Opinion
DOCKET NO. A-3859-13T1
01-09-2015
SAB PUBLIC ADJUSTERS, Plaintiff-Respondent, v. JAMES GORMLEY and PAULINE STEINBACHER, Defendants-Appellants.
Gregg A. Shivers argued the cause for appellants (Shivers, Gosnay & Greatrex, LLC, attorneys; Mr. Shivers, on the brief). Mark A. Rinaldi argued the cause for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Fisher and Nugent. On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3493-13. Gregg A. Shivers argued the cause for appellants (Shivers, Gosnay & Greatrex, LLC, attorneys; Mr. Shivers, on the brief). Mark A. Rinaldi argued the cause for respondent. PER CURIAM
On December 2, 2011, a fire destroyed defendants' home and took the life of their son. Scott Scelso, a representative of plaintiff SAB Public Adjusters, soon met with defendant James Gormley, and defendants agreed, by contract dated December 3, 2011, to hire plaintiff to adjust their loss in exchange for plaintiff's receipt of fifteen percent of the total sum collected from any property insurer. Defendants ultimately received $446,456.23 on their claim but refused to pay plaintiff, leading to this suit.
After a short period of discovery, defendants moved for summary judgment, arguing the contract is unenforceable due to the absence of a three-day right to rescind — a right defendants claim is militated by the Public Adjusters' Licensing Act (the Public Adjusters' Act), N.J.S.A. 17:22B-1 to -20. Their motion was denied, and defendants moved for leave to appeal, which we granted to consider this novel question regarding the Public Adjusters' Act and a regulation enacted by the Commissioner of Banking and Insurance, N.J.A.C. 11:1-37.13(b).
We start by acknowledging the Public Adjusters' Act applies because plaintiff acted or aided "an insured in negotiating for, or effecting, the settlement of claims for loss of damage caused by, or resulting from, any . . . occurrence covered under a property insurance policy." N.J.S.A. 17:22B-2. The Public Adjusters' Act prohibits a public adjuster from being compensated for its efforts "unless the right to compensation is based upon a written memorandum, signed by the party to be charged and by the adjuster, and specifying or clearly defining the services to be rendered and the amount or extent of the compensation on a form and with such language as the commissioner may prescribe." N.J.S.A. 17:22B-13(b). Based on this delegation of power, the commissioner adopted a regulation declaring the written memorandum required by the statute must "conform to the requirements of the Consumer Contracts Act" (the CCA), N.J.S.A. 56:12-1 to -18, and — of importance to this appeal — "as applicable, the Federal Trade Commission Act as set forth at 15 U.S.C. 41, and 16 C.F.R. subsection 429.1 (1993)." N.J.A.C. 11:1-37.13(b)(4) (emphasis added).
We next recognize that the contract in question does not contain a right of rescission, only a right of cancellation; that is, the cancellation provision here does not return the parties to the status quo ante but purports to entitle plaintiff to compensation even when the contract is cancelled. Other than the question whether the contract should have contained a right of rescission — to which we will shortly turn — we are satisfied the contract otherwise complies with N.J.S.A. 17:22B-13(b). It specifies and clearly defines the services to be performed by expressing plaintiff's agreement to "advise and assist in the adjustment of the insurance claim . . . covering loss which occurred the 2nd day of December, 2011, at [defendants' residence]." The contract also adequately defines the amount of compensation due plaintiff in rendering these services — fifteen percent of any sum recovered. We reject the contention that plaintiff was obligated by law to provide further detail about the services it was engaged to render.
The contract's cancellation provision authorized defendants to
terminate [plaintiff's] services by written notice . . . providing the cancellation is not in violation of N.J.S.A. 17:22B-13(c)[;] however, any such cancellation shall not terminate [plaintiff's] right to be paid as provided in this agreement.We need not consider the enforceability of the emphasized portion to a situation where the insured quickly cancelled before the adjuster performed much or any work and yet still demanded full payment, as the provision would seem to permit. Defendants made no attempt to cancel until February 15, 2012, by which time it appears likely plaintiff had substantially if not completely performed.
[Emphasis added.]
Defendants' argument that the contract is unenforceable because it lacks a three-day right of rescission is based on N.J.S.A. 17:22B-13(b), which declares that a public adjuster's "right to compensation" must be "based upon a written memorandum" that, among other things already mentioned, contains "such language as the commissioner may prescribe." In regulating pursuant to this statute, the commissioner did not expressly state that a public adjuster's contract must include a three-day right of rescission; instead, to the extent the commissioner intended to impose such an obligation, that intent was conveyed — if at all — only indirectly, by reference to three other authorities: the CCA, and "as applicable" the Federal Trade Commission Act and 16 C.F.R. § 429.1.
In considering these three authorities, we first conclude that the contract did not depart from the CCA's requirements. It is "written in a simple, clear, understandable and easily readable way as a whole," N.J.S.A. 56:12-2, and does not, in our view, violate any of the more specific provisions contained in N.J.S.A. 56:12-10. In addition, we note the CCA does not require the inclusion of a right of rescission in any contract bound by its terms. Second, it does not appear, and defendants do not argue, that the form of plaintiff's contract violated any provision of the Federal Trade Commission Act, 15 U.S.C.A. §§ 41 to 58. The matter, thus, turns on the third authority referenced by the state regulation.
N.J.A.C. 11:1-37.13(b) refers only to "the Federal Trade Commission Act as set forth at 15 U.S.C. 41." That particular statute applies only to the establishment and make-up of the Federal Trade Commission. Nevertheless, we assume for present purposes that the state regulation intended to refer to the entire act, 15 U.S.C.A. §§ 41 to 58. We find nothing in the Federal Trade Commission Act's other provisions to support defendants' position.
The third reference — 16 C.F.R. § 429.1 — imposes an obligation on "door-to-door sale[spersons]" to "furnish each buyer, at the time the buyer signs the door-to-door sales contract . . ., a completed form in duplicate captioned either 'NOTICE OF RIGHT TO CANCEL' or 'NOTICE OF CANCELLATION,' which shall (where applicable) contain" a statement that the buyer may cancel the transaction within three business days without penalty or obligation. Because the contract before us does not contain such a rescission provision, we must consider not only whether, on its face, this federal regulation has any application to public adjusters but also, if it does, whether this is an instance in which the state regulation intended the federal regulation's terms to be applicable, bearing in mind that the state regulation states only that this federal regulation has an impact "as applicable." N.J.A.C. 11:1-37.13(b)(4).
That is, because the federal regulation was not always intended to be applicable — otherwise the state regulation's inclusion of "as applicable" makes no sense — this appeal seeks our consideration of the meaning of the federal regulation's terms in light of the circumstances. In large measure, it appears to us that this determination turns on whether a public adjuster generally acts — or whether this public adjuster in particular can be said to have acted — as a "door-to-door" salesman.
Defendants contend that the answer to this question is to be found in another federal regulation — 16 C.F.R. § 429.0(a) — which defines what is meant by a "door-to-door sale." This other federal regulation — not cited in or referenced by N.J.A.C. 11:1-37.13(b) — defines a door-to-door sale as one "in which the seller or [seller's] representative personally solicits the sale, including those in response to or following an invitation by the buyer, and the buyer's agreement . . . is made at a place other than the place of business of the seller[.]" Ibid. Because these two essential aspects — location and solicitation — are joined by the conjunction "and," both must be satisfied in the buyer's favor to support a finding that a transaction constitutes a door-to-door sale.
In this case, there is no dispute about the location of the transaction; it occurred at the place of the fire loss — defendants' home — and, therefore, not at the seller's place of business. The second aspect, however, is not so clear and defies resolution by way of summary judgment.
We question but need not decide whether contracts between public adjusters and their clients are typically or usually formulated at the former's place of business or, more likely, at the location of the property loss.
That is, to fit this definition, a seller must have "personally solicit[ed]" the transaction even when responding to "an invitation by the buyer." 16 C.F.R. § 429.0(a). The federal regulation does not define the word "solicit," so we apply its ordinary meaning, N.J.S.A. 1:1-1; Johnson v. Scaccetti, 192 N.J. 256, 270 (2007), namely: to entreat, urge or petition persistently, see, e.g., Webster's II New College Dictionary 1050 (1999). Accordingly, for there to be a finding of solicitation, the buyer would have to show that, notwithstanding the buyer's invitation to the seller, the seller urged the formation of the contract.
The record on appeal contains the depositions of both defendant James Gormley and plaintiff's representative, Scott Scelso. Gormley testified Scelso was present and obtained Gormley's signature at his home the night of the fire but did not provide a copy of the contract until much later. On the other hand, Scelso testified he was asked to come to the premises by a building contractor, who had previously made referrals to him, and that he met and spoke with Gormley at the damaged home early in the afternoon of December 3; in addition, Scelso testified the contract was formed without any urging from him:
The contract signed by the parties states it was executed at 3:00 p.m. on December 3.
When I was called out on site to go there, Mr. Gormley made it very apparent that he
wanted my services. I also explained to him — I gave him my business card and said: I can come back at any time. He insisted for me to stay there and he wanted me to sign my contract because he wanted me, quote, to handle everything pertaining to the fire.
At this stage, we are required to assume the truth of the testimony of Scelso, whose company was the opponent of the motion. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Scelso's testimony does not suggest he solicited the contract and without proof of solicitation the federal regulation — even if generally applicable to public adjusters — may have no specific application here. We, thus, conclude the trial judge did not err in denying summary judgment because Scelso's testimony, if ultimately credited, negates a finding that the transaction constituted a door-to-door sale.
We would add, however, that in deciding what is before us, we have not necessarily held that the definition of "door-to-door sales" for purposes of the Public Adjusters' Act or the underlying state regulation is that which is contained in 16 C.F.R. § 429.0(a), because the commissioner did not refer to that particular regulation in adopting N.J.A.C. 11:1-37.13(b)(4); the commissioner referred only to 16 C.F.R. § 429.1, which encompasses only what is required in door-to-door sale contracts. That is, we cannot presently exclude the possibility that the commissioner intended to utilize a definition of "door-to-door sale" suggested hy New Tersey law rather than that contained in the federal regulation set forth in the uncited 16 C.F.R. § 429.0. The parties have not argued whether or to what extent New Tersey law might differ with federal law on this point, and we decline to further consider that question as a result.
In addition, the enigma posed hy this case, and the commissioner's indirect method of defining the language a puhlic adjusting contract must contain, is that the state regulation prefaced its reference to the federal regulation with the phrase "as applicahle," suggesting either there might he circumstances in which the federal regulation would not apply to a puhlic adjuster or there are portions of the federal regulation that do not necessarily apply in any circumstance. For example, the state regulation could very well have envisioned that puhlic adjusters do not always or even regularly go "door-to-door" in search of clients and that the federal regulation would have no application when the adjuster is invited hy an insured to examine a loss. It is also possihle that at times — perhaps when great calamities strike — puhlic adjusters do go door-to-door, and that the commissioner intended in those circumstances that the federal regulation would apply. In other words, it may he that the commissioner intended that the application of the federal regulation requiring a three-day right of rescission depended on the particular manner in which the contract was formed.
In future proceedings, the parties might present expert testimony to enlighten the trial court on these points and the usual way in which public adjusters are engaged.
And puzzling still is another question the state regulation provokes: if the commissioner intended to declare, as defendants argue, that all public adjusting contracts must contain a three-day right of rescission, why did the regulation not just say so? Why put public adjusters and the public to the burden of deciphering the state regulation's intentions by way of a scavenger hunt among other regulations when the requirement could have been simply and clearly conveyed as, for example, in N.J.S.A. 17:16C-100(b). Indeed, we find it ironic that a regulation which compels clarity and simplicity in public adjusting contracts should be so murky and convoluted. See, e.g., N.J.S.A. 56:12-10(a)(1) (declaring that consumer contracts should avoid "[c]ross references that are confusing," the very problem encountered here). Ultimately, however, the parties have provided us with no extrinsic evidence or other illuminating materials to ascertain the state regulation's intent. Accordingly, absent a clear understanding of the state regulation's meaning and scope, and absent a resolution of the factual disputes surrounding the formation of the contract in question, summary judgment was not applicable and the judge's denial of defendants' motion was not erroneous. We, thus, affirm the order under review and remand for further proceedings.
This provision is part of the Door-To-Door Home Repair Sales Act of 1968, N.J.S.A. 17:16C-95 to -103. The Door-To-Door Retail Installment Sales Act of 1968, N.J.S.A. 17:16C-61.1 to -90, also contains a similar provision requiring a three-day right of rescission. See N.J.S.A. 17:16C-61.6. Neither of these acts has direct application to the contract in question.
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We would add one other thing regarding plaintiff's right to compensation even if the factual and legal dispute about the contract's formation is ultimately decided in defendants' favor. In canvassing the record, we observe that defendants do not contend they attempted to cancel the contract prior to February 15, 2012, more than two months after its formation. It may be that plaintiff's performance of the contract was substantially completed by that time; it may also be that plaintiff performed in a highly competent manner and defendants benefited from those services. Notwithstanding those possibilities, defendants persist that plaintiff is entitled to no compensation either by way of its contract or through equitable principles. This argument is based on the Public Adjusters' Act itself, which links the adjuster's "right to compensation" to the execution of a contract conforming to the Public Adjusters' Act and the state regulation in question. N.J.S.A. 17:22B-13(b).
In this manner, the Public Adjusters' Act may have the unforeseen consequence of working a forfeiture against a public adjuster who may have, in all good faith, competently performed a legally-deficient contract. As we have demonstrated, plaintiff was in compliance with the Public Adjusters' Act so far as the Act goes, and it is only with the possible violation of the convoluted state regulation that plaintiff's right to compensation has been jeopardized. Equity, as the ancient maxim declares, "abhors a forfeiture." See Walle v. Bd. of Adjustment, 124 N.J. Super. 244, 247 (App. Div. 1973); In re Estate of Peterson, 316 N.J. Super. 549, 552 (Ch. Div. 1998); Giberson v. First Nat'l Bank of Spring Lake, 100 N.J. Eq. 502, 507 (Ch. 1927). And, although a court's inherent equity power to preclude a forfeiture may be invoked only so far as the law permits, Dunkin' Donuts of Am., Inc. v. Middletown Donut Corp., 100 N.J. 166, 182 (1985), in adjudicating the parties' disputes we do not necessarily foreclose consideration of a quantum meruit award even if it is ultimately found plaintiff acted in the manner of a "door-to-door salesman." In short, a rejection of plaintiff's monetary claim may prove highly inequitable if the sole ground upon which rejection is based arises from a tenuous and tortured connecting of the dots from statute to state regulation to federal regulation. In that circumstance, we do not foreclose the trial judge's consideration of whether it would be equitable to allow defendants to be unjustly enriched by plaintiff's services. See Starkey v. Estate of Nicolaysen, 172 N.J. 60, 69 (2002) (recognizing an attorney's failure to memorialize a retainer agreement does not foreclose quantum meruit recovery because a contrary outcome would be unfair to the attorney and permit a windfall for the client).
For these reasons, we affirm the denial of defendants' motion for summary judgment and remand for further proceedings in conformity with this opinion.
Affirmed. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION