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Orest Chaykowsky v. Louis Marut

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


September 7, 2012

OREST CHAYKOWSKY, PLAINTIFF-RESPONDENT,
v.
LOUIS MARUT, L & M LANDSCAPING, BRANDIELLON, INC., AND DEBORAH MARUT, DEFENDANTS-APPELLANTS/ THIRD-PARTY PLAINTIFFS,
v.
STEVEN CHAYKOWSKY, THIRD-PARTY DEFENDANT-RESPONDENT.

On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2320-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted September 21, 2011

Before Judges Graves, J. N. Harris, and Koblitz.

Defendants Louis Marut (Louis) and his wife, Deborah Marut (Deborah), are the owners of Brandiellon, Inc. (Brandiellon), a New Jersey corporation doing business as L & M Landscaping. Defendants appeal from an order dated February 5, 2010, dismissing their answer, counterclaim, and third-party complaint with prejudice; a subsequent order denying defendants' motion to restore their pleadings; and a final judgment in the amount of $2,510,798.22 following a proof hearing. We affirm except for a limited remand for the purpose of determining an appropriate award of reasonable attorneys' fees and costs of suit to plaintiff Orest Chaykowsky; and for further findings regarding plaintiff's claims against Deborah.

The relevant facts adduced from the record and the proof hearing are not complicated. Plaintiff owns several acres of land in Hopewell with two structures on it. The main house has approximately 8500 square feet of living space, and there is a smaller guest house on the property. In the summer of 2005, Louis contacted plaintiff with a proposal to improve plaintiff's property. The proposal included construction of a new 1200-foot driveway to the main house; a stone courtyard for vehicles in front of the house; a driveway connecting the main house to the guest house with a parking area for the guest house; a swimming pool; decorative boulders and stone walls; stone pillars for electric gates; a pathway from the main house to the guest house; landscape lighting; clearing and grading of plaintiff's property; planting of trees and shrubs; and the installation of a drainage system.

Following their initial discussion, plaintiff paid Louis $3500 for more detailed designs. According to plaintiff, Louis said the cost of the improvements shown on the design plans would not exceed $750,000, and plaintiff agreed to have the work done. Plaintiff paid for the work as it was performed based on invoices that Louis presented. However, the parties' verbal agreement was never reduced to writing, and plaintiff was never provided with a list of the materials that would be used to complete the project.

Defendants began clearing trees from plaintiff's property in the fall of 2005, and plaintiff made regular payments based on invoices that Louis presented. Most of the payments were by check. But plaintiff also made some cash payments because Louis "said he had to pay his amigos in cash." Whenever plaintiff made a cash payment, he had Louis initial the invoice to confirm the payment.

By late May or early June 2006, plaintiff had paid Louis more than $750,000 and plaintiff was concerned because Louis and his crew began showing up less frequently. When plaintiff confronted him, Louis said he needed another $100,000 to finish the job, and plaintiff agreed to the additional payment because he wanted the job finished.

In August 2006, plaintiff noticed "the property where the drainage was supposedly installed was soaking wet after almost any rainfall," and in September, after returning from a vacation, plaintiff observed that nothing had been done while he was away. When plaintiff asked Louis "what was going on," Louis said he needed another $100,000, but plaintiff refused to give him any more money. In a letter dated October 4, 2006, plaintiff's attorney terminated defendants' services.

Plaintiff commenced this action in September 2008, alleging among other things, breach of contract; violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-2 to -20; and fraud. Defendants filed an answer and counterclaim, and a third-party complaint against plaintiff's son, Steven Chaykowsky. In their counterclaim, defendants alleged they had not been paid for labor and materials in the amount of $277,207. In their third-party complaint, defendants alleged damages resulting from Steven's "misrepresentations."

In February 2009, plaintiff served defendants with interrogatories and a notice to produce documents. On June 5, 2009, defendants responded to the discovery requests but failed to produce: (1) 1099 or W-2 forms for the individuals who performed work on plaintiff's property; (2) documents relating to lawsuits filed against defendants; (3) documents relating to judgments against defendants; (4) documents relating to complaints made by defendants' clients to various agencies; (5) defendants' payroll records for the time period they performed work on plaintiff's property; (6) defendants' books and records from 2005 to the date of the request; (7) invoices for materials defendants' purchased for work they performed on plaintiff's property; and (8) documents regarding all subcontractors that performed work on plaintiff's property.

Due to defendants' incomplete discovery response, plaintiff filed a motion to dismiss defendants' pleading without prejudice pursuant to Rule 4:23-5(a)(1). That application was granted on November 6, 2009. In a subsequent motion, which was filed on January 15, 2010, plaintiff sought to dismiss defendants' pleading with prejudice. In a supporting certification, plaintiff's attorney stressed that defendants had failed to produce critical business records:

[Defendants'] books and records also will reveal how the Defendants applied the money that they received from Plaintiff. Did they use the Plaintiff's payments to pay for materials and for labor and subcontractors who worked at Plaintiff's property, or did Defendants spend the money on other things? Were the funds deposited into the business account, or used for Defendants' personal purposes? Were subcontractors paid the amounts listed on the invoices provided to Plaintiff? Were subcontractors not paid with the money given to Defendant Marut by Plaintiff, resulting in them leaving the job? This goes to Defendants' fraudulent scheme in violation of the Consumer Fraud Act, which requires these expenses to be spelled out in a written contract, and to his fraudulent intent to commence work with no real intention of completing it unless he was paid far more than Plaintiff understood to be the maximum contract price.

Defendants have brought this lawsuit and discovery related to this lawsuit upon themselves by not having a written, signed contract with Plaintiff, and by not having written, signed riders for any changes or additions to the original contract. Defendant Brandiellon, Inc. is a licensed Home Improvement Contractor in New Jersey. Defendants knew what the applicable laws and regulations are and chose to ignore them. They should not be allowed to avoid discovery that is relevant to Plaintiff's claims that Defendants, among other things, intentionally misrepresented their capabilities, the scope of the work to be done, and the cost of the promised work.

For these reasons, Defendants' responses to Plaintiff's requests for production of documents are not sufficient.

During oral argument on February 5, 2010, defendants' attorney claimed that virtually all of defendants' books and records were destroyed in a storm on August 2, 2009. Nevertheless, the trial court concluded that defendants failed to comply with their discovery obligations because most of the information plaintiff requested was available to defendants from other sources, such as the Internal Revenue Service, defendants' accountant, their payroll service, or their bank. Accordingly, the court granted plaintiff's motion to dismiss defendants' pleadings with prejudice and subsequently denied defendants' motion under Rule 4:50-1(f) to vacate "the dismissal with prejudice." The court found defendants "had both the opportunity and the ability to get [the discovery] materials, [but they] didn't do it."

The court conducted a proof hearing on November 19, 2010, and December 9, 2010. Defendants' attorney was present in court on both dates, and he was permitted to cross-examine plaintiff's witnesses and to present a closing statement to the court. See Chakravarti v. Pegasus Consulting Group, Inc., 393 N.J. Super. 203, 210-11 (App. Div. 2007) ("Even though a defendant who has defaulted has relinquished the right to present affirmative proofs in the matter, the right to challenge a plaintiff's showings in a proof hearing by way of cross-examination and argument should not ordinarily be precluded."); see also Jugan v. Pollen, 253 N.J. Super. 123, 129-31 (App. Div. 1992).

The trial court stated its findings and conclusions in an oral decision on December 9, 2010. The court found that "Mr. Marut quoted Mr. Chaykowsky a price of $750,000" for the landscaping work to be performed on plaintiff's property, and that plaintiff sustained compensatory damages in the amount of $802,774. The court calculated plaintiff's damages based on his expenditures in the amount of $366,307 to correct work improperly performed by defendants; the estimated cost to install the swimming pool and to complete the project in the amount of $245,000; and the "overpayment on the contract price" in the amount of $191,467.

The court also found that defendants' failure to enter into a written contract with plaintiff violated N.J.A.C. 13:45A-16.2(a)(12) and entitled plaintiff to recover under the CFA. Therefore, in addition to compensatory damages, the court awarded plaintiff statutory damages in the amount of $1,605,548, attorneys' fees in the amount of $98,612.50, and costs in the amount of $3,863.72.

Defendants present the following arguments on appeal:

POINT I

THE DEFAULT SHOULD HAVE BEEN SET ASIDE WHERE GOOD CAUSE IS PRESENT IN LIGHT OF THE DEFENDANTS' ATTEMPT BOTH BEFORE AND AFTER DISMISSAL TO COMPLY WITH THE PLAINTIFF'S DISCOVERY DEMANDS.

POINT II

THE TRIAL COURT ERRED NOT ONLY IN ANALYZING THE PLAINTIFF'S EVIDENCE RELATING TO HIS DAMAGE CLAIM, BUT IN CALCULATING THE AMOUNT AS WELL.

POINT III

DEBORAH, AN OFFICER OF BRANDIELLON, IS NOT INDIVIDUALLY LIABLE TO THE PLAINTIFF UNDER THE CFA BECAUSE SHE DID NOT PERSONALLY PARTICIPATE IN VIOLATING THE ADMINISTRATIVE REGULATIONS.

POINT IV

NEITHER INDIVIDUAL DEFENDANT SHOULD BE HELD PERSONALLY LIABLE UNDER THE CFA BECAUSE THE PLAINTIFF'S CLAIM ONLY SOUNDS IN CONTRACT.

We conclude from our review of the record that the trial court did not abuse its discretion when it granted plaintiff's motion to dismiss defendants' answer, counterclaim, and third-party complaint with prejudice, and when it subsequently denied defendants' motion to restore their pleadings. In addition, there is sufficient credible evidence in the record to support the award of treble damages under the CFA. However, there were insufficient findings to justify the award of counsel fees and costs, and those issues are remanded for reconsideration. The trial court must also reconsider whether Deborah is individually liable for plaintiff's damages.

The CFA is remedial legislation that "should be construed liberally in favor of consumers." Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994). To recover under the CFA, a plaintiff must establish three elements: "(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); see also N.J.S.A. 56:8-19.

In this case, the trial court concluded that plaintiff was entitled to recover under the CFA because: (1) defendants violated N.J.A.C. 13:45A-16.2(a)(12), which requires home improvement contracts in excess of $500 to be in writing and to contain specific information; (2) plaintiff sustained an ascertainable loss in the amount of $802,774; and (3) plaintiff's loss was attributable to the lack of a written agreement, with a "clearly stated contract price," describing the work to be performed and the materials to be used.

The scope of our review is limited. "'[W]e do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.'" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963)). In the present matter, there is substantial credible evidence to support the trial court's award of treble damages under the CFA. However, we remand the award of attorneys' fees and costs to the trial court to determine whether the fees and costs requested by plaintiff are reasonable. See N.J.S.A. 56:8-19 (stating that a successful plaintiff is entitled to "reasonable attorneys' fees, filing fees and reasonable costs of suit").

In their third point, defendants argue that the trial court erred when it determined that Deborah was individually liable under the CFA "based upon her position with the corporation." While this appeal was pending, the New Jersey Supreme Court determined that individual liability for regulatory violations under the CFA depends upon "the language of the particular regulation in issue and the nature of the actions undertaken by the individual defendant." Allen v. V & A Bros., Inc., 208 N.J. 114, 133 (2011). Thus, it is clear that Deborah is not automatically liable under the CFA due to her position as Vice President of Brandiellon, and we remand this issue to the trial court for further consideration.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. Jurisdiction is not retained.

20120907

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