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Wm. Blanchard Co. v. Beach Concrete Co.

Decided: May 2, 1977.


Fritz, Ard and Pressler. The opinion of the court was delivered by Pressler, J.A.D.


The appeal before us raises important procedural questions implicating the scope of the entire controversy doctrine, the definition of the mandatory counterclaim rule, the extent to which pleadings may be belatedly amended, and the impact of agreements to arbitrate on these predicates of the judicial process.

This multi-party, multi-issue commercial litigation had its genesis in the construction of a 20-story Blue Cross-Blue Shield office building on Washington Street in Newark. It involves a complex series of affirmative claims expressed by way of complaints, third-party complaints, counterclaims and cross-claims, and amendments to these pleadings by, between among and against seven primary parties. The principal dramatis personae include the owner, Washington Park Building, Inc., a wholly owned subsidiary of Blue Cross*fn1 (Washington Park); the general contractor, Wm. Blanchard Co.

(Blanchard); two of Blanchard's subcontractors, Beach Concrete Co., Inc. (Beach) and Eastern Schokbeton (Schokbeton); Schokbeton's subcontractor C.S.T. Erection Co., East (C.S.T.); and the architect, Welton Becket Associates (Becket).

The instant consolidated appeal by Washington Park and Blanchard challenges two orders of the Chancery Division entered on February 9, 1976 dismissing with prejudice their most recent pleadings by which each belatedly alleged additional and financially substantial claims against the other arising out of the project. These claims had substantial legal and practical effect on the multitude of claims already pending. Each of these two parties, moreover, indisputably had known of the existence of its respective claims against the other for several years prior to their being raised, and each also intended, by assertion of indemnification and contribution rights, to pass on to the other parties to the action the ultimate financial responsibility for the claims made against it by the other. The effect of the orders appealed from was to finally foreclose each of these litigants not only from raising these claims in this litigation but in any subsequent litigation as well. We regard the action of the trial judge to have been eminently correct and we affirm.

It is now almost seven years since this litigation was commenced, and although it has grown in complexity, it is today no nearer trial than it was on the day the first complaint was filed. The complex procedural history of this action and its failure throughout the tortuous course of that history to have reached an adjudication of a single issue on the merits might well serve as a primer demonstrating the endlessly protracted, inordinately wasteful and continuously fragmented judicial process which the explicit procedural reforms of the Judicial Article of the 1947 State Constitution were specifically designed to prevent.*fn2 Sisyphus,

condemned to eternally pushing his rock up the side of the mountain without ever reaching the top, may have been an appropriate metaphorical analogy to the civil justice system of earlier times when multiplicity of actions prevailed and form routinely triumphed over substance. The currency of that analogy here signifies the continued frustration of the goal of affording expeditious substantial justice to litigants on the merits of their controversy and requires reconsideration and restatement of basic principles governing the management of inherently complex litigation. That effort requires us first to chart with specificity the convoluted route by which the present status of this action was reached.

Washington Park, in June 1969, retained Becket as the architect for its Newark Blue Cross building project. Their written contract contained no arbitration clause with respect to disputes which might arise between them. Washington Park also then contracted with its general contractor Blanchard by written agreement which contained a typical "all disputes" arbitration clause applicable to any controversies between them which might arise out of the project. Blanchard subcontracted the construction of the concrete superstructure to Beach and the manufacture and installation of the concrete panels to cover the superstructure to Schokbeton. Each of these contracts contained an arbitration clause covering potential disputes between Blanchard and each of the subcontractors. Schokbeton in turn subcontracted part of its work, the actual installation of the facade panels, to C.S.T. by contract containing, as between them, an arbitration clause. Thus, with respect to potential disputes, Becket had no agreement to arbitrate with anyone. Washington had an agreement to arbitrate only with Blanchard. Blanchard, by way of three separate agreements, was obliged to arbitrate with Washington, Beach and Schokbeton, each of whom was obliged to arbitrate with Blanchard but not with each other or anyone

else, except that Schokbeton was obliged to arbitrate with C.S.T., who in turn was obliged to arbitrate with no one else.

Construction of the building commenced, as scheduled, in the summer of 1969. The original undertaking by Blanchard was to complete the project by January 1971, a deadline extended by Washington Park for a period of one month. The building was completed some ten months thereafter. Thus, by early 1972 all claims by all parties related to the project had already arisen and were known to the parties. A primary cause for the delay in completion was a construction problem which constitutes the core of the controversy here. Relatively early in the construction C.S.T. experienced difficulty in installing the concrete facade panels over the concrete columns erected by Beach. That difficulty was attributable either to their improper manufacture by Schokbeton, Beach's failure to have followed Becket's specifications in erecting the superstructure, or Becket's error in formulating the specifications. As a consequence of making the adjustments necessary to correct that difficulty all of the subcontractors allegedly sustained loss because of their required use of extra labor and materials and because of the delays they thereby incurred in completing their respective portions of the work. Blanchard allegedly also suffered loss from the delay in completing the entire project, as allegedly did Washington Park, the ultimate occupant.

Two separate actions were instituted involving the problems resulting from the concrete work difficulties. The first was an action brought by Blanchard against Beach in the Chancery Division, Essex County (Essex Chancery action) in October 1970. The sole subject of the initial complaint was a stop notice filed by Beach pursuant to the Mechanics Lien Act and certifying that it had not been paid the sums then due it from Blanchard. The sole relief sought by Blanchard was discharge of the stop notice. Beach then filed a counterclaim against Blanchard and a third-party complaint against Washington Park alleging a right

to damages from each for the losses it had sustained as a result of the concrete-work problem and seeking an order compelling both to arbitrate with it. The stop notice was, in fact, discharged early in the action, leaving only Beach's affirmative claims remaining.

In September 1972, and at least nine months after completion of the project, Schokbeton and C.S.T. instituted the second action in the Law Division, Union County (Union Law suit) by way of suit against Blanchard, Washington Park and Becket in which they sought damages allegedly resulting from the concrete-work problem. In that action both Blanchard and Washington filed third-party complaints against Beach and cross-claims against Becket and each other. Becket, among other procedural steps taken by it, also filed third-party complaints against its consulting engineers. Before, however, instituting the Union Law action, counsel for C.S.T. and Schokbeton had engaged in lengthy negotiations with the parties to the Essex Chancery action, not only as to the merits of all of their respective claims but also as to the manner in which they might be most expeditiously disposed of. The subcontractors and Blanchard were, more specifically, attempting to persuade all parties to agree to either a single consolidated arbitration or a single consolidated litigation which would include all claims, including Washington Park's delay claims which had already accrued, which Washington Park had repeatedly referred to but which it had thus far declined to assert. The commencement of the Union law action signalled the failure of the parties to reach a mutually satisfactory procedural agreement.

That failure was attributable to a variety of strategic decisions of both Washington Park and Blanchard. Chief among these was their expressed determination not to assert their direct claims against each other in the pending litigation -- that is, Washington Park's delay claims against Blanchard, which Blanchard would inevitably attempt to pass on to the subcontractors and the architect, and Blanchard's

direct claims against Washington Park arising both from the concrete work delays and from other collateral problems, which claims Washington Park would likewise inevitably attempt to pass on. This determination to reserve their direct claims inter se has repeatedly been explained by Washington Park as the legitimate tactic of allowing it and Blanchard to present a "united front" against the affirmative claims against them made by the others. The other main reason for the failure of the parties to have reached procedural agreement was Washington Park's insistence on the one hand that it would not forego its contractual ...

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