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O.A. Peterson Construction Co., Inc. v. Englewood Hospital and Medical Center

June 30, 2010

O.A. PETERSON CONSTRUCTION CO., INC., PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
ENGLEWOOD HOSPITAL AND MEDICAL CENTER, GRANARY ASSOCIATES, INC., ARMISTEAD MECHANICAL, INC., DESANTIS ARCHITECTURAL WOODWORKING, INC., NORDIC CONTRACTING CO., INC., UNITY ELECTRIC, L.L.C., SINGER EQUIPMENT COMPANY, FROMKIN BROTHERS, INC., THE NEW JERSEY HEALTH CARE FACILITIES FINANCING AUTHORITY, DEFENDANTS, AND ON PAR CONTRACTING, CO., INC., DEFENDANT-RESPONDENT/CROSS-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1367-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted May 24, 2010

Before Judges Reisner and Chambers.

In this construction contract dispute, plaintiff O.A. Peterson Construction Co., Inc. (OAP) appeals from an October 7, 2008 judgment awarding approximately $19,000 to defendant-counterclaimant On Par Contracting Co., Inc. (On Par). In turn, On Par cross-appeals from the judgment, claiming it is entitled to an additional $45,000.*fn1 We affirm the judgment.

OAP was the general contractor on a construction project for Englewood Hospital (Hospital or owner). On Par was one of the subcontractors on the project. The contract between OAP and On Par contained the following provision concerning OAP's obligation to pay On Par:

It is expressly understood and agreed that the receipt by the Contractor of payment for the Subcontractor's work shall be a condition precedent to the Contractor's obligation to pay the Subcontractor. That is, the Contractor shall have no liability or responsibility for any amounts due or claimed to be due the Subcontractor for any reason whatsoever except to the extent that the Contractor has actually received funds from the Owner specifically designated for disbursement to the Subcontractor. [Emphasis added.]

OAP contends that this language constituted an unambiguous "pay if paid" clause, which shifted to On Par the risk of the owner's nonpayment for the work. OAP faults the trial judge for interpreting the clause as delaying, but not defeating, the subcontractor's right to be paid for its work, and for allegedly failing to make a finding of fact as to whether the owner made a payment specifically designated for On Par's work.

According to OAP's brief, the clause required On Par to establish, as a condition precedent to its right to payment, "the receipt by OAP of funds 'specifically designated for disbursement to the Subcontractor.'" OAP further contends that toward the end of the contract period, the Hospital stopped making payments, leading to litigation. OAP asserts that it settled the litigation with the Hospital in an agreement that did not specifically designate how much of the settlement was attributable to work performed by On Par. Based on that assertion, OAP's brief further contends that "the Owner made no payment of funds to OAP that were 'specifically designated' for On Par" and therefore under the pay if paid clause, OAP owes On Par nothing because On Par "accepted the risk that the Owner would not make full payment of the contract price, from which On Par would be paid."

On this appeal, On Par does not disagree with OAP's construction of the clause as requiring, as a condition of payment to On Par, proof that the Hospital paid OAP for On Par's work. In fact, at the trial, On Par's first witness Derek Smith agreed with that interpretation of the contract. However, On Par claims that OAP breached the clause. On Par contends that OAP submitted two applications to the Hospital specifically requisitioning payment for On Par's work, and the Hospital paid OAP in response to those requisitions. OAP then breached the clause by misrepresenting to On Par that the Hospital had not paid, and by failing to remit payment to On Par. At the trial, On Par introduced evidence to support that position through Smith, a witness the judge later found entirely credible.*fn2

In response, OAP contends that the trial judge did not make any findings as to whether OAP received payment of the requisition invoices cited in On Par's appellate brief.

Alternatively, OAP argues that the record reflects that On Par was actually paid for the work reflected in those invoices.

In an October 7, 2008 oral opinion, the trial judge found that OAP did not deny receiving payment from the Hospital. Instead, OAP claimed it delayed payment to the subcontractor because On Par abandoned the job, and filed a construction lien*fn3 O.A. Peterson contends that they did not pay, because when they received ...


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