July 6, 2007
LYLE REAL, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
RADIR WHEELS, INC., AND RICHARD CONKLIN, DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3882-02.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 11, 2006
Before Judges Kestin, Weissbard and Graves.
On April 18, 2002, plaintiff Lyle Real was the successful bidder for a 1970 Corvette convertible offered for sale by defendant Richard Conklin on eBay, an Internet website. After plaintiff paid Conklin the bid price in the amount of $13,651, plaintiff shipped the Corvette to his home in Missouri. Upon receipt of the car, however, plaintiff realized the condition of the vehicle was not as advertised, and he filed suit against Conklin, individually, and Radir Wheels, Inc. (Radir Wheels), a company owned by Conklin, alleging breach of contract, common law fraud, negligent misrepresentation, violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -166, and fraudulent inducement. In their answer, defendants denied all liability.
The parties waived a jury trial. Conklin appeals from a final judgment entered on June 8, 2005, that dismissed the complaint against Radir Wheels, but awarded plaintiff treble damages of $25,953, counsel fees of $29,950, and costs of $6,544.81 under the CFA. The primary issue presented to the trial court, and to this court, is whether Conklin is subject to liability under the CFA. We affirm the judgment of liability based on the trial court's implicit finding of common law fraud, but we conclude the court erred in applying the CFA. Consequently, we remand for modification of the final judgment.
In April 2002, while looking at various online advertisements for 1970 Corvettes, plaintiff, who lives in Missouri, came across an advertisement posted on the eBay website by the user "realcoololdstuff" (Real Cool Old Stuff). The advertisement read as follows:
Vehicle Description 1970 Corvette Convertable [sic]. Matching numbers, One owner Car, 350/300HP 4 speed, Good Frame, New exhuast [sic] system, Power steering, Soft top is good. New Carpet.
Runs Strong, Original rallys, Original radio/cassette. Title is original from 06/24 1970. If you have any Questions please feel free to give us a call at . . . . Thanks and good luck!
Needs door hinge pins, Radiator support, original interior is ok but seats are a little worn. Painted once now has a few chips. Windshield has small crack in the lower left corner.
Terms of Sale 10% deposit required within 5 days of auction close. Delivery options can be disccussed [sic]. Payment in Full required within 10 days of auction close.
Prior to the close of the auction, plaintiff called the telephone number in the advertisement, and he spoke to Conklin regarding the condition of the Corvette. Conklin told him "the car was in good condition," and it could be driven from its location in Montville, New Jersey, where Conklin lived, to Missouri. Thereafter, upon learning he was the highest bidder for the car, plaintiff sent Conklin an initial check for $1,651, and a subsequent check for $12,000. Although both checks were made payable to Conklin and deposited into Conklin's personal checking account, plaintiff received the title work in an envelope that had Radir Wheel's return address. In addition, when plaintiff called Conklin, the phone was answered "Radir Wheels." Plaintiff also noted when he clicked on Real Cool Old Stuff's hyperlink, he got Radir Wheel's website or address.
After the auction closed, plaintiff had another telephone conversation with Conklin about driving the car from New Jersey to Missouri. During this conversation, Conklin told plaintiff the headlights did not "come up automatically" when turned on, "the windshield wipers did not work and that there was no spare tire with the car." Based on this discussion and other considerations, including time constraints, plaintiff elected to ship the car to Missouri.
Plaintiff received the car on May 10, 2002, and later that month, he brought it to Dan Hughes, a mechanic at Just Corvettes, for an "assessment" and "a safety inspection." When Hughes "put the car on the lift to start the safety inspection," he discovered the frame, which was advertised as "good," was "rusted nearly in half," rendering the car unsafe and unlicensable in Missouri. Further inspection of the car showed the soft top, which was also advertised as "good," was in poor condition ("someone had stapled it with metal staples to hold it together"), the driver's seat was "ripped in numerous places," the driver's seat frame was broken, and the radio/cassette, which was advertised as "original," was an after-market item. In addition, defendant's eBay advertisement stated the car "runs strong," but plaintiff testified there was a "large hesitation" when he tried to accelerate. During the inspection by Hughes, plaintiff took digital photographs of the condition of the vehicle, which he sent to Conklin along with an e-mail, and copies of the photographs were marked into evidence during the trial.
Based on the information in the eBay advertisement concerning the condition of the Corvette, plaintiff testified he thought he was purchasing "a serviceable vehicle" that probably needed some repairs, but he expected the car would be safe to operate on the streets. Plaintiff acknowledged he did not expect to receive a Corvette in excellent condition, however, the car he received was "not even close" to the description in defendant's advertisement.
According to plaintiff, a "good frame" was an especially valuable indicator of the car's condition because Corvettes of that vintage have metal frames, which become poor and rusted. Thus, a good frame meant that it would not have to be replaced.
On October 30, 2002, upon advice of counsel, plaintiff videotaped the damage to the car, with Hughes narrating. Plaintiff took another videotape in January 2003, after the body and frame of the car had been separated, so the condition of the frame could be further documented. Plaintiff's expert, Raymond Williams, was present for the second taping.
Williams had owned and operated a business known as "Ray's Corvettes" from 1977 to 1997 and had previously testified as an expert in the repair and appraisal of vehicles, including Corvettes. He testified the frame of the Corvette plaintiff purchased was so full of holes, caused by rust, he could actually see the floor when looking from the top of the frame. When asked whether the rust was visible before the body of the car was removed from the frame, he testified: "We saw it. Laid on Lyle's garage floor just looking at it with a flashlight. It was terminal." He also acknowledged, however, that because the car "sits five inches from the ground," much of the rust was visible only after the car was on a lift. When Williams was asked whether "good frame" had a "meaning in the business," he testified a "good frame" meant the frame was "good and usable. The age doesn't make any difference between good and bad." In his estimation, no part of the frame of this car was in good condition, or even salvageable.
Williams testified the salvage value of the car plaintiff purchased was "around the $4000 range," and, contrary to the eBay ad, the car's engine did not "run strong." According to Williams, the engine was "totally worn out. It wasn't running good. It was a weak engine" that had "already been rebuilt once."
Plaintiff testified if he had known the true condition of the car, he would not have bought it. He believed the car he received in May 2002, was worth approximately $5,000 to $8,000. He originally planned on doing his own repairs to the car, but the repairs that were needed were "well beyond [his] capability." After Conklin refused to rescind the sale, he realized he was left with a car he had to do something with. Ultimately, he decided to keep it and pay to have it repaired and restored.
Plaintiff paid $3,963.24 to purchase a replacement frame, and $832.82 for various additional parts such as the mounting kits, new brake and fuel lines, and attaching hardware. He paid Williams $4,200 for the labor to install the frame, $390 to rebuild the front suspension, $9,015 to replace the rusted-out trailing arms, including the bearing seals and the emergency brake hardware, and $390 to reassemble and reinstall the engine.
He also paid $199 to replace the top, $700 to recover the seats, and $495 for installation.
Plaintiff testified he spent "more than $40,000" to restore the car, including "$14,000 and change" "to replace the rusted frame," and he estimated the car's value was in the "$25,000 to $30,000 range."
After plaintiff rested his case, Conklin testified on his own behalf.*fn1 He claimed his primary occupation was a pumpkin farmer. However, in 1995, he and a partner started Radir Wheels, a corporation that distributed custom wheels for older cars, hot rods, muscle cars, and nostalgic race cars. In 2001, plaintiff bought out his partner's share and, as of 2002, he was the company's sole owner and president.
Conklin denied either he or Radir Wheels sold cars. However, he admitted Radir Wheels allowed some of its customers to advertise cars for sale on its website. According to Conklin, some of "our customers who buy wheels" asked to display their cars "on our website, to show their car with our product on it," and "[q]uite often these cars end up for sale." So, as a courtesy, he sometimes allowed customers to indicate that their cars were for sale. Neither Conklin nor Radir Wheels took a commission for these sales, and the practice started after plaintiff had purchased his car. Conklin further claimed that he never gave plaintiff the impression that Radir Wheels was selling the car that plaintiff bought.
Conklin testified that his hobby is collecting and restoring older cars----especially old pickup trucks----because he grew up on a farm. According to Conklin, "at any given time," he had about fifteen older cars and pickup trucks in his collection because "[t]hat's about all [he] can store inside." Of those fifteen vehicles, four are used on his farm.
Conklin agreed "once in a while," he would sell a car before or after he restored it, but he denied being a car dealer. During cross-examination, Conklin acknowledged that in April 2002, the same month he sold the car to plaintiff, he also sold a 1934 Ford Woody for $15,500, and a 1937 Cadillac LaSalle for $6,100. He claimed these were cars from his collection that he decided to "let go." He also admitted in the late 1990s or "somewhere around 2000," he sold two cars, a 1952 Ford and a 1954 Corvette to Larry Munther, his expert at trial. In his answers to interrogatories, Conklin admitted to selling a 1934 Ford, a 1937 Cadillac, a Ford Script Emblem, and a 1963 Ford Fairlane; however, it was not clear if these were the same cars he referred to at trial. Conklin estimated that since he began working on cars, when he was fifteen years old, he had sold maybe eight to fifteen cars in total. As of trial, he was forty-eight years old.
With respect to the Corvette he sold to plaintiff, Conklin claimed he bought it "quite a few months" before he offered it for sale, and he originally intended to restore it. He claimed he paid about $12,000 for it but did not remember the exact amount.
Prior to purchasing the Corvette, Conklin "briefly looked underneath" the vehicle, and he also looked at the motor and the interior. After he bought the vehicle, he put a rebuilt carburetor in it. He then drove it up and down his street "to try it out, and it ran strong." Conklin thought the top on the car was "pretty decent," though not perfect. And he believed the car would be "very affordable" for someone to restore and that it would increase in value.
Conklin ultimately decided to sell the car without restoring it himself because he had too many projects and "a bunch of bills." Prior to listing it on eBay, he raised the car with a floor jack and put jack stands under it, so he could crawl under the car and look at the underside. He observed "surface rust and some scaling on the frame in spots," but he did not see any holes in the frame.
Although Conklin originally told plaintiff he could drive the car from New Jersey to Missouri, Conklin testified he had second thoughts because he did not know how old the starter, the alternator, or the clutch were. When plaintiff contacted Conklin shortly after receiving the car to complain about holes in the frame, Conklin told plaintiff there were no holes in the frame when the car left his garage.
With respect to plaintiff's videotape of the Corvette, Conklin testified he never had the body of the car off the frame, and if he had ever seen holes in the frame, he would not have advertised that the car had a "good" frame. Conklin agreed the frame might "possibly" have been in worse shape than he "recognized by looking at it," however, he denied he deliberately misrepresented the condition of the vehicle.
Larry Munther, defendant's expert, testified he had restored, bought, and sold close to 300 Corvettes since 1971. However, he never received any professional training in the repair and maintenance of Corvettes, he never testified as an expert before, and he never inspected the vehicle in question. Based on the photographs and videotape he viewed, Munther testified the car plaintiff purchased "looks like it's in excellent condition for a 1970 Corvette." He also claimed the holes in the frame of plaintiff's car could have been caused either by rust or by someone who was poking and "prodding with an implement" to determine the frame's strength, but he believed they were caused by the latter. He also opined the rust shown on the videotape and in the photographs was not visible when the body was on the frame of the car. In Munther's opinion, other than the rusty frame, which he admitted needed to be replaced, the car was "very acceptable for the age of the car." During cross-examination, however, Munther admitted that, in certain photographs, rust was visible on the frame even with the body on the frame. He also admitted scaling was an escalation of rust, and the only thing worse than scaling was having holes in the frame.
The testimony concluded on May 18, 2004, and counsel requested an opportunity to present trial briefs prior to their closing argument. But after the close of all the evidence, and before the parties submitted their proposed findings of fact and conclusions of law, plaintiff's trial counsel was suspended from the practice of law due to unethical conduct unrelated to the present case. This delayed matters and closing arguments did not take place until February 9, 2005. The trial court rendered an oral decision on February 9 and 14, 2005, and on April 25, 2005, the court ruled on plaintiff's request for counsel fees and costs.
The trial court found both plaintiff and his expert, Williams, to be credible witnesses, while it found much of Conklin's testimony and the testimony of his expert, Munther, to be unreasonable and unbelievable. The trial court also found defendant had intentionally misrepresented the condition of the Corvette when he advertised it had a "good frame," an "original radio/cassette," the soft top was "good," and the car "runs strong." The court's findings and conclusions included the following:
Now, after the deposit was paid, [plaintiff] had a discussion with Mr. Conklin. And he asked Mr. Conklin whether he could drive the car to Missouri. And Mr. Conklin indicated that the headlights did not come up, the windshield wipers did not work, there was no spare tire but there was a wheel. And notwithstanding that, Mr. Real did not attempt to rescind the sale because he wanted to improve -- and he knew he was going to have to spend substantial money on many things. But not the frame. And not with making the car run. And, therefore, he elected to have the car shipped from New Jersey. And it was apparently picked up here in New Jersey on May 6 and arrived May
10. And he took the car to Dan Hughes on May 22. However, he indicated, as did his expert, that he could not register the car in Missouri because it was unlicensable because of the frame, which was ready to break in half. And he took still and video photos. Those photos and the video were very important to the [c]court because it corroborated the statement of both Mr. Real and his expert.
Now, Mr. Real testified that the back rail of the top had metal staples and on the left area over the driver side was an opening. And he also indicated that the seat was ripped in a number of places. He also indicated that it was not the original radio cassette, which has not been disputed.
Now, before he took the car, Mr. Real made a check payable to Richard Conklin. Mr. Real testified he would not have purchased the car if he knew of the problems with the frame, with the motor, and all other factors which were not true as set forth in the eBay ad. And as I've indicated earlier, both sides agree that this 1970 Corvette was the lowest production rate for a Corvette. And as the defendant says, it was, therefore, unique. And Mr. Real was prepared to put . . . substantial money into the car, but he expected the facts to be as stated in the ad.
Now, he also indicated that he put more than $40,000 in the car. Now, that doesn't mean you can recover $40,000 in this action if he were successful. But that was his testimony.
Now, he indicated it was convoluted who he was dealing with. Whether he was dealing with Mr. Conklin or Radir Wheels, Inc. because Conklin was obviously using Radir Wheels for whatever purposes. But so that there is no misunderstanding, I might as well state from the outset that the ultimate sale was by Mr. Conklin and not by Radir Wheels and, therefore, the case against Radir Wheels will be dismissed without costs.
Mr. Real had a limited inspection on May 22, 2002. And he indicated, among other things, there was bad rust and that he was concerned with the frame. And Mr. Real wanted the car but, actually, he wanted the matters to be repaired or, I should say more particularly, he requested Mr. Conklin to rescind the sale. . . .
Now, there was a question of Mr. Real what he thought the car was worth when he received it. And he stated that he assumed it could be between 5 and $8,000. Now, he stated on many occasions that the car that he wanted was the car as advertised and what he got was not a "fair deal." In other words, it was not in a condition as listed, which this [c]court has no difficulty in finding that, one, the car did not have a good frame -- in fact, it's even acknowledged inferentially by both the defendant and his expert -- and that the car did not run strong. In fact, it ran poorly, if at all. And I find that it could not have even been licensed. And anyone who buys a car such as this expects at least they can . . . have the car licensed.
Now, I find that there was a rusted frame. I find based on the testimony of Mr. Real and the pictures and videos that there was substantial rust and scaling, contrary to the advertisement. It was buttressed by plaintiff's expert and it was almost in effect acknowledged by Mr. Conklin there was surface rust and scaling, notwithstanding the fact that he looked for that before the sale and says he put the car up on a lift. And obviously he could see from that -- in fact, based on the testimony of the expert, we don't even have to get it on a lift. And I find that it was an unconscionable commercial practice to have a listing that there was a good frame and the car runs strong, which clearly was not true. And that the statement that the seats were slightly worn was not correct. They were broken and ripped. And there was no spare tire.
. . . . . . . Mr. Conklin, inspected this car two times before listing it on eBay and was asked, "Before you listed it here with eBay, did you sit down and go through the car and decide how you were going to describe it?" And his answer was "Yes. I actually jacked it up with a floor jack, put jack stands under it and I crawled under it and looked at the underneath. I studied the engine compartment and the interior and everything."
And the next question was "When you jacked up the car, what did you notice about the underside?"
His answer was "It had surface rust and some scaling on the frame in spots. Scaling is probably a little bit heavier than what you might call surface rust. Some of the scaly places, if beaten with a hammer, could end up with holes."
. . . . . . . Mr. Conklin, put the car on a li[f]t and examined what was underneath. And even if he hadn't, he shouldn't put in the ad that it had a good frame when he knew or should have -- or obviously did know that it wasn't a good frame. It isn't a question of where he bought the car, never looked at it and just assumed it's a good frame. That would be bad to advertise as a frame, as a good frame, but to -- having examined it, it's deplorable in this [c]court's opinion. It's unconscionable for an ad to be put in . . . that fashion to induce people to buy something which was not accurate. And the defendant, Conklin, knew it wasn't accurate. And he even acknowledged that in the video the frame was rusty. But Mr. M[u]nther acknowledged that scale may be a serious problem, and that holes in the frame are not good. So he's acknowledged that the scaling which Mr. Conklin knew of, may be a serious problem.
Mr. Real testified on rebuttal. He said, again, it was not a good frame. There was severe rust on the frame. And he certainly didn't expect he'd have to repair or replace the frame, because it was completely rusted through.
So there's no misunderstanding, this does not involve a negligent, unknowing representation regarding the condition of the frame.
On appeal, defendant claims the trial court erred in finding "a casual seller of automobiles over the internet" is "a merchant or dealer pursuant to the Consumer Fraud Act." In addition, defendant contends the trial court erred in denying his motion to dismiss plaintiff's consumer fraud claim at the close of plaintiff's case in chief, "as was required by Rule 4:37-2(b)." We are constrained to agree.
After plaintiff and his expert witness completed their testimony on April 12, 2004, the following colloquy ensued:
THE COURT: Does the plaintiff have any further proof on your case?
MR. TUNNEY [DEFENDANT'S ATTORNEY]: No, your Honor.
THE COURT: All right. So the plaintiff rests?
MR. TUNNEY: That's correct, Your Honor.
The next morning, defendant's attorney argued certain counts of the complaint, including plaintiff's consumer fraud claim, should be dismissed. In response, plaintiff's attorney claimed there were representations "made by the defendants, who are dealers, that this car was in good shape when it wasn't. And that's a fraud." Defendant's attorney maintained there was no evidence of any intentional deceit, and Conklin had no idea of the actual condition of the frame when he sold the car to plaintiff. Plaintiff's attorney responded: "He is a dealer. And under the statute, he's charged with an obligation to have a knowing basis for his representations." Even though plaintiff failed to cite any evidence to support his claim that Conklin was a dealer, the court ruled "at this stage of the proceeding . . . plaintiff has satisfied the burden of proof that there . . . were many misrepresentations, which [defendant] should have known were misrepresentations and, therefore, the motion will be denied." Notably, the court did not make any finding with respect to Conklin's status as a dealer.
A month later, both Conklin and his expert testified. On direct examination, Conklin denied being a dealer and claimed he was nothing more than a hobbyist or collector. On cross- examination, however, after being confronted with answers he had given to interrogatories, he admitted to various facts, which the court relied upon to conclude that Conklin was a "dealer" under the CFA.
According to R. 4:37-2(b):
After having completed the presentation of the evidence on all matters other than the matter of damages (if that is an issue), the plaintiff shall so announce to the court, and thereupon the defendant, without waiving the right to offer evidence in the event the motion is not granted, may move for a dismissal of the action or of any claim on the ground that upon the facts and upon the law the plaintiff has shown no right to relief. Whether the action is tried with or without a jury, such motion shall be denied if the evidence, together with the legitimate inferences therefrom, could sustain a judgment in plaintiff's favor.
And pursuant to R. 4:40-2(a), the court may reserve decision on a motion for judgment made at the close of all the evidence (i.e., pursuant to R. 4:40-1), submit the case to the jury, and then decide the motion either before or within ten days after the verdict.
All three motions, R. 4:37-2(b) (at the close of plaintiff's case), R. 4:40-1 (at the close of all the evidence) and R. 4:40-2 (after the verdict), are governed by the same standard. Verdicchio v. Ricca, 179 N.J. 1, 30-31 (2004). That is, the court must accept as true all the evidence that supports the party opposing the motion and must accord that party all the legitimate inferences that can be deduced therefrom. If reasonable minds could differ, the motion must be denied. Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969).
We have previously noted a trial judge "cannot reserve decision on a motion for judgment at the close of plaintiff's case." Joseph Hilton & Assocs., Inc. v. Evans, 201 N.J. Super. 156, 165 (App. Div.), certif. denied, 101 N.J. 326 (1985). More recently, however, our Supreme Court held a motion under R. 4:37-2(b) may be reserved "so long as the ultimate decision on such a motion is based only upon the plaintiff's evidence." Verdicchio, supra, 179 N.J. at 30-31 n.4. Thus, even if the motion is reserved, the defendant is still entitled to a ruling "on the adequacy of plaintiff's proofs." Ibid. "It goes without saying that a reviewing court faced with a R. 4:37-2(b) issue must disregard evidence adduced on the defense case." Ibid. Applying these principles here, we conclude defendant's motion to dismiss plaintiff's consumer fraud claim at the close of plaintiff's case should have been granted because there was no evidence that Conklin was a "dealer" or "merchant" under the CFA.
Conklin also contends there is no evidential support in the record for finding him liable for common law fraud, but we reject this argument. To establish common law fraud, it was incumbent upon plaintiff to prove, by clear and convincing evidence, there was a material representation of a presently existing or past fact, made with knowledge of its falsity and with the intention that the other party rely thereon, resulting in reliance by that party to his detriment. Jewish Ctr. of Sussex County v. Whale, 86 N.J. 619, 624-25 (1981); Weil v. Express Container Corp., 360 N.J. Super. 599, 613 (App. Div.), certif. denied, 177 N.J. 574 (2003).
Here, the court specifically found that the condition of the Corvette's frame was visible even without the car being put on a lift, and, in any event, Conklin admitted he had inspected the underside of the car. Thus, Conklin knew the frame was not a "good frame" as he had represented and knew his advertisement on eBay, which plaintiff relied upon, was not accurate. In addition, the court found Conklin knew the frame had scaling, knew the car was not a one-owner vehicle, and he also knew the Corvette's engine did not "run strong."
Moreover, although the trial court originally applied the preponderance of evidence standard to plaintiff's cause of action under the CFA, it later modified its ruling to indicate that the proofs showed by clear and convincing evidence there was a violation of the CFA, due to defendant's intentional misrepresentations. Because the trial court's findings are fully supported by the record, we affirm the judgment of liability based on the trial court's implicit finding of common law fraud. However, under a common law fraud action, there is no authority to award treble damages or plaintiff's travel expenses. Thus, the judgment must be modified to reflect an award of $8,651 against Conklin, i.e., the amount of compensatory damages found by the trial court.
We are satisfied from our review of the record there is no merit to Conklin's remaining arguments, and, with one exception, plaintiff's cross-appeal. See R. 2:11-3(e)(1)(E). The exception pertains to plaintiff's claim that the "trial court erred when it failed to award pretrial interest as part of the judgment." A handwritten note on the final judgment indicates that because treble damages were awarded under the CFA, no prejudgment interest was allowed. We have concluded, however, plaintiff is not entitled to treble damages. Consequently, the trial court must determine whether defendant is liable for the payment of prejudgment interest in light of this opinion.
To summarize: We affirm defendant's liability for common law fraud and the award of damages in the amount of $8,651; the trebling of damages and the award of counsel fees and costs under the CFA is reversed; and the matter is remanded to the trial court to reconsider the costs to be awarded to plaintiff pursuant to R. 4:42-8 and to determine whether plaintiff is entitled to receive prejudgment interest.
Affirmed in part, reversed in part, and remanded for the entry of a modified judgment. We do not retain jurisdiction.