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DECK HOUSE, INC. v. NEW JERSEY STATE BD. OF ARCHIT

February 3, 1982

DECK HOUSE, INC., a Massachusetts Corporation, and Martin M. Laibow, Plaintiffs,
v.
The NEW JERSEY STATE BOARD OF ARCHITECTS, consisting of John Swass, Elizabeth Moynahan, Bernard A. Kellenyi, Alfred L. Wensley, Sidney Schenker, Richard A. Berns, Patricia Koch; and James Zazzali, Attorney General; and Adam K. Levin, Director of Division of Consumer Affairs, Defendants



The opinion of the court was delivered by: DEBEVOISE

The matter is before the Court upon plaintiffs' application for a preliminary injunction and defendants' motion to dismiss the complaint for failure to state a cause of action.

Plaintiff Deck House, Inc., a Massachusetts corporation having its principal place of business in that state, is a manufacturer of prefabricated housing. Plaintiff Martin A. Laibow, a Pennsylvania citizen, is an architect registered and licensed to practice in New Jersey. He has certified plans of prefabricated houses which Deck House has sold to New Jersey residents for construction in New Jersey.

 The defendants are the New Jersey Board of Architects, James Zazzali, Attorney General of New Jersey, and Adam K. Levin, Director of the Division of Consumer Affairs of New Jersey.

 Defendants have taken the position that plaintiffs, by selling prefabricated buildings utilizing such plans and by certifying such plans which were not originally prepared by New Jersey architects, have violated N.J.S.A. 45:3-10. That statute forbids the practice of architecture in New Jersey without a certificate issued by the Board of Architects. In essence, plaintiffs' action seeks to prevent application of N.J.S.A. 45:3-10 to them.

 The Facts

 There is little, if any, dispute about the facts.

 A. The Prefabricated House Industry : Deck House is one of more than 1500 producers of prefabricated, or manufactured, housing and housing components in the United States. A prefabricated house is one in which the materials are specified, manufactured, and often assembled under one roof. Included in this category are pre-cut, panelized, log and shell houses, geodesic domes, metal buildings, and modular/sectional houses. Additionally, many "conventionally built" houses are constructed with factory-made roof trusses and/or floor trusses, wall panels, floor panels, pre-hung windows, pre-hung exterior and interior doors, factory-made cabinetry and pre-jobbed plumbing systems, heating systems, kitchens or baths. The average selling price of a dwelling manufactured by Deck House is $ 57,000, to which must be added the cost of land, the charges of the building contractor, and the costs of all the elements of the house which are not included in the unit Deck House sells.

 Most manufactured houses are sold in the form of a package including plans, which can be tailored to a customer's personal needs, and materials, which are pre-cut and/or assembled in accordance with the plans. The actual structure is then erected on the site by the owner himself or, more commonly, by a local builder.

 According to statistics published in the 1981 Red Book of Housing Manufacturers, a research report on the industrialized housing industry, in 1980, a poor year for the housing industry, approximately 155,000 manufactured units were erected in the United States, nearly 1,000 of them in New Jersey. In 1980, 510 factory-built housing units were produced by manufacturers located in New Jersey.

 The major types of manufactured homes are modular/sectional homes, pre-cut homes and panelized homes. A modular/sectional home is generally described as a three-dimensional housing unit produced in a plant and designed for erection on a permanent foundation with a minimum of on-site labor. Most are made for shipment to the site in two or more sections. A pre-cut house is a manufactured house package for which the many parts are pre-cut but not pre-assembled. A panelized house differs in that it is partially assembled in the factory, then shipped as a package to the site where assembly is completed on the foundation. It includes wall panels and may include other items such as roof systems, floor systems, plus a wide variety of building materials and equipment. Deck House produces panelized homes. The Deck House received by the purchaser includes the exterior shell, the interior wood trim, doors, baseboard, bookcases and cabinets. It does not include sheet rock, electricity, plumbing, heat, painting, floor covering, foundations (which generally are installed before delivery of the Deck House components), landscaping, masonry for the fireplace, the floor slab, and appliances. These non-included items are generally provided or subcontracted for by the building contractor whom the purchaser retains to erect the house.

 More than 4,000 Deck Houses have been built throughout the country, and nearly 150 have been built in New Jersey since the company's inception in 1960, mostly in the less developed areas of the state. Five or six Deck Houses are now under contract awaiting shipment to New Jersey purchasers.

 Typically, a Deck House sale is effected as follows: the prospective customer and a Deck House representative visit the proposed home site and discuss the customer's requirements. If the customer is interested in proceeding, he signs a pre-contract service agreement. The pre-contract service agreement authorizes the company, for a service fee, to prepare sketches and/or drawings for a Deck House. There are three types of pre-contract service agreements, depending on the degree to which a standard Deck House plan (of which there are more than fifty) must be modified, and the company's service fee varies accordingly.

 If the customer selects an existing plan and makes minor modifications, pre-contract service agreement No. 1 will be used, calling for a non-refundable service fee of $ 700.

 If the customer takes an existing plan and makes major modifications, pre-contract service agreement No. 2 will be used, calling for a $ 1,000 service fee. If the customer's requirements are nothing like an existing plan and Deck House must essentially start from scratch, pre-contract service agreement No. 3 will be used, providing for a service fee of $ 2,000. Under both No. 2 and No. 3, if the sketches are not approved by the customer, a portion of the service fee is refunded. Under all three agreements, if the customer elects to proceed with construction, the service fee is applied against the cost of the component package.

 In a typical case sketches are made by employees in Deck House's design department, located at the company's headquarters in Acton, Massachusetts. They are not architects certified by the New Jersey Board of Architects and, in fact, at the present time are not architects at all. When the customer approves the sketches, detailed scaled drawings are prepared. This function, too, is not performed by architects certified by the Board of Architects of New Jersey. When all modifications requested by the customer have been completed, and if the state in which the house is to be erected so requires, the final drawings are sent to a licensed architect of the state for review and approval.

 New Jersey does require that a licensed architect sign and seal the drawings before a building permit can issue. Deck House has retained Laibow, a registered New Jersey architect, for this purpose. Laibow may approve these drawings as prepared or, if necessary, require that further modifications be made. For example, Laibow has returned drawings to the company for redrafting to conform with the requirements of the Small Dwelling Energy Subcode, N.J.A.C. 5:23-3.8(a)(3).

 Laibow certifies only the plans for the portion of the building for which Deck House is responsible, essentially the building from the floor up. His certification does not cover such items as the foundation, walls and footings. The plans note that such work is performed "by others". It is attended to by the building contractor hired by the purchaser. Laibow does not view the construction site and has no role in the location of the building on the site or testing the soil. His certification is sufficient to satisfy building inspectors, and they issue permits on the basis of plans bearing his certification.

 If the customer wishes, the Deck House representative will introduce him to a local builder, usually one who has erected a Deck House before. The builder has no relationship with Deck House, and the customer is not obligated to use him. The customer enters into a contract with Deck House to supply the component package and enters into a separate contract with a builder to erect the house.

 Typically, the entire package of materials needed to erect the Deck House can be shipped to the builder on two 40-foot trailers. The shell of the house can be erected by the builder in approximately two weeks. Normally it takes three to four additional months for the builder to complete the interior. The Deck House package contains all of the materials necessary to construct the exterior shell of the house and many materials relating to the interior trim.

 The process described above is typical of the manufactured housing industry. Most companies, whether they produce panelized, pre-cut or modular houses, offer a stock line of standard plans which can be modified in-house to a greater or lesser extent to meet individual needs. This gives the home-buyer a wider choice of options than if he were selecting a home in a tract of ready-built houses. Yet, even with the personalized line, the cost of a prefabricated home can be less than a standard tract house. This is because manufacturers utilize labor-saving technology and bring many of the more costly functions of home construction indoors. One of the obvious savings is the avoidance of an architect's fee for such a house.

 B. The Events Giving Rise to this Action : In 1977 and 1978 Deck House and a builder, Gene Godby, were involved in dealings with Theodore Zelinski, who sought to purchase a Deck House structure and who negotiated with Godby with a view to entering into a contract to erect and complete the house. Neither the deal with Deck House nor negotiations with Godby came to fruition and on June 30, 1978 Zelinski wrote to the Secretary of the New Jersey State Board of Architects urging that action be taken against Deck House. This was followed by further communications from Zelinski to the Board demanding that they proceed against Deck House and later against Laibow.

 Plaintiffs portray Zelinski as an unreasonable would-be purchaser of a Deck House home exerting pressure against Deck House by seeking to prevail upon the Board of Architects to terminate its ability to do business in New Jersey. Defendants, on the other hand, portray Zelinski as a defenseless New Jersey consumer at the mercy of a seller of homes which were not designed by a New Jersey architect. It is unnecessary for the purposes of this action to decide who is correct. Suffice it to say that Zelinski testified before the Board of Architects in December, 1981; that he was not dissatisfied with the Deck House plans; that he would have proceeded if he could have found a builder who would contract with him, and that his only complaint is that Deck House is violating the law by not using plans prepared by New Jersey architects.

 Zelinski is mentioned only because of the role he played in the Board of Architects proceeding.

 In any event, on May 14, 1979, nearly eleven months after Zelinski's first letter, the Board of Architects held an informal meeting on Deck House's possible violation of N.J.S.A. 45:3-10. At that hearing the Board took testimony concerning the nature of the manufactured housing industry from Ted W. Cahow, then President of the National Association of Home Manufacturers. Deck House wished to present additional witnesses, and Laibow planned to testify. The hearing proceeded under serious time constraints, as only an hour had been scheduled and the Board wished to hear another case which was scheduled to follow the Deck House case. Consequently, the hearing was adjourned without date and without hearing the remaining Deck House witnesses.

 The hearing was adjourned until December 17, 1981.

 On December 15, 1981 plaintiffs filed their action in this Court. The relief sought was: (i) a judgment declaring that defendants' proposed interpretation and application of N.J.S.A. 45:3-10 is illegal, (ii) an order preliminarily and permanently enjoining defendants from proceeding against Deck House or in any way interfering with the manner in which it conducts its business, (iii) an order preliminarily and permanently enjoining defendants from proceeding against Laibow in connection with his review and approval of plans for Deck House, and (iv) attorney's fees and costs of suit.

 At the time the complaint was filed, plaintiffs sought a temporary restraining order which included a restraint upon holding the hearing scheduled for December 17, 1981. I declined to restrain the hearing but, pending an evidentiary hearing on plaintiffs' application for a preliminary injunction, I restrained interference with Deck House's business in New Jersey and enforcement of any determination resulting from the December 17th hearing before the Board of Architects.

 The hearing of plaintiffs' application for a preliminary injunction and defendants' motion to dismiss for failure to state a cause of action was held on December 22, 1981.

 C. The State Agency and Procedures : The New Jersey State Board of Architects consists of "five members, all of whom shall be architects residing in this State and shall have been engaged in the practice of their profession for at least ten years". N.J.S.A. 45:3-1. These members are appointed by the Governor, who "shall give due consideration to, but shall not be bound by, recommendations submitted by the appropriate professional organizations of the State", N.J.S.A. 45:1-2.2. At the present time there is one vacancy in this category of members. In addition, the State Board includes two members whom the Governor appoints "to represent the interests of the public". The public members shall not "have any association or relationship with the profession or a member thereof regulated by the Board of which he is a member, where such association or relationship would prevent such public member from representing the interest of the public". N.J.S.A. 45:1-2.2(b). Further, the Board of Architects has one member, designated by the Governor, who is the head of, or a holder of an office in, a department in the Executive Branch which is deemed clearly related to the Board of Architects. N.J.S.A. 45:1-2.2(c).

 Among the duties of the Board of Architects is licensing architects to practice in New Jersey and enforcing statutes and regulations governing the practice of the profession in this State. Among the statutes which the State Board is required to enforce is N.J.S.A. 45:3-10, which provides, in part:

 
Any person who shall pursue the practice of architecture in this State, or shall engage in this State in the business of preparing plans, specifications and preliminary data for the erection or alteration of any building, except buildings designed by licensed professional engineers incidental or supplemental to engineering projects, or use the title architect or registered architect, or shall advertise or use any title, sign, card or device to indicate that such person is an architect, without a certificate thereof or while his certificate is revoked, suspended or forfeited in accordance with the provisions of this chapter, or any person aiding or assisting such person not having a certificate to practice architecture or while his certificate to practice architecture is revoked, suspended or forfeited, or any person who violates any provision of this act or any rule or regulation of the board shall be liable to a penalty ....

 The Board of Architects has broad powers to investigate possible violations of the applicable statute and regulations. It may require persons to file information with it; it may examine witnesses under oath; it may inspect premises, and it may examine books and records. N.J.S.A. 45:1-18. It is, of course, under no duty to notify the persons being investigated of the nature and extent of its investigation. *fn1"

 In the present case, the Board of Architects exercised its powers to investigate the activities of Deck House and Laibow. The investigation consisted not only of the abbreviated informal hearing held May 24, 1979; the Board or its representative also obtained information from Zelinski and, upon the request of the Board, an investigator conducted an investigation of the municipal files relating to certain Deck House structures erected in New Jersey. The Chief of the Enforcement Bureau of the Division of Consumer Affairs sent the reports resulting from that investigation to the Board of Architects between the date when the Board had notified plaintiffs that evidence showed that they had violated N.J.S.A. 45:3-10 and the date when plaintiffs were to be heard on the charge.

 Having concluded that the evidence showed that the plaintiffs had engaged in, or abetted, the unlawful practice of architecture, various options were available to the Board of Architects. It had the power to revoke or suspend Laibow's license. N.J.S.A. 45:1-21. It was entitled to impose lesser penalties, after affording an opportunity to be heard. N.J.S.A. 45:1-22. It was empowered to seek injunctive relief and civil penalties in the New Jersey Superior Court. N.J.S.A. 45:1-23. In the present case the Board opted for the lesser penalties and hearing approach.

 Having chosen to proceed by this route, the Board of Architects had the further option of hearing the matter itself or requesting that it be heard by an Administrative Law Judge. N.J.S.A. 52:14F-8. The Board of Architects decided to retain jurisdiction and hear the case. Its attorney explained that the Board was motivated by the wish to avoid delay and by the fact that the Board members did not "feel comfortable" with an ...


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