On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-3692- 96.
Before Judges Skillman, Wallace, Jr. and Wells.
The opinion of the court was delivered by: Wells, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 23, 2001
The issue raised on this appeal is whether the plaintiffs, Stephen and Gina Herner, proved sufficient facts to conclude that defendants HouseMaster of America, Inc. and HouseMaster of South Jersey (together known as HouseMaster) committed consumer fraud, thus justifying an award of counsel fees and costs.*fn1
The Herners settled their claims for compensatory damages against HouseMaster, but reserved the right to proceed with their claim for counsel fees and costs with a stipulated cap of $125,000. A two day non-jury trial ensued after which the judge briefly announced that he believed HouseMaster's witnesses and dismissed the claim. We reverse and remand for a determination of the costs and a reasonable counsel fee.
The trial revealed the following facts: The Herners were first time home buyers and possessed no experience in any construction trade. Stephen Herner was age 37 and a truck driver; Gina Herner was age 30, a high school graduate who held various clerical positions following her graduation. They conducted their search for a home through a real estate agent who happened to be Gina Herner's aunt. The couple wanted to spend about $100,000 and had garnered savings of $10,000 for a deposit. They found a home which suited their needs at 432 First Avenue in Bellmawr. In May 1995 they signed an agreement of sale to purchase this home for $102,000.
The realtor then gave the Herners three sales brochures of home inspection services. They reviewed the brochures, made a call or two and scheduled an appointment with HouseMaster who assigned one of their full time inspectors, Joseph J. Tangradi, to inspect the home. When Mr. Tangradi arrived, he presented a two-sided, preprinted single page contract consisting of nine compactly worded clauses to the Herners. Some of the printing was in bold type. Paragraph A read:
LIMITED-TIME GUARANTEED INSPECTION. In approximately 2-3 hours, for an average house, the Company will provide the Client with their professional opinion of the condition of the major elements of the house at the time of the inspection. The Company will provide the Client with a complimentary Guarantee against unexpected, major repair expense for a period of 90 days from the inspection date or 30 days from title transfer, whichever occurs first. This Guarantee, including its term and conditions, will be forwarded to the Client following the inspection.
The cost of this inspection and complimentary Guarantee is $335.
Stephen Herner signed the contract.
Tangradi conducted the inspection in the presence of the Herners and their realtor over the course of several hours on May 13, 1995. He thereafter discussed the condition of the house with the realtor and the Herners verbally and filled in a preprinted written report consisting of fifteen pages and a signature page. The report itemized Tangradi's inspection of fifty-four items contained in seven major household systems: (1) roofing and exterior elements; (2) garage and site elements; (3) attic and interior elements; (4) kitchen and bathrooms; (5) foundation elements; (6) electrical and plumbing systems; and (7) heating and cooling systems.
While we will detail later in this opinion some of Tangradi's specific findings, suffice it to say that of the fifty-four items he examined, Tangradi found that thirty-seven were satisfactory, fourteen others were satisfactory but he had additional comments for each one, and three were rated fair. The HouseMaster report defined satisfactory as "functional at the time of inspection with no visible evidence of a substantial defect." It defined fair as "functional at the time of inspection (although deficiencies may exist) but beyond average age and/or condition limits: capable of being used for a limited period of time."
The Herners carefully reviewed the Tangradi report. Gina Herner testified:
Q: Okay. Now, Mrs. Herner, after reading the express report with your husband that evening, what was the overall conclusion that you reached regarding the condition of the home that you were buying?
A: That everything seemed to be fine, that the inspection went well.
Q: Did you have any concerns about the home needing major repairs?
Q: Did you ultimately buy the house?
Q: What role, if any, did the express report done by Mr. Tangradi play in your purchase of the house?
A: Somewhat, I guess, we did rely on his report, the report concerned that, you know, everything was good.
Q: Did you believe that the report accurately reported on the condition of the house?
A: At this what is HouseMaster's objective in the type of inspection that it does? What is it trying to give to its customers?
A: It's trying to give a balanced -- a balanced inspection, the good and the bad of the house. We try to go from top to bottom, inside and out.
Q: Why a balanced inspection?
A: Well, you have to appreciate the fact that a large percentage of our customers are first time home buyers, very much like the Herners. And they're very apprehensive about this big -- big debt that they're about to go into, very, very nervous.
Many times, their parents do come along for support. And we try to teach our inspectors to be very patient with these people. We -- we don't want to blow things out of proportion for them. On the other hand, we don't want to minimize anything. We want to give them a balanced view of the house, good and bad.
On cross examination Austin stated he had no construction nor inspection background at all but that his training was in sales and marketing. He then testified:
Q: In New Jersey anyway, at the time you do your inspection, the prospective buyer has already signed a contract, you know that, right?
Q: And, therefore, the prospective buyer has already indicated that they desire to buy the house. They've been on buying the house. You know that too, right?
Q: Okay. So, why is it HouseMaster's obligation to point out good things in the house to that buyer who's already decided to buy the house? Why would you want to do that?
A: Because we have -- I said before, we have very nervous buyers. If you go along and point out just all negatives, you can psych that buyer into not buying a house that -- really that they want. Before they order an inspection you, your point, I guess and they're willing to spend $300 for an inspection, they want that house.
Q: They do want the house, right? And they made a decision they do want the house?
A: Barring -- barring finding out something disastrous about the house, they want to buy that house.
Q: So you train your people to point out the bad things they find --
Q: -- but you also train to point out the positive things they find?
A: Yes. If you [go] through a house and say, problem, problem, problem, problem, problem, problem, problem, in the minds of a lot [of] young buyers, they're going to say, this is a problem house. And that's not necessarily true.
Q: So why does HouseMaster care if any particular person buys a particular house?
A: It's like -- we equate it to going in to a doctor for a physical. If you go in there and you just get bombarded with all negatives, you know, you're going to be so depressed. They tell your blood pressure is good, this is not so good. We try to -- we try to point out to the buyer that if the roof is satisfactory and in good shape, gee, that's great. And the buyers feel good about that. My God, I'm a smart buyer.
A: If on the other hand, the hot water heater is defective, they can accept that.
Q: Do you train your inspectors to search for a way to find something positive to say about the house?
Q: Do you think your customers want to be involved with HouseMaster, for any reason at all, on or off the clock, so the HouseMaster inspector can say, it's a nice neighborhood or it's a nice lawn?
A: No, we don't talk about the lawn. This is at the end of the inspection and you say -- it's like shaking hands with somebody and saying, good luck. It doesn't alter the inspection one iota.
Q: But you train your inspectors not just to say good luck. You train them to say something positive about the house, do you not?
A: We like you to leave -- we like to leave on a positive note.
A: We just -- we just think that's a nice thing to do.
Austin was then shown the Inspector Guidelines Manual which is distributed to all franchisees for optional, voluntary use by inspectors. Austin indicated it represented the HouseMaster philosophy. It was the manual in use at the Bound Brook office of HouseMaster from which Tangradi was assigned. A part of the manual stated: "We all must be committed to our marketing program. As the inspector, you are actually the most important salesperson ...