JD JAMES CONSTRUCTION, LLC VS. PDP LANDSCAPING, LLC (L-2404-16, BURLINGTON COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE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-4903-18T3
JD JAMES CONSTRUCTION,
LLC,
Plaintiff-Respondent,
v.
PDP LANDSCAPING, LLC,
Defendant,
and
BDP EXCAVATING, INC.,
PHILIP CALABRESE, JR.,
PHILIP CALABRESE, III, and
PERRY DORTONE,
Defendants-Appellants.
____________________________
Submitted August 25, 2020 – Decided September 18, 2020
Before Judges Alvarez and Gooden Brown.
On appeal from the Superior Court of New Jersey, Law
Division, Burlington County, Docket No. L-2404-16.
Steven A. Berkowitz & Associates, PC, attorneys for
appellants (Steven A. Berkowitz, on the briefs).
Hyland, Levin, Shapiro, LLP, attorneys for respondent
(Daniella Gordon, on the brief).
PER CURIAM
Defendants BDP Excavating, Inc. (BDP), Philip Calabrese, Jr., Philip
Calabrese, III, and Perry Dortone appeal from the June 27, 2019 judgment
entered in favor of plaintiff JD James Construction, LLC, following a bench
trial. Pursuant to the judgment, defendants were held jointly and severally liable
for $94,848.78, and assessed $10,000 in attorney's fees against BDP only. We
affirm.
We derive the following facts from the trial record, adopting by reference
the "factual conclusions reached by the trial court because we are mindful of,
and readily observe, the principle that our scope of review of a judgmen t in a
non-jury case is extremely limited." Nordstrom v. Lyon, 424 N.J. Super. 80, 86
(App. Div. 2012) (citing Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150,
169 (2011)).
On November 18, 2015, PDP Landscaping, LLC (PDP) entered into a
written agreement with Warfel Construction Company (the Warfel contract) for
PDP to perform work as a subcontractor for a commercial construction project
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in Maple Shade for which Warfel had been hired as the general contractor (the
project). Signatories on behalf of PDP for the Warfel contract included
Calabrese, III, as PDP's "Executive," his father, Calabrese, Jr., as the
"Subcontractor Safety Director," and Dortone, as the "Project Manager."
Thereafter PDP's principals, acting under the entity names of BDP and
"PDP Enterprises,"1 hired plaintiff to perform concrete construction work for the
project, by virtue of which the entities executed a written agreement dated
February 29, 2016 (the subcontract). The subcontract provided that plaintiff was
to install "[c]oncrete curbing[,] . . . concrete sidewalks[,] and associated concrete
flat work" with payment due to plaintiff "within [thirty] days of completion" of
the agreed upon work. Calabrese, Jr. and Dortone signed the subcontract on
behalf of defendants under the titles "President PDP" and "Vice [P]resident of
sales/project manager," respectively, and David Peluse signed on behalf of
plaintiff as its "President" and sole principal.
Throughout 2016, after completing work on the project as required under
the subcontract, plaintiff submitted three invoices to Dortone for payment as
1
Calabrese, Jr. testified that BDP, which had not done business since 2005, and
PDP both operated out of his house, shared the same phone number, and shared
the same e-mail address. He also acknowledged that BDP's Facebook page
posted pictures of PDP's jobs, including pictures of the project.
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follows: (1) June 10, 2016 for $55,568; (2) July 16, 2016 for $30,268; and (3)
August 17, 2016 for $49,588. The August 17 invoice, which was the final
invoice submitted upon completion of the work in full, indicated the total
amount of $135,424 was "past due." Peluse testified that none of the "invoices
[were] ever rejected" by defendants either orally or in writing, and no deficiency
in the performance of the work was ever reported. Nonetheless, Peluse never
received payment for any of the work performed. According to Peluse, when
the invoices were not timely paid, he "sent . . . emails to . . . Dortone" and "called
. . . Dortone with no results." He also "went to the site to personally talk to
[Calabrese, Jr.]" about the unpaid invoices. However, Calabrese, Jr. denied
having any conversations with Peluse regarding non-payment.
Under the Warfel contract, Warfel required PDP to "insure that all sub-
subcontractors . . . [were] paid all amounts due in connection with the
performance of th[e] subcontract." PDP also agreed to submit to Warfel with
their payment applications, claim releases and lien waivers certifying "that all
amounts owed in connection with performance of th[e] subcontract [were] paid."
Following receipt of plaintiff's first two invoices, PDP submitted corresponding
payment applications and accompanying lien waivers to Warfel on June 21 and
July 22, 2016. In those payment applications, in addition to listing various other
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incurred expenses, Dortone "certif[ied]" that the "[c]urb" work had been
performed.
Although PDP was paid over half a million dollars by Warfel over the
course of the project,2 including funds received in direct response to the payment
applications certifying that the curb work had been performed, it was undisputed
that PDP failed to make any payments to plaintiff and instead used the funds for
other business purposes. Peluse testified that when he told Calabrese, Jr. he had
"done everything . . . asked of [him] and . . . [had not] received a penny[,]"
Calabrese, Jr. responded that defendants "ha[d not] received any money" from
Warfel. Prior to this conversation, however, Peluse had spoken "to
representatives through Warfel" who confirmed "through scheduled
documentation" that PDP had "already billed for [plaintiff's] services." 3
According to Calabrese, Jr., PDP was not paid a balance of over $268,000
remaining on the Warfel contract, inferring that plaintiff's funds were included
in the unpaid balance.
2
The July 22, 2016 lien waiver specified that PDP had "been paid $568,986.89"
by Warfel for all work performed through June 1, 2016.
3
We note that the judge "indicate[d] for the record that [he] underst[oo]d the
hearsay aspect of [Peluse's testimony]" and remarked that these statements were
"just being offered as an explanation."
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On July 5, 2018, plaintiff filed an amended complaint against PDP and
BDP alleging breach of contract, unjust enrichment, and violation of the New
Jersey Prompt Payment Act, N.J.S.A. 2A:30A-1 to -2 (NJPPA). By seeking to
pierce each entity's corporate veil, the complaint also alleged fraud against
Calabrese, Jr., Calabrese, III, and Dortone, in their individual capacities as well
as against each entity. PDP filed for bankruptcy on August 31, 2018, in the
United States Bankruptcy Court for the Eastern District of Pennsylvania
(bankruptcy court), and plaintiff was listed among the creditors in PDP's
bankruptcy filing. Pursuant to the automatic stay instituted by the bankruptcy
court, plaintiff's breach of contract, unjust enrichment, and NJPPA claims
against defendants were no longer viable, leaving only the veil-piercing and
fraud claims.
Prior to trial, defendants moved to dismiss plaintiff's complaint on the
basis that PDP was an indispensable party for plaintiff to recover on the fraud
claim. Defendants averred that because plaintiff could no longer proceed against
PDP as a result of the bankruptcy proceedings, the remaining allegations against
its alter ego, BDP, and PDP's principals, who were officers common to both
entities, had to be dismissed. On April 30, 2019, the trial court denied
defendants' motion on the ground that PDP was "not an indispensable party to
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the litigation." The court determined plaintiff had sufficiently alleged that "the
principals of the business committed the tortious acts, and therefore the [fraud
and veil-piercing] claims [were] sustainable even without PDP."4
At the conclusion of the two-day bench trial, the judge found in favor of
plaintiff on the fraud count against BDP and against Calabrese, Jr., Calabrese,
III, and Dortone, individually. In a June 6, 2019 oral decision, the judge
determined the evidence presented justified piercing the corporate veil of BDP
to the extent that it was liable for PDP's fraud as an alter-ego entity. See
Interfaith Cmty. Org. v. Honeywell Int'l, Inc., 215 F. Supp. 2d 482, 497 (D.N.J.
2002) ("veil-piercing is proper when a subsidiary is an alter ego or
instrumentality of the parent corporation."). Specifically, the judge found that
"whatever judgment is entitled to be rendered against . . . [PDP] would be
entitled to be entered against [BDP]" because there was "no effort to distinguish
between the two corporations."
Further, the judge concluded that under the participation theory, "a
director or officer of a corporation is individually liable for his or her own
tortious acts even when those acts are committed in connection with or in
4
Following the entry of the June 27, 2019 judgment, PDP was dismissed from
the case without prejudice by consent order dated August 6, 2019.
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furtherance of the corporate business." See Saltiel v. GSI Consultants, Inc., 170
N.J. 297, 303-04 (2002) ("[T]he essence of the participation theory is that a
corporate officer can be held personally liable for a tort committed by the
corporation when he or she is sufficiently involved in the commission of the
tort."). See also State, Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 500
(1983) (finding that veil piercing is appropriate where an individual uses a
corporation as his or her alter ego and abuses the corporate form to defeat the
ends of justice, perpetuate a fraud, accomplish a crime, or otherwise ev ade the
law).
Next, the judge defined common law fraud
as an intentional misrepresentation of material existing
fact made by one person to another with knowledge of
its falsity and for the purpose of inducing the other
person to act and upon which the other person relies
with resulting injury or damage.
Fraud is also the intentional use of deceit, a trick
or some dishonest means to deprive another of his or
her money or property or legal right . . . . Also fraud is
the intentional deception to secure unfair or unlawful
gain.
In making fact-findings, the judge stated there was "an agreement between
Warfel and the defendant corporation," which imposed "obligations" on
defendants to "not . . . put anybody else's rights in jeopardy." Crediting Peluse's
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testimony over that of the defense witnesses, 5 the judge explained that "[t]here
was ongoing communication[]" by Peluse, who, "at all times [kept] . . .
defendants fully aware" of his performance under the terms of the sub-contract,
by virtue of which Calabrese, Jr., Calabrese, III, and Dortone "were fully aware
of [plaintiff's] progress and . . . what [work] was completed." As a result, the
judge determined that plaintiff's services under the sub-subcontract "were, in
fact, undertaken and . . . were, in fact, performed."
The judge further found that over the course of the subcontract, Warfel
paid PDP "about $560,000" and PDP "took the money, . . . used [it] for whatever
other business purposes they thought [were] appropriate, and . . . defrauded . . .
plaintiff." The judge expressly rejected defendants' claim that they intended to
pay plaintiff "when [they got] the other 200 plus thousand" from Warfel. The
judge determined that "[t]here [could] be no other conclusion" but that
"[e]verything that was done here was done with an effort to deny [plaintiff] fair
compensation."
In finding defendants liable for fraud, the judge reasoned that
[b]ased on accepted definitions of fraud, it . . . would
be just beyond the pale of any fair sense of
consideration that if I do things and I induce you either
5
In addition to Peluse, Calabrese Jr., Calabrese, III, and Dortone testified at the
trial.
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as inferentially as an inferred party or as a third party
beneficiary to do that which you would not have done
or I collect sums allegedly on your behalf and I deny
you use of them, it's more than a breach of con[tra]ct.
It is a breach of your fiduciary obligation. It is fraud.
It is the doing or not doing of an act which you shouldn't
or should have done. That's the bottom line here.
....
It would just stretch beyond all credibility a view
that . . . inferentially . . . plaintiff would have to wait
for the unpaid balance from Warfel to [PDP] in order to
qualify for payment when the individuals in this
corporation certainly knew on behalf of the corporation
as well as individually that . . . plaintiff was continuing
to perform work based on the inferred promise that they
would be paid. When money was received, they would
get it. That's the chain of supply here. Warfel . . . to
the defense corporation, then to plaintiff . . . , but that's
the acknowledged sense of what was going on.
And, clearly, giving Warfel releases of liens of
which at least $85,000 is represented by work done at
that juncture, acknowledged work done by . . . plaintiff
is just unconscionable. It's unconscionable as a matter
of equity, it's unconscionable as a matter of law. It
certainly creates an imbalance, an injustice, a degree of
fair play which this court or any court in this state
should not countenance. It is wrong.
In rejecting defendant's contention that any recovery by plaintiff was
restricted to "a breach of contract [claim,]" and that "the economic loss doctrine"
prevented plaintiff from "convert[ing] a breach of contract claim into a tort" in
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the absence of any "indication of fraud extrinsic to the performance of the
contract," the judge explained:
So I do find that all of these gentlemen
represented themselves to be officials of the
corporation and that was understood that they held
themselves out as being part and parcel of what was
going on here, and to come before the [c]ourt and say,
. . . there was a contract, it's just a plain old breach of
contract, I have to say to you . . . that's pure nonsense.
This was more than all of that.
And, therefore, I'm entering judgment for the
reasons that I've indicated because under just pure
fraud, ongoing fraud, fraud in the inducement, . . . fraud
in the receipt of payment, fraud in the ability not to pay,
misuse of the money that [defendants] inferred they
would [pay to plaintiff], at least it would fit the
definition in my view . . . that at the very least, . . .
plaintiff is also a third party beneficiary of [PDP's]
contract [with Warfel].[6]
....
6
See N.J.S.A. 2A:15-2 ("A person for whose benefit a contract is made, either
simple or sealed, may sue thereon in any court . . . although the consideration of
the contract did not move from him."); Broadway Maint. Corp. v. Rutgers, State
Univ., 90 N.J. 253, 259-60 (1982) ("The principle that determines the existence
of a third party beneficiary status focuses on whether the parties to the contract
intended others to benefit from the existence of the contract, or whether the
benefit so derived arises merely as an unintended incident of the agreement[,]"
and, depending on the facts, "construction contracts [may] afford a third party a
right to sue.").
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[P]laintiff is more than an incidental beneficiary.
He is the person for whom these releases and this
money is received in part as well as others.
Relying on the June 21 and July 22, 2016 payment applications that PDP
submitted to Warfel certifying that curb work had been performed, as well as
plaintiff's June 10 and July 16, 2016 invoices, the judge determined that plaintiff
sustained its burden of proof to find defendants jointly and severally liable in
the amount of $85,836—the amount owed to plaintiff after its second invoice7—
plus interest later calculated at $9012.78, as well as $10,000 in attorney's fees
assessed against BDP only. On June 27, 2019, the judge entered a
memorializing order of judgment, and this appeal followed.
On appeal, defendants argue that the judge erred in entering judgment
against defendants on the fraud claim because plaintiff "failed to prove at least
two of the five necessary elements of that tort[,]" and, "[e]qually important," the
"economic loss doctrine precludes [plaintiff's] fraud claim."
We review defendants' arguments applying a limited standard of review:
Final determinations made by the trial court sitting in a
non-jury case are subject to a limited and well-
established scope of review: "we do not disturb the
factual findings and legal conclusions of the trial judge
7
The judge determined that plaintiff's final August 17, 2016 invoice "[was] far
beyond the date" of defendants' "certifications . . . to Warfel" and was therefore
not recoverable.
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unless we are convinced that they are so manifestly
unsupported by or inconsistent with the competent,
relevant and reasonably credible evidence as to offend
the interests of justice."
[Seidman, 205 N.J. at 169 (quoting In re Tr. Created By
Agreement Dated Dec. 20, 1961, ex rel. Johnson, 194
N.J. 276, 284 (2008)).]
"Deference is especially appropriate when the evidence is largely
testimonial and involves questions of credibility." Ibid. (quoting Cesare v.
Cesare, 154 N.J. 394, 412 (1998)); see also N.J. Dep't of Envtl. Prot. v. Exxon
Mobil Corp., 453 N.J. Super. 272, 306 (App. Div. 2018) (observing that a judge
in a non-jury trial has the best "opportunity to hear and see the witnesses and to
get a 'feel' for the case that the reviewing court [cannot] enjoy" (alteration in
original) (quoting Twp. of W. Windsor v. Nierenberg, 150 N.J. 111, 132
(1997))). Informed by this deferential standard of review, we turn to the
substantive principles governing this appeal.
In order to establish the tort of fraudulent inducement, a plaintiff must
prove a misrepresentation of material fact, knowledge or belief by the defendant
of its falsity, intent that the other party rely on it, and detrimental reliance
thereon by the other party. Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) (citing
Jewish Center of Sussex County v. Whale, 86 N.J. 619, 625 (1981)). "The
representation may consist of a present intention to act or not act in the future."
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Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395-96 (App.
Div. 1989). See Van Dam Egg Co. v. Allendale Farms, Inc., 199 N.J. Super.
452, 457 (App. Div. 1985) ("A promise to pay in the future is fraudulent if there
is no present intent ever to do so.").
This intention may be derived from circumstantial
evidence such as: the recklessness or implausibility of
the statement in light of later events; showing that the
promisor's intentions were dependent upon
contingencies known only to the promisor; or simply
from evidence indicating that the promisor would not
or could not fulfill the promise.
[DiDomenico, 236 N.J. Super. at 396 (citing Ocean
Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super.
369, 381 (App. Div. 1960)).]
Fraud in the inducement does not differ materially from common law
fraud, as it provides a cognizable basis for equitable relief in the event a false
promise induced reliance. See Lipsit v. Leonard, 64 N.J. 276, 283-84 (1974).
However, "fraud is never presumed, but must be established by clear and
convincing evidence." Weil v. Express Container Corp., 360 N.J. Super. 599,
613 (App. Div. 2003) (citing Albright v. Burns, 206 N.J. Super. 625, 636 (App.
Div. 1986)).
Under the economic loss doctrine, a plaintiff is prohibited "from
recovering in tort economic losses to which their entitlement only flows from
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contract." Bracco Diagnostics, Inc. v. Bergen Brunswig Drug Co., 226 F. Supp.
2d 557, 562 (D.N.J. 2002) (quoting Duquesne Light Co. v. Westinghouse Elec.
Co., 6 F.3d 604, 618 (3d Cir. 1995)). The doctrine precludes a tort remedy in
"a contractual relationship unless the breaching party owes an independent duty
imposed by law." Saltiel, 170 N.J. at 316-17 (holding that "the existence of
duties that are specifically imposed by law in New Jersey . . . can be enforced
separately and apart from contractual obligations."). In essence, the doctrine
"functions to eliminate recovery on 'a contract claim in tort clothing.'" G&F
Graphic Servs. v. Graphic Innovators, Inc., 18 F. Supp. 3d 583, 588-89 (D.N.J.
2014) (quoting SRC Constr. Corp. v. Atl. City Hous. Auth., 935 F. Supp. 2d
796, 801 (D.N.J. 2013)); see also New Mea Constr. Corp. v. Harper, 203 N.J.
Super. 486, 494 (App. Div. 1985) (finding that defendant's failure to use
construction material specified in the parties' contract was a type of conduct "not
ordinarily alleged in a tort case," and could not give rise to a separate claim by
"[m]erely nominally casting [the] cause of action" as a tort claim).
While New Jersey courts have applied the economic loss doctrine in the
strict liability and negligence contexts, see, e.g., Alloway v. Gen. Marine Indus.,
L.P., 149 N.J. 620 (1997), Spring Motors Distribs., Inc. v. Ford Motor Co., 98
N.J. 555 (1985), "[n]o New Jersey Supreme Court case [has held] that a fraud
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claim cannot be maintained if based on the same underlying facts as a contract
claim." Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 144 (3d Cir. 2001). In
fact, the law on whether a plaintiff may recover for purely economic loss on
concurrent fraud and contract claims has arisen predominantly out of the New
Jersey federal courts and other jurisdictions, not our state courts. See Florian
Greenhouse v. Cardinal IG Corp., 11 F. Supp. 2d 521, 528 (D.N.J. 1998)
("Confronted with the 'morass' of case law in this area, the Third Circuit
commented that 'the continuing validity of fraud claims in cases involving
frustrated economic expectations under New Jersey law is very complex and
troublesome.'" (quoting Vanguard Telecomms., Inc. v. S. New England Tel. Co.,
900 F.2d 645, 653 (3d Cir. 1990))).
When New Jersey federal courts "have permitted a fraud claim to proceed
with a breach of contract claim" as an exception to the economic loss doctrine,
such cases "generally appear to have involved a fraud in the inducement of a
contract" as opposed to "fraud in the performance of a contract . . . ." G&F
Graphic Servs., 18 F. Supp. 3d at 593 (quoting Bracco Diagnostics, Inc., 226 F.
Supp. 2d at 563). As a result, "the fraud in the inducement exception to the
economic loss doctrine" has emerged and has been consistently applied by New
Jersey federal courts to sustain fraud claims in breach of contract cases. Ibid.
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See Florian, 11 F. Supp. 2d at 527 (citing multiple "New Jersey federal . . . cases
[that] have permitted fraud claims to stand in breach of contract cases.").
"The distinction between fraud in the inducement and fraud in the
performance of a contract" is "the conceptual distinction between a
misrepresentation of a statement of intent at the time of contracting, which then
induces detrimental reliance on the part of the promisee, and the subsequent
failure of the promisor to do what he has promised." Bracco Diagnostics, Inc.,
226 F. Supp. 2d at 563 (quoting LoBosco v. Kure Enq'q Ltd., 891 F. Supp. 1020,
1032 (D.N.J. 1995)). In "recognizing the . . . distinction," the "'critical issue'
with regard to economic loss 'is whether the allegedly tortious conduct is
extraneous to the contract.'" Id. at 564 (internal citations omitted). See also
Spring Motors, 98 N.J. at 578-79 (dismissing tort-based claims because the
plaintiff merely alleged that the defendant did not fulfill its contractual
obligations).
Here, the judge determined that defendants' unlawful conduct extended
far beyond mere failure to perform under the sub-contract. The judge
specifically found defendants liable for "fraud in the receipt of payment, fraud
in the ability not to pay, [and] misuse of the money" Warfel paid to PDP that
should have flowed in part to plaintiff. The judge also explicitly found
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defendants liable for "fraud in the inducement" in the formation of the sub-
subcontract with plaintiff, thereby rendering the economic loss doctrine
inapplicable to bar plaintiff's fraud claim even under federal standards.
Contrary to defendants' contention, among the various fraud theories
relied upon by the judge, the judge specifically found fraud in the inducement
based on defendants contracting with plaintiff to perform work for which there
was no intention to pay. The judge's decision in this regard was undoubtedly
informed by the fact that Calabrese, Jr. admitted that neither PDP Enterprises
nor BDP, the contracting entities under the sub-contract with plaintiff, were
actively operating in 2016 or had any involvement with the Warfel project.
Further, as the judge noted, both Calabrese, Jr. and Calabrese, III admitted
"jump[ing] from corporation to corporation" under arguably suspicious
circumstances when they contracted with plaintiff.
While "[a] promise to pay in the future is fraudulent if there is no present
intent ever to do so[,]" whether the promisee did rely and, if so, whether the
reliance was justifiable "is a fact question, in every case in which it is
disputed[.]" Van Dam Egg Co., 199 N.J. Super. at 457-58. In reviewing the
judge's fact findings, "[w]e do not weigh the evidence, assess the credibility of
witnesses, or make conclusions about the evidence." Mountain Hill, LLC v.
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Twp. of Middletown, 399 N.J. Super. 486, 498 (App. Div. 2008) (alteration in
original) (quoting State v. Barone, 147 N.J. 599, 615 (1997)). While "our review
of the sufficiency of the facts to satisfy an applicable legal standard is a question
of law" that is subject to "plenary" review, id. at 498-99, "[r]eversal is reserved
only for those circumstances when we determine the factual findings and legal
conclusions of the trial judge went 'so wide of the mark that a mistake must have
been made.'" Llewelyn v. Shewchuk, 440 N.J. Super. 207, 214 (App. Div. 2015)
(quoting N.J. Div. of Youth & Family Servs. v. M.M., 189 N.J. 261, 279 (2007)).
Here, defendants have demonstrated neither manifest error nor mistake.
The judge rendered a comprehensive and considered opinion, and, given
defendants' conduct, a finding of fraud in the inducement was certainly
permissible and supported by the credible evidence in the record.
Affirmed.
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