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Marascio v. Campanella

298 N.J. Super. 491, 689 A.2d 852 (App. Div. 1997)

CONTRACTORS; CONSUMER FRAUD—A mixed residential-commercial use building qualifies as residential, non-commercial property for the purposes of the Consumer Fraud Act.

The realty company which owned a three-story apartment and office building hired a general contractor to renovate the building. The contractor hired a subcontractor to do the electrical work and paid him upon completion. In a subsequent contract action against a 50% owner of the realty company, the subcontractor claimed that the half-owner of the building instructed him to complete “necessary” extra electrical work in the building, telling him he would pay him directly for the extra work done. The co-owner denied the subcontractor’s claims, stating that another contractor actually did the work the subcontractor claimed to have done. In addition, the co-owner asserted that the Consumer Fraud Act barred the subcontractor from enforcing an oral contract for electrical work in a residential building. The subcontractor argued that the Court should look at the nature of ownership and the use of the property when determining whether a property is residential or commercial for purposes of the Consumer Fraud Act. He further claimed that an apartment building in which the owner does not live is commercial property, and therefore not within the scope of the Consumer Fraud Act.

The Appellate Division agreed with the building’s co-owner, stating that the Consumer Fraud Act is applicable in this case and precludes the enforcement of an oral residential-improvement contract. The Court held that a commercially owned building with two floors of residential apartments and one floor of commercial office space qualifies as residential, non-commercial property for purposes of the Consumer Fraud Act, and that it would be anomalous to include only part of the building within the scope of the Act. Under the Act, a residential property is any structure used “in whole or substantial part” as a residence by “any natural person.” The Act contains no requirement that the owner reside in the building. Furthermore, since the regulations under the Act accommodate contracts for renovations to property having multiple uses, the oral contract between the subcontractor and the building’s half-owner was a home improvement contract and had to be in writing. The Court felt the public policy behind the Act favored its application in this instance and that the Court’s analysis was consistent with the plain meaning of the statute.

The Court then turned its focus to whether the half-owner should be personally liable or whether he was acting as an agent of the corporate owner of the building. The Appellate Division refused to pierce the corporate veil. In doing so, it stated that the lower court’s findings were insufficient to support subcontractor’s claim that the co-owner acted in his individual capacity. The case was remanded and the subcontractor given the opportunity to join the realty company as a defendant.


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