October 19, 2007
JOHN RODDY, PLAINTIFF-APPELLANT,
LYNNE CLEMONS, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Monmouth County, Docket No. DC-012510-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 9, 2007
Before Judges Parrillo and Alvarez.
Plaintiff John Roddy appeals from an order of the Law Division, following a bench trial, awarding defendant Lynne Clemons $3141 on her counterclaim against plaintiff. We affirm.
The facts, for the most part, are not in serious dispute. On July 10, 2005, the parties executed two home improvement contracts, one for the renovation of the first floor of defendant's home for $87,500, and the second for a two-story addition to the existing dwelling for $80,000, for a total contract price of $167,500.*fn1 The contracts provided for a schedule of payments upon completion of designated work phases, with the remaining balance due on each contract to be paid after completion of the project. After construction on the home commenced in July 2005, the parties agreed upon "extras" to the original contracts, although the agreement was never reduced to a formal writing. Plaintiff estimated the cost of the additional work amounted to $13,200, while defendant estimated the total to be $12,100.
In any event, sometime thereafter, in August 2005, construction came to a halt because defendant ran out of funds. However, she was able to secure a construction loan and, consequently, plaintiff resumed work in January 2006. Defendant's loan provided that interim payments to the home contractor would not be made until completion of designated phases of the project. Plaintiff operated under the terms of the loan agreement until June 2006 when he ceased work because defendant refused to advance monies to him ahead of the loan's payment schedule. Plaintiff claims the monies were necessary for him to continue the work. By then, plaintiff had completed the "roughing" work on the house, but not the "finish" work, and defendant had already paid plaintiff $169,900 of the contract price.*fn2 Despite her requests, plaintiff never returned to complete the project, requiring defendant to hire outside contractors to finish the job at a cost of $12,841.
Plaintiff filed a breach of contract action against defendant in the Special Civil Part seeking damages for the unpaid work he performed for defendant. Defendant answered and counterclaimed for reimbursement of monies she expended to complete the construction work that plaintiff had agreed to perform. Following a bench trial, the judge dismissed plaintiff's complaint and awarded defendant $3141 on her counterclaim. The trial judge reasoned:
And I find that the original contract price, this is clear, between the plaintiff and the defendant, was $167,500. Both sides agree that there were extras on that. The plaintiff says that there were $13,200 in extras. The defendant says there's was [sic] $12,100 in extras. I don't find that there's been any particular proof as to what the amount in extras was, so I'll have to go with the lower figure.
I have established the contract price at $179,600. Of that amount, 169,900 was paid, according to the receipts and the checks. That would leave a balance due of $9,700. I do find though that the defendant needed to pay third parties in order to get the work completed. And that she paid those third parties $12,841.
And that the, if you subtract $9,700 from $12,841, that would leave a balance due to her of $3,141. So, I'll enter a judgment for the defendant in the amount of $3,141.
On appeal, plaintiff raises the following issues for our consideration:
I. CLAIMANT STOPPED PRODUCTION AT WORK SITE OF DEFENDANT AFTER SHE BREACHED THE CONTRACT'S PAYMENT SCHEDULE, THEREFORE HE SHOULD NOT HAVE BEEN HELD LIABLE FOR EXPENSES [ACCRUED] BY THE DEFENDANT [AFTER THIS BREACH].
II. JUDGMENT [sic] OF $3,141 TO DEFENDANT RESULTED FROM A MISCALCULATION OF MONEY TRULY OWED AND RESULTED FROM FRAUDULENT REPRESENTATION BY THE DEFENDANT.
These contentions lack merit. Suffice it to say, the trial court's findings are supported by sufficient credible evidence and reasonably based in law.
As to the latter, it is well-settled that a building contractor cannot "recover unless he [or she] has substantially complied with the contract." Jardine Estates, Inc. v. Donna Brook Corp., 42 N.J. Super. 332, 337 (App. Div. 1956). Good faith compliance with all important particulars of the contract is necessary for a finding of substantial performance. Ibid.; - see also Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 501 (1992) (citing with approval Jardine court's definition of substantial compliance), overruled on other grounds, In re Tretina Printing, Inc. v. Fitzpatrick & Assocs., 135 N.J. 349, 358 (1994). Substantial performance of a construction contract is: when all of the essentials necessary to the full accomplishment of the purpose for which the building has been constructed are performed or the building is fit for its intended purpose, or when the contract has been performed with such an approximation to complete performance that the owner obtains substantially what is called for by the contract.
[13 Am. Jur. 2d Building and Construction Contracts § 48 (2007) (footnotes omitted).] See also Jardine, supra, 42 N.J. Super. at 337.
The contractor's "default [should] not be willful, nor should the defects . . . deprive the property of [its] value for its intended use, nor [should they] pervade the . . . work [so] that a deduction in damages [would] not be fair compensation." Jardine, supra, 42 N.J. Super. at 337-38; 14 Williston on Contracts § 42:4 (4th ed. 2000).
"Where there is conflicting testimony as to whether or not the contractor has substantially performed the contract, the issue is to be determined by the trier of the facts." Jardine, supra, 42 N.J. Super. at 338 (emphasis added). Where factual disputes arise as to the extent of performance, abandonment, incomplete work, or defective work, they are for the trier of fact to decide. Ibid.; Brannworth v. Borough of Verona, 94 N.J.L. 194, 195-96 (E. & A. 1920).
Here, in awarding defendant her expenses to complete the contract, the trial judge implicitly found that plaintiff has not substantially performed under the contract to warrant payment to him of the full contract price. We, of course, defer to the ability of the factfinder to judge credibility, In re Taylor, 158 N.J. 644, 656 (1999); Close v. Kordulak Bros., 44 N.J. 589, 599 (1965), and are further satisfied that his findings are supported by adequate credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). Indeed, plaintiff himself has admitted not completing the work on defendant's home as contractually required, leaving defendant's home unusable until the finish work was complete. In this regard, it appears that the home was not completed in such a manner so that it could be used for its intended purpose, nor did the owner obtain almost complete performance. Jardine, supra, 42 N.J. Super. at 337.
Plaintiff nevertheless contends that it was defendant who breached the contract by failing to advance payment prior to completion of the contract, and therefore she cannot prevail on her counterclaim. We disagree. In the first place, the contracts executed by the parties both specifically and expressly provide that final payment under each contract is not due until completion of the work detailed therein. Moreover, plaintiff operated for six months under the terms of defendant's construction loan agreement, and to the extent that this document modified the original payment schedules, plaintiff may be considered as having ratified or affirmed any such modification to the initial contracts. See Restatement (Second) of Contracts §287 (1981). And finally, plaintiff has presented no evidence in support of his claim that advance payment in June 2006 was necessary to continue construction or, correspondingly, to deviate from the construction loan stipulation. Accordingly, we are satisfied that plaintiff's breach is both factually and legally based.
We are also satisfied that the judge's calculation of defendant's damages was proper as both a matter of fact and law. As noted, the judge found the original contract price to be $167,500, increased to $179,600 to reflect the value of add-ons estimated to be worth $12,100 -- the lower of the parties' disputed figures. Since defendant already paid plaintiff $169,900 of this amount, there was an outstanding balance of $9700 due on the contract, which was then deducted from the $12,841 defendant actually paid to third parties to finish the project as contracted, leaving a total of $3141 owed to defendant.
We discern no error in this calculation. Compensatory damages are usually awarded in a breach of contract action. Totaro, Duffy, Cannova & Co. v. Lane, Middleton & Co., 191 N.J. 1, 13 (2007). The "party who breaches a contract is liable for all of the natural and probable consequences of the breach of that contract." Ibid. (quoting Pickett v. Lloyd's, 131 N.J. 457, 474 (1993)). The goal of compensatory damages "is to put the injured party in as good a position as he would have been in if performance were rendered as promised." St. Louis, L.L.C. v. Final Touch Glass & Mirror, Inc., 386 N.J. Super. 177, 188 (App. Div. 2006); see also Totaro, supra, 191 N.J. at 13. That position is contingent "upon what the parties reasonably expected." Totaro, supra, 191 N.J. at 14. "[The] [breaching party] is not chargeable for loss that he did not have reason to foresee as a probable result of the breach when the contract was made." Ibid. (quoting Donovan v. Bachstadt, 91 N.J. 434, 444 (1982) (internal citations omitted)).
When calculating compensatory damages, it is not necessary to follow specific rules if they would "defeat a common sense solution." St. Louis, supra, 386 N.J. Super. at 188 (quoting 525 Main Street Corp. v. Eagle Roofing Co., 34 N.J. 251, 254 (1961) (alteration in original)). In fact:
[t]he general rule with respect to building contracts is that the disappointed owner may recover the costs of completing the promised performance or making necessary repairs, unless under the facts it is impossible to do so or the costs of completion or repairs would constitute unreasonable economic waste, in which event reference would be made to the difference in value formula. [Ibid. (quoting Main Street, supra, 34 N.J. at 255).]
According to the Restatement of Contracts:
(2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on
(a) the diminution in the market price of the property caused by the breach, or
(b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him.
[St. Louis, supra, 386 N.J. Super. at 189 (quoting Restatement (Second) of Contracts: Alternatives to Loss in Value of Performance § 348 (1981)).]
Here, the judge calculated damages based on the parties' reasonable expectations inasmuch as plaintiff could have easily foreseen that defendant would have had to hire other contractors to finish the work he left uncompleted. Consequently, the cost of finishing the work plaintiff left undone was a probable result of plaintiff's breach and an appropriate measure of damages. The trial judge placed defendant in the same position she would have been in had the contract been performed upon. As in St. Louis, supra, "'the disappointed owner . . . recover[ed] the costs of completing the promised performance.'" 386 N.J. Super. at 188 (quoting Main Street, supra, 34 N.J. at 255). Accordingly, the trial judge's award of compensatory damages was appropriate, and his damages calculation was reasonable.
We have considered plaintiff's remaining contentions and consider them without merit. R. 2:11-3(e)(1)(A) and (E).