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RNR Contractors, Inc. v. Outdoor Properties, L.L.C.

A-0095-04T1 (N.J. Super. App. Div. 2005) (Unpublished)

CONSTRUCTION LIENS — A subcontractor cannot hold a property owner liable for construction liens for unpaid materials and labor if it has not entered into a contract with the property owner and the property owner has no interest in the improvements performed by the subcontractor.

A father had a controlling interest in a company that owned several properties. The father’s son had a controlling interest in a development company. The development company entered into a contract with an education company to build a charter school on the father’s company property. Contemporaneously, the father’s company entered into a thirty-year lease agreement with the education company. The lease provided that the education company was to pay the property owner the entire thirty-year’s rent in one lump payment upon the signing of the lease. The development company then entered into an agreement with a general contractor to build the school. The general contractor subsequently contracted with a subcontractor to perform some of the improvements on the property. After construction began on the project, the education company requested to take occupancy of the school at a date that was much earlier than the target date for completion of the project. As a result, the development company requested that the general contractor cease all construction and paid the general contractor for the work that had been performed to date. It obtained from the general contractor a release of liens, which stated that the subcontractor had been paid in full for its work, but it turned out that the subcontractor had not been fully paid. As a result, the subcontractor filed actions against the development company, general contractor, education company, and property owner. All of the defendants filed summary judgment motions. The subcontractor filed a response to the summary judgment motions, admitting the majority of the statement of facts presented in the defendants’ motions. As a result, the lower court determined that the material facts of the case were not in dispute, and granted summary judgment in favor of all of the defendants. The subcontractor appealed. On appeal, the subcontractor asserted that its lien claim was enforceable against the property owner despite the fact that it had not entered into a contract with the owner. It asserted that when the son entered into the agreement with the general contractor on behalf of the development company, he acted as an agent for the property owner, which was a company owned by his father. As a result, the subcontractor claimed that it was in privity with the property owner and therefore, the property owner was liable for the liens. The subcontractor further contended that the property owner should pay for the liens because it was unjustly enriched by the work performed by the subcontractor.

The Appellate Division affirmed the lower court’s summary judgment award. It rejected the subcontractor’s assertion that it was in privity with the property owner based on the father-son relationship. It held that the son was not acting as an agent for his father’s company, the property owner, when he entered into the contract with the general contractor because neither companies were owned or controlled by the same people. Also, there was no express language in the contract providing that the property owner was a party to the contract. It further held that the property owner was not unjustly enriched by the subcontractor’s work, which had been performed solely for the use of the property by the education company, who was to occupy the property for thirty years pursuant to the lease.


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