Opinion
DOCKET NO. A-6171-09T4
08-03-2012
GEMINI RESTORATION INC., Plaintiff-Respondent, v. DR. JOSEPH LEONE, Defendant-Appellant, and CHRISTINE MISEO, PA, ARCHITECTS and CHRISTINE MISEO, jointly, severally, and alternatively, Defendants.
Jeremy I. Silberman argued the cause for appellant (Norris, McLaughlin & Marcus, P.A., attorneys; David C. Roberts, of counsel and on the brief; Mr. Silberman, on the brief). Thomas C. Martin argued the cause for respondent (Nowell Amoroso Klein Bierman, P.A., attorneys; Anthony Pantano and Mr. Martin, of counsel and on the brief; Lisa J. Jurick, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner, Simonelli and Hayden.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2659-05.
Jeremy I. Silberman argued the cause for appellant (Norris, McLaughlin & Marcus, P.A., attorneys; David C. Roberts, of counsel and on the brief; Mr. Silberman, on the brief).
Thomas C. Martin argued the cause for respondent (Nowell Amoroso Klein Bierman, P.A., attorneys; Anthony Pantano and Mr. Martin, of counsel and on the brief; Lisa J. Jurick, on the brief). PER CURIAM
Defendant, Dr. Joseph Leone (Leone or defendant), appeals from a July 9, 2010 final order entering judgment totaling $313,026.80 in favor of plaintiff, Gemini Restoration, Inc. (Gemini or plaintiff), and denying defendant's post-trial motions. He also appeals from two interlocutory orders: an August 10, 2007 order denying his summary judgment motion and dismissing his counterclaim under the Consumer Fraud Act, and an August 13, 2008 order denying reconsideration.
By way of background, this case arises from a contract to perform extensive renovations to Leone's multi-million-dollar house in Spring Lake. A previous contractor had begun the work but had not completed the job, and Leone retained Gemini to finish the project. Under the supervision of Christine Miseo, an architect whom Leone had retained to oversee the renovation project, Gemini completed extensive renovations. Leone paid for the work, except for a portion of the last invoice. Although Miseo had approved the work reflected in Gemini's invoices, Leone withheld payment, claiming that Gemini had charged excessive labor rates.
Plaintiff filed suit against Leone for the balance due, and Leone filed a counterclaim alleging that the contract violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (the CFA or the Act), and that some of the work was defective. Plaintiff also filed an amended complaint naming Miseo as an additional defendant. In 2007, on the parties' summary judgment motions, the court dismissed Leone's CFA counterclaim on equitable grounds, but did not dismiss his affirmative defense that plaintiff's suit was barred because the contract violated the CFA.
Beginning in May 2006, Gemini served Leone with a series of three offers of judgment (OOJ), each offering to accept $70,000 to resolve Gemini's contract claim. The last two also specifically offered $0 to resolve Leone's remaining counterclaim concerning defective workmanship. The case proceeded to a jury trial in 2009. At the close of plaintiff's evidence, Leone moved for an involuntary dismissal of the complaint pursuant to Rule 4:37-2(b). The court dismissed the breach of contract claim because the contract violated the CFA regulations governing home improvement contractors, but allowed plaintiff to proceed in quantum meruit for the reasonable value of its services. The jury returned a $92,000 verdict in plaintiff's favor.
Before the close of plaintiff's evidence, the parties settled Leone's defective-work counterclaim for $50,000. Gemini's insurer paid $45,000, and Gemini paid $5000. Hence, that issue was not submitted to the jury, and no evidence was admitted on the issue during the remainder of the trial.
On this appeal, Leone contends that the trial court erred in dismissing his counterclaim, allowing plaintiff to proceed in quantum meruit, failing to properly instruct the jury on quantum meruit, denying him counsel fees under the CFA, and awarding plaintiff counsel fees under the offer of judgment rule. Finding no merit in any of these contentions, we affirm the July 9, 2010 order and judgment.
I
Because the principal issues in the case turn on the pre-trial summary judgment motion and cross-motion, we address the summary judgment record first.
In September 2004, Gemini contracted with Leone to complete renovation work on his house in Spring Lake. Miseo recommended Gemini to Leone for the renovation project in 2004. She was familiar with plaintiff's president, Kermit "Kim" Abrahamson, and had worked with him before. Miseo had also worked with Leone on some projects in the past by "draw[ing] up the plans after [Leone] . . . [told] her what [he] would like to have done." At his deposition, Leone confirmed that he had worked with Miseo a number of times over the past fifteen years, including a project on his home in Short Hills, work on his office in Millburn, and a shopping center in Madison.
The Gemini contract estimated a total of $221,738.55 for the proposed renovation work, based on "labor, material and supervision costs plus cumulative 10% [and] 10% overhead and profit." The contract stated it did not include a price for "fiberglass decking" or "exterior handrailings or decks," but estimates for those items would be "provided at a later time." The contract also provided that "[i]f changes are made or requested they will be performed only after a credit or debit memo has been supplied."
The summary judgment record submitted on appeal does not contain an executed version of the contract, although there is no dispute that it was signed.
Abrahamson did not consider the contract a time and materials contract because it contained a lump sum estimate for proposed renovation work. In other words, the $221,000 was "a hard number . . . to do the work described." Abrahamson did not define the term "labor" in the contract "[b]ecause [he] wasn't aware there were going to be so many change orders on the job" and he "was never asked that" question at the time. According to Abrahamson, he did not provide a breakdown of the components of the hourly rate he charged for labor, because he did not think "it [was] anyone['s] business [as to] how [he] ma[d]e a living or what or how [he] mark[ed] up [his] labor and materials because that's what" was done in the industry. According to Miseo, in the industry the term "labor" was understood to include "any insurance, FICA, contributions, 401K contributions, [and] miscellaneous monies that [] directly or indirectly go to the employee." In other words, she agreed that a charge for "labor" would include considerably more than the net hourly amount the contractor paid to the worker. She agreed that Gemini's rates were consistent with the industry standard.
Abrahamson testified that the labor rates he charged Leone were based on the Xactimate computer program which was "widely used" in the construction industry. However he discounted those rates and charged Leone less than the rates Gemini "would be paid by a company such as State Farm Insurance" for similar reconstruction work.
This term is spelled "Xactimate" and "Exactimate" in different parts of the record.
After Gemini's renovations began, the scope of the project changed significantly as Miseo and Leone sought a series of additions to the work. In October 2004, Abrahamson orally agreed with Miseo that, going forward, he would bill Leone monthly for his services "on a model of labor, material, supervision, plus overhead and profit." Abrahamson did not prepare any subsequent contracts for Leone's execution because Leone persistently declined to discuss the subject with him and instead directed him to discuss the work modifications with Miseo. As Abrahamson put it, he "always turned back to . . . Miseo because doctors [such as Leone] have a great way of avoiding questions when they don't have the time or the energy to answer it, and in [ninety-five] percent of the time it would be speak to . . . Miseo, she's pretty much handling the project."
When asked during his deposition whether he considered the original contract voided as of October 15, 2004, Abrahamson responded "[y]eah." In his certification on summary judgment, Abrahamson explained that he "was saying . . . that there were so many change orders and additional work . . . became a part of the contract."
Abrahamson certified that Miseo was "hired . . . to serve as [Leone's] design professional and to review the work being performed, review the bills for the labor and materials and to address issues related to the additions/change orders."
According to Abrahamson, his invoices for the work completed during the months of October 2004 through February 2005 were presented to Leone and Miseo. Those invoices fully disclosed the hourly rates he was charging for labor. Leone and Miseo "both advised [Abrahamson] that further formalities were not necessary because [Leone] was relying upon Miseo to be his professional advocate in the matter and to review the work and the bills." Miseo "approved each and every one of the bills for labor and materials submitted by [plaintiff]."
In his affidavit, Leone admitted that Gemini disclosed the hourly rates it was charging for labor: "Gemini sent me invoices for its services, . . . dated October 15, 2004, November 16, 2004, December 20, 2004, January 31, 2005 and February 9, 2005. The invoices provided a breakdown of items such as . . . cost of labor."
Miseo testified that invoices "would be faxed to [Leone] and [her] monthly[,]. . . [Leone] would call [her] up and ask [her] if [she] thought the [bills] looked fair . . . [a]nd [they] would discuss it and that's how [plaintiff] would get paid." At his deposition, Leone testified that he did not recall reviewing invoices with Miseo. But when asked whether he had reason to dispute the truthfulness or accuracy of the aforementioned portion of Miseo's testimony, Leone responded, "[n]o."
According to Miseo, she approved all of the invoices except the last one. Miseo did not have her notes with her at her deposition, which would have confirmed her recollection regarding which invoices she reviewed.
Leone claimed that it was not until he received Gemini's last bill in February 2005 that he began to believe that Abrahamson had been overcharging him for labor. Miseo testified that Leone told her in February that the last invoice "[was not] going to be paid until some of the numbers had been looked at and some of the wages had been looked at."
For all of the completed renovation work, plaintiff was paid $221,738.55, representing the original contract price, and $130,261.36 of the $219,842.81 in charged invoices for subsequent completed work. Leone refused to pay the remaining $89,581.36. The gist of Leone's objection to the rates was his alleged belief that Gemini was only going to charge him the hourly wage it paid to its workers, plus ten percent for overhead and ten percent as profit.
On August 10, 2007, immediately following oral argument on the motion, Judge Joseph P. Quinn placed an opinion on the record. He found as fact that Leone originally bought the house for "one and a half million dollars," and hired a contractor to perform some renovations. He then hired Gemini to perform extensive additional work, amounting to about a half million dollars. He found that Miseo, an architect, was Leone's friend and also had a "longstanding" professional relationship with him. She "was the architect for . . . at least one home that Mr. Leone apparently owned in Short Hills. And also for an office building in [Millburn]."
The judge found there were material disputes of fact concerning "the amount of money that Leone owes Gemini" as well as possible liability on the part of Miseo. He therefore denied plaintiff's summary judgment motion concerning the amounts owed, and Miseo's summary motion seeking dismissal of plaintiff's complaint against her. However, he found that the undisputed facts warranted dismissal of Leone's CFA counterclaim against plaintiff. He acknowledged Leone's claims that
there were problems with the written contract. That the hours were misstated and that there were ambiguities associated with the hourly rate that would be charged. And therefore there [are] per se violations of the Consumer Fraud Act.
However, based on D'Egidio Landscaping v. Apicella, 337 N.J. Super. 252 (App. Div. 2001), and Messeka Sheet Metal Co., Inc. v. Hodder, 368 N.J. Super. 116 (App. Div. 2004), the judge concluded that Leone was equitably estopped from asserting a CFA claim. He reasoned that "in this case . . . you have a plaintiff who's completed all of the work and at the end, after everything is all done, the [defendant] essentially argues that the [CFA] has not been complied with." He also reasoned that Leone had delegated to Miseo, his construction professional, the responsibility to review and approve plaintiff's bills, including the hourly rates being charged. He found that Miseo was well aware of the hourly rate being charged. She approved the bills, and confirmed at her deposition that the rates were reasonable and in line with industry standards.
The judge also noted that plaintiff not only used the Xactimate computer program to calculate the labor rate, but then actually charged less than the Xactimate rate. Further, he considered that Leone's theory, that Gemini was going to charge exactly the same amount that they pay their laborers, "is certainly one rejected by Mr. Leone's own architect, Miseo. . . . And [Leone's theory] just seemed fairly farfetched. . . . The deposition of Miseo, I think was compelling on this. She clearly understood this and clearly approved each and every one of the payments. And to the present day, maintains that the amounts charged by Gemini were in accordance with industry standards."
The judge reasoned that, like Messeka, this was a case where "the owner was represented by an architect" and thus was not a "typical 'home improvement situation' where the owner deals directly with the contractor." Here "the defendant Leone testified at length at his deposition that he delegated to his architect all of these things [and] that if there were any questions on the project the architect would take care of them. . . . And this is not the kind of case that the [CFA] was intended to address."
[H]ere essentially, what Leone did was, he hired his friend, Miseo, who is the architect, who had the authority to [act] for Leone and Miseo has specialized knowledge as an architect not only specialized knowledge as an architect, but specialized knowledge as a[n] architect who has worked on other projects for Mr. Leone. And she's chargeable with that special knowledge.
This is a far cry from a typical consumer case where the Act is needed to protect a consumer.
He concluded that if Miseo had a problem with the labor rate or the number of hours being charged, she should have brought those objections to Gemini's attention in a timely manner, rather than approving all of the invoices, thus inducing Gemini to complete the work. As a result, Leone was equitably estopped from pursuing a CFA claim against Gemini. In an oral opinion placed on the record on August 13, 2008, Judge Quinn re-confirmed his decision in denying Leone's motion for reconsideration.
II
We review the trial court's summary judgment decision de novo. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). In reviewing the summary judgment record, we determine whether based on that record there were material facts in dispute and, if not, whether giving the non-moving party the benefit of all favorable inferences, the moving party was nonetheless entitled to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
We consider the trial judge's summary judgment decisions based solely on the motion record and not based on evidence presented later when the case was tried. See Lebron v. Sanchez, 407 N.J. Super. 204, 213 (App. Div. 2009). Consequently, we disapprove defendant's effort, in its brief, to expand the summary judgment record with references to the record made later during the trial. In reviewing Judge Quinn's summary judgment decision, we consider only the evidence that the parties presented to him on that motion.
Defendant's appendix did not include a list of the documents submitted in support of or in opposition to the summary judgment motions, as required by Rule 2:6-1(a)(1). We required defendant to submit a copy of Leone's affidavit, filed in support of his summary judgment motion. Defendant provided a copy of the judge's August 10, 2007 oral opinion on the motion. That opinion indicated that the motion was argued just before the judge put his opinion on the record, and he incorporated by reference the "[oral] argument and the discussions had on the record herein" because it was "an important aspect of the case and important aspect of this ruling." However, defendant did not order or provide to us a transcript of the motion argument.
The CFA regulations governing home improvement contractors require that all changes in the terms and conditions of a home improvement contract must be in writing, which must be "signed by all parties," N.J.A.C. 13:45A-16.2(a)(12). The regulations also require that, where a home improvement contractor makes a time and materials contract, "the hourly rate for labor and all other terms and conditions of the contract affecting price [must] be clearly stated." N.J.A.C. 13:45A-16.2(a)(12)(iii). The record reflects that the initial contract between Gemini and Leone was a fixed-price contract, in which Gemini agreed to perform specified work for a price of approximately $221,000.
Thereafter, however, Leone and Miseo asked Gemini to perform a greatly expanded amount of work, which both sides clearly understood would increase the price of the project and which both sides understood Gemini would perform on a time and materials basis. There is no dispute that Gemini did not issue a second or amended contract, signed by both sides, covering this additional work and setting forth the hourly rate that Gemini would charge for that work. N.J.A.C. 13:45A-16.2(a) (12); N.J.A.C. 13:45A-16.2(a)(12)(iii). Violation of the CFA regulations is a per se violation of the Act. Cox v. Sears Roebuck & Co., 138 N.J. 2, 18-19 (1994). The question before Judge Quinn, and on this appeal, is whether Leone was equitably estopped from pursuing a CFA claim.
In D'Egidio, we held that a homeowner was equitably estopped from invoking the CFA against a contractor based on the contractor's alleged violations of the home improvement regulations. D'Egidio, supra, 337 N.J. Super. at 252. We reached this conclusion because the homeowner, who was the contractor's relative, had induced the violation by insisting that a contract was not necessary due to their family relationship and longstanding friendship. Later on, however, a dispute arose and the homeowner claimed he should be able to avoid paying the balance of the contractor's bill because the contractor violated the regulations. We rejected that argument:
We are satisfied, nonetheless, that defendant is not entitled to the protections offered by the statute and the regulation because it was his own conduct which caused the violation. Were we to conclude that defendant is entitled to invoke N.J.A.C. 13:45A-16.2(12), the result would be to permit defendant to retain, at no cost, the fruits of D'Egidio's labor when he was the one who insisted a written contract was unnecessary in light of their longstanding relationship. It would also reward defendant with the remedial provisions of the consumer fraud statute. We consider such a result unacceptable; one who induces the alleged wrongdoing should not benefit as a result of it.
[Id. at 257.]
We recognized the remedial purpose of the CFA and the usual rule of liberal construction applied to CFA claims. However, we concluded that allowing this plaintiff to invoke the CFA would be inconsistent with the purpose of the Act:
We are satisfied, . . . that in the unique circumstances presented here, we are not . . . weakening the scope of the statute's protective reach when we apply the doctrine of estoppel. Defendant is, as the trial court noted, in the home improvement business himself as a painter and as chargeable for knowing the applicable regulations as plaintiff. "The consumer fraud statute is aimed at promoting truth and fair dealing in the market place." Permitting this defendant in the context of this case to invoke the statutory remedies afforded by the Consumer Fraud Act would not further those laudable legislative objectives.
[Id. at 258-59 (citation omitted).]
In Messeka, we addressed a situation in which a subcontractor sued a homeowner to collect on a bill for installing air conditioners:
The subcontractor Messeka urges on this appeal that the judge erred in applying the CFA to this transaction, an air conditioning installation on a totally gutted and rehabilitated house where the job was undertaken by a general contractor hired by the owner and where the owner was also represented by a hired architect. Messeka asserts that its project was beyond the scope and statutory purpose of the CFA. We agree.
[Messeka, supra, 368 N.J. Super. at 120-21.]
Because "the owner engaged the services of an architect to prepare plans and a general contractor, who hired Messeka," we concluded that Messeka "was not, in our view, a traditional 'seller' within the customary understanding of the CFA's regulations. . . . The regulations are designed to protect homeowners who deal directly with contractors." Id. at 124-25. We also concluded that, given the realities of large construction projects run by general contractors and architects, it would be impractical to expect the owner to "deal directly with everyone on the job" and to require each subcontractor to comply with the CFA regulations by providing "a contract in writing directly with owner." Id. at 125. We also observed that the general contractor and the homeowner were friends, and the general contractor had no written agreement with the homeowner.
In reaching our conclusion, we found that D'Egidio was somewhat analogous, in that it involved an inequitable attempt by a homeowner to avoid paying a contractor by invoking the CFA. Id. at 128. We considered it pertinent that the homeowner in Messeka chose to deal with the subcontractor through an intermediary rather than dealing with him directly, and that in those circumstances the subcontractor could reasonably assume that it was the general contractor's responsibility to ensure compliance with the CFA. Id. at 129.
In Scibek v. Longette, 339 N.J. Super. 72, 85 (App. Div. 2001), which involved an approximately $3000 bill for car repairs, we declined to apply equitable estoppel where there was no evidence of any inequitable conduct by the customer in inducing a violation of the Act. However, we observed that a "somewhat mechanical and rigid" rule precluding a contractor from any recovery, due to a technical CFA violation, was arguably inappropriate
where the consumer has obtained the benefit of his bargain and attempts to use the Act as a sword rather than a shield. Where, for example, there is no dispute as to the work authorized to be done and the agreed upon price, it seems highly unfair to deny the repairman any affirmative right to recover merely because of a technical, inadvertent violation of the Act's prescriptions.
[Id. at 82.]
Based on the undisputed summary judgment record, we conclude that Gemini's original contract with Leone was consistent with the CFA. It was not a time and materials contract. It was a lump sum contract, and therefore was not required to list an hourly rate for work performed. The CFA issue stems from all of the additional work that Leone and Miseo requested, and plaintiff's failure to insist on a signed time and materials contract addendum, specifying the hourly rates to be charged for each new project expansion.
As part of Gemini's opposition to Leone's summary judgment motion and in support of Gemini's cross-motion, Abrahamson submitted a certification attesting as follows: "On a monthly basis, I provided Dr. Leone and Miseo with a full and complete breakdown on the labor charges. This detailed information is broken down by month by trade, hour, rates dates, straight time and over time." Leone's initial motion affidavit had admitted that Gemini disclosed the labor rates, and defendant did not submit a reply certification from either Leone or Miseo contradicting Abrahamson's certification. There is also no dispute on this record that Miseo reviewed and approved all of the invoices.
Therefore, based on the summary judgment record presented to us, it is undisputed that, at least as early as the October 2004 invoice, plaintiff disclosed in writing the hourly rates he was charging for the work. After the fact, Leone challenged the calculation of those rates, alleging that they were inflated. But there is no doubt that Leone and his agent Miseo were aware of the rate per hour that plaintiff was charging for the work. That is what the CFA requires, not a breakdown of how the contractor arrives at the rate charged. In other words, as long as the customer knows in advance that the contractor will be charging $50 an hour for labor, the contractor need not disclose how it calculated the $50 hourly rate.
Miseo, whose job included reviewing and approving the invoices, never questioned the reasonableness of the rates Gemini was charging. In fact, she testified in her deposition that the rates were reasonable and consistent with industry standards. We conclude that when she approved the invoices, she was implicitly agreeing to the labor rates on Leone's behalf. Moreover, there was no rebuttal to Abrahamson's certification attesting that Leone declined to discuss proposed contract changes with him and instead repeatedly referred him to Miseo to discuss her recommendations for modifications to the original scope of the work. Under the circumstances of this case, where Leone interposed his construction professional (in this case, his architect) as an expert intermediary between himself and the contractor, and the architect proposed and approved the additional work to be done and approved the labor rates to be charged, we find that the contractor substantially complied with the essential purpose if not the precise terms of the CFA regulations.
We find no error in Judge Quinn's conclusion that Leone was estopped from affirmatively asserting a CFA violation based on the lack of a formal signed contract amendment disclosing the labor rates. We agree with Judge Quinn that this case is closer to D'Egidio and Messeka than it is to Scibek. See also Exit A Plus Realty v. Zuniga, 395 N.J. Super. 655, 667-68 (App. Div. 2007) (declining to void a real estate listing agreement because of "technical violations that resulted in no prejudice to defendants"). Unlike Scibek, here the lack of a formal signed contract containing the labor rates did not give rise to the dispute between the parties. See Scibek, supra, 399 N.J. Super. at 82. The litigation ensued when Leone came up with an after-the-fact argument about the known labor rates, which Judge Quinn accurately characterized as "far-fetched." We further agree with him that Leone failed to prove that any CFA violations caused an ascertainable loss; on the undisputed motion record, Leone paid clearly-disclosed, fair labor rates for the work performed. We conclude that, on the record presented at the time of the motion, Judge Quinn properly denied defendant's summary judgment motion on its CFA claim and properly granted plaintiff's cross-motion, striking defendant's CFA counter-claim.
III
We next address defendant's arguments premised on the trial record. The case proceeded to trial before Judge Sullivan on Gemini's breach of contract claim and Leone's counterclaim based on alleged defects in the work Gemini performed. The trial began on February 2, 2009.
On February 9, 2009, Gemini's insurance carrier settled Leone's counterclaim concerning the alleged defective work.
Just prior to the trial, Judge Sullivan construed Judge Quinn's order as pertaining solely to Leone's affirmative CFA claim and as not precluding him from using the CFA "as a defense" to plaintiff's contract claim. At the close of plaintiff's evidence, Judge Sullivan dismissed the contract claim, due to plaintiff's technical non-compliance with the CFA regulations. However, he permitted plaintiff to proceed in quantum meruit. See Marascio v. Campanella, 2 98 N.J. Super. 491, 504-05 (App. Div. 1997). Gemini did not cross-appeal from the ruling striking its contract claim, and we therefore need not address that issue. Leone's trial-related appellate arguments primarily relate to the quantum meruit issues and we review the trial record with that in mind.
In his testimony, Abrahamson explained that Gemini primarily did "insurance restoration," i.e., performing appraisals, estimates, and repairs on properties that had been damaged "by insurable losses." However, Leone's property did not involve an insurance claim. As of 2004, Abrahamson had known Miseo both personally and professionally for a number of years and had previously used her as an architect on insurance-related projects. In August 2004, Miseo recruited him to renovate Leone's house, which was quite dilapidated after an earlier contractor abandoned work on it. He and Leone agreed on and signed a contract for the first phase of the work, which involved installing siding, windows, and other exterior repairs needed to prevent further weather-related damage during the ensuing winter.
In his testimony, Abrahamson explained the terms of the initial contract, which stated that the total price for the work included "labor" plus "10% profit" and "10% overhead." He testified that "labor" included the hourly wage itself, plus a considerable amount of indirect costs such as vacation time, the employer's contribution to the employee's 401K, and medical benefits. He explained that neither he nor any other contractor could stay in business without charging customers the cost of the "labor burden" in addition to the hourly wage paid to their employees. He further indicated that Miseo would have understood this, and in his view, Leone's attack on his billing was "so nonsensical that it's never come up in my 40 years in business."
According to Abrahamson, shortly after he started the project, Miseo began adding to the scope of the work, as they discovered additional problems left by the previous contractor. However, Leone insisted that Abrahamson address all the details with Miseo.
Abrahamson confirmed that with his invoices, he included a detailed list of what each of his employees had done on the job, and the hourly rate charged for each employee.
Every day that I supplied labor on the job, what I did was, on every particular day, I would say who I had on the job, . . . the particular task that they had performed on that particular day on the job. And also what I was charging per hour for their labor to do that.
Abrahamson testified that he was, among other things, a professional estimator, familiar with insurance appraisal work. He testified that the hourly rates he charged Leone for labor were "actually a little bit below" the rates that were customary in the industry. Abrahamson testified that as a "courtesy" to Leone, he also supplied certain materials without charge. Two weeks after he supplied his final bill for the work, Miseo told him "it had been approved," but shortly thereafter, Leone told him that "he wanted to review the documents." After some further delay, Leone told Abrahamson that he believed he had overcharged him for the labor. Abrahamson responded that his previous billings had clearly indicated what he was charging for labor.
Abrahamson identified as his business records the "Man Day Counts" that documented in detail what work each employee performed on the job and what hourly rate he charged for that work. He further testified that a computer program called "Exactware" was used by insurance estimators to derive standard labor rates. He went through a list of those rates, explaining that the rate he charged Leone was up to $12 per hour less than the industry standard rate. He also confirmed that Gemini actually performed all the work for which it billed Leone. According to Abrahamson, he was surprised when Leone questioned the labor rates he charged, because Miseo knew about and approved those rates.
On cross-examination, defense counsel elicited from Abrahamson that he considered himself an expert in home improvement contracting and in the preparation of invoices for that work. Abrahamson explained that the initial contract, dated September 2004, was a fixed price contract, but he understood that he would do any additional work on a time and materials basis. He also confirmed that Leone and Miseo "had the benefit of knowing what the labor rates were on October 1" and did not object. On cross-examination, he admitted that he did not include with the October invoice a specific list of the hourly wages he paid each worker, although he insisted that he did include such a list with subsequent invoices.
On direct examination, Abrahamson testified that the hourly wage rate could be derived from the October bill by dividing the total labor charge by the number of hours that was listed on the bill.
Gemini's attorney read the jury portions of Miseo's deposition, in which she agreed with Abrahamson that the "cost of labor" could include not only wages but the cost of providing assorted employee benefits.
At the close of plaintiff's evidence, Leone's attorney successfully moved for dismissal of Gemini's contract claim, based on violations of the CFA regulations. However, when asked by the trial judge whether plaintiff's case would then proceed on quantum meruit, defense counsel agreed, stating, "I don't know that I could stand here with a straight face and argue to the contrary. So, yes, so if Your Honor were to agree that the complaint seeking breach of contract should be dismissed . . . all that would be left would be a fair value claim." Later during the argument, defense counsel stated "with respect to the quantum meruit or fair value claim and I just say this for the record, . . . I wish I had more specific case law to offer to the Court here this morning, but it would seem to me that if a contractor who has failed to abide by the [CFA] regulations" has his contract claim stricken, "it would seem to me at odds with that thinking to then allow that contractor to proceed in a fair value claim." Counsel then moved to dismiss the quantum meruit claim for lack of proof of the value of the services, but not based on the non-applicability of quantum meruit as a basis of recovery.
In a lengthy oral opinion, Judge Sullivan dismissed the complaint against Miseo and dismissed Gemini's contract claim against Leone, but held that Gemini had produced sufficient testimony from Abrahamson and Miseo to establish a quantum meruit claim. Although Leone's counsel reserved the right to argue that Gemini should not be allowed to recover anything more than the actual hourly wage it paid its employees, there was no specific argument about recovery of profit or overhead.
In his relatively brief testimony, Leone confirmed that he and Miseo had been friends for twenty years, and she had done a number of projects for him. He testified that when he read the original contract, he thought the $221,000 price included a labor component consisting of the hourly wages Gemini paid its employees, plus ten percent, plus another ten percent for profit. However, on cross-examination, he admitted that the term "wages" did not appear anywhere in the original contract.
Leone denied receiving time sheets for Gemini's employees as attachments to any of Gemini's invoices. He contended that he questioned the labor rates when he received Gemini's final bill, because the bill was higher than the previous total of the estimates he had received for the work. On cross-examination, Leone was confronted with a December 4, 2004 fax to Miseo, consisting of an eight-page detailed break-out of the hourly rates Gemini was charging for its work. Leone admitted that, after December 4, he made several payments to Gemini without questioning the labor rate.
In rebuttal testimony, Abrahamson further explained the components of his quantum meruit claim, which he testified totaled $92,750.13. He also re-affirmed that the labor rates provided by the Xactimate computer program were the "customary" rates in the industry. He went over again in detail the rates he charged Leone and the extent to which those rates were lower than the Xactimate rates. According to Abrahamson's testimony, had he used the Xactimate rates, he would have charged Leone an additional $70,000 for the work performed. He testified that he charged Leone the lower rates, because this was "the largest residential job of this type" he had ever done, Miseo was a close personal friend of his and of Leone, and he "wanted to be fair on the project because I was dealing with a professional that I had a very good relationship with."
Defendant did not present any expert testimony to contradict plaintiff's evidence concerning the fair value of its work. In his summation, defendant's counsel argued that the fair value of Gemini's work was the $358,000 that Leone had already paid. In his summation, Gemini's counsel argued that the jury could return a verdict for the approximately $92,000 that Abrahamson testified he was owed. However, he argued in the alternative that the fair value of the work would include an additional $70,000, representing the discount Abrahamson gave Leone from the standard charges calculated using the Xactimate program.
After deliberating for an hour, the jury returned a verdict for $92,000. Plaintiff filed an application for final judgment on the verdict plus interest and counsel fees. Defendant filed a motion for a new trial or for judgment notwithstanding the verdict, and for counsel fees under the CFA. Before the post-trial motions were decided, Judge Sullivan retired. Judge Tassini heard extensive oral argument on the motions. During the arguments, Judge Tassini warned defense counsel that, because he had not presided over the trial, the defense was "taking an awful chance" by pursuing a new trial motion without providing the judge with a trial transcript to review.
On the third day of argument, defense counsel argued that plaintiff's counsel fee application under the offer of judgment (OOJ) rule did not separate out fees spent to defend against Leone's claim for defective work, which was settled. Judge Tassini rejected that argument. We decline to adjudicate Leone's contention, raised in a letter submitted after the appellate oral argument, concerning the settlement of the counterclaim and its alleged impact on the offer of judgment. The claim is facially unpersuasive. See Gonzalez v. Safe Sound Sec. Corp., 185 N.J. 100, 124 (2005) ("The fee-shifting provisions of R. 4:58-2 are triggered by a 'verdict.'"). However, the argument was never raised in the trial court, and it is not appropriately asserted for the first time on appeal. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
Judge Tassini issued a lengthy written opinion on April 15, 2010, deciding the motions. In his decision, he noted that he had "no record on which to conclude that Dr. Leone objected to Gemini proceeding on its quantum meruit claim." In fact he concluded that "at trial, Dr. Leone apparently conceded that dismissal of the [CFA] claim . . . resulted in the trial proceeding on Gemini's quantum meruit claim." Judge Tassini concluded that Dr. Leone did not present "a basis to vacate the trial court's ruling[]" allowing Gemini to pursue a quantum meruit claim. R. 4:49-1(a). He also found that "Dr. Leone was not a prevailing party under the CFA, he did not suffer an actual loss, and I do not see that he is entitled to relief under the CFA or that the verdict should be vacated or that a new trial granted." He found no basis to conclude that upholding the jury verdict would result in a miscarriage of justice, and he concluded that Gemini was entitled to an order for judgment for the verdict amount, plus interest and counsel fees under the Offer of Judgment Rule.
A.
On the appeal relating to the trial record, Leone first argues that the trial court "erred in allowing Gemini to proceed to the jury on its quantum meruit claim after finding Gemini committed consumer fraud." Like Judge Tassini, we conclude that Leone conceded this issue in the trial court. In fact, his trial counsel told Judge Sullivan that he could not argue "with a straight face" that Gemini was not entitled to pursue a claim for the fair value of its services. See Brett v. Great Am. Recreation, 144 N.J. 479, 503 (1996). Counsel did later remark that, although he could not cite any cases on point, he believed that should not be the law. We are inclined to conclude that such an off-hand remark was insufficient to preserve the issue for appeal. Nieder, supra, 62 N.J. at 234.
However, even considering the argument on this appeal, it is without merit. We have previously held that where a claim is stricken for failure to comply with the CFA regulations, the contractor may nonetheless proceed in quantum meruit. Marascio, supra, 298 N.J. Super. at 504-05; see also Weichert Co. Realtors v. Ryan, 128 N.J. 427, 436-38 (1992) (applying quantum meruit to a dispute over a real estate broker's contract); Scibek, supra, 339 N.J. Super. at 82. That principle was properly applied here, where defendant and his architect were aware of the labor rates plaintiff was charging, made no objection until after plaintiff had completed the work, and had no good faith basis to challenge the labor rates.
B.
Defendant next argues that Gemini presented insufficient evidence to support a quantum meruit claim. This argument is completely without merit and warrants no discussion beyond the following comments. R. 2:11-3(e)(1)(E). On both plaintiff's case in chief and on rebuttal, Abrahamson provided extensive testimony about the value of the services provided. And on cross-examination, defendant's counsel elicited from Abrahamson that he was an expert in his field. Plaintiff also introduced dozens of pages of back-up documentation to justify the charges set forth in its invoices. Moreover, in her deposition testimony, portions of which were read to the jury, Miseo admitted that plaintiff's labor rates were reasonable and that she approved the invoices because Gemini charged a reasonable price for the work performed. There was ample credible evidence to support the jury's verdict. See McDonald v. Mianecki, 159 N.J. Super. 1, 25 (App. Div. 1978), aff'd, 79 N.J. 275 (1979).
C.
Defendant next argues that plaintiff was not entitled to recover lost profits as part of its quantum meruit claim, and that the trial judge should have instructed the jury to deduct profits from its award. We have reviewed the entire trial transcript, and this argument was not presented to the trial court during the charge conference or at any earlier time during the trial. Consequently, plaintiff did not have an opportunity to address the issue and the judge did not charge the jury on the issue. Defendant briefly raised the issue on a post-trial motion for a new trial, but that was not the appropriate time to raise a challenge to the jury charge. See R. 1:7-2.
Defendant's reliance on Hudson City Contracting Co. v. Jersey City Incinerator Auth., 17 N.J. 297 (1955), is misplaced, because that case concerned an illegally awarded public contract. Under those circumstances, the contractor was only allowed to recoup its expenses and was denied recovery of its profits. Id. at 309. Hudson is not on point here. Further, there was evidence that, even without including profit, the fair value of the work done was considerably more than Abrahamson charged Leone. We find no plain error, no miscarriage of justice, and no basis to set aside the verdict. R. 1:7-2; R. 2:10-2.
IV
Defendant's arguments concerning the counsel fee award to plaintiff are equally insubstantial, and warrant no discussion beyond the following. R. 2:11-3(e)(1)(E). Because there is no basis to reduce the quantum meruit award, as set forth in Section II C above, there is likewise no basis to conclude that Gemini failed to recover at least 120% of its $70,000 offer of judgment. See R. 4:58-2(a).
Moreover, defendant's reliance on Best v. C & M Door Controls, Inc., 200 N.J. 348, 358-60 (2009), is misplaced. That case construed Rule 4:58-3(c), which precludes a fee award under the OOJ rule where "a fee allowance would conflict with the policies underlying a fee-shifting statute." In Best, an employer made defensive use of the Rule by making an offer of judgment to an employee asserting claims under the Conscientious Employee Protection Act, (CEPA), N.J.S.A. 34:19-1 to -14, and the Prevailing Wage Act, N.J.S.A. 34:11-56.25 to -56.47. Id. at 352. The Court held that because neither statute allowed an employer to recover counsel fees, awarding the employer a fee under the OOJ rule would be contrary to the policies underlying those statutes and was therefore precluded by R. 4:58-3(c). Id. at 358-60. In this case, Leone's CFA claims were stricken before trial, and Gemini's offer of judgment was directed to its own affirmative claims which were not based on the CFA. In the circumstances of this case, an award of counsel fees to Gemini would not conflict with the policies of the CFA.
Defendant's reliance on BJM Insulation & Construction, Inc v. Evans, 287 N.J. Super. 513 (App. Div. 1996), is misplaced. In that case, the defendant homeowner succeeded in having plaintiff contractor's complaint dismissed due to his violation of the CFA. Id. at 515. Although she prevailed at trial, she had no ascertainable damages, because the court did not require her to pay plaintiff's bill. Id. at 516. The trial court denied her application for counsel fees on that basis, and she appealed. Ibid. In that context, we noted that "[f]or the purposes of eligibility for payment of reasonable attorneys' fees and costs, the Consumer Fraud Act makes no distinction between a person who raises the Act's provisions in an affirmative claim and one who pleads it as a defense." Ibid. (citing Cox, supra, 138 N.J. at 24). In Delta Funding Corp. v. Harris, 189 N.J. 28, 49 (2006), the Court cited BJM in holding that a foreclosure defendant would be entitled to counsel fees "if she successfully asserts defenses based on the CFA in that proceeding." However, the Court specifically stated, "we do not address whether attorney's fees and costs would be available in all contexts where the CFA is raised as a defense." Ibid.
BJM is not applicable on the individual facts of this case, where Leone not only was equitably estopped from raising his CFA claim affirmatively but also did not prevail at the subsequent trial. Moreover, based on the trial record, Leone's defense to payment of Gemini's final bill was clearly frivolous. Leone, who had undertaken several prior construction projects and had an architect representing him on this one, inappropriately attempted to use the CFA to avoid payment of a reasonable bill. We find no legal error or abuse of discretion in the trial court's decision to deny his fee application. See Rendine v. Pantzer, 141 N.J. 292, 317 (1995).
Consequently, it is also clear that Leone would not have been able to establish an ascertainable loss if he had been allowed to proceed on his affirmative CFA claim. See Weinberg v. Sprint Corp., 173 N.J. 233, 253-54 (2002); Pron v. Carlton Pools, Inc., 373 N.J. Super. 103, 113 (App. Div. 2004).
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Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION