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G. Pacillo Contracting, Inc. v. Township of South Orange Village


July 23, 2008


On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Essex County, Docket No. C-53-06.

Per curiam.


Argued: May 5, 2008

Before Judges Stern, C.L. Miniman and Kestin.

Plaintiff G. Pacillo Contracting, Inc. (Pacillo), appeals from a final judgment dismissing its complaint to compel defendant Township of South Orange Village (the Township) to arbitrate Pacillo's claim that the Township breached its contract for the renovation of an historic firehouse in South Orange when the Township terminated the contract, allegedly for cause. Because the plain language of the contract required arbitration, we reverse and remand the matter for entry of an order to compel the Township to arbitrate the dispute in accordance with the terms of the contract.


The historic firehouse in the Township needed to be renovated and the Township obtained partial funding from the State. As a result of State funding requirements, the Township required an architect with a background in historic buildings. In December 2001, the Township engaged the services of the Mylan Architectural Group (Mylan) in connection with renovations and additions to its historic firehouse. The Township had used Mylan on previous projects and was familiar with its work.

First, the Township asked Mylan to ascertain the building's condition. Then Mylan and the Township planned the restoration work, involving mainly the exterior of the building, such as windows, re-pointing, roof repairs, and the construction of additions. Mylan was engaged to draft and review the specifications for the construction project, including the technical, structural and engineering specifications, as well as the written portions of the specifications, and to manage the bidding process.

The Township Engineer, Salvatore Renda, was involved in the firehouse renovation project from the beginning and served as the contact between Mylan and the Township. He consulted with Mylan on the details and technical aspects of the restoration. The Township and Renda relied upon Mylan to prepare the plan specifications, bid documents and contract documents. Mylan drafted these documents, and the Township submitted some additional documents that it specifically wanted included in the initial bid documents and the later contract documents. One of the submitted documents was entitled "General Instructions to Bidders" (GIB).

When the bid documents were prepared, Mylan submitted the bid package to Renda, including the plans; specifications; general conditions, which included the standard American Institute of Architects Contract Form A201 (AIA Form A201); and the Township's documents, including the GIB. Renda reviewed the specifications before they were submitted to prospective bidders, but he had no discussions with Mylan about anything other than some "technical portions of the specifications, the nuts and bolts, [and] the actual construction practice." Thus, the Township was given an opportunity to make any comments or express any concerns about the contract. It did not. As a result, the bid package, which included the future contract, became final and was made available to prospective bidders who went to Mylan's office to purchase a copy of the package.

Pacillo is an experienced public contractor, having worked on about one hundred public projects before this renovation project. It had also worked with Mylan on a prior municipal building project and was invited by it to bid on this one. Pacillo, like other bidders, obtained and reviewed the entire bid package in order to bid on the project. The only persons who were involved in the contracting process were Mark Ritacco, a Pacillo partner; Dennis Mylan, the architect, who was the Township's authorized contract agent; and Renda, but only with respect to some technical matters.

The contract was comprised of the bid documents bound or incorporated by reference into two volumes dated January 19, 2004, entitled "Specifications for Renovation and Addition to South Orange Fire Headquarters." The first book contained a list of the Township's eighteen loose sheets, instructions to bidders, general conditions, supplementary conditions and some of the technical specifications. The second book contained the balance of the technical specifications, which are not relevant here. The general conditions incorporated AIA Form A201 by reference,*fn1 making it a part of the contract. Ritacco reviewed the bid package and was fully familiar with AIA Form A201 from all of Pacillo's prior public contracting work.

Pacillo then submitted two formal bids and one negotiated bid pursuant to N.J.S.A. 40A:11-5(3). When bidding was complete, the Township awarded the contract to Pacillo on January 24, 2005. Pacillo and the Township executed a two-page formal contract on February 14, 2005, that required compliance with the January 19, 2004, specification document.

After work had begun, Construction Technology Corporation (CTC), a construction management firm retained by the Township to oversee the renovation of the firehouse, on November 4, 2005, sent a letter to Pacillo terminating the contract "for cause" under ¶ 14.2.2 of AIA Form A201. By letter dated January 25, 2006, Pacillo filed a demand for arbitration against Township with the American Arbitration Association (AAA) in accordance with the Construction Industry Arbitration Rules under AIA Form A201. Pacillo sought $689,000 in damages against the Township in the arbitration demand. The Township refused to participate in arbitration, claiming that it was not obligated to do so by the contract documents.

Provisions concerning the resolution of a dispute are found in various portions of the contract. AIA Form A201 provides in § 4.2.11 that "[t]he Architect will interpret and decide matters concerning performance under and requirements of, the Contract Documents on written request of either the Owner or Contractor." The Township's GIB in ¶ 7 also required that requests for interpretation be made to the architect. In interpreting the contract, Mylan was required by § 4.2.12 of AIA Form A201 to abide by the following principles:

Interpretations and decisions of the Architect will be consistent with the intent of and reasonably inferable from the Contract Documents . . . . When making such interpretations and initial decisions, the Architect will endeavor to secure faithful performance by both Owner and Contractor [and] will not show partiality to either . . . .

Paragraph 7G of the GIB provided further guidance to Mylan in construing the contract:

In case of any discrepancy between any of these items, the one with more specific language takes precedence over any with general language, and the one that is more stringent takes precedence over the one that is less stringent.

Where disputes could not be resolved through Mylan's interpretation of the contract, AIA Form A201 provided for a hierarchy of dispute resolution, first by Mylan under § 4.4, then by mediation under § 4.5, and then by binding arbitration under § 4.6. The pertinent mediation subsection provides:

§ 4.5.2 The parties shall endeavor to resolve their Claims by mediation which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Mediation Rules of the American Arbitration Association currently in effect.

Request for mediation shall be filed in writing with the other party to the Contract and with the American Arbitration Association. The request may be made concurrently with the filing of a demand for arbitration but, in such event, mediation shall proceed in advance of arbitration or legal or equitable proceedings, which shall be stayed pending mediation for a period of 60 days from the date of filing, unless stayed for a longer period by agreement of the parties or court order.

If mediation failed, the final dispute resolution step was arbitration:

§ 4.6.2 Claims not resolved by mediation shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association, and a copy shall be filed with the Architect.

The GIB, too, focused on alternate dispute resolution. GIB ¶ 18 provides in pertinent part:

Pursuant to N.J.S.A. 40A:11-41.1, all construction disputes must contain provisions for alternate dispute procedures (hereinafter "ADR") for resolving disputes that may arise under construction contracts. Since the contract between the parties relates to construction within the Township of South Orange Village, the following ADR procedures are hereby adopted:

A. The parties shall attempt to resolve all disputes pursuant to this contract by good faith negotiations. If a dispute is unable to be resolved through verbal agreement, either party may reduce the dispute to writing, which the parties shall then attempt to resolve within five (5) business days. If the parties are unable to resolve the dispute within five (5) business days, then either party may seek the appointment of a mediator by notifying the other party, in writing, of such a request.

B. Upon a demand for mediation, the parties shall attempt to agree upon a mediator. If the parties are unable to agree upon a mediator, then the Township of South Orange Village shall obtain a list of retired Supreme Court Justices and Superior Court Judges, who have agreed to make themselves available for this purpose. When the list is produced, the parties shall review the list and indicate the judges that they want struck. The list with the struck judges shall be exchanged and the most senior judge remaining on the list shall be contracted. If that judge accepts the appointment as mediator, the mediation shall be conducted within ten (10) business days. If the judge does not accept the appointment, the parties shall then go to the next senior judge on the list until a mediator is reached.

On March 2, 2006, plaintiff filed a summary action pursuant to N.J.S.A. 2A:23A-4(b) to compel the Township to arbitrate the dispute between the parties before the AAA. The chancery judge executed an order to show cause and on March 21, 2006, the Township filed an answer and certifications from the Township's purchasing agent and counsel opposing the relief sought.

After oral argument, the judge denied Pacillo's request to compel arbitration and we denied leave to file an interlocutory appeal. After a two-day bench trial, the judge issued a written decision on June 12, 2007, in which she found that the alternate dispute resolution provisions of AIA Form A201 and GIB ¶ 18 were ambiguous because they were susceptible of two different interpretations: (1) Arbitration is mandated by AIA Form A201 if mediation was not successful, as advocated by Pacillo, or (2) the GIB provision superseded AIA Form A201, as advocated by the Township, permitting resort to a judicial forum if mediation was not successful. The judge found that there was no meeting of the minds on this issue, rendering the arbitration provision a nullity. Accordingly, an order was entered on July 24, 2007, dismissing Pacillo's complaint with prejudice. This appeal followed.

The construction of a contract is a question of law. Healy v. Fairleigh Dickinson Univ., 287 N.J. Super. 407, 413 (App. Div.), certif. denied, 145 N.J. 372, cert. denied, 519 U.S. 1007, 117 S.Ct. 510, 136 L.Ed. 2d 399 (1996); see also Kaufman v. Provident Life & Cas. Ins. Co., 828 F. Supp. 275, 282 (D.N.J. 1992), aff'd, 993 F.2d 877 (3d Cir. 1993) (whether a contract is clear or ambiguous is a question of law). As such, we owe no special deference to the chancery judge's construction of the language of the contract. Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). However, when an ambiguity exists, we defer to the judge's factual findings so long as they are supported by adequate, substantial and credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974).

"To determine the meaning of the terms of an agreement by the objective manifestations of the parties' intent, the terms of the contract must be given their 'plain and ordinary meaning.'" Kaufman, supra, 828 F. Supp. at 283. "An ambiguity in a contract exists if the terms of the contract are susceptible to at least two reasonable alternative interpretations." Ibid. However, "[t]he court should not torture the language of [a contract] to create ambiguity." Stiefel v. Bayly, Martin & Fay, Inc., 242 N.J. Super. 643, 651 (App. Div. 1990); see also Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 191 (App. Div. 2002). "'A writing is interpreted as a whole and all writings forming part of the same transaction are interpreted together.'" Nestor v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997) (quoting Barco Urban Renewal Corp. v. Housing Auth. of Atl. City, 674 F.2d 1001, 1009 (3d Cir. 1982)). "'In the quest for the common intention of the parties to a contract, the court must consider the relations of the parties, the attendant circumstances, and the objects they were trying to attain.'" Ibid. (quoting Anthony L. Petters Diner, Inc. v. Stellakis, 202 N.J. Super. 11, 27 (App. Div. 1985)).

We find no ambiguity as to the applicable alternate dispute resolution procedure required in this case by the "Specifications for Renovation and Addition to South Orange Fire Headquarters." AIA Form A201, § 4.5.2, requires the parties to "endeavor to resolve their Claims by mediation . . . in accordance with the Construction Industry Mediation Rules of the American Arbitration Association," "unless the parties mutually agree otherwise." And, here, the parties did mutually agree otherwise, providing in GIB ¶ 18B for mediation by a judge rather than the American Arbitration Association. On the other hand, although the parties could also have agreed to modify the arbitration provision in § 4.6.2 of AIA Form A201 by allowing for resort to the courts or some other final arbiter, they chose not to do so inasmuch as GIB ¶ 18 is silent in this respect.

The absence of ambiguity is consistent with other provisions of the parties' contract. GIB ¶ 18E specifically allowed the parties to agree to binding alternate dispute resolution and that is precisely to what they agreed in § 4.6.2 of AIA Form A201. Additionally, GIB ¶ 7G, providing that specific language governs general language in the event of a discrepancy, mandated enforcement of § 4.6.2 of AIA Form A201.

Our conclusion that there was no ambiguity in the parties' contract is reinforced by the requirement that contract documents must be read as a whole, without undue emphasis on one section to the disregard of others. Borough of Princeton v. Bd. of Chosen Freeholders, 333 N.J. Super. 310, 325 (App. Div. 2000) (citing Schenck v. HJI Assocs., 295 N.J. Super. 445, 452-53 (App. Div. 1996), certif. denied, 149 N.J. 35 (1997)), aff'd, 169 N.J. 135 (2001); Andreaggi v. Relis, 171 N.J. Super. 203, 228 (Ch. 1979). A contract's parts are to be harmonized, if possible, to the end that effect is given to all parts. Republic Bus. Credit Corp. v. Camhe-Marcille, 381 N.J. Super. 563, 568-69 (App. Div. 2005); Cumberland County Improvement Auth. v. GSP Recycling Co., Inc., 358 N.J. Super. 484, 497 (App. Div.), certif. denied, 177 N.J. 222 (2003); Silverstein v. Donohey, 32 N.J. Super. 357, 364 (App. Div. 1954), aff'd sub nom. Silverstein v. Keane, 19 N.J. 1 (1955). Where several writings are made as part of one transaction, they are to be read together as one instrument with a recital in any one of the writings explaining, amplifying or limiting the recitals in the other writings. Schlossman's, Inc. v. Radcliff, 3 N.J. 430, 435 (1950) (citing Schlein v. Gairoard, 127 N.J.L. 358, 360-61 (E. & A. 1941)); see also Lawrence v. Tandy & Allen, Inc., 14 N.J. 1, 6 (1953); Petters Diner, supra, 202 N.J. Super. at 21; Nestor, supra, 301 N.J. Super. at 210.

The contract here was unambiguous and should have been enforced as written. Karl's Sales & Serv., Inc. v. Gimbel Bros., Inc., 249 N.J. Super. 487, 493 (App. Div.), certif. denied, 127 N.J. 548 (1991); see also Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960); Levison v. Weintraub, 215 N.J. Super. 273, 276 (App. Div.), certif. denied, 107 N.J. 650 (1987). Even if it was ambiguous, it should have been strictly construed against the Township, the party preparing it. Karl's, supra, 249 N.J. Super. 493. In light of our interpretation of the contract as a whole, the other issues raised by Pacillo are moot and we do not address them in this opinion.

Reversed and remanded for entry of an order compelling the Township to submit to binding arbitration with the American Arbitration Association.

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