On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6155-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges A. A. Rodriguez, Sabatino and Fasciale.
This case arises out of a dispute regarding a contract for home renovations. Defendants Craftsman Builders, Inc. (Craftsman) and Christopher Davis (Davis) respectively, the contractor and its sole shareholder, (collectively referred to as "defendants") appeal from a jury verdict entered against them and an order denying their motion for a new trial. They contend that the judge charged the jury improperly and further erred by awarding attorneys' fees and costs pursuant to the offer of judgment rule.*fn1 Plaintiffs-homeowners, Carl Pope and Daniel Struble, cross-appeal from a mid-trial order dismissing claims that they made pursuant to the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195. We reverse the dismissal of plaintiffs' CFA claims, the jury verdict, and the award of attorneys' fees, and we remand for a new trial on all issues.
In August 2007, plaintiffs filed their complaint and alleged that they suffered damages as a result of defendants' negligence, breach of contract, and consumer fraud. Defendants then filed a counterclaim seeking unpaid fees for services rendered. In July 2009, plaintiffs filed and served an offer of judgment in the amount of $225,000.
A judge and jury tried the case in September and October 2009, during which time the judge dismissed plaintiffs' CFA claims. The jury determined that plaintiffs were twenty percent negligent and defendants were eighty percent negligent, returned a verdict of $315,000 in plaintiffs' favor on their negligence claim and $37,500 on their breach of contract claim, and awarded $36,300 in defendants' favor on their counterclaim. In January 2010, the judge awarded plaintiffs $64,287.36 in counsel fees and costs, molded the verdict to include interest and to offset defendants' verdict on their counterclaim, and entered a final judgment in plaintiffs' favor in the net amount of $360,867.76. The following facts were adduced at trial.
In 1989, plaintiffs purchased a home in Montclair (the property). The property was constructed in the 1840s and contained an addition built in 1920. In 2003, they decided to renovate the property and retained Paul Newman, an architect, to prepare the design plans. Plaintiffs' plumber, Tom Mesce, who had a work-related history with defendants, contacted Davis regarding the renovation project.
In February 2005, Pope and Davis met at the property. Pope provided Davis with the design plans that Newman prepared, and he asked Davis to prepare a bid proposal. In March 2005, Davis estimated that the project would cost $201,000 and take approximately four to six months to complete. In April 2005, Davis estimated that the job would cost $246,000. In May 2005, the parties entered into a final construction contract presented by defendants, which included a renovation cost of $259,400 and provided that [a]ll work is to be completed in a workmanship type manner according to manufacturer specifications, industry standards, design specifications[,] and accepted practices. All work will meet or exceed all relevant applicable federal, state[,] county[,] or local codes and regulations. All structural work is guaranteed for as long as you own your home, however, the guarantee is non-transferable. All work is guaranteed for a period of not less than [five] years, excepting items where the manufacturer guarantee is less than that period . . . .
The project, bar[r]ing an[y] act from God, material shortage, or natural disaster, is to be completed in the time allotted, in this case, six months. The six month project time begins with the receipt of the first payment. Should the project be delayed due to inactivity or mismanagement on the part of the contractor, the owner will be credited 1% of the project cost per week up to 10% of the initial project cost until the completion of the project.
The parties signed the contract, and in June 2005, defendants commenced working on the project.
In September 2005, the parties expanded the scope of the project and revised the contract accordingly. As a result of the revisions, including a "much larger foundation" and at least 1000 feet of additional living space, the contract price increased to $375,000 and the estimated completion time was extended to nine months or less.
Defendants then issued two change orders. In March 2006, Pope signed the first order totaling $60,200, which addressed termite damage and a fallen chimney. At the time he signed that change order, Pope noticed that the second floor had been totally redesigned; the master bath had been changed to the other side of the house; and the steps to the second floor were not built according to the plans. Davis explained to Pope that the re-design was necessary to satisfy the township's concerns that the structure was going to fail. In August 2006, Davis issued the second change order totaling approximately $40,000, but plaintiffs refused to sign it. Instead, Pope contacted Davis to express his discontent and inform him of his position that defendants were in default on the contract. In November 2006, plaintiffs repeated their discontent with defendants' work and the length of time that it was taking.
In January 2007, the township issued a notice of violation and order
to terminate the renovation work due to various failed inspections. In
March 2007, the township issued a certificate of occupancy and
plaintiffs moved back into the house and changed the locks. By the
time they took possession of the
house, plaintiffs had paid defendants a total of $446,500.*fn2
In May 2007, Davis asked plaintiffs to provide him with a
punch list; however, Pope did not consider the many problems that he
noticed to be mere punch-list related items.*fn3
Pope then hired Anthony Ciccotti (Anthony) and Ciccotti Construction (collectively referred to as "Ciccotti") to complete the renovation work.*fn4 Anthony testified on plaintiffs' behalf as a fact witness. In or around June 2007, Anthony inspected the exterior of the house and noticed a host of problems with the property.*fn5
In September or October 2007, Anthony prepared a written quote of $56,703 for the work, which plaintiffs signed, and in October 2008, Anthony increased the quote to add an additional $190,152, for a total of $246,855. Anthony explained that the total contract price included remedial and new work, consisting of a new design to the back porch. In February 2008, Ciccotti started working on the property. Upon noticing that there were three separate break points in the framing, Ciccotti retained Newman for guidance on how to make the repairs, and then repaired the framing.
Newman testified as plaintiffs' forensic expert in architecture. He explained that the renovation's construction by defendants was contrary to his design plans. In May 2006, he wrote a letter to the Montclair Building Department explaining that the ridge beam, the joist framing connecting the base to the roof, the connection of the joist to the rafters, and the use of multi-lam beams instead of lally columns all deviated from his plans. The deviations, however, were "perfectly acceptable."
Plaintiffs also presented the factual testimony of Bruce Lael, a licensed professional engineer and building code inspector. Lael inspected the property in or around April 2007. He also observed several problems with the property.*fn6
Plaintiffs produced Harbhajan Braich as their forensic engineering expert, whose testimony the judge limited to issues other than damages.*fn7 Braich visited the property three times between January and September 2009, and he performed noninvasive inspections of the property. Braich testified that Craftsman was required to follow the architectural plans, and he too observed problems with the renovation work.*fn8
Robert McLoughlin, the construction official for Montclair Township who was responsible for enforcement of the Uniform Construction Code, testified that he visited the property on September 11, 2007, after the certificate of occupancy had been issued. During his visit, he noticed electrical violations: the absence of electrical outlets and closet lights, improper wiring and lack of receptacles in the kitchen, and improper wiring of the circulator pump on the boiler. He issued violations notices relating to three sub-codes: building, plumbing, and electrical.
David J. Shih testified as defendants' forensic structural and professional engineering expert. He inspected the property and prepared a report in August 2009. In preparing his report, he reviewed Newman's and Braich's reports, as well as the inspections from the township and the architectural/design drawings that Newman had prepared.
Shih concluded that Newman's design of the lally column and ridge beam were underdesigned. There were gaps between the rafters and the ridge beam because the ridge beam was too weak, which caused deflection. According to Shih, the gap in the rafters was a design problem, not a construction-related problem.
Davis testified that before entering into the contract with plaintiffs, he advised them that there would likely be structural issues due to the age of the house. He indicated that "[t]hroughout the course of this project, the plans lacked both detail and definition to properly encompass what [plaintiffs] wanted carried out." For example, the plans did not provide details on how the new stairway should be constructed. Davis testified that the last day he worked on the property, beyond cleaning up, was February 27, 2007. ...