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Devaney v. Neuman

A-1590-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTORS; DAMAGES—Even if a settlement agreement in a construction dispute provides that a designated engineer is to determine the repair costs to be paid by the contractor, the contractor can still present expert testimony to refute the accuracy of the engineer’s damage calculation.

Homeowners alleged defective workmanship in the construction of their home and sued the builder for damages. A settlement was reached. It provided that the builder would pay the owners $46,500 and would do additional work. A specified engineer was to be the project manager for the repairs and would determine the value of all outstanding remedial work. If the additional work were not completed by a specified date, the builder was required to pay damages equivalent to the cost to do the unfinished work. The terms of the settlement were incorporated into a proposal. The builder refused to sign on the ground that it provided greater relief than to which had been agreed. He claimed that he thought he would have had the opportunity to meet with the engineer to confer as to the remediation projects; instead, the settlement gave the owners carte blanche to decide what projects should be completed. Notwithstanding his refusal to consent, the lower court signed the order.

The builder sought reconsideration of the order and a hearing to determine whether a valid and enforceable settlement had been reached between the parties. The lower court denied relief, finding that the settlement did not mention any provision by which the builder and the engineer would meet to determine what would be included as part of the remedial efforts. In addition, because the specified date in the settlement had passed in which the builder was to have completed the repairs, the lower court granted a motion by the owners to enforce the settlement agreement. It awarded the owners $113,116.50, which was the amount determined by the engineer.

The builder contested the motion, claiming that enforcement of the settlement would be unjust because there was never a meeting of the minds with respect to the issue of remediation. The builder also challenged the $113,116.50 award as unfair in light of the owners’ actual damages. The builder provided a certification by another engineer that the cost of repairs would only have been $36,982.50. In response, the lower court reduced its original judgment to $50,000, finding that the original amount was excessively high under the circumstances. Both parties appealed.

On appeal, the builder argued that it was entitled to have the lower court’s order vacated because there was never a meeting of the minds with respect to the remedial repair aspect of the settlement. The Appellate Division disagreed, finding that the settlement was not so indefinite as to require that relief. It concluded that the settlement consisted in part of the lump sum payment and found no uncertainty or ambiguity in that requirement. The Court also found the settlement to have contained a remediation component. It rejected the builder’s claim that no such remediation had been reached. The record showed that when the settlement was reached, the builder had the engineer’s inspection report, a supplemental report, and a report by another architect regarding remedial repairs. The parties had also already taken a videotaped deposition of the engineer. According to the Court, there was nothing in the transcript of the settlement that suggested that the builder disagreed with any of the repairs that were set forth in those three documents or in the deposition. Therefore, the Court defined the builder’s remediation obligation by reference to them.

In addition, the Appellate Division held that the lower court did not abuse its discretion in allowing the builder to offer expert evidence with respect to the reasonable costs of remediation. The panel noted that although the settlement agreement provided that the value of uncompleted repairs would be set by the engineer, the lower court found the engineer’s estimates to have been substantially inflated. Thus, the Court was unwilling to bar the builder from having an opportunity to demonstrate the designated engineer’s error.

Finally, the Appellate Division found that the lower court did not meaningfully evaluate the varying estimates provided, nor did it explain how it reached $50,000 award. Therefore, the amount of the judgment was set aside and the matter was remanded for a plenary hearing to determine the reasonable costs of repairs.

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