Brick Tp. Municipal Utilities Authority v. Diversified R. B. & T. Const. Co., Inc.

• Decision Date: 11 December 1979
• Citation: 171 N.J.Super. 397,409 A.2d 806
• Parties: BRICK TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, a body politic organized under the laws of the State of New Jersey, Plaintiff-Respondent, v. DIVERSIFIED R. B. & T. CONSTRUCTION CO., INC., a New Jersey Corporation, Defendant-Appellant, v. AMERICAN ARBITRATION ASS'N, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 397

171 N.J.Super. 397

409 A.2d 806

BRICK TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, a body politic

organized under the laws of the State of New

Jersey, Plaintiff-Respondent, v. DIVERSIFIED R. B. & T. CONSTRUCTION CO., INC., a New Jersey

Corporation, Defendant-Appellant, v. AMERICAN ARBITRATION ASS'N, Defendant-Respondent.

Superior Court of New Jersey, Appellate Division.

Argued Nov. 27, 1979.

Decided Dec. 11, 1979.

Thomas S. Cosma, Newark, for defendant-appellant (Connell, Foley & Geiser, Newark, attorneys; Theodore W. Geiser, Newark, of counsel).

Michael E. Cunningham, Brick Town, for plaintiff-respondent Brick Tp. Municipal Utilities Authority (Starkey, Kelly, Cunningham & Blaney, Brick Town, attorneys).

Defendant-respondent American Arbitration Ass'n did not file brief.

Before Judges LORA, ANTELL and PRESSLER.

The opinion of the court was delivered by

LORA, P. J. A. D.

Diversified R. B. & T. Construction Co., Inc. (Diversified) appeals from a final judgment entered in the Chancery Division permanently enjoining and restraining it from arbitrating a claim against Brick Township Municipal Utilities Authority (BTMUA) for additional costs for realignment of an effluent line on a construction project because its demand for arbitration was filed out of time.

BTMUA and Diversified entered into a contract on March 22, 1976 for the construction of a pumping station. A dispute arose as to additional compensation which Diversified claimed it was owed as a result of alleged dewatering problems and misalignment of piping on the project site.

The contract, apparently due to its length, was not made an exhibit but certain clauses of the contract were before the trial court. Article III provides that such claims be submitted, in the first instance, to the engineer for his approval. Accordingly, Diversified, by letters dated April 24, 1978 and May 22, 1978, requested BTMUA's engineers, Fellows, Read and Weber (FRW), to pass on the aforesaid claims.

FRW, by letters dated May 1, 1978 and May 25, 1978, rejected Diversified's claims. On July 10, 1978 Diversified mailed a petition and a demand for arbitration to the American Arbitration Association (AAA), which had been designated by the contract for arbitration.

Article III further provides that either the owner or the contractor may demand arbitration with respect to any claim, dispute or other matter that has been referred to the engineer within 30 days of the engineer's written decision thereon.

The trial judge found that the demand for arbitration had been untimely made and that there was no issue of estoppel in light of the particular facts and circumstances of the case.

Diversified contended below, as it does on appeal, that the conduct of BTMUA amounted to a waiver of the 30 day contractual limitation period for arbitration; that BTMUA was estopped from raising the contractual provision as a defense and that the trial judge applied an incorrect standard in determining that there was no basis to invoke the equitable doctrine of estoppel.

In support of its position, Diversified asserts that it was in constant communication with BTMUA during the period from July 11, 1978, the date of the filing of the demand for arbitration, and September 12, 1978, the date upon which the arbitrators first convened. It also argues that the letter received from the engineer allegedly rejecting Diversified's claims was vague and ambiguous and did not constitute a rejection of the claim here involved. Furthermore, Diversified states that BTMUA's failure to review the contract during that period and its asserting the clause as a defense nearly a month later when it became aware of the 30-day clause in the contract, resulted in Diversified's expending engineering fees in preparation for the arbitration hearing.

The threshold question is whether the engineer's letter was an unconditional and unequivocal rejection of Diversified's claim, thereby triggering the 30-day contractual limitation period. The trial judge had no difficulty in finding the May 25, 1978 letter unambiguous and on its face a written final determination of the claim. We agree and perceive no merit in Diversified's contention that paragraph three of the letter, which stated "a settlement of this claim along the lines of the attached estimate is recommended," converted what is otherwise a final decision into a mere proposal. Obviously, the recommendation referred only to the manner in which the amount due under Item 1 would be allowed but it did not affect the finality of the disallowance of Item 2 which is the subject of this complaint.

That Diversified itself so read the letter is indicated by the fact that its only response thereto was its filing of the demand for arbitration a month and a half later. Clearly, if it had regarded the May 25 letter as a stage in negotiation, it would have responded in kind. Its demand for arbitration demonstrates that it saw no reason for further negotiation and regarded the May 25 letter as final.

The arbitration provision of the contract provided that "no demand for arbitration shall be made later than thirty (30) days after the date which the engineer rendered his written decision . . . ," and "the failure to demand arbitration within said thirty (30) day period shall result in the engineer's decision being final and binding. . . . "

An arbitration agreement is to be construed according to the usual methods of contract interpretation whereby a mutual, reasonable and meaningful design is sought from the language used by the parties and maximum effect is given to their intention. Keppler v. Terhune, 88 N.J.Super. 455, 462, 212 A.2d 683 (App.Div.1965); Wm. J. Burns, etc., Inc. v. N. J. Guards Union, Inc., 64 N.J.Super. 301, 307, 165 A.2d 844 (App.Div.1960). While public policy favors the arbitration process, and contracts should be read liberally to find arbitrability if reasonably possible, there survives the principle that the authority of the arbitrators is derived from the mutual assent of the parties to the terms of submission; the parties are bound only to the extent, and in the manner, and under the circumstances pointed out in their agreement, and no further. Goerke Kirch Co. v. Goerke Kirch Holding Co., 118 N.J.Eq. 1, 4-5, 176 A. 902 (E. & A.1934). The parties have a right to stand upon the precise terms of their contract. Nor do we have a right to rewrite the contract merely because one might conclude that it might well have been functionally desirable to draft it differently. Moreira Constr. Co., Inc. v. Wayne Tp., 98 N.J.Super. 570, 576, 238 A.2d 185 (App.Div.1968).

It is well settled that where a contract provides that a demand for arbitration must be filed within a stated time and the party desiring arbitration permits the agreed period to pass without making demand, he waives his right to arbitration. See, generally, Jordan v. Friedman, 72 Cal.App.2d 726, 165 P.2d 728, 729 (D.Ct.App.1946) (holding that where a general contractor who did not file a demand for arbitration until three months after stated time had lapsed, waived his right to arbitration); Broadway-Fortieth St. Corp. v. President and Directors of Manhattan Co., 296 N.Y. 165, 71 N.E.2d 451, 452 (Ct.App.1947) (holding that where no steps initiating arbitration where taken until after expiration of the dates specified in the agreement and there was no extension of time and no waiver, no valid award could be made and petitioner was not entitled to an order directing arbitration); Dickens v. Pennsylvania Turnpike Comm'n, 351 Pa. 252, 40 A.2d 421, 423 (Sup.Ct.1945) (holding that where a provision in a turnpike construction contract that reference of question in dispute must be made within 30 days after final quantities were determined, was condition precedent to arbitration, and where dispute was not submitted within 30 days, contractor was not entitled to arbitration); Reynolds Jamaica Mines v. La Societe Navale Caennaise, 239 F.2d 689, 694 (4 Cir. 1956) (holding that where the parties had agreed that all disputes would be...