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Vaid v. Mocci

A-0661-05T5 (N.J. Super. App. Div. 2007) (Unpublished)

CONSUMER FRAUD ACT; CONTRACTS; DEFAULT; DAMAGES —Even though a contract between a homeowner and a contractor may limit the contractor’s liability for non-performance to returning the deposit, there is no reason not to enforce the homeowner’s consumer fraud claims.

Two prospective homebuyers entered into a contract with a construction company for the purchase of a lot on which the company was to construct a home. They gave the company a $25,000 deposit and obtained a mortgage commitment for the balance of the purchase price. More than one year later, construction still had not started and an attorney for the contractor responded to an inquiry from the homeowners by offering to return the deposit. When the original contract was signed, the contractor did not own the lot in question. It wasn’t until two years following the attorney’s letter to the homeowners, that a principal of the contractor purchased the property and then sold it to another company, of which he was also a principal, for $69,000 more than was contracted for the construction of the homebuyers’ home. Nearly one year later, the homebuyers sued the contractor for fraud and breach of contract. When the action was brought, the homebuyers’ deposit still had not been returned.

A default judgment was entered. At a damages hearing, the homebuyers sought a judgment for the amount by which the home’s appraised value would exceed the purchase price. The homebuyers also sought treble damages under the Consumer Fraud Act. The lower court found that the contractor had committed fraud, but rejected the homebuyers’ request for damages other than for return of their deposit, which was trebled. It also awarded attorneys’ fees, costs, and pre-judgment interest.

On appeal by the contractor and its principal, the Appellate Division pointed out that under the contract between the parties, the only liability the contractor could face for non-performance under a benefit of the bargain theory was the return of the deposit. It saw no reason not to enforce that part of the contract. On the homebuyers’ claims for consumer fraud, the Court found that the homebuyers’ improperly calculated the ascertainable loss under their benefit of the bargain claims when they claimed the increase in the home’s value. It found that the time period for the valuation of the property’s potential worth should have begun when the contractor misrepresented to the homebuyers that it owned the property and should have ended around the time that the attorney informed them that his client still intended to start the construction, which was the time period in which the fraud was known to occur. The homebuyers’ calculations ended roughly four years beyond the date of the attorney’s letter, but the Court found that the homebuyers did not establish that any misrepresentations occurred following the date of the attorney’s letter. The Court also found that the lower court properly denied the homebuyers’ benefit of the bargain claims, but found that the lower court was in error for not awarding the ascertainable damages under consumer fraud law and for not awarding the full amount of pre-judgment interest on their deposit. The Court additionally found that interest on the deposit should have begun to accrue when the deposit was given to the company and not on the date of the lower court’s judgment. Thus, it remanded the matter to the lower court for a determination of damages consistent with the Court’s findings.

The Court allowed the homebuyers to present more accurate damages under the benefit of the bargain rule on remand. It rejected the homebuyers’ argument that the $69,000 profit realized by the company constituted an appropriate alternative calculation of damages under the Consumer Fraud Act, but noted that such damages could have been available under other legal theories such as ones for unjust enrichment or for damages under consumer fraud law that covered ascertainable losses.


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