Jefferson Tp. v. Toro Development Corp.
| Decision Date | 14 March 1985 |
| Citation | 489 A.2d 1212,199 N.J.Super. 459 |
| Parties | TOWNSHIP OF JEFFERSON, a Municipal Corporation of the State of New Jersey, Plaintiff-Appellant, v. TORO DEVELOPMENT CORPORATION, a Corporation of the State of New Jersey, Defendant-Respondent. |
| Court | New Jersey Superior Court — Appellate Division |
Lawrence P. Cohen, Succasunna, for plaintiff-appellant (Cohen & Kron, Succasunna, attorneys; Lawrence P. Cohen, Succasunna, of counsel and on brief).
Steven E. Brawer, Clifton, for defendant-respondent (Brawer & Green, Clifton, attorneys; Steven E. Brawer, Clifton, of counsel, Marc E. Alterman, Clifton, on brief).
Before Judges McELROY and DREIER.
The opinion of the court was delivered by
DREIER, J.A.D.
Plaintiff appeals from a judgment entered by the trial judge in the Chancery Division confirming an arbitration award against plaintiff. The total payments under the contract, as initially amended, were $584,252.75. The one acknowledged change order removing certain pavement items reduced the final contract price to $467,247.35. Defendant claimed entitlement to $395,403.58 in additional compensation described in detail in the brief and written summation presented to the arbitrators. The Township in its letter brief to the arbitrators claimed liquidated damages and additional costs and offsets in the total amount of $129,567.97. After 19 days of hearings, the arbitrators, having the benefit of the parties' written briefs and summations, made a net award to defendant in the amount of $280,000. This award was confirmed by the trial court in an order dated May 1, 1984.
The trial judge in his oral opinion of February 24, 1984 expressed dismay over the lack of factual findings by the arbitrators, but noted that the arbitrators were under no statutory or regulatory direction to provide such information at the time of their award. The trial judge found specifically that the award was "within the broad parameters of what one might expect as a sensible result from this kind of a factual context." Although the contractual language might have indicated a different result from that reached by the arbitrators, the trial court found that the arbitrators could have determined that the contract had been modified by the conduct of the parties.
The trial judge was correct in his conclusion that arbitrators are not required to articulate the reasons for their award. N.J.S.A. 2A:24-7 requires only that the award be made in writing. An award may not be vacated merely because "the arbitrators gave no details in the award." Tave Construction Co. Inc. v. Wiesenfeld, 82 N.J.Super. 562, 566, 198 A.2d 486 (Ch.Div.1964), aff'd o.b. 90 N.J.Super. 244, 217 A.2d 140 (App.Div.1966). Judge Stanton applied the correct standard for examining an unexplained arbitration award as enunciated in Fred W. Donnelly, Inc. v. Unit One Lawrence, 171 N.J.Super. 30, 33-34, 407 A.2d 1251 (App.Div.1979), certif. den. 82 N.J. 298, 412 A.2d 803 (1980).
In Donnelly, the issue was whether a contractor had improperly constructed a roof. The arbitrator awarded $41,160 against the contractor, without findings of fact. The contractor attempted to vacate the award, claiming that the arbitrator had ignored the parties' written contract, a lease. On appeal from the Law Division's confirmation of the arbitration award, the contractor complained that the Law Division should have ordered the arbitrator to make factual findings. The Appellate Division first found that it had the power under certain circumstances to order an arbitrator to set forth factual findings and legal conclusions, citing Kearny PBA Local # 21 v. Kearny, 81 N.J. 208, 219-220, 405 A.2d 393 (1979). It noted, however, that in close cases the court should follow a "policy of indulgent treatment of arbitrators and their awards." Donnelly, 171 N.J.Super. at 33, 407 A.2d 1251 (quoting LaStella v. Garcia Estates, 66 N.J. 297, 303, 331 A.2d 1 (1975)). The court further stated that before a court may consider extrinsic evidence affecting an arbitration award the
[c]ourt must first conclude that the potential for the arbitrator's error is greater than the potential for a correct result. Where a court finds legal and factual conclusions that could sustain the award, there is no justification for examination of extrinsic evidence and no justification to compel an arbitrator, who is not otherwise required, to set forth his findings of fact and conclusions of law. Kearny PBA Local # 21 v. Kearny, 81 N.J. at 219-220 . [Id., 171 N.J.Super., at 33-34, 407 A.2d 1251].
The Donnelly court found that the arbitrator there could have interpreted the lease to show that the parties did not intend to exclude damages caused by defendant, and thus the award could be considered unimpeachable.
The trial court in reviewing the arbitrator's award in this case analyzed the parties' agreement and found that notwithstanding the requirement for change orders in the contract,
[p]arties more often than not do not follow the contractual provisions with respect to change orders and modifications of the job once the job has been undertaken ... [G]iven the gross circumstances of this case, it is fairly arguable that the result achieved in this case is a sensible result. Experience is such that we know that it is implicit in the circumstances that there could have been a course of conduct which amply justified departure from the strict terms of the contract....
We have reviewed the trial judge's decision, bearing in mind that "[a]rbitration is viewed favorably by our courts, and every doubt is resolved in favor of the validity of the award." Ukrainian Nat. Urban Renewal v. Muscarelle, Inc., 151 N.J.Super. 386, 396, 376 A.2d 1299 (App.Div.), certif. den., 75 N.J. 529, 384 A.2d 509 (1977). We may vacate an arbitration award only if we find that one of the grounds set forth in N.J.S.A. 2A:24-8 applies:
a. Where the award was procured by corruption, fraud or undue means;
b. Where there was either evident partiality or corruption in the arbitrators, or any thereof;
c. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause being shown therefor, or in refusing to hear evidence, pertinent and material to the controversy, or of any other misbehaviors prejudicial to the rights of any party;
d. Where the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made.
When an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators.
Plaintiff urges that "undue means" in subparagraph a. and the exceeding of powers noted in subparagraph d. provide two bases to vacate this award. We do not know which of defendant's claims or plaintiff's counterclaims for credits were accepted or rejected by the arbitrators; we know only that the net claim of defendant for $280,000 was allowed.
Given the dollar amount of the claims we realize that the arbitrators of necessity allowed a substantial portion of defendant's claims for additional work necessitated by unanticipated subsurface conditions. It was acknowledged that the parties did not follow the procedure set forth in the agreement to resolve these differences. Plaintiff claims that the conditions were not brought to its attention until most of the alleged additional work had been performed by defendant. Defendant contends that it could not follow the change order procedure since it was informed early in the job that the mortgagee would approve no change orders and that plaintiff, therefore, would not sign such orders.
Whether the arbitrators determined that plaintiff was estopped from insisting on the change order procedure, whether defendant was entitled to be paid for the reasonable value of the additional work on a quantum meruit basis and not pursuant to the contract, or whether for some other reason the parties' conduct authorized an avoidance of the contract procedure, we do not and cannot know. We do know that section 17 of the contract set forth a procedure for the processing of change orders. Once the subsurface conditions had been called to plaintiff's attention it had an obligation to investigate and to effect "an equitable adjustment." The parties had provided further that the contract itself at such point "shall be modified by a CHANGE ORDER." If, notwithstanding this contract condition, plaintiff had informed defendant that no change orders, even those absolutely required, would be signed, plaintiff could have been found by the arbitrators to have been barred by estoppel, waiver or unclean hands from demanding strict compliance with the change order portions of the contract.
Plaintiff also argues that the amounts found due to defendant should have been limited by the unit price provisions of the contract. We note, however, that the value of the additional work is a subject uniquely suited to arbitration where, as here, the arbitrators have been specifically chosen because of their background and experience in the industry.
Plaintiff's strongest point is that any amendment requiring a substantial increase in the amount it must pay could not legally have been made without a change order under the provisions of the public bidding statute and the regulations of the Local Finance Board and the Division of Local Government Services. Under N.J.S.A. 52:27BB-32 the Local Finance Board has adopted mandatory procedures to be followed by all local units (including plaintiff) under the Local Government Supervision Act of 1947, amended ( N.J.S.A. 52:27BB-1 et seq.), and the Local Public Contracts Law ( N.J.S.A. 40A:11-1 et seq.). These regulations, effective April 15, 1977, appear at N.J.A.C. 5:30-14.4. Section (b)1 defines a change order as:
A lawfully prepared and properly authorized document which directs...
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