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Czar, Inc. v. Heath

198 N.J. 195, 966 A.2d 1008 (2009)

CONSUMER FRAUD ACT; CONTRACTORS — A contractor separately hired to do interior work inside a home under construction is not exempt from the regulations under the Consumer Fraud Act because it is not a builder exempted for coverage by reason of either the Contractor’s Registration Act or the Home Warranty and Builders Registration Act.

A homeowner hired a general contractor to build a new home. The homeowner then separately hired a home improvement contractor to design and install a custom kitchen in the home and to perform certain interior work in the kitchen. Before the work was completed, the homeowner and kitchen contractor had a dispute regarding the work and the homeowner refused to pay the balance of the contract price. The kitchen contractor filed suit for the balance of the contract price. The homeowner filed its own, separate suit alleging, among other things, a violation of the Consumer Fraud Act. The two complaints were consolidated within one action, with the homeowner’s claim being treated as a counterclaim to the kitchen contractor’s suit. The kitchen contractor made a motion to dismiss the homeowner’s consumer fraud claims. It argued that since the work was part of the construction of a new house, any claims the owner had were subject to the New Home Warranty and the Builders Registration Act. On that basis, the kitchen contractor claimed that the work it performed, being new construction, was not subject to the Consumer Fraud Act. The homeowner responded that the work performed was home improvement work that was subject to the Consumer Fraud Act.

The lower court found that the kitchen contractor’s services were properly part of the construction of a new residence. Relying on language in the home improvement regulations promulgated pursuant to the Consumer Fraud excluding new residence construction, the lower court concluded that the homeowner had no claim under the Consumer Fraud Act. The homeowner appealed and the Appellate Division reversed, finding that the exemption did not apply to the work performed by the kitchen contractor.

The Appellate Division relied on that fact that the kitchen contractor was not the general contractor hired to build the house, and that the kitchen contractor did not install or build any of the structural elements. Instead, the kitchen contractor designed and built the cabinets and did some minor interior work. The Appellate Division also looked at the two regulations together and found that the remedies available to the homeowner under the Home Warranty Act would not address the work provided by the kitchen contractor and would deprive the homeowner of the protections to which they were entitled. Alternatively, it found that even if the kitchen contractor had engaged in new home construction, the Warranty Act included an election of remedies that would allow the homeowner to either seek arbitration under the Warranty Act or sue under the Consumer Fraud Act.

The Supreme Court affirmed. It noted that the Consumer Fraud Act is “broad and remedial legislation enacted to protect consumers of a variety of goods and services.” The Court noted that the Contractor’s Registration Act and the Home Warranty and Builders Registration Act were intended to cover two different types of contractors. Builders, who were required to register under the Builders Registration Act, were exempt from registration under the Contractors Registration Act, and home improvement contractors were exempt from registering under the Builders Registration Act. Each statute was designed to provide recourse to homeowners, but with different types of available remedies. The Court noted that while the kitchen contractor claimed it was exempt under the Home Warranty Act, it did not show that it had registered as a home builder or had made a home warranty available for the work it did. Therefore, the Court concluded that the kitchen contractor was not a builder. Rather, it was a home improvement contractor within the meaning of the Consumer Fraud Act and was subject to its provisions and the regulations promulgated that Act.

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