CATHY C. CARDILLO v. BRIAN BOLGER

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1117-07T21117-07T2

CATHY C. CARDILLO,

Plaintiff-Appellant,

v.

BRIAN BOLGER,

Defendant-Respondent,

and

B & C RENOVATION, INC.,

Defendant.

_______________________________

 

Submitted: September 24, 2008 - Decided:

Before Judges Fisher and C.L. Miniman.

On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Hudson County, Docket No. L-1272-06.

Cathy C. Cardillo, appellant pro se.

Respondent has not filed a brief.

PER CURIAM

Plaintiff Cathy Cardillo presents a narrow issue for our consideration in her appeal from a final judgment entered on September 13, 2007, which dismissed her claims against defendant Brian Bolger and entered judgment in her favor against defendant B & C Renovation, Inc. (B&C), in the amount of $42,000. She asserts that the judge erred in concluding that Bolger was not liable for his corporation's violations of regulations governing home-improvement practices. We now reverse and remand for entry of judgment against Bolger.

The first count of plaintiff's complaint alleged violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106, by both defendants. The second count, also against both parties, sought damages for breach of contract. The plaintiff ultimately limited her CFA claims to violations of the regulations govern ing home-improvement practices, N.J.A.C. 13:45A-16.1 to -16.2, for which strict-liability is imposed under Cox v. Sears Roebuck & Co., 138 N.J. 2 (1994). Plaintiff also withdrew her breach of con tract claim and any request under the CFA for treble damages or attorney's fees, seeking only the statutory remedy of a refund, N.J.S.A. 56:8-2.11, in the amount of $42,500 of the $68,000 she had already paid to B&C.

At trial, plaintiff made no effort to impose liability on Bolger by piercing the corporate veil. Instead, she relied exclusively upon the active participation of Bolger, a corporate officer and the sole shareholder of B&C, in the CFA violations committed by the corporation, relying on the tort-participation theory of liability recognized in Saltiel v. GSI Consultants, Inc., 170 N.J. 297 (2001), which the judge found inapplicable here.

Our discussion of the facts is drawn exclusively from the judge's findings of fact, which are summarized here. Bolger is the sole owner of B&C and there was no evidence of any other person acting on behalf of the corporation relative to the issues before the court. The litigation arose out of a home-renovation project that began in February or March 2004. The written contract had been lost prior to trial.

The judge found by a preponderance of the evidence that plaintiff had established a CFA claim against B&C. Specifi cally, he found that the following acts constituted regulatory violations: (1) B&C was not a registered licensee with the City of Jersey City as required by municipal ordinance at the time of the home-improvement work and had failed to post the performance bond required by municipal ordinance; (2) B&C started the demoli tion necessary to prepare for the home improvements with out having obtained the necessary permits; (3) B&C installed an inadequate cooling and heating system which was not properly sized for the needs of the plaintiff and the work that had been contracted; and (4) B&C delayed in the completion of the work and, in some respects, failed to complete the work. The judge concluded that these violations triggered the strict-liability standard of the CFA under Cox. He also found that the asserted defenses were not proven and, thus, he entered judgment in favor of plaintiff and against B&C for the full amount of the refund sought.

With respect to Bolger, the judge found that he was not involved in a fraudulent scheme, although he may have been neg ligent and may have failed to perform to the level required of him. The judge pointed out that plaintiff advanced $30,000 to B&C on March 12, 2004, and that Bolger applied for construction permits on March 17, 2004, and paid the required fee, which was incon sistent with a fraudulent scheme. Also, the judge found that Bolger cooperated with a structural inspection of the prem ises by plaintiff's engineer and was willing to make certain correc tions to the work, albeit "[w]hether he did them the right way or not is another story, but . . . he attempted to make cor rec tions or offered to make corrections." Additionally, the judge found that Bolger admitted to the damage to the tub and attempted to make a correction, which was again inconsistent with a fraudulent scheme.

The judge concluded that these facts were distinguishable from the facts of Kugler v. Koscot Interplanetary, Inc., 120 N.J. Super. 216 (Ch. Div. 1972). Defendant's principal stock holder and officer participated in the fraudulent pyramid scheme in which defendant made misrepresentations to prospective dis tributors. Id. at 257. Here, the judge opined that the tort-participation theory described in Saltiel required more than was required to impose strict-liability for CFA regulatory viola tions under Cox. He concluded that the evidence was insuffi cient to trigger the application of the tort-participation theory because Bolger was not involved in a fraudulent scheme. The judge stated, "So I don't see this type of fraud that is required to get the participation theory to be involved in this case. And Saltiel goes into this analy sis of whether . . . the facts in this case . . . sound in con tract or sound in tort." The judge concluded that the CFA claims here sounded in contract and that the tort-participation theory had not been proven. Consequently, he dismissed the claims against Bolger individu ally. On the motion for reconsid eration, the judge reaffirmed his earlier decision. This appeal followed.

Plaintiff does not raise any issue with respect to the judge's fact-findings, which are binding on appeal. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). However, plaintiff contends that the judge miscon strued and misap plied the tort-participation theory of liability to the facts when he dis missed her claims against Bolger, argu ing that B&C's CFA viola tions sounded in tort rather than con tract. She also contends that Bolger is made individually liable for his own acts, although done as an officer and share holder of B&C, pursuant to the definition of "person" in the CFA. See N.J.S.A. 56:8-1(d). Because these issues present questions of law, our review is plenary. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.").

We begin with the CFA, which prohibits certain commercial practices:

The act, use or employment by any per son of any unconscionable commercial prac tice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omis sion of any material fact with intent that others rely upon such concealment, suppres sion or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent perform ance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice[.]

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

The CFA further provides that, "[t]o accomplish the objec tives and to carry out the duties prescribed by this act, the Attorney General . . . may . . . promulgate such rules and regu lations . . . as may be necessary, which shall have the force of law." N.J.S.A. 56:8-4. The regulations so promulgated that govern home-improvement practices, N.J.A.C. 13:45A-16 to -16.2, make unlawful certain acts and practices utilized by a seller "involving the sale, attempted sale, advertisement or performance of home improvements." N.J.A.C. 13:45A-16.2.

The Supreme Court explained in Cox, supra, 138 N.J. at 17, that "[u]nlawful practices fall into three general categories: affirmative acts, knowing omissions, and regulation violations." As to the proofs required, the Court held as follows:

When the alleged consumer-fraud viola tion consists of an affirmative act, intent is not an essential element and the plain tiff need not prove that the defendant intended to commit an unlawful act. How ever, when the alleged consumer fraud con sists of an omission, the plaintiff must show that the defendant acted with knowl edge, and intent is an essential element of the fraud.

. . . .

The third category of unlawful acts con sists of violations of specific regula tions promulgated under the Act. In those instances, intent is not an element of the unlawful practice, and the regulations impose strict liability for such violations. The parties subject to the regulations are assumed to be familiar with them, so that any violation of the regulations, regardless of intent or moral culpability, constitutes a violation of the Act.

[Id. at 17-19 (citations omitted).]

The CFA also provides that the term "'person' as used in this act shall include any natural person . . . [or] corporation . . . and any . . . officer . . . [or] stockholder . . . thereof[.]" N.J.S.A. 56:8-1(d). Like this definition, the regulations governing home-improvement practices define "seller" as meaning "a person engaged in the business of making or selling home improvements and includes corporations . . . and their officers . . . and employees." N.J.A.C. 13:45A-16.1A. Thus, the CFA and the regulations governing home-improvement practices apply equally to corporations and the individuals acting on their behalf.

We recognized individual liability in New Mea Construction Corp. v. Harper, 203 N.J. Super. 486, 502-03 (App. Div. 1985), where we held:

The judge should also assess damages against plaintiffs' principal Ashworth, who was a defendant as to the Consumer Fraud Act Count, if he finds from a review of the record and his findings that she meets the test for liability under that Act. See N.J.S.A. 56:8-1(d) (definition of "person"); Hyland v. Aquarian Age 2,000 Inc., 148 N.J. Super. 186, 193 (Ch. Div. 1977); Kugler v. Koscot Interplanetary, Inc., 120 N.J. Super. 216, 253-256 (Ch. Div. 1972).

Although the Chancery judge in Koscot imposed individual CFA liability under the tort-participation theory and did not dis cuss the statutory definition at all, the Chancery judge in Aquarian relied exclusively on the CFA's definition of "person." Compare Koscot, supra, 120 N.J. Super. at 253-54, with Aquarian, supra, 148 N.J. Super. at 193.

We have applied the CFA broadly because of its remedial pur pose and have liberally construed it in favor of the victim ized consumer, the object of legislative concern. Lemelledo, supra, 150 N.J. at 269; Jefferson Loan Co., Inc., v. Session, 397 N.J. Super. 520, 533-34 (App. Div. 2008) (observing that the CFA "is one of the strongest consumer protection statutes in the nation" and that its history "is one of constant expansion of consumer protection") (internal citations and quotations omit ted); Scibek v. Longette, 339 N.J. Super. 72, 78 (App. Div. 2001) (CFA "is to be applied broadly in light of the statute's remedial purpose"); Ramapo Brae Condo. Ass'n, Inc. v. Bergen County Housing Auth, 328 N.J. Super. 561, 575 (App. Div. 2000), aff'd, 167 N.J. 555 (2001) (same); Levin v. Lewis, 179 N.J. Super. 193, 200 (App. Div. 1981) (holding that auto-repair regu lations promulgated under the CFA are to be liberally construed in favor of protecting consumers). In accordance with this broad interpretative prin ciple, we are satisfied that the judge here erred in applying the tort-participation theory to this CFA claim to exonerate Bolger because he is directly liable to plaintiff under the definitions of "person" in the CFA and "seller" in the applicable regulations.

We do not believe that a different result is mandated under the tort-participation theory discussed in Saltiel. There, defendant GSI Consultants, Inc. (GSI), entered into a contract with plaintiff requiring GSI to design and prepare specifica tions for turfgrass for two athletic fields. Saltiel, supra, 170 N.J. at 299. Plaintiff alleged that GSI was negligent in preparing the speci fications and sought to recover in tort against defendants Henry Indyk and Richard G. Caton as current and former officers of GSI, respectively. Id. at 299-300. On the individual defendants' motions for summary judgment, the motion judge concluded that they were acting in their corporate capacities and dismissed the claims against them. Id. at 301-02. We reversed, "conclud[ing] that both Indyk and Caton could be personally liable for negligence under the so-called 'participation theory of personal liability.'" Id. at 302.

The issue before the Saltiel Court required it "to con sider: (1) the proper application of the participation theory of personal liability for tortious conduct by corporate officers under New Jersey law; and (2) whether the plaintiff's claim against Indyk and Caton sounds in tort or contract." Ibid. The Court began by observing,

Thus, the essence of the participation the ory is that a corporate officer can be held personally liable for a tort committed by the corporation when he or she is suffi ciently involved in the commission of the tort. A predicate to liability is a finding that the corporation owed a duty of care to the victim, the duty was delegated to the officer and the officer breached the duty of care by his own conduct.

[Id. at 303.]

The Court explained that "New Jersey cases that have applied the participation theory to hold corporate officers personally responsible for their tortious conduct generally have involved intentional torts." Id. at 304. Because the con duct at issue in Saltiel did not implicate such conduct, the Court then explored the boundaries between contract, where duties are vol untarily assumed, and tort, where duties are imposed by law, id. at 315-17, concluding that the dispute at issue was essentially a matter of contract. Id. at 318.

We recognize that the Saltiel Court cited Koscot for the proposition that New Jersey had applied "the participation the ory to hold corporate officers personally liable for certain statutory violations." Id. at 305. However, Saltiel made no CFA claim and the Court did not consider the necessity of using that theory to determine whether liability should be imposed upon corporate officers under the CFA. We find the judge's con clusion that Bolger was not liable for his acts in violation of the CFA because they were essentially contractual in nature to be inconsistent with the plain language of the CFA and the regu lations, which are to be given a liberal construction. The tort-participation theory simply cannot circumscribe the reach of the CFA and the remedies it provides to consumers. In any event, even if it is applicable, the Saltiel citation to Koscot can reasonably be construed to suggest that corporate officers, directors, shareholders, and employees are individually liable for statutory violations in which they participate, just as they are individually liable for intentional torts in which they par ticipate because the duty is imposed by law, like a tort. We, thus, find the distinction between contract and tort irrelevant to the imposition of individual liability for statutory viola tions by corporate officers, directors, shareholders, and employees within the scope of their authority to act for the corporation and conclude that Bolger is personally liable for the refund ordered.

Reversed and remanded for entry of judgment in favor of plaintiff and against Bolger.

 

Plaintiff did not supply us with full trial transcripts but only the September 4, 2007, summations; the September 6, 2007, decision; the transcript of the October 19, 2007, proceedings on plaintiff's motion for reconsideration; and the November 16, 2007, transcript of her motion to stay the dismissal of the com plaint against Bolger. No appeal was taken from the judge's orders on the motions for reconsideration and stay.

The violation of an obligation imposed by law, such as Jersey City Ordinance 134-3, may be an "unconscionable com mercial practice" under N.J.S.A. 56:8-2. Cf. Lemelledo v. Beneficial Mgmt. Corp. of Am., 289 N.J. Super. 489, 501-02 (App. Div. 1996), aff'd, 150 N.J. 255, 264 (1997); Artistic Lawn & Landscape Co., Inc. v. Smith, 381 N.J. Super. 75, 86 (Law Div. 2005).

This was contrary to N.J.A.C. 13:45A-16.2(a)(10)(i), which pro vides that "[n]o seller contracting for the making of home improvements shall commence work until he is sure that all applicable state or local building and construction permits have been issued as required under state laws or local ordinances."

This violated N.J.A.C. 13:45A-16.2(a)(2)(vii), which makes it an unlawful practice to "[m]isrepresent directly or by implica tion that products or materials to be used in the home improve ment . . . [a]re of sufficient size, capacity, character or nature to do the job expected or represented."

This was contrary to N.J.A.C. 13:45A-16.2(a)(7)(ii), which pro vides that it is an unlawful practice to "[f]ail to begin or complete work on the date or within the time period specified in the home improvement contract . . . ."

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A-1117-07T2

January 12, 2009