On appeal from the Superior Court of New Jersey, Law Division, Mercer County.
Approved for Publication March 15, 1996.
Before Judges Shebell, Stern and Newman. The opinion of the court was delivered by Shebell, P.j.a.d.
The opinion of the court was delivered by: Shebell
The opinion of the court was delivered by SHEBELL, P.J.A.D.
Defendant, Weichert Company Realtors (Weichert), appeals, on leave granted by this court, from an interlocutory order, entered after a bench trial on liability only, finding Weichert liable under the Consumer Fraud Act, N.J.S.A. 56:8-2, as the sole proximate cause of plaintiffs' damages resulting from defective construction of homes purchased by the plaintiffs at a development in Lawrence Township, Mercer County, called Squire's Runne. The plaintiffs in these four consolidated actions were all purchasers in a development marketed by Weichert and built by defendant Allen Rumberg and defendant, Timberline Property Development (Timberline), a corporation owned by the builder and his wife, defendant, Ellen Rumberg. Ellen Rumberg was also employed by Weichert as its sales representative on the site.
Plaintiffs' cross-appeal from the dismissal of their common law fraud and the Consumer Fraud Act claims against Allen Rumberg and Ellen Rumberg, and common law fraud claims against Weichert. They also appeal the dismissal of their consequential damages claims based on emotional distress.
Plaintiffs, Roxanne Gennari, James and Joan Nestor, Rajan and Grace Mathews, and Raymond and Janet LaChapelle, filed separate verified complaints against Timberline and the Rumbergs. The complaints alleged common law fraud and consumer fraud and sought compensatory and punitive damages. Thereafter, plaintiffs filed amended complaints naming Weichert as an additional defendant. Weichert filed its answers, generally denying the allegations, and asserting by way of defenses, no breach of duty owed to plaintiffs, estoppel by deed, waiver, and the statute of frauds. Weichert also cross-claimed for contribution and indemnification and filed a third-party complaint against J.E.M. Heating and Cooling, Inc. (J.E.M.), and Rick Ings for indemnification and contribution. Plaintiffs Gennari, Nestor and Mathews subsequently filed second amended complaints naming Ings and J.E.M. as direct defendants.
The cases were consolidated, and commencing June 1, 1993, a bifurcated trial as to liability covered 34 days, over a period of 8 months. An oral decision was rendered on May 13, 1994, finding defendant, Weichert Realty, liable under the Consumer Fraud Act, N.J.S.A. 56:8-2, as the sole proximate cause, of defective conditions relating to the structural, functional, and appearance aspects of the plaintiffs' homes. An order embodying the Judge's decision was entered on May 26, 1994.
Squire's Runne is a thirty-five house development. Allen Rumberg began his experience in the construction of wood frame housing with his employment in 1979, by his brother-in-law, Philip Kayne, a developer and builder of commercial and residential property since 1963. Kayne is the brother of Ellen Rumberg. Ten years earlier Rumberg had graduated from Indiana Technical Institute with a degree in mechanical engineering. During the years after he graduated, Rumberg worked in engineering, and around 1976 he started working part-time with Kayne. In 1979, he started working full-time with Kayne's construction company.
Rumberg's first building project while working full-time with Kayne was a twenty-six house development in Parsippany. He was a supervisor. After Parsippany, Rumberg worked with Kayne in Florham Park, a project of ten to thirteen lots, again in a supervisory capacity. Rumberg, however, maintained that he was a "co-builder" with Kayne in that development.
In 1981, Kayne and Rumberg came to a "verbal" understanding that Rumberg would share in the profits in some of the developments. About that time, Kayne purchased sixteen to eighteen lots in Livingston. Although Rumberg characterized himself, again, as "co-builder," Kayne described Rumberg's duties as supervisory, but said Rumberg was allowed to take on responsibility in dealing with people and in answering questions.
Before the Livingston project was completed, Kayne entered into a joint venture, consisting of thirty-five homes in Mendham, with a law firm and bank. Rumberg was promised 10% of the profits as an overseer of the construction. However, Rumberg and Kayne had a falling out before the development in Mendham was completed and they parted ways. At the point that Rumberg left that project, ten to thirteen homes had proceeded to closing.
Nevertheless, Kayne agreed to form the Habonim Corporation with Rumberg. Rumberg was president and owned 40% of the company. In late 1984 or early 1985, Rumberg and Kayne found four lots in an existing subdivision in Holmdel. The company purchased the lots and called it Hidden Manor. Rumberg selected Weichert to market the homes because Weichert was willing to pay for all of the project's advertising, preparation of brochures, inserts into newspapers, and communication with other realtors. Ellen Rumberg, who had worked for Weichert as a salesperson for about a year, helped in the negotiations between Thomas Glick, manager of Weichert's East Brunswick office, and her husband. She became the listing agent for that development. Rumberg maintained that he performed the building services on the Holmdel development and that no one supervised his work at that site. Kayne, however, asserted that nothing Rumberg did at Mendham, Livingston, Florham Park or Holmdel was ever accomplished without Kayne's supervision.
Three of the four purchasers at the Hidden Manor development at Holmdel were not satisfied with Rumberg's work. According to one, he contracted with Rumberg on July 6, 1985. The closing was scheduled for December 15, 1985, the date Rumberg chose. However, the foundation was not even started until late October or early November. By mid-December, the house was 80% framed but had no roof. Construction progressed very slowly after that with a variety of problems. The absence of a roof and windows allowed rain and snow to permeate the subflooring in the house making it soft and weak. Nevertheless, oak hardwood flooring was put on top, again before windows and a roof were installed, allowing it to get wet, shrink, discolor and stain. The closing on the property eventually occurred in July, 1986. At that time there were many items unresolved and the purchaser's attorney insisted that $27,500 be put in escrow in order to assure that the problems were resolved. It took two years to do so.
A second Holmdel house went to contract on October 9, 1985, with closing scheduled for March 15, 1986. It did not close until September 1986 and the purchaser experienced problems. The oak hardwood flooring was installed before the roof was in place and it, too, buckled and warped. Doors were cracked but were hung nevertheless. Cabinets were not finished properly; the heating system had improper sized motors which had to be replaced; the ductwork in the basement had sections which broke off; the roof in the family room leaked and pipes for an upstairs bathroom were run through the garage but not insulated so they froze in the winter.
The purchasers of the third house did not testify about its condition. Instead, Lawrence Swirsky, an expert in home inspection and construction, who examined plaintiffs' houses, inspected this home. He found holes in the cinder block foundation caused by improper waterproofing on the outside of the foundation. The girders and floor joists were not properly supported and secured. The floors were uneven because the framers did not properly lay the floor joists. The air conditioning system's supply and return ducts were inadequately sized. The framing materials were of poor quality and in his opinion, this home did not represent quality construction.
In late 1985 or early 1986, Rumberg was shown the property which was to become the Squire's Runne development by his wife with an agent who listed the property. The Rumbergs used an existing corporation, R&R Property Development, Inc., to buy what was a sod farm. Rumberg sought a subdivision and received final approval on October 22, 1986. He engaged Weichert to begin marketing the property as Squire's Runne. Weichert's listing agreement took effect on March 1, 1986, and its responsibilities included paying for the total cost of the sales trailer at the site and advertising which totaled $70,000. Weichert expected to realize a profit of over $200,000.
Roxanne Gennari was the first of the four plaintiffs to contract for a new home in Squire's Runne. Gennari, a full-time real estate agent, was active in Mercer County since 1980. In April 1986, Nancy Healey, Gennari's neighbor and a Weichert agent, told her about a new development Weichert was marketing. Although Gennari was not looking for a new home, she was impressed with Healey's description of both the builder and the development because Healey was someone whose opinion Gennari respected. She and Healey were business partners, and had purchased a lot in a Windsor Township development on which they intended to have a house built and then to sell it.
Healey told Gennari that Squire's Runne was to be constructed by a North Jersey builder who had built hundreds of homes and was a person of detail and craftsmanship. If they acted quickly, they could get in at pre-construction prices. In Healey's opinion, this represented a wonderful investment. Gennari was interested and excited not only because of her friend's opinion but because she knew Weichert was a large and reputable firm and was behind the development. At the site, Gennari first met Ellen Rumberg. She confirmed that her husband had built hundreds of homes, demanded excellent quality, and that he built homes in Mendham. She said he has five engineering degrees and that he was "timely."
Prior to Gennari's May 14, 1986 contract signing, Healey invited her to attend a meeting at Weichert's Princeton office with the builder. At that meeting, Rumberg claimed he had a father and son team who would be working on this project and who had been working with him for years, and that he was so particular only one man in the whole State could do Rumberg's stucco work. He produced a portfolio with a number of photos of homes. Healey told Gennari that Rumberg built the homes. She reiterated that Rumberg had built hundreds of homes and had recently finished a development in Mendham.
After the meeting, Gennari asked Healey to go to look at the homes that Rumberg had built in Mendham. Healey did, and reported back that the homes were more beautiful than the photographs; the development was gorgeous, the detail exquisite, and the craftsmanship excellent. Gennari expressed concern about the closing date to Healey and the Rumbergs. She asked to close in January, 1987. Ellen Rumberg asserted that her husband always closed on time. Gennari, therefore, signed her contract on May 14, 1986.
Healey testified that the only things she told Gennari about the development were that they could purchase early at a reduced price and that it was going to be located on a beautiful piece of property. She denied ever describing Rumberg as the best builder from North Jersey and denied that she ever told Gennari that Rumberg had built hundreds of homes. She also denied going to Mendham after the meeting with Gennari and Rumberg and reporting back to Gennari as to what she had seen. Healey and her husband, though, had driven to Mendham before Gennari's meeting with Rumberg. They spoke to a resident in the development who was happy with the builder and his home.
Gennari made color and option selections with Ellen Rumberg. The process was finished by early fall, but nothing was happening on the site despite the January 2, 1987 closing date. Ellen Rumberg told her not to worry, and blamed the delay on the township which did not give final subdivision approval until the end of October. Rumberg received the building permit for the Gennari lot on November 17, 1986.
Gennari was not able to inspect her home while it was being constructed. There was no road to the homesite and no easy way for her to get there. Rumberg told her that one of his rules was that purchasers were not welcome to go to the homes. She would have to have his specific permission to visit the property during construction. Rumberg posted a security guard to prevent access to the homes. On one occasion, Gennari slipped by the guard, got into the house, and complained about some deficiencies. Rumberg became angry, ordered her to stay away from the home and indicated he would fire the guard. Gennari noticed two obvious problems with the house. The back stairs were constructed so that they jutted into one of the bays of the two-car garage, effectively rendering it a one-car garage and the brick being put on the front of her home was the wrong color. The staircase was removed when Rumberg maintained that there was no other way to construct it. Rumberg also corrected the mistake with the brick.
The Gennari closing was delayed until January, 1988. The only walk-through of the house permitted occurred on the day of the closing. Gennari noticed many problems. She observed drainage problems and a large hump on the front lawn. She had seen these months earlier and was assured by Ellen Rumberg, that they were just grading problems. There were gaps and buckling in the siding; bent wood in the trim; the roofing was discolored and not what she had chosen; and there were cracks in the foundation. The garage and basement floors were badly cracked, the basement walls had several large cracks, a kitchen wall was bowed, and the hardwood floors had gaps throughout. The most serious problem was with the heating system. Upstairs was extremely hot, while downstairs the heat was inadequate. She was told that the heat problem was simply a matter of adjustment. Someone allegedly had brushed up against the thermostat which caused the excessive heat upstairs. She was told that the mound on the front yard was there because the township ordered that type of grading and there was nothing they could do about it. She later found out that the mound was associated with the aerobic wastewater disposal system that was required in place of a normal septic system.
Despite the problems, Gennari went to closing because the people who bought her old home wanted her to leave, and Rumberg threatened to sue her if she did not close on time. Furthermore, she feared loss of the nearly $100,000 she had already deposited. She was assured by the Weichert representatives at the sales trailer that everything would be taken care of.
Once she moved in, however, the heating system was not working properly and the septic system overflowed onto the front lawn, backed up into the basement, and caused a terrible smell in the bathrooms. Twice she had ankle deep water in the basement from septic system overflow. The installer of the system explained that normally there is an overflow alarm on the system, but it had not been hooked up. Further, although she was told the system would have a 1500-gallon capacity, it was downsized to hold only 500 gallons. This was inadequate as six people were living in the house, using about eight hundred gallons of water a day. The system repeatedly overflowed even to the time of trial. As to the heating system, the ductwork had fallen into the basement several times because it was not secured properly. Although it was a two-zone system, the system was not constructed so that the zones were entirely separate and both systems were feeding off only one return.
Gennari also complained that the windows were inferior and leaked air and water. She had chosen Andersen Windows, but had been given the Ideal brand instead. Her hardwood floors were still a problem at the time of trial. Each time Rumberg sent people over to fix them, they made the situation worse. They were still buckling and not level, had large gaps and were poorly finished. The exterior of the property was never properly graded causing pooling of water which flooded her basement and her front walkway.
Grace and Rajan Mathews, other disgruntled buyers, found Squire's Runne through a builder-friend who suggested that they get in touch with Ruth Skonieczny, a Weichert agent. Grace was familiar with Weichert as one of the biggest real estate companies in New Jersey. She associated the Weichert name with very good quality homes. She met with Skonieczny, who gave her a brochure and promotional material. Grace was impressed with the fact that these were going to be custom built homes with flexibility in design, that nationally known brand name materials were being offered in the houses and that such a large realtor with name recognition was making the offering.
Within the first two weeks of May 1986, the Mathews met with Skonieczny at the site and first asked who the builder was. They were told that Rumberg had built hundreds of homes, and that she herself had worked with him very closely at a development in Holmdel, along with Rumberg's wife, Ellen. She claimed Rumberg was an excellent builder with great credentials and was known for quality workmanship, performed by crews who had worked with, and for him, in the past. She asserted that Rumberg was devoted to detail and actively supervised the building of the homes. The Mathews were presented with a portfolio of impressive homes which Rumberg had built.
They discussed the completion of the home, as the Mathews were expecting their first child in the early part of September. They specifically asked Skonieczny what her experience had been with Rumberg as to timely closings. She represented that Rumberg needed three to four months to complete a home and was very good about meeting deadlines and was always within two weeks of the scheduled closing date.
The Mathews met with Rumberg himself before signing the contract. He said he had built hundreds of homes and had qualifications, experience and expertise necessary and he took care in building homes, using quality craftsmen and crews brought with him from other developments. He maintained that he spent much time supervising his projects and introduced them to his supervisor. When the Mathews raised the timing issue, Rumberg confirmed that closing would be three to four months from the time they signed the contract.
They signed the contract on June 17, 1986, with a closing date of December 30, 1986, or four months from the issuance of a mortgage commitment, for the base price of $360,000. The Mathews did no checking on their own to verify the representations made about Rumberg's experience or qualifications. Skonieczny showed them newspaper articles about the development to support her claims. The articles also referred to the builder's commitment to quality, use of top-grade construction materials and quality workmen, and his framing of homes in douglas fir.
In August, though, when they had noticed nothing had been done on their lot, they checked with Skonieczny who said Rumberg had run into problems with the township and that the building process would take an additional month and a half. They listed their home for sale with Weichert through Skoniezcy. She sold their house with a closing date in February, 1987. She assured the Mathews, however, that they would be in the Squire's Runne home in early February. That date came and went as did several others in early 1987. As with Gennari, Rumberg promised month by month a closing date, and each month the date got pushed back. The buyers of their home were cooperative, however, and agreed to the extension until April, when they gave the Mathews a deadline to the end of May. At the end of May, the Squire's Runne home was still not ready. The Mathews first moved in with friends and rented a townhouse in Princeton Junction on a monthly basis. They finally closed on September 26, 1987.
Up to the date of closing, the Mathews were not allowed to visit their homesite, as Rumberg said they could not go in without his permission. Rumberg posted a guard and the Mathews never tried to get by him to see their home. Their first inspection was on the date of the closing and resulted in a four-page list of items which the Mathews found incomplete or not done properly. Rumberg, though, said the repairs could all be completed within thirty days and the Mathews went through with the closing.
After living in the house for four or five days, upon finishing a load of wash, they saw foam all over the front yard. Rumberg responded they were using the wrong detergent. Over the next several days, the windows started collapsing. Fog was appearing between the panes and the windows began leaking air as the weather got colder. They thought these were Hurd windows, which had a high quality reputation, but Rumberg told them that they got Ideal windows instead. At first, the leakage was only from air, but after a very heavy rain, three of the windows were also leaking water under the sills.
As time went on, the Mathews noticed other serious problems. Their bathroom pipes went through the garage area. They froze because there was no insulation even though they had paid for an upgraded insulation package. There was a severe water problem in the basement. The basement walls were wet and water came in from beneath a concrete slab which was part of the entry way into the house. The walls in the entry way and around the stairway were bowed and misaligned, and there was a slope in the entry foyer floor. Doors were misaligned and could not be secured because the bolt did not meet the hole on the doorframe. The hardwood floors also had defects. The septic system continued to overflow even though they changed detergents and it made a gurgling noise that could be heard throughout the front of the house, as a silencer had not been installed. There was also a problem with the timing of the pumps. Four pumps failed within a year and a half, some of which occurred when the system's one year warranty expired and for which the Mathews had to pay.
Furthermore, the heat distribution was uneven and the bedroom over the garage was extremely cold, as was the adjoining bathroom. Only once, after the Mathews repeatedly complained to Rumberg, did Rumberg send someone over to look at the heating system. That person looked at the ductwork and never came back. A portion of their roof bowed, but Rumberg claimed it was a result of normal settling.
In June 1986, Joan and James Nestor saw an advertisement for Squire's Runne. Because of its location and because it was offered by Weichert Realtors, it immediately interested them. Joan went to the site alone, meeting first with Ellen Rumberg who introduced herself as a sales representative of Weichert. She informed Joan that she was the builder's wife and would be involved in the building process. She stated that her husband had an engineering degree, had over ten years of building experience, had built over a hundred homes and had used a crew that had been with him for years. He was a man who paid extreme attention to detail. Ellen stated that Weichert supported her husband one hundred percent.
On June 10, 1986, the Nestors and the Rumbergs met at the site. Nestor noticed a large sign advertising Squire's Runne with a logo and only Weichert's name on it. The brochure Mrs. Nestor was given had only Weichert's name on it. Rumberg talked about the wonderful Hurd windows he used in the development and Ellen brought out other samples of materials Rumberg used in these homes, including Revere siding. Rumberg told them that he was a quality builder, had built over one hundred homes, had more than ten years of experience as a builder, used an experienced crew of workmen who had been with him for years, and that he hired the finest workers. He told them he had four degrees, but was most proud of his engineering degree. Ellen added that her husband's customers loved him and some of them still called the office about him. Ellen said Weichert was supporting her husband one hundred percent. The Nestors recalled how the Rumbergs kept repeating that Allen used experienced workers and good quality materials.
On June 14, 1986, the Nestors went to an address in Mendham given to them by Ellen Rumberg, as a home her husband had built. The homeowner told them that she had been in the house only two weeks and was its second owner, so she did not know the builder. She gave them a tour of the house which the Nestors found to be absolutely beautiful. They were convinced that a top builder built that home. The only problem they saw were some gaps in the hardwood flooring.
They immediately scheduled another appointment with the Rumbergs to talk about building their home and on June 19, 1986, they chose a lot. They were initially interested in lot number three but Rumberg persuaded them to choose lot twenty-four instead because it had "perked" beautifully. Rumberg asserted that he had never built a home that had a water problem, but he had some concerns in that regard with lot three. They took lot twenty-four because Rumberg claimed they would never have a water problem there. Ellen said the closing would be January 15, 1987, as her husband built homes in four months. She also stated that the January date was firm. At that meeting, Joan Nestor mentioned the unsightly gaps in the hardwood floor that she had seen in the Mendham house. Allen Rumberg told her that it occurred because those people had chosen a lower grade of wood and he would not allow that to happen at Squire's Runne.
They signed the contract of sale on July 15, 1986, with a closing date of January 15, 1987. The Nestors were given a choice between Andersen and Hurd windows and initially indicated a preference for Andersen. However, Allen Rumberg gave a lengthy presentation using a Hurd window sample. The Nestors then chose Hurd windows, and Ellen Rumberg checked the space next to Hurd windows on the selection sheet. Rumberg asserted that Douglas fir was the premier lumber in construction and that it would be used in their house.
By October 1986 nothing was happening at the site and so the Nestors stopped at the trailer and met Ruth Skonieczny. She introduced herself as a Weichert sales agent. They asked what was going on. She told them that they had to trust the builder, and that Lawrence Township was delaying Rumberg. The January closing date, however, passed without explanation. Rumberg assured them in late January that they would be in their house by March. In March, the framing on the house was only half done, but in May, the Nestors received a notice that another installment payment was due because the roof and windows were in place. They attempted to visit the site on several occasions but a guard was posted who said no one was allowed on the site. They were able to view the home only from a distance, and nothing appeared unsatisfactory from their distant vantage point.
In July 1987, Joan Nestor went to the site to meet with the mason about a fireplace. She found the siding color was yellow. They had, however, chosen a tan which they had coordinated with the roof and shutters. At that point though, at least seventy-five percent of the siding was on. The Nestors themselves were in a time bind because there was a contract of sale on their own home, and, therefore, they decided to keep the wrong color siding.
The Nestors needed to close in September because they had a mid-October closing date on their old house. Their written request to Rumberg received no response. In early October, James Nestor met with Rumberg and told him that they had to close by October 19, or he would be forced to rent with a minimum three-month lease which would postpone the closing for three months. On October 7, the Nestors were allowed a walk through of the home, accompanied by their ...