Torcon, Inc. v. Alexian Bros. Hosp.

• Decision Date: 26 July 1985
• Citation: 205 N.J.Super. 428,501 A.2d 182
• Parties: TORCON, INC., Plaintiff, v. ALEXIAN BROTHERS HOSPITAL, A Corporation of the State of New Jersey, and Gerard Joseph Oakley, Defendants.
• Court: New Jersey Superior Court

Page 428

205 N.J.Super. 428

501 A.2d 182

TORCON, INC., Plaintiff, v. ALEXIAN BROTHERS HOSPITAL, A Corporation of the State of New Jersey, and Gerard Joseph Oakley, Defendants.

Superior Court of New Jersey, Chancery Division Union County.

Decided July 26, 1985.

Robert S. Peckar, Hackensack, for plaintiff (Peckar & Abramson, Hackensack, attorneys)

A. Dennis Terrell, Morristown, for Alexian Bros. Hosp. (Shanley & Fisher, P.C., Morristown, attorneys).

David Suarez, Jersey City, for Gerard Joseph Oakley (Suarez & Suarez, Jersey City, attorneys).

OPINION

WERTHEIMER, J.S.C.

This matter was heard on remand from the Appellate Division to determine, after a hearing pursuant to Lopez v. Swyer, 62 N.J. 267, 300 A.2d 563 (1973): (1) the applicability of the "discovery rule" to the facts of this case, and (2) if applicable, to rule on the timeliness vel non of a Demand for Arbitration.

On December 7, 1981 Alexian Brothers filed a Demand for Arbitration with respect to two contracts. One contract required plaintiff, Torcon, Inc., to perform construction work for the hospital and the other involved Oakley as architect on the project. Each contract contained an arbitration clause which provided that no Demand for Arbitration could be made if legal proceedings would have been barred by the applicable Statute of Limitations.

In response to the Demand for Arbitration, Torcon filed a Verified Complaint and Order to Show Cause to enjoin the arbitration on the grounds that the Demand for Arbitration was untimely and, therefore, barred by virtue of the aforementioned contract. The Chancery Division, Union County, held that N.J.S.A. 2A:14-1.1 (the ten year Statute of Limitations) controlled and, therefore, the Demand for Arbitration was timely. The Appellate Division reversed holding:

Though N.J.S.A. 2A:14-1.1 may sometimes bar an action that might otherwise be timely, if an action is barred by 2A:14-1 it cannot be saved by N.J.S.A. 2A:14-1.1. See O'Connor v. Altus, 67 N.J. 106, 122-123 (1975).

The Demand for Arbitration was filed on December 7, 1981. Therefore, if it is found that either the cause of action arose more than six years before that date or that the discovery rule does not affect the running of the Statute of Limitations, then the Demand would be untimely.

The seminal "discovery rule" case in this State is Fernandi v. Strully, 35 N.J. 434, 173 A.2d 277 (1961). Our Supreme Court recognized therein that there were certain " 'class(es) of cases' where the period of limitations may and should fairly and justly be said to begin to run when the plaintiff knows or has reason to know of this cause of action." Id. at 450, 173 A.2d 277 (Emphasis supplied). Fernandi was a medical malpractice case wherein a foreign object (a wing nut) remained in plaintiff's abdomen after total hysterectomy surgery. In balancing the interests involved, the Supreme Court emphasized that plaintiff's claim did not "raise questions as to her credibility" ... that "the lapse of time (did) not entail the danger of a false or frivolous claim, nor the danger of a speculative or uncertain claim" and "the circumstances (did) not permit the suggestion that Mrs. Fernandi may have knowingly slept on her rights." The Court, however, limited its ruling to the foreign object medical malpractice case.

Since Fernandi the discovery rule has been held applicable to cases involving the six-year period of limitations, See New Market Poultry Farms, Inc. v. Fellows, 51 N.J. 419, 241 A.2d 633 (1968) concerning an alleged error in a land survey; Diamond v. New Jersey Bell Telephone Co., 51 N.J. 594, 242 A.2d 622 (1968), alleging negligent installation of an underground conduit that caused flooding on plaintiff's property; Federal Insurance Co. v. Hausler, 108 N.J.Super. 421, 261 A.2d 671 (App.Div.1970), where it was held that N.J.S.A. 2A:14-1 was subject to the discovery rule in an action for wrongful detention of shares of stock; Gibbins v. Kosuga, 121 N.J.Super. 252, 296 A.2d 557 (Law Div.1972), where plaintiff started suit nine years after closing title because a well was not on their property. See also McCoy Co., Inc. v. S.S. "Theomitor III", 133 N.J.Super. 308, 336 A.2d 557 (Law Div.1975), Brown v. College of Medicine and Dentistry, 167 N.J.Super. 532, 536-537, 401 A.2d 288 (Law Div.1979) and O'Keeffe v. Snyder, 83 N.J. 478, 416 A.2d 862 (1980), where the discovery rule was applied to an action for replevin of a painting under N.J.S.A. 2A:14-1.

This Court finds there is no legitimate reason to hold that the discovery rule is inapplicable to cases involving a Demand for Arbitration under a construction contract in the appropriate circumstances, in view of the expanding employment of the discovery rule. If "the discovery rule is essentially a rule of equity (and) ... equity lies at its genesis," Lopez, supra., 62 N.J. at 273, 300 A.2d 563 there is no reason not to apply it in cases involving construction and design when the allegation is that the damage or injury lay hidden for a period of time. It would be anomolous to hold that certain classes of plaintiffs are afforded the protection of the discovery rule while others are not when it is alleged the injury was not readily ascertainable. The discovery rule should be equally applicable to allegedly hidden construction and design effects as it is to the hidden wing nut in Mrs. Fernandi's abdomen. Therefore, the Court holds that the discovery rule is applicable to this case and could affect the calculation of the relevant period of limitations.

* * *

In order to determine if it will save Alexian Brothers' Demand for Arbitration we must carefully review material events and their dates:

(1) On January 23, 1969 Alexian Brothers contracted with Oakley to prepare plans and specifications for construction;

(2) On November 25, 1970 Alexian Brothers contracted with Torcon to construct;

(3) On April 21, 1975 the Certificate of Substantial Completion was executed by Alexian Brothers and Torcon. (It is uncontroverted by the parties that the normal period of limitations would begin to run at this time. Therefore, unless the discovery rule or another legal theory, such as equitable estoppel, extends the period of limitations, Alexian Brothers would normally be barred from filing its Demand for Arbitration after April 21, 1981.)

It is equally uncontroverted that at or around April 21, 1975 Alexian Brothers had noticed it had difficulty with extensive water leaks and seepage in certain areas of construction. Water leaks about the windows were noticed practically every time it rained to the extent that some patients had to be removed from their rooms. These leaks were noted by Alexian Brothers' Brother Ruberg, the Chief Executive Officer at the time, even before April of 1975. Brother Ruberg assumed that the leaks were the "responsibility" of the Contractor. In fact, for a period of time Torcon individually and through its subcontractors demonstrated a willingness to return and correct some of these leaks, when advised about them by Alexian Brothers, and admittedly made visits to attempt repairs on the building leaks up through March of 1976.

Alexian Brothers admits that Brother Ruberg advised senior management in the spring of 1976 that "any defects found at the new wing should be brought to the attention of the general contractor for correction". Therefore, Alexian Brothers continued to demonstrate not only knowledge of problems with the construction but also had decided who was the responsible party to correct those problems.

Brother Ruberg had "overall responsibility (regarding) the project" for Alexian Brothers. During the construction he formally toured the site at least once a week and informally viewed it practically everyday. He wrote to and had discussions with Torcon representatives in June 1975 concerning exterior water leaks in the Grassman Hall mens' toilet. In response Torcon expressed a willingness to repair. On October 23, 1975 he wrote to Torcon requesting the repair work be accomplished because "the problem is becoming more critical with each days (sic) delay."

Water leaks were not the only problems that existed since the building was accepted. Ruberg wrote Torcon in April 1977 noting "a severe crack developed in the staircase of the new tower early after completion of the project." Actually, Torcon had been contacted in March 1976 about cracks in the canopies at the main entrance, CCCU and the Emergency D & T Wing.

Alexian Brothers contends, however, that the cause of these leaks and the other problems was not known to it until after it engaged Universal Waterproofing in the spring of 1981 to inspect and repair the "leakage problems around the windows and certain other problems." In May 1981, Universal Waterproofing's principal noted masonary cracks. Rather than submit a bid to recaulk and reseal, he outlined a series of concerns he had in a letter to Alexian Brothers dated June 4, 1981, which he believed required fuller investigation.

Preservation Technology was subsequently retained and performed an in-depth inspection, including dismantling of brick and exposure of cavity walls, in the fall of 1981 which revealed, among other things: that the cavity wall was bigger than the specifications called for in some places; that debris was left in the cavity wall which disrupted the function of flashing; wall ties...