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ABJ Sprinkler Co., Inc. v. Paxton Construction

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


September 23, 2010

ABJ SPRINKLER CO., INC., PLAINTIFF,
v.
PAXTON CONSTRUCTION, JON PAXTON T/A PAXTON CONSTRUCTION, CRESSE DEVELOPMENT, L.L.C., DEFENDANTS-RESPONDENTS, AND WILLIAM M. O'MEARA AND MAUREEN O'MEARA, HUSBAND AND WIFE, TIMOTHY W. MILLEVOI AND MONICA A. MILLEVOI, HUSBAND AND WIFE, COUNTRYWIDE HOME LOANS, INC., JOHN F. CRAWFORD, FRED M. HUBBARD, JR. AND DEBRA A. HUBBARD, HUSBAND AND WIFE, WELLS FARGO HOME MORTGAGE, DEFENDANTS-APPELLANTS, AND PARK PLACE MANAGEMENT, L.L.C., SELECT BANK, PHILADELPHIA FINANCIAL MORTGAGE, CITIMORTGAGE, INC., FRANCIS E. MURPHY, SR., GREENPOINT MORTGAGE FUNDING, INC., CHERIE L. DEGON, GENEVA MORTGAGE CORP., 111 EAST 17TH STREET CONDOMINIUM ASSOCIATION AND SCHINDLER ELEVATOR CORP., DEFENDANTS.

On appeal from Superior Court of New Jersey, Law Division, Cape May County, L-270-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 13, 2010

Before Judges Lisa, Reisner and Alvarez.

This appeal concerns several claims under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195, based on a condominium developer allegedly having filed false affidavits of title in the course of selling the units to several purchasers. The purchasers and their mortgage lenders appeal from a February 20, 2009 order denying their motion for entry of final judgment by default on their CFA claims. We reverse and remand.

I.

This case has a complicated history, however, most of the litigation was settled while this appeal was pending, leaving only the CFA claims.*fn1 Hence that is the only issue we address.

The CFA claims concern defendants Jon Paxton (Paxton) t/a Paxton Construction, a general contractor, and Cresse Development, L.L.C., the owner and developer of the condominium construction project (collectively, the Cresse defendants). Paxton was also the managing member of Cresse Development.

In 2004, Paxton Construction contracted with ABJ Sprinklers to install automatic fire sprinklers at the construction project, which consisted of one commercial unit and four residential units. ABJ completed the job around February 15, 2005. Between February 25, 2005, and March 4, 2005, Cresse sold units to three residential buyers and on March 11, 2005, Cresse sold the commercial unit to Park Place Management.

Prior to each of the closings, Cresse conveyed to the buyers an affidavit of title signed by Paxton, representing among other things that "[n]o judgment or other lien, including a Notice of Unpaid Balance or Lien Claim under the Construction Lien Law, has been filed against [the property]." The affidavit also attested: "There are no pending lawsuits or judgments against it or other legal obligations which may be enforced against this property." Further, the affidavit stated:

We are not aware that anyone has filed or intends to file a mechanic's or construction lien or building contract relating to this property. No one has notified us that money is due and owing for construction, alteration or repair work on this property.

However, contrary to the statements in the affidavit, Cresse had not paid ABJ for its work, and as a result, ABJ filed a construction lien against the property on March 8, 2005, followed by a lawsuit against Cresse and the owners. The owners filed a cross-claim against the Cresse defendants, who defaulted. The judge entered default judgment against the Cresse defendants on several other causes of action, entered a $92,631.45 lien in favor of ABJ against the owners' property, and entered judgment in the same amount against the Cresse defendants and in favor of the owners. However, the judge rejected the owners' CFA claims for treble damages and counsel fees. The judge focused on Cresse's delay in filing the Master Deed until July 20, 2005. That filing, in turn would have triggered a title search that would have revealed the filed construction lien. He reasoned that the late filing of the Master Deed "was mere negligence." The owners appealed.

During the course of the appeal, we granted the owners' motion to supplement the record with an excerpt from the transcript of Paxton's deposition, taken after entry of the judgment on appeal. In that deposition, Paxton admitted that at the time the affidavits were signed, he knew that there was an ongoing dispute between Cresse and ABJ over the amount of money owed for the sprinkler work. He further admitted that during the closings, Cresse owed an outstanding debt to ABJ, although the amount was in dispute.

II.

Our review of the trial judge's legal interpretations is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Having reviewed the record, we understand the trial judge's underlying pragmatic concern that ABJ's initial $46,000 construction claim had ballooned into a complex multi-party litigation, with attendant major litigation expense, and his reluctance to further complicate the litigation with the CFA claim. However, we also conclude that as a matter of law and fact, the owners established a prima facie violation of the CFA and were entitled to default judgment on that claim.

In an application for default judgment, the applicant's proofs are to be viewed "indulgently" and the inquiry is whether the applicant has presented a prima facie case satisfying all elements of the cause of action. See Heimbach v. Mueller, 229 N.J. Super. 17, 20 (App. Div. 1988). It is not appropriate for the court to judge the credibility of plaintiff's proofs, unless those proofs contain within them a clear refutation of plaintiff's cause of action; nor should the court hypothesize possible defenses for the defaulting defendant. See id. at 24-27.

The CFA prohibits both affirmative misrepresentations and knowing omissions, described in pertinent part as follows: 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, in connection with the sale or advertisement of any merchandise or real estate. [N.J.S.A. 56:8-2.]

Under the CFA, "acts of omission must be 'knowing' and committed with 'intent' to induce reliance." Vagias v. Woodmont Props., L.L.C., 384 N.J. Super. 129, 134 (App. Div. 2006). On the other hand, the prohibited affirmative acts, including misrepresentation of material facts, "do not require proof of intent to mislead." Id. at 133 (citing Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 378 (1977)). The materiality element is important:

"Not just 'any erroneous statement' will constitute a misrepresentation prohibited by [the CFA]. The misrepresentation has to be one which is material to the transaction and which is a statement of fact, found to be false, made to induce the buyer to make the purchase."

[Gennari v. Weichert Co. Realtors, 148 N.J. 582, 607 (1997) (quoting Gennari v. Weichert Co. Realtors, 288 N.J. Super. 504, 535 (App. Div. 1996)).]

On this record, we have no hesitation in concluding that Paxton's affidavits of title were issued to induce the buyers to complete the purchases of the units. Ibid. Had the buyers known about ABJ's claims, they or their title insurers undoubtedly would have required Cresse to resolve those claims before the sales closed. Thus, the representations were material to the transactions, and they affirmatively and falsely stated that there were no outstanding debts, liens, or other claims against the property. That alone is sufficient to satisfy the standard set forth in N.J.S.A. 56:8-2. See Ji v. Palmer, 333 N.J. Super. 451, 461-63 (App. Div. 2000); Vagias, supra, 384 N.J. Super. at 135-36.

However, the additional admissions in Paxton's deposition also establish that he knew the representations were false when he made them, because he knew that Cresse still owed ABJ money for the sprinkler installation and that there was an ongoing dispute over the amount due. In this context, the failure to promptly file the Master Deed is beside the point. The CFA violations occurred when Paxton signed the affidavits of title and supplied them to the buyers.

Because the buyers established a CFA violation, we reverse the order on appeal and remand this matter to the trial court to address the issues of damages and counsel fees under the CFA. In that connection, should the buyers wish to apply for counsel fees for this appeal, in addition to fees for the CFA litigation in the trial court, they should make that application to the trial judge, pursuant to the last sentence of Rule 2:11-4.

Reversed and remanded.


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