C.A.S. CONTRACTING, INC. v. HALL BUILDING CORP.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5653-03T15653-03T1

C.A.S. CONTRACTING, INC.,

Plaintiff-Appellant,

vs.

HALL BUILDING CORP.,

Defendant-Respondent.

__________________________________

 

Argued: November 14, 2005 - Decided February 8, 2006

Before Judges Cuff, Holston, Jr., and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-0872-01.

Andrew Bayer argued the cause for appellant (GluckWalrath, attorneys; Mr. Bayer, of counsel; Sterling Rauf and Kimberley M. Wilson, on the brief).

Robert T. Lawless argued the cause for respondent (Hedinger & Lawless, attorneys; Mr. Lawless, on the brief).

PER CURIAM

This appeal involves a breach of contract dispute between an excavation subcontractor and the general contractor. The parties entered into four subcontracts relating to four separate public school construction projects. The subcontractor alleged the general contractor breached the contracts by refusing to pay the amounts allegedly owed as progress payments; the general contractor alleged that the subcontractor breached the contracts by abandoning construction and sought to charge the subcontractor with costs it incurred to finish the projects. Following a thirteen-day bench trial, Judge Stroumtsos found that the general contractor owed the subcontractor $77,627.53 for work completed prior to abandonment and the subcontractor owed $63,396.86 for completion costs. It is from the net judgment of $14,230.67 that the subcontractor appeals. We affirm.

C.A.S. Contracting, Inc. (CAS) is a construction company that performs excavation and related activities such as land clearing, demolition, utilities installation, trucking, soil sales and removal. In 1998 and 1999, CAS and Hall Building Corp. (Hall), a general contractor that works on both public and private construction projects, entered into four subcontracts for excavation and site work on four school projects in Monroe Township, Metuchen, Montgomery Township and Plainfield.

According to the contracts, CAS was entitled to progress payments or interim payments during the course of construction. The payments were for work performed pursuant to the contract specifications and for additional work performed pursuant to change orders entered during the course of construction. The four contracts were identical in all relevant terms. Paragraph 5.2.2 addressed "retainage/security" and provided for a 10% default retainage. Paragraph 29 of a rider to the contracts provided that the retainage could be reduced at the discretion of the general contractor and construction manager "provided all required Releases, Certification, etc., are in order and work has been performed satisfactorily." Hall reduced the retainage from 10% to 2%.

Paragraph 5.2.3 addressed the timing of the applications for progress payments. Hall instructed CAS to submit "pencil copies" of its payment applications by the twenty-fifth of each month to allow Hall to submit the application to the owner by the thirtieth of each month. Paragraph 29 of the rider to the contract provided that all applications for payment were to be made on forms prescribed by the general contractor.

Paragraph 5.2.5 addressed the timing of payment by the general contractor (Hall) to the subcontractor (CAS). It provided that the general contractor would pay the subcontractor no later than seven days after the owner paid the general contractor.

Paragraph 5.2.6 addressed the procedure for dealing with delayed progress payments. It allowed CAS to stop work if it did not receive payment within seven days after Hall received payment from the owner and provided that CAS furnished an additional seven days notice of its intention to cease work. Furthermore, if the subcontractor's work had been stopped for thirty days due to non-receipt of progress payments, the subcontractor could terminate the agreement on an additional seven days notice.

Over the course of work on the four projects, particularly the Monroe project, CAS and Hall disputed the amount due to CAS as progress payments. CAS submitted applications for payment; Hall made payments but not always for the amount requested by CAS.

One of the primary disputes concerned whether progress payments were overdue. Hall considered a payment overdue only if a progress payment was made more than seven days after it received payment from the owner. On the other hand, CAS considered a progress payment "past due" if it had not been paid within thirty days of submission of its payment application to the general contractor. In addition, Hall contended, and the CAS bookkeeper conceded, that CAS was unfamiliar with the forms and the information required for its submissions for interim payments. Hall asserted that CAS's unfamiliarity with the documents led to untimely, inaccurate or incomplete payment submissions. Furthermore, there were also disputes between the parties about the percentage of completion of a project, the value of work required pursuant to change orders, and the quality of CAS's work.

The parties' relationship broke down as a result of the billing issues. If CAS did not receive the entire amount requested in a payment application, CAS added the balance to the next application. Hall, on the other hand, did not carry balances forward. It treated past payment applications as completed when payment was made, even if the payment was different than requested. Hall expected a subcontractor who disagreed with a particular payment to make a separate application for payment that addressed the deficiencies of the prior application.

From CAS's perspective, matters became serious in the Fall of 1999 when it experienced severe cash flow problems. CAS's principal, William Warren, testified that he spoke many times telephonically and in person to Hall employees demanding payments and informing John Hall, the president of Hall, and site superintendents that he could not continue to work without payment. Hall, however, did not believe that the business relationship was in jeopardy because it believed that it had treated CAS fairly and did not owe CAS substantial money.

Eventually, CAS ceased work on all four projects. The actual date of the cessation of work was a matter of some dispute. In addition, CAS contended that the cessation of work was justified due to payment arrears, while Hall contended that it owed little, if any, money.

According to CAS, it stopped work on all four projects after a meeting on January 24, 2000, at which John Hall stated that he did not believe that any funds were due. At trial, however, CAS admitted that there were no arrearages on the Montgomery project at the time it ceased work. CAS justified terminating work on all projects because it claimed that both before and during the January 24 meeting, Hall took the position that CAS would not be compensated for the work it was performing, including additional work which was required at the Montgomery site due to contaminated soil.

By letter dated January 26, 2000, the CAS attorney informed Hall that CAS was owed in excess of $120,000 and no further services would be provided until all invoices were paid in full. On January 31, 2000, Hall sent a "three day notice" to CAS to return to the job. When it received no response, Hall issued a letter dated February 8, 2000, terminating the four contracts. Curiously, and contrary to CAS's previously stated position about its intention to cease work, its attorney sent Hall a letter dated February 9, 2000, asserting that CAS's absence from the work sites was attributable to weather, not non-payment. Counsel did, however, request payment within seven days pursuant to the provisions of paragraph 5.2.6. In another letter dated February 10, 2000, CAS's attorney enclosed copies of "aging reports" and requested payment on the outstanding balances.

Hall hired replacement contractors to complete the work left unfinished by CAS. For the most part, the replacement subcontractors worked on a time and material basis. Therefore, completion costs were higher than projected by the contract.

One of the key disputes was whether the parties met on January 24, 2000. William Warren, CAS's principal, insisted that a meeting occurred on that date at which John Hall stated that not only did Hall not owe CAS the money alleged by CAS, but that CAS would owe Hall money at the end of the project if it did not complete its obligations under the contracts. Warren insisted that it was this statement at the meeting that communicated to him that he could not expect payment and that he was justified in ceasing work under the contracts. Warren also maintained that his attorney, his bookkeeper, John Hall and his attorney attended this meeting.

John Hall, on the other hand, insisted that the meeting did not occur on January 24. He testified that only one meeting occurred between the parties, and that this meeting occurred on September 21, 2000. John Hall, his controller, and his attorney all concede that at the September 21 meeting Mr. Hall made the statement attributed to him by Warren at the January 24 meeting. Hall's controller and attorney also testified that they did not attend a meeting on January 24, 2000. The controller stated that she anticipated a meeting on January 28, was prepared to tender a check to CAS at that time but the meeting never occurred.

On January 24, 2001, CAS filed a complaint alleging breach of contract and unjust enrichment against defendant Hall. In its answer, Hall asserted a counterclaim for breach of contract.

Notably, the trial judge found that the January 24, 2000 meeting did not occur. He also found that no statements were made by John Hall or any Hall representative that could be interpreted as an anticipatory breach of contract. Rather, the trial judge found that CAS breached its contract with Hall by abandoning work and failing to follow the contractual procedure to resolve disputes over progress payments.

Judge Stroumtsos found that there were no arrears on the Montgomery project at the time CAS ceased work. As to the other three projects, the judge found that the amounts in dispute were small, within industry standards, and that Hall did not withhold substantial payments.

Judge Stroumtsos also found that CAS was owed a certain amount of money in quantum meruit damages but not to the extent alleged by CAS. Moreover, because CAS breached its contracts by abandoning construction, Hall was entitled to completion costs, although not to the extent submitted by Hall.

On appeal, CAS contends that:

I. THE TRIAL COURT ERRED WHEN IT FOUND THAT THERE WAS NO ANTICIPATORY BREACH BY HALL FOR FAILURE TO PAY C.A.S. FOR SERVICES RENDERED.

II. THE TRIAL COURT'S LEGAL CONCLUSIONS REGARDING ANTICIPATORY BREACH IN THIS MATTER WERE IN ERROR.

III. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT FAILED TO AWARD ATTORNEY'S FEES AND COSTS TO C.A.S. PURSUANT TO THE SUBCONTRACTS.

A judgment in a non-jury case shall not be overturned, except where after a careful review of the record and weighing of the evidence, the appellate court determines that "continued viability of the judgment would constitute a manifest denial of justice." Baxter v. Fairmont Food Co., 74 N.J. 588, 597-98 (1977). An appellate court will not disturb the factual findings and legal conclusions of the trial judge 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, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963)). "'That the case may be a close one or that the trial court decided all evidence or inference conflicts in favor of one side has no special effect.'" Czoch v. Freeman, 317 N.J. Super. 273, 283 (App. Div.) (quoting State v. Johnson, 42 N.J. 146, 162 (1964)), certif. denied, 161 N.J. 149 (1999).

The rationale underlying this limited scope of appellate review is that "a trial judge's findings are substantially influenced by his or her opportunity to hear and see the witnesses and to get a 'feel' for the case that the reviewing court can not enjoy." Twp. of W. Windsor v. Nierenberg, 150 N.J. 111, 132 (1997). For this reason, credibility determinations are entitled to particular deference, because the trial judge has a superior perspective to evaluate the veracity of witnesses. Id. at 132-33.

We discern no reversible error in the trial court's factual findings. Presented with two widely divergent versions of events, the trial judge accepted as more credible the version presented by the defense witnesses. It is not for this court to second guess the trial court's credibility determinations, particularly where the credibility determination relied in part on the absence of documentary corroboration in the nature of billing records by the attorneys for the January 24 meeting.

Moreover, given the findings of fact, the court correctly applied the law. An anticipatory breach of contract "is a definite and unconditional declaration by a party to an executory contract--through word or conduct--that he will not or cannot render the agreed upon performance." Ross Sys. v. Linden Dari-Delite, Inc., 35 N.J. 329, 340-41 (1961). Here, since the trial judge found as a matter of fact that Hall had not made any declaration, through words or conduct, that it would not render the agreed upon performance, there was no anticipatory breach of contract.

Moreover, the judge found that relatively little money was due to CAS on applications for progress payments already submitted to Hall. This finding of fact renders the case substantively different and distinguishable from the case relied upon by CAS, Zulla Steel, Inc. v. A & M Gregos, Inc., 174 N.J. Super. 124, 130-32 (App. Div. 1980), in which the general contractor was found to have breached the subcontract with the plaintiff by reason of its substantial underpayments, and substantial delinquencies in payments, over a prolonged period of time. It also renders this case different from Vinen Corp. v. Alan W. Nau Contracting, Inc., 232 N.J. Super. 589, 595 (App. Div.), certif. denied, 118 N.J. 184 (1989), in which the defendant's wrongful withholding of $11,000, coupled with a demand that the plaintiff sign a release of lien, including the unpaid $11,000, or be paid none of the amount concededly owing or any future amount, constituted a material breach of contract which justified the plaintiff walking off the construction job.

Because Hall did not commit an anticipatory breach or breach of contract, CAS was not justified in abandoning its work. Furthermore, the evidence reflects that CAS abandoned its work without giving notice under the terms of the contracts. This added another basis for concluding that CAS breached the contracts. Providence Wash. Ins. Co. v. Beck, 255 N.E.2d 600 (Mass. 1970); Blaine Econ. Dev. Auth. v. Royal Elec. Co., 520 N.W.2d 473, 476-77 (Minn. Ct. App. 1994).

CAS contends the trial court erred by failing to award counsel fees. CAS contends it was a prevailing party and therefore entitled to counsel fees under the terms of the parties' contracts.

The question presented is whether CAS is entitled to an award of counsel fees as a "prevailing party" under the terms of the contracts. Contract interpretation is a matter of law, Rena, Inc. v. Brien, 310 N.J. Super. 304, 321 (App. Div. 1998), Adron, Inc. v. Home Insurance Co., 292 N.J. Super. 463, 473 (App. Div. 1996), and legal issues are reviewed de novo, Manalapan Realty, L.P. v. Township Committee of Manalapan, 140 N.J. 366, 378 (1995). Counsel fee awards, however, are typically reviewed for an abuse of discretion. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001).

Fee-shifting is permissible if expressly provided for by statute, court rule, or contract. Id. at 440. "However, even where attorney-fee shifting is controlled by contractual provisions, courts will strictly construe that provision in light of the general policy disfavoring the award of attorneys' fees." N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 570 (1999).

Here, the contracts provided for an award of counsel fees to a "prevailing party" in litigation arising under the contracts. More specifically, the contracts provided:

Should either party employ an attorney to institute suit or demand arbitration to enforce any of the provisions hereof, to protect its interest in any matter arising under this Agreement, or to collect damages for the breach of the Agreement or to recover on a surety bond given by a party under this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees, costs, charges, and expenses expended or incurred therein. (emphasis added).

The trial judge ruled that CAS was not a prevailing party entitled to counsel fees because CAS had not succeeded on its breach of contract claim. Rather, it was CAS that breached the contracts and Hall that was entitled to breach of contract damages. CAS was entitled only to quantum meruit damages. There is a two-pronged test to determine whether a party seeking fees is a prevailing party. First, there must be a "factual causal nexus between the pleading and the relief ultimately received." Ibid. (citing Singer v. State, 95 N.J. 487, 494, cert. denied, 469 U.S. 832, 105 S. Ct. 121, 83 L. Ed. 2d 64 (1984)). In other words, the party must establish that the "'lawsuit was causally related to securing the relief obtained; a fee award is justified if [the party's] efforts are a 'necessary and important' factor in obtaining the relief.'" Ibid. (quoting Singer, supra, 95 N.J. at 494).

Second, the party must prove that "'the relief granted had some basis in law.'" Id. at 571 (quoting Singer supra, 95 N.J. at 494). "The party seeking fees need not obtain all relief sought, but there must be a resolution of some dispute that affected the defendant's behavior towards the prevailing plaintiff." Packard-Bamberger, supra, 167 N.J. at 444.

In this case, CAS lost on virtually every factual and legal issue presented in the trial court. Most significantly, the court ruled that CAS, not Hall, had breached the contracts. Therefore, Hall, not CAS, was entitled to breach of contract damages. CAS succeeded only in obtaining quantum meruit damages, and the amount awarded to CAS was greatly reduced by the breach of contract damages awarded to Hall. Under these circumstances, CAS could not reasonably be viewed as a prevailing party.

Accordingly, the May 6, 2004 judgment is affirmed.

 

Warren and his attorney concede that they attended the September 21 meeting.

(continued)

(continued)

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A-5653-03T1

February 8, 2006