On appeal from the Superior Court, Law division, Camden County.
King, Gaulkin and D'Annunzio. The opinion of the court was delivered by Gaulkin, J.A.D.
Plaintiffs Walter Michael Rzepiennik and Joellyn Rzepiennik (Rzepienniks) brought this action to recover damages for alleged defects in a home they purchased from defendant U.S. Home Corp. (U.S. Home) with mortgage financing from defendant Murray Financial Associates, Inc. (Murray Financial). All of the claims were dismissed prior to trial by summary judgments. The Rzepienniks now appeal.
On August 14, 1983, the Rzepienniks contracted with U.S. Home to purchase a home to be built for them. The purchase price was $114,670. The Rzepienniks obtained a mortgage commitment from Murray Financial for $103,200. At the January 27, 1984 closing, the Rzepienniks received a homeowner warranty which fixed U.S. Home's obligation to remedy defective conditions. That warranty was issued pursuant to The New Home Warranty and Builders Registration Act, N.J.S.A. 46:3B-1.
After the Rzepienniks moved into the house, they experienced water and heating problems. U.S. Home undertook certain repairs, but the Rzepienniks were unsatisfied. Accordingly, on November 19, 1984, they filed a demand for arbitration as permitted by the homeowner warranty:
If Homeowner is unsuccessful in resolving a warranty dispute as provided above, Homeowner may demand impartial third-party conciliation and arbitration of any warranty dispute with U.S. Home. A form for this purpose may be obtained from the American Arbitration Association ("AAA"), at 1607 Main
Street, Suite 1115, Dallas, Texas 75201, or by calling 800-527-9008. (In Texas call collect 214-748-4979.) There is no charge for this call, or for initiating the conciliation and arbitration procedure. When AAA sends Homeowner the form, AAA will also send Homeowner a copy of the arbitration rules according to which the arbitration process will be administered. The address of the local AAA office that will administer the arbitration will be shown in the form. Homeowner must then complete the form and return it to the local office of AAA. This office will appoint an arbitrator who will arrange for a hearing to be held at the Residence within 20 days, and will notify Homeowner and U.S. Home of the time and date of the hearing. At the hearing the arbitrator will first attempt to assist in reaching a voluntary agreement resolving the matters in dispute. Any matters that are not resolved will be determined by arbitration which will be binding on both parties. The arbitrator's award shall be rendered within 20 days following the hearing and both parties will be notified immediately. If the arbitrator's award requires work to be performed by U.S. Home, the award will also state the time by which the work is to be completed.
In keeping with the warranty, the Rzepienniks' demand was for arbitration "in accordance with the Arbitration Rules administered by the American Arbitration Association, Inc. (AAA)." Included among those rules was this limitation on the arbitrator's authority:
The Award shall be limited to a determination of (1) the existence of a defect under the Warranty and, where appropriate, (2) the nature of the repair or replacement, and the time within which U.S. Home shall perform the corrective action.
Following an arbitration hearing held at the Rzepiennik home on January 15, 1985, the arbitrator issued an award determining that (1) the mechanical heat generation was inadequate, (2) certain doors and windows malfunctioned and were inadequately weatherproofed and (3) the drinking water was not potable because of an inadequate filtration system. The arbitrator ordered U.S. Home to correct the work within 45 days.
U.S. Home apparently took some steps to correct the defects, but the Rzepienniks remained dissatisfied. They filed a complaint in the Law Division seeking compliance with the arbitration award and asserting against U.S. Home a variety of damage claims for breach of contract, negligence, ...