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Onorato Construction Inc. v. Eastman Construction Co.

June 22, 1998


The opinion of the court was delivered by: Dreier, P.j.a.d.

Argued: May 27, 1998

[9]    Before Judges Dreier and Keefe.

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

Plaintiff, Onorato Construction, Inc., a sub-subcontractor which constructed parking lot curbing, appeals from a summary judgment dismissing plaintiff's claim against defendant, Eastman Construction Company, the general contractor. Eastman, by way of subcontract, had retained J. Gram Construction Co., Inc. to perform site construction work on a project in Livingston. Gram, in turn, subcontracted a portion of the work to plaintiff. Plaintiff fully performed its work, resulting in an outstanding balance of $47,977.63 due to Onorato from Gram.

On September 29, 1993, plaintiff wrote to defendant notifying defendant of the amount due from Gram and informed Eastman that plaintiff had not been paid due to Mr. Gram's "personal problem." The letter requested defendant to hold Gram's retainage so that plaintiff could be paid. Defendant acknowledged receipt of this letter. The next day Gram wrote to defendant explaining that there was money owing to its subcontractors and suppliers and that there was "enough money owed to J. Gram from Eastman to pay everyone concerned in full." The letter requested Eastman to pay the subcontractors and suppliers. Gram stated that due to its current financial strains, the subcontractors and suppliers listed in the letter should "be paid either directly by Eastman or with joint checks." Plaintiff was one of the subcontractors listed in this letter, which defendant also admits receiving. A few days after receiving this letter, defendant faxed the following message to plaintiff:

This is to confirm our telephone conversation of 10-7-93 in regards to issuing joint checks between your company and J. Gram Const. for monies owed by J. Gram. This will be accomplished over the next few months.

All monies owed to J. Gram will not be paid to them directly.

Thereafter, in accordance with its undertaking, Eastman issued a joint check for $15,000 payable to "J. Gram Construction Co., Inc. and Onorato Construction Inc." Plaintiff received the check and deducted the $15,000 from the outstanding indebtedness. With other minor adjustments that had been made, the balance due to plaintiff from Gram was $30,981.63, and on November 11, 1993, plaintiff wrote to defendant notifying defendant of this balance due. On December 15, 1993, plaintiff again wrote to defendant, noting that the same balance due was outstanding, and requested "any help you can give us regarding payment of this balance, $30, 981.63." Defendant at no time disavowed its previous undertaking to pay plaintiff or issue joint checks, or its promise not to pay Gram directly.

Although there is no certification asserting any express forbearance on the part of plaintiff from instituting any legal action to secure the acknowledged debt from Gram and executing on the fund being held for Gram's benefit by defendant, it is reasonably inferable from the facts that no such action was instituted in reliance on defendant's oral and written undertaking to protect plaintiff. We accord plaintiff this inference because on this motion for a summary judgment by defendant, plaintiff was entitled to all reasonable inferences from the facts alleged. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995).

On August 16, 1994, Gram submitted a final application to defendant for payment of $60,521.05. After making deductions not relevant here, defendant on December 22, 1994, paid Gram directly the sum of $47,907.81 as full and final payment for the project. Inexplicably, and in direct derogation of its undertaking to plaintiff and other suppliers or subcontractors, this payment was made neither to the suppliers and subcontractors nor by joint check. The parties have acknowledged that Gram is insolvent, leaving plaintiff (and apparently the other suppliers) without recourse other than making this claim against defendant. Plaintiff advanced various theories upon which defendant should be liable for its undertaking. Among these are that defendant's debt to Gram had been assigned to plaintiff; that plaintiff was the third-party beneficiary of defendant's agreement to pay; that there was a quasi-contractual relationship under which plaintiff should be paid, and the like. The trial Judge focused upon the apparent lack of consideration for defendant's undertaking to pay plaintiff. He stated:

The situation here is clear. Onorato was concerned about receiving its payment from Gram because of Gram's precarious financial position. And in order to satisfy those concerns, Gram instructed Eastman to make payment directly to Onorato, or to make payment by a check payable to both Gram and Onorato. There was one [joint] check which was issued by Eastman, at Gram's request.

The mere payment of such request, in my opinion, does not create a new contract in favor of Onorato or an obligation from Eastman to Onorato, since there was no indication of any consideration for the assumption of such an obligation. Eastman was only obligated to pay Gram for the work performed, but was not obligated to Onorato.

On appeal, plaintiff has again advanced these theories, adding other bases such as an equitable lien and the like. In plaintiff's brief, after referring to one of its legal theories, it summarizes its argument in a terse statement:

Here, Eastman assumed a duty to pay Onorato directly or by joint check. That duty was breached. As a result of that breach Onorato was damaged. ...

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