Opinion
DOCKET NO. A-3138-09T4
01-10-2013
CARL POPE and DANIEL STRUBLE, Plaintiffs-Respondents/ Cross-Appellants, v. CRAFTSMAN BUILDERS, INC. and CHRISTOPHER DAVIS, Defendants-Appellants/ Cross-Respondents.
Richard A. Tanner argued the cause for appellants/cross-respondents (Bashwiner and Deer, LLC, attorneys; Mr. Tanner, of counsel; Joseph A. Deer, on the brief). Elizabeth A. Delahunty argued the cause for respondents/cross-appellants (Franzblau Dratch, attorneys; Ms. Delahunty, of counsel; Stephen N. Dratch, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges A. A. Rodríguez, Sabatino and Fasciale.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6155-07.
Richard A. Tanner argued the cause for appellants/cross-respondents (Bashwiner and Deer, LLC, attorneys; Mr. Tanner, of counsel; Joseph A. Deer, on the brief).
Elizabeth A. Delahunty argued the cause for respondents/cross-appellants (Franzblau Dratch, attorneys; Ms. Delahunty, of counsel; Stephen N. Dratch, on the brief). PER CURIAM
This case arises out of a dispute regarding a contract for home renovations. Defendants Craftsman Builders, Inc. (Craftsman) and Christopher Davis (Davis) respectively, the contractor and its sole shareholder, (collectively referred to as "defendants") appeal from a jury verdict entered against them and an order denying their motion for a new trial. They contend that the judge charged the jury improperly and further erred by awarding attorneys' fees and costs pursuant to the offer of judgment rule. Plaintiffs-homeowners, Carl Pope and Daniel Struble, cross-appeal from a mid-trial order dismissing claims that they made pursuant to the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195. We reverse the dismissal of plaintiffs' CFA claims, the jury verdict, and the award of attorneys' fees, and we remand for a new trial on all issues.
Rule 4:58-2.
In August 2007, plaintiffs filed their complaint and alleged that they suffered damages as a result of defendants' negligence, breach of contract, and consumer fraud. Defendants then filed a counterclaim seeking unpaid fees for services rendered. In July 2009, plaintiffs filed and served an offer of judgment in the amount of $225,000.
A judge and jury tried the case in September and October 2009, during which time the judge dismissed plaintiffs' CFA claims. The jury determined that plaintiffs were twenty percent negligent and defendants were eighty percent negligent, returned a verdict of $315,000 in plaintiffs' favor on their negligence claim and $37,500 on their breach of contract claim, and awarded $36,300 in defendants' favor on their counterclaim. In January 2010, the judge awarded plaintiffs $64,287.36 in counsel fees and costs, molded the verdict to include interest and to offset defendants' verdict on their counterclaim, and entered a final judgment in plaintiffs' favor in the net amount of $360,867.76. The following facts were adduced at trial.
In 1989, plaintiffs purchased a home in Montclair (the property). The property was constructed in the 1840s and contained an addition built in 1920. In 2003, they decided to renovate the property and retained Paul Newman, an architect, to prepare the design plans. Plaintiffs' plumber, Tom Mesce, who had a work-related history with defendants, contacted Davis regarding the renovation project.
In February 2005, Pope and Davis met at the property. Pope provided Davis with the design plans that Newman prepared, and he asked Davis to prepare a bid proposal. In March 2005, Davis estimated that the project would cost $201,000 and take approximately four to six months to complete. In April 2005, Davis estimated that the job would cost $246,000. In May 2005, the parties entered into a final construction contract presented by defendants, which included a renovation cost of $259,400 and provided that
[a]ll work is to be completed in a workmanship type manner according to manufacturer specifications, industry standards, design specifications[,] and accepted practices. All work will meet or exceed all relevant applicable federal, state[,] county[,] or local codes and regulations. All structural work is guaranteed for as long as you own your home, however, the guarantee is non-transferable. All work is guaranteed for a period of not less than [five] years, excepting items where the manufacturer guarantee is less than that period . . . .The parties signed the contract, and in June 2005, defendants commenced working on the project.
The project, bar[r]ing an[y] act from God, material shortage, or natural disaster, is to be completed in the time allotted, in this case, six months. The six month project time begins with the receipt of the first payment. Should the project be delayed due to inactivity or mismanagement on the part of the contractor, the owner will be credited 1% of the project cost per week up to 10% of the initial project cost until the completion of the project.
In September 2005, the parties expanded the scope of the project and revised the contract accordingly. As a result of the revisions, including a "much larger foundation" and at least 1000 feet of additional living space, the contract price increased to $375,000 and the estimated completion time was extended to nine months or less.
Defendants then issued two change orders. In March 2006, Pope signed the first order totaling $60,200, which addressed termite damage and a fallen chimney. At the time he signed that change order, Pope noticed that the second floor had been totally redesigned; the master bath had been changed to the other side of the house; and the steps to the second floor were not built according to the plans. Davis explained to Pope that the re-design was necessary to satisfy the township's concerns that the structure was going to fail. In August 2006, Davis issued the second change order totaling approximately $40,000, but plaintiffs refused to sign it. Instead, Pope contacted Davis to express his discontent and inform him of his position that defendants were in default on the contract. In November 2006, plaintiffs repeated their discontent with defendants' work and the length of time that it was taking.
In January 2007, the township issued a notice of violation and order to terminate the renovation work due to various failed inspections. In March 2007, the township issued a certificate of occupancy and plaintiffs moved back into the house and changed the locks. By the time they took possession of the house, plaintiffs had paid defendants a total of $446,500. In May 2007, Davis asked plaintiffs to provide him with a punch list; however, Pope did not consider the many problems that he noticed to be mere punch-list related items.
This amount represents $11,300 more than the total of the revised contract amount of $375,000 plus the first change order of $60,200.
Pope noticed that the floors were damaged; the molding did not fit properly; the doors did not close properly; the tile was not laid properly in the bathroom; the sump pumps were inoperable; there were no outlets in the basement; the kitchen cabinets were "off" and there was no molding around them; the back porch was not completed; the foyer door had no glass in it; there were no gutters above any of the porches; there was missing siding above the porches; some of the siding had started to separate; the trim around the exterior of the house was coming apart; the yard was not leveled and graded; water was pouring into the basement near the sewer pipe; the chimney was not raised to its proper height; the thimble on the chimney had been sealed over; the soaking tub was inoperable; a lot of the woodwork was marred and scratched and in very poor condition; the house was dirty; the exterior of the house did not seem to have been painted; there were broken electrical outlets; the dryer was scratched and the washing machine was broken; the stove was broken and the dishwasher was not hooked up; there was inadequate water pressure in the kitchen and throughout the house; the basement was not finished; and the entire second floor appeared to be supported by shims.
Pope then hired Anthony Ciccotti (Anthony) and Ciccotti Construction (collectively referred to as "Ciccotti") to complete the renovation work. Anthony testified on plaintiffs' behalf as a fact witness. In or around June 2007, Anthony inspected the exterior of the house and noticed a host of problems with the property.
He also hired Mialek Mechanical (Mialek) to repair the air conditioning. Mialek was a subcontractor under the Craftsman contract and installed the HVAC system after defendants had stopped working on the property.
Anthony observed missing siding and damage to the existing siding; no flashing over the windows, rim joists, or doors; three exterior doors were all single-paned containing gaps underneath them because there was no weather stripping; gaps between the roof and the house because of the lack of flashing; and that the pipe from the sump pump was sticking out of a window. Inside the house he noticed that the tile in the upstairs bathroom stuck up approximately a quarter inch in the corners, and there were sharp edges; the wood flooring was placed too close to the molding; the light switches were below the railing; the lights in the kitchen had not been installed; and there were loose outlets in the wall.
In September or October 2007, Anthony prepared a written quote of $56,703 for the work, which plaintiffs signed, and in October 2008, Anthony increased the quote to add an additional $190,152, for a total of $246,855. Anthony explained that the total contract price included remedial and new work, consisting of a new design to the back porch. In February 2008, Ciccotti started working on the property. Upon noticing that there were three separate break points in the framing, Ciccotti retained Newman for guidance on how to make the repairs, and then repaired the framing.
Newman testified as plaintiffs' forensic expert in architecture. He explained that the renovation's construction by defendants was contrary to his design plans. In May 2006, he wrote a letter to the Montclair Building Department explaining that the ridge beam, the joist framing connecting the base to the roof, the connection of the joist to the rafters, and the use of multi-lam beams instead of lally columns all deviated from his plans. The deviations, however, were "perfectly acceptable."
Plaintiffs also presented the factual testimony of Bruce Lael, a licensed professional engineer and building code inspector. Lael inspected the property in or around April 2007. He also observed several problems with the property.
He noticed that there were two zones of heating in the house, but no separate zone controls; there was insufficient water flow to the shower in the master bath; the overhead electrical service coming to the house was tied to the house with rope; there was a switch behind a stair railing; there was no air ventilation channels behind the insulation; there was no ridge vent on the roof; siding was missing on the exterior; the back porch roof had no gutters; there was no sump pump; the basement concrete floor had some shrinkage cracking; and the faucet and spout were at the wrong end of the tub.
Plaintiffs produced Harbhajan Braich as their forensic engineering expert, whose testimony the judge limited to issues other than damages. Braich visited the property three times between January and September 2009, and he performed non-invasive inspections of the property. Braich testified that Craftsman was required to follow the architectural plans, and he too observed problems with the renovation work.
Plaintiffs did not appeal from this ruling.
For example, one window was unfinished in the kitchen, there were gaps between the cabinets, and the outlets were very low. In the basement, one center beam rested on a door header, a few sewer pipes snaked through joists with big holes in them, and one concrete block wall was not filled with concrete as designed.
Robert McLoughlin, the construction official for Montclair Township who was responsible for enforcement of the Uniform Construction Code, testified that he visited the property on September 11, 2007, after the certificate of occupancy had been issued. During his visit, he noticed electrical violations: the absence of electrical outlets and closet lights, improper wiring and lack of receptacles in the kitchen, and improper wiring of the circulator pump on the boiler. He issued violations notices relating to three sub-codes: building, plumbing, and electrical.
David J. Shih testified as defendants' forensic structural and professional engineering expert. He inspected the property and prepared a report in August 2009. In preparing his report, he reviewed Newman's and Braich's reports, as well as the inspections from the township and the architectural/design drawings that Newman had prepared.
Shih concluded that Newman's design of the lally column and ridge beam were underdesigned. There were gaps between the rafters and the ridge beam because the ridge beam was too weak, which caused deflection. According to Shih, the gap in the rafters was a design problem, not a construction-related problem.
Davis testified that before entering into the contract with plaintiffs, he advised them that there would likely be structural issues due to the age of the house. He indicated that "[t]hroughout the course of this project, the plans lacked both detail and definition to properly encompass what [plaintiffs] wanted carried out." For example, the plans did not provide details on how the new stairway should be constructed. Davis testified that the last day he worked on the property, beyond cleaning up, was February 27, 2007. While he admittedly had not completed all of the work under the contract, he had obtained the certificate of occupancy for plaintiffs.
Davis indicated that plaintiffs had agreed that Craftsman would be permitted to complete the project after the township issued the certificate of occupancy, but that plaintiffs prevented him from finishing the project. Notwithstanding the fact that defendants were paid a total of $446,500, Davis claimed that he was still owed $36,300 for construction services rendered.
On appeal, defendants argue that the judge erred by charging the jury on the principles of negligence and awarding attorneys' fees under the offer of judgment rule. They also contend that the verdict was against the weight of the evidence. Plaintiffs argue on their cross-appeal that the judge erred by dismissing their CFA claims. We focus on the jury charge, the award of fees, and the dismissal of the CFA claims. Because we are remanding for a new trial on all issues, we need not reach defendants' contention that the verdict was against the weight of the evidence.
I.
We begin by addressing defendants' argument that the judge erred by charging the jury on negligence as a separate cause of action. They argue that any negligence would merely be evidence of a breach of contract, which was already pleaded, and that the jury charge was confusing. They assert that the judge further erred by properly charging the jury that it could not consider consequential damages, but then, in contradiction, charging "that the damages [in this case] were the natural and probable consequences of either party's conduct." They also contend that it was wrong to tell the jury that they could find liability for both negligence and for breach of contract. Defendants maintain, therefore, that the jury awarded plaintiffs a double recovery based on the same facts. Plaintiffs assert that defendants should be precluded from being heard on this argument because defense counsel submitted a request to charge the jury on negligence and failed to object to that charge.
Proper jury charges are essential to a fair trial. Reynolds v. Gonzalez, 172 N.J. 266, 288 (2002). The failure to provide clear and correct jury charges may constitute plain error. Das v. Thani, 171 N.J. 518, 527 (2002). Indeed, "[e]rroneous instructions are poor candidates for rehabilitation as harmless, and are ordinarily presumed to be reversible error." State v. Afanador, 151 N.J. 41, 54 (1997).
A trial judge must provide the jury with a clear explanation of the legal principles governing the case. Vallejo ex rel. Morales v. Rahway Police Dep't, 292 N.J. Super. 333, 342 (App. Div.), certif. denied, 147 N.J. 262 (1996). "Jury charges 'must outline the function of the jury, set forth the issues, correctly state the applicable law in understandable language, and plainly spell out how the jury should apply the legal principles to the facts as it may find them.'" Reynolds, supra, 172 N.J. at 289 (quoting Velazquez v. Portadin, 163 N.J. 677, 688 (2000)).
Generally, "an appellate court will not disturb a jury's verdict based on a trial court's instructional error 'where the charge, considered as a whole, adequately conveys the law and is unlikely to confuse or mislead the jury, even though part of the charge, standing alone, might be incorrect.'" Wade v. Kessler Inst., 172 N.J. 327, 341 (2002) (quoting Fischer v. Canario, 143 N.J. 235, 254 (1996)). In fact, "[c]ourts uphold even erroneous jury instructions when those instructions are incapable of producing an unjust result or prejudicing substantial rights." Fisch v. Bellshot, 135 N.J. 374, 392 (1994).
In the judge's preliminary instruction to prospective jurors, she explained:
[This civil case] arises out of an agreement between the parties in the nature of a construction contract for residential property.At the charge conference, defendants' counsel stated that plaintiffs had not submitted a written request for a negligence charge. Plaintiffs' counsel then orally requested such a charge and the judge responded as follows:
The plaintiffs in this case bring this suit contending that the contract was breached by the negligent conduct of the defendants or that the defendants failed to perform the contract in accordance with the terms of the contract. They sue to recover money damages for the breach of the contract.
The defendants in this case deny that they breached the contract or that they performed a task negligently. The jury will be asked to decide whether the defendants breached the contract and if the plaintiffs are entitled to an award of damages. The jury will also be asked to decide on the appropriate amount.
I'm not going to give you any more time. . . . [Y]ou've had more than enough time to consider the basic charges that you wanted the [c]ourt to consider, and if they had to be tailored through the course of testimony, that's another consideration, but the negligence charge is a basic, boilerplate charge that you could have recited. It's not here.As a result, defendants' counsel withdrew his request for all charges relating to proximate cause and comparative negligence. When plaintiffs' counsel asked defense counsel to clarify which charges he was withdrawing, the court stated: "He said that there's no issue raised as to negligence, so he's going to withdraw his proximate cause [charge]," and "anything that relates to negligence." Nevertheless, the judge then informed counsel that she planned to charge negligence, proximate cause, and comparative negligence. She explained that
And why I'm charging negligence is if . . . I did not charge it, it would be error. There is a certain evidence that has been presented to the jury that presents a question of fact with respect to negligence . . . .The judge then charged the jury, in pertinent part, that
. . . .
And the only reason that I'm allowing negligence[, notwithstanding the fact that plaintiffs failed to request such a charge,] is because . . . I'm bound by law to charge on the law as supported by any evidence that's been presented for the jury to consider, and there was some evidence for the jury to consider.
In this action, the plaintiffs contend that the defendants were negligent because they did not comply with the standard of care that the law imposes upon them while performing the work of their contract with plaintiff. Plaintiff contends that as a result of defendants' negligence, plaintiff suffered injury for which damages are sought.
. . . .
Further, the home repair contractor's conduct must be measured by the standard of home repair and building/contractor's practice in the same or similar communities at the time the contract[or] was performing his services. Thus, a home repair and building contractor has the duty to have and to use that degree of judgment, knowledge, skill, . . . which a contractor of ordinary ability possesses and exercises in the same or similar communities at the time the contractor performed the services.
Thus, if you find that the contractor has exercised that degree of knowledge, skill, judgment, . . . which is possessed and used by the average contractor, you may not find them liable for negligence even though unsatisfactory results may have occurred.
. . . .
In the usual case, the standard building contractor practice by which to judge defendants' conduct cannot be determined by the jury without the assistance of expert testimony. However, in some cases, such as the case at hand, the jury may determine from its common knowledge and experience the standard of care by which to judge the defendants' conduct.
In this case, plaintiff contends that the defendant violated the duty of care owed to the plaintiff by negligently completing the task and the contract, and by failing to complete certain tasks as have been testified to, such as the railings, the siding, the structural work.
In this case, therefore, it is for you, as jurors, to determine based upon common knowledge and experience what . . . care the average contractor would have exercised in the same or similar circumstances. It is for you as jurors to say from your common knowledge and experience whether defendant did something which the average member of his profession would not have done, or whether defendant failed to do something, or failed to take some measure that the average member of their profession would have done or taken in the circumstances of this case.
After determining the standard of care required under the circumstances of this case, you should then consider the evidence to determine whether the defendant has complied with or departed from that standard of care.
We conclude that the judge erred, despite her stated concern that she was obligated to do so, by charging negligence as a separate cause of action in this case. First, plaintiffs' cause of action fundamentally sounds in breach of contract, not in negligence. When "there is no express contractual provision concerning workmanship, the law implies a covenant that the contract will be performed in a reasonably good and workmanlike manner." Aronsohn v. Mandara, 98 N.J. 92, 98 (1984). The Court in Minemount Realty Co. v. Ballentine, 111 N.J. Eq. 398, 399 (E. & A. 1932), held that "[w]here a party contracts to build a building for a specified purpose, the law reads into the contract a stipulation that the building shall be erected in a reasonably good and workmanlike manner and when completed shall be reasonably fit for the intended purpose." In Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 91 (1965), the Court noted that the home buyer relies on a mass housing developer's "implied representation that the house will be erected in [a] reasonably workmanlike manner."
In Aronsohn, supra, 98 N.J. at 95-96, the plaintiff homeowners sued the defendant contractors after they discovered defects in the patio that the defendants built before the plaintiffs had purchased the home. The plaintiffs' suit was based on strict liability, negligence, and breaches of express and implied warranties. Id. at 96. The Court held that the contractor was not "immunized from his contractual obligation to have performed his work in a workmanlike, non-negligent manner simply because the original owner or buyer transferred the property to a successor." Id. at 99. In doing so, the Court noted, with regard to a possible negligence claim, that
a contractor may be liable to third persons who suffer personal injury and property damages as a proximate result of a contractor's negligent workmanship after he has completed the job.
However, what is involved here is essentially a commercial transaction, and plaintiffs' claim is rested on the violation of the implied contractual provision that the patio would be constructed in a workmanlike fashion. We do not intend to exclude the possibility that a cause of action in negligence would be maintainable. See Rosenau v. City of New Brunswick, 51 N.J. 130 (1968) (holding valid a negligence suit in which a consumer of water supplied by the city sued the manufacturer of a defective meter which allegedly caused water damage to the meter as well as to his home). However, we do not need to decide the validity of plaintiffs' negligence claim, since, as discussed above, the contractor's negligence would constitute a breach of the contractor's implied promise to construct the patio in a workmanlike manner.
[Id. at 107.]
Here, the contract between the parties contained an express contractual provision that Craftsman would perform the renovation in a workmanlike fashion. Thus, their allegations sound in contract, not negligence: defendants breached the express provisions of the contract and/or failed to perform under the contract.
We agree with defendants that the jury charge was confusing. In commingling concepts of breach of contract in the negligence charge, the judge stated:
In this case, plaintiff contends that the defendant violated the duty of care owed to the plaintiff by negligently completing the task and the contract, and by failing to complete certain tasks as have been testified to, such as the railings, the siding, the structural work.Failing to complete certain tasks, however, is evidence of a breach of contract, not negligence. Additionally, in light of an express warranty regarding workmanship, negligently completing the tasks set forth in the contract is also evidence of a breach of contract. See Aronsohn, supra, 98 N.J. at 107.
Moreover, by charging negligence as a separate cause of action, along with breach of contract, the judge permitted the jury to find liability under both negligence and breach of contract for the same conduct, thereby permitting double recovery for plaintiffs. The judge instructed the jury that failing to complete certain contractual tasks amounted to liability under both the negligence and the breach of contract causes of action, which was improper. See Taylor v. Metzger, 152 N.J. 490, 509 (1998) (noting that a plaintiff should be prevented from having a "double recovery" when the same evidence supports damage claims under two different laws). In fact, the jury awarded separate and redundant damages for negligence and breach of contract. Therefore, we reverse the verdict and remand for a new trial.
We appreciate that the trial judge charged negligence out of caution and a concern that her failure to do so might be deemed to be reversible error on a future appeal. We also are mindful that the question of whether negligence should be separately charged arose spontaneously at the charge conference, in the absence of a proper written charge request submitted by plaintiffs' counsel on the subject in accordance with Rule 4:25-7(b). The judge also was not apparently provided with any briefs addressing the necessity, as a matter of law, of charging negligence in this case. Nor did counsel or either party express any objections or reservations once the judge advised them of her perception that she was legally obligated to issue a negligence charge and to include both issues on the verdict form. Even so, the simultaneous charge of both negligence and contract theories here produced confusion and duplicative recovery that mandates corrective action.
II.
Defendants contend that the judge erred by awarding plaintiffs attorneys' fees and costs pursuant to the offer of judgment rule. They argue that the court used an erroneous calculation in determining that such an award was appropriate. We need not reach this issue because we are remanding the case for a new trial, but do so anyway for sake of completion.
Rule 4:58-1 provides that
a. Except in a matrimonial action, any party may, at any time more than [twenty] days before the actual trial date, serve on any adverse party, without prejudice, and file with the court, an offer to take a monetary judgment in the offeror's favor, or as the case may be, to allow judgment to be taken against the offeror, for a sum stated therein (including costs). The offer shall not be effective unless, at the time the offer is extended, the relief sought by the parties in the case is exclusively monetary in nature.There are various consequences to non-acceptance of the offer, such as
(a) If the offer of a claimant is not accepted and the claimant obtains a money judgment, in an amount that is 120% of the offer or more, excluding allowable prejudgment interest and counsel fees, the claimant shall be allowed, in addition to costs of suit: (1) all reasonable litigation expenses incurred following non-acceptance; (2) prejudgment interest of eight percent on the amount of any money recovery from the date of the offer or the date of completion of discovery, whichever is later . . . ; and (3) a reasonable attorney's fee for such subsequent services as are compelled by the non-acceptance.
[R. 4:58-2.]
The offer-of-judgment rule is "designed particularly as a mechanism to encourage, promote[,] and stimulate early out-of-court settlement of negligence and unliquidated damage claims that in justice and reason ought to be settled without trial." Crudup v. Marrero, 57 N.J. 353, 357 (1971). "To fulfill its purpose, the rule imposes financial consequences on a party who rejects a settlement offer that turns out to be more favorable than the ultimate judgment." Schettino v. Roizman Dev., Inc., 158 N.J. 476, 482 (1999); see also Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 125 (2005) (indicating that "[t]he rule was intended to penalize 'a party who rejects a settlement offer that turns out to be more favorable than the ultimate judgment'" (quoting Schettino, supra, 158 N.J. at 482)).
The molded verdict, excluding allowable prejudgment interest and attorneys' fees, resulted in a $253,200 net judgment in plaintiffs' favor. See Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 112, 125 (2005) (applying offer-of-judgment rule to adjusted judgment excluding prejudgment interest and attorneys' fees); Wiese v. Dedhia, 354 N.J. Super. 256, 260 (App. Div. 2002) (same), certif. denied, 175 N.J. 546 (2003). The "money judgment" or "ultimate judgment" was less than 120% of the $225,000 that plaintiffs offered and, therefore, they were not entitled to an award of attorneys' fees and costs under the offer of judgment rule. R. 4:58-2; Schettino, supra, 158 N.J. at 482. As a result, we reverse the imposition of attorneys' fees and costs subject to the outcome of a separate trial.
III.
In support of their cross-appeal, plaintiffs contend that it was error to dismiss their CFA claims "for failure to offer proof of clearly defined damages." We agree with plaintiffs that they offered sufficient evidence of ascertainable loss to allow their CFA claims to withstand defendants' motion to dismiss.
We begin by summarizing the applicable law governing CFA claims. The CFA "provides a private cause of action to consumers who are victimized by fraudulent practices in the marketplace." Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 576 (2011). The CFA is intended to "be applied broadly in order to accomplish its remedial purpose," Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 264 (1997), and therefore is to be construed liberally in the consumer's favor, Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994).
The elements of a CFA claim are: "(1) an unlawful practice, (2) an ascertainable loss, and (3) a causal relationship between the unlawful conduct and the ascertainable loss." Lee v. Carter-Reed Co., 203 N.J. 496, 521 (2010) (internal quotation marks omitted). A consumer who can prove these elements is "entitled to legal and/or equitable relief, treble damages, and reasonable attorneys' fees." Ibid. (citing N.J.S.A. 56:8-19).
The CFA defines an unlawful practice as:
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, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived[,] or damaged thereby.
[N.J.S.A. 56:8-2.]
Such practices can be divided into three general categories: affirmative acts, knowing omissions, and regulatory violations. Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 556 (2009). "[A] person who makes an affirmative misrepresentation 'is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive.'" Suarez v. E. Int'l College, 428 N.J. Super. 10, 31 (App. Div. 2012) (quoting Gennari v. Weichert Co. Realtors, 148 N.J. 582, 605 (1997)). Although intent is not an essential element for violations based on affirmative acts, where a plaintiff seeks to recover based upon a defendant's omission, the plaintiff "'must show that the defendant acted with knowledge, and intent is an essential element of the fraud.'" Ibid. (quoting Bosland, supra, 197 N.J. at 556). "The capacity to mislead is the prime ingredient of all types of consumer fraud." Cox, supra, 138 N.J. at 17.
Regarding "unconscionable commercial practice," the Court has recognized that "the Legislature must have intended that substantial aggravating circumstances be present in addition to" a mere breach of contract or breach of warranty, since "any breach of warranty or contract is unfair to the non-breaching party." Id. at 18. The Court also noted that proof of an unconscionable commercial practice is not necessary to establish a violation of the CFA. Id. at 19. "Rather, the [CFA] specifies the conduct that will amount to an unlawful practice in the disjunctive," ibid. (emphasis added), and includes "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," N.J.S.A. 56:8-2 (emphasis added). Proof of any one of those acts or omissions is sufficient to establish unlawful conduct under the CFA. Cox, supra, 138 N.J. at 19.
Causation under the CFA requires demonstration that the consumer suffered an ascertainable loss "as a result of" the unlawful practice. Lee, supra, 203 N.J. at 522 (quoting N.J.S.A. 56:8-19). The CFA does not require a showing of "reliance" to prove causation. Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., 192 N.J. 372, 391 (2007); see also Gennari, supra, 148 N.J. at 607 (noting that while "[a]t common law, independent investigations could signal a lack of reliance," the CFA "does not require proof of reliance"). Nor does the unlawful conduct need to be the sole cause of the harm. Varacallo v. Mass. Mut. Life Ins. Co., 332 N.J. Super. 31, 48 (App. Div. 2000).
Here, we focus on whether the judge erred by concluding that plaintiffs failed to demonstrate damages to sustain their CFA claims. An "ascertainable loss" is one that is "quantifiable or measurable" rather than "hypothetical or illusory." Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 248 (2005). Examples include an out-of-pocket loss, the replacement cost of a defective product, or a demonstrable loss in value. See Lee, supra, 203 N.J. at 522; Thiedemann, supra, 183 N.J. at 248. An ascertainable loss "has been broadly defined as embracing more than a monetary loss"; such a loss "occurs when a consumer receives less than what was promised." Thiedemann, supra, 183 N.J. at 244 (quoting Union Ink Co. v. AT&T Corp., 352 N.J. Super. 617, 646 (App. Div.), certif. denied, 174 N.J. 547 (2002)). It does not have to involve out-of-pocket expenses; it can include a lost benefit of the bargain. Id. at 248-49. The loss, however, must be quantifiable even if it has not been experienced as an out-of-pocket loss. Hoffman v. AsSeenOnTV.com, Inc., 404 N.J. Super. 415, 426 (App. Div. 2009). Indeed, the ascertainable loss must be a "definite, certain[,] and measurable loss, rather than one that is merely theoretical." Bosland, supra, 197 N.J. at 558. A plaintiff must be able to demonstrate the amount of the ascertainable loss to a "reasonable degree of certainty." Cox, supra, 138 N.J. at 22; see also Gupta v. Asha Enters., LLC, 422 N.J. Super. 136, 148 (App. Div. 2011) (stating that "[a]dequately alleging an ascertainable loss is a prerequisite for maintenance of a private action to remedy a violation of the CFA").
We conclude that plaintiffs presented sufficient evidence of ascertainable loss to defeat defendants' motion to dismiss the CFA claims. Plaintiffs produced evidence that defendants estimated the renovation job would cost $375,000 plus the first change order of $60,200. Instead, plaintiffs retained Ciccotti to complete the project, who estimated that it would cost an additional $246,855 to finish the job. Although defendants argued that Ciccotti's estimate included additional work not part of the renovation job, such an argument is more appropriately made to a jury. As a result, we reverse the order dismissing the CFA claims. These claims shall be included for the jury in the new trial on remand.
Defendants did not contend that plaintiffs were unable to bring CFA claims against Davis personally. Rather, they argued that plaintiffs failed to show ascertainable loss. As a result, we do not reach whether plaintiffs produced sufficient evidence to establish personal liability under the CFA. See Allen v. V & A Bros., Inc., 208 N.J. 114, 131-36 (2011) (addressing individual liability under the CFA). We expect that on remand the parties and trial court will resolve that issue.
We conclude that the parties' remaining arguments are without sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).
Reversed and remanded for a new trial on all issues.
We reverse the judgment defendants obtained on their counterclaim, without prejudice, because of the generally confusing jury charges which tainted the entire proceeding.
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I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION