Where an owner of a property sues a contractor in a construction litigation case, the burden of proof is upon the owner to both prove that the work was defective and what it will cost to have the defective work repaired. In an unpublished decision from February 2021, the Appellate Division noted that even without testimony from the contractor who prepared the repair estimate, the repair estimate may still be admissible as a business record exception to the rule against hearsay. The court noted that the repair estimate, "may have been admissible as a business record if: (a) the author prepared the document in the regular course of business, contemporaneously with its estimate, and not for litigation, (b) the business regularly made such estimates, and (c) the method, purpose or circumstances of preparation did not indicate that it was not trustworthy. Accordingly, while the better evidence would still be to bring in the contractor for live testimony, the court found that the trial court (among other things) should have at least considered if the estimate was admissible as a business record and therefore the case was reversed and remanded. (Olivera v. NJ Asphalt Services)
In an unpublished decision released today, the Appellate Division gave litigants two reminders for those engaged in construction litigation over unpaid services. The first reminder is directed to a defendant that assert a "setoff" amount is due and owing from the plaintiff. In that regard, the Court reminds that a setoff is an affirmative defense and that the defendant "bears the burden of proving it." In the case at bar, although the defendant sought a setoff amount from the plaintiff, it failed to produce evidence showing that such an amount was actually due. Here, for example, the defendant's trial witness claimed, during testimony, to not have the correct ledger with her while on the stand and thus could not competently testify to the large setoff amount sought.
The second reminder to litigants touches on the Prompt Payment Act ("PPA") which is found at N.J.S.A. § 2A:30A-2. The first subsection of that statute is applicable only with the owner, while the second subsection is applicable only with a subcontractor. In the former subsection "(a)" if an owner does not reject an invoice/work by a contractor it is "deemed approved." In subsection "(b)" if a contractor does not reject an invoice/work by a subcontractor it is NOT "deemed approved." This distinction is important when seeking payment for construction services because if an invoice and/or work performed is "approved" or "accepted" the lone argument between the parties will be financial in nature. (A&E Construction Co. v. Barrier Electric Co., Inc, et als.)
In a reported opinion from the Appellate Division, the Court overturned a trial court verdict in the amount of $457,870.86 (inclusive of counsel fees), finding that there was no violation of the Uniform Fraudulent Transfer Act (“UFTA”). The suit was brought by a landlord who had been leasing 16,000 square feet of a strip mall to a Amma Corp. for the operation of a supermarket. Prior to the end of the lease, the owners of Amma Corp., Mr. and Mrs. Perez, created a new company named NRVP LLC and opened another supermarket under that company’s name in a different location less than a half-mile away. The Perezes operated both supermarkets simultaneously for approximately nine months, but proceeded to have Amma break its lease with its landlord about nineteen months early. After breaking the lease, the Perezes shut down Amma Corp.
Unable to find a replacement tenant for Amma Corp., the landlord sued NRVP LLC for the balance due under the remainder of Amma’s lease on a successor liability theory. The trial court testimony indicated that other than a trademark, no assets of Amma were transferred to NRVP. However, given the common ownership, the close proximity in location, and the transfer of Amma’s trademark of the term “Super Supermarket” to the new company, the trial court found that NRVP was liable for the debts of Amma as a “continuation of the selling corporation,” and entered judgment in favor of the landlord.
However, the Appellate Division disagreed and reversed the trail court’s decision, finding that transfer of all, or substantially all, of the assets of the prior company is a prerequisite to the imposition of liability upon another company. Here, while there was the transfer of a trademark, the expert testimony was that is value was only $740 and there were no other assets transferred. Accordingly, there could be no successor liability. 160 West Broadway Associates LP v. 1 Memorial Drive LLC, et. al
Peter J. Vazquez, Jr.