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Moreira Construction Co. v. Township of Wayne

Decided: January 19, 1968.


Conford, Collester and Labrecque. The opinion of the court was delivered by Conford, S.j.a.d.


This is an appeal by a contractor on a contract to build a trunk sewer line for the Township of Wayne, from an order of the Chancery Division denying a demand for arbitration (except in one minor respect) by plaintiff contractor of claims for extras against defendant municipality. The claims for extras amount to $325,862.71. Performance of the contract took three years, and we are informed that the basic contract price was $444,782.40. The last work on the job seems to have been done about October 1964.

Apparently, sometime during the summer of 1966 (or perhaps earlier; the date is not specified in the appendix) plaintiff submitted to defendant a detailed 75-page specification of extras wherein each item claimed is broken down as to labor, materials, use of equipment and the date of rendition. In each case, also, there is a general indication of the reason for the particular extra, e.g., "change on plans, moving * * * sewer closer to brook * * *"; "removal two lengths of 24" R.C.P. ordered by the engineer * * *"; "due to wrong line and grade furnished by engineer * * * time lost"; "due to stop order of January 24, 1962"; "2.755 MFBM ordered by engineer"; "due to a water service * * * which was not shown on plans * * * lost 5 hours * * *," etc.

This specification of extras is not contained in the appendix nor was it an item of evidence before the trial court (which, without objection by any party, decided the matter on the return of an order to show cause on the basis of the pleadings, affidavits and argument). We requested it at the oral argument in order to have some minimal understanding of the basic dispute on the merits.

The contract is apparently a lengthy document not made an exhibit. Certain sections of it are incorporated in the affidavits. The arbitration clause, construction of which is the central issue on this appeal, is set forth on page 39 of the specifications and reads as follows:

"(a) Appeal by the Contractor -- Should the Contractor take exception to any determination of, or revision by the Engineer relating to the interpretation of this contract, or the performance of work thereunder, the Contractor shall, within two (2) days, after receiving notification of such decision, or revision, file with the Owner a notice of appeal therefrom, together with a full statement of facts as he believes them to be true, and he shall also furnish the Engineer a copy of said notice and statement of facts.

Upon completion of the work, all matters of appeal shall be submitted to a Board of Referees composed of three members, one of whom shall be appointed by the Owner, one by the Contractor, and the third shall be chosen by the first two. The cost of appeal shall be borne by the Contractor in matters wherein the decisions of the Engineer are affirmed, and in other matters, the costs shall be borne jointly by the Contractor and the Owner in such proportion as the Board of Referees shall determine.

The decision of the Board of Referees shall be conclusive and binding upon both the Contractor and the Owner."

Defendant argued below, and Judge Mountain in the Chancery Division agreed (with the one exception referred to above), that none of the presently disputed extra items became subject to arbitration under the foregoing agreement because they were never made "matters of appeal" by plaintiff in the manner specified by the contract, and only such matters of appeal were made subject to arbitration by the agreement of the parties. Plaintiff, on the other hand, argues that the question whether the disputed items are, indeed, "matters of appeal," is itself for the arbitrators rather than the court, because defendant's claim that they do not fall within the clause constitutes an issue of "procedural arbitrability," which, it is asserted, is always for determination by the arbitrator rather than the court. Prime reliance is placed on Standard Motor Freight, Inc. v. Local Union No. 560, 49 N.J. 83 (1967), and certain

decisions of the United States Supreme Court, all discussed hereinafter.

The factual record before us is not too illuminative.

On October 4, 1966 defendant's attorney wrote to plaintiff's attorney stating the township's position on the claim for extras theretofore submitted by plaintiff, as noted above. The letter offered a total of $9,807.02 in settlement of certain items and rejected the claims for the balance. It called attention to the fact that $79,014.65 of the items claimed pertained to a railroad crossing as to which an enclosed copy of a letter from plaintiff to defendant's consulting engineers of August 9, 1962 had stated that the work could be done "without any additional cost to the Township of Wayne."

Plaintiff's attorney responded by letter of October 13, 1966 indicating he was construing the letter of October 4, 1966 as "the decision of the Owner * * * and a disposition of the Contractor's appeal from the Engineer's decision." Stating that the determination by the owner was not satisfactory, the letter went on to "invoke the further provisions of the Contract," but quoting only the second and not the first paragraph of the arbitration clause (a) quoted ...

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