EASTERN CONCRETE MATERIALS, INC. VS. LIBERTY MUTUAL INSURANCE COMPANY (L-3241-17, HUDSON COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-3492-18T1
EASTERN CONCRETE
MATERIALS, INC.,
Plaintiff-Respondent,
v.
LIBERTY MUTUAL INSURANCE
COMPANY, AS SURETY OF KRE
HAMILTON URBAN RENEWAL
LLC, and INDUSTRIAL URBAN
CORPORATION,
Defendants,
and
ENGINEERED DEVICES
CORPORATION,
Defendant/Third-Party
Plaintiff,
v.
LIBERTY MUTUAL INSURANCE
COMPANY AS SURETY OF
CLAREMONT CONSTRUCTION
GROUP, and CLAREMONT
CONSTRUCTION GROUP, INC.,
Third-Party Defendants-
Appellants.
___________________________________
Argued March 2, 2020 – Decided April 24, 2020
Before Judges Sumners, Geiger and Natali.
On appeal from the Superior Court of New Jersey, Law
Division, Hudson County, Docket No. L-3241-17.
John H. Klock argued the cause for appellants (Gibbons
PC, attorneys; John H. Klock, of counsel and on the
briefs).
Craig W. Miller argued the cause for respondent.
PER CURIAM
In this construction lien case, third-party defendants Liberty Mutual as
surety for Claremont Construction Group and Claremont Construction Group,
Inc. (collectively Claremont) appeal from a March 20, 2019 judgment entered
following a jury verdict in favor of plaintiff Eastern Concrete Materials, Inc.
(Eastern). We affirm in part and reverse and remand in part.
We first identify the parties involved in this project to construct two
residential seventeen-story interconnected towers (the Marin Project) on
property owned by defendant KRE Hamilton Urban Renewal LLC (KRE) in
Jersey City. KRE hired Claremont as the general contractor for the Marin
A-3492-18T1
2
Project. Claremont subcontracted with defendant Industrial Urban Corporation
(IUC) to provide all cast-in place concrete work for the Marin Project. IUC, in
turn, engaged Eastern to supply the ready-mix concrete and third-party plaintiff
Engineered Devices Corporation (EDC) to supply material and equipment.
Prior to entering into the agreement with Claremont, IUC executed a
promissory note in the amount of $2,645,736.71 in favor of Eastern. The
Claremont-IUC contract was in the amount of $11,050,000. Under the terms of
the agreement, IUC was required to "pay for material, equipment and labor used
in connection with the performance of th[e] [s]ubcontract through the period
covered by previous payments received from [Claremont]."
As the work progressed, IUC submitted formal requests for payment to
Claremont. By January 2017, IUC had submitted twelve applications for
payment that totaled $11,175,337, including approved change orders, with
$11,007,667 worth of work reported as completed. In each application, IUC
certified that all work (materials and labor) had been paid through the previous
applications. Claremont paid IUC $10,445,167, retaining five percent
($552,500) in accordance with the subcontract. The purpose of the retainage
was to "cover costs of items to be completed or corrected by the
A-3492-18T1
3
[s]ubcontractor." No further payment applications were made by IUC to
Claremont.
On March 3, 2017, Claremont received an email from Eastern claiming it
was owed $791,188.32 for concrete delivered to the Marin Project. Claremont
alleged this was the first notice it received that Eastern had not been paid for the
past eight or nine months. Thereafter, the parties adopted a joint payment
procedure. Claremont also claimed IUC had not completed its work. There
were no further joint checks issued after a May 2017 meeting.
In May 2017, EDC filed a construction lien for $89,305.08 against KR E.
On June 22, 2017, Eastern filed a construction lien for $784,466.40 against KRE.
Liberty Mutual Insurance Company filed lien bonds as surety for Claremont. As
a result, the Marin Project property was released from the liens and KRE was
removed.1
In August 2017, Eastern filed this action against KRE and IUC, seeking
to enforce its construction liens. That same month, Eastern filed an amended
complaint that added EDC as a lienor party. EDC subsequently joined
Claremont as a third-party defendant.
1
KRE subsequently moved to dismiss plaintiff's amended complaint pursuant
to Rule 4:6-2(e). A December 4, 2017 order dismissed Eastern's complaint
against KRE without prejudice.
A-3492-18T1
4
The jury trial commenced on February 26, 2019. Before jury selection
began, EDC and Claremont settled their matter for $50,000 on its construction
lien claim of $89,305.08. Additionally, IUC announced it would not participate
in the trial and assigned its affirmative claims to Eastern without objection by
Claremont.
Claremont's defense theory was that IUC improperly diverted funds from
the Claremont-IUC contract to pay off the promissory note owed to Eastern.
At the close of the evidence, Claremont moved for judgment under Rule
4:40-1. The trial judge denied the motion, noting the lack of evidence that the
Claremont payments, deposited into IUC's operating account, "was the only
money available to pay their other obligations." Thus, the court found no
evidence that IUC did not use its own funds to pay the IUC-Eastern note. Based
on the testimony, the judge characterized Claremont's assertion as mere "belief
and suspicion." The judge permitted Claremont to
argue to the extent there's sufficient evidence in the
record that while Claremont was paying [IUC], [[IUC],
for whatever reason, wasn't paying Eastern, but beyond
that speculating on what they were . . . doing with the
money that they got from Claremont, . . . I don't think
there's enough evidence in the case . . . to permit you to
ask the jury to infer that they were diverting the funds.
A-3492-18T1
5
The judge concluded the evidence did not support Claremont's contention
that Eastern "failed to do their due diligence on the payments that they did get."
The jury returned a verdict against Claremont for the unpaid $781,611.40
worth of concrete Eastern supplied for the Marin Project. The jury found the
amount due to IUC on the subcontract, was $708,279, "consisting of the
$552,500 retainage plus $155,279 for completed and unpaid approved work and
purchased materials."
On March 20, 2019, the trial judge entered a judgment for $658,277.84
(the lien fund amount less the $50,000 settlement reached between Claremont
and EDC). On March 29, 2019, the judge entered a default judgment against
IUC, awarding Claremont $236,211 for work IUC failed to complete. This
appeal followed.
Claremont raises the following points for our consideration:
I. IDENTIFICATION OF THE SOURCE OF FUNDS
IS REQUIRED BY CRAFT2 AND UNDERLIES THE
RATIONALE FOR THE LIEN ACT.
A. THE COURT ERRED IN NOT ADMITTING
THE REQUEST FOR ADMISSIONS OF IUC.
B. CRAFT REQUIRES THE SUPPLIER OR
VENDOR TO ASCERTAIN THE SOURCE OF
2
Craft v. Stevenson Lumber Yard, Inc., 179 N.J. 56 (2004).
A-3492-18T1
6
FUNDS, BUT THE COURT ERRONEOUSLY
PLACED THE BURDEN ON CLAREMONT.
C. THE COURT ERRONEOUSLY DIRECTED
CLAREMONT NOT TO ARGUE COLLUSION
IN CLOSING.
II. THE LIEN ACT CALLS FOR [THE] COURT TO
DETERMINE THE LIEN FUND AND FURTHER
WHERE THE LIEN FUND ARISES FROM A
CONTRACT TO INTERPRET THE CONTRACT.
III. COURT ERRED IN ALLOWING [EASTERN] TO
ATTEMPT TO PROVE ALLEGED CLAIMS THAT
IUC DEFAULTED ON.
IV. CLAREMONT IS ENTITLED TO PARTICIPATE
IN THE LIEN FUND.
V. THE COURT ERRED IN MAKING THE
JUDGMENT PRO TANTO INSTEAD OF PRO RATA.
"A jury verdict is entitled to considerable deference and 'should not be
overthrown except upon the basis of a carefully reasoned and factually
supported (and articulated) determination, after canvassing the record and
weighing the evidence, that the continued viability of the judgment would
constitute a manifest denial of justice.'" Risko v. Thompson Muller Auto. Grp.,
Inc., 206 N.J. 506, 521 (2011) (quoting Baxter v. Fairmont Food Co., 74 N.J.
588, 597-98 (1977)).
A-3492-18T1
7
The primary purpose of the Construction Lien Law, N.J.S.A. 2A:44A-1 to
-38, is to secure payment to subcontractors and others "who provide work,
services, material, or equipment, pursuant to a written contract." NRG REMA
LLC v. Creative Envtl. Sols. Corp., 454 N.J. Super. 578, 587 (App. Div.)
(quoting Craft, 179 N.J. at 68), certifs. denied, 234 N.J. 577 and 235 N.J. 111(2018). The "secondary purpose is to 'protect owners' against paying more than
once for the same work or materials." L & W Supply Corp. v. DeSilva, 429 N.J.
Super. 179, 183 (App. Div. 2012) (quoting Labov Mech., Inc. v. E. Coast Power,
L.L.C., 377 N.J. Super. 240, 245 (App. Div. 2005)).
Under the Construction Lien Law, a lien fund exists if a property owner
has paid the general contractor less than the value of the work completed.
N.J.S.A. 2A:44A-9(a). A lien fund is limited to "the earned amount of the
contract between the owner and the contractor minus any payments made prior
to service of a copy of the lien claim." N.J.S.A. 2A:44A-9(b)(1). "[N]o lien
fund exists, if, at the time of service of a copy of the lien claim, the owner . . .
has fully paid the contractor for the work performed . . . ." N.J.S.A. 2A:44A -
9(d); see also Craft, 179 N.J. at 80 ("Because the lien fund can only be based on
what is actually owed, when nothing is owed there can be no fund.") A property
owner "should never be subject to liens in an amount greater than the amount
A-3492-18T1
8
unpaid by the owner to its prime contractor at the time the lien claim is filed."
Labov, 377 N.J. Super. at 240.
DENIAL OF ADMISSION OF REQUESTS FOR ADMISSION
Claremont moved to admit into evidence the request for admissions served
on IUC. In those requests, IUC admitted that it "never identified to [Eastern]
the source of the funds used for any payment to [Eastern] during the period
from" May 2016 to June 2017 and that "[Eastern] never requested IUC to
identify the source of funds in any payment by IUC to [Eastern]" duri ng that
period. Claremont sought to introduce the requests for admission in support of
its defense theory that IUC improperly diverted funds from the Claremont -IUC
subcontract to pay off the promissory note entered into between IUC and Eastern
for work unrelated to the Marin Project, and that Eastern turned a blind-eye.
The court excluded the requests for admission from evidence because it was not
referenced by any witness during trial.
Claremont argues the court erred in excluding the requests from evidence
because "those admissions conclusively established the facts without the need
for any additional testimony." We disagree.
We owe "substantial deference to the evidentiary rulings of a trial judge."
Fitzgerald v. Stanley Roberts, Inc., 186 N.J. 286, 319 (2006) (citing DeVito v.
A-3492-18T1
9
Sheeran, 165 N.J. 167, 198 (2000)). Our review "is limited to examining the
decision for abuse of discretion," Hisenaj v. Kuehner, 194 N.J. 6, 12 (2008),
"i.e., [that] there has been a clear error of judgment," Griffin v. City of East
Orange, 225 N.J. 400, 413 (2016) (alteration in original) (quoting State v.
Brown, 170 N.J. 138, 147 (2001)). "Thus, we will reverse an evidentiary ruling
only if it 'was so wide off the mark that a manifest denial of justice resulted.'"
Griffin, 225 N.J. at 413. (quoting Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480,
492 (1999)).
"Any matter admitted under [Rule 4:22] "is conclusively established
unless the court on motion permits withdrawal or amendment of the admission."
R. 4:22-2.
Here, Claremont served the requests for admissions on IUC, not Eastern.
Although IUC responded to the requests and admitted those facts, it defaulted
prior to trial. Claremont sought to establish the subject matter of the requests
by admitting them in evidence against Eastern in support of its collusion theory.
In that regard, Claremont maintains that IUC made nine monthly payments
totaling $880,878.90 to Eastern on account of the promissory note it executed
the month before IUC entered into the contract with Claremont. Claremont
contends IUC admitted that it never identified to Eastern the source of the funds
A-3492-18T1
10
used to make the promissory note payments and, pursuant to Rule 4:22-2, the
admissions conclusively established those facts without the need for any
additional testimony.
Claremont cites no authority for the proposition that responses to requests
for admissions by one party that later defaults are admissible at trial and binding
on a different party. We are aware of no such authority. Instead, we look to the
federal court precedent to resolve this issue. See L.W. ex rel. L.G. v. Toms
River Reg'l Sch. Bd. of Educ., 189 N.J. 381, 405 (2007) (noting that New Jersey
courts "may look to federal jurisprudence for guidance").
Rule 4:22-2 "follows Fed. R. Civ. P. 36(b) and clarifies the extent to which
a party is bound by his admission." Pressler & Verniero, Current N.J. Court
Rules, cmt. on R. 4:22-2 (2020) (emphasis added). In Kittrick v. GAF Corp.,
125 F.R.D. 103, 106 (M.D. Pa. 1989), the District Court concluded that a
plaintiff's admissions could not bind a third-party plaintiff. The court relied
upon Charles Alan Wright & Arthur Miller, Federal Practice and Procedure §
2264 at 741 (1970) ("It is only when the admission is offered against the party
who made it that it comes within the exception to the hearsay rule for admissions
of a party opponent." (footnote omitted)); id. at 746-47 ("The admission does
not bind the party who requested it. . . . Nor do the admissions of a party bind
A-3492-18T1
11
a coparty." (footnote omitted)). See also Riberglass, Inc. v. Techni-Glass Indus.,
811 F.2d 565, 566-67 (11th Cir. 1987); In re Leonetti, 28 B.R. 1003, 1009-10
(E.D. Pa. 1983), aff'd mem. sub nom. Earl Realty, Inc. v. Leonetti, 725 F.2d 667(3d Cir. 1983) (admission of one party is not binding upon a co-defendant);
United States v. Wheeler, 161 F. Supp. 193, 198 (W.D. Ark. 1958) (requests for
admission directed only to one party are not binding on another party). We find
these federal authorities persuasive.
Claremont's reliance on Massachusetts Mutual Life Insurance Co. v.
Manzo, 234 N.J. Super. 266 (App. Div. 1989), rev'd on other grounds, 122 N.J.
104 (1991), is misplaced. In Manzo, the court found admissible a requested
admission under Rule 4:22-2 where the party to whom the answer was directed
failed to respond. 234 N.J. Super. at 281. Unlike in this case, the request was
served on the very parties sought to be bound by their failure to respond. Here,
in contrast, the requests for admission were served upon IUC not Eastern.
While the requests for admission may have been admissible against IUC,
they are not admissible against Eastern, who did not make the admissions. It
would be fundamentally unfair to bind Eastern to IUC's responses to requests
for admissions. Eastern had the right to contest any material facts in dispute;
that right is not lost because a defaulted party (IUC) admitted those facts. We
A-3492-18T1
12
discern no abuse of discretion by the trial judge in excluding the requests for
admission served upon IUC from evidence. 3
BURDEN TO ASCERTAIN SOURCE OF FUNDS
Claremont argues Eastern has no valid lien claim because "it failed in its
duty to ascertain where the payments they received were actually coming from
in order to allocate the funds to the appropriate project," citing Craft.
In Craft, the Court held that "a supplier has a duty to determine which of
a contractor's projects is the source of its payment and to allocate the payment
accordingly." 179 N.J. at 63. The Court stated when "the creditor knows or
should know that a debtor is under an obligation to a third party to devote a
relevant payment to discharge a duty the debtor owes to the third party, the
payment must be applied to do so regardless of the debtor's instruction or lack
thereof." Id. at 74.
In L&W, we expanded on a supplier's obligation to determine the source
of payments made by purchasers of materials and properly allocate the funds.
We clarified that the standard established in Craft "imposes an affirmative duty
3
In any event, we view the alleged error as harmless. Charles Abate, Eastern's
Chief Financial Officer, testified that he did not know or attempt to ascertain the
source of the funds from which Eastern was paid.
A-3492-18T1
13
upon the supplier to allocate payments correctly" and thus "the supplier must
inquire about the source of payments it receives." L & W, 429 N.J. Super. at
190. We noted, however, that an inquiry "would serve no purpose if the
contractor has specifically instructed that its payments be allocated to particular
accounts and the supplier has no reason to believe that the allocation is
improper." Ibid. We explained: "The law should not generally require a
supplier to challenge a materials purchaser without reason to suspect improper
allocation of funds. To do so would impose on suppliers the burdensome and
awkward duty of presuming that their customers may be engaging in improper
conduct." Id. at 190-91. We held that it is only
when [a] purchaser of materials has not provided
specific, reliable instructions as to the allocation of its
payment, or when the circumstances are such that a
reasonable supplier should suspect the purchaser has
not used an owner's funds to pay for materials supplied
for that owner, [that] supplier must make further
inquiry and attempt to ascertain the source of the
payment funds so that it can allocate them to the correct
accounts.
[Id. at 192.]
Claremont maintains Eastern breached its duty to ascertain the source of
the funds received from IUC and to allocate those funds to work relati ng to the
Marin Project. It contends IUC utilized a general operating account, where
A-3492-18T1
14
Claremont's checks were deposited and from which IUC paid down its
promissory note to Eastern. The trial judge rejected Claremont's argument,
noting: there was no evidence that Claremont's checks were the only funds
available in IUC's account; Eastern kept an accounting record indicating the
IUC's funds were properly credited to work relating to the Marin Project; and
IUC was not required to have a separate bank accounts for different jobs. We
discern no error by the trial judge. The record supports her finding s.
CLAREMONT'S CLOSING ARGUMENT
Claremont contends "the court erred in directing [it] not to mention
collusion" during its summation. We disagree.
We recognize that "counsel is allowed broad latitude in summation."
Colucci v. Oppenheim, 326 N.J. Super. 166, 177 (App. Div. 1999) (citations
omitted). "That latitude is not without its limits, and 'counsel's comments must
be confined to the facts shown or reasonably suggested by the evidence
introduced during the course of the trial.'" Hayes v. Delamotte, 231 N.J. 373,
387 (2018) (quoting Colucci, 326 N.J. Super. at 177). "Further, counsel 'should
not misstate the evidence nor distort the factual picture.'" Ibid. (quoting Colucci,
326 N.J. Super. at 177). "A trial court must exclude from summation those
arguments that the evidence does not reasonably support." State v. Reddish, 181
A-3492-18T1
15
N.J. 553, 629 (2004) (citation omitted). The scope of summation "must not
exceed the 'four corners of the evidence,'" and "all reasonable inferences drawn
therefrom." State v. Loftin, 146 N.J. 295, 347 (1996) (citations omitted).
"The trial court has broad discretion in the conduct of the trial, including
the scope of counsel's summation." Litton Indus. v. IMO Indus., 200 N.J. 372,
392 (2009). "The abuse of discretion standard applies to the trial court's rulings
[concerning] counsel's summation." Id. at 392-93.
As discussed above, Claremont sought to argue IUC improperly diverted
funds from the Claremont-IUC subcontract to pay off its promissory note with
Eastern for work unrelated to the Marin Project, and that Eastern turned a blind -
eye. In directing Claremont not to mention collusion, the judge stated, "there's
[not] enough evidence in the case . . . to permit [Claremont] to ask the jury to
infer that [IUC] was diverting the funds." Based on her review of the record,
the judge found the defense theory was speculative. Absent evidence of
collusion, the judge properly precluded mention of collusion during defense
counsel's summation. We discern no abuse of discretion.
AMOUNT OF THE LIEN FUND
Claremont contends the trial judge erred by failing to instruct the jury that
the lien fund was limited to $552,500, and for "allowing the jury to consider
A-3492-18T1
16
purported unsigned change orders" in determining the lien fund amount.
Claremont asserts $552,500 (the five percent retainage) is the lien limit because
that was the amount due on the Claremont-IUC subcontract, IUC certified it paid
its suppliers, and no change orders were approved in accordance with the
subcontract. We concur.
Statutory interpretation involves questions of law and is reviewed de novo
by appellate courts. McGovern v. Rutgers, 211 N.J. 94, 108 (2012). "A trial
court's interpretation of the law and the legal consequences that flow from
established facts are not entitled to any special deference." Manalapan Realty,
L.P. v. Twp. Comm. of Twp. of Manalapan, 140 N.J. 366, 378 (1995). However,
fact findings by a judge are entitled to deference on appeal "when supported by
adequate, substantial and credible evidence" in the record. Rova Farms Resort,
Inc. v. Inv'rs Ins. Co. of Am., 65 N.J. 474, 484 (1974).
The lien fund is defined by N.J.S.A. 2A:44-2:
"Lien fund" means the pool of money from
which one or more lien claims may be paid.
The amount of the lien fund shall not
exceed the maximum amount for which an
owner can be liable. The amount of the lien
fund that attaches to the owner's interest in
the real property cannot exceed the lien
fund.
A-3492-18T1
17
In turn, N.J.S.A. 2A:44A-9 addresses the date that the lien fund is
calculated. It states, in relevant part:
If more than one lien claimant will participate in a lien
fund, the lien fund shall be established as of the date of
the first of the participating lien claims lodged for
record unless the earned amount of the contract
increases, in which case the lien fund shall be
calculated from the date of the increase.
[N.J.S.A. 2A:44A-9(f).]
Here, Eastern and EDC filed lien claims against the property and sought
to participate in the lien fund. EDC filed the first lien claim in May 2017; at
that time, the record indicates the only amount due to IUC from Claremont was
the retainage amount, $552,500. The court submitted the computation of the
lien claim to the jury. The jury interrogatories indicate the jury considered the
retainage amount along with other separate amounts for work allegedly
performed and unpaid. The jury ultimately found the lien fund consisted of the
$552,500 retainage in addition to $155,279 for "completed and unpaid approved
work and purchased materials."
Claremont argues the referenced change orders surfaced after May 2017
and are invalid because they were not executed in accordance with the
subcontract. Therefore, it did not constitute "earned money" that would increase
A-3492-18T1
18
the lien fund.4 We agree. The trial court did not interpret the contract or change
orders, leaving the issue for the jury to decide. An improperly executed change
order does not constitute "earned money" and should not have been considered
by the jury in the computation of the lien fund. N.J.S.A. 2A:44A-9(f).
Furthermore, the computation of the lien fund should have been
undertaken by the court. While N.J.S.A. 2A:44A-9 does not expressly state
whether the determination of a lien fund is for the court or jury, N.J.S.A.
2A:44A-23, which addresses payment of lien claims, indicates the court should
make such determination. "The Superior Court shall order the distribution of a
lien fund, after its calculation in accordance with [N.J.S.A. 2A:44A-9] . . . ."
N.J.S.A. 2A:44A-23(c). "[S]tatutes must be read in their entirety; each part or
section should be construed in connection with every other part or section to
provide a harmonious whole." Burnett v. County of Bergen, 198 N.J. 408, 421
(2009) (quoting Bedford v. Riello, 195 N.J. 210, 224 (2008)).
As we explained in NRG, "[t]he court must also calculate the lien fund for
each claimant." 454 N.J. Super. at 597. While the value of the work and
materials may be issues of fact, the "earned amount of the contract" is calculated
by the court. Id. at 597-98.
4
It is also unclear whether the work was, in fact, performed.
A-3492-18T1
19
The trial court erred by permitting the jury to determine the amount of the
lien fund. The record establishes that the amount of the lien fund was $552,500,
not $707,779. We reverse that aspect of the verdict and remand for the trial
court to enter a corrected judgment fixing the lien fund at $552,500.
LIEN FUND PARTICIPATION
We next address whether Claremont was entitled to participate in the lien
fund. Claremont argues the court erred in denying introduction of evidence of
its claim against IUC and that it is entitled to be a first-tier lien fund participant. 5
Claremont contends it "need not file a lien" to participate in the lien fund
"because as the owner of the bond it is an equitable lien holder." We are
unpersuaded by this argument.
N.J.S.A. 2A:44A-3 addresses entitlement to a construction lien. It states,
in relevant part:
Any contractor, subcontractor or supplier who provides
work, services, material or equipment pursuant to a
contract, shall be entitled to a lien for the value of the
work or services performed, or materials or equipment
furnished in accordance with the contract and based
upon the contract price, subject to [N.J.S.A. 2A:44A-6,
-9 and -10].
[N.J.S.A. 2A:44A-3(a).]
5
A first-tier claimant is "a claimant who is a contractor." N.J.S.A. 2A:44A-2.
A-3492-18T1
20
N.J.S.A. 2A:44A-9(b)(1) states, subject to certain exceptions, "in the case
of a first tier lien claimant, [the lien fund shall not exceed] the earned amount
of the contract between the owner and the contractor minus any payments made
prior to service of a copy of the lien claim."
Here, Claremont sought to introduce six "job work order" forms; the judge
excluded the documents. The judge reasoned that the only witness who
referenced those forms did not prepare the documents, did not have the
"expertise or qualifications" to testify about the document, and "has nothing to
do with the determination that back charges [are] warranted or should be
pursued." Thus, to the extent Claremont argues the judge abused her discretion
in excluding job work order forms, its argument lacks merit.
Moreover, the record does not suggest KRE owes Claremont any money
under their contract so as to entitle Claremont to be a first-tier claimant in the
lien fund. See N.J.S.A. 2A:44A-9(b)(1).
For these reasons, the judge properly determined that Claremont was not
a lien fund participant.
PRO RATA v. PRO TANTO REDUCTION OF THE LIEN FUND
Finally, Claremont argues the court erred by treating its settlement with
EDC as a pro tanto reduction in the lien fund. It contends the verdict "should
A-3492-18T1
21
be molded according to the 10.8 percent that EDC had, and the judgment should
be reduced pro rata and not pro tanto." We disagree.
N.J.S.A. 2A:44A-23 addresses the payment of lien claims. "The amount
due a lien claimant shall be paid only after the lien claim has been established
by judgment . . . . All lien claims established by judgment are valid claims that
shall be concurrent and shall be paid as provided in subsection c. of this section."
N.J.S.A. 2A:44A-23(a). N.J.S.A. 2A:44A-23(c), in turn, states that "[t]he
Superior Court shall order the distribution of a lien fund, after its calculation in
accordance with [N.J.S.A. 2A:44A-9] . . . ." It provides five manners in which
to the funds may be allocated. N.J.S.A. 2A:44A-23(c)(1)-(5). While all five
refer to pro rata allocation, this does not end our analysis.
Eastern's filed lien claim was for $784,661.40. The jury found the lien
fund was $708,277.84. The court entered a judgment against Claremont in the
amount of $658,277.84 after reducing the lien fund amount by the $50,000
settlement between Claremont and EDC. The court determined reduction of the
lien fund pro tanto was proper "because EDC settled their claim," and therefore
EDC's "lien claim was not 'established by judgment' as referenced in N.J.S.A.
2A:44A-23(c)." It also reasoned "there is no need to allocate on a pro rata basis
A-3492-18T1
22
as set forth in N.J.S.A. 2A:44A-23(c)(5)6" "because the combined amount of the
claims made does not exceed the amount of the lien fund established by the
jury."
While the statute does not refer to pro tanto allocations, it states that "[t]he
amount due a lien claimant shall be paid only after the lien claim has been
established by judgment." N.J.S.A. 2A:44A-23(a). "All lien claims established
by judgment are valid claims that shall be concurrent and shall be paid as
provided in in subsection c. of this section." Ibid. Because EDC and Claremont
settled their dispute, EDC's lien claim was not established by judgment.
Therefore, the court was not authorized to allocate the funds pro rata pursuant
to N.J.S.A. 2A:44A-23(c).
Since the lien fund was only $552,500, applying the $50,000 pro tanto rata
allocation, Eastern shall be paid $502,500 on its lien. Accordingly, the trial
6
N.J.S.A. 2A:44A-23(c)(5) provides:
If there are no first or second tier lien claimants, the lien
fund for third tier lien claimants shall be allocated in
amounts equal to that third tier's valid claims. If the
total of the claims of any group of third tier lien
claimants exceeds the lien fund for that group of
claimants as provided by [N.J.S.A. 2A:44A-9] the
allocations shall be reduced pro rata so as not to exceed
that lien fund.
A-3492-18T1
23
court shall enter an amended judgment in favor of Eastern reflecting that
amount.
In sum, we affirm the trial judge's rulings except we reverse the
calculation of the amount of the lien fund. We remand for entry of an amended
judgment fixing the lien fund at $552,500 and the amount of Eastern's lien at
$502,500, after applying the $50,000 pro tanto reduction.
Affirmed in part and reversed and remanded in part. We do not retain
jurisdiction.
A-3492-18T1
24