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Famularo Electric, LLC v. Lyndhurst Residential Community


August 13, 2010


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1320-07.

Per curiam.


Argued May 4, 2010

Before Judges Carchman, Lihotz and Ashrafi.

Defendants Lyndhurst Residential Community, LLC (Lyndhurst) and Daibes Brothers, Inc. (Daibes) appeal from a March 18, 2009 judgment, following a bench trial, in favor of plaintiff Famularo Electric, LLC on its breach of contract complaint and dismissal of their counterclaim with prejudice.

Plaintiff, an electrical subcontractor, entered into a contract with defendants to perform electrical work with respect to a mixed use residential/commercial building. Plaintiff initiated this action alleging defendants failed to make required periodic payments on invoices it had submitted. Defendants filed a counterclaim, contending plaintiff failed to perform as required under the contract.

On appeal, defendants argue the judgment is against the weight of the evidence and various trial errors warrant a new trial. Alternatively, attacking the award of damages, defendants argue plaintiff failed to mitigate its losses and was not entitled to prejudgment interest. Plaintiff cross-appealed, contesting a reduction made by the trial court in calculating its award.

Following our review of these arguments, in light of the record and applicable law, we affirm the entry of judgment in favor of plaintiff. However, we remand to the trial court for further findings regarding the calculation of the amount credited to defendants, prior to the entry of judgment.

The facts are taken from the trial record. On June 24, 2005, plaintiff entered into a contract with Daibes to provide electrical work with respect to three separate projects: a field house in Lyndhurst, a sports complex in Palisades Park and a six-story mixed use commercial/residential building in Riverside (Riverside project). Daibes was the Construction Manager for all three projects, and the Riverside property was owned by Lyndhurst. This appeal concerns only the award to plaintiff for its work on this project.

Using a pre-printed, American Institute of Architects (AIA) standard form A101/CMa-1992,*fn1 plaintiff and Lyndhurst prepared an agreement for work on the Riverside project (the Agreement). Generally, the Agreement provided plaintiff would be paid $1,625,000.00 for the specified electrical work set forth in plaintiff's June 9, 2005 bid proposal, subject to adjustments stated in the contract. Lyndhurst agreed to make progress payments based upon plaintiff's submission of monthly invoices to Daibes, which was responsible for reviewing the requests, certifying payment should be made and forwarding them to Lyndhurst. Invoices were to be accompanied by substantiation and, if submitted by the 25th day of a month, payment would follow by the 31st day of the following month. Any invoices submitted after the 25th of the month were to be paid within forty-five days after receipt.

In §5.6, the Agreement added these further conditions for calculating the payment amount of each invoice:

§5.6.1. Take that portion of the Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the total Contract Sum allocated to that portion of the Work in the Schedule of Values, less retainage of Ten percent (10.00%). Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in Section 7.3.7 of the General Conditions; §5.6.2. Add that portion of the Contract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the complete construction (or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing), less retainage of Ten percent (10.00%)[.]

Thereafter, Article 6 stated final payment was due and payable when the work was fully performed. Specifically, the Agreement stated:

Final payment, constituting the entire unpaid balance of the Contract Sum shall be made by the Owner to the Contractor when (1) the Contract has been fully performed by the Contractor except for the Contractor's responsibility to correct nonconforming Work as provided in Section 12.2.2 of the General Conditions and to satisfy other requirements, if any, which necessarily survive final payment; and (2) a final Project Certificate for Payment has been issued by the Construction Manager and Architect[.]

Agreement was reached on three change orders regarding the Riverside project. Change order one modified air conditioning and heating work, increasing the cost by $42,021.00. Change order two dealt with kitchen range receptors, for the agreed price of $15,675.00. Change order three provided for the relocation of power for the elevators at a cost of $19,299.50.

Plaintiff submitted invoices to Daibes on a monthly basis between June 24, 2005 and March 29, 2006. When Lyndhurst failed to submit payment, plaintiff ceased its performance and filed a four-count complaint alleging Lyndhurst failed to pay the periodic invoices, improperly withheld ten percent of any payments made, and failed to pay the reasonable value of plaintiff's material and labor. Judgment was also sought against Daibes based on its failure to make payment for the invoices and to pay the reasonable value of plaintiff's material and labor.

Lyndhurst filed an answer raising nineteen affirmative defenses, including that plaintiff's complaint failed to state a cause of action; plaintiff was contractually barred from bringing this cause of action; plaintiff breached the contract; and the work performed evinced poor workmanship and defective equipment. Lyndhurst also filed a two-count counterclaim, asserting plaintiff failed to perform and complete the project in accordance with the Agreement, thereby materially breaching its terms and conditions, and asserting plaintiff failed to perform its obligation in a good, workmanlike manner, causing damages.

Discovery ensued. When defendants failed to timely comply with discovery requests, plaintiff filed a motion to suppress defendants' pleadings. An October 19, 2007 order suppressed defendants' answer and counterclaim for failure to answer interrogatories and produce documents. Thereafter, plaintiff withdrew its motion and the parties attempted to resolve the dispute in mediation. When mediation was unsuccessful, plaintiff moved to restore its complaint and requested default against defendants for noncompliance with discovery. The motion was granted as unopposed and the order, filed on June 6, 2008, restored plaintiff's complaint, entered default against defendants, and scheduled a proof hearing.

Default was later vacated based upon defendant's asserted compliance with all discovery requests. The final discovery deadline was extended to October 3, 2008. Plaintiff's second motion to dismiss defendants' pleadings for failure to provide discovery was granted in part on October 10, 2008. The court barred defendants from presenting at trial (1) any documents that had not previously been produced; (2) any expert testimony; and (3) affirmative claims or defenses for which it had not provided discovery.

A bench trial commenced on October 23, 2008. Plaintiff sought all payments, as requested by the previously submitted invoices. James Famularo, plaintiff's president, explained that electrical work actually began prior to execution of the Agreement, sometime in June or July 2005, and plaintiff had eight or nine workers on site for approximately thirty days prior to issuing its first invoice. Between June 24, 2005 and May 29, 2006, plaintiff hand-delivered monthly invoices to Daibes' offices in Edgewater for its work on the Riverside project.

The first invoice, for $201,500 and dated June 24, 2005, was paid in full, subject to the contractual ten percent retainage. Subsequent monthly invoices were partially paid by Daibes in an untimely and arbitrary manner. Famularo reviewed each invoice and testified to the work performed, the amount billed, and the sum paid. Plaintiff billed a total of $1,483,699.50 for which it received payment of $1,254,276.78. Of the unpaid balance, $81,052.85 was attributed to the electrical work provided for in the original contract and $148,369.95 was held in retainage. Famularo acknowledged final payment was due upon the full completion of the contract.

Plaintiff asserted it completed all electrical work for the first through fifth floors and obtained final inspection and approval on April 5, 2006. Photographs showing the work which had been provided on the sixth floor were also introduced. Famularo acknowledged the entire floor was not completed when he left the site. The parties stipulated $218,296 worth of electrical work required by the Agreement was not completed by plaintiff, but disputed the extent and value of the work plaintiff had completed.

Plaintiff received no complaints about the work performed. Jeffrey Friedman, a representative of Daibes, allegedly informed Famularo the project was under-financed and another construction loan had to be applied for by Daibes before plaintiff could be paid. Famularo advised Friedman and Joseph Schwartz, Daibes' Construction Manager consultant, that full payment of the monthly invoices was required if plaintiff was to keep its men on the job. When payments were not forthcoming, plaintiff ceased work and left the Riverside project job site around March or April 2006.

Defendants disputed various sums stated in the invoices submitted by plaintiff. Testimony was provided by Schwartz, a civil engineer specializing in structural engineering, and Anthony J. Prisco, an electrical contractor with Prisco Electric, Inc., which took over the electrical work on the Riverside project following plaintiff's departure.

In the beginning of May 2006, Schwartz walked through each floor of the Riverside project and determined the extent of the electrical work that was incomplete. He also had received all of plaintiff's invoices, approving the portion for which plaintiff would receive payment before sending them to Daibes' administrative office, where a bookkeeper issued the funds. Schwartz testified the invoices did not reflect the actual work performed; sometimes plaintiff over billed for work fixed by the contract and other times billed before the work was completed. Schwartz admitted he paid plaintiff's first invoice even though he felt all the work listed had not been completed, allowing plaintiff to "frontload the job."

Addressing specific line items, Schwartz testified $93,000 of the total $100,000 allotted for surface mounted lighting fixtures was billed, but that no such fixtures were installed; $17,600 of the total $35,000 was billed for installation of a generator, yet Schwartz had to purchase a generator unit for $20,000; plaintiff billed the total cost for roughing out all six floors, yet it had completed only five; and a $40,000 bill for engineering fees was submitted, but plaintiff provided no engineering drawings. Schwartz also challenged plaintiff's billing for the change orders, testifying plaintiff over billed $14,800 on the first and $5,675 on the second, as the work listed had not been completed. Finally, Schwartz offered testimony that many invoices overstated the value of work completed. Schwartz stated his opinion of the value provided versus the amount plaintiff billed.

Upon plaintiff's objection to Schwartz's opinions on the value of the work performed, the court excluded portions of the testimony found to be in the nature of expert testimony, which had been barred by prior court order due to the discovery violations. The court stated:

[W]e're walking a fine line here because he is an engineer and [] was going to [be] qualified as an expert[. H]e basically is an expert, [although] he's not allowed to give expert opinion testimony, so it's hard to draw a distinction in this case between fact and opinion, but I find that to be opinion and I'm striking it for the record.


I mean, I think this witness is going beyond. I've allowed some latitude here because I'm trying to understand what the counterclaim is, because in looking at the pleading, which I have before me, it's just generally ple[]d as items not being performed in accordance with the agreement. There's material breach of the agreement. And there was negligent performance of work.

I'm trying to get a handle [o]n what... the counterclaim is, and that's why I've been allowing some patience with this, so - but I'm not going to allow him to give opinion testimony, especially when he doesn't have backup.

He hasn't given me any backup, and he's basically giving me some net opinions, quite frankly, so please keep him focused on what he can state[, which] is not opinion testimony and which is verified by some factual documentation.

Prisco testified that only eighty percent of the fifth floor electrical work had been completed and no electrical work had been done on the sixth floor when he took over the project in July 2006. His testimony was also limited by the trial judge, who excluded as expert opinion work he allegedly had to "re-do." When asked about the extent of lighting fixtures installed at the site, Prisco estimated twenty-five percent of the lighting fixtures were installed upon his arrival in June 2006, not the ninety-three percent suggested by plaintiff's invoices. Prisco also testified the work required by the third change order was not completed when he took over the Riverside project, and no generator or surface mounted lights were installed. Plaintiff objected to Prisco's testimony as running afoul of the pre-trial order. The court allowed the testimony but later disregarded any portions characterized as expert opinion.

On March 3, 2009, the trial judge issued a memorandum of decision ordering a total payment to plaintiff of $233,554.99 on the Riverside project. The court credited Famularo's testimony as either uncontroverted or supported by the municipal inspection certifications and other evidence. The court found plaintiff was not prohibited by the Agreement from leaving the project for reasonable cause, which was satisfied by defendants' non-payment. Consequently, the judge found defendants breached the Agreement, and plaintiff left the job in "a responsible, organized fashion," rather than "simply abandoning the project" as alleged by defendants. The court also determined plaintiff had engaged in good faith and fair dealing and there was no evidence supporting a contention its work was unacceptable or did not pass inspection.

Accordingly, the judge concluded defendants breached the contract, and plaintiff was entitled to the balance for work it completed, calculated as $209,427.80.*fn2 The court deducted $20,000.00 for the cost of the generator billed, but not paid for, by plaintiff. In accordance with Section 7.2 of the Agreement, the court awarded prejudgment interest, calculated at statutory rates from April 29, 2006 to the date of payment, in the amount of $17,314.96. Finally, defendants' counterclaim was dismissed with prejudice.

Defendants appealed. Plaintiff cross-appealed regarding the calculation of its award. We examine the parties' positions.

Defendants first challenge, as error, the trial court's exclusion of the lay opinion testimony offered by Schwartz and Prisco, as to the value of plaintiff's work "because they were not experts." We reject this argument as unpersuasive.

The exercised discretion to admit or exclude testimony will be overturned on appeal only when it is demonstrated that the trial court abused its discretion. Benevenga v. Digregorio, 325 N.J. Super. 27, 32 (App. Div. 1999), certif. denied, 163 N.J. 79 (2000).

Expert testimony is required when the subject is "so esoteric that jurors of common judgment and experience cannot form a valid judgment" without it. Phillips v. Gelpke, 190 N.J. 580, 591 (2007) (internal quotations omitted). "The necessity for, or propriety of, the admission of expert testimony, and the competence of such testimony, are judgments within the discretion of the trial court." State v. Zola, 112 N.J. 384, 414 (1988), cert. denied, 489 U.S. 1022, 109 S.Ct. 1146, 103 L.Ed. 2d 205 (1989).

In its memorandum of decision, the trial court stated that it disregarded that portion of Schwartz's testimony that plaintiff had over-billed defendant with respect to change order two by $5,675.00. Contrary to defendants' assertion, the testimony was not excluded because the witnesses were not experts, but rather because expert testimony was barred by the pre-trial order. The trial judge evaluated the testimony offered by Schwartz and Prisco, finding it transcended a factual recitation of events to an evaluative assessment of the qualitative and quantitative value of plaintiff's work product -- clearly expert testimony. These opinions were properly disregarded procedurally, based on the pre-trial order, and substantively because they were found to be "speculative in nature and unsubstantiated by any credible evidence." See Neno v. Clinton, 167 N.J. 573, 585 (2001) (requiring lay opinion to be based on an adequate foundation); Lane v. Oil Delivery, Inc., 216 N.J. Super. 413, 420 (App. Div. 1987) (holding that the basis for witnesses lay opinion must not be "a matter of speculation"); see also N.J.R.E. 701.

The testimony offered by the defense witnesses encompassed on subjects beyond a layman's common understanding or knowledge, making the trial judge well within her discretion to disregard portions of the testimony. For example, Schwartz offered an opinion that the fair value of plaintiff's work on change order number two was only $10,000, and Prisco testified certain work needed to be remediated because it was ineffective. Moreover, these assertions were unaccompanied by documentation evincing the conclusions offered, such as proof that Schwartz or Friedman had rejected an invoice because the work was over-billed, or that the cost of fixtures or equipment used to perform the work was inflated, or that the municipal building inspector provided notice the work had been rejected. When the testimony related to proven facts, such as the cost of the generator, which plaintiff admittedly did not install, the court accepted it.

The court also discounted portions of the testimony challenging work invoiced by plaintiff because defendant controlled relevant information, but did not present it. Specifically, both Schwartz and Prisco commented on the billing for engineering, suggesting they had not been provided with such services. Famularo explained he provided this information to Friedman, whom defendants did not call as a witness. In her decision, the trial judge stated, "the [c]court notes that Mr. Friedman was not called as a witness to testify at the time of trial by the defense, and an adverse inference can be drawn therefrom."

Defendants argue the trial court's sua sponte drawing of a negative inference against them was error. We are not persuaded.

Under appropriate circumstances, a trial court has the discretion to draw adverse inferences. Such decisions will be overturned only when found to be arbitrary and capricious. Cockerline v. Menendez, 411 N.J. Super. 596, 620-21 (App. Div.) certif. denied, 201 N.J. 499 (2010). An adverse inference is available when a party does not call to the stand a witness it has the power to produce whose testimony would be superior to that testimony presented at trial. Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 118 (2005). The adverse inference is not to be utilized when the witness is unavailable or likely to be prejudiced against the party calling him. Ibid.

We have no quarrel with the trial court's exercised discretion. Friedman's interactions with Famularo were integral to the funding of the project and the reasons for delayed payment. Additionally, Famularo testified certain documents, like the engineering plans, were given to Friedman.

Defendants argue Friedman was equally available to both parties and could have been called by plaintiff. Famularo provided the information he imparted to, or received from, Friedman. Under the circumstances, particularly understanding Friedman was an executive for Daibes, it is neither necessary nor logical to suggest plaintiff was required to present Friedman as its witness.

When distilled, the trial court's determination rests on its determination of the credibility of the parties. The court's opinion stresses the consistency of Famularo's testimony with the overall proofs and identifies the unsubstantiated assertions proffered by defendants.

We must defer to a trial court's credibility determinations, which are binding on appeal when supported by adequate, substantial and credible evidence on the record. Sager v. O.A. Peterson Constr., Co., 182 N.J. 156, 164 (2004). This deference is provided because the trial court "has the opportunity to make first-hand credibility judgments about the witnesses who appear on the stand; it has a feel of the case that can never be realized by a review of the cold record." See Division of Youth & Family Services v. M.C. III, 201 N.J. 328, 342-43 (2010) (internal quotation omitted). Our role is not to reweigh the evidence; we determine only whether the factual findings are supported.

We determine the trial court properly and clearly articulated its factual findings and correlated them with the relevant legal conclusions. R. 1:7-4(a). In light of the detailed factual and credibility findings by the court, grounded in the evidence of record, we reject as meritless defendants' argument that the judgment is not supported by the weight of the evidence. R. 2:11-3(e)(1)(E).

Based upon our determination, we need not address defendants' assertion that plaintiff failed to mitigate its damages, a position based on acceptance of the proposition that the court erred in rejecting defendants' argument that plaintiff over billed. Additionally, we note the legal issue was not raised before the trial court and will not be considered for the first time on appeal. Community Hosp. Group, Inc. v. Blume Goldfaden Berkowitz Donnelly Fried & Forte, P.C., 381 N.J. Super. 119, 127 (App. Div. 2005); see also Pressler, Current N.J. Court Rules, comment 2 on R. 2:6-2 (2010). We also reject the suggestion that cumulative error warrants a new trial. R. 2:11-3(e)(1)(E).

In their final point, defendants argue the trial court erred in awarding plaintiff prejudgment interest because §7.2 of the Agreement was not dispositive on the issue. Rather than focusing on the legal aspect of this claim, defendants return to their factual challenge previously rejected by the trial court: that plaintiff's invoices "overstated" the "actual work performed," and that the Agreement allows only for amounts "due and unpaid." The trial court's reasoned determination will not be disturbed. In re Estate of Lash, 169 N.J. 20, 34 (2001); P.F.I., Inc. v. Kulis, 363 N.J. Super. 292, 301 (App. Div. 2003), certif. denied, 178 N.J. 453 (2004); Musto v. Vidas, 333 N.J. Super. 52, 74 (App. Div.), certif. denied, 165 N.J. 607 (2000).

We now examine the argument presented in plaintiff's cross-appeal. Plaintiff challenges the reduction of its claim by $20,000.00, the value of the generator purchased by defendants. Plaintiff maintains it never billed defendants for the generator, and the sum contained on its March 29, 2006 invoice, $17,600, related to running conduit and wiring for the generator's installation. Further, plaintiff argues defendants' assertion was not corroborated by documentary proofs.

According to the Agreement, the total cost of the generator and its installation was $35,000. If defendants spent $20,000 for the generator unit, a factual statement found credible by the trial court, plaintiff may well have been entitled to payment of $15,000 for the work provided.

The trial court's determination, in light of the testimony and invoice documents, the credit due defendant should be $20,000 was not fully explained. We have previously discussed the need for factual findings supporting a trial court's legal conclusions. R. 1:7-4(a). Consequently, we remand this issue for further explanation of the court's determination and modification of the judgment as necessary.

Affirmed in part and remanded in part for further findings as discussed in this opinion. We do not retain jurisdiction.

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