On appeal from the Superior Court, Appellate Division.
Clifford, Handler, Pollock, O'Hern, Garibaldi, Stein
[138 NJ Page 6] 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, 416 A.2d 933 (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, 619 A.2d 1024 (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 "consumer fraud involves at the very least an 'unconscionable commercial practice (quoting N.J.S.A. 56:8-2 and Skeer v. EMK Motors, Inc., 18 ...