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Don Corson Construction Co., Inc. v. Hrebek

June 5, 2007


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. MON-L-1725-01.

Per curiam.


Argued February 28, 2007

Before Judges Wefing, Parker and Yannotti.

Defendant Robert J. Hrebek appeals from a final judgment entered on December 16, 2005 after a jury awarded plaintiff $535,000 for breach of a construction contract. He also appeals from an order entered on February 6, 2006 denying his motion for a new trial or, alternatively, remittitur. We affirm.


The facts relevant to this appeal are summarized as follows. In the Fall of 1997, defendant purchased an eighteen-acre property in Wall Township. Defendant, an attorney who negotiates labor contracts for Monmouth County, entered into an oral agreement with plaintiff to construct defendant's "dream house" on the property. Plaintiff*fn1 is a general contractor whose main business is "pre-engineered steel buildings" and industrial and commercial buildings that he designs and constructs.

Plaintiff testified that he agreed to undertake the project and that he would bill defendant for his own manual labor at $60 an hour. Defendant wanted plaintiff to perform all necessary supervision for the project, which plaintiff agreed to do for "[twenty] percent . . . on top of [the total project]." Plaintiff testified that the twenty percent would be calculated on the costs of "all the labor, all the material, [and] all [of plaintiff's] operating equipment." Plaintiff understood that defendant "agreed on everything" and did not want a written contract because he was eager to start the project and thought their friendship made a written agreement unnecessary.

Defendant testified that he and plaintiff had an oral agreement and that neither of them offered or requested a written contract or cost estimate. The oral agreement included plaintiff's supervision of the project because the project would be built "through sub[-]contractors." Defendant understood that he would pay "a reasonable fee . . . on a hourly basis for [plaintiff's] work effort," in addition to paying for the sub-contractors and materials. Defendant did not recall the exact words that either of them used as to how plaintiff would be paid for supervision, but defendant insisted that the agreement did not include an additional twenty percent as a supervision or management fee. Defendant testified that he "expected to pay $60 an hour for Don Corson to oversee the building of my home."

Plaintiff's wife, Barbara Corson, handled the paperwork and banking for the project. She also coordinated with the sub-contractors when they could not reach her husband, but her time was not billed to defendant. Barbara testified that there was no payment schedule for the project because whenever plaintiff needed to make project-related payments, he asked defendant for the funds and defendant paid them. All the monies paid to plaintiff by defendant were placed in a special account from which plaintiff paid the suppliers, sub-contractors and the corporation.

Plaintiff did not ask for interim payments of the management fee, however. While he kept a record of the number of hours he and his employees spent in manual labor and billed for it, he did not record the time he spent on project management because he did those tasks continually, taking and making phone calls, coordinating sub-contractors and materials and overseeing the performance of all the work being done. Moreover, the architect's plans were incomplete, requiring plaintiff to provide many of the details and determine the materials to be used. Defendant testified that there was no discussion about billing for the project. He assumed that plaintiff was billing and getting paid for his own work, "because [he] didn't expect [plaintiff] to work for free."

On April 11, 2000, plaintiff submitted a three-page bill with handwritten details. The first two pages consisted of expenses already incurred, named the suppliers and sub-contractors and listed the exact amounts for each, totaling $1,456,775.12. One item stated: $375,000 for plaintiff, with no detailed description. The $375,000 item was money plaintiff paid to sub-contractors. The bill also listed farm equipment that defendant had purchased for plaintiff to use on the property, amounting to $65,967.01, bringing plaintiff's total expenditures to $1,522,742.13.

The third page of the April 11 bill listed dollar amounts, totaling $759,270 that plaintiff expected to incur in finishing the project. The expenses to date and the expected future expenses totaled $2,282,012.13. Plaintiff acknowledged that at the time of the April 11 bill, he would have been satisfied to receive that total amount at the completion of the project. After he reviewed the bill, defendant asked plaintiff about two of the items: $240,000 and $80,000 listed as "owed Don Corson." Plaintiff responded that those amounts reflected the management fee.

Defendant testified that he was concerned about having already paid $1.5 million for the project and he questioned certain items on the bill and asked for further details about the amount paid to one sub-contractor and the $375,000 that plaintiff paid to sub-contractors. Defendant testified at his deposition that he was satisfied with plaintiff's explanation of the sub-contractor payment but claimed he never received information about the $375,000 item, despite repeated requests. At trial, defendant claimed that he continued to complain to plaintiff about the billing and the lack of detail, but never put his complaints in writing. He testified at trial that "[e]very time I gave [plaintiff] a check, I asked him for an explanation of the 375. And he wouldn't give it to me."

In November 2000, a certificate of occupancy was issued for the house. On December 14, 2000, plaintiff issued a final bill for the project totaling $2,834,933, including the management fee. By that time, defendant had already paid $2,157,000. In addition, defendant paid two items directly: $100,000 for kitchen cabinets and $80,000 for the architect's fees. According to plaintiff, defendant still owed $53,472 for suppliers and sub-contractors, $30,000 for miscellaneous expenses, and $417,369 "owed Don Corson Construction Co."

The $417,369 figure included $339,319 in management fees; $33,030 for equipment rental; and $30,720 as the unpaid portion for plaintiff's manual labor at the discounted rate. Plaintiff discounted his manual labor charge to $40 per hour, rather than the agreed-upon rate of $60 per hour, for 540 hours and further discounted his fee $30 per hour for another 304 hours. Plaintiff testified that he discounted his hourly rate because on a big project "there's just an awful lot of cleanup and there's a lot of little stuff that you have to do," and he did not feel right charging full price for such work. Plaintiff also discounted the management fee by reducing the base on which he calculated it. Rather than using the full price of the project, plaintiff based his fee on the cost of materials and sub-contractors, $1,696,597.30. Twenty percent of that figure amounted to $339,319.

Defendant claimed that the December bill was the first time he learned of the management fee. He testified that he understood "construction management" to mean that plaintiff "was there every day watching that job, watching the sub-contractors. Making sure the work was done properly. He was a working supervisor, if you will," and that this was included in the $60 per hour rate.

Plaintiff testified that he averaged approximately five hours per day of labor and seven hours of construction management. Nevertheless, defendant claimed that the information provided by plaintiff was "not sufficient" to identify which hours plaintiff spent performing a management function.

On January 9, 2001, defendant wrote to plaintiff directing him to "stop all work on this property and do nothing further." The letter stated in part:

I am staggered by how far out of line and exorbitant your demand is, and I am disheartened that someone whom I regard as a friend would present such a demand.

I firmly believe that to date you have been paid more than sufficiently and that in fact I have paid more than I should because of overbilling. I have certainly paid enough to expect you to take care of any subs you may yet owe.

Because I want to maintain our friendship if at all possible, I would be happy to discuss this with you. Please feel free to call me at your convenience.

Plaintiff testified that the January 9 letter was his first indication that defendant objected to the December 14, 2000 bill. After receiving the letter, plaintiff attempted to reach defendant to discuss the matter -- as the letter suggested -- but defendant did not respond. Defendant's failure to respond prompted plaintiff to withdraw the discounted fee and to recalculate it "based upon the handshake deal back in September of 1998," rather than on the reduced base. The recalculation resulted in a management fee of $492,540.24. Plaintiff did not withdraw the discounts for his manual labor, however. Defendant still owed $25,478.90 for sub-contractors and $78,050 for labor.

John Cohen, a licensed professional engineer, testified as plaintiff's expert on the value and quality of construction, the construction process and the reasonableness of the costs. He concluded that the dollar value of the project as constructed was in excess of $2.9 million. He determined the reasonableness of the actual costs by comparing the actual costs to a prospective estimate as it would have been calculated before the project started. Cohen retained Brian Hanifin, a cost consultant, to prepare the prospective cost estimate. Hanifin used the same information relied upon by Cohen, in addition to published data on nationwide averages for construction costs and proprietary cost data, to prepare the prospective cost estimate. Cohen testified that, although he was qualified to prepare cost estimates, he is "by no means an expert at that," and relied on a cost estimator (Hanifin) who was familiar with costs "for locality, for time, [and] for market forces."

Based on "court documents," Cohen took the total facility cost of $2,098,500.08 for the house alone and the total square footage of the main residence, 12,362, and calculated an actual "total facility cost" of approximately $170 per square foot. Cohen explained that a house at "middle market values" would have been worth approximately $125 per square foot, while a luxury home with the special features of this one, which included "special masonry, the huge [roof] overhangs, the extensi[ve] plumbing and heating systems," could be valued at "[$]200 [per square foot] or higher."

Cohen noted that Hanifin's prospective cost estimate for the house, including the barn and other items such as the farm equipment, was $2,922,332.33. Cohen deducted those items and calculated Hanifin's projected cost estimate for the house alone at $170 per square foot -- the same as the actual cost. In Cohen's opinion, that figure confirmed that plaintiff's construction of the house for $170 per square foot was "more than reasonable" for "a luxury home" with all of its special features. Cohen indicated that he was struck by "the quality of the workmanship" and "the lack of notable problems" on "a job of this complexity." He also noted "the uniqueness of the construction," including special materials like the oversized bricks and stones that ...

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