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APS Contractors, Inc. v. School District for the Chathams

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


April 3, 2009

APS CONTRACTORS, INC., PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
SCHOOL DISTRICT FOR THE CHATHAMS, DEFENDANT-APPELLANT/CROSS-RESPONDENT.

On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-111-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 3, 2009

Before Judges Graves, Grall and Ashrafi.

Defendant School District for the Chathams appeals a jury verdict in favor of plaintiff APS Contractors, Inc. and denial of its post-trial motions. Plaintiff APS Contractors cross-appeals denial of its motion for prejudgment interest. We affirm the jury verdict and the post-trial rulings.

Plaintiff, a general contractor, was awarded four contracts totaling more than five million dollars to construct additions and renovations at five public schools in the Chatham School District. Upon completion of the work, plaintiff claimed that defendant owed a balance of $1,685,115 after accounting for all adjustments and change orders. Defendant School District disputed the amount asserting that plaintiff's calculation included large sums for change orders that had not been approved in accordance with the contract terms. The School District also claimed it was owed credits for corrective work, negligent workmanship, and delay damages.

Plaintiff filed suit alleging breach of contract and quantum meruit causes of action. Defendant School District brought counterclaims for breach of contract and negligence. The case was tried before a jury in January 2008, and the jury returned a verdict in favor of plaintiff APS Contractors for $1,450,000. Defendant moved for a new trial or what it called remittitur. Plaintiff filed a cross-motion for prejudgment interest. Both motions were denied by the trial court.

On appeal, defendant School District raises five arguments:

I. THE TRIAL COURT ERRED IN EXCLUDING DEFENDANT'S SUPPLEMENTAL EXPERT REPORT

II. THE TRIAL COURT ERRED BY EXCLUDING EVIDENCE OF DEFENDANT'S DAMAGES FOR PROFESSIONAL SERVICES AND ADDITIONAL CORRECTIVE WORK

III. THE JURY AWARD ON PLAINTIFF'S CLAIM FOR UNAPPROVED CHANGE ORDERS IS CONTRARY TO LAW AND AGAINST THE WEIGHT OF THE EVIDENCE

IV. THE COURT'S CHARGE TO THE JURY ON THE ISSUE OF CONTRACT MODIFICATION WAS ERRONEOUS AND PREJUDICIAL TO DEFENDANT

V. THE TRIAL COURT ERRED BY FAILING TO RECOGNIZE THE EXCESSIVENESS OF THE JURY'S DAMAGES AWARD AND GRANTING REMITTITUR

We reject all of these arguments.

I.

The trial court suppressed some of the proposed testimony of the School District's expert witness because a report summarizing that testimony was not provided in discovery until more than five months after the close of discovery and after trial dates had been set. The discovery period was extended three times and finally expired on March 2, 2007, without a further request for extension. Defendant School District had served its initial expert report a month earlier, in February 2007. In April 2007, at oral argument on cross-motions for summary judgment, the judge apparently commented that more expert evidence was needed. Consequently, defendant undertook to prepare a supplemental expert report, but defense counsel did not seek leave from the court to re-open discovery or to provide a late expert report.

Defendant served its supplemental expert report on August 15, 2007. By that time, two trial dates had been set. Plaintiff objected to the late discovery. Defendant still did not seek intervention of the court by moving to re-open discovery or even by complying with the requirements of Rule 4:17-7 pertaining to amendment of interrogatory answers after the discovery period. When trial began on January 14, 2008, plaintiff moved to suppress the proposed expert testimony disclosed only in the late supplemental report. The trial court granted plaintiff's motion. Defendant contends that the court's ruling reduced its potential counterclaim damages by $1,279,466, and consequently it was reversible error.

This court will "generally defer to a trial court's disposition of discovery matters unless the court has abused its discretion or its determination is based on a mistaken understanding of the applicable law." Rivers v. LSC P'ship, 378 N.J. Super. 68, 80 (App. Div.), certif. denied, 185 N.J. 296 (2005). We find no misunderstanding of the law or abuse of discretion here.

Rule 4:24-1(c) governs extensions of discovery and provides, in part, that "[n]o extension of the discovery period may be permitted after an arbitration or trial date is fixed, unless exceptional circumstances are shown." At the time that the supplemental report was served, trial dates had been set. The trial court concluded that defendant had not met its burden of showing exceptional circumstances for late service of discovery.

We have identified four inquiries that a moving party must satisfy to extend discovery based upon exceptional circumstances:

(1) why discovery has not been completed within time and counsel's diligence in pursuing discovery during that time; (2) the additional discovery or disclosure sought is essential; (3) an explanation for counsel's failure to request an extension of the time for discovery within the original time period; and (4) the circumstances presented were clearly beyond the control of the attorney and litigant seeking the extension of time. [Rivers, supra, 378 N.J. Super. at 79 (quoting Vitti v. Brown, 359 N.J. Super. 40, 51 (Law Div. 2003)).]

Defendant makes no attempt to address these inquiries and, instead, relies on Tucci v. Tropicana Casino and Resort, Inc., 364 N.J. Super. 48 (App. Div. 2003), arguing that the report was served in response to comments made by the motion judge after the end of the discovery period, that the report was critical to defendant's damages claims, and that plaintiff was not prejudiced by the late submission.

Even accepting these contentions as true, defendant has provided no explanation for its failure to request an extension of discovery. Summary judgment motions were heard on April 27, 2007, and defendant had ample time to request an extension of discovery to supplement its expert report before serving it in August 2007, or before the January 2008 trial date. Defendant has not provided a transcript of the summary judgment motions, but any comment that the judge may have made regarding a need for additional evidence cannot be viewed as having granted an open-ended extension of discovery. Furthermore, there is no showing in the record before us that the information contained in the supplemental expert report was unavailable before the end of discovery.

Defendant's reliance on Tucci, supra, 364 N.J. Super. 48, is also misplaced. In that case, the plaintiffs' expert report was thirty-nine days late because the parties were not able to schedule the expert's inspection until after the deadline had passed for service of the report. The defendant had cooperated in the late scheduling of the inspection and had not given any indication of objecting to a late report. Also, plaintiffs' attorney had a legitimate excuse for failing to seek another extension of discovery from the court - his mother was terminally ill. In this case, defendant School District does not have any similar explanations for its lack of diligence in either obtaining the information in the supplemental report during the discovery period or in seeking an extension of discovery.

Because defendant made no attempt to comply with the court rules for discovery and because defendant has not shown exceptional circumstances for an extension, the trial court did not abuse its discretion in suppressing proposed expert testimony that was not timely disclosed in discovery.

II.

At trial, the judge also barred testimony of defendant's expert regarding corrective engineering, architectural, and legal expenses allegedly incurred by the School District to remediate deficiencies in plaintiff's performance. Defendant School District argues it was error for the judge to exclude evidence of these damages, which totaled $412,838.50.

A trial court's evidentiary rulings are examined on appeal for abuse of discretion. Hisenaj v. Kuehner, 194 N.J. 6, 12 (2008). We find no abuse of discretion in the judge's ruling with respect to evidentiary limitations on the expert's testimony.

To determine the basis for the expert's testimony, the trial court held a hearing pursuant to Rule 104(a) of the Rules of Evidence. The expert testified that he took numbers provided by other professionals and contractors and totaled them to arrive at the damages figure. In response to direct questions from counsel and the judge, the expert said that he did no investigation or evaluation as to the reasonableness or necessity of the expenses incurred. The trial judge correctly concluded that the expert's testimony in that regard was not admissible.

In effect, defendant was attempting to present evidence of its damages through hearsay testimony from its expert. The expert himself had no knowledge of the necessity or reasonableness of those costs for remedial or corrective work. He would merely repeat what the professionals stated in their invoices, assuming that the work was necessary and the charges reasonable.

Rule 703 of the Rules of Evidence permits expert opinion based on "facts or data derived from (1) the expert's personal observations, or (2) evidence admitted at the trial, or (3) data relied upon by the expert which is not necessarily admissible in evidence but which is the type of data normally relied upon by experts in forming opinions on the same subject." State v. Townsend, 186 N.J. 473, 494 (2006). But the rule does not provide an independent basis for the admission of otherwise inadmissible evidence. Day v. Lorenc, 296 N.J. Super. 262, 267 (App. Div. 1996).

An expert cannot offer for the truth of their content the facts upon which he relies based on hearsay information he has received. Expert testimony should not be used as "a vehicle for the 'wholesale [introduction] of otherwise inadmissible evidence.'" State v. Vandeweaghe, 351 N.J. Super. 467, 481 (App. Div. 2002) (quoting State v. Farthing, 331 N.J. Super. 58, 79 (App. Div.), certif. denied, 165 N.J. 530 (2000)), aff'd on other grounds 177 N.J. 229 (2003).

Nor can an expert testify about the conclusions or opinions of another person concerning issues at the heart of the case. See Brun v. Cardoso, 390 N.J. Super. 409, 422-24 (App. Div. 2006). Such evidence is inadmissible under Rule 808 of the Rules of Evidence. See Nowacki v. Comty. Med. Ctr., 279 N.J. Super. 276, 282-83 (App. Div.), certif. denied, 141 N.J. 95 (1995).

In this case, the School District proposed to prove its damages through the expert but without any testimony from a person with firsthand knowledge or expertise. In the absence of the professionals themselves to attest to the necessity and reasonableness of their charges, another witness with knowledge should have been presented to demonstrate that the invoices of the professionals provided admissible evidence of defendant's damages. Defendant might have offered an expert with knowledge and training in the several fields or a lay witness with relevant factual information concerning the necessity and reasonableness of the corrective costs. As proffered, the expert's proposed testimony was merely reciting inadmissible hearsay for its truth or, alternatively, offering a net opinion.

The net opinion rule "forbids the admission into evidence of an expert's conclusions that are not supported by factual evidence or other data." State v. Townsend, supra, 186 N.J. at 494; see Creanga v. Jardal, 185 N.J. 345, 360-62 (2005); State v. Papasavvas, 163 N.J. 565, 607 (2000). An expert must "give the why and wherefore of his or her opinion, rather than a mere conclusion." State v. Townsend, supra, 186 N.J. at 494 (quoting Rosenberg v. Tavorath, 352 N.J. Super. 385, 401 (App. Div. 2002)). The trial judge concluded that defendant's expert had no basis for offering an opinion regarding the necessity or reasonableness of the alleged damages. Because the expert could not provide the "why and wherefore" to support the damage amounts, the trial judge correctly excluded the expert's testimony regarding these damages.

III.

Plaintiff APS Contractors sought damages of $1,685,115, including $820,000 for work performed under oral change orders rather than the original contracts. The jury awarded plaintiff $1,450,000 in damages on both breach of contract and quantum meruit theories. Therefore, the damages award necessarily includes at least $584,885 in damages based on the change orders. Defendant argues that this work was unauthorized and that, pursuant to state law and the parties' contracts, a school district cannot be required to pay for change orders that were not authorized. According to defendant, state law requires the proper execution of an authorized change order before a contractor can proceed with additional work on a public school contract. See N.J.S.A. 52:27BB-32; N.J.A.C. 6A:23-7.1(a); N.J.A.C. 5:30-11.2, -.3, -.5. Defendant first raised this argument in its motion for a new trial.

Without deciding whether the cited statute or regulations apply to a plaintiff such as APS Contractors, or whether defendant's argument otherwise has merit, we agree with the trial court that this defense should have been raised at trial or earlier. Because it was not, defendant waived this defense. See Williams v. Bell Tel. Lab., Inc., 132 N.J. 109, 118-20 (1993); Vasilik v. Federbush, 327 N.J. Super. 6, 11-12 (App. Div. 1999); Lahue v. Pio Costa, 263 N.J. Super. 575, 598 (App. Div.), certif. denied, 134 N.J. 477 (1993). Defendant having undertaken to try its case without pleading a statutory defense that may have been available to it as a public school district, a post-trial motion is too late to raise that defense for the first time.

Defendant also argues that the jury verdict is against the weight of the evidence because the terms of the contracts required plaintiff to obtain written approval of change orders before proceeding with any additional work. "The standard for reversal on weight of the evidence grounds is high." Klawitter v. City of Trenton, 395 N.J. Super. 302, 325 (App. Div 2007). "Only when upon examination the verdict is found to be so contrary to the weight of the evidence as to give rise to the inescapable conclusion that it is the result of mistake, passion, prejudice or partiality, may it be disturbed." Ibid. (quoting Aiello v. Myzie, 88 N.J. Super. 187, 194 (App. Div.), certif. denied, 45 N.J. 594 (1965)).

At trial, the jury heard evidence that prior written authorization was required by the contracts for change orders but that this procedure was not followed in practice. The witness for plaintiff APS Contractors testified that it took several months to obtain authorized change orders from the Board of Education and that it was not practical to stop construction to wait for authorization. He testified that the construction manager and architect, who were the School District's agents, would give oral approval for the change orders and that the paperwork would be submitted and completed in due course. He also said that defendant's agents observed the work being performed by APS Contractors and they never suggested that the work should not proceed without a signed change order. The jury apparently accepted this testimony as demonstrating a modification of the strict terms of the contract. We see no evidence of "mistake, passion, prejudice or partiality" on the part of the jury in awarding damages as it did and find no reason to overturn the damages award.

IV.

Defendant argues next that it was error for the trial court to charge the jury on the issue of contract modification and that the charge was prejudicial to defendant. However, defendant not only failed to object at the charge conference or at any time before the jury retired to deliberate but defendant itself requested much of the modification charge that the court gave and to which defendant now objects. Defendant's argument can be considered only if the jury charge constitutes plain error. R. 1:7-2. "Under that standard, the issue is whether the [jury instruction] had the 'clear capacity for producing an unjust result.'" Fertile v. St. Michael's Med. Ctr., 169 N.J. 481, 493 (2001) (quoting State v. Melvin, 65 N.J. 1, 18 (1974)). We find no plain error.

The trial judge charged the jury concerning contract modification as follows:

The plaintiff... claims that to the extent the original contract required countersigned change orders in order for the plaintiff to be paid for certain []work, it was later modified to eliminate this requirement. The defendant denies this. The defendant contends that there was never any modification.

So to establish modification, [plaintiff] must prove that[], one, the parties agreed to the modification, two, that there was some outward modification [sic "indication"] of their agreement, three, that the terms were reasonably certain, meaning the parties could identify what they were required to do and determine at some further date whether or not the terms had been fulfilled, and four, the defendant received some new value in exchange for agreeing to the modification.

And new value doesn't necessarily have to be in terms of money. Having a project proceed more []expeditiously or... avoiding the formalities of getting a writing or a change order may be sufficient.

The second quoted paragraph mirrors the model jury charge and was the charge proposed by defendant School District. Model Jury Charge (Civil), § 4.10I (May 1998).

Defendant argues that the modification charge should not have been given because there was no evidence that a contract modification was executed in accordance with the terms of the contracts. Plaintiff presented evidence, however, to show that the actions of the parties modified the contracts to bypass signed change orders before work could proceed. We find no error in the trial court's including a charge to the jury on contract modification.

Defendant also argues that the trial court's comment concerning "new value" in the third quoted paragraph was a direct reference to plaintiff's case and that it was highly prejudicial to defendant. Jury instructions must "correctly state the applicable law in understandable language, and plainly spell out how the jury should apply the legal principles to the facts as it may find them." Jurman v. Samuel Braen, Inc., 47 N.J. 586, 591-92 (1966). Although a court often must comment on the facts of a case in its instructions, "any comment must be designed to avoid unduly influencing or otherwise invading the province of the jury." State v. Reddish, 181 N.J. 553, 612-13 (2004). Here, the instructions accurately explained the legal concept of consideration in the context of the facts of the case. We perceive no undue influence of the jury nor any "clear capacity for producing an unjust result" in the trial court's instruction. Fertile v. St. Michael's Med. Ctr., 169 N.J. at 493.

V.

Defendant contends that if a new trial is not granted, the damages award should be reduced to $630,000 to reflect $820,000 of unauthorized change orders. Defendant calls this request a remittitur, but it is actually asking this court to rule in its favor regarding the excluded testimony of its expert witness or to set aside certain types of damages awarded. Repeating its previous arguments, defendant asserts that it is entitled to reduction of the damages because its supplemental expert report should have been admitted in evidence, the issue of contract modification should not have been considered by the jury, and the verdict includes amounts prohibited by the parties' contracts and by law. In the previous sections of this opinion, we have found each of these points to be without merit. There was no basis to reduce the jury's award of damages.

VI.

Plaintiff cross-appeals denial of its motion for prejudgment interest. The trial court reasoned that because defendant was a public body and there were no extraordinary circumstances, and because defendant School District did not have the use of the money and would need to go to the taxpayers to satisfy the judgment, prejudgment interest was not warranted.

Plaintiff argues that the public policy of limiting the award of prejudgment interest against public entities has lost much of its suasion and that interest has been awarded against governmental entities in appropriate situations. Plaintiff says it has not yet been paid for work performed in 2002 and that it has been carrying a credit line of between $1,000,000 and $1,500,000 at considerable cost.

Equitable principles govern awards of prejudgment interest in contract disputes. County of Essex v. First Union Nat'l Bank, 186 N.J. 46, 61 (2006).

In awarding prejudgment interest, [t]he basic consideration is that the defendant has had the use, and the plaintiff has not, of the amount in question; and the interest factor simply covers the value of the sum awarded for the prejudgment period during which the defendant had the benefit of monies to which the plaintiff is found to have been earlier entitled. The allowance of prejudgment interest is a matter of discretion for the trial court. Unless the award represents a manifest denial of justice, an appellate court should not interfere. [Ibid. (internal citations and quotation omitted).]

"[T]he denial of interest [is] particularly appropriate where, in the absence of an overriding equity, a governmental agency would be called upon to pay the interest." Penpac, Inc. v. Passaic County Utils. Auth., 367 N.J. Super. 487, 502 (App. Div.)(internal quotation omitted), certif. denied, 180 N.J. 457 (2004). Moreover, "[w]here the debtor is a governmental agency and interest in the cause is not provided for by statute, particular circumspection in the granting of pre-judgment interest is required and a showing of overriding and compelling equitable reasons must be made in order to justify the award." Bd. of Educ. v. Levitt, 197 N.J. Super. 239, 244 (App. Div. 1984).

We agree with the trial court that there are no "overriding and compelling equitable reasons" to award prejudgment interest. The trial court did not abuse its discretion in denying prejudgment interest to plaintiff.

Affirmed.

20090403

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