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Rizzo v. Walsh

A-2467-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTORS; SUBCONTRACTORS; CONSUMER FRAUD—A property owner may have to pay a subcontractor directly for work performed if during the course of the construction it did so with checks payable directly to the subcontractor and it looked like the property owner was, in effect, guarantying payment because the subcontractor can rely on the history of those payments, the Consumer Fraud Act doesn’t require a writing between an owner and a subcontractor, and the subcontractor is entitled to be paid quantum meruit.

A homeowner hired a general contractor to oversee extensive renovations. The general contractor, in turn, hired a painting subcontractor. There were no written contracts between or among the painting contractor, the general contractor, or the homeowner. The general contractor was obligated to supervise the work performed by subcontractors, “and pay them upon satisfactory completion of the work.” When the general contractor ran into financial difficulties, the homeowner began making payments through the general contractor using personal checks directly payable to the subcontractor. On one occasion, the homeowner personally handed the painting subcontractor two checks for painting services rendered up through a given date. After that payment, the painting subcontractor did more work, but was never paid. The painting contractor then submitted an invoice directly to the homeowner, but the homeowner refused to pay, directing the painting contractor to the general contractor because the homeowner had paid considerable monies to the general contractor. The lower court held that the painting subcontractor was entitled to be paid by the homeowner “for work performed under the theories of contract, quantum meruit and unjust enrichment.” It further held that the painting subcontractor’s claim “was not barred by the failure to have a written contract under the Consumer Fraud Act (CFA).”

The homeowner appealed, without success. The Appellate Division commented that there was no dispute over the quality of the work or the amount of remuneration owed to the painting subcontractor. It took note that the homeowner’s only defense at trial was that he had paid the general contractor and expected the general contractor to pay the painting subcontractor. The lower court, however, had found, “in light of credible documentary proof,” that the monies paid by the homeowner to the general contractor did not involve any painting services, but were for other, unrelated work. Even though there was no enforceable contract between the painting subcontractor and the homeowner, “[c]ourts generally allow recovery in quasi-contract when one party has conferred a benefit on another, and the circumstances are such that to deny recovery would be unjust.” It was undisputed that the painting was done in good faith and accepted by the homeowner. The homeowner’s customary business practice of paying the painting subcontractor directly or through the general contractor by check payable to the painting subcontractor could be used to infer that the painting subcontractor “reasonably expected to be compensated” by the homeowner and “that a reasonable person in [the homeowner’s] position would know that [the painting subcontractor] was performing services with the expectation of being paid.” Lastly, even though the CFA requires a written contract between a homeowner and a home improvement contractor, the CFA is “designed to protect homeowners who deal directly with contractors.” Here, the homeowner hired the general contractor and it didn’t matter that it subsequently dealt directly with the painting subcontractor because such dealings did “not change the fundamental nature of the arrangement to warrant application of the CFA’s regulatory requirements.” The Court also opined that “even if applicable, the CFA would not bar recovery in quantum meruit.”

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