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Sale of Vehicle Without Disclosure of Prior Damage - Consumer Fraud - 10/7/1991

Knapp v. Potamkin Motors Corp., 602 A.2d 302, 253 N.J.Super. 502 (N.J.Super.Law

Div. 10/07/1991)

      [1]     New Jersey Superior Court, Law Division

      [2]     No. W-023871-89

      [3]     602 A.2d 302, 253 N.J.Super. 502, 1991.NJ.40291

      [4]     Decided: October 7, 1991.

      [5]     MICHAEL W. KNAPP, PLAINTIFF,

      v.

      POTAMKIN MOTORS CORP., DEFENDANT

      [6]     SOMERSET COUNTY

      [7]     William J. Schwartz, for plaintiff.

      [8]     Howard A. Teichman, for defendant.

      [9]     Arnold, P.J.Cv.

      [10]    Arnold

      [11]    ARNOLD, P.J.Cv.

      [12]    This is a consumer fraud action based on an allegation that

      defendant knowingly concealed, suppressed or omitted a material fact with

      the intent that plaintiff rely on the concealment, suppression or

      omission. This court instructed the jury that in order to find that

      defendant committed a consumer fraud "it is not necessary for the

      plaintiff to prove that he was misled." That language appears in the

      "Second Alternate" portion of model jury charge (civil) § 4.22 (April

      1987). The jury decided that defendant committed a consumer fraud, and

      awarded plaintiff $5,000 in damages. Defendant moves for a judgment n.o.v.

      or in the alternative for a new trial or remittitur. Based on a review of

      the history of the Consumer Fraud Act and the relevant case law, this

      court holds that the jury should not have been instructed that "it is not

      necessary for the plaintiff to prove that he was misled" and that the

      instructions were so contradictory as to constitute reversible error

      requiring a new trial.

      [13]    The material facts are as follows. On September 30, 1987,

      plaintiff, Michael Knapp, bought a "new" Chevrolet S-40 Blazer truck from

      defendant, Potamkin Motors Corp. (Potamkin). Plaintiff accepted delivery

      after dark and he noticed no damage to the truck. However, about a week

      later, after his wife discovered pieces of glass behind the front seat,

      plaintiff examined the truck and found places where paint had been sprayed

      on parts not normally painted. He brought the truck to an expert in the

      auto body repair business who told him that the roof and other areas had

      been damaged and improperly repaired. Plaintiff sued Potamkin alleging,

      inter alia, that Potamkin violated the Consumer Fraud Act by selling him

      as "new" a truck that had been substantially damaged prior to delivery. At

      trial, the expert testified that the repairs had not been properly made,

      that at the time of his inspection it would have cost $2,000 to properly

      repair the truck, and that it would now cost in excess of $4,000 to

      properly repair the truck. Potamkin's representative in his testimony

      admitted that the truck had been damaged in transit from the factory, and

      that this had not been disclosed to plaintiff. He testified that no

      disclosure was made because the cost of the repairs was less than $400 and

      Potamkin had a policy of not disclosing to a customer that a vehicle being

      sold as "new" had sustained damage unless the cost of repair exceeded

      $400. Potamkin argued that the car had been properly repaired.

      [14]    As originally enacted in 1960, the Consumer Fraud Act, N.J.S.A.

      56:8-1 et seq., did not provide a private cause of action. In section 2,

      it declared certain practices to be unlawful "whether or not any person

      has in fact been misled, deceived or damaged thereby" and gave the

      Attorney General certain powers to redress violations. N.J.S.A. 56:8-3 et

      seq. In 1971, the act was substantially amended and section 19 was added.

      That section allows a private cause of action by a person who has been

      damaged as a proximate result of a violation of the act. Specifically

      section 19 reads in relevant part:

      [15]    Any person who suffers any ascertainable loss of moneys or

      property, real or personal, as a result of the use or employment by

      another person of any method, act, or practice declared unlawful under

      this act or the act hereby amended and supplemented may bring an action or

      assert a counterclaim therefor in any court of competent jurisdiction . .

      . .

      [16]    The legislative history of the 1971 amendment is very meager and

      is set forth in Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 471-472,

      455 A.2d 508 (App.Div.1982). In Skeer the court concluded that the 1971

      amendment was intended to encourage private parties to bring their own

      actions instead of the Attorney General and to provide an incentive for an

      attorney to take a case by mandating payment of attorneys fees and treble

      damages. But, there is no legislative history to indicate whether the

      Legislature considered the relationship between the language in section 2,

      declaring certain practices to be unlawful "whether or not any person has

      in fact been misled, deceived or damaged thereby," and the requirement in

      section 19 requiring a person to show damages as a proximate result of a

      violation of the Consumer Fraud Act in order to recover.

      [17]    This court agrees with defendant that the only logical

      interpretation of sections 2 and 19 is that the Attorney General has the

      authority to seek to redress and enjoin violations of the act whether or

      not any person has been misled, damaged or deceived thereby, but that a

      private person must be misled and damaged as a proximate result of a

      violation of the act in order to have standing to sue. This court's

      reasoning is as follows.

      [18]    There are two categories of offenses in the Consumer Fraud Act.

      Chattin v. Cape May Greene, Inc., 124 N.J. 520, 522, 591 A.2d 943 (1991)

      (Stein, J., concurring). The first category of offenses -- unconscionable

      commercial practices, deception, fraud, false pretenses, false promise and

      misrepresentation -- are affirmative acts. They do not require proof of

      intent to deceive. Ibid. The second category differs from the first

      because they are acts of omission and they do require proof of intent to

      deceive.*fn1 This distinction is similar to the distinction between

      equitable fraud and legal fraud. Ibid.; see also Jewish Center of Sussex

      County v. Whale, 86 N.J. 619, 624-625, 432 A.2d 521 (1981). Like the first

      category, equitable fraud does not require proof of intent to deceive.

      However, legal fraud is similar to the second category because scienter

      and proof of damage proximately caused by the act are required.

      [19]    The elements of legal law fraud are: (1) material

      misrepresentation of a presently existing or past fact, (2) knowledge of

      its falsity and an intention to obtain an undue advantage and (3) the

      intention that the other party rely thereon, resulting in reliance by the

      other party to his detriment. Jewish Center of Sussex County v. Whale,

      supra. These elements of proof are set forth in the third paragraph of the

      "Second Alternate" portion of model jury charge 4.22. But the second

      paragraph of that charge recites that "it is not necessary that any person

      has in fact been misled or deceived." This charge is correct in an action

      brought by the Attorney General since section 2 of the act specifically

      provides that such proof is not necessary. However, this charge is

      inconsistent and confusing when a private party brings an action since

      that party must prove the elements of legal fraud as well as damages under

      section 19. See Mishinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 473,

      541 A.2d 1063 (1988).

      [20]    The verb mislead means to lead in a wrong direction, to deceive.

      Webster's Third New International Dictionary (1981) at 1444. To instruct

      the jury that plaintiff had to prove all of the elements of legal fraud,

      including damages, while also instructing them that plaintiff did not have

      to prove that he was misled, is to give the jury contrary instructions.

      These instructions were so contrary as to constitute error and require a

      new trial. Davidson v. Fornicola, 38 N.J. Super. 365, 118 A.2d 838

      (App.Div.1955).

      [21]    Accordingly, defendant's motion for a new trial is granted. At the

      new trial this court will not instruct the jury that "it is not necessary

      for plaintiff to prove that he was misled."

      

       Opinion Footnotes

      

      [22]    *fn1 Specifically, they require the knowing concealment,

      suppression, or omission of any material fact with the intent that others

      rely on such concealment, suppression or omission. Fenwick v. Kay American

      Jeep, Inc., 72 N.J. 372, 377, 371 A.2d 13 (1977).