Opinion
DOCKET NO. A-3177-14T2
06-03-2016
MIDLANTIC FIRE, LLC, Plaintiff-Respondent, v. ERNEST BOCK & SONS, INC., Defendant-Appellant.
Hankin, Sandman, Palladino & Weintrob, attorneys for appellant (Colin G. Bell, on the briefs). Beckman, Ogozalek, & Londar, attorneys for respondent (Lilia Londar, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Hoffman and Whipple. On appeal from Superior Court of New Jersey, Law Division, Burlington County, Docket No. DC-8529-14. Hankin, Sandman, Palladino & Weintrob, attorneys for appellant (Colin G. Bell, on the briefs). Beckman, Ogozalek, & Londar, attorneys for respondent (Lilia Londar, on the brief). PER CURIAM
Defendant appeals a February 12, 2015 judgment in favor of plaintiff in the amount of $2,780.00, plus court costs. We affirm.
We summarize the following facts from the record. Defendant is a general contractor. Plaintiff is a subcontractor specializing in fire protection systems. The parties entered into a subcontract on August 12, 2011, agreeing that plaintiff would install and complete the sprinkler systems on the third and fourth floors of a medical facility in Marlton. The price listed in the contract was $36,000. The contract provided that the work was to be done in accordance with all drawings and plans contained as exhibits to the subcontract.
The subcontract contained a "pay-if-paid" (PiP) clause, which provides:
Payment by Owner to the General Contractor for the work/materials invoiced by the Subcontractor/Supplier shall be a condition precedent to General Contractor's obligation to pay Subcontractor/Supplier. Accordingly Subcontractor/Supplier agrees and understands that it shall bear the risk of non-payment by the Owner and shall be entitled to no compensation from the General Contractor in the event of non-payment by the Owner for its work/materials.
Plaintiff installed the system several months after the parties signed the contract. Plaintiff relied upon the construction notes and construction plan provided by defendant when installing the systems, pursuant to the contract. After plaintiff installed the sprinklers, defendant alerted plaintiff that it needed to change some of the work it had performed because the sprinklers plaintiff installed interfered with the placement of unistruts necessary for the installation of medical equipment in the facility. Plaintiff sent defendant a proposal for a change order, including the terms of what plaintiff considered to be a new contract and a contract price of $2780.00. Defendant's project manager authorized plaintiff to undertake the work proposed in the change order via email. Defendant, however, denies that the change order was approved because the project owner did not approve of the costs delineated in the change order. The owner declined to do so because of a "lack of communication [and] coordination" between the contractors. Defendant did not pay plaintiff the amount listed on the change order on the basis that it was not paid the amount from the project owner. Plaintiff subsequently filed suit in the Law Division, Special Civil Part, to recover the payment listed in the contract. The trial court conducted a trial on February 12, 2015. On that same day, the trial court ruled in favor of plaintiff, and entered an order to that effect. This appeal followed.
On appeal defendant argues that the PiP provision in the contract bars plaintiff's recovery; and that the trial court improperly excluded defendant's witness's testimony. We disagree.
As a threshold matter, the trial judge made findings of fact and conclusions of law. When a party alleges error in a judge's findings, as defendant does here, the scope of appellate review is limited. We consider only whether the findings made could reasonably have been reached on "substantial" credible evidence present in the record, considering the proof as a whole. Rova Farms Resort, Inc. v. Inv'rs Ins. Co. of Am., 65 N.J. 474, 484 (1974). We do, however, review the construction and interpretation of contracts de novo; because contract construction is a question of law, no deference is owed to the trial court's interpretation of contractual language. See Kieffer v. Best Buy, 205 N.J. 213, 222-23 (2011).
We also note that the parties have stipulated that Pennsylvania law applies to the terms of the contract. Parties may choose to have their contract governed by the law of another state, "so long as that choice does not contravene a fundamental policy of New Jersey." Winer Motors, Inc. v. Jaguar Rover Triumph, Inc., 208 N.J. Super. 666, 671 (App. Div. 1986) (quoting Turner v. Aldens, Inc., 179 N.J. Super. 596, 601 (App. Div. 1981)). Because we discern no contravention of a fundamental public policy in this case, we honor the parties' choice of law provision.
Defendant asserts that the trial court incorrectly concluded that plaintiff's change order was outside the scope of the original contract, and that plaintiff's claim should be barred pursuant to the PiP provision in the contract. Under Pennsylvania law, PiP clauses "are generally enforceable to bar a subcontractor's claims against a general contractor for payment, if the general contractor was never paid by the owner." Quinn Constr., Inc. v. Skanska USA Bldg., Inc., 730 F. Supp. 2d 401, 420 (E.D. Pa. 2010). Defendant relies on this language in support of its argument.
The Quinn court nevertheless concluded that "nonpayment of [subcontractor's] change orders" was unenforceable under Pennsylvania law. Id. at 420-21. The court noted that "courts are reluctant to enforce a conditional payment provision against an unpaid subcontractor that is not responsible for the condition giving rise to the payment defense." Ibid. (citing 3 Philip L. Bruner & Patrick J. O'Connor, Jr., Bruner and O'Connor on Construction Law § 8:49 (West)). Although the Quinn court was specifically faced with a general contractor who settled a change order with a project owner, the Quinn court's reasoning was predicated on the premise that "parties to a contract have an implied duty not to frustrate conditions precedent to their performance." Ibid. (citing Howley v. Scranton Life Ins. Co., 53 A.2d 613, 616 (Pa. 1947)).
The Quinn court's reasoning is persuasive here. In this case, the trial court specifically found that the issues requiring plaintiff to change its work came as a result of defendant's error in its planning and communication with plaintiff. The trial court noted that plaintiff relied on the plans and drawings submitted for the project, and that any notes on the plans requiring coordination among subcontractors were the general contractor's responsibility. Like the subcontractor in Quinn, plaintiff was not responsible for the change order that defendant requested in this case; rather, defendant's own error spurred the need for the change order in this case. We accordingly conclude that the parties' agreement does not bar plaintiff's claim in this instance. Because we discern no bar against plaintiff's claim, we decline to reach the question as to whether the terms of the change order were a modification of the original contract or a separate contract.
We note that, as a whole, we only conclude that PiP clauses are unenforceable when owners fail to pay subcontractors as a result of their own error. We make no conclusions as to the general enforceability of PiP clauses. --------
Defendant finally asserts that the trial court erred by excluding hearsay evidence at trial. We conclude that defendant's argument lacks sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION