VESCOM STRUCTURES, INC. v. ENGINEERED FRAMING SYSTEMS, INC.

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NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0396-04T50396-04T5

VESCOM STRUCTURES, INC.,

Plaintiff-Respondent,

v.

ENGINEERED FRAMING SYSTEMS, INC.,

Defendant-Appellant,

and

TERMINAL CONSTRUCTION CORP. and

LIBERTY MUTUAL INSURANCE COMPANY,

Defendants-Respondents.

____________________________________

 

Argued October 6, 2005 - Decided

Before Judges Wefing, Wecker and Graves.

On appeal from Superior Court of New

Jersey, Law Division, Bergen County,

No. L-5539-03.

Jill Tobia Sorger argued the cause for

appellant (Tobia & Sorger, attorneys;

Ms. Sorger and Ronald L. Tobia, on the brief).

Benjamin D. Lentz argued the cause for

respondent Vescom Structures, Inc.

(Torre, Lentz, Gamell, Gary & Rittmaster,

attorneys; Mr. Lentz, Kevin M. Gary and

Susan M. Pascale, on the brief).

No brief was submitted on behalf of

respondents Terminal Construction Corp.

and Liberty Mutual Insurance Company.

PER CURIAM

Engineered Framing Systems, Inc. ("Engineered") appeals from a trial court order granting summary judgment to Vescom Structures, Inc. ("Vescom"). After reviewing the record in light of the contentions advanced on appeal, we affirm.

Terminal Construction Corp. ("Terminal") was the general contractor on a project involving the construction of new student housing at Montclair State University. Terminal subcontracted with Engineered to supply the floor framing, wall framing and floor system for the project. The subcontract specified that Engineered was to supply a "Vescom composite steel flooring system" and set the price at $7,362,000.

Engineered, in turn, signed a purchase order dated August 1, 2002, agreeing to purchase the necessary steel joists, pour stops, weld washers and metal decking from Vescom for $769,000. The purchase order was on Engineered's form and specified the terms of payment in the following language: "Paid five (5) days after receipt of payment from the owner. No retainage. Vendor will be paid for all fabricated material stored off-site."

Engineered made one payment to Vescom in October 2002 of $192,000. The following month Engineered sent Vescom a check for $150,000, but that check was returned for insufficient funds. That insufficiency was never cured. Vescom made its last delivery under the purchase order in December 2002, but Engineered made no further payments, leaving a balance due to Vescom of $577,000.

Vescom made continued efforts to collect payment, but these were unsuccessful, and it commenced suit in February 2003. On July 14, 2003, Joel Person, the president of Vescom, met with John Hildreth, the president of Engineered. This meeting resulted in the following letter agreement, executed by both men on behalf of their respective companies.

This letter confirms the agreement at our July 14, 2003 meeting with respect to Vescom's claim for payments due on the Montclair State University project ("the Project"):

1. EFS acknowledges that Vescom has fully performed its sub-subcontract with EFS for composite steel joists, decking, pour stops and related engineering for the Project (the "Sub-subcontract"); that Vescom has earned the full $769,000 Sub-subcontract amount; that there remains an earned but unpaid $577,000 Sub-subcontract balance; and that EFS is presently unable to pay Vescom said $577,000 Sub-subcontract balance due only to the failure and refusal of Terminal to pay EFS all amounts owed to EFS under its subcontract with Terminal on the Project.

2. EFS agrees that, to assist Vescom in its recovery of its earned Sub-subcontract balance, EFS will provide to Vescom an executed affidavit in the form attached to this letter agreement.

3. Vescom agrees that any settlement with Terminal and/or Liberty for the claims asserted in the matter of Vescom Structures, Inc. v. Engineered Framing Systems, Inc., Terminal Construction Corp. and Liberty Mutual Ins. Co., pending in New Jersey Superior Court, Essex County, Docket No. L-1763-03 (the "Action") will serve as a full release by Vescom of EFS for the earned Sub-subcontract balance and all other claims asserted or which may be asserted by Vescom against EFS in the Action. It is agreed that Vescom reserves all rights and discretion to accept or reject any such settlement with Terminal and/or Liberty on terms which Vescom alone may deem proper.

4. In the absence of such a settlement by Vescom with Terminal and/or Liberty, EFS agrees that it remains fully liable to Vescom for the said unpaid Sub-Subcontract balance.

Attached to that letter agreement was an affidavit executed by Hildreth, the concluding paragraph of which stated:

Vescom has completed all of its obligations under the Sub-subcontract and the labor and materials required thereby have been incorporated into the Project. There is presently an earned, but unpaid, balance of $577,000 under the Sub-subcontract.

This construction project spawned a number of other lawsuits, all involving the counterclaims, cross-claims and third-party complaints seemingly endemic in such construction litigation.

Vescom's action was consolidated with these various suits.

After a period of discovery, Vescom moved for summary judgment against Engineered, Terminal and Liberty Mutual. Vescom included in its moving papers a copy of Hildreth's July 23, 2003 affidavit which had been annexed to the agreement between Vescom and Engineered and which we set forth earlier in this opinion.

Engineered opposed Vescom's motion, contending that the July 2003 agreement and affidavit were executed in conjunction with Vescom's attempt to recover from Terminal and the bonding company and did not represent an admission that Engineered owed $577,000 to Vescom. According to Engineered, it had paid to Vescom all the funds that it had received from Terminal. In arguing orally against Vescom's motion, Engineered also contended that the July 2003 letter represented a new contract that superseded the August 2002 purchase order.

Terminal responded to Vescom's motion by submitting a certification executed by its president, Donald N. DiNallo, that Terminal had paid more than $800,000 to Engineered for Vescom's scope of work, and that Terminal did so relying in part on periodic affidavits from Hildreth that Engineered had paid its suppliers in full. DiNallo stated in his certification that Terminal had been forced to remove Engineered from the Montclair State project for nonperformance and that Terminal had received claims in excess of $2,000,000 for labor and material for which Terminal had paid Engineered but for which Engineered in turn had not paid its suppliers.

After argument, the trial court granted summary judgment to Vescom against Engineered and denied Vescom's motion for summary judgment against Terminal and Liberty Mutual. Engineered now appeals from the trial court's order granting Vescom's motion. Vescom has not cross-appealed.

Engineered makes three contentions on appeal. It asserts that the trial court erred in granting summary judgment because there was a genuine issue of material fact whether the agreement of July 2003 represented a new contract between the parties, that the trial court erred in ruling that the delay in payment on the part of Engineered was unreasonable as a matter of law and that the trial court erred in certifying its order as final under R. 4:42-2.

Our review of the trial court's order is de novo, applying the same standard as did the trial court to determine whether there is a genuine issue of material fact. Turner v. Wong, 363 N.J. Super. 186, 198-200 (App. Div. 2003). Thus, as must a trial court, we, too, must determine whether "the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

If we conclude that no genuine issue of material fact does exist, we must then analyze whether the trial court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998)). At that point, "a trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Turner, supra, 363 N.J. Super. at 199 (quoting Manalapan Realty, L.P. v. Twp. Comm. of the Twp. of Manalapan, 140 N.J. 366, 378 (1995).

We reject Engineered's argument that a jury should have determined whether the July 2003 agreement was a new, superseding contract. The principles underlying a claim of a substituted contract were illustrated in Rosenberg v. D. Kaltman & Co., 28 N.J. Super. 459 (Ch. Div. 1953). The plaintiff in that case was employed as a sales supervisor for the defendant, and in December 1950 signed a contract containing a restrictive covenant in the event he ceased working for the defendant. Id. at 461. In March 1953 he signed another restrictive covenant, less extensive in its scope than the first. Id. at 462. The plaintiff then contended that the second covenant replaced the first. Ibid. The Chancery Division judge rejected his argument, stating

[t]he general rule is that a subsequent contract covering the same subject matter and made by the same parties, but containing terms inconsistent with the former contract so that the two cannot stand together, rescinds, supersedes and substitutes for the earlier contract and becomes the only agreement on the part of the parties on the subject matter.

[Id. at 463-64]

He noted that in order for the second contract to supersede and replace the first, "[t]he terms of the second contract must be so inconsistent with those of the former contract that they cannot stand together." Id. at 464.

We concur entirely with the trial court that the terms of the July 2003 agreement are not inconsistent with the terms of the earlier purchase order and, thus, the July 2003 agreement may not be deemed a substituted contract. The provision in the July 2003 agreement under which Vescom agreed to release Engineered in the event it negotiated a settlement with either Terminal or Liberty Mutual is not inconsistent with the original purchase order; nothing within that July 2003 agreement could reasonably be read as an agreement by Vescom to look solely to Terminal and Liberty Mutual for payment. Further, there is no uncertainty or ambiguity in the July 2003 agreement which would warrant parol evidence or departure from the general rule that contract interpretation is a legal question, to be decided by the court. Driscoll Constr. Co., Inc. v. State of New Jersey Dep't of Transp., 371 N.J. Super. 304, 313 (App. Div. 2004).

We also reject Engineered's contention that the trial court erred in ruling that the delay in payment was unreasonable as a matter of law. Before the trial court, Engineered contended that under the August 2002 purchase its obligation to pay Vescom was conditioned upon Terminal paying Engineered for Vescom's work. The trial court rejected that construction of the contract, ruling that Engineered's receipt of payment from Terminal was not a condition precedent to Engineered's obligation to pay Vescom for the work Vescom performed. Before us, Engineered does not frame its argument in terms of the contract language; rather it contends that the motion was premature in light of the complexity of the litigation. It notes, for instance, that subsequent to this motion, Montclair State University was added as a party litigant.

We do not consider Engineered's argument persuasive. We are unable to perceive how the University's entry into this litigation affects the proper interpretation and construction of the contractual obligation owed to Vescom by Engineered. Vescom's contractual relationship was with Engineered, not with the general contractor, nor with the owner or the architect or engineers. It was entitled to have its rights and duties analyzed in terms of its own contract.

The use of conditional payment clauses has increased significantly in recent years. Margie Alsbrook, Comment, Contracting Away an Honest Day's Pay: An Examination of Conditional Payment Clauses in Construction Contracts, 58 Ark. L. Rev. 353 (2005). The majority approach in considering such clauses is to interpret them as imposing a reasonable time for payment. Id. at 354. A contrary interpretation places the risk of non-payment upon the subcontractor; it exposes the subcontractor to the risk of insolvency on the part of either the owner or the general contractor and also places the subcontractor at the mercy of disputes erupting between the general contractor and the owner, or disputes erupting between the general contractor and other subcontractors, leading to a delay in payment. We would be hesitant to interpret a contract to that effect absent a clear indication by the subcontractor of its understanding and acceptance of such terms.

In our judgment, an interpretation of this contract to call for payment within a reasonable time accords with the language the parties used. We note, moreover, that the August 2002 contract was on a form prepared by Engineered; if Engineered intended that its obligation to pay its subcontractor was contingent upon Terminal paying Engineered, it should have inserted clear language to such effect.

We reject the assertion put forth by Engineered that the matter was not ripe for summary judgment. It made no argument to the trial court that the materials supplied by Vescom were defective in any way, and no hint of that is contained within either the July 2003 agreement or Hildreth's annexed affidavit. Engineered makes no showing of what further discovery was needed.

It has been more than three years since Engineered's one and only payment to Vescom. It is more than three years since Vescom completed its performance. We agree with the trial court that a delay in payment of this length is unreasonable as a matter of law.

The final argument put forth by Engineered on this appeal, that the trial court should not have certified its order as final, is related to the preceding one. It contends that because of the "multiple issues" involved in the consolidated litigation, it was improper to separate out the question of its contractual duty to Vescom. We disagree, for many of the reasons we have already set forth. Vescom did not contract to assume the risk that it would not be paid for its work until all the disputants resolved their conflicts with one another. One court has described a large construction project as involving the chaos and uncertainty found on a battlefield. Blake Constr. Co. v. C.J. Coakley Co., 431 A.2d 569, 575 (D.C. 1981). A trial court confronted with a multitude of disgruntled disputants need not put off resolving one separable aspect of the controversy until all issues have been explored. Rather, handling those discrete questions that can be fairly addressed is a service to all the litigants.

The order under review is affirmed.

 

(continued)

(continued)

12

A-0396-04T5

November 30, 2005

 


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