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Manchester Township Board of Education v. Thomas P. Carney Inc.

Decided: February 5, 1985.


On appeal from Superior Court of New Jersey, Chancery Division, Ocean County.

King, Deighan and Bilder. The opinion of the court was delivered by Deighan, J.A.D.


On this appeal we are presented with the question of whether arbitrators improperly precluded rebuttal testimony and if so, whether the matter should be remanded to the same panel or a new panel of arbitrators or to the trial court for final disposition.

Defendant Thomas P. Carney, Inc. (Carney) appeals from an order vacating an arbitration award and remanding this matter to the American Arbitration Association (AAA) for a determination either to schedule a hearing de novo or to reopen this matter before the original panel. Carney seeks to reinstate the original award of the arbitrators. Plaintiff Manchester Township Board of Education (Board) cross-appeals from that portion of the judgment granting discretion to AAA to schedule a hearing de novo or to reopen the matter before the original panel, contending that the original panel should be disqualified from rehearing the matter.

On June 11, 1974 the Board entered into a contract with Carney for the construction of the high school. The contract contained an arbitration clause which required all disputes arising out of the contract to be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the AAA. The school was completed and dedicated in September 1976 but within a few months several structural problems developed, including extensive leaks throughout the building and openings and dead spots in the gymnasium floor. A dispute arose between the parties concerning the responsibility for repair of these problems.

The parties were unable to resolve their differences, consequently the Board filed a petition with the AAA for arbitration. Hearings were conducted at the high school for five days in July and August of 1982. The Board presented testimony of a builder and two written reports of an engineer who was unable to appear at trial. Carney's attorney agreed to defer cross-examination of the Board's engineer until he was able to appear

for cross-examination. Both the Board's witnesses, the builder and engineer, concluded that the flashings on the rising walls were improperly installed and did not conform to the architect's plans.

Carney produced an engineer who testified that the leaks were caused by an architectural defect, i.e., insufficient and improperly designed expansion joints in the roof. The expert also testified that even if the flashings were improperly installed the water would not have drained down the interior wall and could not have caused damages in areas of the ceiling far removed from the rising wall. He said the dead spots on the gymnasium floor were the result of low temperatures.

Robert Carney, who was on the construction site daily during the installation of the roof, testified that he pointed out to the architect's representative at the site, Don Hamnet, that there was some deficiency in the "neverstrol" flashing. Even though there was no written change order, Carney said that he and Hamnet agreed to change the plans and designs in accordance with the manner in which it is presently constructed.

After testimony was concluded on Friday, August 13, 1982 the hearings were continued to August 18 and 19, 1982. On August 16, 1982 the Board's attorney telegraphed Carney's attorney that a water infiltration test was scheduled for August 17, 1982 at 1:45 p.m. Shortly thereafter Carney's attorney advised that, rather than present further testimony, he decided to rest his case. Thereupon the Board's attorney advised that he planned to produce his engineer to rebut statements made by Carney's engineer and Robert Carney regarding the depths of the flashing and that he hoped to produce testimony of Don Hamnet, the architect's engineer mentioned by Robert Carney in his testimony the preceding Friday. Shortly thereafter on the same date the Tribunal Administrator of the AAA advised plaintiff's attorneys that the hearing was closed and no rebuttal testimony would be taken. Counsel for the Board objected and after further consultation with the arbitration panelists, the

AAA informed him that the panel would hear no rebuttal arguments. This was confirmed by letter.

On August 17, 1982 the water infiltration test was conducted as scheduled and this time professional photographs were taken. On the same date a written objection was made to the AAA by the Board's attorney protesting the arbitrators' preclusion of the offer of rebuttal testimony. On October 8, 1982 an award was made which denied the claim of the Board in its entirety. The Board filed this action to vacate the arbitration award on the ground that the arbitrators refused to hear evidence pertinent and material to the controversy, N.J.S.A. 2:24-8c. It also sought to terminate any further arbitration of the issues and to allow further disputes to be decided by the court. Alternatively, the Board sought to vacate the award and to schedule a de novo hearing before a different panel of arbitrators.

At the close of the plaintiff's case before the trial court in the present proceeding, Carney moved for a judgment of involuntary dismissal which was denied. After presenting testimony of its engineer, Carney's motion for a continuance to remand the matter to the arbitrators for findings of fact to ascertain the reasons for the arbitrators' decision was denied.

At the conclusion of a three-day hearing the trial judge found that the arbitrators refused to permit the Board to present pertinent and material rebuttal evidence; that the refusal was prejudicial to the Board, and that their refusal deprived the Board of its right to a full and fair hearing. The court vacated the award pursuant to N.J.S.A. 2A:24-8c., and remanded the matter to the AAA for a hearing de novo before a new panel of arbitrators or, in the discretion of the AAA, to resubmit the matter to the original arbitrators. Carney's subsequent motion for a new trial was denied. This appeal and cross-appeal followed.

On August 12, 1983 the AAA ruled that the matter would be resubmitted to the original panel. The Board protested. In

September 1983 the Chairman of the Arbitration panel resigned due to ill health. On September 26, 1983 the AAA requested counsel for a list of convenient dates for the arbitration hearings. The Board again protested but Carney's attorney insisted that arbitration proceed. On October 31, 1983 the AAA directed that the hearings continue notwithstanding the pendency of this appeal and directed a list of convenient dates to be submitted. Upon application of the Board, the trial judge restrained the AAA from rescheduling or conducting further hearings until final determination of this appeal.

Carney contends that the arbitrators properly exercised their discretion and there is no basis in law or in fact for a reversal of the award; that the proferred rebuttal proof is merely cumulative and redundant; that the trial court erred in failing to grant defendant's motion (a) for involuntary dismissal and (b) for a remand to the arbitrators for findings of fact. Lastly, it maintains that if the judgment is affirmed, the matter should be remanded to the original arbitration panel. The Board argues that the matter should not be remanded to AAA but rather the court should retain jurisdiction of the controversy but if remanded to the AAA it should be heard de novo by a new arbitration panel.

First we consider Carney's contention that there is no basis in law or in fact for a reversal of the award. We disagree. N.J.S.A. 2A:24-8 of the New Jersey Arbitration Act, 2A:24-1 et seq., provides:

2A:24-8. Vacation of award; rehearing.

The court shall vacate the award in any of the following cases:

c. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause being shown therefore, or in refusing to hear evidence, pertinent and material in the controversy, or of any other misbehaviors prejudicial to the rights of any party.

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, ...

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