Title: Van Note-Harvey Associates, P.C. v. The Township of East Hanover
Citation: N/A
Docket Number: a-124-01
State: new-jersey
Issuer: new-jersey Supreme Court
Date: March 12, 2003

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). In October 1972, defendant Township of East Hanover contracted with Van Note to provide professional engineering services in connection with a multi-million dollar sanitary sewer construction project. Van Note designed the system and supervised its installation. After EPA and DEP grants were awarded to the Township, a contract for installation of the system was awarded to J.A. Cavanaugh Contractors, Inc. (JAC) in August 1982. Under the terms of the contract, monthly estimates were to be submitted to the Township as the work progressed. In addition, JAC was to be paid for materials used in the project based on a fixed unit price. Any extras were to be adjusted on completion of the installation. During the course of the construction, an issue arose regarding JAC s alleged use of excessive sheeting. On completion of the project, JAC sought payment for the additional sheeting and other cost overruns in excess of $1 million, approximately $287,99 of which was attributable to the additional sheeting. Those claims for cost overruns were submitted to arbitration and the Township settled for $940,000. Thereafter, Van Note submitted to the Township a bill in the amount of $110,000 for professional services rendered during the sewer construction project and a separate bill in the amount of $167,658.26 for services rendered during the sewer construction project. When the Township disputed the bills, Van Note filed suit. In the complaint, Van Note sought to recover a $183,998.15 balance due and owing for providing professional engineering services during the arbitration proceedings, $20,648.63 for interest on retainage held by the defendant, contractual prejudgment interest of $42,127.27 on the accumulating accounts receivable as of the date when the complaint was drafted, and other amounts for various other charges. Both the claims for the interest on the retainage held by the Township and prejudgment interest on the accumulating accounts receivable were based on specific provisions in the contract between Van Note and the Township. In its answer to the complaint, the Township asserted a counterclaim alleging that Van Note, among other things, had engaged in professional negligence that contributed to the cost overruns, including the extra sheeting. The Township demanded a trial by jury on all issues. At the conclusion of the evidence, the trial court instructed the jury that Van Note was seeking to recover five types of contract damages, and enumerated them, with the exception of the contractual pre-judgment interest. Neither party objected to the trial court s failure to reference or to submit to the jury the issue of prejudgment interest. During the course of deliberations, the jury came back with a question, ultimately pointed at the award of interest. In response to the question, the trial court told the jury that it need not consider an award for interest, as that determination would be made by the trial court on a post-application motion. The jury returned a verdict in favor of Van Note in the same amount outlined in the trial court s charge. The jury rejected the Township s counterclaim for professional negligence. The trial judge rejected Van Note s subsequent post-judgment application for prejudgment interest, finding that Van Note had not shown overriding and compelling equitable reason to justify such an award. That reasoning was based on the court s belief that the Township had not prosecuted a frivolous counterclaim. The Appellate Division affirmed, deferring to the trial court s finding that prejudgment interest was not warranted under the contract or under the equities of the case. The Supreme Court granted Van Note s petition for certification. HELD : In the face of contractual provisions providing for payment of prejudgment interest on accumulating overdue accounts receivable, the Township of East Hanover, like any private entity, must be required to comply with its contractual obligations, and this matter is remanded to the Law Division for a determination of plaintiff s entitlement to prejudgment interest under the contract. 1. The trial court s failure to submit the issue of prejudgment interest to the jury, without objection, and the court s assertion several times during the trial that that issue would be decided by the court in a post-judgment motion, constitutes a waiver of the previous demand for a jury trial on prejudgment interest on accumulating overdue accounts receivable. (p. 8) 2. The trial court s decision does not reflect that it decided Van Note s claim of entitlement to contractual prejudgment interest. The trial court s statement that it was denying Van Note s application for prejudgment interest because Van Note had not shown an overriding and compelling equitable reason to justify such an award, was a reference to the standard for awarding prejudgment interest in contract or contract-like actions against a governmental agency when there is no statute authorizing such interest. In the face of the contractual provision regarding prejudgment interest, the Township, like any private entity, must be required to comply with its contractual obligations. (p. 9) The Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law Division to determine whether plaintiff Van Note is entitled to prejudgment interest on the accumulating overdue accounts receivable pursuant to the contract between the parties. The remand proceedings are to be conducted without a jury. To the extent that the jury s verdict decided any precondition to awarding prejudgment interest, that determination must be accorded res judicata effect under the circumstances of this case. JUSTICES LONG, VERNIERO, LaVECCHIA, ZAZZALI, and ALBIN join in JUSTICE COLEMAN s opinion. CHIEF JUSTICE PORITZ did not participate. Plaintiff-Appellant, v. THE TOWNSHIP OF EAST HANOVER, Defendant-Respondent. Argued January 6, 2003 Decided March 12, 2003 On certification to the Superior Court, Appellate Division. Michael A. Spero argued the cause for appellant (McCarthy and Schatzman, attorneys). Christopher E. Martin argued the cause for respondent (Weiner Lesniak and Ohrenstein &amp; Brown, attorneys; Mr. Martin and Margaret A. Miller, on the brief). The opinion of the Court was delivered by COLEMAN, J. This case is essentially a suit on a book account in which plaintiff seeks to recover contractual prejudgment interest on accumulating accounts receivables. Although the complaint sought such prejudgment interest, that issue was not submitted to the jury. The trial court indicated that it would decide that issue after the jury rendered its verdict. Judgment entered pursuant to the jury s verdict provided that the interest . . . be calculated and entered by way of post judgment motion. At the conclusion of a hearing on that motion, the court denied the requested prejudgment interest. The Appellate Division affirmed in an unpublished opinion. We now reverse and remand for a determination of prejudgment interest under the contract. The Township answered the complaint and asserted a counterclaim alleging that plaintiff, among other things, had engaged in professional negligence when providing pre-construction and construction engineering services that contributed to the cost overruns, including the extra sheeting. The Township demanded a trial by jury on all issues. The trial court instructed the jury that plaintiff was seeking to recover five types of contract damages: 1) $183,998 related to the arbitration; 2) $56,709 related to grant applications; 3) $13,000 related to sewer reviews; 4) $211 for litigation aid; and 5) $39,960 for interest on retainage. Significantly, and without objection by counsel for plaintiff, the jury was not instructed with respect to contractual pre-judgment interest. The jury verdict sheet listed the above five items without stating the amount sought for each. When various exhibits were being checked before permitting them to be taken into the jury room, the trial judge stated: I will fix the interest charges, depending on the verdict, so you don t have to leave that in there, perhaps. During the jury s deliberations, it submitted the following question to the court: Can we increase/decrease damage award, dollar amounts? Counsel for the Township suggested that the court inform the jury that the issue of interest was in the domain of the court. The court s response to the jury s question is contained in the following colloquy: THE COURT: Well, of course, as I said to you in my charge, you have the authority to render the damages. But this case involves a specific claim for liquidating damages. That is that they asked for specific amounts. You can t increase those. You may decrease them, if you feel that the evidence that you heard warrants such a decrease. So it s not an all or nothing. But because it s capped at what they ve asked for, and there is no other proofs that would give make them. Does that answer your question? A JUROR: Not really. THE COURT: Not really. All right. A JUROR: Well THE COURT: You can remain seated. A JUROR: Does that include court costs as well or THE COURT: Don t worry about don t worry about court costs. Don t worry about interest charges. A JUROR: Okay. That s A JUROR: That s really what our question is about. THE COURT: The rules on interest are controlled by post-application motions and things like that. I ll take care of it. A JUROR: That was our question. THE COURT: Why didn t you ask about interest? You re masking your discussions by such a clever question. Shows you what a good jury you are. You re all there are rules, but you don t have to worry about them, that deal with interest that runs from certain things, prejudgment interest, interest that may be within the contents of obligations. But that can all be taken care of procedural[ly] by myself. Thank you very much. The jury, using the verdict sheet, returned a verdict for plaintiff in the sum of $293,886.71, the same amount outlined in the court s charge. The jury rejected the counterclaim for professional negligence. In a post-judgment application, the trial court rejected plaintiff s application for prejudgment interest because . . . plaintiff has not shown overriding and compelling equitable reason to justify such an award. That reasoning was based on the court s belief that the Township had not prosecuted a frivolous counterclaim. The Appellate Division affirmed, deferring to the trial court s finding that prejudgment interest was not warranted under the contract or under the equities of the case. We granted plaintiff s petition for certification, 172 N.J. 358 (2002), and now reverse. NO. A-124 SEPTEMBER TERM 2001 ON CERTIFICATION TO Appellate Division, Superior Court VAN NOTE-HARVEY ASSOCIATES, P.C., Plaintiff-Appellant, v. THE TOWNSHIP OF EAST HANOVER, Defendant-Respondent. DECIDED March 12, 2003 Justice Coleman PRESIDING OPINION BY Justice Coleman CONCURRING OPINION BY DISSENTING OPINION BY