March 27, 2008
NAOMI NGUYEN, PLAINTIFF-RESPONDENT,
TROBY MOTORS, STEVEN TROBIANO, DEFENDANTS-APPELLANTS, AND AUTO WHOLESALERS & DEALERS, INC., DEFENDANT-RESPONDENT, AND IRA LEXUS, INC., DEFENDANT.
AUTO WHOLESALERS & DEALERS, INC., THIRD-PARTY PLAINTIFF,
IRA LEXUS, INC., THIRD-PARTY DEFENDANT. TROBY MOTORS AND STEVEN TROBIANO, THIRD-PARTY PLAINTIFFS,
CARFAX, THIRD-PARTY DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-1245-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 3, 2008
Before Judges Lintner and Graves.
This case involves a series of transactions in which defendant Auto Wholesalers & Dealers Inc. (Wholesalers) wholesaled a 1996 Toyota Land Cruiser to Troby Motors,*fn1 which then retailed the vehicle to Naomi Nguyen. The Land Cruiser was later determined to have been stolen and was seized by the police. This case implicates the Consumer Fraud Act, N.J.S.A. 56:8-1 to -106 (CFA) and its policies.
On appeal, Troby contends that the judge erred in granting summary judgment in favor of Nguyen on her CFA claim and in limiting its contribution claim against Wholesalers to breach of contract damages. Troby also asserts that the award of counsel fees in favor of Nguyen on her CFA claim was excessive. We conclude the CFA is applicable to the transaction between Troby and Nguyen and inapplicable to the wholesale transaction. We, therefore, affirm the judgment of liability on Nguyen's CFA claim and the damage judgments entered against Wholesalers on Troby's cross-claim. We remand the issue of counsel fees for further proceedings because the award was entered without the benefit of the factual analysis required in Furst v. Einstein Moomjy, 182 N.J. 1, 24 (2004). We do not retain jurisdiction.
We restate the substantially undisputed facts. Wholesalers is in the business of selling used motor vehicles to dealers and other wholesalers. It does not sell vehicles on a retail basis to the public. In September 2003, Wholesalers sold the Land Cruiser to Troby for $13,300. Wholesalers had purchased the vehicle from Ira Lexus, a Massachusetts dealer. History searches performed by CARFAX for both Wholesalers and Troby failed to show that the vehicle had been stolen.*fn2
In November 2003, Troby sold the Land Cruiser to plaintiff for $16,063. Plaintiff paid $5000 in cash and financed the remainder of the purchase price. On May 28, 2004, the State Police seized the vehicle from plaintiff. The police report indicated that the Land Cruiser's VIN number plate had been changed and that the vehicle had been stolen in New York in 1999. The portion of the purchase price that had been financed was resolved by insurance, leaving plaintiff with actual damages of $5600.*fn3
When plaintiff's remaining claim for damages was not resolved by Troby and Wholesalers, plaintiff pressed her CFA claim.*fn4 Plaintiff moved for partial summary judgment on her CFA claim against Troby. On April 28, 2006, Judge Merkelbach entered summary judgment, finding Troby liable to plaintiff under the CFA.
On October 13, 2006, another motion judge entered an order assessing treble damages of $16,800 against Troby. The order also awarded plaintiff counsel fees of $7,442.50 and costs of $614.15. On November 22, 2006, plaintiff's counsel wrote the motion judge recounting his version of the procedural history and requesting that the judge "recalculate" the counsel fees to total $16,447.50. On December 18, 2006, Troby responded to plaintiff's request, pointing out that it had been trying to settle with plaintiff but was not receiving any cooperation from co-defendants, complaining that "[p]laintiff has continued to 'churn' this file." Troby asserted that the transaction would not have occurred had it not been for the sale from Ira Lexus to Wholesalers, that it had a default judgment against Ira Lexus, and "has already not only paid for the vehicle from . . . Wholesalers but also paid the plaintiff's auto loan already in the sum of $10,440.21 which should be taken into consideration when the plaintiff's settlement is distributed among the co-defendants."
On March 2, 2007, the judge wrote that, based upon his review of plaintiff counsel's letter of November 22, 2006, he was inclined to vacate the Order of October 13, and "to enter the Order upon consideration of the information, arguments and clarification set out in [counsel's] letter of November 22, 2006."*fn5 Plaintiff's counsel prepared and forwarded to the judge a proposed form of order on March 27, 2007. Troby responded by letter on April 4, 2007, objecting to the Order based upon his previous submissions filed by way of objection prior to entry of the October 13 Order.
On April 5, 2007, the judge signed the proposed order awarding additional counsel fees to plaintiff's counsel in the amount of $9005. Troby filed for interlocutory appeal. Plaintiff moved to enforce the order for counsel fees. The judge ordered "that enforcement of any future motion or order for the turnover of funds, relating to the April 5, 2007 Order . . . shall be stayed, pending resolution of . . . interlocutory appeal . . . ." The judge also noted that "he had not received [Troby's] letter in opposition dated April 4, 2007." Meanwhile on March 30, 2007, Judge Codey denied Troby's motion seeking contribution from Wholesalers in the full amount of the CFA claim. Instead, he limited Wholesalers' contribution on Troby's cross-claim to $5600.*fn6 In announcing his ruling, Judge Codey, concluded:
I'm going to enter summary judgment against . . . Wholesalers in the amount of the stipulated damages, [$]5600. They're not liable for any of the actions regarding Troby's contact with Miss Nguyen. It was a consumer fraud action solely as to them. They're in it up to the 5600-dollar stipulated base damage claim.
Because Judge Codey's Order disposed of the remaining issues, we transformed Troby's interlocutory appeal to an appeal as a matter of right.
We address first Troby's contention that plaintiff failed to establish liability under the CFA to warrant a grant of summary judgment. Troby argues, essentially, that the judge erred in considering the State Police report because it amounted to hearsay evidence, failed to link the vehicle seized to the vehicle stolen in New York in 1999, and failed to establish conduct amounting to consumer fraud.
We reject Troby's assertion that plaintiff's proofs were not adequate to establish that it failed to convey good title to the Land Cruiser. Troby's answer admitted paragraph eight of plaintiff's amended complaint asserting that the State Police Criminal Investigation Bureau/Auto Theft Unit went to plaintiff's home, advised her that they were taking possession of the vehicle because it had been stolen, and advised that the VIN on the car had been switched after it was stolen. Indeed, Troby provided the following in its response to plaintiff's Statement of Uncontested Material Facts:
The defendant admits that the police alleged that the Toyota Land Cruiser sold by the defendant to the plaintiff was stolen. However, the plaintiff has failed to introduce evidence specifically linking the car sold by the defendant to a Toyota Land Cruiser allegedly stolen in New York in 1999. The plaintiff has also failed to introduce evidence of any criminal convictions in this matter, or any indicia that the charges alleged in the police report are correct or verified.
We agree with Judge Merkelbach's reliance on the following quote from American Container Corp. v. Hanley Trucking Corp., 111 N.J. Super. 322, 331 (Ch. Div. 1970):
The purchaser of goods warranted as to title has a right to rely on the fact that he will not be required, at some later time, to enter into a contest over the validity of his ownership. The mere casting of a substantial shadow over his title, regardless of the ultimate outcome, is sufficient to violate a warranty of good title.
Troby does not deny the vehicle purchased by plaintiff did not have good title, nor does it present any proofs that the police mistakenly confiscated it. Indeed, it is not consistent for Troby to claim plaintiff's proofs were inadequate and, at the same time, seek and obtain a default judgment against the initial seller of the vehicle, based upon the same allegation. Judge Merkelbach correctly exercised his discretion in relying on the police report to establish that the Land Cruiser was stolen and that title was not transferred on the sale.
We move on to discuss Troby's assertion that plaintiff failed to establish an unlawful practice under the CFA. The CFA was enacted "to protect [the consumer] against fraudulent and unconscionable practices in the sale of consumer goods and services." Marascio v. Campanella, 298 N.J. Super. 491, 500 (App. Div. 1997). The Act imposes liability upon any person who uses "any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission." N.J.S.A. 56:8-2.
Unlawful practices under the Act "fall into three general categories: affirmative acts, knowing omissions, and regulation violations." Cox v. Sears Roebuck & Co., 138 N.J. 2, 17 (1994). If the alleged violation is an affirmative act, it is not necessary to prove that the defendant intended to commit the unlawful act. Id. at 17-18; see also Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 378 (1977) (concluding that intent is not required when defendant affirmatively omits information required to be disclosed by regulation). If the alleged violation involves an omission, as contrasted with an affirmative act, then the plaintiff must show that the defendant acted with knowledge and intended to commit the deception. Cox, supra, 138 N.J. at 18.
The Act is intended to be applied liberally, Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 268 (1997), and "has three main purposes: to compensate the victim . . . ; to punish the wrongdoer through the award of treble damages; and, by way of the counsel fee provision, to attract competent counsel to counteract the community scourge of fraud." Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999) (internal citations omitted). Thus, the Act seeks "not only to make whole the victim's loss, but also to punish the wrongdoer and to deter others from engaging in similar fraudulent practices." Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 12 (2004) (citing Cox, supra, 138 N.J. at 21).
Troby asserts that it acted "with no intent to deceive." Troby does not dispute plaintiff's allegations that it impliedly represented to plaintiff that it had a legal right to sell the vehicle to plaintiff and would deliver clear title if purchased. Whatever the intention of Troby's representatives at the time of the sale, they failed to deliver what was represented to plaintiff and what the plaintiff had a right to expect she would receive - good title. Thus, plaintiff established sufficient violation of the CFA through Troby's affirmative act of purportedly transferring good title to plaintiff.
We next consider Troby's claim that the judge erred in limiting damages to $5600 on its cross-claim against Wholesalers. "The available legislative history demonstrates that the [A]ct was intended to be 'one of the strongest consumer protection laws in the nation.'" New Mea Const. Corp. v. Harper, 203 N.J. Super. 486, 501-02 (App. Div. 1985) (quoting Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 471-73 (App. Div. 1982)). "Throughout its history, the [A]ct has protected consumers from deception and fraud, even when committed in good faith." Herner v. Housemaster of Am., Inc., 349 N.J. Super. 89, 105 (App. Div.), certif. denied, 174 N.J. 40 (2002). The CFA "should be construed liberally in favor of consumers." Cox, supra, 138 N.J. at 15 (citing Barry v. Arrow Pontiac, Inc., 100 N.J. 57, 69 (1985); Levin v. Lewis, 179 N.J. Super. 193, 200 (App. Div. 1981); State v. Hudson Furniture Co., 165 N.J. Super. 516, 520 (App. Div. 1979); Martin v. Am. Appliance, 174 N.J. Super. 382, 384 (Law Div. 1980)).
Generally, "a wholesale buyer of goods intended for resale is not a 'consumer,' and the sale is a non-consumer transaction outside the ambit of CFA protection." Papergraphics Int'l, Inc. v. Correa, 389 N.J. Super. 8, 13 (App. Div. 2006); see also City Check Cashing, Inc. v. Nat'l State Bank, 244 N.J. Super. 304, 309 (App. Div.), certif. denied, 122 N.J. 389 (1990). Troby purchased the Land Cruiser, not as a consumer, but as a wholesaler intending to resell it to an individual consumer. Under the circumstances, Judge Codey correctly determined that Troby was not a "consumer" under the CFA, nor was its purchase of the Land Cruiser from Wholesalers the type of "consumer transaction" covered by the statute. Accordingly, Troby's cross-claim against Wholesalers was properly limited to its contractual damages of $5600.
Lastly, we address briefly the award of counsel fees. Troby asserts on appeal that the hours allegedly spent (38.7) and hourly rate ($425) charged by plaintiff's CFA counsel were excessive. Troby also asserts that the judge later increased the hours from his prior finding of 22.9, based upon an informal motion for reconsideration, without any explanation. There is no transcript setting forth the reasons for the judge's determination either on the initial motion or plaintiff's subsequent request to increase the fee award. However, the judge prepared a worksheet in response to the initial motion, setting counsel's hourly rate at $325 and reducing certain hourly charges, arriving at total hours of 22.9. It would appear that the judge subsequently relied solely upon plaintiff counsel's representations in deciding to increase the fee previously awarded, without any analysis. The lack of factual findings and conclusions makes it impossible for us to determine what, if any, explicit principles outlined in Furst v. Einstein Moomjy, 182 N.J. 1, 24 (2004), and Rendine v. Pantzer, 141 N.J. 292 (1995), were considered by the judge in either the initial award or the subsequent increase. "[A] trial court must analyze the [relevant] factors in determining an award of reasonable counsel fees and then must state its reasons on the record for awarding a particular fee." Furst, supra, 182 N.J. at 21. Therefore, we vacate the award of counsel fees and remand for proceedings in accordance with Furst and Rendine.
The judgment in favor of plaintiff on her CFA claim against Troby is affirmed, as is the judgment of $5600 on Troby's cross-claim against Wholesalers. The matter is remanded for reconsideration of plaintiff's counsel fees in accordance with Furst and Rendine. We do not retain jurisdiction.