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Czar, Inc. v. Heath

398 N.J. Super. 133, 939 A.2d 837 (App. Div. 2007) (Unpublished)

CONSUMER FRAUD ACT; CONTRACTORS; HOME IMPROVEMENTS — Even though a consumer directly contracts for the installation of kitchen cabinets, doors, moldings, and items of like character to be installed within a home under construction, it doesn’t mean that the contractor performing that work is doing new construction; rather, such work retains its character as a home improvement and the contractor doing such work is not exempt from the Consumer Fraud Act.

Two consumers “engaged a general contractor to construct a new home for them. They contracted, however, directly with a carpenter for the installation of custom kitchen cabinets, interior doors, a front door, and certain moldings. [The carpenter] was not a general contractor, nor a subcontractor, and its name [did] not appear on the building permit for the new home.” After a dispute arose over payment and timing of the carpenter’s work, the consumers sued, and in their suit, alleged that the carpenter had violated the Consumer Fraud Act as applied to home improvement contractors. The lower court, however, found “that the new home was a ‘new residence’ within the meaning of N.J.A.C. 13:45A-16.1A and that [the consumers and the carpenter] had entered into a contract and, therefore, were in direct privy with one another.” After making those findings, the lower court concluded that the consumers were “intimately involved with the construction of a new residence, at least as to the kitchen, although the judge found that the only construction [the consumers] undertook in the home was with respect to the installation of kitchen cabinets, certain doors, and chair rails.” Nonetheless, it concluded that the carpenter’s work was new construction and not a home improvement. Therefore, the lower court held that the Consumer Fraud Act was not applicable to the case before it.

On appeal, the Appellate Division was careful to point out that it would not set aside the findings of fact by the lower court, but felt no such hesitation to “undertake an independent ‘interpretation of the law and the legal consequences that flow from established facts… .’” It then looked to the regulations that were adopted by New Jersey’s Department of Law and Public Safety, and especially to the part that was “devoted to home improvement practices.” Looking through the regulations, the Court took special note that “‘Home improvement’ means the ... construction, installation, ... of ... doors, cabinets, ..., but does not include the construction of a new residence.” Thus, it disagreed with the lower court’s interpretation of “home improvement.” In doing so, it held that “[w]hile the language of the regulation provides that home improvement ‘does not include the construction of a new residence,’ [the carpenter] did not and was not hired to construct a new residence.” It especially noted that the carpenter “was not the general contractor hired to construct [the] new residence, did not install or build any structural improvements in the home, but rather contracted directly with [the consumers] for the installation of custom kitchen cabinets, a front door, interior doors, and certain moldings.” It then gave some examples of what the consequences would be if it followed the lower court’s reasoning. One example was that a consumer who contracted “directly with a retail carpeting seller for all-wool carpeting who later determine[d] that the retail carpeting seller provided nylon instead, would have no remedy under the Consumer Fraud Act simply because the carpeting was placed in a newly constructed home.” According to the Court, such an interpretation “would not “comport with a plain reading of the regulation or with the intent of the Act.”

Further, the Court held that the regulations promulgated under the Consumer Fraud Act had to be read in pari materia with “The New Home Warranty and Builder’s Registration Act” (New Home Act). In doing so, it took into account that “statutes and regulations in pari materia are to be construed together when helpful and resolving doubts or uncertainties in the ascertainment of legislative intent.” It took note that the regulations under the New Home Act “require a new home builder to register with the Department of Consumer Affairs. Contractors performing home improvements are exempt from registering under the New Home Builders Act. Following that reasoning, the Court held that the carpenter was not a new home builder, and was not regulated under the New Home Act, but instead was regulated under the home improvement practices regulations promulgated under the Consumer Fraud Act.

In addition, the Court noted that even though “a new home builder’s acts may not be within the definition of ‘home improvement’ and, therefore, not within the unlawful practices set forth in the home improvement practices regulations [of the Consumer Fraud Act], a builder of a new home may still be subject to the [Consumer Fraud] Act.” As a result, the Court pointed out that “even if it were to conclude that [the carpenter] was a new home builder and excluded from the definition of home improvement [in the regulations], and consequently [would] not fall within the unlawful practices section of those regulations, it would still not be exempted from being subject to the provisions of the Consumer Fraud Act. It would only [be] exempt [] from falling within the definition of unlawful practices.”

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