CHRISTOPHER HOUGHTON VS. STEVE HOURAN (L-1982-15, BERGEN COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2056-16T3
CHRISTOPHER HOUGHTON,
Plaintiff-Respondent,
v.
STEVE HOURAN, HOURAN FUCETOLA
CONSTRUCTION, LLC, and HOURAN
USA CONSTRUCTION, LLC,
Defendants/Third-Party
Plaintiffs-Appellants,
v.
SHEILA HOUGHTON,
Third-Party Defendant-
Respondent,
and
S&L ARCHITECTURE STUDIO, LLC,
Third-Party Defendant.
_________________________________
Argued May 23, 2018 – Decided June 21, 2018
Before Judges Koblitz, Manahan, and Suter.
On appeal from Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-
1982-15.
Michael J. Confusione argued the cause for
appellants (Hegge & Confusione, LLC,
attorneys; (Michael J. Confusione, of counsel
and on the brief).
Jeffrey S. Wilson argued the cause for
respondents (Hedinger & Lawless LLC,
attorneys; Jeffrey S. Wilson, on the brief).
PER CURIAM
Defendants Steve Houran (Houran), Houran Fucetola
Construction, LLC (Houran Fucetola), and Houran USA Construction,
LLC (Houran USA) (collectively defendants) appeal from the
December 20, 2016 judgment entered against them in favor of
plaintiff Christopher Houghton for defendants' breach of contract
and violation of home improvement regulations. We affirm the
liability and compensatory damages portion of the judgment because
there was substantial evidence to support them. We vacate the
attorney's fee award because of a lack of findings under Rule 1:7-
4(a) and remand that issue for findings of fact and conclusions
of law. We also vacate the judgment based on a lack of findings,
to the extent that it imposed individual liability upon defendant
Houran for compensatory damages and for attorney's fees, and remand
those issues to the trial court for findings consistent with Rule
1:7-4(a). We have not retained jurisdiction.
In September 2014, plaintiff filed a complaint seeking
compensatory, treble and punitive damages and attorney's fees from
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defendants for breach of contract, misrepresentation, and
violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -
48, arising from a home improvement contract that he signed with
Houran Fucetola. Defendants' answer1 included a counterclaim for
breach of contract and unjust enrichment and a third-party
complaint against plaintiff's wife, Sheila Houghton, which
additionally alleged tortious interference with the contract.2
Sheila Houghton filed a third-party counterclaim.
I
A bench trial was conducted in November 2016, from which we
glean the facts. In 2013, Kenneth Schier of S&L Architecture
Studio was hired to prepare architectural plans for an addition
to plaintiff's home in Ridgewood, New Jersey. Plaintiff searched
for a contractor through Home Advisors. Defendant Steve Houran
received the referral, contacted plaintiff and met with him.
Plaintiff gave Houran a copy of the architectural plans. Houran
prepared the written contract based on these plans. It was signed
on September 16, 2013, by plaintiff and Houran Fucetola.
1
Defendants' answer acknowledged that Steve Houran is the owner
and managing member of Houran Fucetola and Houran USA.
2
Defendants filed a third party complaint against S&L Architecture
Studio, LLC. This claim was dismissed.
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The contract did not include the business address of Houran
Fucetola, the start and completion date for the project or the
total price to be paid by plaintiff. It did include sub-categories
of work to be completed and the price for the foundation, framing,
roofing, siding, flooring, electrical, and plumbing. The contract
included a schedule of payments that were due upon certain
benchmarks.
Work commenced on the addition in March 2014, after building
permits were obtained. The construction project immediately
struck a sour note, with the defendants undertaking demolition
work while the Houghtons were away, contrary to their instruction.
The work proceeded until April 23, 2014, when Houran sent a
termination notice, claiming that delays were attributable to the
owner's interference with the scope of the work and "trigger[ed]"
by "the decision to remove portions of the contract." By that
point, plaintiff had paid $51,861.74, which was 80% of the
contract. The construction was not finished. Plaintiff hired
contractors to remediate and complete the work.
Schier testified as an expert in residential construction
that there were multiple problems with the construction which was
"[b]elow acceptable reasonable standards," describing it as "the
worst construction project [he] had ever seen in [his] career."
He testified that the foundation was improperly constructed, the
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ridge beam was not made of microllam as required by the plans, the
construction used improper fasteners, lacked headers, used
improper joist hangers, did not have hurricane straps, was missing
floor joists, and the second floor stairs now were sagging. There
were other workmanship problems as well.
The Village of Ridgefield building inspector, Carlo
Madrachimov, testified, "there [were] multiple failures on this
. . . project," which included the depth of the footing, framing
deficiencies, and use of a ridge beam made of "regular nominal
lumber." He said that the architect's plans were not followed.
Houran testified that he had many years' experience in the
construction industry and completed hundreds of home improvement
renovations. He said they ran into some issues in the construction
that required four change orders, all of which were agreed to by
plaintiff through email. His firm was not able to complete the
project because plaintiff "excised" parts of the contract. He
blamed Sheila Houghton for interfering with their work. Houran
was not permitted to testify about issues he had with the
architectural plans because defendants had not named any expert
witnesses in their answers to discovery. David Sanchez, who was
employed by Houran USA on the project, testified that Sheila would
not let the project go forward as she "was always there having a
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little comment or asking something or saying something to do their
own way."
The trial court issued a written opinion on November 17,
2016,3 finding that defendants breached the contract by sending
the termination notice and that Sheila did not interfere with
defendants' work. The court described Houran's testimony as
"lacking detail, or any support by reference to the applicable
architectural codes." The court did not consider his testimony
credible because photographs in evidence showed "the poor quality
of his work." The court found that plaintiff suffered actual
damages of $41,493.06, consisting of the cost to remediate and to
complete the work, less the balance remaining on the contract.
The court held that the contract violated portions of the
"Home Improvement Practices" regulations, N.J.A.C. 13:45A-
16.2(a)(12), because it did not include defendants' business
address, the dates or time period the work would begin or be
completed by, or the total price to be paid by the buyer. The
court denied plaintiff's request for treble damages under the CFA,
however, because his damages arose from "shoddy work and breach
of contract," and were not causally related to the CFA violations.
3
The record does not include an order from November 17, 2016.
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Plaintiff was entitled to an award of attorney's fees under the
CFA, citing Cox v. Sears Roebuck & Co., 138 N.J. 2 (1993).
The trial court's December 20, 2016 "Order for Judgment"
provided in the "whereas" clauses that "sufficient evidence had
been presented that the defendant Steven Houran was individually
liable under the 'Home Improvement Practices' regulations of the
CFA" and that plaintiff's attorney's fee certification was
"reasonable and proper based on the complexity of this case and
the amount of time reasonably expected for a case of this nature."
The court entered a judgment against all defendants, including
Houran individually, in the amount of $68,193.06, consisting of
$41,493.06 in compensatory damages and $26,700 in attorney's fees
and costs.
On appeal, defendants contend that the trial court erred by
finding that they breached the contract and by rejecting their
claim of anticipatory breach by plaintiff. Houran contends he
should have been able to testify as an expert about the work
performed by his company. Even if there were liability on the
part of the company because the contract was breached or the home
improvement regulations were violated, defendants claim the court
should not have held Houran individually liable for damages or for
attorney's fees. Although not raised before the trial court,
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defendants argue the court erred by not apportioning the award of
attorney's fees between the breach of contract and CFA claims.
II
We afford a deferential standard of review to the factual
findings of the trial court on appeal from a bench trial. Rova
Farms Resort, Inc. v. Inv'rs Ins. Co., 65 N.J. 474, 483-84 (1974).
These findings will not be disturbed unless they are "so manifestly
unsupported by or inconsistent with the competent, relevant and
reasonably credible evidence as to offend the interests of
justice." Id. at 484 (quoting Fagliarone v. Twp. of N. Bergen,
78 N.J. Super. 154, 155 (App. Div. 1963)). However, our review
of a trial court's legal determinations is plenary. D'Agostino
v. Maldonado, 216 N.J. 168, 182 (2013) (citing Manalapan Realty,
L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
There was ample evidence to support the court's finding that
defendants breached this contract. To establish his breach of
contract claim, plaintiff was required to prove that (1) "[t]he
parties entered into a contract containing certain terms"; (2)
"plaintiff did what the contract required [him] to do"; (3)
"defendant[s] did not do what the contract required the
defendant[s] to do"; and (4) "defendant[s'] breach, or failure to
do what the contract required, caused a loss to the plaintiff."
Model Jury Charge (Civil), 4.10A "The Contract Claim - Generally"
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(approved May 1998); see Globe Motor Co. v. Igdalev, 225 N.J. 469,
482 (2016). No one disputed that there was a written contract and
that plaintiff paid defendants pursuant to the contract.
The contract provided that the work was to be completed per
the final architectural plans. The evidence, which largely was
unrefuted, showed that defendants' construction work varied widely
from these plans, consisting of among other things, improper ridge
beams, headers, fasteners, hangers and straps. Houran's
testimony, found not to be credible, was inconsistent with the
photographic evidence. The work that was performed by defendants
needed to be repaired, resulting in additional expenses to
plaintiff.
We agree with the trial court that the evidence did not
support defendants' anticipatory breach of contract claim. "An
anticipatory breach is a definite and unconditional declaration
by a party to an executory contract – through word or conduct –
that he will not or cannot render the agreed upon performance."
Ross Sys. v. Linden Dari-Delite, Inc., 35 N.J. 329, 340-41 (1961).
If the breach goes to the essence of the contract, the non-
breaching party may treat the contract as terminated and refuse
to render continued performance. Id. at 341. Anticipatory
repudiation can be found "where reasonable grounds support the
obligee's belief that the obligor will breach the contract.'"
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Spring Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super.
158, 180 (App. Div. 2008) (quoting Danzig v. AEC Corp., 224 F.3d
1333, 1337 (2000)).
Houran's and Sanchez's testimony that Sheila "interfered" and
asked them to "change" things evidenced nothing specific that
would have prevented performance under the contract. Houran
testified he could have completed the contract, which undercut his
claims about Sheila. Houran also complained that plaintiff
"excised" certain portions of the contract but this was not
material because by that time, plaintiff had substantially
performed and defendant never demanded reasonable assurance from
plaintiff. See Spring Creek, 339 N.J. Super. at 179-80.
Defendants contend the court erred by not allowing Houran to
testify as an expert witness. "The admission or exclusion of
expert testimony is committed to the sound discretion of the trial
court." Townsend v. Pierre, 221 N.J. 36, 52 (2015). "The decision
as to exclusion must stand unless so wide of the mark that a
manifest denial of justice resulted." Ratner v. General Motors
Corp., 241 N.J. Super. 197, 202 (App. Div. 1990).
Houran testified as a fact witness about construction of the
addition; he did not have training or experience to testify about
the architectural plans. Also, defendants did not provide the
names of, or reports from, any expert witnesses in their answers
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to discovery. We discern no abuse of discretion by precluding
Houran's testimony as an expert under these circumstances.
Defendants appeal the judgment to the extent that it imposed
individual liability on Houran to pay damages and attorney's fees
because plaintiff's contract was with Houran Fucetola and not
Houran individually. The judgment simply provided in a "whereas"
clause that "sufficient evidence had been presented that the
defendant Steve Houran was individually liable," citing to the
home improvement regulations of the CFA. The trial court made no
findings of fact to support this portion of the judgment.
Rule 1:7-4(a) requires that in all actions tried without a
jury the court "shall by an opinion or memorandum decision, either
written or oral, find the facts and state its conclusions of law."
"The purpose of the rule is to make sure that the court makes its
own determination of the matter." In re Tr. Created by Agreement
Dated Dec. 20, 1961, by & between Johnson and Hoffman, Lienhard &
Perry, 399 N.J. Super. 237, 254 (App. Div. 2006). "When a trial
court issues reasons for its decision, it 'must state clearly
[its] factual findings and correlate them with relevant legal
conclusions, so that parties and the appellate courts [are]
informed of the rationale underlying th[ose] conclusion[s].'"
Avelino-Catabran v. Catabran, 445 N.J. Super. 574, 594-95 (App.
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Div. 2016) (alterations in original) (quoting Monte v. Monte, 212
N.J. Super. 557, 565 (App. Div. 1986)).
Here, the compensatory damages portion of the judgment was
based on a breach of contract. The contract was between Houghton
and Houran Fucetola. Houran was not individually liable solely
as a managing member of the limited liability company. See
N.J.S.A. 42:2C-30 (providing that "[t]he debts, obligations, or
other liabilities of a limited liability company . . . are solely
the debts, obligations, or other liabilities of the company[,] and
[they] do not become the debts, obligations, or other liabilities
of a member or manager solely by reason of the member acting as a
member or manager acting as a manager").
The power to look beyond the corporate form is well
established. Stochastic Decisions, Inc. v. DiDomenico, 236 N.J.
Super. 388, 393 (App. Div. 1989). "It is only upon proof of fraud
or injustice that a court will pierce the corporate veil to impose
liability on the corporate principals." Touch of Class Leasing
v. Mercedes-Benz Credit, 248 N.J. Super. 426, 441 (App. Div. 1991)
(citations omitted).
Here, the court made no findings of fraud or injustice that
would support its order that Houran was individually responsible
for the breach of contract by the limited liability companies.
In the absence of findings, we must vacate the judgment to the
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extent it imposed individual liability on Houran and remand that
issue to the trial court for appropriate findings of fact and
conclusions of law.
The December 20, 2016 judgment awarded $26,700 in attorney's
fees and costs to plaintiff against defendants, including Houran
individually. Defendants contend the court erred in awarding
attorney's fees against defendant Houran individually and by not
allocating fees between the breach of contract and CFA claims.
An award of attorney's fees is reviewed for "abuse of
discretion." Masone v. Levine, 382 N.J. Super. 181, 193 (2005).
"[A]buse of discretion is demonstrated if the discretionary act
was not premised upon consideration of all relevant factors, was
based upon consideration of irrelevant or inappropriate factors,
or amounts to a clear error in judgment." Ibid. (citing Flagg v.
Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002)).
The CFA allows courts to award "reasonable attorney's fees"
to a successful plaintiff under certain circumstances. N.J.S.A.
56:8-19. A plaintiff may recover attorney's fees for violations
of the CFA even where the plaintiff has failed to establish an
ascertainable loss. Cox, 138 N.J. at 24; Branigan v. Level on the
Level, Inc., 326 N.J. Super. 24, 31 (App. Div. 1999). Here, the
trial court awarded fees although it found there was no
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ascertainable loss by plaintiff arising from the regulatory
violations.
An employee or officer of a corporation can be held
individually liable under the CFA "when the basis for the CFA
claim is a regulatory violation rather than an affirmative act or
knowing misrepresentation." Allen v. V & A Bros., Inc., 208 N.J.
114, 133 (2011). In Allen, the Court recognized this involved
"fact-sensitive determinations." "[I]ndividual liability for a
violation of the CFA will necessarily depend upon an evaluation
of both the specific source of the claimed violation that forms
the basis for the plaintiff's complaint as well as the particular
acts that the individual has undertaken." Id. at 136. The same
analysis should apply when determining whether attorney's fees
awarded under the CFA for regulatory violations can be assessed
individually against an employee or officer of a corporation or
limited liability company.
The trial court awarded attorney's fees based on the
uncontested violation of the home improvement regulations. The
contract itself had made no provision for an award of fees in the
event of a breach. The judgment provided in a "whereas" clause
that plaintiff's counsel submitted a certification "in accordance
with Rule 4:42-9(a) and RPC 1.5(a)" in the amount of $26,700 and
the court found that amount "to be reasonable and proper based on
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the complexity of this case and the amount of time reasonably
expected for a case of this nature." However, the court made no
findings about the fees charged, the hours spent on the case,
whether the hours related to the breach of contract or CFA claim
or any of the other factors under RPC 1.5. See R. 1:7-4(a).
We do not know whether the court determined a lodestar or
whether it chose to enhance it. See Rendine v. Pantzer, 141 N.J.
292, 337 (1995) (providing that after determining the lodestar,
the trial court should "consider whether to increase that fee to
reflect the risk of nonpayment in all cases in which the attorney's
compensation entirely or substantially is contingent on a
successful outcome"). The court did not give reasons for why
Houran should be held individually liable for these fees.
Defendants complain that the attorney fee award should be
allocated because there were no ascertainable losses attributable
to the CFA claim. However, attorney's fees do not have to be
proportionate to the damages. "Although there is no requirement
that an award of attorneys' fees be proportionate to damages, 'the
amount of damages a plaintiff recovers is certainly relevant to
the amount of attorney's fees to be awarded . . . .'" Chattin v.
Cape May Greene, Inc., 243 N.J. Super. 590, 616 (App. Div. 1990)
(quoting Riverside v. Rivera, 477 U.S. 561, 574 (1986)).
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We vacate the award of attorney's fees because of these lack
of findings. We remand the issue of attorney's fees to the trial
court to make findings of fact and conclusions of law. In that
regard the court is to determine the amount of attorney's fees
that are reasonable and then whether the fees should be assessed
against Houran individually.
Affirmed in part; vacated and remanded in part. We do not
retain jurisdiction.
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