Joseph Lande & Son Inc. v. Wellsco Realty Inc.

• Decision Date: 04 November 1943
• Docket Number: No. 20.,20.
• Citation: 34 A.2d 418,131 N.J.L. 191
• Parties: JOSEPH LANDE & SON, Inc., v. WELLSCO REALTY, Inc.
• Court: New Jersey Supreme Court

131 N.J.L. 191

34 A.2d 418

JOSEPH LANDE & SON, Inc.,

v.WELLSCO REALTY, Inc.

No. 20.

Court of Errors and Appeals of New Jersey.

Nov. 4, 1943.

COPYRIGHT MATERIAL OMITTED.

Appeal from Supreme Court.

Action by Joseph Lande & Son, Inc., against Wellsco Realty, Inc., to recover balance due plaintiff under subcontract to install heating units in four duplex houses constructed for defendant on ground that defendant owner made payments in advance of terms of building contract and, after general contractor's failure to pay for work done under subcontract, promised to pay balance due thereunder if plaintiff would complete the installation. The trial judge directed a verdict for plaintiff on the count relating to advance payments, and a verdict for defendant on the count based on defendant's alleged promise to pay balance due under subcontract, and defendant appeals and plaintiff cross-appeals.

Judgment reversed as to both counts, and a venire de novo awarded.

DONGES and COLIE, Justices, and DILL, Judge, dissenting.

Samuel Rosenblatt, of Montclair, for appellant and cross-respondent.

Warren Dixon, Jr., of Hackensack, for respondent and cross-appellant.

HEHER, Justice.

The complaint is in four counts, only two of which are involved in this appeal. The trial judge directed a verdict for plaintiff on the third count and a verdict for defendant on the fourth count. These rulings constitute the subject-matter of the cross appeals.

By the third count, a subcontractor pleads a cause of action against the owner on a stop notice served and filed on October 14, 1941, under R.S.1937, 2:60-116, 2:60-118, N.J.S.A. The defendant owner interposed, inter alia, the plea of nil debet; and one of the questions motted at the trial was whether the owner had made advance payments for which it was liable under R.S.1937, 2:60-124, N.J.S.A. The trial judge resolved it in the affirmative as a matter of law and therefore directed a verdict for plaintiff; and therein he fell into error.

The principal contract was made on May 29, 1941. It provided for the construction of four duplex houses (eight families) and attached garages for the defendant owner on or before the ensuing September 1st. It was filed on June 2, 1941, pursuant to 2:60-115. The contract price was $30,000, subject to an allowance of $5,064. for certain materials and equipment to be supplied by the owner. There was a provision for ‘progress payments.’ The owner undertook to pay the contract price as follows: ‘On or about the 1st and 15th day of each month 85 per cent. of the value, based on the contract prices, of labor and materials incorporated in the work and of materials suitably stored at the site thereof up to that day of that month, as estimated by the architect, less the aggregate of previous payments; and upon substantial completion of the entire work, a sum sufficient to increase the total payments to 85 per cent. of the contract price. Final payment shall be due 30 days after substantial completion of the work provided the work be then fully completed and the contract fully performed.’

By contract with the general contractor, plaintiff agreed to install the heating units for $2,160. It maintains that it fully performed the subcontract; and it seeks the recovery of $1,660, the balance of the contract price remaining unpaid.

The general contractor discontinued work before full performance of its contract; and the buildings were completed by another contractor engaged by the ownner. The proofs established that the moneys paid to the general contractor, and for completion after its default, are in excess of the contract price; and the question is whether there were payments to the general contractor ‘in advance of the terms' of the contract.

Evidence was adduced tending to show that about 80% of the work provided for in the main contract had been done when the general contractor abandoned the contract; and it was the trial judge's view that, since the owner had made payments in excess of 80% of the contract price, less the retained percentage, there were advance payments for which it was debarred from credit in this action under secs. 2:60-119 and 2:60-124, supra. Plaintiff's contention is that, at the time of the service and filing of the stop notice, the general contractor was entitled to but 80% of the contract price, less the retained percentage of 15%, or the net sum of $16,956.48, thus making an overpayment more than sufficient to cover its claim. The owner proved by its architect and other witnesses that payments were in fact made on the basis of 85% of the cost of labor and materials; and this testimony stood uncontroverted.

Thus, the question is one of construction and intent as manifested in the contract. Is it the fair purport of the terms used that the installment payments should have been made on the basis of percentage of the whole work completed? We find no such intendment. As was true of the contract considered in the case of Post v. Geldziler, 105 N.J.L. 370, 145 A. 323, 324, nothing was said about ‘percentage of completion.’ In that case, it was provided that no payments should be made ‘for more than eighty-five (85%) per cent. of the work completed, materials furnished and actually installed in the building;’ and this court declared that ‘if the contractor agrees to a lump sum on a losing basis, he may still, under this clause, legitimately obtain certificates for 85 per cent. of fair cost of work done and materials furnished, and exhaust the contract price before the work is completed.’ The clause was construed to have reference to the ‘cost of the work’ done, irrespective of the relation of the work done to the entire undertaking.

But it is said in opposition that the contract in the case at hand provides for payments of ‘85% of the value, based on the contract prices, * * * as estimated by the architect,’ and ‘upon substantial completion of the entire work, a sum sufficient to increase the total payments to 85% of the contract price;’ and that thereby ‘the 85% payments are tied in directly and specifically to the contract price,’ and therefore the case of Post v. Geldziler, supra, is not apposite. But we think the case at bar is stronger for the owner than was the cited case. There, the clause read: ‘* * * eighty-five (85%) per cent. of the work completed, materials furnished and actually installed in the building.’ Here, the term ‘contract prices' is in the plural and plainly has reference to the price to the contractor of labor performed and materials furnished in the work done rather than the whole contract price. Moreover, the price of ‘materials suitably stored at the site’ of the construction work is also to be considered. The last clause thus cited by respondent evidently refers only to the final payment, if the contract price is not exhausted before full performance of the contract, and it does not thereby become inoperative. The language employed is obviously not appropriate to the indubitable expression of a purpose to render installment payments on the basis of ‘percentage of completion.’ There was no evidence, in aid of interpretation, of the customary practice under such a clause. The engineer who acted as inspector of the construction work, on behalf of a bank which had loaned money on the project, testified that he ‘estimated the value of the work completed and its relation to the entire job,’ but he later said he considered ‘the value of the work done’ and that the whole contract price did not enter into his calculations.

Thus, the ruling of the trial judge on the third count was based upon a misconception of the contract, and so was erroneous.

In this view, we have no occasion to determine whether the sum claimed in the stop notice was in excess of the amount actually due, and the stop notice was therefore void.

And we are of opinion that the trial judge erred in directing a verdict for defendant on the fourth count. The evidence adduced in relation to the cause therein pleaded raised a factual issue.

The allegation is that defendant requested plaintiff ‘to complete its contract’ with the general contractor ‘by making installation of the six remaining heating units in the...