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Stone v. Kahr Properties

December 16, 2008

D. WYATT STONE AND STONE FOUNDATION, LLC, PLAINTIFFS-RESPONDENTS/ CROSS-APPELLANTS,
v.
KAHR PROPERTIES, LLC, RICHARD KAHR, AND MELJO LLC, DEFENDANTS-APPELLANTS/ CROSS-RESPONDENTS, AND MELODIE KAHR AND JOSHUA KAHR, DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-3490-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 5, 2008

Before Judges Winkelstein, Fuentes and Gilroy.

Defendants appeal from a final judgment dated June 11, 2007, memorializing a jury verdict in favor of plaintiff in the amount of $345,519.57, plus attorneys' fees and costs, for defendants' violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to-20. Defendants argue on appeal that the CFA does not apply to them; plaintiff did not prove an ascertainable loss; the trial court's jury instructions and verdict sheet were erroneous; the jury's verdict was inconsistent; and the trial court did not adequately cure plaintiff's prejudicial behavior during trial. We reject defendants' arguments and affirm.*fn1

I.

The trial was conducted from March 6 through March 21, 2007. Because the parties' versions of the facts differ, we recite the facts based on each witness's testimony. All references to plaintiff in this opinion are to plaintiff D. Wyatt Stone.

A. D. Wyatt Stone

Plaintiff is in the business of buying high-end residential properties, renovating them, and selling them for profit. He has had over twenty years experience in real estate investment. In August 2003, plaintiff's realtor, defendant Melodie Kahr, advised him that 27 Park Avenue in Burlington would be a good investment. Although plaintiff had not asked her to look for properties in Burlington for him, he nonetheless liked the house, and he purchased it on September 26, 2003 for $500,000, intending to renovate it and sell it the following spring.

When plaintiff first visited the property, Ms. Kahr's husband, defendant Richard Kahr, was there. Mr. Kahr told plaintiff "it was a great deal, he'd do it himself if he could afford it." Plaintiff was aware that Mr. Kahr owned several properties in Burlington that he had renovated and either resold or rented. During the property visit, Mr. Kahr offered to do the renovations for plaintiff. Ms. Kahr told plaintiff that her husband "had a large work crew in the area, that he owned a lot of buildings and had much experience in renovation." Mr. Kahr agreed to begin the renovations in October 2003 and complete the project in six months. Plaintiff purchased the house based on Mr. Kahr's agreement to do the work.

Mr. Kahr subsequently provided plaintiff with an initial "Budget Estimate" for the project of $150,000, leaving some items open for discussion and indicating that a contract would follow. The estimate was prepared on the letterhead of defendant Meljo, LLC, a company owned by Ms. Kahr. Mr. Kahr provided a second "Budget Estimate," also prepared on Meljo letterhead, providing for a six-month time frame within which to complete the renovation work, a twenty percent profit, and a total project cost of $169,500, with an additional $35,500 estimated for additional items to be discussed between the parties; the estimate again indicated that a "contract will follow." Plaintiff expected a ten to twenty percent increase in the budget, as was customary in the business. At Mr. Kahr's request, plaintiff advanced the $20,000 profit, so that Mr. Kahr could "defray his income taxes." Although plaintiff never received a written contract from defendants, he did not believe a contract was necessary because he trusted Ms. Kahr. The parties ultimately stipulated that a verbal contract existed.

Because Mr. Kahr managed several other properties, plaintiff wanted to keep the documentation and accounting for 27 Park Avenue separate. Thus, Mr. Kahr agreed to form a separate LLC and open a separate checking account designated solely for the 27 Park Avenue project.

During a site inspection shortly after the project began, plaintiff observed "shoddy craftsmanship," including peeling exterior paint, and floors cut up by a jigsaw. Plaintiff expressed his concern to Mr. Kahr, who indicated that he would fix the problems.

Despite his dissatisfaction with the work, as of December 8, 2003, plaintiff had paid defendants $120,000; by February 14, 2004, he had paid $160,000; and as of March 10, 2004, plaintiff had paid over $235,000. Plaintiff agreed to an increased contract price of approximately $236,000.

In November or December 2003, plaintiff asked Mr. Kahr to provide him with invoices and receipts for the expenses associated with the project. Mr. Kahr did not comply with that request, but instead provided a check register that did not reflect payments exclusively for 27 Park Avenue; Mr. Kahr did not establish a separate LLC or checking account for plaintiff's project. Because plaintiff was concerned that a number of the listed payments did not appear to be related to his property, he requested invoices representing the payments reflected in the check register. Mr. Kahr did not supply those invoices.

Following a site inspection in early 2004, when it became apparent to plaintiff that the project could not be completed within the six months agreed to, plaintiff gave defendants a sixty-day extension to complete the work. By May 2004, the project was still not complete, yet Mr. Kahr continued to request more money from plaintiff. Plaintiff refused to pay the additional sums because the March 2004 completion date had passed, the construction was incomplete, and the amount Mr. Kahr requested was in excess of what the parties had agreed upon to complete the project.

Consequently, plaintiff contacted Ms. Kahr, who agreed to take over the accounting for the project and provide plaintiff with the invoices he had requested. Plaintiff fired Mr. Kahr, but kept his foreman, David Schugardt, on the job as project manager. Plaintiff loaned Ms. Kahr $35,000 to finish the project, which she did not repay. Nor did she provide plaintiff with the invoices he had requested. Instead, she gave him additional checks, informing him that, "we don't have invoices, we don't keep invoices, my husband doesn't work that way, he works off checks." Plaintiff remained unable to determine which payments were for his property.

In a letter to Ms. Kahr dated September 14, 2004, plaintiff explained that he hired Mr. Kahr based upon Ms. Kahr's personal recommendation and he was promised that a separate LLC would be created with its own checking account limited to his project. He claimed that although he had paid $235,000 to defendants, he had only been provided with $51,000 in invoices and the checks he had been given did not indicate if they were for expenses solely for 27 Park Avenue. Plaintiff also identified $70,500 in expenses he paid to finish the project, in excess of the $236,285 budget that he had agreed to.

Plaintiff never received a response to his letter. Instead, in October 2004, the Kahrs filed a construction lien against 27 Park Avenue. After the lien was discharged, plaintiff sold the property on January 19, 2005, for $875,000.

Plaintiff testified that his damages were $182,000. He arrived at that figure by subtracting the amount of the contract, $236,000, from the total amount of money he paid into the project, which he testified was $414,000. He deducted $51,000, representing the amount he paid for the kitchen, a project he agreed was outside the scope of the contract. After applying these deductions, plaintiff arrived at a figure of $127,000, to which he added the $35,000 loan he made to Ms. Kahr, and the $20,000 profit he advanced to Mr. Kahr.

B. Samantha Roland

Samantha Roland, plaintiff's assistant, handled finances, billing and general record keeping associated with plaintiff's properties, including 27 Park Avenue. In December 2003, at plaintiff's request, Roland contacted Mr. Kahr and requested an accounting of the expenditures for the project. Mr. Kahr told her that he was setting up a computer system to track expenditures, and would provide her with the information as soon as the system was up and running. Roland continued to request this information in January and February 2004. She did not receive a response until March 10, 2004, when Mr. Kahr faxed her a check register purporting to show expenditures for 27 Park Avenue. Roland was unable to determine which checks reflected payments made by defendants solely in connection with 27 Park Avenue. Roland requested that Mr. Kahr provide her with documentation specifying only the work done and paid for with respect to plaintiff's property, but he never did.

After Ms. Kahr took over the project, she gave plaintiff checks and invoices associated with 27 Park Avenue. Based on those documents, Roland prepared a summary of all payments made to Kahr Properties, which totaled $235,000. Roland also prepared a spreadsheet labeled "questionable expenses," which included expenses for payments unrelated to 27 Park Avenue.

C. David Schugardt

David Schugardt had been employed as a construction manager for over twenty years by Kahr Properties, Meljo and other entities owned and operated by defendants. He renovated approximately fifteen houses per year for defendants. Schugardt saw 27 Park Avenue for the first time in the fall of 2003 when he walked through the property with Mr. Kahr. Mr. Kahr told him that plaintiff had hired him to renovate the property with the intention of hiring him as a contractor on a regular basis to renovate other properties plaintiff planned to purchase, renovate and resell, as long as plaintiff was satisfied with Kahr's work at 27 Park Avenue.

Schugardt began working part-time on 27 Park Avenue in the winter of 2003. By that time, workers had already begun painting the exterior of the house. Schugardt expressed concern to Mr. Kahr because the weather at the time was cool and damp, which was an inopportune time to paint the exterior. In fact, the paint peeled, and the exterior ultimately had to be scraped and repainted. In April 2004, Mr. Kahr asked Schugardt to work on the ...


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