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Gallo v. Sphere Const. Corp.

January 16, 1996

JAMES S. GALLO, PLAINTIFF,
v.
SPHERE CONSTRUCTION CORP., DEFENDANT.



MacKENZIE, P.J.Ch.

The opinion of the court was delivered by: Mackenzie

Civil Action

MacKENZIE, P.J.Ch.

This is a case of first impression involving the issue of whether a general contractor may file a lien against property under the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1 to -38, where the property owner terminated negotiations prior to the execution of a written contract for construction.

Plaintiff James S. Gallo (Gallo) owns undeveloped land in Township of Sparta, Sussex County, New Jersey, which is known as Block 35, Lot 25 of the Sparta Township Tax Map. In June 1995, Gallo entered into a long-term lease with J-Mal, Inc. (J-Mal), a franchisee of Kiddie Academy International, Inc., for rental of a building to be erected on the property, which J-Mal would use as a child care center. Gallo solicited bids from various general contractors for construction of the building, eventually selecting the bid submitted by defendant Sphere Construction Corporation (Sphere).

After preliminary negotiations had seemingly led to an agreement between Gallo and Gerald Nechamkin (Nechamkin), president of Sphere, Gallo advised Nechamkin on October 17, 1995 to prepare a written contract. Gallo then confirmed the understanding of the parties by letter dated October 31, 1995. The letter stated, in pertinent part: "Please consider this my letter of intent to enter into a formal contract with you for the building and sitework for the Kiddie Academy in Sparta." At or about the same time, Sphere prepared and submitted to Gallo a standard American Institute of Architects Form of Agreement (AIA Document A107).

On November 9, Dennis Joy, Esq., Gallo's attorney, sent a letter to Nechamkin indicating that the form of agreement, as prepared, was unacceptable to Gallo, and suggesting several alterations that would render the proposed contract acceptable. Further Discussions between Gallo and Nechamkin took place on November 15, following which the parties were unable to agree on certain critical aspects of the contract, including the construction completion date and the consequences of Sphere's failure or inability to complete the project by that date. On November 16, Joy notified Nechamkin by letter that Gallo was cancelling a meeting with Nechamkin scheduled for later that morning. The letter further informed Nechamkin that Gallo was terminating negotiations between the parties because Gallo intended to award the contract to another builder.

On November 17, 1995, Kevin D. Kelly, Esq., Sphere's attorney, filed a purported construction lien claim against Gallo's property in the office of the Sussex County Clerk. The amount of the lien claim was $792,000, which represented the full amount of the rejected contract. This action to discharge the construction lien claim followed by way of verified complaint and order to show cause. Prior to the return date, however, Sphere discharged the original lien claim and substituted a second lien claim on December 26, 1995. The new lien claim, signed and submitted by Nechamkin, was for $94,631, which Nechamkin alleged represented the actual work performed by Sphere plus its lost profits. Although the filing of the second construction lien claim rendered moot the original issue for court determination, the attorneys for both parties asked the court to decide whether the second lien claim should be permitted to remain of record pendente lite.

Plaintiff advances the following arguments: (1) any construction lien claim is improper because there is no contract between Gallo and Sphere which satisfies the definitional requirement of "contract" contained in the Construction Lien Law, and (2) the amount of the lien claim filed by Sphere, which included lost profits, is excessive because the right to such a lien exists only with respect to work or services actually performed, or material or equipment actually furnished. The questions thus presented are: (1) whether Sphere was statutorily entitled to file either lien, and (2) whether the now discharged first lien has any effect on Sphere's right to file a second lien.

The Construction Lien Law was signed into law on December 23, 1993, and took effect on April 22, 1994, thereby repealing the old Mechanics' Lien Law and portions of the Municipal Mechanics' Lien Law. *fn2 The Construction Lien Law provides, in pertinent part:

Any contractor, subcontractor or supplier 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 [N.J.S.A. 2A:44A-9 and 2A:44A-10]. The lien shall attach to the interest of the owner in the real property.

(N.J.S.A. 2A:44A-3).

In order for a contractor, subcontractor or supplier to be entitled to a lien, any work or services performed, or material or equipment provided, must have been done "pursuant to a contract." "Contract" is expressly defined in the act as "any agreement, or amendment thereto, in writing, evidencing the respective responsibilities of the contracting parties . . . ." N.J.S.A. 2A:44-2 (emphasis added). Thus, according to the clear language of the statute, a written agreement between the parties is a prerequisite to the filing of any lien claim.

As a general rule, if a statute is clear and unambiguous, the court "need delve no deeper than the act's literal terms to divine the Legislature's intent." State v. Butler, 89 N.J. 220, 226, 445 A.2d 399 (1982). When the Legislature specifically defines a term, as it did here, courts are bound by that express definition. Febbi v. Board of Review, Div. of Employment Sec., Dep't of Labor and Indus., 35 N.J. 601, 606 (1961); Eagle Truck Transport, Inc. v. Board of Review, Div. of Employment Sec., Dep't of Labor and Indus., 29 N.J. 280, 289 (1959). When statutory language is clear and unambiguous, the court's function is to enforce the statute as written, absent any specific indication of legislative intent to the contrary. ...


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