ALEX FERNANDES et al. v. SUSAN NAVAS t/a G&S GENERAL CONTRACTING, PELCON CONSTRUCTION, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2792-06T12792-06T1

ALEX FERNANDES and

ELAINE FERNANDES,

Plaintiffs-Respondents,

v.

SUSAN NAVAS t/a G&S GENERAL

CONTRACTING, PELCON

CONSTRUCTION, INC.,

Defendants,

and

GASPER SCATURRO,

Defendant-Appellant.

_____________________________

 

Submitted January 29, 2008 - Decided

Before Judges Skillman and LeWinn.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, L-6471-05.

William A. Ward, attorney for appellant.

Mary Ann Virgona, attorney for respondents.

PER CURIAM

In July 2003, plaintiffs, husband and wife, contracted with defendant, Gasper Scaturro, doing business as G & S Contracting (G & S), to perform certain renovations to their two-family residence in Lodi, New Jersey. Plaintiff, Elaine Fernandes (hereinafter "plaintiff") had been referred to Scaturro through his girlfriend, Susan Navas, whom plaintiff knew through her employment. Difficulties arose during the course of the construction that ultimately led plaintiffs to file a lawsuit against Scaturro, Navas, G & S, and Pelcon Construction, Inc.; the complaint asserted claims under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (CFA), as well as for breach of contract, fraud and various other theories of liability.

Trial was held on November 28, 2006, at which time plaintiff appeared with counsel, and Gasper Scaturro (hereinafter defendant) appeared pro se. At the conclusion of trial, the judge rendered a bench decision finding that defendant had violated the CFA and awarding plaintiffs treble damages under N.J.S.A. 56:8-19 in the amount of $360,000, representing three times the $120,000 they had paid to defendants pursuant to the proposal. The judge also awarded counsel fees and costs in the amount of $14,586. On December 18, 2006, the judge entered judgment against defendants in accordance with his decision.

Defendant has appealed, raising the following issues:

I. The Plaintiffs had the burden of proving damages flowing from a violation of the Consumer Fraud Act or regulations.

II. The Court below lacked impartiality.

We have thoroughly reviewed the record. We affirm the trial court's findings that defendant violated the CFA. However, we remand for reconsideration of the quantum of damages. We reject, as without merit, defendant's claim that the trial judge lacked impartiality. R. 2:11-3(e)(1)(E).

I.

Plaintiff met Susan Navas while both were working as paralegals at a law firm. In July 2003, plaintiff told Navas about a decision she and her husband had made to renovate and enlarge a two-family residence owned by her in-laws; the Fernandes' were to acquire title to the property in August 2003, and it was their intention to renovate and expand it so they could move in and live together with Mr. Fernandes' parents.

Navas told plaintiff that defendant, who was her boyfriend, was a general contractor, and she recommended him for the job. On July 18, 2003, plaintiff met with defendant and, on July 24, signed a proposal with G & S for the following work: construction of a two-story addition and a finished basement apartment; complete re-modeling of the first floor, as well as the kitchen and bathrooms; installation of all new flooring, plumbing and electric fixtures throughout the residence; aluminum siding on the exterior of the entire residence; and construction of a sidewalk on the side of the residence.

The proposal was entirely hand-written, including the name G & S Contracting at the top with an address listed only as "Elizabeth, N.J." The proposal provided that the "job will be totally completed to move in condition. Specs to follow. Plans and permits included." No start date or completion date was stated in the proposal. Plaintiff testified that she told defendant that she and her husband and his parents wanted to be back in the residence by Thanksgiving, and that defendant agreed to have the job completed by then.

The total price stated on the proposal was $124,000, with a payment schedule described as follows: "$62,000 deposit[,] 2 payments 1/2 way through[,] $31,000 with remain[d]er at completion." Plaintiff paid defendant $6,000 on July 24, 2003, and an additional $56,000 in August 2003 when she and her husband obtained title to, and took a mortgage on, the residence.

Construction permits were not issued until October 10, 2003; plaintiff paid for the permits even though the proposal stated defendant would pay for them. Defendant provided no plans or "specs" as promised in the proposal. Demolition began in late October. Around that time, defendant informed plaintiff that the job would not be completed until about December 15.

Defendant told plaintiff he had a partner named Steve Grotto, who worked at Pelcon. Plaintiff encountered Grotto on the premises daily, once work began, and regarded him as the supervisor of the project.

Plaintiff made two additional payments to defendant: $20,000 on November 18, 2003 and $33,000 on November 25. On December 19, 2003, plaintiff paid Grotto $5,000, at his request. Thus, by the end of December, plaintiff had paid defendant a total of $120,000 (including the $5,000 paid to Grotto). In late November or early December, defendant demanded more money from plaintiff in order to complete the job.

In January or February 2004, defendant sent plaintiff an email demanding an additional $30,000 plus another $30,000 upon completion. Defendant stated he would not return to work if these payments were not made. Defendant had last worked at the job site in December 2003. Tools and equipment belonging both to defendant and to Pelcon Construction were left on the premises, which Grotto came to retrieve in January.

Plaintiff identified photographs of the residence taken in January 2004. The photographs showed "the existing basement unfinished," incomplete spackling of sheetrock on the stairway landing; the master bedroom still in need of insulation, tile work, flooring and plumbing; an incomplete electrical box on the second floor; unfinished walls and uninstalled machines in the laundry room on the second floor; the kitchen lacking tile work, cabinets, countertops, flooring, door and window trims; an unfinished downstairs bathroom with no plumbing installed; no new flooring throughout the house; and supplies plaintiff had purchased, for which defendant was responsible under the proposal, but which he told her to purchase and said he would reimburse her, including ceiling fans, light fixtures, toilets, faucets, and vanities. Plaintiff also produced a photograph showing the debris, garbage and full dumpster defendant left on the premises when he refused to finish the job.

Plaintiff submitted an exhibit that purported to list all the expenses she and her husband incurred to finish the renovations. The total was $114,641.51. These expenses included nine months of rental payments plaintiffs paid because they were not able to move back into the residence until July 15, 2004. However, these expenses also included counsel fees totaling $13,184.83 (a $2000 retainer paid to Thurber Cappell LLC, and $11,184.83 in "unpaid legal fees" owed to trial counsel).

Defendant testified that there were change orders, to which both plaintiffs verbally consented, that increased the cost of the project. However, defendant provided no details as to those change orders or any other explanation as to why additional costs needed to be incurred. He provided no accounting of how he had disbursed the $120,000 paid by plaintiffs. Defendant stated that, when plaintiffs refused to pay those additional costs, he walked off the job. He was willing to finish the work as long as plaintiffs would pay the additional expenses.

In his bench decision, the trial judge made the following findings:

The proposal, in terms of being a valid contract pursuant to the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq., and the Division of Consumer Affairs, New Jersey Administrative Code Section 13:45A-16.1 et seq. is woefully inadequate to fulfill those requirements. The Court specifically noting there is no start or end date. There's no time which the job is to take place. The terms [are] indefinite. The . . . written contract was required insofar as the amount is stated as $124,000, but the timing of the payments is not done, except with the 62,000-dollar deposit and two payments halfway through, and of course what halfway through was not specified as to - - since there is no start or end date, nor time of performance specified in the contract, and that . . . $93,000 was going to be paid halfway through, with the balance to be paid at the end. Apparently, much more than that was paid.

But nonetheless, again, the contract was not in the form as required with the specified dates and . . . without having any kind of date, and without the contractor's name being clearly indicated, there's a G S Contracting from Elizabeth, New Jersey with a zip code; no street address, no post office box being given, and a number of other essential terms, the contract then, as a written contract, did not include the essential terms and is, therefore, . . . not valid according to our statutes.

. . . .

[The] evidence . . . shows that this job was not in any way, shape, or form, in terms of finish [sic] carpentry, or installation of items, completed, that . . . [plaintiff] paid for a number of items that were specified in the proposal and, as such, with the violation of the Consumer Fraud Act and the home improvement practices regulations, she incurred damages. . . . [B]ecause of the delays, and the representations that were not kept, she incurred an additional $114,641.51 in actual out-of-pocket costs for items that should have been included in the contract.

And so based on that measure of ascertainable loss, she had 114,641.51. On the other hand, if we looked at her refund remedy, she'd have $120,000. Either one of those figures would be her measure of loss, based on the refund provisions of the Consumer Fraud Act or based on her actual contractual, both direct and consequential damages, which she has proved . . . .

I'll use the refund amount of $120,000. having found that there is a violation of the Consumer Fraud Act. I will triple that amount, which is $360,000 and enter judgment against [all defendants].

I will accept a certification for legal services as the Consumer Fraud Act does provide for legal fees . . . for the prevailing party . . . .

The judge thus premised his damages award solely on defendant's violation of regulations. Despite his finding that plaintiff incurred damages due to defendant's "delays and the representations that were not kept," the judge did not address the extent to which those delays and unkept representations constituted violations of the CFA.

II.

Under the CFA, an "unlawful practice" is defined as

[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid[.]

[N.J.S.A. 56:8-2.]

The CFA also authorizes the promulgation of regulations "to carry out the duties prescribed by this act, . . . which shall have the force of law." N.J.S.A. 56:8-4.

The Supreme Court has clarified that the statutory concept of "unlawful practice" encompasses "three general categories: affirmative acts, knowing omissions, and regulation violations. The first two are found in the language of N.J.S.A. 56:8-2, and the third is based on regulations enacted under N.J.S.A. 56:8-4. . . . The capacity to mislead is the prime ingredient of all types of consumer fraud." Cox v. Sears, Roebuck & Co., 138 N.J. 2, 17 (1994).

The Division of Consumer Affairs has promulgated extensive "Home Improvement Practices" regulations "to deal with practices susceptible to consumer-fraud violations, such as may be found under home-improvement contracts." Id. at 16; N.J.A.C. 13:45A-16.1 to -16.2. Violations of those regulations constitute "unlawful acts" within the meaning of N.J.S.A. 56:8-2. Cox, supra, 138 N.J. at 18. "In those instances, intent is not an element of the unlawful practice, and the regulations impose strict liability for such violations." Ibid.

The trial court correctly found that defendant had violated numerous Home Improvement Practices regulations relating to the form and substance of his proposal. Although the judge did not specify the individual regulations in issue, his findings established violations of the following regulations:

N.J.A.C. 13:45A-16.2(a)(12): [Failure of the proposal to] clearly and accurately set forth in legible form and in understandable language all terms and conditions of the contract, including, but not limited to the following:

(i) The legal name and business address of the seller . . . ;

(ii) A description of . . . the principal products and materials to be used or installed in performance of the contract. The description shall include, where applicable, the name, make, size, capacity, model, and model year of principal products or fixtures to be installed, and the type, grade, quality, size or quantity of principal building or construction materials to be used[;]

. . . .

(iv) The dates or time period on or within which the work is to begin and be completed by the seller[.]

The judge's findings of fact track these regulatory requirements. Defendant's "noncompliance with the Home Improvement Practices regulations constitutes a clear violation of the [CFA]." Cox, supra, 138 N.J. at 19.

However, the trial judge failed to consider whether defendant's "affirmative acts" of "delays and misrepresentations" constituted "unconscionable commercial practice[s]" thereby establishing a separate violation of the CFA, independent of the regulatory violations.

The standard of conduct that the term "unconscionable" implies is lack of "good faith, honesty in fact and observance of fair dealing." However, "a breach of warranty, or any breach of contract, is not per se unfair or unconscionable . . . and a breach of warranty alone does not violate a consumer protection statute." Because any breach of . . . contract is unfair to the non-breaching party, the law permits that party to recoup remedial damages in the action on the contract[.]

[Id. at 18 (quoting Kugler v. Romain, 58 N.J. 522, 544 (1971) and D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11, 25 (App. Div. 1985)).]

Thus, the trial judge must also consider whether any of plaintiff's losses stemmed from contractual breaches by defendant that did not amount to "unlawful practice[s]" under the CFA.

Plaintiff claimed that as a result of defendant walking off the job in December 2003 and refusing to return unless he received a total of $60,000 in additional payments, she incurred over $100,000 in additional expenses in connection with completing the work contemplated under defendant's proposal. The judge opined that either that additional expense figure or the $120,000 paid to defendant "would be her measure of loss[.]" He then summarily chose the $120,000 figure as the measure of damages without engaging in any further analysis of this issue.

The trial judge thus failed to make any findings on the critical issue of the amount of "loss" that was directly attributable to defendant's violations of the CFA. In other words, the judge failed to identify what losses stemmed from defendant's regulatory violations and/or from defendant's "unconscionable commercial practice[s]" of "delays and misrepresentations." As noted, the judge also neglected to consider whether any of plaintiff's losses resulted from contractual breaches that did not rise to the level of "unlawful practices" prohibited by the CFA.

Under N.J.S.A. 56:8-19, "[a]ny person who suffers any ascertainable loss of moneys or property . . . as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act" is entitled to an award in the amount of "threefold the damages sustained . . . ." An award of treble damages "is mandatory under N.J.S.A. 56:8-19 if a consumer-fraud plaintiff proves both an unlawful practice under the Act and an ascertainable loss." Cox, supra, 138 N.J. at 24.

It is clear that such unlawful practices, even those characterized as "technical," constitute a violation of the CFA. Branigan v. Level on the Level, 326 N.J. Super. 24, 29-30 (App. Div 1999). However, "it is also clear that treble damages are not awarded unless there is a causal link between the violation and damages." Id. at 30. In order to obtain treble damages under the statute, plaintiff must prove an "ascertainable loss" directly attributable to defendant's unlawful practice. Roberts v. Cowgill, 316 N.J. Super. 33, 41 (App. Div. 1998). See Feinberg v. Red Bank Volvo, Inc., 331 N.J. Super. 506, 511 (App. Div. 2000).

Plaintiff gave a "guesstimate" that defendant completed about 60% of the work. Thus, although defendant did not complete the construction pursuant to the proposal terms, nonetheless plaintiff received some "benefit of her bargain" in the work that was started but left incomplete. When she testified as to the $114,641.51 in expenses incurred to complete the construction, she did not clearly specify what work had to be started anew and what was able to be continued from the work defendant had done.

Under the circumstances, we conclude that "the contract price," awarded by trial judge, may not have been "the correct measure of consumer-fraud damages" because some of defendant's "consumer-fraud occurred in the course of performance, not in the actual contracting for the home-improvement work." Cox, supra, 138 N.J. at 23. Defendant is strictly liable for the consumer fraud in his non-compliance with N.J.A.C. 13:45A-16.2(a)(12)(i), (ii), and (iv), with respect to the form and substance of his proposal; these unlawful practices occurred "in the actual contracting for the home-improvement work." However, as noted, plaintiff's "ascertainable loss" attributable to those regulatory violations may not be equal to the full amount of the $120,000 paid to defendant.

The trial judge failed to make express findings regarding the "causal connection" between defendant's unlawful practices and plaintiff's losses. It appears that at least some of those losses were sustained as a result of defendant's improper performance of the contract, rather than the regulatory violations in the formation of the contract itself. As noted, it may also be that some of defendant's conduct amounted to contract breaches that do not constitute "unlawful practice[s]" within the purview of the CFA. On remand, the trial judge must consider this and make more specific findings on the damages issue.

Therefore, because the record contains no meaningful analysis either of plaintiff's ascertainable loss or of the "causal connection" between such loss and defendant's conduct, we remand this matter to the trial court for reconsideration of these issues. We do not retain jurisdiction.

Affirmed in part; reversed in part.

 

In their complaint, plaintiffs identified Pelcon Construction, Inc. (Pelcon), as "a corporation in WoodBridge [sic], New Jersey" that "supervised construction at the [p]remises and supplied labor for the renovation at the [p]remises." The complaint identified Navas as "an individual . . . who is trading as 'G&S General Contracting.'"

Judgment was entered against Pelcon by default. On February 2, 2007, the trial judge entered an order vacating default against Pelcon; plaintiffs thereafter settled their claims with Pelcon in May 2007.

As noted above, the amount of $13,184.83, representing counsel fees, should be deducted from this figure.

(continued)

(continued)

16

A-2792-06T1

April 10, 2008