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Czar, Inc. v. Heath

March 18, 2009

CZAR, INC., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT,
v.
JO ANNE HEATH AND THOMAS J. HEATH, SR., DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 398 N.J. Super. 133 (2008).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The issue in this appeal is whether a contractor hired by a homeowner to design and install a kitchen and to perform certain other interior work in a new home then being built by a different contractor, was engaged in new home construction, thus limiting the homeowners' claim to the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20, or was instead performing home improvements, and thus subject to suit under the Consumer Fraud Act because of the 2004 amendments to that statute, N.J.S.A. 56:8-136 to -152, regulating home improvement contractors.

Defendants JoAnne and Thomas Heath, Sr., hired a general contractor to build a new home for them. After much of the home was completed, they hired plaintiff Czar, Inc., to design the kitchen, to build and install custom kitchen cabinets, and to perform other interior work, including installing doors and decorative moldings. Before Czar completed its work, a dispute arose and the Heaths refused to pay Czar the full contract price for services and work that it had performed. Czar filed a complaint alleging that it had performed by building the cabinets and that the Heaths breached the contract by preventing Czar from delivering and installing the cabinets, and thus completing its work. The Heaths' counterclaim alleged that the work Czar had performed was not workmanlike and the cabinets were not what had been promised. They asserted they were entitled to relief based upon nine causes of action, including consumer fraud. Czar moved to dismiss the Consumer Fraud Act (CFA) count, arguing that its work was part of the construction of a new home and thus specifically excluded from the CFA. The Heaths asserted that the work was properly categorized as home improvements. The trial court dismissed the CFA claim, finding that Czar's services were properly classified as the "construction of a new residence" and thus the Heaths could not seek CFA remedies against Czar.

The Appellate Division, in a published opinion, reversed. 398 N.J. Super. 133 (2008). The panel held that the exemption for construction of a new residence found in the home improvement regulations did not apply to the work performed by Czar. The panel relied in part on the facts that Czar was not the general contractor hired to build a new residence and did not install or build any structural improvements in the home, but rather contracted directly with the Heaths for the installation of custom cabinets and certain interior work. Construing the statutes and regulations together, the panel found that because the statutory remedies applicable to new home builders would not be available to address work done by a separately-retained contractor who performs his work in a new home, Czar's theory would deprive the Heaths of protections to which they were entitled. Alternatively, the panel concluded that even if Czar were engaged in new home construction, that separate statutory scheme included a reservation of, and an election of, remedies, which would preserve a CFA cause of action as an alternative form of relief.

The Supreme Court granted Czar's motion for leave to appeal. 195 N.J. 414 (2008).

HELD: The Consumer Fraud Act, the Contractor's Registration Act, the New Home Warranty Act, and the regulations promulgated pursuant to those statutes were designed to provide an integrated scheme of protections for homeowners. The contractor, which neither acted as the general contractor nor qualified as a builder of new homes, was engaged in the business of home improvements and subject to the remedies of the Consumer Fraud Act.

1. To determine whether Czar was engaged in new home construction or was performing home improvements, the Court analyzes the interplay between the CFA, the Contractor's Registration Act, the New Home Warranty and Builders' Registration Act, and the regulations promulgated to implement those statutes. The CFA is broad remedial legislation enacted to protect consumers of a variety of goods and services. One example of the Legislature's repeated expansions of the CFA's reach is the 2004 enactment of the Contractor's Registration Act, N.J.S.A. 56:8-136 to -152. That statute and its implementing regulations created a framework within the CFA that regulates contractors engaged in the home improvement business. The statute broadly applies to those engaged in "remodeling, altering, renovating, repairing, restoring, modernizing, moving, demolishing, or otherwise improving or modifying of the whole or any part of any residential or non-commercial property." Any person or entity that falls within the definition of a home improvement contractor must register with the Division of Consumer Affairs and maintain commercial general liability insurance. Any violation of the statute's provisions is "an unlawful practice" subject to the CFA's remedies, which strongly suggests that the Legislature intended to broadly empower consumers of these services to seek relief for violations and to be made whole. (pp. 7-11)

2. The Contractor's Registration Act exempts from its provisions any person required to register under the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20, a statute in existence for nearly three decades. Those governed by the New Home Warranty Act were already subject to a registration requirement and a regulatory mechanism that provided recourse to the homeowners who dealt with them through that statute's remedies. The key to understanding how the Legislature intended these statutes to be construed in complimentary fashion lies in the identity of the entities to which each applies and the differences in the remedies that each affords. The New Home Warranty Act defines "builder" simply in terms of entities "engaged in the construction of new homes." The principal remedy of the New Home Warranty Act is its warranty program, which focuses on major defects that might be found in a new home and provides homeowners a source of payment to correct deficiencies. A homeowner's reliance on the warranty is an affirmative election of remedies that precludes suit based on a defect within the scope of the warranty. By making the provision of the warranty its central focus, the New Home Warranty Act limits the meaning of the definition of contractors to whom the statute can apply. (pp. 11-16)

3. By comparing the two statutes, it is apparent that they create a harmonious protective scheme. Each imposes a registration requirement upon a defined group of contractors. The New Home Warranty Act created a warranty program, coupled with a home buyer's right to elect remedies, and required the new home contractor to include warranty information in its registration. In place of warranty protections, the Contractor's Registration Act requires insurance and disclosure and, through implementing regulations, defines unlawful practices subject to the CFA's remedies. (pp. 16-17)

4. Czar argues that it was involved in the building of a new home and thus exempt from the remedies available under the home improvement statute and regulations. At the same time, Czar does not suggest that it registered as a new home builder under the New Home Warranty Act, or that it made available the warranty that is so central to that statute's protections. The Court declines to read the statutes as Czar suggests because it would provide less, rather than more, protection for the homeowner. The Legislature did not intend that a contractor could escape registration and participation in the warranty program applicable to new home builders and also avoid registration and compliance with the remedies available under the home improvement statute and regulations. (pp. 17-20)

5. That the Heaths hired Czar to build the kitchen and make other changes to the home not yet completed is of no moment. The Court looks beyond the description and location of the work and focuses on whether the entity hired to perform it would have been required to, or could have adhered to, the New Home Warranty Act registration and warranty program. As Czar simply did not, its argument that it was engaged in new home construction fails. (p. 20)

The judgment of the Appellate Division is AFFIRMED as MODIFIED.

JUSTICE RIVERA-SOTO has filed a separate, DISSENTING opinion, expressing the views that the work at issue was the construction of a new home; that simply because the Legislature sought to cure two different sets of ills under two different statutes does not mean that all claims involving the construction of a new home must fall under one of the statutory schemes; that the common law is designed to fill gaps that may exist between the coverage of dissimilar statutes; and that there is no gap to fill in this case because the homeowners still retain their already pled claims, including breach of contract, negligence, unjust enrichment, and unlawful possession of goods.

CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, ALBIN, and WALLACE join in JUSTICE HOENS's opinion. JUSTICE RIVERA-SOTO filed a separate, dissenting opinion.

The opinion of the court was delivered by: Justice Hoens

Argued October 20, 2008

This appeal presents us with a novel question about the scope and application of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. In short, we are required to decide whether a contractor hired by a homeowner to design and install a kitchen and to perform certain other interior work in a new home then being built for the homeowner by a different contractor, was engaged in new home construction or was instead performing home improvements. The homeowners argue that the kitchen and interior work constituted home improvements, thus subjecting the contractor to suit pursuant to the CFA because of the 2004 amendments to that statute, see N.J.S.A. 56:8-136 to -152, regulating the work of home improvement contractors. The contractor contends that any work performed as part of building a new home is excluded from the definition of home improvements that is utilized by the CFA and that the homeowners' claim is governed instead by the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20.

Because the several statutes relied upon by the parties, and the regulations promulgated pursuant to each of them, were designed to be understood and applied as an integrated scheme of protections for homeowners, and because adopting plaintiff's analytical approach might leave these homeowners without the remedy that the Legislature intended be available to them, we conclude that plaintiff, which neither acted as the general contractor nor qualified as a builder of new homes, was engaged in the business of home improvements and subject to the remedies of the CFA.

I.

The facts that are germane to our analysis of this issue are relatively few. Defendants JoAnne and Thomas Heath, Sr., contracted with a general contractor to build a new home for them in Florham Park. After much of the home had been completed, they hired plaintiff Czar, Inc., to design the kitchen, which included relocating the plumbing and electrical fixtures, to build and install custom kitchen cabinets, and to perform other interior work, ...


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