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Haberman v. West Saddle Development Corp.

Decided: November 28, 1989.


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

King, Baime and Keefe. Keefe, J.A.D.


Plaintiffs Fredric and Sheila Haberman appeal from an order for summary judgment in favor of defendants West Saddle Development Corp., George McCarthy, and Thore Christiansen (collectively referred to as West Saddle). The Law Division held that plaintiffs' civil action for damages was barred by the election of remedies provision of the New Home Warranty and Builders' Registration Act (Act), N.J.S.A. 46:3B-9. This statute has been the subject of several reported decisions. Rzepiennik v. U.S. Home Corp., 221 N.J. Super. 230 (App.Div.1987); Nolan v. Homes by Brinkerhoff, Inc., 230 N.J. Super. 306 (Law Div.1988) and Postizzi v. Leisure Technology, Inc., 235 N.J. Super. 285 (App.Div.1989). Both Nolan and Postizzi involved interpretations of the statute in the context of a warranty issued by Home Owners Warranty Insurance Company (HOWIC) and administered by the Home Owners Warranty Corporation (HOW). This case also involves a policy issued by HOWIC and administered by HOW. However, because the wording of the documents executed by the plaintiffs in this matter and their relevant conduct differs substantially from the facts in both Nolan and Postizzi, neither case is depositive of this case.

For reasons to be expressed more fully we hold that: 1) Plaintiffs' execution of the Dispute Settlement Record and Acceptance of Decision forms constituted an election of remedy under N.J.S.A. 46:3B-9 which prevents them from relitigating West Saddle's responsibility to correct items covered by the HOWIC insurance policy. 2) To the extent that plaintiffs' current suit seeks damages resulting from West Saddle's failure to satisfactorily correct items for which the Dispute Settler

found West Saddle responsible, an additional remedy is provided in the HOW policy and must be exhausted before plaintiffs may resort to litigation. 3) Because the HOWIC policy does not cover contractual disputes that are not also covered warranty matters identified in the policy, plaintiffs are not barred by statute from pursuing such contract claims in this litigation. Thus, we affirm in part and reverse in part the order granting summary judgment to the defendants and remand the matter for further proceedings conforming with this opinion.

In September 1987 plaintiffs entered into a contract with West Saddle for the purchase of a new home in Saddle River, New Jersey. The contract provided that acceptance of a deed did not result in a waiver of plaintiffs' right to bring a claim against West Saddle for failure to comply with the terms of the contract. Title was transferred to plaintiffs on January 23, 1983. At closing of title, West Saddle provided plaintiffs with the HOWIC policy in compliance with the requirements of the Act. N.J.S.A. 46:3B-1 to -12. Plaintiffs provided West Saddle with a punch list of numerous defects and repairs required to be made to the property at the time of the closing and, apparently, thereafter.

Dissatisfied with West Saddle's response to their request for repairs, plaintiffs initiated the dispute settlement procedure provided in the policy. A Dispute Settler was appointed by HOW and dispute settlement proceedings took place over the course of approximately five months.

On or about September 7, 1983 plaintiffs executed an Acceptance of Decision form. The form in pertinent part says:

If you accept the dispute settler's decision, complete and sign this form and return it to the HOW regional office within 45 days in which case the builder will be bound to perform according to the decision. If you do not complete this form and return it within 45 days, you will be deemed to have rejected the decision and the builder will not be obligated to perform in accordance with it.

I (we), the Undersigned, part(ies) to Home Owners Warranty Agreement, . . ., having participated in EDS Meeting which resulted in the attached decision, do hereby accept the terms of said Decision exactly as rendered in full settlement of all claims presented at the meeting.

The Decision alluded to in the form referred to a Dispute Settlement Record consisting of six pages and some 59 items dated July 6, 1983 and signed by both plaintiffs. The Dispute Settlement Record contained the Dispute Settler's decision concerning West Saddle's responsibility or lack of same for each item. Above the ...

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