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Peter and Monica Graham v. William Muldoon

December 7, 2010


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2240-07.

Per curiam.


Submitted September 29, 2010 -- Decided Before Judges Wefing, Payne and Baxter.

Plaintiffs appeal from a trial court order granting summary judgment to defendants 17 Heller Drive L.L.C. ("Heller Drive") and its principals, William Muldoon and Brian Malat, and to defendant Rhodes, Van Note and Company ("Rhodes"). After reviewing the record in light of the contentions advanced on appeal, we affirm.

Muldoon and Malat, together with Domenic Bullaro who is not involved in this litigation, formed Heller Drive to purchase the existing house located at 17 Heller Drive in Montclair, which had been built in the 1950s. The plan was to knock down that existing house and then build and market a new one. When the project was completed, Rhodes served as the listing broker and prepared a marketing brochure that described the property as an "[e]xtraordinary new colonial." Plaintiffs purchased the home for a price in excess of $1.6 million and moved in on December 1, 2006. Approximately two weeks later, the sewer system backed up, and sewage leaked throughout the basement. A subsequent inspection revealed that the sewer line was the one installed in the 1950s when the original house had been constructed, that it had been improperly pitched at the outset and had, in addition, become blocked over the years with tree roots. Plaintiffs incurred significant expense to repair the damage to the basement and to fix this sewer line. They filed suit for damages and named as defendants Heller Drive, Muldoon, Malat, and Rhodes, as well as the contractor, architect and plumber involved in the renovations. They included in their complaint counts alleging consumer fraud, negligent misrepresentation, malicious misrepresentation, equitable fraud, and intentional fraud.

The contractor defaulted. We infer from portions of the record before us that plaintiffs' claim against the architect was dismissed for failure to file an affidavit of merit. Plaintiffs eventually settled their claims against the plumber and Heller Drive, reserving their right to appeal the trial court's grant of summary judgment with respect to consumer fraud. They now appeal from the trial court's order that granted summary judgment to defendants Muldoon, Malat, and Heller Drive on their consumer fraud claim; they also appeal from the trial court's order granting summary judgment to Rhodes on plaintiffs' claims of consumer fraud, misrepresentation and fraud.

I We turn first to plaintiffs' claim of consumer fraud, presented under New Jersey's consumer fraud statute, N.J.S.A. 56:8-1 to -106. N.J.S.A. 56:8-2 declares unlawful "[t]he act, use or employment . . . of any . . . 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 . . . in connection with the sale or advertisement of . . . real estate. . . ." There is no question that the actions of these defendants in marketing this property come within the scope of the consumer fraud statute. Strawn v. Canuso, 140 N.J. 43 (1995); Byrne v. Weichert Realtors, 290 N.J. Super. 126 (App. Div. 1996). We reject the assertion of defendants Muldoon and Malat that they were not engaged in the regular course of selling real estate, as was defendant Rhodes, and thus fall outside the protections of the consumer fraud statute. They rely upon the principle that the consumer fraud statute does not apply "to non-professional sellers of real estate, i.e., to the homeowner who sells a house in the normal course of events." Byrne, supra, 290 N.J. Super. at 134 (citations omitted).

The actions of Muldoon and Malat cannot be equated, in our judgment, with those of an individual home owner who sells his residence privately, that is, without the assistance of a broker or agent. Rather, they engaged in this business venture with the undeniable purpose of making a profit. Given the remedial purpose of the consumer fraud statute, it must be construed liberally. Scibek v. Longette, 339 N.J. Super. 72, 78 (App. Div. 2001). We would be acting counter to that purpose if we were to accept this portion of their argument.

A party alleging consumer fraud must establish three elements in order to prevail: "(1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendants' unlawful conduct and the plaintiff's ascertainable loss." N.J. Citizen Action v. Schering-Plough Corp., 367 N.J. Super. 8, 12-13 (App. Div.), certif. denied, 178 N.J. 249 (2003). While a party need not prove reliance upon the alleged unlawful conduct to establish a statutory consumer fraud claim, the party must prove, nonetheless, a causal connection between the alleged unlawful conduct and an ascertainable loss. Int'l Union of Operating Eng'rs Local 68 Welfare Fund v. Merck, 192 N.J. 372, 389 (2007). Thus, while plaintiffs need not have proved they relied upon the marketing of this house as "new" in making their purchase, they were required to prove a causal link between the marketing they claim to be unlawful and their loss.

Pron v. Carlton Pools, Inc., 373 N.J. Super. 103 (App. Div. 2004), illustrates the principle. Plaintiff engaged defendant to install a new in-ground pool on his premises; part of his decision to select defendant for the project was the representation that it did not use subcontractors to perform the work. Id. at 106. Approximately one year after completion, plaintiff experienced problems with the pool's plaster finish, and defendant refused to perform repairs, saying the problems were due to the improper use of pool chemicals, rather than any defect in workmanship. Ibid. Plaintiff sued for damages, and it developed during the litigation that defendant had used an electrician and a plumber who were not its employees, in apparent contradiction to its earlier representations. Ibid. Plaintiff, however, was not entitled to any recovery because there was no causal link between defendant's use of these subcontractors and the problems with the pool plaintiff had experienced. Id. at 111.

Plaintiffs contend that defendants marketed this house as "new," knowing that it was a "knock-down" renovation. This, they assert, was unlawful conduct which caused them an ascertainable loss. Defendants do not dispute that plaintiffs suffered an ascertainable loss but argue that their conduct was neither unlawful nor a cause of plaintiff's loss. We need not decide whether the marketing of this house fit within the statute's description of an unlawful practice, N.J.S.A. 58:8-2, for we are satisfied that plaintiffs are unable in any event to establish a causal link between that marketing and their loss.

Plaintiff Peter Graham testified along the following lines at his deposition.

A. The - - one of the things that was on our list was new construction in terms of criteria for a new house. And our understanding - - my understanding of the condition was that the street Heller Drive had a number of ranch homes that were built in the early 1950s, that several of them had been deconstructed to a point and then reconstructed, and 17 Heller Drive I understood to be ...

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