Civil judgment concerning a claim for damages by Su Feng-wen
Case:
Civil judgment concerning a claim for damages by Su Feng-wen
Key Words:
condominium with an additional floor level, concealment of information, punitive damages
Reference:
Panchiao District Court Civil Judgment (87) Su Tzu No. 575.
Industry:
Housing Construction Industry (4601)
Relevant Laws:
Summary:
1. According to the plaintiff: Defendants Chien Hung Construction Company Ltd. ("Chien Hung"), Huang Fu (the president of Chien Hung), and Wang Fu-kang, were the builders of a residential building named "Taipei A-sha-li" located in the Tak'uai Hsi section of Taoyuan City. The condominium in the residential building were pre-sold (sold before their construction) to homebuyers through subscription. The defendants failed to apply for the construction of an additional floor level and knew that the homebuyers could not legally apply for a change of design to construct one, yet the defendants deliberately concealed this information and claimed in an advertisement that purchasers could enjoy "two floors for the price of one" and "elevated 4.2-meter high condominium space in the style of a loft." Included in the advertisement was a recommended interior design with the additional floor incorporated, leading the plaintiff to believe mistakenly that the additional floor level and extra space it provided could be legally obtained at the time of transfer of ownership of the house or by follow-up construction thereafter. The defendants' advertisement thus contained false and misleading representations concerning the additional floor level, in violation of Article 21(1) of the Fair Trade Law and Article 22 of the Consumer Protection Law. The plaintiff was deceived into signing the contract by the above fraudulent acts. The price of the condominium paid by the plaintiff was a loss suffered by the plaintiff as a result of Chien Hung, Wang Fu-kang and Huang Fu's intentional violation of the Fair Trade Law and the Consumer Protection Law and Huang Fu's illegal business practices. It was also an illegal gain of the defendants Chien Hung and Wang Fu-kang. Under Articles 31 and 32 of the Fair Trade Law, Articles 22 and 51 of the Consumer Protection Law, Article 23 of the Company Law, and Articles 184 and Article 185 of the Civil Code, the plaintiff is entitled to claim damages calculated as twice the amount of its losses plus interest accruing from the time the loss occurred; the defendants should be jointly and severally liable for such damages. 2. According to the defendants: Each floor of the Taipei A-sha-li residential building was designed to be 4.2 meters in height. No additional floor level was included in the designs, so Chien Hung did not apply for permission to construct an additional floor level when applying for a construction license from the Taoyuan County Bureau of Public Works. As no additional floor level had been applied for, it is inconceivable that the defendant would have informed the plaintiff of the existence of a legally constructed additional floor or instruct its salespersons to inform the plaintiff of such. Furthermore, there was no mention of any "loft," "condominium with an additional floor level," or "two floors" whatsoever in the contract for the pre-sold condominium signed by both parties; nor was there record of separate measurements of the area of the floor and the additional floor level. Having moreover affixed his seal many times on the contract's appended floor plans, which do not show any additional floor designs, the plaintiff should have been clearly aware that the property at issue was a condominium with a single floor and without any additional floor levels. The contract that the plaintiff signed with Chin Ku Te Company for interior decoration proves that the plaintiff would, after the ownership of the condominium had been transferred from Chien Hung, commission Chin Ku Te, at his own separate expense, to construct the additional floor and rooms. Chien Hung's advertising literature was only for the reference of the plaintiff regarding possible space division. Whether or not to construct an additional floor was totally up to the plaintiff. The two parties did not agree to incorporate the design depicted in the advertisements as part of the contract. The plaintiff was obviously aware that under construction regulations the additional floor level could not be constructed as part of the initial construction but had to be constructed additionally; otherwise he would not have contracted Chin Ku Te to carry out additional construction after acquiring the condominium's ownership. As the plaintiff was fully aware that the additional construction would be in breach of current construction regulations, he has no grounds to claim to have been deceived into paying the installments. Advertising meant simply to attract consumers should not be taken as evidence of fraud even if such advertising is ruled to contain untruthful representations; the plaintiff must further provide substantive evidence that the defendants intentionally misled the plaintiff during the subsequent process of discussion and negotiation leading to agreement and signing of the contract. Furthermore, defendants Wang Fu-kang and Huang Fu are neither "enterprises" as defined in Article 32 of the Fair Trade Law, nor "business operators" as defined in Article 51 of the Consumer Protection Law, so the plaintiff cannot claim compensation from those two defendants pursuant to those two articles of law. Huang Fu never took part in producing the said advertisement, selling the condominiums, or signing contracts with homebuyers. He was not a builder by trade and was ignorant in the area of construction business practices. He was not involved in any way in the process of the plaintiff's purchase of the disputed real estate. Hence, Huang Fu was in no position to deceive the plaintiff. Also, Wang Fu-kang was one of the landowners of the disputed real estate. His only involvement in the real estate deal was providing his land for Chien Hung to construct "Taipei A-sha-li" upon. He did not take part in the production of the advertisement or the sale of the pre-sold condominiums; he was never aware of the contents of the advertisement. Considering the above, he could not possibly have deceived the plaintiff. Therefore, the plaintiff has no reasons to hold the three defendants jointly and severally liable for compensation. 3. Reasons for the judgment: (1) There is substantive evidence supporting the plaintiff's claim that he was deceived into purchasing the disputed condominium. (i) The sales pitch in the advertisement for "Taipei A-sha-li" produced by Chien Hung clearly included the following claims: "Elevated 4.2 meter condominiums in the style of lofts," "Enjoy two floors for the price of one," "Three-dimensional condominiums priced at NT$2.2 million and upwards," "Ingenious four rooms, accommodating a family of three generations, priced at NT$2.6 million and upwards" with floor plans and photographs showing the two-floor design. The advertisement also claimed "The second floor is best suited to accommodate Japanese style rooms constructed above the first floor's vestibule and dining room and intended for sitting and reclining purposes; Japanese style rooms do not have to be as high as the residents are tall," and "the elevated 4.2 meters...could be cut into two equal halves vertically." This advertisement is on record with the Court and its content is undisputed by both parties, and can be taken as factual evidence. (ii) The disputed condominium purchased by the plaintiff is 4.2 meters in height. The total area of the main and auxiliary property measures 16.15 p'ing [one p'ing equals 36 square feet]; the area of the staircase measures 2.01 p'ing; and the area of the public space measures 2.52 p'ing, as evidenced by the contract for the pre-sold unit on record in the case file. Clearly, the area of the disputed condominium is quite small and Chien Hung highlights how the elevated space can be used to fill out such small condominiums in its promotional advertisement by illustrations featuring an additional floor. This practice is sufficient to lead consumers into thinking that the usable area has in fact already been increased by the addition of an extra floor and that the average price per p'ing is commensurately less than it actually is. Since unit price and usable area are important factors influencing consumers' decisions, and since the defendants highlighted the use of the elevated space for an additional floor to attract buyers, the disputed condominium's capacity to accommodate an additional floor is deemed an important factor in this business transaction. (iii) According to Article 1(xv) of the Construction section of the Building Technology Regulations (the "Regulations"), an "additional floor" is defined as a floor level constructed between the floor and ceiling of a condominium. Should the area of the additional floor level exceed one-third of that of the floor proper or 100 square meters, it shall be deemed as a separate floor in its own right. A builder who wishes to build an additional level must obtain a construction license pursuant to Articles 25(1), 30, and 39 of the Regulations or apply for a change of design within the building's statutory capacity in accordance with the law. Under Article 68 of the Construction Law, illegally constructed additional levels are subject to a fine or to suspension of construction or demolition. The area of additional levels shall be calculated as part of a building's total area. If the seller or builder has exhausted the total statutory capacity of the building, buyers of condominiums therein shall not be granted licenses for additional construction. Being a professional construction company, Chien Hung could not evade accountability by claiming it was unfamiliar with the construction regulations aforementioned. As a professional construction company, it is imperative that Chien Hung knows all current construction regulations. It was under the presumption that Chien Hung knew its trade well that the plaintiff transacted with Chien Hung. However, Chien-hung, despite knowing the restrictions of the law, highlighted the feature of an additional level in its sales pitch and failed to disclose the illegality of building such an additional level. The plaintiff was thus misled into believing he could have the same construction shown in the sample condominium and signed the contract without questioning the legality of building an additional level. There is sufficient evidence to prove that Chien Hung deceived the plaintiff into expressing willingness to buy the condominium by misleading him as to characteristics of the condominium deemed material to the transaction. (iv) The defendants argued that the contract did not include the design of the additional level and that the advertisement should not be deemed part of the contract. However, to avoid infringement on consumer rights by untruthful advertisements, Article 22 of the Consumer Protection Law provides that business operators must ensure the truthfulness of the content of advertisements and their obligations to consumers shall be no less than what is stated in the advertisements. This Article of law is by nature a prohibition. As a result, indications such as "for reference only" in an advertisement cannot relieve the defendants of accountability. In its legal nature, an advertisement is an inducement to an offer. This legal nature is not changed by Article 22 of the Consumer Protection Law. However, the spirit of Article 22 dictates that once consumers sign contracts with business operators the content of advertisements shall be deemed part of the contract. The advertisement in this case was indeed produced only as a means to attract consumers and for their reference, but the plaintiff was attracted by it and signed the contract after talking to the salespersons hired by the defendants. Given the limited space of the disputed condominium, whether an additional level could be built would have been a critical factor in the sales transaction for the yet-to-be-constructed condominium and serious consideration for both the seller and the buyer. Before the deal was completed, the salespersons must have made good use of the promotional advertisement supplemented by the floor plan of the additional level and photographs. Otherwise, the small condominiums of 20 p'ing could not have been pitched as "three-dimensional condominiums priced at 2.2 million and upwards," and "ingenious four rooms, accommodating three generations, priced at 2.6 million and upwards" as the advertisement claimed. Having listened to the salespersons' explanations, the plaintiff decided to sign the contract with the defendants, thinking the space of the disputed condominium could be fully utilized by adding another floor level. It is clear that the viability of an additional floor level as recited and shown in the advertisement was a matter of agreement by both parties. Although the advertisement was not attached to the purchasing contract, it is deemed a part of the contract rather than merely as an inducement to an offer. Though the contract per se did not incorporate the construction of the additional level, the plaintiff would not have been misled if the defendant Chien Hung had not highlighted the use of an additional floor level to promote the sale of the condominium. The fact that the contract did not explicitly state the existence of an additional floor level fails to lessen the defendants' accountability for deliberately deceiving the plaintiff. (v) The defendants argued that they never promised to construct an additional floor level and that construction of such a level was totally left to the discretion and expense of the plaintiff. They further argued that, as shown by the floor plan attached to the contract, the disputed condominium had a single-floor design, and that the plaintiff fully understood this, as proven by his seal affixed on the floor plans. The defendants' arguments address only whether they had the responsibility to construct an additional floor level; they fail to address whether the option of an additional floor level was part of the contract. The defendants furthermore acknowledged that they had not applied for a license to construct additional floor levels. They nevertheless concealed such information from consumers while providing promotional blurbs such as "enjoy two floors for the price of one," and "elevated 4.2 meters in the style of lofts," and an interior decoration plan including the additional floor level for consumers' reference. The advertisement thus evoked a general impression in consumers' minds that they could legally acquire the additional space provided by the additional floor level after acquiring the condominium's ownership and by a second round of construction. Moreover, the Fair Trade Commission had previously ordered that the advertisement in this case be removed from circulation after determining it contained false and misleading re presentations concerning additional floor levels. A photocopy of the relevant FTC Disposition dated 19 September 1997, ref. Kung Chu Tzu (86) No. 159, is included in the case file. Clearly, the defendants did falsely claim that the disputed condominium could legally have an additional floor level installed as a means to promote the sales of the disputed condominium. (2) Chien Hung is a business operator and a company specializing in the design and construction of housing products; while the plaintiff is a consumer who engaged in the transaction for the purpose of using the housing product. In promoting the sale of the disputed condominium, the defendant had an obligation to be truthful in the content of its advertisements and to provide consumers not less than what it stated in such advertisements, in keeping with Article 22 of the Consumer Protection Law. The defendant highlighted the feature of the additional floor level in its promotional advertisement. However, permission to construct additional floor levels was not included in the construction license; and since the building's statutory capacity had been exhausted, the plaintiff was not legally entitled to apply for a change of design after acquiring ownership of the condominium. Knowing that the advertisement was an untruthful representation of reality, the defendant nevertheless misled the plaintiff into believing the advertisement's content. The plaintiff signed the contract, paid installments totaling NT$162,000, and suffered losses thereby. Under the aforesaid regulations, the plaintiff is well justified in claiming punitive damages from the defendant. After carefully examining the facts and finding that the defendant (Chien Hung) deliberately misled the plaintiff by its untruthful advertisements and caused him injury by the signing of the contract, this Court has found it appropriate for the plaintiff to claim damages calculated as twice the amount of the installments paid (NT$162,000 x 2 = NT$324,000). Appendix: Chien Hung Construction Company, Ltd.'s Uniform Invoice Number: 86522751 Summarized by Ch'iu Shu-fen; Supervised by Hsu Chao-ying