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St. Joseph's Hospital and Medical Center v. Muirfield Construction Co.

July 29, 2003

ST. JOSEPH'S HOSPITAL AND MEDICAL CENTER, PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
AND WM. BLANCHARD CO., PLAINTIFF,
v.
MUIRFIELD CONSTRUCTION CO., DEFENDANT/THIRD-PARTY PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
AND HARTFORD FIRE INSURANCE COMPANY, DEFENDANT,
AND GERARD SHEET METAL FABRICATORS, INC., THIRD-PARTY DEFENDANT-RESPONDENT/CROSS-APPELLANT,
AND FIDELITY AND DEPOSIT COMPANY OF MARYLAND, NORTH AMERICAN REINSURANCE CORPORATION, UNIVERSAL UNDERWRITERS INSURANCE COMPANY, PRUDENTIAL REINSURANCE CORPORATION, SKANDIA AMERICA REINSURANCE CORPORATION, AND THE REINSURANCE CORPORATION OF NEW YORK, THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Passaic County, L-3998-93.

Before Judges King, Wefing and Lisa.

The opinion of the court was delivered by: King, P.J.A.D

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: April 30, 2003

[This is a redacted version of our full and lengthy opinion in this construction litigation matter. Only this issue on the duty to object under R. 4:41-5(b) to the master's findings at the trial level in the Law Division in order to preserve for appellate review the findings of the master meets the criteria for publication. R. 1:36-2(d). We hold that the failure to object to the master's findings at the Law Division level did not preclude appellate review of the sufficiency of the evidence to support the master's findings and conclusions, especially in this context. We recommend that the Civil Practice Committee consider studying the matter with an eye to suggesting a clarifying amendment to the Supreme Court. We found that the record supported the master's findings in all respects and affirmed the judgment.]

In 1986, St. Joseph's Hospital and Medical Center (St. Joseph's) hired the Wm. Blanchard Co. (Blanchard) as construction manager for a multi-year, $42-million project of renovation and new construction for its facility (the project). During the new construction St. Joseph's would continue to operate. Blanchard was responsible for coordinating all aspects of the project and performing interior demolition in the areas to be renovated. For the other work, it hired trade contractors as its own subcontractors, including Muirfield Construction Co. (Muirfield) for plumbing and for heating, ventilation, and air-conditioning work (HVAC). Muirfield, in turn, hired Gerard Sheet Metal Fabricators, Inc. (Gerard), as its subcontractor to design, fabricate and install HVAC ducts. Hartford Fire Insurance Company (Hartford) was Muirfield's surety. The remaining parties described in the caption were Blanchard's sureties. None had an active role at trial or on appeal.

The set of contracts among the parties had provisions, typical for construction projects, under which St. Joseph's would grant to Blanchard, and Blanchard would in turn grant to its subcontractors, an extension of time for delays which they encountered, as well as change orders covering payment for the extra labor and material costs which the delay caused, but which precluded Blanchard and the subcontractors from seeking any additional"delay damages" for inefficiencies or other lost opportunity costs arising from the delay, i.e., a"no-damages" provision. During the construction period, St. Joseph's realized there was a need for major additions to accommodate new patient services. This increased the project's cost to about $50 million. The delays eventually prompted St. Joseph's to have Blanchard accelerate all work on the project in order to achieve substantial completion by the planned dedication date for the hospital in September 1991 (the acceleration). The dedication occurred as scheduled; completion took another fourteen months.

St. Joseph's started this action by a suit seeking damages against Muirfield for Gerard's delay, prompting Muirfield to make a third-party claim against Gerard. The hierarchy of contracts nominally made St. Joseph's adverse to Blanchard and Muirfield adverse to Gerard because those were the pairings with contractual privity. The reality was that Muirfield and Gerard worked together to assert their claims as if St. Joseph's and Blanchard had acted as a single entity. The parties consented to the appointment of a master, retired Judge Richard S. Cohen, to conduct a complete trial-type hearing and render a report.

The master found that Gerard proved its extra costs on the project and that Muirfield had done so with a few exceptions. More important, he found that the major additions and the acceleration sufficiently increased the degree of confusion, inefficiency, and uncertainty about scheduling work on the project so as to render the delays that those problems caused qualitatively broader than the types of delays ordinarily contemplated by parties who include a"no-damages" provision in a contract. He concluded that the"no damages" provision did not govern the delays attributable to the major additions or to the acceleration.

The master estimated that the delays attributable to the major additions or to the acceleration accounted for only forty percent of Muirfield's and Gerard's extra costs on the project. The balance claimed represented ordinary kinds of delay which was precluded by the no-damages provision. The Law Division adopted the master's report without comment and entered judgment on it. St. Joseph's appeals the finding that the no-damages provision failed to cover all aspects of the project. Muirfield and Gerard cross-appeal from the failure to award the entirety of their extra costs and the failure to award the costs of defending against a frivolous claim. They also challenge the master's adjustment to one of their claimed cost items. Muirfield also raises an unavailing jurisdictional claim of first impression in New Jersey.

[Sections of this opinion have been redacted for publication purposes. See R. 1:36-3.]

The master found that Muirfield had proved damages, exclusive of retainage, of $1,940,205.50, with prejudgment interest of $843,989.39.*fn1 The sum was $2,784,194.89, which the forty-percent factor reduced to a net amount of $1,113,677.90. With $252,292 for retainage plus $109,247.02 in interest, Muirfield's total recovery was $1,475,216.92. Gerard proved damages, exclusive of retainage, of $1,019,544.60, on which prejudgment interest was $443,501.90; application of the forty-percent factor reduced the $1,463,046.50 sum to a net amount of $585,218.60. He awarded Gerard $74,953 for retainage plus $32,604.55 in interest, for a total recovery of $692,776.15.

On March 14, 2000 at the request of the parties, the master issued a clarification of his report. He increased Muirfield's recovery by $17,556.56 to correct for an arithmetical mistake which brought Muirfield's total recovery to $1,492,773.48. He also explained that he had intended to recommend that Blanchard be as responsible for the judgment as St. Joseph's, so he expressed the recoveries as a set of contractual and tort judgments that in effect made Blanchard liable to Muirfield and Gerard, even though they ensured that only St. Joseph's would actually have to pay the damage awards.

On March 17, 2000 Gerard moved for an award of costs and counsel fees for having to defend against a frivolous action. On March 31, 2000 Muirfield made a similar motion, and cross-moved on Gerard's motion to preserve the right to"pass through" to plaintiffs any award that Gerard obtained. On April 5, 2000 Gerard moved for reconsideration, by the judge or in the alternative by the master, of the finding that only forty percent of its damages were awardable. On April 12, 2000 plaintiffs protested the unfairness of giving Muirfield and Gerard a chance in effect to retry this case before the judge ...


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