Opinion
DOCKET NO. A-3723-13T4
06-20-2016
BYRON MONTENEGRO, Plaintiff-Respondent, v. MARKO MILETIC, Defendant-Appellant.
Jure Miletic, attorney for appellant. Mario M. Blanch, attorney for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer and Haas. On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. SC-171-14. Jure Miletic, attorney for appellant. Mario M. Blanch, attorney for respondent. PER CURIAM
This is a contract dispute between a homeowner and a home improvement contractor. Pursuant to a June 25, 2013, written agreement, plaintiff agreed to install an aluminum fence around defendant's backyard pool. Plaintiff sued defendant seeking an amount allegedly due under the contract, as modified by a subsequent agreement entered into on November 15, 2013. Defendant counterclaimed for liquidated damages due to plaintiff's delay, and for repairs due to plaintiff's allegedly shoddy workmanship. After a trial in the Small Claims Section of the Special Civil Part, the court awarded judgment on plaintiff's claim and dismissed defendant's counterclaim. Defendant appeals, asserting the court erred in its interpretation of the parties' agreements, and in its evidentiary rulings. Having reviewed defendant's arguments in light of the record and applicable principles of law, we are constrained to reverse.
I.
The parties were the sole witnesses at the trial. We discern the following facts from the trial record.
The parties entered into a written contract dated June 25, 2013 for the installation of a fence. The contract was in the form of a typed purchase order, signed by both parties, on "NJ Steel Construction" letterhead, with many handwritten insertions. The contract included a description of the fence, but omitted many details. The contract unclearly stated: "Fence in left side and fence in right side and back to attached [sic] to south fence" without stating whether the "south fence" already existed. The contract also did not disclose the total length of the fence or its precise location on defendant's property; did not assign responsibility for a proper survey, or for any site preparation, if required; specified that the balusters would be aluminum, but did not specify the materials to be used in other components, such as the posts, frame or gate; and described two gates: "Gate 10'x6' Highest point and 5'Lowest point" and "Gate 7' x6 High and 5' lowest point" (sic). The contract called for "special" brown paint.
The contract did not specify whether "NJ Steel Construction" was a corporation or other formal business entity. Neither did it disclose a home improvement contractor registration number. See N.J.S.A. 56:8-138 (requiring registration for home improvement contractors); N.J.S.A. 56:8-151 (stating that a person may not engage in home improvement contracts over $500 without disclosing registration number).
The contract set a completion date of July 18, 2013, and included a liquidated damages clause which stated: "If job done after 7/18 then will be 200 dollars charge per day to NJ Steel Const" (sic). The price was $8000 plus $280 in tax and required a fifty percent downpayment with the remainder to be paid upon completion. Plaintiff acknowledged receiving a $4000 check from defendant on June 26, 2013.
Disputes regarding plaintiff's workmanship arose as soon as construction began. The parties accused each other of breaching their agreement. Defendant memorialized his disputes in a series of letters sent to plaintiff in August, October, and November of 2013. The letters expressed defendant's disagreement regarding whose responsibility it was to prepare the site for construction; the precise demarcation of where one side of the fence should have been placed; the alignment of the fence; the failure of the fence to pass inspection because its gates opened inwards (toward the pool) instead of outwards, and because the bottom of the fence was more than two inches from the ground; the lack of caps on some fence posts; that parts of the fence were painted black, not brown; and, that the project as a whole was not completed on time, in large part because plaintiff left the country for a month-long vacation.
Although plaintiff did not respond to any of defendant's letters, he disputed defendant's allegations at trial. Plaintiff alleged that defendant told him to start digging in the wrong place, which required him to expend additional time and energy removing and reinstalling part of the fence. He contended it was defendant's responsibility, not his, to prepare the site for installation. He also explained that he left the job site in June 2013 for medical reasons, not to go on vacation. At one point, plaintiff removed the gates from the fence for repairs, but refused to reinstall them unless defendant paid $1,000.
On November 15, 2013, the parties entered into a written letter agreement on NJ Steel Construction letterhead. The agreement referred to the dispute over the removed gates, and provided that defendant would make a partial payment that day. The agreement stated:
I, Byron Montenegro, as owner of the NJ steel construction company made a contract of some fences and two gates [that] would be installed at the home address . . . for Mr. Marko Miletic, in June of 2013, for the amount of $8,280. I have received payments of $4,000 dollars to start and then according to the progress of the work I have received payments of $1,000, $800, and $200 dollars leaving a balance of $2,280.
The contract could not be finished on the date indicated for several reasons. The work was completed in October. The inspector had indicated that the doors should be opened towards the outside and not inside. For this reason the doors were removed from the property of [defendant] with his permission to make the changes that the inspector required. The doors were not installed because [defendant] refused to pay the balance. We have reached an agreement to install the doors on this day November 15th [2013] to receive a payment of one thousand dollars on behalf of [defendant] and that he would pay the remaining balance of $1,280 once inspection was passed. Only if the inspector asks for other changes, then the work will be done at no cost but if [defendant] asks for extra changes, then he would have to pay for every change requested. If the balance isn't paid after passing inspection, [defendant] agrees for my company to sue him for the balance of $1,280.
The next day, November 16, 2013, defendant stopped payment on the $1000 check he had given to plaintiff because he was still unsatisfied with plaintiff's workmanship. In a letter dated November 17, defendant asserted he came home late Friday and did not discover the defects until the next day. He identified "several serious problems with the workmanship," including: the east door was visibly misaligned; plaintiff randomly used black paint on part of the fence doors; plaintiff failed to install caps on several posts; he misplaced the south side fence a foot "too far from the property line"; and the bottom of the west-side fence was too high, and would still fail inspection. Defendant asserted that plaintiff "promised many times" to fix the caps, and knew about the clearance issue. Defendant sought to terminate the contract, stating, "We have nothing left to discuss, if you would like to pursue this further, then it must be in court."
Plaintiff asserted he was entitled to payment of $2280, the unpaid balance due on the contract price of $8280. Plaintiff conceded he did not know if the project ultimately passed inspection, stating that defendant never called him back for a second inspection. With respect to the painting issue, he claimed that defendant "told me that he was going to paint them black, so I asked if I could use spray to do the touch-up. And he said, yes, that was fine, because he was going to paint the gates black." He asserted that defendant initially directed him to install the gates to open inward, because the rise of the land would block the door. With respect to the clearance, plaintiff stated, "the inspector did tell me that that part was too high, but he said, all you need to do is just put either some stone or put more ground there that needs it."
Apparently disregarding the inspector's statement as hearsay, the court noted that the inspector was not present to testify on plaintiff's behalf.
Defendant contended that he was entitled to $3000 in delay damages pursuant to the liquidated damages clause. He also sought $1471.35 in damages to repair the fence. He relied on a price quoted by another contractor, who allegedly "established that the job was not done correctly." However, the court sua sponte barred introduction of the estimate on hearsay grounds. The court also rejected defense counsel's argument that the document was admissible as a business record in the absence of a witness to lay a foundation. The court also rejected defense counsel's proposal to call the witness to testify by telephone.
We presume defendant selected the $3000 amount to remain within the Small Claims Division's jurisdictional amount, see Rule 6:1-2(a)(2) (jurisdictional amount); Rule 6:11 (providing for transfer to Special Civil Part if counterclaim exceeds jurisdictional amount).
The trial court found that the June 25, 2013 purchase order was a binding contract, and plaintiff was entitled to the remaining money owed pursuant to its terms. The court concluded, "Plaintiff did what the contract required the Plaintiff to do. The Defendant did not do what the contract required the Defendant to do." The court did not address defendant's claim that the work was deficient, or failed to pass inspection.
The court also found that the November 15, 2013 letter agreement modified the original contract, described the parties' remaining duties, and waived the liquidated damages provision of the initial contract.
I do believe that the second . . . writing, the one dated November 15th in which there was an agreement for the Defendant to pay $1,000 to the Plaintiff, after which the Plaintiff would do certain work and then have an inspection and complete the remaining work, actually was a modification of the contract.The court entered judgment for $2280 in favor of plaintiff and dismissed defendant's counterclaim.
. . . .
However, the Defendant did not abide by his obligation in that contract [(the modification)]. . . . Based upon that, and based upon the fact that he did not have an expert here to testify on his behalf . . . I will grant the Plaintiff the relief he is seeking . . . and I will deny the counterclaim of the Defendant in which he's seeking $3,000 for the liquidated damages of $200 a day, plus the completion of the project.
I do believe that by entering into that secondary contract that it voided the $200 a day liquidated damage provision and I dismiss the case.
[(Emphasis added).]
This appeal followed. Defendant contends the trial court erred by excluding his proffered repair cost estimate as hearsay. He also contends the court erroneously treated the November 15, 2013 letter agreement as a novation, although the court did not use that term, thereby voiding the liquidated damages clause. Defendant invites us to exercise original jurisdiction and award defendant liquidated damages in the amount of $3000.
II.
We exercise limited review of a trial court's fact-finding in a non-jury case. Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011). We are bound by a trial court's findings of fact when they are supported by "adequate, substantial, credible evidence." Ibid. (quoting Cesare v. Cesare, 154 N.J. 394, 411 (1998). "Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility." Ibid. We "should 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." Ibid.
"Although we generously review a trial court's evidentiary rulings, we may overturn the trial court's evidentiary decision if there is a clear error of judgment or the decision lacks the support of credible evidence in the record." Manata v. Pereira, 436 N.J. Super. 330, 344 (App. Div. 2014) (citing Estate of Hanges v. Metropolitan Property & Cas. Ins. Co., 202 N.J. 369, 384 (2010)). However, "we will reverse a judgment based on an evidentiary error only if we are convinced that the error was clearly capable of producing an unjust result." Ibid. (internal quotation marks omitted) (quoting Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480, 502 (1999)).
"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 v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). In particular, interpretation of contract language is a legal question that we review de novo. See Kieffer v. Best Buy, 205 N.J. 213, 222-23 (2011).
We consider first the issue of contract interpretation, and defendant's claim that the court erred in determining that the November 15 letter agreement voided the liquidated damages clause of the original contract. In interpreting the meaning of the November 15 letter agreement, we "read the document as a whole in a fair and common sense manner," Hardy ex rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 103 (2009), and enforce terms that are "clear and unambiguous . . . as written." Watson v. City of E. Orange, 175 N.J. 442, 447 (2003). The court determines, as a legal matter, whether the contract is ambiguous. Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997). In seeking to ascertain the meaning of the language used, we "consider[] the situation of the parties, the attendant circumstances, the operative usages and practices, and the objects the parties were striving to achieve." George M. Brewster & Sons, Inc. v. Catalytic Constr. Co., 17 N.J. 20, 32 (1954); see also Conway v. 287 Corp. Ctr. Assocs., 187 N.J. 259, 268-70 (2006) (discussing role of extrinsic evidence in contract interpretation).
We agree with the trial court's determination that the November 15 agreement resulted in a waiver of the liquidated damages clause. However, we reject defendant's argument that this conclusion requires finding that the November 15 agreement was a novation. See Wells Reit II-80 Park Plaza, LLC v. Director, Div. of Taxation, 414 N.J. Super. 453, 466 (App. Div. 2010) (stating that a novation "substitutes a new contract and extinguishes the old one"). The letter agreement modified, rather than replaced, the original agreement.
The parties acknowledged that "the contract could not be finished on the date indicated for several reasons." This recital does not assign either party with responsibility for the delay. Plaintiff alleged delay resulted from defendant's failure to properly plot out the fence and prepare the site. Defendant contended plaintiff was responsible for the delay because he left the country in mid-July. While the recital by itself arguably preserved the dispute of who was responsible for delays and damages claims arising therefrom, the subsequent language clearly limits the parties' remaining financial obligations, thus excluding any claims for delay damages incurred by either side. The letter stated:
We have reached an agreement to install the doors on this day November 15th to receive a payment of one thousand dollars on behalf of [defendant] and that he would pay the remaining balance of $1,2 80 once inspection was passed. Only if the inspector asks for other changes, then the work will be done at no cost but if [defendant] asks for extra changes, then he would have to pay for every change requested. If the balance isn't paid after passing inspection, [defendant] agrees for my company to sue him for the balance of $1,280.
The fair reading of this language is that the parties, recognizing their ongoing dispute, determined that the decision of the inspector would be dispositive of their respective obligations. Defendant agreed to pay, and plaintiff agreed to accept, $1000 for the door installation, and $1280 once the job passed inspection. Plaintiff was not obliged to perform any work in addition to installing the doors, unless required by the inspector. If the fence passed inspection, then defendant was obliged to make the final payment, or be sued for that amount.
Implicit in this is that defendant waived any claim for delay damages, or for the performance of additional modifications not required by the inspector. Thus, defendant waived any right to demand most of the changes set forth in the November 17 letter — to alter the alignment of the fence doors (unless required to do so by the inspector); to move the south side fence by one foot; to change the color of the doors; or to install allegedly missing caps on fence posts. However, defendant retained the right to seek modifications to the west-side fence, if the clearance was too high to pass inspection.
Although we reject defendant's argument that he preserved his claim to liquidated delay damages, we find insufficient grounds for the court to have awarded plaintiff $2280. The condition precedent to plaintiff's right to the final $1280 was passing inspection. Plaintiff admitted that the fence did not comply. He asserted that instead of lowering the fence, defendant could have raised the ground. However, nothing in the parties' agreement obliged defendant to modify the site to cure plaintiff's workmanship. Although plaintiff was entitled to $1000 upon installation of the doors, plaintiff was also obliged to make appropriate repairs to assure that the fence passed inspection.
A home improvement contractor is obliged to furnish a final inspection certificate to a home owner before obtaining the right to final payment. N.J.A.C. 13:45A-16.2(a)(10)(ii).
In this regard, the court erred in rejecting defendant's estimate of repair work. To the extent it set forth an estimate of repairs needed to enable the fence to pass inspection, the document would have been relevant to defendant's counterclaim. We do not question the court's assessment that the estimate was hearsay. See Ferraro v. Public Service Ry. Co., 6 N.J. Misc. 463, 463 (Sup. Ct. 1928).
Unfortunately, defendant did not request the court to make a record of the excluded evidence. See R. 1:7-3. --------
However, the court failed to engage in the analysis required when deciding whether a hearsay document can be admitted in a small claims case. N.J.R.E. 101(a)(2)(A) permits relaxation of the Rules of Evidence in small claims matters "to admit relevant and trustworthy evidence in the interest of justice." Consequently, we have held that "the fact that hearsay evidence is proffered does not automatically require its exclusion. The test is relevance and trustworthiness." Penbara v. Straczynski, 347 N.J. Super. 155, 162 (App. Div. 2002). The judge in a small claims case is "required to consider the evidence and make a determination of its admissibility based on its trustworthiness and probative value. The failure to do so constitutes reversible error." Id. at 162-63.
Therefore, we are constrained to reverse entry of judgment for plaintiff and remand for further proceedings. Plaintiff shall be required to establish that the fence satisfied code, once he installed the doors, in order to establish a right of recovery. If it did not, defendant shall be entitled to damages equal to the reasonable and provable cost of repairs to satisfy inspection. The court shall consider whether defendant's proof of the cost of repairs was trustworthy, notwithstanding that it was hearsay.
On remand, the trial court may also need to consider issues related to compliance with the Home Improvement Contractor Registration Act and home improvement practices regulations. The contract did not include a home improvement contractor registration number, as required by N.J.S.A. 56:8-151. The court may consider whether plaintiff failed to register as a home improvement contractor, or to draft the contract in compliance with applicable regulations. See N.J.S.A. 56:8-138 (stating that home improvement contractor may not engage in business unless registered); N.J.S.A. 56:8-151 (identifying essential terms in home improvement contracts); N.J.A.C. 13:45A-16.1A and -17.2 (defining "home improvement" to include installation or construction of fences).
If plaintiff was not registered, the court may consider whether his non-compliance was such that, under the circumstances, it deprived him of a right to enforce the contract, see Scibek v. Longette, 339 N.J. Super. 72, 80 (App. Div. 2001) (citing Huffmaster v. Robinson, 221 N.J. Super. 315 (Law Div. 1987); Artistic Lawn & Landscape Co. v. Smith, 381 N.J. Super. 75, 88 (Law Div. 2005), and whether he was restricted to recovering, at most, quantum meruit. See Marascio v. Campanella, 298 N.J. Super. 491, 504-05 (App. Div. 1997).
Reversed and remanded. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION