September 24, 2012
KENNETH JECAS AND CAROLYN SUE JECAS, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
D&R BOATS, INC., D&R BOAT WORLD, ROBERT BARONE, DONALD BARONE, AND JACK FERGUSON, DEFENDANTS-RESPONDENTS/ CROSS-APPELLANTS, AND ANCHOR MARINE SERVICES OF NJ, INC. AND PHILLIP MORRIS, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3238-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 10, 2012
Before Judges Parrillo, Sabatino and Fasciale.
Plaintiffs Kenneth and Carolyn Sue Jecas*fn1 appeal from a July 9, 2010 order granting summary judgment to defendants D&R Boats, Inc. and D&R Boat World (collectively D&R), as well as three individuals associated with D&R, Robert Barone, Donald Barone, and Jack Ferguson (individual defendants).*fn2 Defendants cross-appeal from a May 28, 2009 order vacating an order dismissing the case. We reverse the July 9, 2010 order granting summary judgment to D&R but affirm the dismissal of plaintiffs' complaint against the individual defendants. We affirm the May 28, 2009 order.
In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46-2(c) that governs the trial court. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). We must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Viewed most favorably to plaintiffs, the summary judgment record established the following facts.
In 2004, plaintiffs shopped for a powerboat that contained an onboard generator.*fn3 They intended to replace a boat that they purchased in 2003 from D&R that lacked a generator. They returned to D&R and noticed a used poster in its showroom advertising a boat containing an onboard generator. They explained to a D&R sales representative that they desired a boat containing a generator and selected the advertised boat.*fn4
Although D&R knew that the generator would not run, D&R did not provide that information to plaintiffs. In August 2004, plaintiffs purchased the boat for $83,180 without knowing that the generator was defective.
D&R delivered the boat to plaintiffs' boat club and presented them with an "as is" delivery receipt. Plaintiff asked the D&R representative, defendant Ferguson, to demonstrate how to operate the equipment on the boat and discovered that the generator would not operate. Plaintiff then refused to accept delivery of the boat unless D&R agreed to repair the generator. D&R's representative indicated that D&R would pay for the repair costs or replace the generator. Plaintiff then accepted delivery of the boat.
D&R asked an owner of New York Marine Generator Co. (NYM) to repair the generator for plaintiffs. NYM's owner inspected the generator, tuned it up, and informed plaintiff that the generator was now working. Approximately one week later, plaintiff started the generator and copious amounts of smoke billowed out. In October 2004, plaintiffs removed the boat from the water for winter storage, but plaintiff continued to follow-up with D&R. D&R eventually instructed plaintiff to contact Anchor Marine, another repair company, to complete the repairs.
Plaintiff contacted Anchor Marine and its representative requested $500 to remove the generator from the boat for inspection. Plaintiff relied on D&R's representation that it would pay for the repairs and charged the $500 on his credit card expecting D&R to reimburse him. After several months, Anchor Marine informed plaintiff that the generator could not be repaired and it would cost $4,800 for a new one plus $2,000 in labor costs. D&R refused to pay. Without plaintiffs' authorization, Anchor Marine then charged plaintiff's credit card $1,542.99.
Subsequently, plaintiff filed a breach of contract special civil part
(SCP) pro se complaint against D&R in Somerset County, and sought
$8,260 in damages to cover the full cost of the repairs. D&R then
agreed to repair the generator if plaintiff dismissed the SCP
complaint, which plaintiff did. Plaintiff, however, reserved his right
to pursue additional claims against D&R and Anchor Marine.*fn5
D&R fixed the generator and re-installed it on the boat, but
refused to reimburse plaintiffs $1,542.99, the amount that Anchor
Marine had unilaterally charged plaintiffs' credit card. Plaintiffs
then filed this complaint (the Monmouth County complaint) against D&R,
Anchor Marine,*fn6 and the individual
Defendants filed a motion to dismiss the Monmouth County complaint and argued that the entire controversy doctrine barred plaintiffs from proceeding because the SCP complaint had been dismissed with prejudice. In December 2007, the court granted defendants' motion. Plaintiffs then filed a motion in Somerset County seeking to modify the SCP order from "with prejudice" to "without prejudice," and on December 12, 2008, a Somerset County judge granted plaintiffs' motion.*fn8 Next, plaintiffs filed a motion in Monmouth County seeking to vacate the order dismissing the Monmouth County complaint, and on May 28, 2009, the court granted plaintiffs' motion and vacated the order dismissing the Monmouth County complaint.*fn9
Thereafter, defendants moved for summary judgment seeking to dismiss
the Monmouth County complaint. The judge conducted oral argument,
granted defendants partial summary judgment, and dismissed plaintiffs'
claims alleging misrepresentations and consumer fraud.*fn10
This appeal followed.
On appeal, plaintiffs argue that the judge (1) erred by granting summary judgment to D&R because the facts support plaintiffs' claims for consumer fraud, misrepresentation, and concealment; and (2) failed to recognize that the individual defendants are personally liable for their tortious conduct. On their cross-appeal, defendants contend that in vacating the order initially dismissing the Monmouth County complaint, the judge misapplied Rule 4:49-2 (motion to alter or amend a judgment or order) and Rule 4:50-1 (motion for relief from judgment or order).
We begin by summarizing the applicable law governing claims alleging consumer fraud. "The Consumer Fraud Act [CFA], N.J.S.A. 56:8-1 to -195, provides a private cause of action to consumers who are victimized by fraudulent practices in the marketplace." Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 576 (2011). The CFA is intended to "be applied broadly in order to accomplish its remedial purpose," Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 264 (1997), and therefore is to be liberally construed in favor of the consumer, Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994).
The elements of a CFA claim are: (1) an unlawful practice,
(2) an ascertainable loss, and (3) a causal relationship between the unlawful conduct and the ascertainable loss. Lee v. Carter-Reed Co., 203 N.J. 496, 521 (2010). A consumer who can prove these elements is entitled to legal and/or equitable relief, treble damages, and reasonable attorneys' fees. Ibid. (citing N.J.S.A. 56:8-19).
The CFA defines an unlawful practice as: 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, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby. [N.J.S.A. 56:8-2.]
Such practices can be divided into three general categories: affirmative acts, knowing omissions, and regulatory violations.*fn11 Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 556 (2009). "[A] person who makes an affirmative misrepresentation 'is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence, or intent to deceive.'"
Suarez v. E. Int'l College, ___ N.J. Super. ___, ___ (App. Div. 2012) (slip op. at 22) (quoting Gennari v. Weichert Co. Realtors, 148 N.J. 582, 605 (1997)). Although intent is not an essential element for violations based on affirmative acts, where a plaintiff seeks to recover based upon a defendant's omission, the plaintiff "'must show that the defendant acted with knowledge, and intent is an essential element of the fraud.'" Ibid. (quoting Bosland, supra, 197 N.J. at 556). "The capacity to mislead is the prime ingredient of all types of consumer fraud." Cox, supra, 138 N.J. at 17.
Regarding "unconscionable commercial practice," the Court has recognized that "the Legislature must have intended that substantial aggravating circumstances be present in addition to" a mere breach of contract or breach of warranty, since "any breach of warranty or contract is unfair to the non-breaching party." Id. at 18. The Court also noted that proof of an unconscionable commercial practice is not necessary to establish a violation of the CFA. Id. at 19. "Rather, the [CFA] specifies the conduct that will amount to an unlawful practice in the disjunctive," ibid. (emphasis added), and includes "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," N.J.S.A. 56:8-2 (emphasis added). Proof of any one of those acts or omissions is sufficient to establish unlawful conduct under the CFA. Cox, supra, 138 N.J. at 19.
An "ascertainable loss" is one that is "quantifiable or measurable" rather than "hypothetical or illusory." Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 248 (2005). Examples include an out-of-pocket loss, the replacement cost of a defective product, or a demonstrable loss in value. See Lee, supra, 203 N.J. at 522; Thiedemann, supra, 183 N.J. at 248.
Finally, causation under the CFA requires demonstration that the consumer suffered an ascertainable loss "as a result of" the unlawful practice. Lee, supra, 203 N.J. at 522 (quoting N.J.S.A. 56:8-19). Notably, the CFA does not require a showing of "reliance" to prove causation. Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., 192 N.J. 372, 391 (2007); see also Gennari, supra, 148 N.J. at 607 (noting that while "[a]t common law, independent investigations could signal a lack of reliance," the CFA "does not require proof of reliance"). Nor does the unlawful conduct need to be the sole cause of the harm. Varacallo v. Mass. Mut. Life Ins. Co., 332 N.J. Super. 31, 48 (App. Div. 2000).
Applying these principles to plaintiffs' allegation that D&R committed consumer fraud, we conclude that genuine issues of material fact exist to warrant denial of D&R's summary judgment motion and reversal of that aspect of the trial court's July 9, 2010 order.
When D&R acquired the boat from its previous owner, D&R's representative inspected it and documented that the generator would not "keep running." D&R then placed a written note in the boat's file and thereafter ignored the defective generator. D&R posted an advertisement for the boat in its showroom, noting that the boat possessed an onboard generator. D&R concealed the information it possessed that the generator would not run and then, upon delivery of the boat to plaintiffs, attempted to obtain plaintiffs' signature on an "as is" delivery receipt.
Giving plaintiffs the benefit of all reasonable inferences, a jury could find that D&R committed (1) an affirmative misrepresentation by implying in its advertisement that the boat contained a functioning generator, or (2) an omission with knowledge by failing to disclose that the generator was defective. See Bosland, supra, 197 N.J. at 556. The advertisement had "[t]he capacity to mislead," which is "the prime ingredient of all types of consumer fraud." Cox, supra, 138 N.J. at 17.
Moreover, it is undisputed that plaintiffs suffered an ascertainable loss comprised of the $500 deposit to NYM and the $1,542.99 amount Anchor Marine charged. A jury could reasonably find that this loss was ascertainable and resulted from D&R's initial misrepresentation. See N.J.S.A. 56:8-19.
Defendants cite D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11 (App. Div. 1985), regarding the distinction between claims for consumer fraud and breach of contract. In D'Ercole, the defendant sold the plaintiff a tow truck that almost immediately suffered mechanical failures; the defendant then failed to honor its warranty to repair those failures. Id. at 13-14. We found that the defendant's "recalcitrance . . . in failing to honor its warranty and its intransigent and shoddy attitude toward plaintiff" did not rise to the level of "unconscionable commercial practice." Id. at 28. Unlike in D'Ercole, D&R indisputably knew about the defective generator before plaintiffs expressed an interest in purchasing the boat. Also, D'Ercole dealt with an alleged "unconscionable commercial practice," whereas D&R's conduct qualifies as potentially fraudulent, deceptive, misleading, or a knowing omission of a material fact, none of which requires a showing of unconscionability. Cox, supra, 138 N.J. at 18-19. Thus, we distinguish D'Ercole factually.
Defendants also compare plaintiffs' purchase of the boat to Thiedemann, supra, in which the Court cited with approval a trial court's finding that what plaintiffs urge here is that they are entitled to a Mercedes-Benz motor vehicle without any flaws or glitches, without any reasonably-remediable problems, and without any of the ordinary tribulations of automobile ownership or lease: in other words, a perfect car unaffected by the laws of physics and common sense. [183 N.J. at 243.]
In Thiedemann, the defendant repaired a fuel gauge under warranty, at no cost to the plaintiffs. Ibid. The Court found that plaintiffs failed to show an ascertainable loss. Id. at 255. Here, plaintiffs incurred financial losses because defendants refused to reimburse their out-of-pocket expenses as promised.
Next, we agree with the judge that the individual defendants were entitled to summary judgment. Although the CFA can impose liability upon an individual, that individual can only be liable for his/her own affirmative acts or knowing omissions. Allen v. V & A Bros., Inc., 208 N.J. 114, 131-33 (2011). Such an individual may not be held liable under the CFA "merely because of the act of the corporate entity." Id. at 132.
Plaintiffs failed to produce sufficient credible evidence that the individual defendants personally committed any affirmative acts or knowing omissions warranting liability under the CFA, even when viewed in the light most favorable to plaintiffs. Although plaintiffs assert that both Robert Barone and Donald Barone were involved in plaintiffs' negotiation for and purchase of the boat, plaintiffs presented no evidence that Robert or Donald personally made any affirmative representations regarding the condition of the generator or knew of the condition of the generator before it was discovered by plaintiff upon delivery. Similarly, plaintiffs failed to show that Ferguson -- who was not involved in the sale of the boat and merely delivered the boat to plaintiff as instructed by D&R --knew of the generator's condition before he tested it in plaintiff's presence.
Plaintiffs also claim that the individual defendants falsely promised to repair the generator to induce plaintiffs to accept delivery; however, even under plaintiffs' version of the facts, D&R referred plaintiffs to NYM, who attempted, albeit unsuccessfully, to repair the generator within a month after delivery, at no cost to plaintiffs.
We reject plaintiffs' contention that their "tort" claims against the individual defendants should not have been dismissed because "corporate officers and employees are personally liable for their torts, even if acting on behalf of a corporation, and even if the corporation is also liable."*fn12
Defendants urge that we uphold the dismissal of the Monmouth County complaint because (1) plaintiffs' "non-descript" claims of misrepresentation are more akin to claims of fraud than of negligence, and (2) allowing plaintiffs' misrepresentation claims to proceed "would be to convert every garden-variety breach of contract action into a . . . tort claim."
"A tort remedy does not arise from a contractual relationship unless the breaching party owes an independent duty imposed by law." Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 316 (2001); see also Int'l Minerals & Mining Corp. v. Citicorp N. Am., Inc., 736 F. Supp. 587, 597 (D.N.J. 1990); New Mea Constr. Corp. v. Harper, 203 N.J. Super. 486, 493 (App. Div. 1985). "'Generally speaking, there is no general duty to exercise reasonable care to avoid intangible economic loss or losses to others that do not arise from tangible physical harm to persons and tangible things.'" Saltiel, supra, 170 N.J. at 310 (quoting W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 92 at 657 (5th ed. 1984)). Our courts have found that some circumstances impose duties under both contract and tort, such as with doctors, attorneys, manufacturers, or bailees. Id. at 317. However, in those cases, the law imposed duties independent of those that arose under contract, for example, the duty to exercise due care. Ibid. There is no such duty here.
Finally, we reject defendants' argument on their cross-appeal that the judge erred by vacating the order dismissing the Monmouth County complaint.
A motion for relief from judgment under Rule 4:50-1 should be granted sparingly. A trial court's decision under Rule 4:50-1 is entitled to "substantial deference, and should not be reversed unless it results in a clear abuse of discretion."
U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467 (2012). "[A]lthough the ordinary 'abuse of discretion' standard defies precise definition, it arises when a decision is 'made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007) (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). We discern no abuse of discretion here.
Rule 4:50-1(f) allows the court to vacate a final judgment for "any other reason justifying relief from the operation of the judgment or order." Subsection (f) is the "catchall" category. "No categorization can be made of the situations which would warrant redress under subsection (f). . . . [T]he very essence of (f) is its capacity for relief in exceptional situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice." Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966) (citation omitted); see also DEG, LLC v. Twp. of Fairfield, 198 N.J. 242, 269-71 (2009).
To obtain relief under subsection (f), the movant must demonstrate that the circumstances are exceptional and that enforcement of the order or judgment would be unjust, oppressive or inequitable. Nowosleska v. Steele, 400 N.J. Super. 297, 304-05 (App. Div. 2008); City of East Orange v. Kynor, 383 N.J. Super. 639, 646 (App. Div.), certif. denied, 188 N.J. 352 (2006). Plaintiffs showed that they are entitled to relief under subsection (f).
Although defendants maintain that the SCP settlement operated as a dismissal on the merits, the Somerset County judge found that the dismissal of the SCP complaint "was not a determination of the merits of the case," and that any settlement between plaintiff and D&R "was conditioned on the defendant performing in some way which, apparently, never --never got done, at least not done to the satisfaction of the plaintiff." We also note that there was no written stipulation of dismissal of the SCP action, nor a general release executed by plaintiff, substantiating defendants' contention that the dismissal was intended to foreclose further litigation.
We have carefully considered the remaining arguments of the parties and conclude that they are without sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed in part; reversed in part.