317 A.2d 68 (N.J. 1974)
Mrs. Natalie Weintraub owned and occupied a six-year-old Englishtown home that she placed with The Serafín Agency, Inc. for sale.1 The Donald P. Krobatsches examined the illuminated house and found it suitable.2 On June 30, 1971, Weintraub as seller and the Krobatsches as purchasers signed a contract for the sale of the property at $42,500.3 The contract stated that the purchasers had inspected the property and were fully satisfied with its physical condition, that no representations had been made, and that the seller assumed no responsibility for the present or future condition of the premises.4 A $4,250 deposit was sent by the purchasers to the broker to be held in escrow pending closing.5
The purchasers requested that the house be fumigated, and that service was performed.6 A fire after the contract signing caused damage, but the purchasers indicated readiness for an adjustment at closing.7 On the evening of August 25, 1971, prior to closing, the purchasers entered the then-unoccupied house and, upon turning on the lights, observed roaches running in all directions up the walls, drapes, and elsewhere.8
The following day their attorney wrote to Weintraub advising that the house was infested with vermin despite recent exterminator service and rescinding the contract on the ground that the infestation rendered the house unfit for human habitation.9 On September 2, 1971, an exterminator examined the premises and confirmed that cockroaches had infested the entire house, stating that treatment would require removal of the carpeting.10
Weintraub rejected the rescission and filed suit in the Law Division against the Krobatsches and the broker.11 She initially sought specific performance but later limited her claim to damages in the amount of the $4,250 deposit.12 The broker answered and counterclaimed for its $2,550 commission.13 The Law Division granted Weintraub summary judgment for the deposit amount and directed payment from escrow funds but denied the broker's summary judgment motion and held that claim for trial. The Appellate Division affirmed the judgment for Weintraub but modified the order to award the broker its commission as well. The Krobatsches sought further review, alleging they were entitled to a trial on whether fraudulent concealment or nondisclosure by the seller justified rescission.14
Whether the seller of a home had a duty to disclose to the purchasers a known latent infestation of vermin throughout the house?15
Yes. The established facts indicate that the Krobatsches were astonished to see roaches running in all directions upon turning on the lights.18 An exterminator later confirmed that cockroaches had infested the entire house.19 Because the seller had occupied the home for six years, the infestation was a latent condition not observable during the purchasers' inspections with all lights illuminated.20 The rule therefore imposes a duty on the seller to disclose the condition if she was aware of it.21
The purchasers' contract stated they were satisfied with the physical condition, but that does not bar a claim for fraudulent concealment of a material latent defect.22
The seller had a duty to disclose the known latent infestation of vermin to the purchasers.23
Whether the purchasers were entitled to rescind the contract based on the seller's alleged fraudulent concealment or nondisclosure of the infestation?24
Where the seller deliberately conceals or fails to disclose a latent infestation of such magnitude as to render the house unfit for human habitation, the purchasers are entitled to rescind the contract.25
Yes. The purchasers immediately rescinded upon discovery of the infestation and the exterminator's report.26 The condition was so repulsive that they chose to rescind rather than proceed with adjustment for other damage.27 If the trial judge finds deliberate concealment of a significant latent condition not observable by the purchasers, rescission is justified.28
Minor conditions would not call for rescission, but the described infestation of the entire house meets the threshold for equitable relief.29
The purchasers were entitled to rescind the contract if they establish the seller's fraudulent concealment or nondisclosure of the infestation.30