STROUD-HOPLER, INC. v. FARM HARVESTING COMPANY, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5510-03T35510-03T3

STROUD-HOPLER, INC.,

Plaintiff,

v.

FARM HARVESTING COMPANY, INC.,

Defendant-Respondent,

and

TOYS "R" US, INC.,

Defendant-Appellant.

_______________________________________

FARM HARVESTING COMPANY, a New

Jersey Corporation,

Plaintiff-Respondent,

v.

TOYS "R" US, INC., a Delaware

Corporation,

Defendant-Appellant,

and

MT. HOPE ROCK PRODUCTS, INC.,

Defendant.

_______________________________________

B.M. & P. LOCAL UNION #37 EMPLOYEE

BENEFIT FUNDS,

Plaintiff,

v.

INDUSTRIAL CONCRETE,

Defendant/Third-Party Plaintiff,

v.

FARM HARVESTING COMPANY,

Third-Party Defendant-Respondent,

and

TOYS "R" US,

Third-Party Defendant-Appellant.

_______________________________________

BOONTON LABORERS LOCAL 591 EMPLOYEE

FRINGE BENEFIT FUNDS,

Plaintiff,

v.

INDUSTRIAL CONCRETE CONSTRUCTION CO.,

INC.,

Defendant/Third-Party Plaintiff,

v.

FARM HARVESTING COMPANY,

Third-Party Defendant-Respondent,

and

TOYS "R" US,

Third-Party Defendant-Appellant.

DUNBAR CONCRETE PRODUCTS, INC., a

New Jersey Corporation,

Plaintiff,

v.

FARM HARVESTING CO., a New Jersey

Corporation,

Defendant-Respondent.

LOC PUMP & EQUIPMENT, INC.,

Plaintiff,

v.

FARM HARVESTING CO.,

Defendant-Respondent.

LABORERS LOCAL 913 EMPLOYEE BENEFIT

FUNDS,

Plaintiff,

v.

INDUSTRIAL CONCRETE CORP.,

Defendant/Third-Party Plaintiff,

v.

FARM HARVESTING COMPANY,

Third-Party Defendant-Respondent,

and

TOYS "R" US,

Third-Party Defendant-Appellant.

 

Argued: November 14, 2005 - Decided:

Before Judges A. A. Rodr guez, C. S. Fisher and Yannotti.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket

No. MRS-1-1124-95.

Bruce D. Meller argued the cause for appellant (Peckar & Abramson, attorneys; Mr. Meller, of counsel; Alan Winkler and Carlia M. Brady on the brief).

Richard E. Wenger argued the cause for respondent (Hedinger & Lawless, attorneys; Mr. Wenger and Anthony J. Belkowski on the brief).

PER CURIAM

Defendant Toys "R" Us, Inc. appeals from a judgment entered May 4, 2004 in favor of plaintiff Farm Harvesting Co. in the total amount of $2,513,725.34, which represents damages of $1,276,075.67 on plaintiff's breach of contract claim, pre-judgment interest of $802,144.38 and attorneys' fees in the amount of $435,505.29. The judgment also declares that plaintiff's related construction lien claim is valid and enforceable. We affirm in part, reverse in part and remand for further proceedings.

I.

These consolidated actions arise from a contract dated June 27, 1994 which provides for the performance by plaintiff of certain site work required by defendant for the construction of a warehouse and distribution center in the Township of Mt. Olive. The work, which included excavation, stripping and grading, was to be performed over a 260 acre site. The total contract price was $5,011,128. According to defendant, timing of the project was critical. Defendant wanted the distribution center operational by June 1995 so that it could be used to stock defendant's stores for Halloween and Christmas sales, which comprise 50% of defendant's annual retail sales.

Plaintiff commenced work on July 5, 1994. Defendant maintains that plaintiff failed to complete the work by the dates specified in the agreement. The dispute between the parties came to a head in March 1995, when plaintiff wrote defendant and advised that it would stop work unless it was paid in full for work previously performed. Defendant claims that it validly exercised its right to withhold payment because plaintiff overcharged, defendant incurred damages by reason of plaintiff's delayed performance, and plaintiff abandoned the project. Defendant declared plaintiff in default and terminated the agreement. These actions followed.

Following a bench trial, the judge issued a written opinion in which he concluded that defendant wrongfully terminated the agreement. The judge identified the primary issue in the case as whether plaintiff completed the site work in a timely manner. The judge found that the contract:

is not sufficiently clear with respect to completion dates. The ambiguities raised by the contract leave considerable doubt with respect to whether or not plaintiff actually complied with the terms. Mini-schedules were adopted when work fell behind; however, there is a dispute with regard to the contractual force of a mini-schedule and whether the violation of a mini-schedule could lead to termination. The Court concludes that the establishment of a mini-schedule was not intended to establish a legal obligation as much as it was an effort to try to deal with a significant, ongoing confluence of problems on the job. It is felt that plaintiff has borne the burden of proving that the contract is so ambiguous that it cannot be depended upon to establish the necessary completion date, at least to the extent that a default could be declared, and plaintiff could be terminated.

The judge noted that plaintiff had encountered various difficulties in performing the work, "some of which were beyond the control of plaintiff." The judge pointed out that the project had been delayed by bad weather, which created a "serious problem with the building pad" and required the addition of stone "because the area was so wet." The judge found that other difficulties delayed completion of the site work. Those problems included work in or around Route 206, problems encountered with design and installation of a water meter pit, and delays in the receipt of certain municipal approvals.

The judge found that plaintiff had substantially completed its work and, to the extent that it did not, plaintiff had been precluded from doing so by defendant's wrongful termination of the agreement. The judge determined that plaintiff was entitled to recover the contract price, less a fair amount allocable for the work that had not been completed. The judge additionally determined that plaintiff was entitled to be paid for certain extra work. The judge also found that plaintiff was entitled to pre-judgment interest and an award of counsel fees.

In addition, the judge denied defendant's application to invalidate plaintiff's construction lien claim. The judge found that the claim was valid even though it was based in part on requests for payment for additional work that had not been approved in writing by defendant. The judge further determined that plaintiff had not willfully overstated the claim and did not fail to join all necessary parties in the litigation concerning the validity of the claim.

Defendant appeals and raises the following contentions: 1) the contract included Exhibit H and the project specifications including the supplementary general provisions in the scope of work summary; 2) the contract was not ambiguous as a matter of law; 3) defendant validly terminated the contract because plaintiff failed to perform in a timely manner; 4) plaintiff did not substantially complete the work and therefore did not have a right to recover the balance of the contract price; 5) the trial judge erred by awarding damages for extra work claims that were barred under the contract; 6) plaintiff's construction lien claim should have been dismissed because it included amounts not based on the contract, was willfully overstated and not enforced in accordance with law; 7) defendant was entitled to indemnification for the liens filed by plaintiff's subcontractors; 8) the judge erred in awarding pre-judgment interest; and 9) the judge erred by awarding attorneys' fees to plaintiff that were unnecessary and unsubstantiated.

II.

Here, the trial judge found that defendant had wrongfully terminated the agreement. The judge based that conclusion in large part on his finding that the contract is "so ambiguous that it cannot be depended upon to establish the necessary completion date, at least to the extent that a default could be declared, and plaintiff could be terminated." Defendant argues that the judge's interpretation of the agreement was inconsistent with the plain language of the contract. We agree.

A court's role in interpreting a contract is to ascertain the intention of the parties as revealed in the language of the contract. Jacobs v. Great Pacific Century Corp., 104 N.J. 580, 586 (1986). When construing a contract, the court must consider the contract language "in the entire context of the circumstances under which it was written, and to accord the language a rational meaning in keeping with the expressed general purpose." Ibid. In ascertaining the intention of the parties, the court must consider the surrounding circumstances and the objects that the parties sought to obtain in their agreement. Schenck v. HJI Associates, 295 N.J. Super. 445, 450-51 (App. Div. 1996), certif. denied, 149 N.J. 35 (1997) (citing Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282-83 (1993)).

Moreover, courts must refrain from making a better contract than the parties have made for themselves. Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999). This principle of contract interpretation is especially pertinent in a commercial, arms-length setting. Saxon Constr. v. Masterclean, 273 N.J. Super. 231, 235-36 (App. Div.), certif. denied, 137 N.J. 314 (1994). If the terms of the agreement are clear, the court's function is to enforce the contract as written. Schenck, supra, 295 N.J. Super. at 450 (citing U.S. Pipe & Foundry Co. v. American Arbitration Ass'n, 67 N.J. Super. 384, 393 (App. Div. 1961)).

We are convinced that the trial judge departed from these principles in concluding that the contract failed to clearly spell out the dates for completion of the work and the consequences for failure to meet the contract deadlines.

Article 8.1.3 of the contract provides that the work shall be "substantially completed" and "completed" no later than the dates set forth in Exhibit H. Article 8.1.4 states:

The Work shall be deemed to be substantially completed when the Work has been completed to such an extent as to allow [defendant], without interference or interruption resulting from continuance of the Work by [plaintiff] . . . to commence and perform its fixturing and merchandising operations and other preparatory work in order that the Project may be in full operation for its intended purposes (including the issuance of permanent certificate of occupancy or its equivalent) no later than the day following the Completion Date, with nothing other than minor punch list items, primarily of a cosmetic nature, remaining to be done on the Completion Date, and [defendant's] Representative has certified to such effect.

In addition, Exhibit H states:

As defined in Article 8 of this Contract, the term "Substantial Completion Date" shall mean the date specified below for the appropriate aspect of the Work:

1. Building pad grading, stone base and preparation - August 19, 1994

2. Site grading - August 30, 1994

3. Balance of sitework - October 30, 1994

4. Asphalt wearing course - April 29, 1995

As defined in Article 8, of this Contract, the term "Completion Date" shall mean the date specified below for the appropriate aspect of the Work.

1. Building pad grading, stone base and preparation - August 30, 1994

2. Site grading - September 13, 1994

3. Balance of sitework - November 12, 1994

4. Asphalt wearing course - May 13, 1995

For each aspect of the work as noted above, that aspect's Substantial Completion Dates and Completion Dates shall have the full force and effect individually, including with respect to liquidated damages as described in Article 17 of this contract, as the defined terms Substantial Completion Date and Completion Date carry throughout the Contract.

The agreement additionally spells out the consequences for failure to perform in a timely manner. Article 17.2 of the agreement provides for the imposition of liquidated damages in the amount of $2,000 per day in the event the contractor fails to substantially complete the work by the Substantial Completion Date, or fails to fully complete the work by the Completion Date. Moreover, article 20.2 provides defendant with the right to terminate the agreement. This section of the agreement states in pertinent part that if plaintiff:

fails to make prompt payment to Subcontractor or for materials or labor, or persistently disregards laws, ordinances, rules, regulations or orders of any public authority having jurisdiction, or is otherwise in violation of any provision of the Contract Documents, then [defendant] may, without prejudice to any other right or remedy he may have, and after giving [plaintiff] and his surety, if any, forty-eight (48) hours written notice, terminate the employment of [plaintiff] and take possession of the Work . . . .

We are satisfied that the provisions of the contract establishing completion dates for the four phases of the contract work are not in any way ambiguous. Exhibit H plainly establishes the dates for substantial completion and completion of the four phases of the work. Exhibit H is explicitly incorporated in the article 8.1.3 of the agreement and article 8.1.4 makes clear that failure to complete the work by those dates permits the imposition of liquidated damages and termination of the contract.

The trial judge found that Exhibit H was not part of the contract because it was not listed as a "contract document" in article 1.1 of the agreement. However, the contract does not support this finding. Article 1.1 of the agreement states that the "Contract Documents" consist of "[t]his [a]greement" as well as certain other documents. Exhibit H was clearly part of the agreement. It was expressly referenced in article 8.1.3. Moreover, Exhibit H was listed as an item in the table of contents.

The judge also found that certain contract specifications were not part of the agreement. In our view, this finding also is inconsistent with the plain language of the agreement. Article 1.1 of the contract expressly states that the specifications are one of the "Contract Documents." The specifications are mentioned throughout the contract and detail the work that is to be performed. Exhibit E states that the "Scope of Work" is as stated in the specifications and project drawings.

We reject plaintiff's assertion that the agreement only includes certain "technical" specifications and does not encompass the "supplementary general provisions" in the specifications. The "supplementary general provisions" were part of the specification manual provided to all prospective bidders. The "technical" specifications and the "supplementary general provisions" were included in the manual. We are convinced that all of the terms in the manual were incorporated in the agreement.

The "supplementary general provisions" make clear that strict compliance with the construction deadlines established in the agreement was required. Section 1.1 of the "supplementary" terms states that this is a "time is of the essence project" and "strict adherence to project scheduling is a must." Section 1.2 states that, due to the nature of defendant's business, the project "must be" completed in accordance with the agreed construction schedule. In addition, section 1.7 states:

No extension of time beyond date stipulated in proposal will be allowed on account of inclement weather or other causes which could have been avoided by exercise of reasonable foresight on [plaintiff's] part.

These provisions are consistent with defendant's purpose of having the site work completed in an expeditious manner so that the distribution center would be built and in operation by June 1995. The plain language of the agreement reflects that timely completion of each phase of the site preparation work was necessary to achieve this purpose.

It is undisputed that plaintiff did not meet the dates in Exhibit H for substantial completion and completion of the first three phases of the work. The judge's finding that defendant wrongfully terminated the agreement was primarily based on the judge's erroneous finding that the contract was ambiguous as to the timeframes within which the work was to be performed and the consequences of a failure to perform in a timely manner. We therefore reverse the monetary judgment (including the award of pre-judgment interest and attorneys' fees) and remand for reconsideration of the determination that defendant wrongfully terminated the contract.

III.

Defendant next argues that the judge erred in finding that: the parties agreed to plaintiff's proposal to alter the dates in Exhibit H; defendant waived strict compliance with the contract's completion dates; and plaintiff's delay was justified by a combination of poor weather and the soil conditions.

The standard for our review of factual findings made by a judge is well established. The judge's findings of fact are binding on appeal unless "they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 484 (1974) (quoting from Fagliarone v. Twp. of No. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)). We may set aside the judge's findings if we are convinced that they are plainly mistaken and our intervention and correction is required. Ridley v. Dennison, 298 N.J. Super. 373, 378 (App. Div. 1997)(quoting from State v. Johnson, 42 N.J. 146, 162 (1964)).

In his decision, the judge noted that, although plaintiff signed the contract on June 29, 1994, which included the Exhibit H project schedule, John Forgatch, President and sole owner of plaintiff, submitted a new schedule that same day. Plaintiff's new schedule extended the dates in Exhibit H by six or seven weeks. The judge suggested that the submission of this schedule and defendant's execution of the contract after its receipt created some ambiguity in the contract terms for completion of the work.

We find no support in the record for this conclusion. According to article 4.10.1 of the contract, plaintiff's project schedule was to detail more specifically the manner in which it would commence and complete various portions of the work. However, in light of the completion dates set forth in Exhibit H, a project schedule submitted pursuant to article 4.10.1 cannot be used as a vehicle to alter the milestone dates for completion of the work. Furthermore, defendant never agreed to plaintiff's revised schedule for completion. Defendant executed the agreement with the completion dates in Exhibit H. Thus, the submission by plaintiff of its project schedule on June 29, 1994 provides no justification for plaintiff's undisputed failure to meet the substantial completion and completion dates in Exhibit H for the first three phases of the work.

There is also no basis in the record for any finding that defendant waived strict compliance for completion of the work. The judge noted that certain "mini schedules" had been established by the parties in order to address plaintiff's untimely performance. However, the evidence does not establish that defendant acquiesced in the delays or waived its rights under the agreement.

Indeed, as early as August 31, 1994 when it was apparent that plaintiff would not meet the first two substantial completion dates in Exhibit H, defendant wrote to plaintiff and advised that it would be held in default based on the delays unless the lost time was made up. Defendant wrote again on November 4, 1994 and demanded that plaintiff proceed expeditiously with the work. By letter dated December 2, 1994 defendant threatened to terminate the agreement because of the delays.

The agreement makes plain that defendant's efforts to address plaintiff's untimely performance do not constitute a waiver of defendant's remedies for plaintiff's failure to meet the contractual dates for substantial completion and completion of the work. The agreement expressly provides in article 7.5.2:

No action or failure to act by [defendant], Architect or [plaintiff] shall constitute a waiver of any right or duty afforded any of them under the Contract Documents, nor shall any such action or failure to act constitute an approval of or acquiescence to any breach thereunder, except as may otherwise be expressly provided in this Agreement or specifically confirmed in writing.

Furthermore, defendant's failure to exercise its right to terminate and assume responsibility for the project prior to March 17, 1995 does not constitute a waiver of these contractual remedies. Article 8.1.5 states that "[f]ailure of [defendant] to exercise its rights pursuant hereto shall not be deemed a waiver thereof, nor prevent [defendant] from exercising such rights at a later date."

The judge additionally found that plaintiff's failure to comply with the contract's completion dates was in part due to weather conditions. Relying upon Forgatch's testimony and photographs of the site, the judge found that the weather conditions could not have been anticipated and "some delay was inevitable given the wet conditions."

However, the bidding specifications placed all prospective bidders on notice that the contractor would be responsible for any delays due to the weather. An 8-page handout issued at the bidder's conference was incorporated in the minutes of the pre-bid meeting. These minutes are included in Addendum #1 to the agreement. The handout stated in pertinent part that defendant "does not recognize rain or weather delays. Time lost due to weather shall be made up without any additional cost to [defendant]."

The evidence failed to establish that rain in the vicinity of the project site was unusually heavy in July, August, September, and October of 1994. Although plaintiff's civil engineer James Beach testified that plaintiff's delays were in part due to the weather conditions, he did not compare the amount of rain that fell in the latter part of 1994 with the amount of rain that fell in prior years. Daniel K. Crowley, a construction consultant who testified for defendant, performed a detailed weather analysis and his testimony showed that the amount of rain recorded at Morristown Airport (which is less than five miles from the site) was not unusually severe in the summer and fall of 1994. In any event, the contract expressly provides that defendant would not recognize a delay due to weather conditions.

The judge also found that another factor in the delay was the condition of the soils. Again, the contract does not recognize soil conditions as a justifiable reason for delay. Along with the specifications, prospective bidders were provided with copies of reports on soil conditions prepared for defendant by Melick-Tully and Associates, Inc., consulting geotechnical engineers. One report stated in pertinent part that the soils at the site were "highly susceptible to disturbance from exposure to wet weather. . . ."

As we stated previously, section 1.7 of the supplemental general provisions of the specifications made abundantly clear that no extensions of time would be permitted due to inclement weather or any other causes that might have been avoided by "reasonable foresight." Clearly, plaintiff was on notice of the soil conditions at the site and with "reasonable foresight," plaintiff could have avoided any delays related to those conditions.

We therefore conclude that the judge erred in finding that the parties agreed to alter the completion dates in Exhibit H and in finding that defendant waived strict compliance with those construction deadlines. We further conclude that the judge erred in finding the plaintiff's delays were justified by the weather and soil conditions at the site.

However, in his written opinion, the judge cited several other reasons for plaintiff's failure to perform the agreement in a timely manner. These reasons include: the delay in deciding to use stone to address the effect of water infiltration on the building pad; the Township's disapproval of the design for proposed water and sewer facilities; the delay in securing approval by the Township of the design for the water meter; the need to construct a larger pit to house the re-designed water meter; construction problems in or around Route 206 and nearby wetlands; and the failure by defendant to provide needed information and permits from State and local officials. The judge stated that he took these factors into account in finding that plaintiff's delays were excusable.

These other reasons may, in fact, warrant a finding that defendant wrongfully terminated the contract. But the judge failed to make critical findings of fact on these issues. He did not determine whether these delays were the fault of plaintiff or defendant. He failed to detail the amount of time attributable to these delays and, whether singly or together, they explained and justified plaintiff's failure to perform the work in a timely manner. These issues should be considered by the judge on remand.

IV.

Defendant next contends that the judge erred in dismissing its counterclaim for indemnification in which it alleged that plaintiff had an obligation to discharge the construction liens of its subcontractors. We disagree.

In support of this claim, defendant relies upon articles 10.2 and 10.3 of the agreement. Article 10.2 states that plaintiff was required to discharge any lien filed or served by any of its subcontractors. Article 10.3 provides that plaintiff must indemnify and hold defendant harmless "from and against any and all loss, cost, damage or expense (including attorneys' fees) arising out of or . . . resulting from any claim" initiated against defendant by one of plaintiff's subcontractors.

When plaintiff's subcontractors filed construction liens against defendant's property, defendant demanded that plaintiff provide indemnification as required by article 10.3. In its counterclaim, defendant asserted that plaintiff had a contractual obligation to discharge the liens. In addition, in the answers to the complaints filed by the subcontractors against both plaintiff and defendant, defendant asserted cross-claims against plaintiff for indemnification. The complaints in the actions brought by the subcontractors were not tried along with plaintiff's complaint against defendant. Moreover, there was no mention of the indemnification claim at the trial of this matter.

The issue was not raised until the trial judge filed his written opinion and the parties met to discuss the form of judgment. Defendant asserted that plaintiff had not offered any defense at trial to the claim. Defendant maintained that it incurred legal costs in the actions brought by the subcontractors and plaintiff was responsible for these costs. However, defendant presented no proof of such expenses at trial. The judge found that that defendant's indemnity claim failed because it had wrongfully terminated the contract. The judge dismissed the claim.

We are satisfied that the judge reached the correct conclusion. As we stated previously, on remand, the judge must reconsider the finding that defendant wrongfully terminated the agreement. However, even if it is determined that defendant validly terminated the contract, its claim for indemnification fails because at trial it did not present any evidence of monetary loss resulting from the assertion of claims by plaintiff's subcontractors. The claim was properly dismissed.

V.

Defendant additionally contends that the judge erred in declaring that plaintiff's construction lien claim is valid and enforceable.

The Construction Lien Law (CLL), N.J.S.A. 2A:44A-1 to -38 provides that a contractor who provides

work, services, material or equipment pursuant to a contract, shall be entitled to a lien for the value of the work or services performed, or materials or equipment furnished in accordance with the contract and based upon the contract price, subject to the provisions of sections 9 and 10 of this act [N.J.S.A. 2A:44A-9 and -10]. The lien shall attach to the interest of the owner in the real property.

[N.J.S.A. 2A:44A-3.]

"The amount of a lien claim shall be limited to the contract price, or any unpaid portion therefore, whichever is less, of the claimant's contract for the work, services, material or equipment provided." N.J.S.A. 2A:44A-9. In addition, the amount for which an interest in real property may be subject to a lien

shall not be greater than . . . the total amount of the contract price between the owner and the contractor less the amount of payments made, if any, prior to receipt of a copy of the lien claim . . . .

[N.J.S.A. 2A:44A-10.]

The CLL defines "contract" to mean:

any agreement, or amendment thereto, in writing, evidencing the respective responsibilities of the contracting parties, which, in the case of a supplier, shall include a delivery or order slip signed by the owner, contractor, or subcontractor having a direct contractual relation with a contractor, or an authorized agent of any of them.

[N.J.S.A. 2A:44A-2.]

Plaintiff's construction lien claim was filed in May 1995. The claim listed the total amount of the contract, plus amendments, as $5,451,202.65. The claim was reduced by $436,579 which was stated to be an "agreement upon credit" that was "[s]ubject to additional adjustment on documentation of concrete" provided by defendant's contractor. The amount paid to plaintiff was stated to be $2,843,775.83, leaving a total lien claim in the amount of $2,170,847.82.

Relying upon N.J.S.A. 2A:44A-15(a), defendant asserts that the lien claim should not have been enforced. The statute provides that:

If a lien claim is without basis, the amount of the lien claim is willfully overstated, or the lien claim is not filed in substantially the form or in the matter or at a time not in accordance with the provisions of this act, the claimant shall forfeit all claimed lien rights and rights to file subsequent lien claims to the extent of the face amount claimed in the lien claim. The claimant shall also be liable for all court costs, and reasonable legal expenses, including attorneys' fees, incurred by the owner, contractor or subcontractor,...in defending or causing the discharge of the line claim.

[Ibid.]

Defendant argues that plaintiff wrongfully included amounts pursuant to verbal change orders. Defendant also maintains that the claim was "willfully overstated."

Defendant argues that the lien claim wrongfully included amounts claimed under certain change orders in which plaintiff sought payment of about $300,000. In Patock Constr. Co., Inc. v. GVK Enters., L.L.C., 372 N.J. Super. 380, 386 (App. Div. 2004), certif. denied, 182 N.J. 629 (2005), we pointed out that the purpose of a written contract is to provide "tangible evidence" of the claim to eliminate proof problems if the validity of the claim is litigated and to afford third parties a basis for evaluating the merits of the claim. Ibid. (citing Legge Indus. v. Joseph Kushner Hebrew Acad./JKHA, 333 N.J. Super. 537, 562 (App. Div. 2000)).

We agree with defendant that plaintiff's lien claim should not have included the amounts in its unapproved change orders. A change order request does not constitute a written contract for which a lien may be asserted under the CLL. However, we reject defendant's assertion that the lien claim in its entirety is invalid. Clearly, there was a basis for the remainder of the claim and, in that respect, the claim was valid. Depending on the outcome of the remand proceedings, the lien claim may be enforced but only to the extent that it is based on a written agreement by defendant. That does not include change orders that were submitted by plaintiff but never agreed to in writing by defendant.

Defendant also asserts that the lien claim cannot be enforced because it was willfully overstated. N.J.S.A. 2A:44A-15(a). Defendant points out that the judge initially awarded plaintiff $1,276,075.67, an amount which is about $900,000 less than the lien claim. However, to show willful overstatement, there must be evidence that the claimant is asserting a claim for monies the claimant knows it is not entitled to recoup. Patock, supra, 372 N.J. Super. at 388. We are convinced that this matter is a good faith dispute over the amounts allegedly due to plaintiff under the agreement. We agree with the trial judge that plaintiff did not assert its lien claim in bad faith.

Finally, defendant asserts that the lien claim should be set aside because plaintiff failed to join all parties who had an interest in the property and who might be "adversely affected by the judgment." N.J.S.A. 2A:44A-16(a). Defendant argues that plaintiff should have joined Stroud-Hopler and Industrial Concrete in the litigation related to the lien claim. The argument is without merit. Stroud-Hopler and Industrial Concrete were parties to the action regarding the validity of the lien claim by reason of the consolidation of that action with other actions related to this dispute. In the circumstances, joinder was not required.

VI.

Defendant also contends that the judge erred in awarding pre-judgment interest, erroneously determined that plaintiff substantially completed the contract, wrongly awarded plaintiff damages for extra work barred under the contract and erred in awarding attorneys' fees. Because plaintiff's right to relief on its breach of contract claim is subject to reconsideration, we decline to entertain these issues at this time. Defendant may raise these arguments in the event the judge finds on remand that defendant wrongfully breached the contract.

 
Affirmed in part, reversed in part and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

(continued)

(continued)

4

A-5510-03T3

January 24, 2006