to their purchase did any of defendants advise them of the elevator's history and that had they known of the accident they would never have purchased the house. Plaintiffs sued the sellers for affirmative and negligent misrepresentation and fraud, and all defendants for civil conspiracy to defraud, and intentional and negligent infliction of emotional distress. Plaintiffs also sued the Better Homes defendants for breach of the implied covenant of good faith and fair dealing, and both the Better Homes defendants and the Coldwell Banker defendants for negligence, consumer fraud and unjust enrichment.

Defendants filed motions to dismiss. In a comprehensive and well-reasoned written opinion of July 31, 2012, the court denied the motions except as to the two counts for intentional and negligent infliction of emotional distress. Coldwell Banker moved for reconsideration and refused to engage in discovery while its motion was pending. For reasons unclear to us, that motion, initially returnable in September, which the court described as nothing more than the Coldwell Banker defendants' attempt at a "second bite at the apple," was not heard and denied until March 27, 2013. Because of the "stakes of the litigation" and "the delay in deciding the motions," the court granted plaintiffs' cross-motion "to reset the discovery clock and grant 450 days of discovery from the signing of [the] order." The court wrote

The complaint in this matter was filed January 26, 2013, and as a Track [3] case, was assigned 450 days of discovery. A good portion of that time has been spent litigating the underlying motion to dismiss as well as the instant application for reconsideration. It would not be reconcilable with the notions of justice to deprive the parties of a full and fair opportunity to litigate this case. Therefore, discovery is extended 450 days.

The court denied plaintiffs' request for depositions on a date certain and granted Coldwell Banker's request that paper discovery precede depositions.

During the protracted delay caused by motion practice, plaintiffs lost the lease of the home they had quickly rented to avoid exposing their children to the elevator. They moved back into the Colts Neck home in July 2012, and later that summer hired a retired Otis Elevator maintenance examiner referred by their counsel to evaluate the elevator. Although all of the access doors to the elevator were screwed shut, prohibiting a full examination, the examiner was able to look at the equipment in the elevator control room and, from the attic, to view the inside of the elevator shaft, the cab and the inside of one of the access doors. Following that "informal and limited inspection," the examiner signed a certification in September stating that he could not determine if the elevator cab had ever been replaced but that viewing the cab and shaft from the attic, "the current spacing, structure and arrangement of the access doors, the elevator cab and the gate there could be a repeat of the 2002 incident." Specifically, the examiner certified that

[t]he current spacing coupled with the absence of a safety device which would prevent a child from standing in the space between the elevator cab and access doors, creates a situation that would allow a child to remain in a dangerous area and suffer tragic consequences. I reiterate that this was a limited evaluation of the elevator but it appears that the current structural arrangement leaves the elevator in a highly dangerous condition, especially to young children.

Following that inspection, plaintiffs determined to remove the elevator, which they did in January 2013. They did so without notice to defendants, none of whom had inspected the elevator for purposes of the litigation. The first notice defendants received of the elevator's destruction was a two-sentence letter to their counsel on April 29, in which plaintiffs' counsel wrote

[P]lease be advised that the Petrosinos are living in the house which is in the process of being renovated. The elevator shaft has been partially removed and the elevator itself has been removed and destroyed.

Defendants thereafter filed motions to dismiss the complaint on the basis of spoliation of evidence, which the court granted after hearing oral argument. Relying on Aetna Life & Cas., Co. v. Imet Mason Contractors, 309 N.J. Super. 358, 366-67 (App. Div. 1998), the judge found plaintiffs "had a duty to preserve the evidence since they brought the underlying litigation and the elevator is at the center of the dispute."

Turning to the question of fault, the court considered both the underlying dispute and the length of time the case had been litigated in determining "the fault lies solely with the Petrosinos in this matter." The judge wrote

While it does appear that the Defendants did not take the opportunity to inspect the elevator in the recent months, the Petrosinos at a minimum should have provided notice to the Defendants of their plans to renovate the house and intention to destroy the evidence. Moreover, the fact that the Petrosinos waited four months to inform the Defendants of the destruction of the elevator is unacceptable. During that time, the parties litigated the case under the assumption that the elevator was still intact.

The trial court likewise found prejudice to defendants as

it is difficult for the Defendants to replicate the discovery using only limited reports, blueprints, and the remainder of the elevator shaft. See Robertet Flavors, Inc. v. Tri-Form Constr., Inc., 203 N.J. 252 (2010). Since the Complaint at issue alleges that . . . the gap between the elevator shaft and the elevator was unsafe, it is impossible for the Defendants to replicate the elevator as it was installed solely by using construction plans and the like.

Recounting that it had been explicit in its opinion denying defendants' motion to dismiss that "[d]iscovery should be taken to determine whether the elevator was replaced and safety of the current elevator," the court found plaintiffs "were on notice of this court's position that discovery would act as the key factor in establishing their cause of action based on the alleged physical condition of the elevator." Concluding that

with the elevator now destroyed and the Defendants unable to inspect same, it is impossible both for the Petrosinos to advance their claim and the Defendants to defend the claim. Based on the Complaint, the elevator and elevator shaft are the most important pieces of physical discovery in this matter, and the case cannot go forward without them.

The court accordingly dismissed plaintiffs' complaint in its entirety based on spoliation of evidence.

Plaintiffs have appealed from that order as well as from the court's earlier order dismissing their claims for intentional and negligent infliction of emotional distress. The Coldwell Banker defendants and the Better Homes defendants (together the broker defendants) have cross-appealed from the court's denial of their initial motions to dismiss the counts for civil conspiracy, negligence, consumer fraud and unjust enrichment. The Better Homes defendants also appeal from the denial of their motion to dismiss plaintiffs' claim for breach of the implied covenant of good faith and fair dealing.

Having reviewed the parties' arguments in light of the applicable law, we reverse the order dismissing the complaint based on spoliation of evidence. As to the sellers, we find the court should have considered whether a lesser sanction short of dismissal would have provided a fair and practical remedy, and we remand to allow the trial court to undertake such an inquiry. As to the broker defendants, because plaintiffs' claims against them rest on administratively-imposed duties and thus survive even absent plaintiffs' evidence regarding the state of the elevator at the time of sale, and because all prejudice to them can be eliminated by suppressing any such evidence, we reinstate the claims for negligence, conspiracy to defraud, consumer fraud, unjust enrichment and, as to the Better Homes defendants, the claim for breach of the implied covenant of good faith and fair dealing. We affirm the court's order dismissing plaintiffs' claims for intentional and negligent infliction of emotional distress. We deny the broker defendants' cross-appeals in their entirety.

Because it is helpful in considering the issues surrounding spoliation to have the elements of the various causes of action alleged fresh in mind, we address the broker defendants' cross-appeals first and consider the court's initial decision denying defendants' motion to dismiss. Of course, in reviewing a decision on a motion to dismiss a complaint under Rule 4:6-2(e), we are not concerned with plaintiffs' ability to prove the allegations of their complaint but only whether the facts alleged are sufficient to state a cause of action. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989).

We turn first to the trial court's denial of the broker defendants' motion to dismiss plaintiffs' negligence, conspiracy to defraud and consumer fraud claims. Underlying their position that the complaint fails to state a cause of action as to each of these claims is the broker defendants' contention that the children's deaths in the elevator in 2002 represented only a "psychological impairment" to the Colts Neck property, which they were under no duty to disclose. We conclude they misapprehend both the nature of the condition and their duties to plaintiffs.

The duties owed by licensed real estate agents, such as the broker defendants, to their principals and other parties involved in a real estate transaction have been established by regulation. N.J.A.C. 11:5-6.4(b) requires that

Every licensee shall make reasonable effort to ascertain all material information concerning the physical condition of every property for which he or she accepts an agency or which he or she is retained to market as a transaction broker . . . . Information about social conditions and psychological impairments as defined in [N.J.A.C. 11:5-6(d)] is not considered to be information which concerns the physical condition of a property.

Under the regulation, a reasonable effort to ascertain all material information entails, at least, making inquiries of the seller about any physical conditions that may affect the property and conducting a visual inspection to determine if there are any readily observable physical conditions affecting it. N.J.A.C. 11:5-6.4(b)(1). The regulation requires specifically that licensees disclose

all information material to the physical condition of any property which they know[,] or which a reasonable effort to ascertain such information would have revealed[,] to their client or principal and when appropriate to any other party to a transaction.

[N.J.A.C. 11:5-6.4(c).]

Information is considered material under the regulation

if a reasonable person would attach importance to its existence or non-existence in deciding whether or how to proceed in the transaction, or if the licensee knows or has reason to know that the recipient of the information regards, or is likely to regard it as important in deciding whether or how to proceed, although a reasonable person would not so regard it.

[N.J.A.C. 11:5-6.4(b)(2).]

The regulation, however, further provides that information about psychological impairments, defined by way of example as including, but not limited to, "a murder or suicide which occurred on a property, or a property purportedly being haunted," is not "considered information which affects the physical condition of a property." N.J.A.C. 11:5-6.4(d). Although licensees need not automatically disclose information regarding psychological impairments,

upon receipt of an inquiry from a prospective purchaser or tenant about whether a particular property may be affected by a . . . psychological impairment, licensees shall provide whatever information they know about the . . . psychological impairments that might affect the property.

[N.J.A.C. 11:5-6.4(d)(3).]

As a review of the regulation makes clear, the broker defendants' argument that the children's deaths in the elevator in 2002 represented only a "psychological impairment" to the Colts Neck property, which they were under no duty to disclose to plaintiffs is simply wrong.1 The elevator in the Colts Neck property represents a major mechanical system with a history of dangerously defective operation. The issue is not only that two children perished on the property but that they died by being crushed in the malfunctioning elevator. It is simply impossible to imagine that a reasonable buyer would not attach importance to the existence of that fact. That plaintiffs specifically asked about the safety of the elevator, which we accept as true for purposes of review, likewise should have indicated to defendants that these plaintiffs, at least, would attach special significance to the elevator's history. As the history of the elevator's dangerously defective operation is information concerning the physical condition of the property, which would certainly be material to a reasonable person notwithstanding any repair, and was clearly, in any event, important to plaintiffs given their questions as to its safety,2 we hold the broker defendants had a duty to disclose the information to them.

Having established the broker defendants' duty to disclose the elevator's history of dangerously defective operation, we turn next to consider the broker defendants' arguments that the trial court erred by refusing to dismiss plaintiffs' negligence, conspiracy to defraud and consumer fraud claims. "To prevail on a claim of negligence, a plaintiff must establish that the defendant breached a duty of reasonable care, which constituted a proximate cause of plaintiff's injuries." Cockerline v. Menendez, 411 N.J. Super. 596, 611 (App. Div.)(internal quotation marks omitted), certif. denied, 201 N.J. 499 (2010). As the broker defendants had a duty to disclose the elevator's history, plaintiffs' allegation that they did not do so, resulting in their suffering damages states a claim of negligence which the trial court was correct in refusing to dismiss. See Van Natta Mech. Corp. v. Di Staulo, 277 N.J. Super. 175, 180-81 (App. Div. 1994).

In addition to arguing lack of duty, the Better Homes defendants also argue the negligence claim should have been dismissed against them for lack of any actual knowledge of the 2002 elevator accident. Specifically, the Better Homes defendants argue there is no proof they knew of the elevator's history prior to closing. They assert they learned of the 2002 accident only after the sale. Although that may ultimately be determined to be the case, there appears at present a genuine dispute over what the Better Homes defendants knew and what they should have known precluding dismissal of the claim or the entry of summary judgment in their favor. See ibid.

The trial court's ruling denying the broker defendants' motions to dismiss plaintiffs' claims for conspiracy to defraud and consumer fraud, we find likewise correct. Proof of common law fraud requires the plaintiff to show that the defendants, here the sellers, made a material misrepresentation of a presently existing or past fact, with knowledge or belief of the statement's falsity, intending that plaintiff will rely on it, that plaintiffs reasonably did rely on the statement, and resulting damages. N.J. Dep't of Treasury, Div. of Inv. ex rel. McCormac v. Qwest Commc'ns Int'l, Inc., 387 N.J. Super. 469, 485 (App. Div. 2006). The "[d]eliberate suppression of a material fact that should be disclosed is equivalent to a material misrepresentation (i.e., an affirmative false statement)." N.J. Econ. Dev. Auth. v. Pavonia Rest., Inc., 319 N.J. Super. 435, 446 (App. Div. 1998); see also Strawn v. Canuso, 140 N.J. 43, 62 (1995).3 Thus, silence "'in the face of a duty to disclose, may be a fraudulent concealment.'" Pavonia, supra, 319 N.J. Super. at 446 (quoting Berman v. Gurwicz, 189 N.J. Super. 89, 93 (Ch. Div. 1981), aff'd, 189 N.J. Super. 49 (App. Div.), certif. denied, 94 N.J. 549 (1983)).

Here, plaintiffs pled common law fraud with the necessary particularity and have made a sufficient showing of fraud to defeat defendants' motion for dismissal.4 Plaintiffs pled, and through certifications elaborated, that Kevin Ventrice, when asked whether "there was anything [plaintiffs] needed to know about the . . . property," including "about the safety of the working elevator," told plaintiffs the elevator was safe, and, by extension, there was nothing they needed to know. Plaintiffs further allege that these statements were false, that Ventrice knew they were false at the time they were made, and that plaintiffs relied on those assurances of safety in choosing to purchase the property. Because plaintiffs' claim against the sellers is based on the sellers' allegedly false statements made in the context of a real estate transaction, we reject the broker defendants' argument that plaintiffs' claim fails because they cannot establish the existence of a fiduciary duty. See Berman, supra, 189 N.J. Super. at 93-94 (explaining that in the absence of an existing duty to disclose, which our law imposes on a seller of real estate, omissions are generally only fraudulent in a business transaction when the omitting party is a fiduciary or stands in a relationship of trust and confidence with the defrauded party).

A civil conspiracy claim requires a showing of

a combination of two or more persons acting in concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal element of which is an agreement between the parties to inflict a wrong against or injury upon another, and an overt act that results in damage. It is enough [for liability] if you understand the general objectives of the scheme, accept them, and agree, either explicitly or implicitly, to do your part to further them. Most importantly, the gist of the claim is not the unlawful agreement, but the underlying wrong which, absent the conspiracy, would give a right of action.

[Banco Popular N. Am. v. Gandi, 184 N.J. 161, 177-78 (2005) (citations and internal quotation omitted).]

In alleging the sellers' made false statements and failed to disclose material information about the elevator in the face of a duty to do so resulting in their suffering damages, plaintiffs have stated a claim for common law fraud against the sellers, supplying both the underlying wrong and one overt act in furtherance of the conspiracy. Thus, assuming plaintiffs could plead at least implicit agreement among the parties not to inform plaintiffs of the dangerously defective history of the elevator, the conspiracy claim would stand. Ibid.

A review of the complaint and the motion record clearly establishes that plaintiffs have successfully pled conspiracy claims against the broker defendants. As to the Coldwell Banker defendants, the emails between the sellers' daughter, defendant Mulligan, and others at Coldwell Banker establish their knowledge of the elevator's history and their agreement to conceal that history from plaintiffs. As to the Better Homes defendants, plaintiffs allege they were aware of the elevator's history and chose to join with the sellers in concealing it by not correcting Kevin Ventrice's statements to plaintiffs about the elevator. As the broker defendants had a duty to disclose the elevator's history to plaintiffs, N.J.A.C. 11:5-6.4, their silence alone would support a claim for conspiracy to defraud as it provides both an underlying wrong and an act (or omission) in furtherance of the conspiracy. See Pavonia, supra, 319 N.J. Super. at 446; Berman, supra, 189 N.J. Super. at 93. Because the poor safety record of the elevator is a matter of fact, not opinion, we reject the broker defendants' argument that Ventrice's statement about the elevator was only opinion and thus not actionable. Joseph J. Murphy Realty, Inc. v. Shervan, 159 N.J. Super. 546, 549-51 (App. Div. 1978), certif. denied, 79 N.J. 487 (1979).

Defendants next argue that the trial court erred in not dismissing plaintiffs' consumer fraud claims as they contend plaintiffs failed to plead an ascertainable loss or unconscionable business practice sufficient to survive a motion to dismiss. Claims brought under the Consumer Fraud Act require that a plaintiff demonstrate three elements: "'1)unlawful conduct by defendant; 2) an ascertainable loss by plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss.'" D'Agostino v. Maldonado, 216 N.J. 168, 184 (2013) (quoting Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 553 (2009)). Under the Consumer Fraud Act, unlawful conduct includes the

[a]ct, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate[.]

[N.J.S.A. 56:8-2.]

The broker defendants' argument that plaintiffs have not pled actionable unlawful conduct is without merit. In their complaint, plaintiffs alleged that defendants "withheld information regarding the property from [plaintiffs] which would have impacted upon either the price paid by Plaintiffs or their decision to purchase the property at all." Plaintiffs further allege that defendants "knowingly concealed, suppressed, or omitted facts material to the [real estate sale] in that they failed to advise Plaintiffs or reveal the horrendous [elevator accident]."

Plaintiffs have obviously pled unlawful conduct under the Act in that they have alleged that defendants "knowingly concealed" the dangerously defective history of the elevator in connection with the real estate transaction, an act which is expressly included within the bounds of unlawful conduct under the Act.5 N.J.S.A. 56:8-2; D'Agostino, supra, 216 N.J. at 184; see also Mango v. Pierce-Coombs, 370 N.J. Super. 239, 254 (App. Div. 2004) (to prove consumer fraud against a realtor, a plaintiff must show the realtor "intentionally concealed the information about the defect with the intention that its client would rely on the concealment, and that the information was material to the transaction").

The broker defendants' arguments regarding plaintiffs' alleged failure to plead an ascertainable loss are equally ill-founded. Plaintiffs allege in their complaint that they "suffered an ascertainable loss of money as follows: [t]he value of the home is less than the Plaintiffs paid for it due to its tragic history and the home is potentially unmarketable due to that history." A "demonstration of loss in value will suffice to meet the ascertainable loss hurdle and will set the stage for establishing the measure of damages." Thiedmann v. Mercedes-Benz USA, L.L.C., 183 N.J. 234, 248 (2005). Such a loss, to meet the requirements of ascertainability, need only be "quantifiable and measurable" such that "an estimate of damages, calculated within a reasonable degree of certainty" could be produced. Id. at 248-49. As plaintiffs pled a loss that could be quantified and measured within a reasonable degree of certainty, no more was required.6

The broker defendants' arguments regarding the court's failure to dismiss the claims of unjust enrichment and, as to the Better Homes defendants, the breach of the duty of good faith and fair dealing, require only brief comment. The doctrine of unjust enrichment "rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another." Goldsmith v. Camden Cnty. Surrogate's Office, 408 N.J. Super. 376, 382 (App. Div.) (quoting Assocs. Commercial Corp. v. Wallia, 211 N.J. Super. 231, 243 (App. Div. 1986)), certif. denied, 200 N.J. 502 (2009). A cause of action for unjust enrichment requires "proof that 'defendant received a benefit and that retention of that benefit without payment would be unjust.'" Cnty. of Essex v. First Union Nat'l Bank, 373 N.J. Super. 543, 549 (App. Div. 2004) (quoting VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994)), aff'd in part and remanded on other grounds, 186 N.J. 46 (2006); Goldsmith, supra, 408 N.J. Super. at 382.

Plaintiffs' claim for unjust enrichment functionally posits that the broker defendants were paid commissions for the sale of the home that only resulted due to the "fraud" perpetrated on plaintiffs regarding the safety of the elevator. Assuming the fact finder agrees that plaintiffs' purchase resulted from reliance on the lack of disclosure by the broker defendants, it follows that it would be inequitable and unjust for those defendants to keep their "ill-gotten" gains. Accordingly, plaintiffs' have pled the elements of a claim for unjust enrichment. See Goldsmith, supra, 408 N.J. Super. at 382.

The Better Home defendants also claim that the trial court erred in upholding plaintiffs' allegations that defendants violated the covenant of good faith and fair dealing inherent in their contractual relationship. The covenant of good faith and fair dealing is "contained in all contracts and mandates that 'neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.'" Seidenberg v. Summit Bank, 348 N.J. Super. 243, 253 (App. Div. 2002) (quoting Sons of Thunder v. Borden, Inc., 148 N.J. 396, 420 (1997)). The Better Homes defendants argue that as they had no express contract with plaintiffs outside of the sale contract between plaintiffs and the sellers, there was no contract on which the covenant could be based. We reject that argument.

The Better Homes defendants admit they agreed to assist plaintiffs in finding a home and received a commission for their efforts. Although the nature and form of their agreement is not clear at this stage of the litigation, plaintiffs' complaint alleges that there was a binding agreement. They also allege that by deceiving plaintiffs about the elevator's history in order to gain a commission, the Better Homes defendants acted in bad faith in the performance of that agreement, thus denying plaintiffs its benefits. Accordingly, plaintiffs' complaint states a claim of breach of the covenant of good faith and fair dealing. See Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224-26 (2005).

With the elements of plaintiffs' claims against the broker defendants fresh in mind, we consider whether the trial court was correct in dismissing plaintiffs' claims against the broker defendants based on plaintiffs' spoliation of evidence. Where a party to litigation under a duty to preserve evidence destroys that evidence, that party becomes subject to spoliation sanctions. Aetna, supra, 309 N.J. Super. at 365. The existence of a duty to preserve evidence is "a question of law to be determined by the court." Ibid. Such a duty exists where there is

(1) pending or probable litigation involving the defendants, (2) knowledge by the plaintiff of the existence or likelihood of litigation; (3) foreseeability of harm to the defendants, or in other words, discarding the evidence would be prejudicial to defendants; and (4) evidence relevant to the litigation.
 

[Id. at 366 (quoting Hirsch v. Gen. Motors Corp., 266 N.J. Super. 222, 250-51 (Law Div. 1993)).]

We agree with the trial judge that plaintiffs were under a clear duty to preserve the elevator. At the time the elevator was destroyed, litigation between plaintiffs and defendants had been ongoing for nearly a year, centered on plaintiffs' claims that they should have been told about the elevator's history of dangerously defective operation, that the elevator cab was the same one involved in the 2002 accident and that its configuration inside the elevator shaft at the time of sale rendered it unsafe for their small children. Destruction of the elevator would not only affect plaintiffs' ability to prove their claims but also the sellers' ability to prove the elevator was safe at the time of sale. The elevator was central to the litigation and thus relevant and material to the claims and defenses. See Hirsch, supra, 266 N.J. Super. at 251. As there is no real dispute that spoliation occurred, the issue on appeal is the wisdom of the sanction.

Trial courts have the "'inherent discretionary power to impose sanctions for failure to make discovery'" including failure caused by spoliation. Aetna, supra, 309 N.J. Super. at 365 (quoting Hirsch, supra, 266 N.J. Super. at 260). Because dismissal with prejudice is "the ultimate sanction," our Supreme Court has directed that it should be imposed "only sparingly" and "normally . . . ordered only when no lesser sanction will suffice to erase the prejudice suffered by the non-delinquent party." Robertet, supra, 203 N.J. at 274 (quoting Zaccardi v. Becker, 88 N.J. 245, 253 (1982)).

In imposing any sanction for spoliation, a court must evaluate the facts in light of the three goals of the spoliation doctrine: "to make whole, as nearly as possible, the litigant whose cause of action has been impaired by the absence of crucial evidence; to punish the wrongdoer' and to deter others from such conduct." Ibid. As the Court put another way, the focus in selecting the proper sanction is "evening the playing field," Rosenblit v. Zimmerman, 166 N.J. 391, 401 (2001), or rectifying the prejudice caused by the spoliation so as to "place[ ] the parties in equipoise, Hirsch, supra, 266 N.J. Super. at 266." Robertet, supra, 203 N.J. at 273.

Although we agree with the trial court that defendants' delays in conducting discovery and plaintiffs' concern for the safety of their children and their desire to proceed with renovations to their home do not in any way excuse plaintiffs' conduct, we nevertheless conclude that as to the broker defendants, the sanction of dismissal was not appropriate.

As our analysis of plaintiffs' claims against those defendants for negligence, conspiracy and consumer fraud make clear, the broker defendants were under a regulatory duty to disclose to plaintiffs all material information affecting the physical condition of the property, as well as to disclose all psychological impairments about which plaintiffs asked, including the elevator.7 As we have held that the history of the elevator's dangerously defective operation is information concerning the physical condition of the property that was required to be disclosed, the condition of the elevator at the time of sale is not critical to the viability of those claims or to the broker defendants' defenses to those claims, although it could certainly affect a damage calculation. The condition of the elevator at the time of sale is irrelevant to the broker defendants' obligation to disclose, when asked, all psychological impairments to the property. See N.J.A.C. 11:5-6.4(d)(3).

Because neither plaintiffs' claims against the broker defendants nor their defenses are dependent on the condition of the elevator at the time of sale, dismissal of the claims as to those defendants is too harsh a sanction. Instead, a lesser sanction of suppressing all evidence relating to the elevator after plaintiffs took possession of the property, including but not limited to the two inspections plaintiffs had conducted of the elevator and shaft, should be sufficient to level the playing field and remove any advantage plaintiffs' access to the elevator at the time of sale and thereafter would accord them in the litigation.

Consideration of the sanction as it applies to the sellers is more challenging. Plaintiffs argue that any prejudice to the sellers is assuaged by the existence of the original plans and schematics. Although the Court in Robertet noted that the existence of these types of construction documents can often limit or remove entirely any prejudice to defendants from spoliation of evidence, whether such is possible here is not clear. The problem is that much of the disagreement between plaintiffs and the sellers centers around the sellers' representation that the elevator was "safe" at the time of sale. Plans, no matter how detailed, cannot answer that question, especially in light of plaintiffs' allegation that it was the spacing between the elevator cab, as installed, and the shaft that presented the danger. Although suppressing the evidence of plaintiffs' inspections of the elevator after they took possession of the property may well make it impossible for them to prove the sellers' representations as to the safety of the elevator were false, it also deprives the sellers of the best evidence they had to prove their statements were true.

Nevertheless, we conclude the trial court erred in not considering the same lesser sanction of suppressing all evidence relating to the elevator after plaintiffs took possession of the property, including but not limited to the two inspections plaintiffs had conducted of the elevator and shaft. Suppression of that evidence would level the playing field by depriving plaintiffs of that which they deprived the sellers post-sale inspection of the elevator and shaft for purposes of the litigation. Although it may be that plaintiffs cannot prove their claims against the sellers without that evidence, we cannot conclude that on this record. Indeed, our review of the record suggests that plaintiffs used the same firm to remove the elevator in 2013 that the sellers used to replace the cab after the 2002 accident. If true, that suggests that the firm continues in existence and may have records of its work on the elevator in the Colts Neck property. It is also possible that the parties may be able to depose persons who repaired or maintained the elevator.

The court should ask plaintiffs and the sellers to present what records are available concerning the elevator and their positions as to sanctions short of dismissal. The court should consider the evidence presented and evaluate the prejudice to the sellers in light of the other evidence available, taking testimony if necessary. The court should then be in a position to fashion a sanction consistent with fundamental fairness to both parties.

Finally, we agree with defendants that the trial court properly dismissed plaintiffs' claims for negligent and intentional infliction of emotional distress. Plaintiffs can generally maintain an independent tort for negligent infliction of emotional distress in only two types of cases. A plaintiff can either "demonstrate that the defendant's negligent conduct placed plaintiff in reasonable fear of immediate personal injury, which gave rise to emotional distress that resulted in a substantial bodily injury or sickness," or by satisfying the four element test laid out by the Court in Portee v. Jaffee, 84 N.J. 88 (1980). Jablonowska v. Suther, 195 N.J. 91, 104 (2008).

As plaintiffs do not allege that defendants' "negligently with[holding] from Plaintiffs the tragic history of the property" put them in reasonable fear of immediate personal injury to themselves, they must satisfy the Portee test to state a prima facie claim for negligent infliction of emotional distress. See ibid. To establish that claim, plaintiff must show that

(1) the defendant's negligence caused the death of, or serious physical injury to, another; (2) the plaintiff shared a marital or intimate, familial relationship with the injured person; (3) the plaintiff had a sensory and contemporaneous observation of the death or injury at the scene of the accident; and (4) the plaintiff suffered severe emotional distress.

[Id. at 103 (citing Portee, supra, 84 N.J. at 97).]

Plaintiffs' claim that defendants owed them a duty to disclose the prior elevator accident, failed to do so, and as a result of learning the truth, plaintiffs were put in fear of potential injury or death to their children simply does not state a Portee claim under our law.8

To establish a claim for intentional infliction of emotional distress, a plaintiff must show that the defendant (1) intentionally or recklessly engaged in (2) extreme and outrageous conduct (3) that was the proximate cause of (4) plaintiff suffering emotional distress so severe that no reasonable person could be expected to endure it. Buckley v. Trenton Sav. Fund Soc'y, 111 N.J. 355, 366-67 (1988). Extreme and outrageous conduct is defined as "'so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.'" Id. at 366 (quoting Restatement (Second) of Torts 46 comment d (1965)).

Although the facts here support the conclusion that the information as to the elevator's history was intentionally withheld, they do not constitute the sort of atrocious conduct defined by the tort. In short, we agree with the trial court that plaintiffs cannot recover for intentional infliction of emotional distress for failure to disclose a physical condition of property.

To sum up, we reverse the order dismissing the complaint based on spoliation of evidence. As to the sellers, we conclude the court should have considered whether a lesser sanction short of dismissal would have provided a fair and practical remedy, and we remand to allow the trial court to undertake such an inquiry. As to the broker defendants, we reinstate the claims for negligence, conspiracy to defraud, consumer fraud, unjust enrichment and, as to the Better Homes defendants, the claim for breach of the implied covenant of good faith and fair dealing. We affirm the court's order dismissing plaintiffs' claims for intentional and negligent infliction of emotional distress. We deny the broker defendants' cross-appeals in their entirety.

Affirmed in part; reversed in part; and remanded. We do not retain jurisdiction.

1 Although we do not agree that the broker defendants are correct in asserting the elevator's history constituted only a psychological impairment of the property, even were that so, they still had a duty to disclose the information to plaintiffs when they asked whether the elevator was safe. See N.J.A.C. 11:5-6.4(d)(3).

2 The trial judge determined that the "materiality of the 2002 elevator accident is somewhat dependent on the safety and condition of the current elevator," implying that the broker defendants may not have had a duty to disclose if the elevator was "functional and safe" at the time of sale. Although we can imagine that repairs to certain physical conditions of a property, replacement of a crumbling front step, for instance, might affect the materiality of the information, we do not agree that a repair to the elevator would render the information of its history immaterial to the physical condition of the Colts Neck property. Notwithstanding any repair, a reasonable person would attach importance to the fact that the elevator once malfunctioned, killing two children, in deciding whether or how to proceed in purchasing the property. See N.J.A.C. 11:5-6.4(b)(2). In addition, the broker defendants had a duty to disclose, when asked, all psychological impairments to the property, which would no doubt encompass the grisly deaths of two young children in the elevator. See N.J.A.C. 11:5-6.4(d)(3).

3 Strawn has since been partially abrogated by statute as the case relates to residential real estate contracts for new construction entered into before the statute's effective date. See Nobrega v. Edison Glen Assocs., 167 N.J. 520, 533 (2001).

4 While the direct fraud claim is against the sellers, not the broker defendants, that claim underlies the conspiracy to defraud claim.

5 The Better Homes defendants also argue, as with the conspiracy to defraud claim, that they lacked knowledge of the elevator incident and thus the claim should have been dismissed as against them. Their argument, like that in opposition to the conspiracy count, is premature. Although to succeed on a consumer fraud claim against a broker for concealing or omitting material facts, a plaintiff must prove the broker knew the facts in question, discovery had not yet proceeded to the point where summary judgment would be appropriate as to the question of Better Homes' knowledge. Although partially transformed into a summary judgment motion by consideration of matters outside the pleadings, this was still effectively a motion to dismiss on the pleadings and the pleadings set out that Better Homes knowingly concealed the information. That the Better Homes defendants claim that they did not know, as opposed by plaintiffs' assertions that they did, does nothing more than prove the existence of a dispute over the fact, the claimed lack of knowledge would not support dismissal for failure to state a claim. See Van Natta Mech. Corp., supra, 277 N.J. Super. at 180-81; Nobrega, supra, 327 N.J. Super. at 418.

6 Plaintiffs now assert other damages, including their costs in renting another residence.

7 As the broker defendants' duty to disclose also underlies the claims for unjust enrichment and breach of the duty of good faith and fair dealing, the same analysis of the spoliation remedy applies as well.

8 Plaintiffs' reliance on Strachan v. John F. Kennedy Mem'l Hosp., 109 N.J. 523 (1988), to argue the Court has done away with the requirement of physical injury, either to the plaintiff or to another with whom the plaintiff shared an intimate, familial relation for any and all claims for infliction of emotional distress is belied by the opinion. See id. at 538 ("We need not decide today whether Portee's abandonment of the physical injury requirement for emotional distress claims should extend to all "direct" claims for emotional distress. We need look no further than the long-recognized exception for negligent handling of a corpse, or the especial likelihood that this claim is genuine, to conclude that plaintiffs need not demonstrate any physical manifestations of their emotional distress here.") (citations omitted).