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Wasserstein v. Kovatch

Decided: January 8, 1993.

HENRY P. WASSERSTEIN AND LINDA P. WASSERSTEIN, PLAINTIFFS-APPELLANTS,
v.
THOMAS A. KOVATCH, INES KOVATCH AND JOSEPH SIDDRON, DEFENDANTS. LODEWYCK CONSTRUCTION CO., INC., PLAINTIFF-RESPONDENT, V. GUILD CONTRACTING CORP., HENRY P. WASSERSTEIN, LINDA P. WASSERSTEIN, THOMAS P. KOVATCH, AND JOSEPH SIDDRON, DEFENDANTS. CONKLIN & STRONG, INC., A NEW YORK CORPORATION, PLAINTIFF, V. LODEWYCK CONSTRUCTION CO., A NEW JERSEY CORPORATION, DEFENDANT



On appeal from Superior Court, Law Division, Bergen County.

Petrella, D'Annunzio and Keefe.*fn1The opinion of the court was delivered by Petrella, P.J.A.D.

Petrella

Plaintiffs Henry P. Wasserstein and Linda P. Wasserstein appeal from an order for summary judgment entered in the Law Division in consolidated cases. The motion Judge granted the application of Lodewyck Construction Co., Inc. (Lodewyck), a plaintiff in a consolidated case against Guild, the Wassersteins and others, to compel arbitration of all the disputes between all parties. The Wassersteins were the only parties who opposed the motion, notwithstanding the fact that the only arbitration agreement was between the Wassersteins and Guild Contracting Corp. (Guild), a contractor the Wassersteins had hired to build an addition on their house.

The dispute arose out of the construction of the addition on the Wassersteins' home on Freeman's Lane in Franklin Lakes and resulted in several law suits. The Wassersteins, who had contracted with Guild for the addition, brought suit alleging fraud against the principals of Guild (the general contractor), rather than against Guild, the corporation with which they had the construction contract which contained an arbitration clause. In a separate suit, Lodewyck, a subcontractor, sued Guild, the Wassersteins, and Guild's principals for the value of goods delivered and services rendered. Another suit was brought by Conklin & Strong, Inc. (Conklin), a sub-subcontractor, against Lodewyck. These law suits were consolidated in the Law Division, Bergen County.

The Wassersteins contend on their appeal: (1) they cannot be compelled to arbitrate any claim in the absence of a contractual agreement to do so; (2) Lodewyck has no direct or derivative right to compel arbitration; and (3) the parties, including Guild, have waived any right they might have had to compel arbitration by instituting suit, or, alternatively, by failing to comply with all conditions precedent to arbitration.

In the spring of 1989, the Wassersteins decided to add a major addition to their house. Observing that their neighbors, Thomas and Ines Kovatch, had recently substantially completed

an addition to their home, the Wassersteins decided to ask what architect they had used. Linda Wasserstein phoned Ines Kovatch in late May or early June of 1989 and told her that she planned to put an addition on her house. Mrs. Wasserstein said she liked the appearance of the Kovatch addition, and did not want to enter a business relationship with someone she knew. Mrs. Kovatch said she had been pleased with the work of their architect and contractor. In July or August 1989, Joseph Siddron went to the Wasserstein home, identified himself as the builder of the Kovatch addition, and told Mrs. Wasserstein that Mrs. Kovatch had sent him. Siddron handed her a business card which identified his business as Guild.

On March 19, 1990, the Wassersteins signed a contract*fn2 with Guild to construct the addition with completion no later than August 15, 1990, at a contract price of $257,000. Siddron signed the contract on behalf of "Guild Construction." The contract contained a broad provision for resolution of disputes in Article 10.8 which reads:

10.8 All claims or disputes between the Contractor and the Owner arising out or relating to the Contract, or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise and subject to an initial presentation of the claim or dispute to the Architect as required under Paragraph [sic] 10.5. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to the Contract Documents shall include, by consolidation, joinder or in any other manner, any person or entity not a party to the Agreement under which such arbitration arises, unless it is shown at the time the demand for arbitration is filed that (1) such person or entity is substantially involved in a common question of fact or law, (2) the presence of such person or entity is

required if complete relief is to be accorded in the arbitration, (3) the interest or responsibility of such person or entity in the matter is not insubstantial, and (4) such person or entity is not the Architect or any of the Architect's employees or consultants. The agreement herein among the parties to the Agreement and any other written agreement to arbitrate referred to herein shall be specifically enforceable under applicable law in any court having jurisdiction thereof.

In their complaint (filed November 14, 1990) the Wassersteins alleged there was no corporation by the name of Guild Construction in New Jersey, but there was one under the name Guild Contracting Corp. with Thomas Kovatch listed as a Director. Their complaint also asserted that the Kovatches and Siddron intentionally and fraudulently concealed that (1) Guild was not the general contractor for the Kovatch addition, (2) Guild was not in existence when the Kovatch addition was constructed, (3) Thomas Kovatch was a significant owner of Guild, and (4) Siddron had never previously acted as the principal officer of a general contractor. The Wassersteins further alleged that Guild was unable to perform its work timely or in a workmanlike manner.

The Wassersteins claimed in their complaint that they learned some of the foregoing information around August 9, and at that time Kovatch admitted that "Guild" had performed its job improperly. According to the Wassersteins, Kovatch told them on August 11 he was going to dissolve Guild on completion of the Wassersteins' addition, and said "I fold companies all the time and put them into bankruptcy" and that Siddron will "go ...


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