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Ivashenko v. Katelyn Court Co.

May 30, 2008


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-4400-05.

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



Argued April 22, 2008

Before Judges Skillman, Winkelstein and LeWinn.

In this appeal, we are asked to decide if the election of remedies provision of the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20 (the Act), and its concomitant regulations, N.J.A.C. 5:25-1.1 to -5.5 (the regulations), bar plaintiffs' lawsuit against the builder and architects of their home. The trial court dismissed plaintiffs' complaint on summary judgment on the grounds that the lawsuit was barred because plaintiffs had previously sought relief under the Act. On appeal, plaintiffs argue that their election to proceed under the Act was not knowing and voluntary, and thus the Act's election of remedies provisions did not preclude their Superior Court action. We find merit to plaintiffs' argument, and accordingly, we reverse the summary judgment and reinstate their complaint.

For purposes of the summary judgment motion, the material facts are not contested. In December 1998, plaintiffs entered into a contract with defendant Katelyn Court, owned by defendants Russell Weber, Sr. and Russell Weber, Jr. (collectively, the builder), to purchase a newly constructed home in Old Bridge. Defendant Thomas J. Fitzpatrick, an architect, employed by defendant AED Associates (collectively, the architects), prepared the plans. The home was substantially constructed in 2000. After plaintiffs moved into the home that December, they provided the builder with a punchlist of items that needed repair, one of which was the rear foundation wall, which plaintiffs described as having "three wet spots" and "bowing in."

In May 2001, plaintiffs filed their first New Home Warranty (HOW) claim, asserting that the rear foundation wall in the basement of their home was defective. Because the parties did not agree to arbitration, Terence Luckie, a claims analyst of the Bureau of Homeowner Protection (the Bureau), met with plaintiffs and Russell Weber, Jr. in July 2001 at plaintiffs' home. See N.J.A.C. 5:25-5.5(c)3ii. Luckie requested that the builder provide the specifications that the architects had prepared concerning the repair of the rear foundation wall. Those specifications had been previously submitted to the Old Bridge Township Building Department after the foundation wall was pushed in when a piece of equipment struck it during construction. The specifications stated, in part, that the "rear block wall [had] been pushed in . . . by machine/equipment grading around foundation[, and the] [j]oints shall be watched for any future movement. The issue will be address[ed] if needed in the future." At the time they filed the first HOW warranty claim, plaintiffs were unaware of the incident and that the architects had submitted specifications to repair the wall.

Also following the meeting, plaintiffs provided Luckie with a report prepared by their engineer, Andrew Marino. The report stated, in part, that "[b]ased on the lean noted in the wall (up to 3 inches) and inward buckling, as well as water penetration, horizontal cracking and evidence of ongoing movement, it is recommended that the wall be reconstructed with new reinforced pilasters, properly tied at the top and bottom."

On September 5, 2001, the Bureau issued its decision. As to plaintiffs' claim that the rear foundation wall was bowing, the decision stated:

Repairs were made to the rear basement wall according to specifications provided by Builder's Architect and approved by the Construction Official prior to the issuance of the Certificate of Occupancy. At the time of inspection there was no sign of failure or evidence of a Major Structural Defect as defined in N.J.A.C. 5:25-1.3 & 3.7. . . . The homeowner shall monitor the wall throughout the warranty period for signs of movement and/or cracking, and notify the Builder and the New Home Warranty Program . . . by phone and in writing should the wall exhibit signs of movement or failure. Therefore at this time this claim is DENIED. [(emphasis added).]

After receiving the decision, plaintiffs filed a second notice of claim and request for dispute settlement. Without addressing the merits of the claim as it pertained to the foundation wall, on October 17, 2001, an arbitrator denied the claim as duplicative of the first HOW warranty claim.

Over the next two years, the foundation wall continued to deteriorate. It developed a large horizontal crack, seven and one-half feet off of the floor, approximately one-eighth to one-quarter of an inch in width, and roughly thirty feet long. Several vertical cracks connected to the horizontal crack, with one crack passing through the foundation to the exterior of the wall. The tops of the pilasters, vertical structural columns, had separated from the foundation, with additional bowing of the rear wall. Consequently, ...

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