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Coburn v. J.C.C. Construction Corp.

A-0149-07T1 (N.J. Super. App. Div. 2008) (Unpublished)

CONSUMER FRAUD ACT; CONTRACTORS — Omission of a material fact by a builder with the intention that others will rely on that omission could be a violation of the Consumer Fraud Act.

A builder constructed a new home and retaining wall. When a prospective buyer visited the property, the builder told her the house was well built with good materials. The retaining wall was not discussed, and the buyer knew nothing about a plot plan. Several months after buying the property, the buyer noticed the retaining wall was leaning. She hired engineers to inspect the wall. Test holes were placed where a seepage pit was shown on the builder’s plot plan, whereupon a portion of the rear side of the wall collapsed. The excavation disclosed that the seepage pit had not been built. Additionally, the plot plan had called for clean crushed stone to be placed along the entire wall from its base to its top, and between the wall and the soil behind it. There was, however, only a minimal amount of stone there. Lastly, test holes revealed that the wall was built with blocks different from those that were specified in the plot plan. The buyer sued the builder for breach of contract and for violation of the Consumer Fraud Act (CFA). At the end of trial, after receiving its jury charges, the jury deliberated and found that the builder had breached the contract of sale and had violated the CFA. It awarded contract damages, treble damages, and attorney’s fees under the CFA. The builder appealed, claiming the evidence was not adequate to establish a violation of the CFA, claiming plain error in the jury charge, and claiming that the breach of contract damage award was excessive.

The Appellate Division first found the evidence was adequate to establish a violation under the CFA. It held that the CFA provides protection from unlawful practices in connection with the sale of real estate and that treble damages under the CFA are permitted to deter unlawful practices by punishing a wrongdoer. Such unlawful practices would include an omission of a material fact with the intent that others rely upon that omission. Here, the jury found a violation based on an omission of material fact. The Court indicated that a fact in a real estate matter is material when it is important to a particular buyer’s decision or when it would be important to a reasonable buyer. It found that a juror could reasonably conclude the builder knew the retaining wall was at risk of failure when it sold the property and that knowing such information would be important to a reasonable buyer. However, the Court disapproved the jury charge that had told the jury it could conclude the builder omitted a material fact if it determined the builder knew it had used blocks different than those specified or knew it did not install the specified clean, crushed stone. It found such items could not have been important to the buyer because the buyer had not contracted for any specific materials or methods and that the buyer’s only concern was the risk of the retaining wall’s failure which would go to the builder’s liability. The jury charge suggested that liability could be based on the builder’s failure to disclosed deviations from the plot plan. Therefore, the Court set aside the jury’s findings and remanded for a new trial on the alleged violation of the CFA. Additionally, it found the breach of contract damages to be excessive because the lower court had imputed the value of the blocks called for by the plot plan even though the buyer clearly had a contract for replacement of the retaining wall with cheaper, though arguably functional blocks. The Court also reduced the award further by the amount that the buyer had been paid in a settlement with a dismissed party to the action.

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