July 10, 2012
RATIONAL CONTRACTING INC., D/B/A RATIONAL ROOFING, PLAINTIFF-APPELLANT,
CONGREGATION AGUDATH ISRAEL OF WEST ESSEX, NEW JERSEY CORPORATION; TRANE US, INC., F/K/A TRANE, A DIVISION OF AMERICAN STANDARD, INC.; LAKELAND BANK, NEW JERSEY BANKING CORPORATION; ANDREW E. HALL & SON, INC., T.G. ELLIOT, INC., DEFENDANTS, AND FRANKOSKI CONSTRUCTION COMPANY, NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9636-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 8, 2012 -
Before Judges Reisner and Simonelli.
Plaintiff Rational Contracting Inc. appeals from the June 10, 2011 judgment entered in favor of defendant Frankoski Construction Company, reflecting the jury's award of $84,490 for compensatory damages on defendant's counterclaim, and the trial judge's award of $9,357.55 for prejudgment interest. We affirm that part of the judgment awarding compensatory damages, and reverse and remand with respect to the prejudgment interest award.
Defendant, a general contractor, entered into a contract with Congregation Agudath Israel of West Essex to construct a synagogue in Caldwell. Defendant then entered into a contract with plaintiff to install exterior panels and a roof for a contract price of $454,250.*fn1 A dispute later arose between the parties, resulting in plaintiff filing a construction lien for the balance allegedly due under the contract. Plaintiff also filed a complaint to foreclose the lien, alleging that it had performed all the work required under the contract and was owed $154,347.
Defendant filed a counterclaim, alleging that plaintiff failed to perform the work within the terms of the contract, and that defendant had to retain another roofing company to "complete and correct the shoddy work performed by [p]laintiff, [and] to complete the work not performed by plaintiff" at a cost over and above the contract price. Defendant retained Northeast Roof Maintenance Associates (NRM) at an additional cost of $275,000 to correct plaintiff's allegedly defective work and complete the work plaintiff allegedly failed to complete.
Plaintiff moved in limine to bar the testimony and report of defendant's liability and damages expert, Andrew Hooey, who is NRM's president and co-owner. Plaintiff argued that Hooey rendered an inadmissible net opinion. The trial judge denied the motion, finding that Hooey was both a fact and expert witness because his company had completed the work, he had the training and experience to qualify as an expert, and there was a sufficient factual basis to support his opinion.
At trial, Hooey testified about his training, education, and experience in the roofing business, the nature of NRM's business, and how plaintiff's work was defective and did not conform with the contract's roofing specifications. Hooey also testified about the nature and amount of uncompleted work and the "corrective" work that was required to remedy plaintiff's defective work.
Regarding damages, Hooey testified that NRM charged defendant $275,000, which was "reasonable and necessary" to perform the remaining roof work and remedy plaintiff's defective work. He testified about the number of hours, dates of work, material used, and other particulars of the work NRM performed. He also testified that he determined what to charge defendant by adding the cost of labor and materials plus an overhead charge of twenty percent, plus a profit charge of an additional twenty-five percent. He calculated the labor charge by averaging the hourly rate for NRM's employees who are paid between $10 per hour and $40 per hour, which was consistent with what other roofing companies in the area paid their employees, and then adding a charge for payroll taxes, workers' compensation insurance premiums, and general liability insurance premiums. He concluded that the $50 per hour labor rate was reasonable.
On cross-examination, plaintiff's counsel challenged Hooey on the veracity of his labor and material charges. Hooey acknowledged that the charges he cited were "based on [his] own internal costs" and "not based on any study of the market."
Upon completion of Hooey's testimony, the judge noted that although Hooey was qualified as an expert, defense counsel never presented Hooey as an expert witness to the jury, and Hooey offered no expert testimony. The judge, thus, declared that "[s]o far as I'm concerned there is no expert testimony that has been provided in this case[,]" and determined to treat Hooey's testimony as fact testimony. As a result, the judge gave no instructions to the jury on how to treat expert testimony.
The jury entered a no cause of action verdict on plaintiff's claims against defendant, and awarded defendant $84,490 in compensatory damages on the counterclaim. On June 10, 2011, the judge entered an order for judgment reflecting the jury's verdict. Without explanation, the judge awarded $9,357 for prejudgment interest.*fn2 This appeal followed.
On appeal, plaintiff contends that the judge erred in (1) denying its motion in limine to bar Hooey's expert report and testimony as to damages because Hooey rendered a net opinion; and (2) permitting the jury to consider the reasonable value of NRM's services and materials without expert testimony. Plaintiff also contends that defendant failed to establish damages because Hooey did not testify as to the reasonable value of NRM's work based on the usual and customary pricing of roofing contractors performing similar work in Essex County.
On appeal, a trial court's evidentiary rulings are subject to deference and are reviewed under the abuse of discretion standard. Brenman v. Demello, 191 N.J. 18, 31 (2007). A trial court's evidentiary ruling should stand unless it is "'so wide of the mark that a manifest denial of justice resulted.'" Ibid. (quoting Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480, 492 (1999)).
With respect to damages recoverable for breach of a building contract, our Supreme Court held 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. [525 Main St. Corp. v. Eagle Roofing Co., 34 N.J. 251, 255 (1961) (internal citation omitted).]
Whether the cost of repair or diminution in value of the property is the measure of damages "rests in good sense rather than in a mechanical application of a single formula." Ibid.
Depending on the circumstances in a given case, either diminution in the value of the property or the reasonable cost of restoring or repairing the damage may be appropriate. Velop, Inc. v. Kaplan, 301 N.J. Super. 32, 64 (App. Div. 1997), appeal dismissed, 153 N.J. 45 (1998). When a defendant defectively constructs a structure, however, the damages are usually deemed to be the cost to remedy any defect, rather than the diminution in value between the performance rendered and that promised. In part, this is because the former measure of recovery, in a construction contract setting, will make the owner whole that is, give the owner the benefit of the bargain that he or she made. . . . Thus, if a defect in the contractor's performance is repairable, the basic measure of the owner's damages is usually the cost of repair. [St. Louis, L.L.C. v. Final Touch Glass & Mirror, Inc., 386 N.J. Super. 177, 189 (App. Div. 2006) (quoting 24 Williston on Contracts § 66:17 (4th ed. 2002)).]
Once an "injured party establishes [the] cost to remedy defects, [the opponent] bears [the] burden of challenging evidence to reduce the award." Id.
Moreover, New Jersey permits considerable speculation by the trier of fact as to damages. "If the evidence affords a basis for estimating the damages with some reasonable degree of certainty, it is sufficient." Tessmar v. Grosner, 23 N.J. 193, 203 (1957) (citing Wolcott, Johnson & Co. v. Mount, 36 N.J.L. 262, 272 (Sup. Ct. 1873), aff'd, 38 N.J.L. 496 (E. & A. 1875)). "The rule relating to the uncertainty of damages applies to the uncertainty as to the fact of damage and not as to its amount, and where it is certain that damage has resulted, mere uncertainty as to the amount will not preclude the right of recovery." Ibid. Where the evidence affords a reasonable basis for awarding compensatory damages and the damages awarded were not excessive, that award should not be disturbed on appeal. Id. at 204.
On appeal, plaintiff does not challenge Hooey's testimony about the nature and extent of the defects and uncompleted work. Plaintiff only challenges Hooey's failure to opine about the reasonable value of the work NRM performed. However, the proper measure of damages is the reasonable cost to complete the work and remedy the defects. Hooey testified about what it cost to correct the defects and finish the work required under the contract, and concluded that the cost was reasonable. He was the perfect witness to provide this testimony because his company actually performed the work, and he calculated what to charge for it. He explained to the jury how he calculated his costs, testified that his charges were reasonable and necessary, and explained that his labor charge comported with what other roofing contractors in the area paid their employees. This was sufficient to establish damages with some reasonable degree of certainty. No expert testimony was required. Even if expert testimony was necessary to establish the reasonable and customary cost of fixing the roof in Essex County, at the very least Hooey's testimony was evidence of that cost, and did not constitute a net opinion. See Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 18 (2004) (holding that expert testimony was not required to establish the replacement cost of a defective carpet where the price tag on the item served as evidence of its value).
Plaintiff contends that the judge erred in awarding prejudgment interest, or alternatively, erred in using the enhanced interest rate to calculate the amount. The judge provided no reasons for awarding prejudgment interest or for the rate he used to calculate the amount, and may have calculated interest from the wrong date. Accordingly, we reverse the award of prejudgment interest, and remand for the trial court to reconsider the issue anew and provide a statement of reasons for awarding prejudgment interest and using the enhanced interest rate to calculate the amount.
The judgment for compensatory damages is affirmed, the judgment for prejudgment interest is reversed, and the matter is remanded for further proceedings consistent with this opinion.
Affirmed in part, reversed in part, and remanded. We do not retain jurisdiction.