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Rush v. Kuhn

Decided: February 8, 1984.

MARTIN RUSH, UROLOGY ASSOCIATES, P.A., WALTER KAHN AND MARCELLUS AND MASSELL, P.A., PARTNERS TRADING UNDER THE NAME OF 70 EAST AND MARTIN RUSH, UROLOGY ASSOCIATES, P.A., A CORPORATION OF THE STATE OF NEW JERSEY, WALTER KAHN, AND MARCELLUS AND MASSELL, P.A., A PROFESSIONAL CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFFS-APPELLANTS,
v.
KUHN, SMITH & HARRIS, INC., A CORPORATION OF THE STATE OF NEW YORK, PAUL W. REILLY; JOHN C. MORRIS; FRAIOLI-BLUM-YESSELMAN AND PARTNERS, DEFENDANTS-RESPONDENTS, AND FRAIOLI-BLUM-YESSELMAN AND PARTNERS, DEFENDANTS, THIRD PARTY PLAINTIFFS-RESPONDENTS, V. ESTATE OF DR. MARTIN RUSH, UROLOGY ASSOCIATES, P.A., WALTER KAHN, AND MARCELLUS AND MASSELL, P.A., PARTNERS TRADING UNDER THE NAME OF 70 EAST, THIRD PARTY DEFENDANTS-APPELLANTS. KUHN, SMITH & HARRIS, INC., A BODY CORPORATE, PLAINTIFF-RESPONDENT, V. DR. WALTER J. KAHN, DR. MARTIN RUSH, MARCELLUS & MASSELL, P.A., UROLOGY PROPERTIES, INC., INDIVIDUALLY AND AS PARTNERS T/A 70 EAST, DEFENDANTS-APPELLANTS, AND HARRY RICH ACOUSTICS, INC., HUDIK-ROSS, INC., RED BANK ELECTRIC, INC., B. KATCHEN IRON WORKS, INC., DEFENDANTS, AND PAUL W. REILLY, DEFENDANT-RESPONDENT



On appeal from Superior Court of New Jersey, Law Division, Monmouth County.

Bischoff, Petrella and Brody. The opinion of the court was delivered by Brody, J.A.D.

Brody

[193 NJSuper Page 391] This protracted litigation was commenced in 1975 to resolve disputes arising out of the construction of an office building. The issues on these appeals demonstrate the serious problems caused by using arbitration to resolve some aspects of a single, complex controversy and using litigation to resolve others.

Plaintiffs are four medical doctors*fn1 and the partnership they formed to build and own a medical office building that each would occupy as a separate tenant. (In their capacity as owners of the property the doctors will be referred to as "partners." Otherwise they will be referred to as "tenants.") The partners entered into two contracts, each containing an arbitration clause. One was with defendant Reilly (the architect) and the other with defendant Kuhn, Smith & Harris, Inc. (the contractor). The architect agreed to design the building and the contractor agreed to build it. The architect employed two consulting engineers, defendant Morris and defendant Fraioli-Blum-Yesselman (the engineers).

A provision in the building contract required completion of the building within 300 days and made time of the essence. The building was not substantially completed until 15 months past the contract deadline. The basic liability issues in the case are factual: who and what caused the delay. Each of the parties blames the others. Additional disputes relate to workmanship and extras.

Reasons for the delay largely originate in the partners' decision to scale down the project for economic reasons. Charges are made that the architect was too slow and negligent in making the necessary changes, the partners were too slow in approving them, and the contractor was too slow and negligent in implementing them.

The contractor demanded arbitration, the first step anyone took toward a formal resolution of the dispute. Plaintiffs thereupon brought this action to litigate claims of the partnership and of the tenants who were delayed in relocating their offices. Over plaintiffs' objection that the contractor's demand for arbitration was out of time, the trial court dismissed and referred to arbitration all claims between the partnership and

the contractor. The court also acceded to plaintiffs' request that since there was to be arbitration it should include claims involving the architect because of the arbitration clause in his contract. The judge stated in his letter opinion that the claims to be arbitrated are "dismissed without adversely affecting the claims of the remaining plaintiffs [the tenants] suing in their individual capacities. That part of the complaint which has not been dismissed is stayed pending completion of the arbitration." The judge also stayed discovery. The order was certified as a final judgment and plaintiffs appealed. This court affirmed substantially for the reasons given by the trial judge.

The arbitration took three years during which there were 21 days of hearings. The contractor alleged damages totaling $325,333.22. The partnership alleged damages totaling about $166,000 and claimed indemnification from the architect for any award it may have to pay the contractor. The architect sought $3,600, the balance of his fee which the partnership had withheld. The arbitrators ruled that the trial judge's order barred the tenants from proving their damages in arbitration.

By their award the arbitrators ordered the partnership to pay the contractor $137,700 and ordered the architect to pay the partnership $24,400 including the withheld portion of his fee. There is nothing on the face of the award that indicates what those sums represent.

The Law Division confirmed the award over the partners' objection that it was inconsistent. They had argued that even if the contractor's award included all the non-delay damages claimed, the remaining sum awarded the contractor far exceeded the sum awarded the partnership against the architect. The premise of this argument is that any delay attributed to the partnership was entirely the fault of the architect who therefore should have been made to indemnify the partnership in full. The partnership appealed the judgment of ...


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