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Honeywell International, Inc. v. O.A. Peterson Construction Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 10, 2008

HONEYWELL INTERNATIONAL, INC., PLAINTIFF-RESPONDENT,
v.
O.A. PETERSON CONSTRUCTION CO., INC., DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-4595-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted March 4, 2008

Before Judges Gilroy and Baxter.

Defendant O.A. Peterson Construction Co., Inc., appeals from the June 25, 2007 order of the Law Division, which entered judgment in favor of plaintiff Honeywell International, Inc.,*fn1 in the amount of $20,950.20. We affirm in part; reverse in part; and remand to the trial court for further proceedings consistent with this opinion.

Plaintiff is engaged in the business of, among other matters, manufacturing and supplying materials and services for heating, ventilation, and air conditioning systems. Defendant is engaged in the business of providing construction management and general contracting services for third-party construction projects.

Commencing in January 2000, defendant submitted three invoices to plaintiff: 1) an invoice dated January 26, 2000, in the amount of $1,500, Job No. 99-205; 2) an invoice dated January 27, 2000, in the amount of $6,784.43, part of which was paid, reducing the balance to $1,995.67, Job No. 99-247; and 3) an invoice dated April 5, 2000, in the amount of $75,750.80, Job No. 99-070. On August 15, 2003, plaintiff sent a bill to defendant in the amount of $80,519.87 for materials purchased by defendant for third-party projects. On June 7, 2005, plaintiff filed its complaint against defendant seeking to collect monies owed on its book account. Defendant filed its answer, not only denying liability to plaintiff, but also asserting that it was entitled to a setoff in the amount of $79,246.47 for monies plaintiff owed on its three invoices.

The matter was tried without a jury. Prior to commencement of testimony, the parties stipulated to the following facts: 1) "Honeywell International, Inc., merged with and into Allied Signal in 1999"; 2) "Allied Signal amended its certificate of incorporation in 1999 to change its name from Allied Signal to Honeywell International, Inc."; 3) "any mon[ies] that O.A. Peterson is successful in establishing at . . . trial as being due and owing from Allied Signal shall constitute equal dollar-for-dollar credit against any mon[ies] that plaintiff Honeywell International is successful in establishing at trial as due and owing to it from O.A. Peterson"; and 4) "there remains unpaid by O.A. Peterson to Honeywell the sum of $80,519.87."

Following the stipulation, plaintiff rested, leaving defendant to its proofs concerning the monies allegedly due on its three invoices. Defendant asserted that the work and material rendered to plaintiff, as evidenced by the three invoices, were authorized by Allied Signal, separate from the work performed by defendant under the $144,800 purchase order for renovation of the second floor of the Solvay Building (the Solvay project). Plaintiff denied liability for payment on the three invoices, asserting that the invoices covered work that was included within the scope of the February 18, 1999 purchase order for the Solvay project. In support of its claim that it was entitled to an offset, defendant presented testimony from Lisa Freedman, its bookkeeper and Assistant Comptroller; and Kurt Vanden Berg, its former estimator and Project Manager. Plaintiff countered with testimony from John McClellan, its current Director of Facilities of its Morristown headquarters; and John Friend, its Purchasing Agent at Morristown.

Freedman testified as follows. Defendant does not owe plaintiff $80,519.87, the amount stipulated, but only $1,273.28, which represents the difference between the amount stipulated and the total of its three invoices owed by plaintiff. Between 1998 and 2000, defendant performed approximately sixty to seventy construction projects at Allied Signal's Morristown complex. The construction projects were awarded to defendant by Allied Signal, either by a competitive bid proposal process or on a time and material basis. Each project was assigned a job number by defendant for accounting and billing purposes. The Solvay project was assigned Job No. 99-010. Each of the construction projects at Allied Signal's facilities was conducted under the supervision of Vanden Berg.

On January 8, 1999, Vanden Berg submitted a bid proposal in the amount of $144,800 "to furnish all material, labor, supervision, construction tools, facilities and equipment to complete the interior renovation on [the Solvay project] as per plans and specifications prepared by Allied Signal." Although Allied Signal's plans and specifications included the purchase and installation of carpet, the proposal submitted by defendant excluded it because defendant had not received a quote from its subcontractor, Fromkin Brothers, Inc. Defendant's bid proposal was reviewed by Allied Signal's project manager, Kim Lyons, who noted that defendant's proposal did not include the purchase and installation of carpet as specified in the plans and specifications. Nevertheless, Allied Signal awarded the contract to defendant on January 20, 1999. On February 18, 1999, Allied Signal prepared and forwarded a purchase order to defendant for the Solvay project in the amount of $144,800. On February 23, 1999, defendant executed and returned the purchase order to plaintiff, after which defendant completed all the work agreed upon.

Freedman testified regarding defendant's three outstanding invoices. The first invoice was for Job No. 99-205 dated January 26, 2000, for the construction of an insulated knee wall in the AB Building, D-wing, in the amount of $1,500. The AB Building is a separate building from the Solvay Building, and the work performed there was not related to the $144,800 purchase order for the Solvay project. The second invoice dated January 27, 2000, in the amount of $1,995.67, represented the balance due for work performed under Job No. 99-247 for the construction of a wall and door unrelated to the Solvay project.

The third invoice dated April 5, 2000, in the amount of $75,750.80 was for work performed under Job No. 99-070, representing additional work that had been authorized by Kim Lyons at the Solvay Building, separate from the work the parties had agreed on under Job. No. 99-010. The invoice amount of $75,750.80 consisted of charges by Fromkin for carpet installation in the amount of $48,760, and for labor and material to paint five additional offices and remove vinyl adhesive from four walls in one office, all located in the Solvay Building in the amount of $2,400; defendant's labor charge of $14,710.20; and a 15% profit factor of $9,880.54. Attached to the third invoice were copies of invoices received by defendant from Fromkin for the material used and labor performed.

In support of her testimony that the labor and material charged under Job No. 99-070 was not included in the scope of the work under Job No. 99-010, Freedman referenced Fromkin's estimate for the installation of carpet and flooring in the amount of $48,760, which was dated February 3, 1999, approximately one month after defendant had submitted its bid to perform the work on the Solvay project for $144,800. Freedman also noted a handwritten note she had received from Lyons, acknowledging that defendant's bid did not include the installation of the carpet before defendant received the award of the bid from Allied Signal. According to Freedman, because of Allied Signal's unique working relationship with defendant, it was common practice for Allied Signal to verbally award defendant construction contracts in excess of $5,000 and to confirm the contract after the project was completed via purchase orders and invoices. Lastly, Freedman testified that all three invoices of defendant represented monies owed for work completed by defendant and not paid by plaintiff.

Vanden Berg testified that he was the individual who had prepared the bid proposal for the Solvay project under Job No. 99-010, and that the proposal did not include a price for the purchase and installation of the carpet. The work performed by Fromkin under Job No. 99-070 was authorized by Allied Signal's second Project Manager, Mary Jo Cestone, separate and apart from the contract work performed under Job No. 99-010. As evidence that the work performed under Job No. 99-070 was not included within the scope of the work authorized under Job No. 99-010, Vanden Berg testified that he never submitted bid proposals without having estimates from his subcontractors in hand, here Fromkin; and he did not receive Fromkin's proposal for the carpet until approximately one month after he had submitted the proposal for the renovations of the Solvay project.

John McClennan testified that although he was not involved in the preparation of the specifications for the Solvay project, nor in the work itself, he believed that the specifications on which defendant had submitted its $144,800 bid included the installation of carpet throughout the second floor. McClennan based his opinion on a review of a construction plan found in plaintiff's file, containing finished notes calling for the installation of the carpet. However, because the plan was not dated, McClennan conceded that he could not state whether the document represented a preconstruction plan on which defendant submitted its bid, or whether it represented a finished plan when the work would have been completed.

Friend also testified that he believed that carpeting was required as part of the bid specifications for the Solvay project. However, like McClennan, he could not testify when the plan had been prepared that he had relied on for his testimony, before or after defendant submitted its bid. When Friend was confronted with Lyons's note to Freedman, acknowledging that defendant's bid did not include a price for the purchase and installation of carpet, Friend stated that when reviewing the matter he had questioned Freedman whether defendant's bid included carpet, and that in reply Freedman had written him a note stating: "This is the layout that was given to contractors as part of the bid. Carpet was to be incl. & was included on all other bids. I was never told that it was left off of the [defendant's] bid. Let me know what you think[?]"

On May 22, 2007, the trial judge rendered an oral decision entering judgment in favor of plaintiff in the amount of $20,950.20, determining that defendant was entitled to an offset in the amount of $59,569.67, or $19,676.80 less than the amount claimed. In reaching his decision, the judge determined that: Freedman and Vanden Berg were credible; the material and services contained in the invoice of January 26, 2000, under Job No. 99-205 in the amount of $1,500 and in the invoice of January 27, 2000, under Job No. 99-247 in the amount of $1,995.67 had been supplied and rendered, invoiced and not paid by plaintiff; and, defendant was entitled to a setoff for the monies owed by plaintiff under those two invoices. However, the trial judge determined that defendant was only entitled to a portion of the setoff claimed under the invoice dated April 5, 2000, for Job No. 99-070 in the amount of $75,750.80.

As to the third invoice, the judge found that: 1) Allied Signal's plans and specifications for the Solvay project had included the purchase and installation of carpet as specified on the Solvay project plan identified by McClennan and Friend; 2) defendant did not include the purchase and installation of carpet in its January 8, 1999 bid proposal of $144,800, because it had not received the estimate from its supplier, Fromkin; 3) defendant received the estimate from Fromkin in the amount of $48,760 on February 3, 1999; 4) Lyons had reviewed defendant's bid proposal of January 8, 1999, and although she had recognized that the proposal did not include a quotation for the carpet, that Allied Signal, nevertheless, awarded the contract to defendant; 5) defendant assigned Job No. 99-010 to the Solvay project; 6) Fromkin installed the carpet on the second floor of the Solvay Building pursuant to its February 3, 1999 estimate, completing the work on or before May 25, 1999, the date that Fromkin requisitioned defendant for payment; and 7) defendant had supplied and installed the carpet pursuant to verbal authority extended to Vanden Berg by either Kim Lyons or Mary Jo Cestone, in accordance with the past business practices of Allied Signal with defendant.

Accordingly, the judge concluded that defendant was entitled to a setoff under the third invoice for the charge by Fromkin Brothers for the installation of the carpet in the amount of $48,760, together with a 15% profit factor, for a total setoff of $56,074. However, the judge determined that defendant had not proven that it was entitled to a setoff under the third invoice for the labor charge of $14,710.26, concluding that the labor charge was for the installation of the carpet and was already included in Fromkin's quotation. Similarly, the judge disallowed Fromkin's additional charge of $2,400 for labor and material to paint five additional offices and remove vinyl adhesive from four walls in one of the offices, determining that the labor and material were included within the scope of the work of the original proposal of $144,800. Lastly, the judge disallowed the 15% profit factor ($2,566.54) on the labor charge of $14,710.26 and on Fromkin's $2,400 charge. A confirming order of judgment in the amount of $20,950.20 was entered on June 25, 2007.

On appeal, defendant argues:

POINT I.

A TRIAL JUDGE MAY NOT SUA SPONTE RAISE AN ISSUE FOR THE FIRST TIME IN HIS LETTER DECISION THAT WAS NOT RAISED DURING THE TRIAL.

POINT II.

DEFENDANT'S WITNESSES CONFIRMED THAT THE ENTIRE INVOICE, INCLUDING THE TWO ITEMS THE TRIAL JUDGE OMITTED FROM HIS DECISION, WERE PERFORMED AND RELATED TO THE WORK IN QUESTION.

Because plaintiff did not cross-appeal from the trial judge's award of full credit to defendant on the invoices of January 26, 2000, and January 27, 2000, in the amounts of $1,500 and $1,995.67, respectively, we only address the judge's decision allowing defendant a partial credit on the third invoice dated April 5, 2000, in the amount of $75,750.80.

Reviewing courts "'do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice . . . .'" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

A creditor may prove the amount due on an open book account for services rendered or material sold to a contract debtor by its books of account pursuant to N.J.R.E. 803(c)(6). Hackensack Hosp. v. Tiajoloff, 85 N.J. Super. 417, 419 (App. Div. 1964), certif. denied, 44 N.J. 396 (1965). Admission of the account records establishes a prima facie case of the amount owed on the account. Sears, Roebuck & Co. v. Merla, 142 N.J. Super. 205, 208 (App. Div. 1976). "However, when the reasonable value of those services [or materials] is placed in issue . . . the books of account alone usually cannot" prove the amount due on the open account. Hackensack Hosp., supra, 85 N.J. at 419-20.

Here, the April 5, 2000 invoice for Job No. 99-070 in the amount of $75,750.80 was admitted in evidence through the testimony of Freedman without objection. Plaintiff did not challenge the value of the material supplied or services rendered by defendant, but had only argued that the purchase and installation of the carpet had been included in the scope of defendant's bid proposal of January 8, 1999, in the amount of $144,800. The trial judge rejected plaintiff's argument, determining that the purchase and installation of the carpet was not included in defendant's bid proposal and that Allied Signal was aware of that fact before it awarded the contract to defendant. The judge found that Allied Signal, through Kim Lyons or Mary Jo Cestone, had authorized Vanden Berg to proceed with the carpet installation as a contract extra. However, the judge disallowed: 1) Fromkin's charge of $2,400 for labor and material required to paint five additional offices and remove vinyl adhesive from one of the offices; 2) defendant's charge for labor in the amount of $14,710.26, concluding that it constituted a duplicate charge for the labor to install the carpet as contained in Fromkin's estimate; and 3) the 15% profit factor of $2,566.54 on those two charges.

Because the trial judge's decision, in not allowing defendant credit for the $2,400 charged by Fromkin for labor and material in painting the five additional offices and removing vinyl adhesive from one of the offices, was based on the judge's review of the construction plans that formed the scope of the work required to be performed by defendant on the Solvay project, we determine that there is no reason to interfere with his factual findings on that issue. However, where we part ways with the trial judge is on his determination disallowing defendant's labor charge of $14,710.26, together with the 15% profit thereon. The judge disallowed credit on that charge determining that defendant had not presented any proof as to what the charge was for.

[I] couldn't find any justification even -- in any of the testimony or in any of the records about the . . . charge[] on April 5, 2000, where they talk about . . . $14,710.26 for labor. It doesn't . . . say where -- it does say it's at the second floor Solvay, but . . . there is no explanation for where . . . this came from. And I couldn't see how the defendant, who has the burden, could support it because of two things.

Number one, the labor for the installation of the carpet is included in the . . . Fromkin estimate. He indicates that the material was $33,335, the labor was $13,251, and then there was another breakdown for wood and material and another breakdown for labor. So all the labor for the carpet is in the Fromkin estimate. So where does the $14,710[.26] come from? The original specification for $144,800 included the labor for the painting for the Solvay. And this is all Solvay's second floor. So there's really no doubt about that.

So I don't see how the defendant has sustained its burden of establishing that this labor charge in the amount of $14,710.26 was for work that was authorized, since we're talking about the Solvay project, for work that was authorized at the Solvay project. So I will not allow a setoff in that amount.

Contrary to the judge's determination, Freedman testified that the $14,710.26 labor charge itemized in the third invoice was not for Fromkin's labor in installing the carpet, but rather was for defendant's own "field labor" in supervising the work performed by Fromkin. "It was related to supervision for the carpeting and the flooring and the painting." Accordingly, we reverse that part of the trial court's decision not allowing defendant an offset for the $14,710.26 labor charge and for the 15% profit factor on that amount, or an additional $2,206.54. We remand the matter to the trial court to enter an amended order, reducing the amount of the judgment in favor of plaintiff from $20,950.20 to $4,033.40.

Affirmed in part; reversed in part; and remanded to the trial court for further proceedings consistent with this opinion.


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