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Nickerson v. The Quaker Group

A-6253-06T5 (N.J. Super. App. Div. 2008) (Unpublished)

CONSUMER FRAUD ACT; CONTRACTORS — Absent substantial aggravating circumstances, construction defects and sloppy workmanship alone are not unlawful practices under the Consumer Fraud Act.

Homeowners purchased a new home from a builder. They were advised by a sales agent that this builder was of good quality and had been in business for about fifty years. They received brochures asserting the quality of the homes and the quality of the builder. Nonetheless, the sales contract disclaimed reliance upon any representations. Furthermore, the building contract contained an integration clause stating that the written contract was the entire agreement between the parties. Not long after the start of actual construction, the assets of the builder were sold to another builder. The second builder then assumed responsibility for completing construction. Proper materials were utilized, proper permits were acquired, and the municipality issued a Certificate of Occupancy. Several construction defects were discovered after the homeowners moved in. The homeowners tried to have the builder repair the defect, but when that was successful they sued both builders for damages. The successor builder made attempts to repair various construction defects as submitted by the homeowners. Settlement was reached between all parties; however the lower court, on summary judgment, dismissed claims of fraud and consumer fraud against the first builder. The homeowners appealed.

With respect to the common law claim of fraud, the Appellate Division found that the first builder’s unelaborated statements on quality were opinions rather than actionable misrepresentations. The Court stated that unless a seller is in a confidential relationship with a buyer or has a fiduciary duty, its representation of value is merely an opinion, and not a statement of an objectively verifiable fact. It noted that the representation about quality was used without elaboration, and the fact that they had been in business for fifty years was neither inaccurate nor misleading. The Court noted that general assertions of quality do not reflect material misrepresentations necessary to prove fraud.

As to the homeowners’ claim of a New Jersey Consumer Fraud Act (CFA) violation, it approved the lower court’s finding that the representations of the builder as a quality builder with a reputation built on service were not statements material to the transaction and were rather puffery or sales talk that the law does not recognize as consumer fraud. Additionally, the Court found the lower court did not abuse its discretion by holding that construction defects alone are not unlawful practices under the CFA because no substantial aggravating circumstances occurred. There was no use of substandard materials and no failure to obtain construction permits. It also noted that there were no other accompanying material misstatements, and no suggestion that the assignment itself was a fraud to evade performance. The Court also held that sloppy workmanship by itself falls short of an unconscionable commercial practice required by the CFA in absence of other kinds of evidence of bad faith or lack of fair dealing. It concluded that the construction deficiencies in the matter, even if in violation of the construction code, lacked a causal nexus with the homeowners’ losses because they were not coupled with an aggravating factor as required by law. The Court affirmed the lower court’s ruling that the record was legally insufficient to establish construction deficiencies as unlawful practices under the CFA.

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