Opinion
0602595/2003.
July 20, 2004.
In this action, plaintiff American Spray-On Corp. (Spray-On) seeks to recover money allegedly due for construction work performed pursuant to a subcontract. Spray-On seeks damages in the amount of $40,000 for payment on a dishonored check, and $165,000 on its unjust enrichment and quantum meruit causes of action. Defendant Austin Helle Company, Inc. (AHC) now moves to dismiss the complaint based upon documentary evidence and for failure to state a cause of action. AHC also requests costa, disbursements and attorney's fees.
Background
AHC, a New Jersey construction company, entered into an agreement with the Port Authority of New York and New Jersey (Port Authority) to perform fireproofing construction on a parking garage at Newark Airport in Newark, New Jersey. AHC then entered into a subcontract with non-party Condor Associates, Ltd. (Condor), whereby Condor was to perform asbestos abatement and apply fire retardant materials on steel beams in connection with AHC's fireproofing construction at Newark Airport (AHC-Condor Agreement). Under the AHC-Condor Agreement, Condor agreed to keep the Port Authority's property "free and clear of any Construction Lien Claim, or other claim of lien. . . ." Kianovsky Aff., Ex. B, ¶ 15.
Condor, in turn, entered into a subcontract with Spray-On to perform some of Condor's obligations under the AHC-Condor Agreement (Condor-Spray-On Agreement). Spray-On claims that its work was to be performed for $165,000 "for the ultimate benefit of [AHC], the general contractor." Azrin Aff., ¶ 6. According to Spray-On, the Condor-Spray-On Agreement, like the AHC-Condor Agreement, barred Spray-On from filing a mechanic's lien to protect its rights. Azrin Aff., ¶ 22; Spray-On Opp. Mem. of Law, at 5. Spray-On avers that the majority of the work under the Condor-Spray-On Agreement was completed by May 31, 2002.
Neither party submits a copy of the Condor-Spray-On Agreement.
On June 6, 2002, AHC made a progress payment to Condor in the amount of $169,582. However, on June 11, 2002, Condor requested that AHC withdraw that payment, and make the same payment in two separate checks: one for $40,000 payable to Condor and Spray-On jointly, and one for $129,582 payable solely to Condor. AHC complied with this request and drafted the two checks, both dated June 11, 2002.
On July 2, 2002, Condor allegedly notified AHC that Condor did not forward the $40,000 payment to Spray-On, and that Condor was having financial difficulties. Consequently, AHC placed a stop-payment on the $40,000 check, and, shortly thereafter, terminated the AHC-Condor Agreement.
AHC claims that it terminated the AHC-Condor Agreement due to numerous defaults by Condor, involving Condor's bankruptcy filing, expiration of its workmen's compensation insurance, and failure to pay field labor. Spray-On claims that Condor was liquidated in chapter 7 bankruptcy, and that none of Condor's unsecured creditors, including Spray-On, were paid.
According to AHC, on July 10, 2002, AHC proposed terms for a new agreement with Spray-On, whereby Spray-On would complete work under the Condor-Spray-On Agreement. According to the affidavit of Richard McCann, AHC's president, Spray-On rejected the terms of that agreement. Subsequently, on July 17, 2002, AHC and Spray-On entered into an agreement, whereby Spray-On agreed to complete uncompleted work under the Condor-Spray-On Agreement for $36,300 (AHC-Spray-On Agreement). According to AHC, the AHC-Spray-On Agreement was prospective in nature.
Though it is not clear when, Condor indorsed and delivered the $40,000 check to Spray-On. Spray-On deposited the check on July 31, 2002. Spray-On claims that the check was returned unpaid on August 2, 2002, and that it never received payment for the work performed for AHC's alleged benefit under the Condor-Spray-On Agreement. Spray-On now seeks payment on the dishonored $40,000 check, and payment for the full value of the work it performed under the Condor-Spray-On Agreement.
Discussion
Choice of Law
The parties do not dispute that the agreements relating to this action contain choice of law provisions, providing for the application of New Jersey law. Moreover, the parties do not dispute that their agreements were entered into, and performed, in New Jersey. Therefore, New Jersey law applies. Finucane v Interior Constr. Corp., 264 AD2d 618 (1st Dept 1999).Payment On the Dishonored Check
AHC argues that it had no obligation to pay Spray-On, and that the issuance of the $40,000 joint check did not create such an obligation. In opposition, Spray-On argues that the check is a negotiable instrument, which Spray-On, as a payee, is entitled to cash. Spray-On also argues that it is entitled to maintain an action on the dishonored check because it is a holder in due course.
A "negotiable instrument" is
an unconditional promise to order to pay a fixed amount of money . . . if it: (1) is payable . . . to order at the time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money.
NJSA § 12A:3-104 (a). The holder of a negotiable instrument is entitled to enforce that instrument. NJSA § 12A:3-301.
Here, the $40,000 check is an unconditional promise, because it does not state a condition to payment, or that payment is subject to, or governed by, another writing. NJSA § 12A:3-106 (a). The check is an order, because it is "a written instruction to pay money signed by the person giving the instruction." NJSA § 12A:3-103 (6). The check is for $40,000, "a fixed amount of money." NJSA 12A:3-104 (a). The check is payable to order ( NJSA § 12A:3-109 [b]), because it states: "pay to the order of [Spray-On] and [Condor]" (Kianovsky Aff., Ex. E). The check is " payable on demand," because it is payable on demand, at the will of Spray-On and Condor, and does not state any time of payment. NJSA § 12A:3-108 (a). The check "does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. . . ." NJSA § 12A:3-104 (3). Thus, the $40,000 check is a negotiable instrument.
Spray-On is the "holder" of the negotiable instrument, because it is payable to Spray-On, and Spray-On is in possession of it. NJSA § 12A:1-201 (20). AHC fails to show why Spray-On, as the holder of the instrument, and as a co-payee, is not entitled to enforce it. NJSA § 12A:3-301. Therefore, Spray-On has stated a cause of action for payment on the dishonored check.
AHC has not shown that it has no obligation to honor the check. AHC's argument, that it "was not under an obligation to make good on [the] check" because it had no obligation to Spray-On (AHC Opp. Mem. of Law, at 8), fails to explain why the check cannot be enforced by Spray-On as a negotiable instrument. Nor does AHC cite any law in support of this argument.
AHC also argues that Condor, because of its alleged breach of the AHC-Condor Agreement, had no authority to indorse the $40,000 check to Spray-On, and, therefore, that Condor's indorsement is a nullity. However, even assuming that Condor breached the AHC-Condor Agreement, AHC fails to explain how that breach renders Condor's indorsement of the check to Spray-On unauthorized. Moreover, even if Spray-On were "in wrongful possession of the instrument," it may still be entitled to enforce the instrument. NJSA § 12A:3-301.
" If an instrument is not payable alternatively to two or more persons, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them." NJSA § 12A:3-110 (d). The check was indorsed, because it was signed, and, therefore, negotiated by Condor. NJSA § 12A:3-204 (a). That indorsement transferred Condor's rights in the negotiable instrument to Spray-On. NJSA § 12A:3-203 (a). For the foregoing reasons, AHC has not stated a sufficient basis to warrant dismissal of Spray-On's cause of action for payment on the diahonored check. Accordingly, AHC's motion to dismiss Spray-On's first cause of action for payment on the dishonored check is denied.
The court notes Spray-On's argument that it is a "holder in due course," pursuant to NJSA § 12A:3-302, which would entitle Spray-On to enforce the negotiable instrument against AHC with limited defenses available to AHC. "In the typical case the holder in due course is not the payee of the instrument. Rather, the holder in due course is an immediate or remote transferee of the payee." Id. at Uniform Commercial Code Comment (4). Thus, "the holder-in-due-course doctrine is irrelevant in determining rights between [the drawer of the check] and [the payee] with respect to the instrument," where the drawer of the check is the only drawer. Id.
Quantum Meruit and Unjust Enrichment
AHC next moves to dismiss Spray-On's quantum meruit and unjust enrichment causes of action, arguing that AHC paid a new subcontractor to complete Condor's work, that Spray-On has a remedy at law, and that Spray-On's right to payment arises solely under the Condor-Spray-On Agreement. In opposition, Spray-On argues that AHC received a benefit from Spray-On, that retention of that benefit without payment would be unjust, and that it has no adequate remedy at law.
Generally, a sub-subcontractor who has a dispute with the party with whom it contracted "must resolve this problem without looking to those parties further up the chain. . . ." F. Bender, Inc. v Jos. L. Muscarelle, Inc. , 304 NJ Super 282, 287, 700 A2d 374 (1997). However, some cases justify equitable exceptions to the general rule, permitting the sub-subcontractor to assert a cause of action against the general contractor for quantum meruit. Id.; Oronato Constr. , Inc. v Eastman Constr. Co., 312 NJ Super 565, 711 A2d 1363 (1998).
In order to state a cause of action for quantum meruit, Spray-On must show that AHC was unjustly enriched, that is, that AHC "received a benefit, and that retention of the benefit without payment therefor would be unjust," and that Spray-On has no adequate remedy at law. Callano v Oakwood Park Homes Corp. , 91 NJ Super 105, 109, 219 A2d 332, 334 (1966); F. Bender, Inc., 304 NJ Super at 285; National Amusements, Inc. v New Jersey Turnpike Auth. , 261 NJ Super 468, 619 A2d 262 (1992), affd 275 NJ Super 134, 645 A2d 1194 ( AD 1994). "Unjust enrichment is not an independent theory of liability, but is the basis for a claim of quasi-contractual liability." National Amusements , Inc., 261 NJ Super at 478.
AHC claims that it has not retained the benefit of Spray-On's work without paying for it, arguing that "Condor has received all [it] was entitled to receive under the [AHC-Condor Agreement]." AHC Mem. of Law, at 6. However, AHC fails to show that the $129,582 check, payable to Condor, was actually cashed by Condor. Moreover, while AHC claims that it was required to hire new contractors to complete Condor's uncompleted work (McCannAff., ¶ 17), AHC fails to show that it paid for the portion of the work that was, in fact, completed by Condor. Thus, AHC has not shown that it did not retain the benefit of Spray-On's work without paying for it. Therefore, AHC fails to refute Spray-On's allegations that AHC received the benefit of the work and materials provided by Spray-On without paying for them.
Citing National Amusement , Inc. ( 261 NJ Super 468, supra), AHC argues that Spray-On has an adequate remedy at law by virtue of its breach of contract claim against Condor, thereby precluding Spray-On's equity action for unjust enrichment. In National Amusement , Inc., the court determined that the plaintiff's unjust enrichment claim was improper because the legal remedy of inverse condemnation was available to the plaintiff. Similarly, in Callano ( 91 NJ Super 105, supra), the plaintiff had a legal remedy against the estate of the individual with whom the plaintiff contracted.
Here, conversely, the parties do not dispute that Condor was liquidated in bankruptcy and no longer exists. Moreover, AHC does not refute Spray-On's contention that it was barred from filing a mechanic's lien to protect its rights. Thus, Spray-On cannot maintain an action for breach of contract against Condor, or enforce a lien. AHC does not suggest any other manner in which Spray-On could seek legal redress, and, therefore, AHC has not shown that Spray-On has an adequate remedy at law against Condor.
AHC argues that Spray-On's right to payment arises solely out of the Condor-Spray-On Agreement, and, therefore, that Spray-On is not entitled to maintain its quasi contract claims against AHC. In support of this argument, AHC cites F. Bender, Inc. ( 304 NJ Super 282, supra), Callano ( 91 NJ Super 105, supra), National Amusement , Inc. ( 261 NJ Super 468, supra ) and Insulation Contr. and Supply v Kravco, Inc. (209NJ Super 367, 507 A2d 754). These cases are distinguishable on their facts.
In F. Bender, Inc. ( 304 NJ Super at 285-86), Callano ( 91 NJ Super at 109-10), and National Amusement , Inc. ( 261 NJ Super at 478), the plaintiff had an adequate remedy at law; whereas, here, as discussed supra, AHC has not shown that Spray-On has an adequate remedy at law. In National Amusement , Inc., the court determined that the defendants did not receive a benefit from the plaintiff ( 261 NJ Super at 478); whereas, here, AHC does not show that it received no benefit from Spray-On. In Insulation Contr. and Supply , the defendant paid the full amount due under the subcontract. 209 NJ Super at 374. Conversely, here, as discussed supra, AHC has not shown that it paid the full amount due under the AHC-Condor Agreement. Thus, AHC has not shown that it paid for the benefit that it received.
For the foregoing reasons, AHC's motion to dismiss Spray-On's second and third causes of action for quantum meruit and unjust enrichment is denied.
AHC states no basis for its request for attorney's fees, costs or disbursements. Therefore, that request is also denied.
Accordingly, it is hereby
ORDERED that the motion to dismiss is denied; and it is further
ORDERED that defendant is directed to serve an answer to the complaint within 10 daye after service of a copy of this order with notice of entry,