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Stone v. Kahr Properties, LLC

A-6137-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

CONSUMER FRAUD ACT — The Consumer Fraud Act requires a showing of intent for claims based on concealment, suppression or omission and does not require a showing of intent to deceive if affirmative acts, such as deception, fraud or false promise are made; therefore, it is proper to decide statutory consumer fraud claims on a lower standard of proof than would be required for common law claims.

A buyer in the business of renovating and reselling residential properties purchased a property recommended to him by a real estate broker. The buyer’s renovation contractor was married to the broker. After starting the job, the contractor told the buyer that more time was needed to complete the project than the six months agreed to by them. After examining the premises and concluding that some of the work was improperly performed, the buyer agreed to extend the completion deadline and to an increase in the price for the project. Eventually, the buyer fired the contractor but retained the contractor’s foreman as the project manager to complete the project. The parties, including the broker, disagreed as to whether the contractor ever agreed to set up a separate limited liability company with a separate checkbook for the buyer’s project as asserted by the buyer. In a suit brought by the buyer, the lower court found the contractor and the broker liable for consumer fraud violations.

On appeal, the contractor and the broker argued that Consumer Fraud Act (CFA) did not apply because they were not involved in the sale or advertising the sale of merchandise or real estate. The Appellate Division rejected this argument. The Court found that the evidence contradicted the testimony by the contractor and the broker that they were only involved in performing renovations for family members and not the public. It also rejected their argument that the buyer, as a business entity, did not qualify as a consumer under the CFA and held that a business entity could be considered a person under the CFA. As a result, the Court determined that the lower court was not in error for denying the contractor’s and the broker’s motion for a new trial.

The argument by the contractor and the broker that the buyer should have been equitably estopped from making a consumer fraud claim because he never signed a contract was also rejected. The Court found that the contractor never provided the buyer with a contract, and that the buyer’s failure to insist on a written contract did not stop him from asserting a consumer fraud claim. The argument by the contractor and broker that the lower court’s dismissal of the buyer’s common law fraud claims warranted a dismissal of the statutory claims, was also rejected.

The Court pointed out that the CFA requires a showing of intent for claims based on concealment, suppression or omission, but that affirmative acts such as deception, fraud, or false promise do not require an intent to deceive. On that basis, it found that the lower court had properly decided the statutory consumer fraud claims on a lower standard of proof than would be required for the common law claims. The Court also found, in disagreement with the contractor, that the buyer had provided a reasonable calculation of damages to establish an ascertainable loss as a result of the contractor’s actions. As an example, the Court referred to the contractor’s foreman’s testimony that the house had been improperly painted in cold, damp winter weather and required repainting by the buyer.

The argument that there needed to be a breach of contract before the buyer could assert a statutory CFA claim was rejected. In doing so, the Court pointed out that the contractor’s failure to provide a contract, in and of itself, was a violation of CFA. Based on its findings and conclusions, the Court affirmed the lower court’s ruling of CFA violations on the part of the contractor and broker.


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