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Jewish Center of Sussex Cty. v. Whale

Supreme Court of New Jersey
432 A.2d 521, 1981 N.J. LEXIS 1670, 86 N.J. 619 (1981)
ELI5:

Sections

Rule of Law:

To establish equitable fraud justifying the rescission of a contract, a plaintiff must prove a material misrepresentation of fact, intent that the other party rely on the representation, and actual reliance; unlike legal fraud, proof of scienter (knowledge of falsity and intent to deceive) is not required.


Facts:

  • In late 1977, the Jewish Center of Sussex County placed an advertisement seeking a rabbi to serve the congregation.
  • Whale submitted a resume in response, listing his experience for the years 1970-1977 as an administrator for the Ministry of Education in Jerusalem.
  • In reality, during the 1970-1977 period, Whale had been a fugitive, was convicted of federal mail fraud, served time in a federal penitentiary, and was disbarred from practicing law in New York.
  • The resume did not disclose the criminal conviction or disbarment.
  • Relying on the resume, the Jewish Center hired Whale, and the parties entered into an employment contract on January 1, 1978.
  • Whale performed his duties satisfactorily for several months.
  • In April 1978, the Jewish Center discovered Whale's prior criminal record and disbarment.
  • Upon this discovery, the Jewish Center resolved to rescind the employment contract and notified Whale.

Procedural Posture:

  • Plaintiff (Jewish Center) sued Defendant (Whale) in the trial court (Chancery Division) seeking rescission of the employment contract and an injunction.
  • The trial court granted Plaintiff's motion for summary judgment, ruling that Defendant's failure to disclose constituted fraudulent concealment.
  • Defendant appealed to the Appellate Division.
  • The Appellate Division affirmed the trial court's decision (with one judge dissenting).
  • Defendant appealed as of right to the Supreme Court of New Jersey.

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Issue:

Does a job applicant's submission of a resume containing false information regarding their past employment constitute equitable fraud sufficient to rescind an employment contract, even without proving the applicant had specific intent to deceive?


Opinions:

Majority - Clifford

Yes, the Court affirmed the lower court's judgment because the defendant's resume submission constituted equitable fraud. The Court reasoned that Whale submitted a resume containing a clear falsehood regarding his activities from 1970 to 1977. While legal fraud requires proof of 'scienter' (knowledge of falsity and intent to obtain undue advantage), the plaintiff here sought only the equitable remedy of rescission (canceling the contract), not monetary damages. Therefore, the plaintiff only needed to prove equitable fraud, which consists of a material misrepresentation, intent that the other party rely on it, and actual reliance. The Court found the misrepresentation was material because it related to the defendant's moral character, which is essential for a clergy position. The Court rejected Whale's argument that the Center suffered no damage, noting that in equity, the 'damage' is the unfair advantage gained by the defendant and the imposition of a contract induced by a lie. Because the case could be resolved on the grounds of active misrepresentation (the resume), the Court declined to rule on the broader issue of whether Whale had a duty to voluntarily disclose his past (fraudulent concealment).



Analysis:

This case is significant because it clarifies the lower burden of proof required for equitable remedies compared to legal remedies in contract disputes. By distinguishing equitable fraud from legal fraud, the court established that a contract can be voided for a material lie even if the plaintiff cannot prove the defendant had a malicious intent to deceive (scienter). It underscores that in professional hiring—particularly for positions of trust like clergy—a resume is a representation of fact upon which an employer is entitled to rely without conducting an exhaustive background check. The decision implies that applicants bear the risk of rescission if they include falsehoods in application materials, regardless of their subsequent job performance.

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