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A. J. Tenwood Associates v. Orange Senior Citizens Housing Co.

Decided: March 27, 1985.

A. J. TENWOOD ASSOCIATES, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT,
v.
ORANGE SENIOR CITIZENS HOUSING CO., DEFENDANT-RESPONDENT AND CROSS-APPELLANT



On appeal from the Superior Court of New Jersey, Law Division, Bergen County.

Michels, Petrella and Baime. The opinion of the court was delivered by Michels, P.J.A.D.

Michels

Plaintiff A.J. Tenwood Associates (Tenwood) appeals and defendant Orange Senior Citizens Housing Co. (Orange) cross-appeals from a final judgment of the Law Division that (1) awarded Tenwood a final construction payment of $65,198 without prejudgment interest, (2) held that Tenwood was not entitled to a $200,000 Limited Dividend Contractor's Fee by virtue of the fact that the claim therefore was barred by the one year limitation provision contained in its construction contract with Orange, (3) awarded Tenwood $825.50 without interest as the final installment on the Project Planner's Fee, (4) awarded Tenwood $41,921.41 with prejudgment interest at the rate of 12% for its project administration expenses, and finally (5) dismissed Orange's counterclaim with prejudice. Tenwood also appeals from a post-judgment order denying its motion for a new trial on the limited issue of the enforceability of the one year limitation period or, alternatively, to supplement the record, and Orange cross-appeals from an order denying its motion to supplement and amend the findings of fact and conclusions of law and a portion of the final judgment.

The facts giving rise to this appeal have been recounted adequately in the oral opinion of the trial court. We deem it sufficient, therefore, to briefly point out that this matter arises from two written contracts and an alleged oral agreement entered into by Tenwood for the construction of a senior citizens housing project in Orange, New Jersey. Tenwood, a New York corporation authorized to do business in New Jersey, is a general contractor in the field of high rise construction. Orange is a limited dividend housing association structured as a limited partnership consisting of one general partner, Roy Miller (Miller), and three limited partners. Orange was the

owner and housing sponsor of the senior citizens project, which was financed through public funding with a mortgage obtained through the New Jersey Housing Finance Agency (HFA). Orange and Tenwood entered into a contract for the construction of the project on September 22, 1978, agreeing to a base contract price of $4.2 million. The contract also provided for Orange to receive a Developer's Fee of $410,760 from the proceeds of the HFA Mortgage Loan and for Tenwood to receive from Orange a Limited Dividend Contractor's Fee of $200,000.

Pursuant to an amendment to the contract signed September 26, 1978, the Limited Dividend Contractor's Fee was to be paid by January 15, 1979. Orange never paid this fee and apparently took the position that the fee was not owing. Orange suggests that Tenwood, or at least its President, James N. Canino (Canino), has already received the $200,000 by way of a rather complicated sequence of events and changes in the structure of the project at its inception. The trial court did not reach this issue but rather held that Tenwood's claim for the $200,000 was barred by the one-year limitation period contained in Article 39 of the contract.

The parties also entered into a related Project Planner Agreement on May 8, 1978, pursuant to which Tenwood agreed to render technical advice and assistance in the planning and development of the housing project. Compensation pursuant to that agreement totaled $16,510, of which $15,684.50 had already been approved and paid from HFA mortgage proceeds prior to trial. Payment of the remaining $825.50 was at issue at trial and was due upon issuance of the Certificate of Occupancy. This certificate was issued on December 17, 1980, and the trial court awarded Tenwood the $825.50 without interest.

Finally, Tenwood claimed that its President, Canino, and Orange's General Partner, Miller, had entered into an oral agreement for Tenwood to perform the administrative services connected with the project. These services allegedly were to

include preparing and submitting requisitions to the HFA for funding related to the project. Orange and its General Partner, Miller, denied the existence of the agreement, but Canino testified that Miller had approached him and made the offer because of Miller's poor health and his inexperience in construction matters. A letter written by Miller, dated December 22, 1978, corroborated Canino's claim that Miller had suffered poor health during the period in which the parties allegedly made the agreement, despite Miller's denial. According to Canino, he agreed to have the Tenwood staff perform the services in return for compensation covering Tenwood's direct costs, including labor and related expenses, plus eight percent interest. Tenwood apparently administered the project between the Fall, 1978, and the Summer, 1980. In September, 1980, Tenwood's comptroller, Hyman Wolvorsky (Wolvorsky), submitted an invoice to Orange claiming compensation for the project services rendered in the total sum of $41,921.41. Orange refused payment and contested the validity of the contract at trial. The trial court upheld the claim and awarded Tenwood the $41,921.41.

The proofs also established that Tenwood commenced construction of the housing project in November, 1978. In a letter dated April 9, 1980, the HFA concluded that the contractor substantially completed the project on March 24, 1980, and designated March 24 as "the date on which one year guarantees begin for those items which are specified in the contract documents." Tenants started occupying the project in March, 1980, and on December 17, 1980, a construction official from the City of Orange issued a Certificate of Occupancy. On March 22, 1982, following a reinspection of the project site, the HFA found that Tenwood had satisfied the intent of the owner's punch list (which cataloged the items the contractor had to complete to fulfill his obligations under the construction contract) and thereupon released to Tenwood the funds held by the HFA as security during the construction.

Between July, 1981, and July, 1982, Tenwood apparently attempted unsuccessfully to comply with the requisites of the contract for final payment. To obtain final payment pursuant to the contract (a standard HFA form), Tenwood had to submit to the Agency a Contractor's Affidavit containing "a detailed . . . statement of all liens, claims, and demands" of subcontractors and other third parties arising from the Contract, a bond to cover such claims, a release of Orange from all liability to the Contractor arising from the Contract (except for certain just claims), and a Certificate of Final Acceptance signed by Orange.

Tenwood submitted drafts of its Release and Contractor's Affidavit in a letter dated July 1, 1982. However, at that time the HFA found the forms did not comply with its requirements and therefore rejected them. Moreover, the HFA made several requests of Orange to sign the Certificate of Final Acceptance between July, 1981, and June, 1982. Orange refused, alleging that it sought to have the project inspected by an independent architect. That inspection never took place, though a Certificate of Final Acceptance signed by the project's architect, Emil N. Steo, was issued as early as April 20, 1981.

At trial, during the testimony of the HFA administrator to the project, William Abele, Tenwood submitted the requisite forms for final payment to the HFA and complied with the bond/escrow requirement insulating Orange from third party claims arising from the contract. Finding that Orange had intentionally delayed issuing its Certificate of Final Acceptance and that Tenwood had now otherwise fulfilled the requirements for final payment, the trial court awarded the $65,198 to Tenwood, without prejudgment interest.

The trial court dismissed Tenwood's remaining claims and the counterclaim of Orange. Thereafter the trial court denied Tenwood's motion for a new trial on limited issues and Orange's motion for partial amendment and modification of the

judgment, taxing costs in favor of Tenwood in the sum of $1,216.10. This appeal and cross-appeal followed.

I.

We are satisfied from our study of the record and the arguments presented that, with the exception of the issues discussed below, the judgment of the trial court and the findings of fact on which it was based were adequately supported by the evidence, the denial of the motion for a new trial and partial amendment of the judgment did not constitute a manifest denial of justice, and all of the issues of law raised were clearly without merit. See R. 2:11-3(e)(1)(A), (C) and (E). Furthermore, contrary to Tenwood's claim, there is substantial credible evidence on the record as a whole to reasonably warrant the trial court's findings and conclusion that the September 26, 1978, agreement constituted an amendment to the September 22, 1978, construction contract and that therefore the limitation period contained in the latter document barred Tenwood's claim for the $200,000 Limited Dividend Contractor's Fee. We discern no sound reason or justification for disturbing them. Leimgruber v. Claridge Associates, Ltd., 73 N.J. 450, 455-456 (1977); Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-484 (1974); State v. Johnson, 42 N.J. 146, 162-163 (1964).

II.

Moreover, the one-year limitation period contained in the construction contract executed by the parties on September 22, 1978, was neither unfair nor unreasonable. Although the statutory limitation in this State for actions in contract is six years, N.J.S.A. 2A:14-1, such a limitation may be waived by express agreement of the parties. See Simpson v. Hudson County National Bank, 141 N.J. Eq. 353, 357 (E. & A. 1948). It is fundamental that in the absence of a statute barring such agreements, a contractual stipulation limiting the time for

bringing an action upon a contract to a period less than that prescribed by the foregoing statute is valid if the stipulated period is reasonable and does not violate public policy. See Annotation, "Validity of Contractual Time Period, Shorter than Statute of Limitations, For Bringing Suit," 6 A.L.R. 3rd 1197, 1207, ยง 3 (1966). See also Order of United Commercial Travelers v. Wolfe, 331 U.S. 586, 608, 67 S. Ct. 1355, 91 L. Ed. 1687 (1947); Staehle v. American Employers' Ins. Co., 103 N.J. Super. 152, 154 (App.Div.1968) (citing the A.L.R. annotation and noting that the New Jersey rule comports with the rule in the majority of States). There is persuasive authority holding that contractual provisions which impose a one year period of limitation on actions are not so unreasonable as to constitute a violation per se of public policy. See, e.g., Alderney Dairy Co., Inc. v. Hawthorn Mellody, Inc., 643 F.2d 113, 118 (3rd Cir. 1981); Sherwood Jewelers-Newark, Inc. v. Philadelphia Nat. Ins. Co., 102 F. Supp. 103, 104 (D.N.J.1952); Staehle v. American Employers' Ins. Co., supra, 103 N.J. Super. at 154. Accord, Practical Construction Co. v. Granite City Housing Auth., 416 F.2d 540, 544 (7th Cir.1969); Hartford Accident & Indem. Co. v. Heftler Construction Co., 325 F.2d 107, 108 (7th Cir.1963); Soviero Bros. Contracting Corp. v. City of New York, 286 App.Div. 435, 142 N.Y.S. 2d 508, 513 (1955), aff'd 2 N.Y. 2d 924, 161 N.Y.S. 2d 888, 141 N.E. 2d 918 (1957). Moreover, the Uniform Commercial Code specifically allows one-year limitations to be included in contracts for the sale of goods. See N.J.S.A. 12A:2-725(1).

Beyond this, in the circumstances here present the limitation was manifestly reasonable. Canino had prior experience in HFA projects and thus was familiar with the construction contract, which was a standard HFA form. Canino testified that before signing the contract he reviewed its terms by himself and with James Dugan, Esq., counsel for the project. As Orange points out, Tenwood was free to negotiate amendments ...


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