(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
ALBERT COX, as Executor of the Estate of William Cox v. SEARS ROEBUCK & COMPANY (A-123-93)
Argued March 15, 1994 -- Decided September 15, 1994
CLIFFORD, J., writing for a unanimous Court.
In August 1988, William Cox contracted with Sears Roebuck & Company (Sears) to renovate his
kitchen. Cox financed the $7,295.69 cost of the renovations on his Sears credit card. The contract required
Sears to remove old cabinets and install new ones, to install a vinyl floor, a countertop, a sink and faucet
with a full backsplash, wallpaper, a microwave hood, a garbage disposal and an additional electrical outlet.
Sears was also to reinstall all appliances, to sheetrock walls as necessary, to the cover the exhaust fan, and to
vent the microwave hood outside. On December 5, 1988, Cox agreed to $1,500 of additional work that
included the rewiring and updating of the electrical work in the kitchen.
Dissatisfied with Sears' performance, Cox sued Sears on theories of, among others, breach of
contract and violations of the Consumer Fraud Act (Act). Sears counterclaimed for the full contract price of
$8,795.69. At trial, Cox proffered evidence demonstrating that Sears' work was deficient because the
appearance of the renovations was unattractive, the rewiring of the kitchen was incomplete and substandard,
and the work failed to comply with building and electrical codes and home-repair regulations. Sears never
requested the municipally-required building and electrical permits nor were any issued for the Cox residence
before, during or after Sears' work on the kitchen.
A jury found in favor of Cox on both the breach-of-contract and consumer-fraud causes of action,
concluding that Cox had incurred damages in the amount of $6,830. The trial court granted Sears' motion
for judgment notwithstanding the verdict and entered a "no cause of action" in favor of Sears on both the
contract and consumer fraud counts. The court had dismissed Sears' counterclaim and ordered Sears to
remove any charges to Cox's Sears' credit card and any lien on his home. The court concluded that Cox had
failed to prove any ascertainable loss as a result of Sears' lack of substantial performance under its contract
or to prove any violation of the Consumer Fraud Act. The court found that Cox's continued enjoyment and
use of Sears' labor and materials since installation provided neither consumer fraud nor contract damages.
The trial court also denied Cox's application for attorneys fees.
A majority of the Appellate Division affirmed substantially for the reasons expressed by the trial
court in its opinion. The majority found that Sears' conduct supported a breach-of-contract claim but not a
consumer-fraud claim, and that Cox had not demonstrated any loss entitling him to consumer-fraud damages.
One member of the Appellate Division panel dissented, arguing that the majority had misinterpreted both
the Act and contract-damage principles. The dissent found that the jury correctly calculated the contract
damages because the verdict awarded Cox, $6,830, put him in the position he would have been in had Sears
properly performed the contract. The dissent also noted that the jury's verdict supported the conclusion that
Sears engaged in an unconscionable commercial practice. On the issue of damages, the dissent found that a
charge on a credit card is a legal obligation amounting to a "loss" under the Act. The dissent concluded that
the trial court should have cancelled Cox's contract indebtedness, denied Sears any recovery under the
contract, and awarded Cox the costs to repair as determined by the jury, $6,830, trebled to $20,490, plus
reasonable attorneys' fees, filing fees, and costs. Finally, the dissent also noted that even if Cox had not
suffered a "loss" under the Act, the court should have awarded reasonable attorneys' fees.
Cox appealed as of right based on the dissent below.
HELD: Sears Roebuck & Company's conduct constituted an unlawful practice under the Consumer
Fraud Act and William Cox suffered an ascertainable loss caused by Sears' violation of that Act.
Therefore, Cox is entitled to recover treble damages, reasonable attorneys' fees, filing fees and
costs under the Act.
1. The Legislature has given the Attorney General the power to investigate consumer-fraud complaints
and to promulgate rules and regulations that have the force of law. To violate the Act, a person must
commit an "unlawful practice" as defined in the statute. There are three categories of unlawful practices:
affirmative acts, knowing omissions, and regulation violations. (pp. 13-18)
2. A breach of warranty or contract is not per se unconscionable and such a breach does not alone
violate the Act. Violations of specific regulations promulgated under the Act are considered unlawful and
any such violation constitutes a violation of the Act. To establish a violation of the Act, a plaintiff need not
prove an unconscionable commercial practice. Rather, proof of any one of the acts or omissions provided
under the Act or a violation of a regulation is sufficient to establish unlawful conduct under the Act.
Focusing only on whether an unconscionable commercial practice occurred does not adequately address a
consumer fraud claim. (pp. 18-20)
3. There are several bases for the jury's finding of violations of the Act: Sears failed to have
competent contractors install cabinet work, plumbing and electrical wiring in a safe and professional manner
and in accordance with appropriate regulations; Sears failed to comply with the Home Improvement
Practices regulations; and Sears failed to obtain the required building and electrical permits for the
renovations. (pp. 20-22)
4. The trial court should provide the jury with special interrogatories to ensure that the conduct that
the jury finds is consumer fraud is actually unlawful under the Act. (p. 22)
5. Cox must prove an ascertainable loss in order to recover treble damages under the Act. Here, Sears
committed an unlawful practice by violating the consumer-fraud regulations relating to permits, inspections
and certificates and Cox suffered an ascertainable loss as a result of Sears' failure to comply with the Home
Improvement Practices regulations. An improper debt or lien against a consumer-fraud plaintiff may
constitute a loss under the Act, because the consumer is not obligated to pay an indebtedness arising out of
conduct that violates the Act. In this case, the proper measure of consumer-fraud damages is the cost of
repair as determined by the jury, $6,830, trebled to $20,490. (pp. 23-27)
6. An award of treble damages and attorneys' fees is mandatory under the Act if a consumer-fraud
plaintiff proves both an unlawful practice under the Act and an ascertainable loss. Accordingly, the matter is
remanded to the trial court to calculate an appropriate award for Cox's attorneys' fees, filing fees and costs.
Furthermore, a consumer fraud plaintiff can recover reasonable attorneys' fees, filing fees, and costs if the
plaintiff can prove that the defendant committed an unlawful practice, even if the plaintiff cannot
demonstrate any ascertainable loss and, thus, cannot recover treble damages. (pp. 27-28)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial court
for entry of judgment for Cox on the sixth count of the Complaint, alleging Consumer Fraud Act violations,
the damages to be trebled as provided in this opinion, and for entry of judgment for Cox for attorneys' fees,
filing fees and costs as provided herein.
JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN join in JUSTICE
CLIFFORD's opinion. CHIEF JUSTICE WILENTZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
123 September Term 1993
ALBERT COX, as Executor of
the Estate of William Cox,
Plaintiff-Appellant,
v.
SEARS ROEBUCK & COMPANY,
Defendant-Respondent.
Argued March 15, 1994 -- Decided September 15, 1994
On appeal from the Superior Court, Appellate
Division.
Fredric J. Gross argued the cause for
appellant (Mr. Gross, attorney; Dennis K.
Kuroishi, of counsel).
Allen S. Zeller argued the cause for
respondent (Freeman, Zeller and Bryant,
attorneys; Mr. Zeller and James W. Burns, on
the briefs).
Mary K. Potter, Deputy Attorney General,
argued the cause for amicus curiae Attorney
General of New Jersey (Deborah T. Poritz,
Attorney General, attorney; Andrea M.
Silkowitz, Assistant Attorney General, of
counsel).
Madeline L. Houston, Director of Litigation,
submitted a brief on behalf of amicus curiae
Passaic County Legal Aid Society.
The opinion of the Court was delivered by
CLIFFORD, J.
This appeal, here as of right because of a dissent in the
Appellate Division, R. 2:2-1(a)(2), presents important questions
under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (the Act).
William Cox contracted with defendant for renovations to the
kitchen of his home. (Inasmuch as William Cox died after the
institution of this suit, his son, as executor of his father's
estate, has been substituted as plaintiff. References to
"plaintiff" in this opinion, however, are to the original
plaintiff, William Cox.) Dissatisfied with the work, plaintiff
sued defendant on theories of, among others, breach of contract
and violations of the Act. The jury found for plaintiff on both
the contract and consumer-fraud causes of action, but the trial
court entered judgment in defendant's favor notwithstanding the
verdict.
On plaintiff's appeal a divided panel of the Appellate
Division affirmed in an unreported opinion. The court ruled that
plaintiff had not established that defendant's conduct violated
the Act and had not demonstrated any loss entitling him to
damages. Because we conclude that the majority below erred in
respect of both those rulings, we reverse.
In August 1988, William Cox, then eighty-two years old,
embarked on a renovation project on the kitchen of his forty-year-old house in Clementon, New Jersey, which he had purchased
in 1987. In that connection he sought the services of defendant,
Sears, Roebuck & Company (Sears). After meeting with a Sears
representative and selecting the items he wanted installed, Cox
signed a home-repair-proposal contract and financed the entire
$7,295.69 cost of the transaction on his Sears credit card.
Sears promised plaintiff "satisfaction guaranteed or your money
back."
Cox wanted to change the appearance of his kitchen. The
contract required Sears to remove old cabinets and install new
ones, and to install a vinyl floor, a countertop, a sink and
faucet with a full backsplash, wallpaper, a microwave hood, a
garbage disposal, and one additional electrical outlet. The
contract also required Sears to re-install all appliances, to
sheetrock walls as necessary, to cover the exhaust fan, and to
vent the microwave hood outside.
The bulk of the renovations began on December 5, 1988. On that date, Cox signed an "AUTHORIZATION FOR CHANGE OF SPECIFICATIONS" that Sears' subcontractor presented for an additional $1,500 worth of work on the kitchen. That change order provided for rewiring of the kitchen and updating of the electrical work. Sears worked on the kitchen for approximately three weeks, and on December 23, 1988, plaintiff signed a
statement that the renovations up to that point had been
completed to his satisfaction.
Ultimately, however, Cox was not at all satisfied with
Sears' work. During 1989, he made several telephone complaints
to Sears about inadequacies in the job relating to the microwave
hood and vent, the cabinets, and the vinyl flooring. A Sears
repairman made at least four trips to plaintiff's home to address
the problems. After Cox retained legal counsel around October
1989, Sears made no further repairs to the kitchen.
Plaintiff thereafter sued Sears for breach of contract and
violation of the Consumer Fraud Act, and Sears counterclaimed for
the full contract price, totalling $8,795.69.
The trial record discloses proof from which the jury could have concluded that Sears' work was deficient in that the resulting appearance of the renovations was unattractive, that Sears' rewiring of the kitchen was incomplete and substandard, and that Sears' work failed to comply with building and electrical codes and home-repair regulations. The microwave hood was installed in a lopsided manner and contained a large crack. The door to the microwave slammed shut if not held open. The wallpaper did not cover all wall areas and did not line up evenly with the cabinets. The wood coloring of the cabinets and the trim did not match, and one cabinet had cracks in it. The glue
in the cabinet joints was visible and the joints were not clean.
Sears improperly re-installed the moldings so that they were not
flush to the ceiling or walls. The vinyl flooring buckled, and
Sears did not install cove molding to keep it in place. The
garbage-disposal unit leaked. The microwave vent recirculated
exhaust back into the house instead of outside. (Sears has since
repaired the vent, and Cox hired a plumber to repair the
disposal.)
Concerning the electrical-wiring work, plaintiff produced as
expert witnesses an electrical sub-code inspector (the inspector)
and an electrical contractor and installer (the contractor). The
inspector concluded that the entire kitchen had not in fact been
rewired. Much of the old wiring remained, and the new wiring did
not meet the 1988 building-code requirements. In fact, the
contractor explained that what wiring had been completed had been
installed haphazardly and unprofessionally, resulting in
dangerous, concealed defects. For example, several new outlets
accepting three-prong plugs, which must be grounded for safety
purposes, had not been grounded. Similarly, the polarity of
several wires in the receptacle box were reversed, creating a
risk of electric shock.
In addition, plaintiff produced witnesses who testified that for almost all the kitchen renovations covered by the contract, the municipality required building and electrical permits. For
example, Clementon's building inspector explained that the
removal of old cabinets and installation of new ones required a
building permit. Likewise, the installation of new outlets or
lights, a garbage disposal, an exhaust fan, or any other rewiring
could not be performed without an electrical permit. The
contractor agreed that electrical, plumbing, building, and
construction permits were needed for Cox's renovation. However,
no building or electrical permits had ever been requested or
issued for the Cox residence before, during, or after Sears' work
on plaintiff's kitchen in 1988 or 1989.
The jury returned a verdict in plaintiff's favor on both the
breach-of-contract and the Consumer Fraud Act claims. In respect
of the contract claim, the jury answered special interrogatories
to indicate its finding that Sears had not substantially
performed its obligations under the contract and that that
failure was the proximate cause of damages to Cox. It concluded
that the damages amounted to the full contract price of $8,795.69
and that Sears was entitled to a credit of only $238 for its
work. Finally, it found that Sears had failed to correct the
deficiencies in its performance and that Cox was entitled to
receive $6,830 to complete or repair the work in his kitchen.
Concerning the consumer-fraud claim, the jury wrote on the verdict sheet that it found that Sears had violated the Act through its "failure to have competent contractors install
cabinet work, plumbing and electrical wiring in a safe,
professional manner and in accordance with appropriate
regulations." The jury further concluded that as a proximate
result of that violation, plaintiff had incurred damages in the
amount of $6,830.
Sears moved for judgment notwithstanding the verdict,
asserting that the conduct itemized in the jury's recital of what
constituted consumer fraud did not in fact violate the Act.
Initially the trial court denied the motion and entered judgment
of $6,830 for Cox, trebling it to $20,490 as required by N.J.S.A.
56:8-19, and dismissed Sears' counterclaim. Defendant then
renewed its motion, and plaintiff filed a cross-motion seeking
costs and attorneys' fees in the amount of $56,840.57. The trial
court then granted defendant's motion for judgment
notwithstanding the verdict and entered a "no cause of action" in
favor of Sears on both the contract and Consumer Fraud Act
counts. The court left in place its order dismissing Sears'
counterclaim and ordered Sears to remove any charges to
plaintiff's Sears charge account and any lien on plaintiff's
house.
In a letter opinion the trial court concluded that plaintiff had "failed to prove any ascertainable damage or loss as a result of [Sears'] lack of substantial performance under its contract or [Sears'] violation of the Consumer Fraud Act." It correctly
noted that to recover under the Act, a private plaintiff such as
Cox must prove loss, and that a breach-of-contract claim also
required proof of damages. The court found that the benefit of
Cox's bargain was to have Sears renovate his kitchen according to
the contract specifications for $8,795.69. Although plaintiff
had not paid any money to Sears, he would have to spend $7,130 (a
figure different from the jury's calculation) to complete and
repair the renovations. The court concluded that because "the
amount paid plus the amount needed to put the kitchen in the
required condition is less than the contract price," and because
the proper measure of damages is the "benefit of the bargain,"
"it follows that [plaintiff] has not been damaged by
[defendant's] breach." The court also rejected plaintiff's claim
that the impairment of his credit and Sears' recorded lien on his
house constituted sufficient losses under the Act, pointing out
that plaintiff had failed to demonstrate any difficulty in
obtaining credit at a favorable rate. Last, the trial court
noted that Cox had continued to enjoy the use of Sears' labor and
materials since installation. Therefore, the court concluded,
plaintiff had proved neither consumer-fraud nor contract damages
and could not recover under either theory.
Accordingly, the court denied plaintiff's attorney's application for attorneys' fees, relying on Martin v. American Appliance, 174 N.J. Super. 382, 383-86 (Law Div. 1980), which held that a victim of consumer fraud who does not prove a loss
cannot recover attorneys' fees. (Martin has since been overruled
by Performance Leasing Corp. v. Irwin Lincoln-Mercury,
262 N.J.
Super. 23 (App. Div.), certif. denied,
133 N.J. 443 (1993).)
The majority in the Appellate Division affirmed
substantially for the reasons given by the trial court in its
letter opinion. The majority first found that defendant's
conduct supported a breach-of-contract claim but not a consumer-fraud claim. The court explained that "[c]onsumer fraud involves
at the very least an 'unconscionable commercial practice,'"
(quoting N.J.S.A. 56:8-2 and Skeer v. EMK Motors, Inc.,
187 N.J.
Super. 465, 470 (App. Div. 1982)), and that "[a] breach of
warranty or a breach of contract alone is not unconscionable and
does not violate the Consumer Fraud Act."
Next, the majority confirmed that because the evidence supported the jury's finding that Sears' failure to perform amounted to a breach of contract, the jury's decision to allow Sears nothing under the contract and to award it a credit of only $238 for the value of the work properly performed was appropriate. The majority further concluded that the jury's award of "compensatory damages" of $6,830 to Cox properly put him in as good a position as he would have enjoyed had performance been rendered as promised. (We are unable to unravel the paradox of the Appellate Division's apparent approval of the jury award to plaintiff of $6,830 in "compensatory damages," with a credit
to defendant of $238, with its judgment affirming the trial
court's entry of judgment for defendant notwithstanding the
verdict, the effect of which, of course, was to wipe out
plaintiff's verdict. Because we sit to review the Appellate
Division's judgment, not its opinion, we proceed on the
assumption that the court below determined that the trial court's
entry of judgment for defendant was the correct result.
Moreover, the riddle of is of no moment for purposes of this
appeal, inasmuch as plaintiff does not raise any issues
concerning his breach-of-contract claim but rather confines his
statement of questions presented and his argument to issues under
the Act.)
The majority also found that "the facts of this typical
breach of contract case do not support a recovery for consumer
fraud for the further reason that plaintiff has suffered no
loss." The court noted that Cox has been living with the kitchen
since Sears installed it and that the entire transaction has cost
plaintiff nothing. It also found that Sears had never demanded
payment from plaintiff. It reasoned that to allow plaintiff to
recover three times the cost of completing the renovations "would
distort the Consumer Fraud Act beyond recognition." The majority
added that contrary to the dissent's reasoning, plaintiff did not
incur a "legal obligation" constituting a loss sufficient to
establish his consumer-fraud claim because plaintiff could not
incur such an obligation absent Sears' performance.
The dissenter below argued that the majority had usurped the
province of the jury and had misinterpreted both the Consumer
Fraud Act and contract-damage principles. According to the
dissent, the jury correctly calculated the contract damages
because the verdict awarded plaintiff a sum, $6,830, that put him
in the position he would have been in had Sears performed the
contract. Next, the dissent noted that the jury's verdict "both
implicitly and explicitly supports the conclusion that Sears
engaged in unconscionable commercial practice," and the jury
award "provides plaintiff with the kitchen he would have received
from an accurate performance of Sears' renovation contract." On
the question of damages the dissent rejected the conclusion that
plaintiff had not suffered any loss due to Sears' unlawful
conduct, pointing out that a charge on a credit card is a legal
obligation amounting to a "loss" under the Act. It noted that
many sharp businesses persuade consumers to sign contracts or to
pay with credit cards and that those consumers may later refuse
to pay, but "the fraud [is] accomplished when the consumer
sign[s] what otherwise would be a binding obligation." The
dissent concluded that Cox had "amply proved" a loss as
contemplated by the Act. Concerning treble damages and
attorneys' fees, the dissent observed that "absent compelling
circumstances to the contrary," a court should award treble
damages, attorneys' fees, filing fees, and costs to consumer-fraud plaintiffs.
Addressing the damages issue, the dissenter below claimed
that Sears' lack of substantial performance entitled plaintiff to
damages in the amount of the full contract price; thus, he
concluded that the jury had properly extinguished Cox's
indebtedness to Sears. The dissenter further argued that if
plaintiff had paid cash rather than charge the cost of the
renovations to his credit card, the dissenter would have
calculated the consumer-fraud damages as the cash paid, trebled.
The cancellation of the debt, according to the dissent, was the
equivalent of the return of the cash payment; therefore, the
dissent reasoned, the trial court should have awarded Cox an
additional sum equal to double the contract price. It observed
that "[b]y limiting plaintiff's remedy to the cancellation of the
charge, the judge in effect has nullified the jury's consumer
fraud verdict, and provided only breach of contract damages."
The dissent concluded that to dispose of this case properly, the
trial court should have cancelled Cox's contract indebtedness,
denied Sears any recovery under the contract, and awarded
plaintiff his cost of repair as determined by the jury, $6,830,
trebled to $20,490, plus reasonable attorneys' fees, filing fees,
and costs. Finally, the dissent concluded that even if Cox had
not suffered a "loss" under the Act, the court nevertheless
should have awarded him reasonable attorneys' fees.
The initial question that plaintiff raises on this appeal is whether Sears' conduct constituted an "unlawful practice" under
the Act. If so, we must determine if plaintiff suffered "any
ascertainable loss" due to Sears' conduct. The posture of the
case -- the Appellate Division's affirmance of the trial court's
setting aside a jury verdict for plaintiff and entering judgment
for defendant notwithstanding that verdict -- requires that we
accord plaintiff the benefit of all reasonable and legitimate
inferences to be drawn from the evidence. Under that standard we
are satisfied that Sears' conduct did constitute an unlawful
practice and that plaintiff did suffer a loss caused by Sears'
violation of the Act. Finally, we conclude that plaintiff is
entitled to recover attorneys' fees, filing fees, and costs under
the Act.
In 1960, the Legislature passed the Consumer Fraud Act "to permit the Attorney General to combat the increasingly widespread practice of defrauding the consumer." Senate Committee, Statement to the Senate Bill No. 199 (1960). The Act conferred on the Attorney General the power to investigate consumer-fraud complaints and promulgate rules and regulations that have the force of law. N.J.S.A. 56:8-4. In 1971, the Legislature amended the Act to "give New Jersey one of the strongest consumer protection laws in the nation." Governor's Press Release for Assembly Bill No. 2402, at 1 (Apr. 19, 1971). The Legislature
expanded the definition of "unlawful practice" to include
"unconscionable commercial practices" and broadened the Attorney
General's enforcement powers. Ibid. That amendment also
provided for private causes of action, with an award of treble
damages, attorneys' fees, and costs. Ibid. Governor Cahill
believed that those provisions would provide "easier access to
the courts for the consumer, [would] increase the attractiveness
of consumer actions to attorneys and [would] also help reduce the
burdens on the Division of Consumer Affairs." Governor's Press
Release for Assembly Bill No. 2402, at 2 (June 29, 1971).
In this case, Cox is a private plaintiff, and the Attorney
General did not intervene in the proceedings, confining her
participation to that of an amicus curiae in this Court.
Therefore, the relevant sections of the Act are N.J.S.A. 56:8-2
and -19. They provide:
The 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 with the subsequent performance 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.
Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by
another person of any method, act, or
practice declared unlawful under this act
* * * may bring an action * * * . In any
action under this section the court shall, in
addition to any other appropriate legal or
equitable relief, award threefold the damages
sustained by any person in interest. In all
actions under this section the court shall
also award reasonable attorneys' fees, filing
fees and reasonable costs of suit.
Courts have emphasized that like most remedial legislation,
the Act should be construed liberally in favor of consumers. See
Barry v. Arrow Pontiac, Inc.,
100 N.J. 57, 69 (1985); Levin v.
Lewis,
179 N.J. Super. 193, 200 (App. Div. 1981); State v. Hudson
Furniture Co.,
165 N.J. Super. 516, 520 (App. Div. 1979); Martin,
supra, 174 N.J. Super. at 384. Although initially designed to
combat "sharp practices and dealings" that victimized consumers
by luring them into purchases through fraudulent or deceptive
means, D'Ercole Sales, Inc. v. Fruehauf Corp.,
206 N.J. Super. 11, 23 (App. Div. 1985), the Act is no longer aimed solely at
"shifty, fast-talking and deceptive merchant[s]" but reaches
"nonsoliciting artisans" as well. Ibid. Thus, the Act is
designed to protect the public even when a merchant acts in good
faith. Ibid. Moreover, we are mindful that the Act's provision
authorizing consumers to bring their own private actions is
integral to fulfilling the legislative purposes, and that those
purposes are advanced as well by courts' affording the Attorney
General "the broadest kind of power to act in the interest of the
consumer public." Levin, supra, 179 N.J. Super. at 200.
To those ends the Legislature has given the Attorney General
the authority to promulgate regulations, as follows:
To accomplish the objectives and to carry
out the duties prescribed by this act, the
Attorney General, in addition to other powers
conferred * * * by this act, may * * *
promulgate such rules and regulations * * *
as may be necessary, which shall have the
force of law.
[N.J.S.A. 56:8-4 (emphasis added).]
The Division of Consumer Affairs has enacted extensive
regulations, consistent with the foregoing authority, to deal
with practices susceptible to consumer-fraud violations, such as
may be found under home-improvement contracts. See, e.g.,
N.J.A.C. 13:45A-16. A major purpose of the Home Improvement
Practices regulations is to provide "objective assurances" of the
"terms and criteria according to which home-improvement work
[should] be done."
17 N.J.R. 679 (Mar. 18, 1985). However, the
regulations are not meant to be exhaustive, and practices not
specified in the regulations may nevertheless constitute unlawful
consumer fraud. N.J.A.C. 13:45A-16.2(a).
In this case, the trial court instructed the jury on certain unlawful practices set forth in the administrative code, namely, those making it unlawful under the Act (1) to "[m]isrepresent directly or by implication that products or materials to be used in the home improvement * * * [m]eet or exceed municipal, state, federal, or other applicable standards or requirements," N.J.A.C.
13:45A-16.2(a)2v; (2) to "[r]equest the buyer to sign a
certificate of completion, or make final payment on the contract
before the home improvement is completed in accordance with the
terms of the contract," N.J.A.C. 13:45A-16.2(a)6v; (3) for a
seller contracting for the making of home improvements to
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," N.J.A.C. 13:45A-16.2(a)10i; and (4) for the seller to fail to deliver to the
buyer copies of inspection certificates, when midpoint or final
inspections are required under state laws or local ordinances,
"when construction is completed and before final payment is due
or the signing of a completion slip is requested of the buyer."
N.J.A.C. 13:45-16.2(a)10ii.
To violate the Act, a person must commit an "unlawful practice" as defined in the legislation. Unlawful practices fall into 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. A practice can be unlawful even if no person was in fact misled or deceived thereby. D'Ercole Sales, supra, 206 N.J. Super. at 22; Skeer, supra, 187 N.J. Super. at 470. The capacity to mislead is the
prime ingredient of all types of consumer fraud. Fenwick v. Kay
Am. Jeep, Inc.,
72 N.J. 372, 378 (1977).
When the alleged consumer-fraud violation consists of an
affirmative act, intent is not an essential element and the
plaintiff need not prove that the defendant intended to commit an
unlawful act. Chattin v. Cape May Greene, Inc.,
124 N.J. 520,
522 (1991) (Stein, J. concurring). However, when the alleged
consumer fraud consists of an omission, the plaintiff must show
that the defendant acted with knowledge, and intent is an
essential element of the fraud. Ibid.
In respect of what constitutes an "unconscionable commercial practice," this Court explained in Kugler v. Romain, 58 N.J. 522 (1971), that unconscionability is "an amorphous concept obviously designed to establish a broad business ethic." Id. at 543. The standard of conduct that the term "unconscionable" implies is lack of "good faith, honesty in fact and observance of fair dealing." Id. at 544. 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." D'Ercole Sales, supra, 206 N.J. Super. at 25. Because any breach of warranty or contract is unfair to the non-breaching party, the law permits that party to recoup remedial damages in an action on the contract; however, by providing that a court should treble those damages and should
award attorneys' fees and costs, the Legislature must have
intended that substantial aggravating circumstances be present in
addition to the breach. DiNicola v. Watchung Furniture's Country
Manor,
232 N.J. Super. 69, 72 (App. Div.) (finding that breach of
warranty in supplying defective furniture and denying that defect
existed was not unconscionable), certif. denied,
117 N.J. 126
(1989); D'Ercole Sales, supra, 206 N.J. Super. at 31 (holding
that breach of warranty for malfunctioning tow truck and refusal
to repair was not unconscionable practice).
The third category of unlawful acts consists of violations
of specific regulations 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.
Fenwick, supra, 72 N.J. at 376. 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. See, e.g.,
Skeer, supra, 187 N.J. Super. at 470 (holding that good faith
will not excuse noncompliance with regulations); Fenwick v. Kay
Am. Jeep, Inc.,
136 N.J. Super. 114, 123-24 (App. Div. 1975)
(Kolovsky, P.J.A.D., dissenting) (same), rev'd,
72 N.J. 372
(1977); Huffmaster v. Robinson,
221 N.J. Super. 315, 321 (Law
Div. 1986) (same).
Significantly -- and contrary to the Appellate Division
majority's conclusion -- to establish a violation of the Act a
plaintiff need not prove an unconscionable commercial practice.
Rather, the Act specifies the conduct that will amount to an
unlawful practice in the disjunctive, as "any unconscionable
commercial practice, deception, fraud, false pretense, false
promise, misrepresentation, or the knowing[] concealment,
suppression, or omission of any material fact * * * ." N.J.S.A
56:8-2 (emphasis added). Proof of any one of those acts or
omissions or of a violation of a regulation will be sufficient to
establish unlawful conduct under the Act. Thus, focusing only on
whether an unconscionable commercial practice occurred, as the
Appellate Division did, does not adequately address a consumer-fraud claim.
Applying the foregoing principles to this case, we conclude that the record exposes several bases for the jury's finding of consumer fraud. The jury determined that Sears' "failure to have competent contractors install cabinet work, plumbing and electrical wiring in a safe, professional manner and in accordance with appropriate regulations" constituted consumer fraud in violation of the Act. Sears' noncompliance with the Home Improvement Practices regulations constitutes a clear violation of the Act. The regulations are in place to prevent precisely the poor-quality work that characterized Sears' performance in this case and to protect consumers such as Cox,
even though such sloppy workmanship falls short of an
unconscionable commercial practice.
For instance, the jury could have concluded that although
several permits were required, none was obtained for plaintiff's
renovations. Although no statute or regulation requires a home-repair contractor to obtain all permits for an owner, N.J.A.C.
13:45A-16.2(a)10i does provide that no contractor may begin work
until he or she is sure that all applicable permits have been
issued. Sears, by beginning work without checking for permits,
disregarded the regulation and therefore violated the Act.
Moreover, once a permit is obtained, a code inspector will
inspect the residence periodically and issue a Certificate of
Continued Occupancy to conform to the municipality's inspection
process. Because no permit was ever issued for the Cox home, no
inspections took place and no certificate was issued. In that
regard, Sears violated N.J.A.C. 13:45A-16.2(a)10ii, which
requires a contractor to give the owner a copy of an inspection
certificate before final payment is due and before the contractor
asks the owner to sign a completion slip. In addition, plaintiff
presented evidence to support an inference that Sears had asked
him to sign a certificate-of-completion form before the work had
been completed, a violation of N.J.A.C. 13:45A-16.2(a)6v.
Plaintiff also introduced substantial evidence that the kitchen had been rewired incorrectly, creating a dangerous
condition. Plaintiff relied on Sears to furnish him with a safe
and usable kitchen. By failing to rewire the kitchen properly,
Sears breached the contract. Its poor performance created
several concealed hazardous defects that could constitute a
"substantial aggravating circumstance" warranting a finding of an
unconscionable commercial practice. However, because we do not
detect any bad faith or lack of fair dealing on the part of
Sears, we conclude that the breach of contract does not rise to
the level of an "unconscionable commercial practice" in violation
of the Act. See, e.g., New Mea Constr. Corp. v. Harper,
203 N.J.
Super. 486, 501 (App. Div. 1985) (finding that poor workmanship
and substitution of inferior quality materials in addition to
breach of contract constituted unconscionable commercial practice
in violation of Act).
Finally, we note that the jury's findings, as revealed on
the verdict sheet, were somewhat general. To ensure that the
conduct that a jury concludes amounts to consumer fraud is in
fact unlawful under the Act, we recommend that trial courts frame
special interrogatories to the jury. For example, in addition to
asking a jury what conduct violated the Act, a verdict sheet
might also ask whether the unlawful conduct involved an
affirmative act, a knowing omission, or a violation of a
regulation. Likewise, requiring a jury to identify the
regulations that a consumer-fraud defendant has violated would
further refine the verdict.
We turn now to the issue of damages as provided for under
the Act. In an ordinary breach-of-contract case, the function of
damages is simply to make the injured party whole, and courts do
not assess penalties against the breaching party. However, the
goals of the Act are different. Although one purpose of the
legislation is clearly remedial in that it seeks to compensate a
victim's loss, the Act also punishes the wrongdoer by awarding a
victim treble damages, attorneys' fees, filing fees, and costs.
In that sense, the Act serves as a deterrent. Therefore, in
determining whether plaintiff has established a loss under the
Act, we are guided by but not bound to strict contract
principles.
A private plaintiff victimized by any unlawful practice
under the Act is entitled to "threefold the damages sustained" by
way of "any ascertainable loss of moneys or property, real or
personal * * * ." N.J.S.A. 56:8-19. Significantly, the standard
of proof in consumer-fraud actions by private plaintiffs is
higher than the standard for the Attorney General's enforcement
proceedings. Meshinsky v. Nichols Yacht Sales, Inc.,
110 N.J. 464, 473 (1988). Although the Attorney General need not prove
that a victim was damaged by the unlawful practice, to warrant an
award of treble damages a private plaintiff must show an
"ascertainable loss."
Plaintiff has met the first requirement of N.J.S.A. 56:8-19
by proving that Sears committed an unlawful practice. As
demonstrated above, that unlawful conduct consisted of Sears'
violation of consumer-fraud regulations relating to permits,
inspections, and certificates. The next question, then, is
whether plaintiff suffered any "ascertainable loss," as
contemplated by the Act.
The record satisfies us that Sears' failure to comply with
the Home Improvement Practices regulations visited an
ascertainable loss on plaintiff. The purpose of the regulations
is to protect the consumer from hazardous or shoddy work. Had
all applicable permits been obtained before Sears began work, the
issued permits would have triggered periodic inspections of the
renovations. An inspector would have detected any substandard
electrical wiring or cabinet work and would not have permitted
the work to progress or have issued the required certificates
until Sears corrected the deficiencies. Because the inspections
did not occur, the wiring remained unsafe, the cabinets remained
unattractive, and both resulted in a loss measured by the cost of
repairing those conditions.
The Appellate Division majority suggests that because Cox did not spend money to repair or finish the work, he incurred no loss. However, that interpretation of N.J.S.A. 56:8-19 runs contrary to the Act's clearly remedial purpose. Traditionally,
to demonstrate a loss, a victim must simply supply an estimate of
damages, calculated within a reasonable degree of certainty. The
victim is not required actually to spend the money for the
repairs before becoming entitled to press a claim. See Berg v.
Reaction Motors Div.,
37 N.J. 396, 404 (1962); Tessmar v.
Grosner,
23 N.J. 193, 203 (1957). In this case, the testimony
specifically addressed the cost of repairs, and the trial court
found that Cox had adequately demonstrated those costs. The
court also found persuasive that because plaintiff "kept" the
kitchen since it had been installed, he did not incur any loss.
Obviously, plaintiff had no other choice: he still owned the
house. In addition, Cox did not "gain" a kitchen that he had not
had before; prior to the renovations, he had a normal, safe
kitchen. See 5 Corbin on Contracts § 1091 (Corbin ed. 1964)
(stating that "[t]he injured party should not be deprived of
damages measured by the cost of curing defects, merely on the
ground that he chooses to use the building in its defective
character"). Therefore, we conclude that Cox's loss amounted to
the cost of repairing his kitchen, $6,830, as the jury found.
Moreover, by virtue of his contract with Sears, plaintiff incurred a legal obligation in the form of a debt. That debt was presumptively collectible prior to the lawsuit, and Sears filed a counterclaim demanding payment of the full contract price. Sears also filed a lien on plaintiff's house, thereby encumbering the title. We conclude that an improper debt or lien against a
consumer-fraud plaintiff may constitute a loss under the Act,
because the consumer is not obligated to pay an indebtedness
arising out of conduct that violates the Act.
However, in this case, the debt and the lien, although losses to Cox, and properly cancelled by the trial court for Sears' breach of contract, were not the result of Sears' violation of the Act. Rather, those losses occurred before any consumer fraud took place. The "causation" provision of N.J.S.A. 56:8-19 requires plaintiff to prove that the unlawful consumer fraud caused his loss. Ramanadham v. New Jersey Mfrs. Ins. Co., 188 N.J. Super. 30, 33 (App. Div. 1982); see, e.g., Meshinsky, supra, 110 N.J. at 474-75 (finding that defendant's forgery of plaintiff's signature on loan application, although unconscionable commercial practice, was between bank and defendant and did not cause plaintiff any loss; therefore, plaintiff was limited to damages for defendant's breach of contract). In the case before us, the contract price is not the correct measure of consumer-fraud damages because the consumer fraud occurred in the course of performance, not in the actual contracting for the home-improvement work. See Truex v. Ocean Dodge, Inc., 219 N.J. Super. 44 (App. Div. 1987) (finding that consumer-fraud damages were amount of unconscionable commercial practice of attempted boost in price of $710, trebled to $2,130, and not full contract price). Because the improper debt and lien were not the result of Sears' consumer fraud, plaintiff is not
entitled to have those damages trebled as consumer-fraud damages.
The proper measure of plaintiff's consumer-fraud damages is the
cost of repair as determined by the jury, $6,830, trebled to
$20,490.
Although plaintiff's breach-of-contract claim is not before
us, we take into account the jury's determination that the value
of Sears' performance was $238, and credit that amount against
plaintiff's damage award of $20,490, leaving plaintiff with a
total award of $20,262.
Finally, we determine that an award of treble damages and attorneys' fees 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. The use of the word "shall" in the statute suggests as much. Skeer, supra, 187 N.J. Super. at 469; Ramanadham, supra, 188 N.J. Super. at 32-33. Moreover, the legislative history indicates that the provision for attorneys' fees was intended to impose on the defendant in a private action "a greater financial penalty [than in an action brought by the Attorney General] and * * * [to ensure] that the financial cost to the private plaintiff was minimized and compensation maximized." Skeer, supra, 187 N.J. Super. at 471. Accordingly, we remand to the trial court to calculate an
appropriate award for plaintiff's attorneys' fees, filing fees,
and costs.
For the sake of completeness we add that a consumer-fraud
plaintiff can recover reasonable attorneys' fees, filing fees,
and costs if that plaintiff can prove that the defendant
committed an unlawful practice, even if the victim cannot show
any ascertainable loss and thus cannot recover treble damages.
Performance Leasing, supra, 262 N.J. Super. at 31, 34 (holding
that where jury found that defendant had committed unconscionable
commercial practice and thus had violated Act, but that plaintiff
had not been damaged by that violation, strong precedent
supported award to plaintiff of attorneys' fees). The
fundamental remedial purpose of the Act dictates that plaintiffs
should be able to pursue consumer-fraud actions without
experiencing financial hardship.
We reverse the judgment of the Appellate Division and remand to the trial court for entry there of judgment for plaintiff on the sixth count of the Complaint, alleging Consumer Fraud Actviolations, the damages to be trebled as provided in this opinion, and for entry of judgment for plaintiff for attorneys' fees, filing fees, and costs as provided herein.
Justices Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion. Chief Justice Wilentz did not participate.
NO. A-123 SEPTEMBER TERM 1993
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
ALBERT COX, as Executor of
the Estate of William Cox,
Plaintiff-Appellant,
v.
SEARS ROEBUCK & COMPANY,
Defendant-Respondent.
DECIDED September 15, 1994
Justice Clifford PRESIDING
OPINION BY Justice Clifford
CONCURRING OPINION BY
DISSENTING OPINION BY