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New Mea Construction Corp. v. Harper

Decided: August 6, 1985.


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

King, Deighan and Bilder. The opinion of the court was delivered by King, P.J.A.D.


This action arose from a dispute between a builder and homeowners regarding the construction of a single-family dwelling on the homeowner's lot for $97,000 plus extras. The plaintiff builder brought a suit in June 1982 demanding damages for the balance of the contract payments. Defendants answered in July 1982 denying liability under the contract. Defendants subsequently filed a counterclaim and then an amended counterclaim, four counts in all, in which they made these claims: (1) reimbursement for overcharges for extras in the amount of $15,261.70, (2) damages for abandoning construction and breaching the contract, (3) damages for negligent and careless workmanship, and (4) treble damages and counsel fees under the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq.

The case was tried for 12 days before Judge Fundler without a jury. The judge dismissed the plaintiffs' claim. The judge awarded damages of $29,154 on Count Three of the Counterclaim -- on the theory of faulty construction and workmanship. He resolved the claims under Count One of the Counterclaim against the defendant because the dispute about the alleged overcharges for extras had been resolved through either private agreement by the parties or arbitration by the architect, Feltz. He resolved the claim under Count Two of the Counterclaim in favor of plaintiff because the amount allegedly due on the contract price was a "wash" and an offset when compared to the cost to defendants to finish the construction of the house after the contract was abandoned by the plaintiff. He resolved the claims under the Consumer Fraud Act against the defendants, finding the Act inapplicable in the circumstance of home construction.

The defendants-counterclaimants Harpers raise three points on this appeal. They claim that (1) the judge improperly handled the arbitration issue relating to extras, (2) personal liability should attach to plaintiffs' principal, Marjorie Ashworth, because her negligent conduct led to defendants' damages,

and (3) plaintiffs should be liable under the Consumer Fraud Act.

The contract price was $97,000 plus approved extras. Defendants' architect, Carl Feltz, prepared the plans and specifications. Payment was on the basis of a production schedule: 20% deposit on signing the agreement; 30% due on completion of the foundation and framing; 25% due on completion of the roof, siding, and rough electrical and plumbing work, 20% due upon the installation of the cabinets, sheetrock, furnace and other finishing items; and the final 5% payment due upon completion of the painting and installation of fixtures. Construction began in August or September 1981 and continued until May 4, 1982. The deposit and the first two payments (a total of 75%) had been paid in addition to payments for extras totalling $67,307.70. In May 1982 plaintiff claimed payment due for the next 20% plus $11,454.16 in additional extras, a total of $30,859.16. Jack Polloway, the attorney for Ashworth, demanded this payment in writing and threatened to halt the work if denied.


Judge Fundler found that the parties agreed to arbitrate the amount due for extras. The parties do dispute the scope of the arbitration agreement. Feltz found that defendants had been overcharged and that $52,046 was the justifiable amount for the $67,307.70 billed for extras. This apparently did not include the additional $11,459.16 demanded at the completion of the third stage of construction. Judge Fundler disallowed the builder's claim for this additional amount because it was not supported by a signed agreement between the parties as required by paragraph five of the contract.

As to the $67,307.70 sum for extras already paid the judge noted that each item was supported by a signed writing between the parties which specified the nature of the extra and the cost. He then determined as a fact that the scope of Feltz' arbitration undertaking did not extend to the $67,307.70 already

paid for extras but only to the third stage of the work and the claim made in May for $11,459.16 in extras. We affirm Judge Fundler's decision on this point for the reasons given at pages 22 to 26 and pages 39 to 40 of his 50-page oral opinion of March 30, 1984. He reached the factual conclusion that the architect was only authorized to reach a decision concerning the reasonableness of the additional charge of $11,459.16 for extras completed in the third stage, not the previous charges already made and paid for by defendants. Since this factual view of the record is reasonably supported by the evidence, we must accept it. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-484 (1974); State v. Johnson, 42 N.J. 146, 161-162 (1964).

The correspondence which precipitated the controversy over the arbitration dealt only with the question of payment of the third installment and the billing for $11,459.16 in extras. No mention was made therein of the previously paid $67,307.70. Moreover, the testimony of Polloway regarding the events of the arbitrator's inspection of May 18, 1982 supports the judge's finding on this issue. The judge found: "As to change and price, the Court is not going to rewrite the agreement on extras that the parties have already executed and alter the agreement already made pursuant to paragraph five of the contract. Having done so, the defendants have paid for these extras. If they have been so overcharged, that is their problem. The Court cannot protect fools."


The next question is whether personal liability may attach to plaintiff, New Mea Construction Company's principal, Ashworth. The Third Count of the counterclaim rested on a theory of negligence. It specifically alleged

2. The General Contractor performed much of its work in a careless and negligent manner, causing severe damage to the premises. Among other results, was a partial collapse of the roof of the Harpers' dwelling, which

incident is referenced in this counterclaim for purposes of example only, and not by way of limitation to their problems.

3. As a result of the careless and negligent workmanship on part of the General Contractor, and substantially failing to meet the proper standards of the contracting profession, the Harpers have sustained severe monetary losses in seeking to repair the deficiencies.

Ashworth was not named in the complaint. Only New Mea Construction was a plaintiff. She was named as a defendant to the initial counterclaim but on Counts Two and Three judgment was only demanded against New Mea Construction. Judgment was demanded against both Ashworth and New Mea jointly and severally on Count One, which challenged the overpayment by defendants for extras. The amended answer and counterclaim incorporated the first three counts by reference and added a fourth count against both New Mea Construction and Ashworth under the Consumer Fraud Act. The judgment of $29,154 was entered against New Mea Construction on the Third Count and a judgment of no cause for action was entered in favor of Ashworth as to the entire claim. Shortly after judgment defendant moved to add the individual plaintiff, Ashworth "as defendant on the second and third counts of the counterclaim." As we construe the record, this was the first effort to make Ashworth a defendant as to those counts of the counterclaim which alleged claims for failure to complete the contract and for negligent workmanship.

A motion for leave to amend to conform to the evidence is generally to be liberally construed. R. 4:9-2. It is nonetheless a matter left to the trial judge's sound discretion in the interests of justice. In the present case, defendants had numerous opportunities to amend the negligence and breach of contract counts to specifically include Ashworth, either when granted leave to file the amended counterclaim or during the twelve days of actual trial. Although defendants' motion to amend was properly denied by the trial judge as a matter of discretion, there are sound substantive grounds as well for rejecting defendants' tort claim under count three against Ashworth.

The boundary line between tort and contract actions is not capable of clear demarcation. The recently-published Prosser and Keeton, Law of ...

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