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U.S. Home Corp. v. West Pleasant - CPGT


March 6, 2009


On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-4163-07.

Per curiam.


Argued February 3, 2009

Before Judges Gilroy and Chambers.

This is an action under the New Jersey Arbitration Act of 2003 (Act), N.J.S.A. 2A:23B-1 to -32. Defendant Four G's Land, LLC, appeals from the April 2, 2008 order of the Law Division that affirmed the arbitration panel's (the panel) award determining Four G's and co-defendant West Pleasant - CPGT, Inc., jointly and severally liable to plaintiff, U.S. Home Corporation, d/b/a Lennar Homes, for the return of a $1,510,000 real property contract deposit.*fn1 We affirm.

Plaintiff, West and Four G's entered into a real estate contract that contained an arbitration clause. On November 9, 2006, defendants filed a demand for arbitration before the American Arbitration Association (AAA) alleging a breach of contract. Plaintiff counterclaimed.

On December 5, 2007, the panel issued its award, finding that plaintiff had properly terminated the contract, and determining defendants jointly and severally liable for the return of plaintiff's deposit in the amount of $1,510,000. On December 17, 2007, plaintiff filed an action in the Law Division to confirm the award. On January 16, 2008, the trial court entered an order to show cause (OTSC), returnable on February 8, 2008. Four G's opposed the action and sought to vacate or modify the award. On March 14, 2008, the court continued the hearing. On April 2, 2008, the court entered an order confirming the award and denying Four G's application to modify or vacate the award.


Four G's is the owner of a parcel of land in Jackson Township designated on the tax map as Lots 4.02 and 5.01 in Block 84.01. West is the owner of adjoining Lots 3 and 4.01 in Block 84.01. The four lots, collectively, are referred to as "the property."

On August 9, 2005, defendants entered into a contract (the agreement) with plaintiff for plaintiff to purchase the property. Pursuant to the agreement, defendants were obligated to obtain "approval of a subdivision plan to develop the property [into] 42 building lots . . . together with open space improvements." Accordingly, plaintiff's performance under the agreement was conditioned on defendants "obtaining preliminary and final major subdivision approval for the [p]roject together with all other required regulatory permits and approvals required for the development of the [p]roject . . . ."

The purchase price for the property was $8,400,000; the contract deposit was $1,510,000. Plaintiff paid $10,000 of the deposit to defendants' attorney to hold in escrow, pending closing of title. Plaintiff paid the balance of the deposit, $1,500,000, to defendants, collectively, as the "seller" in two installments of $750,000 each. Unlike the initial $10,000 deposit, there was no requirement that the remaining $1,500,000 be held in escrow. Regarding the deposit monies, the agreement did not address the allocation or sharing of the funds between defendants.

In consideration for the first payment of $750,000, defendants agreed to deliver to plaintiff a mortgage in recordable form on Lot Nos. 2, 3, and 4.01 in Block 84.01 owned by West. A copy of the proposed note and mortgage were attached to the contract. On September 12, 2005, West executed and delivered the note and mortgage. The checks, encompassing the $1,500,000 portion of the deposit, were payable to West or its representative. Four G's did not directly receive any of the deposit funds.

Paragraph 40 of the agreement contained an arbitration clause:

Any controversy or claim arising from or relating to this contract or the breach thereof shall be settled by arbitration administered by the [AAA] under its Arbitration Rules for the Real Estate Industry and judgment on the award rendered by the panel of three (3) arbitrator(s) may be entered in any court having jurisdiction thereof.

(d) The award rendered by the arbitrators consisting of a panel of three arbitrators shall be final and judgment may be entered upon it, in accordance with applicable law in any court having jurisdiction thereof.

On August 9, 2006, defendants notified plaintiff that it had breached the agreement by failing to post performance guarantees required by the governmental agencies having jurisdiction over the subdivision and site plan application. Defendants gave plaintiff thirty days to cure the stated breach, advising plaintiff that, in the event the breach was not cured within the allotted time, defendants were going to terminate the agreement and forfeit plaintiff's deposit as "agreed upon liquidated damages."

On August 25, 2006, plaintiff responded to defendants that it was not in breach of the agreement:

As detailed below, the [a]greement specifically provides that "Purchaser's continued performance of the [a]greement . . . is expressly subject to and contingent upon Seller obtaining the Development Approvals" needed for development of a 42 lot[] residential subdivision, including an effective Freshwater Wetlands Letter of Interpretation ("LOI"). Because Seller has not satisfied the Development Approval contingency, [plaintiff] is not required to perform and, hence, cannot be in default under the [a]greement for any failure to perform.

As to the LOI, plaintiff stated:

[The Department of Environmental Protection ("DEP")] issued an LOI for the site on May 1, 2001. That LOI classified some of the wetlands as intermediate resource value (requiring a 50 foot buffer or transition area) and other of the wetlands as ordinary resource value (requiring no buffer or transition area). . . . That LOI would have permitted development of the 42 lot project specified in the Agreement and as approved by the Planning Board.

However, the 2001 LOI has expired, and on April 11, 2006[,] DEP reissued an LOI for the site. The reissued LOI reclassified some of the wetlands from intermediate resource value to exceptional resource value, thus increasing the required buffers for the reclassified wetlands from 50 feet to 150 feet. . . . These buffers would result in the loss of approximately 9 to 10 building lots and would require redesign of a stormwater basin and realignment of a road. . . . Hence, the reissued LOI failed to satisfy the requirement of the Agreement for Development Approvals that authorize development of the 42 lot residential subdivision.

In June 2006, after defendants engaged in discussions with the DEP, the DEP provided an amended LOI, and then provided a second amended LOI on July 26, 2006. The second amended LOI provided that development would be permitted "'in those areas not considered absolutely essential for the maintenance of the wetlands habitat.'" However, because it did not specify what areas the DEP deemed non-essential, plaintiff found the amended LOI "ineffective to satisfy the Development Approval contingency." On August 25, 2006, plaintiff terminated the agreement and demanded the return of its deposit monies.

On November 3, 2006, defendants filed a demand for arbitration with the AAA. On November 28, 2006, plaintiff filed a counterclaim. On May 7, 2007, the panel issued a scheduling and procedure order setting forth the dates by which the parties were to exchange documents, and the dates for the hearing. The documents were to be exchanged by June 22, 2007, and the hearing was scheduled for September 11, 12, 19, and 20, 2007.

On May 30, 2007, George Glory, the managing member of Four G's, suffered a stroke, rendering him temporarily unable to speak. On June 21, 2007, counsel for defendants advised plaintiff of Glory's condition and requested that the discovery deadlines be extended and the hearing dates adjourned. On July 11, 2007, the parties agreed to extend the document exchange date to August 3, 2007, with defendants serving their expert report by August 31, 2007, and to reschedule the hearing for October 9, 10, 17, and 18, 2007. The panel agreed.

On August 23, 2007, West notified plaintiff that it had retained new counsel. Original counsel, however, continued to represent Four G's in the action. On September 10, 2007, West's counsel made a request of the AAA for an extension of the date to exchange documents and serve expert reports. He asserted that an adjournment was necessary because of Glory's continued health problems, and that a principal of West had been unavailable since counsel was retained, as he was attending to a sick relative in West Virginia. Counsel requested that West be permitted to provide documents within fourteen days, and serve its expert report within twenty-one days.

Although plaintiff objected, the panel granted West's request, but noted that "[t]his shall be the last extension" and that defendants "shall comply in full by th[e] extended dates to everything required of them." Further, the panel provided that the new deadlines would not change the hearing dates, except that the panel cancelled the hearing date of October 9, 2007, because of the unavailability of one of the arbitrators.

On October 3, 2007, Four G's counsel advised the AAA that he would be unavailable for the October 17 and 18, 2007 hearing dates, because he would be in "Florida on a preplanned/prepaid (one year in advance) vacation." He noted that, prior to the cancellation of the October 9 hearing, he had no problem with the dates, as he was "confident [the parties] would conclude th[e] matter in two days." Yet, because of the cancellation, he suggested rescheduling the matter for the week after October 23, 2007. Plaintiff opposed the adjournment request.

On October 9, 2007, the panel denied Four G's request for an adjournment of the arbitration proceeding. At the commencement of the hearing on October 10, 2007, Four G's counsel presented the panel with a letter "to memorialize the sentiment of [his] client in culmination of a series of events and to record its objection to the proceedings commencing today and various decisions":

Much of this case surrounds a [r]e-[i]ssued [LOI] by NJ/DEP . . . . As you may recall, I suggested that the author of that letter, and perhaps the case technician who worked up the file be deposed. What better way to find out what someone meant than to ask them? My request for deposition(s) was denied.

The dates for the hearing were set long ago and when a scheduling conflict arose for me, my request for adjournment was denied. It is interesting that my request for the adjournment only became necessary when the panel, without coordination in the least with the litigants, unilaterally cancelled the hearing long scheduled for October 9th. That decision set into motion [a] chain of events whereby further prejudice has been visited upon my client in the form of forcing the hearing to be concluded in one day or be continued on dates when it is well known that neither my client nor I can attend.

If all of this were not enough, and in the face of medical documentation (see attached letter from Dr. Faisti), a capricious, if not malevolent decision to force Four G's to proceed first at the hearing, despite being the second of two listed claimants, only piled on prejudice to my client. Besides adding insult to injury - it skewed the p[l]aying field hopelessly.

Attached to counsel's letter was a letter from Glory's treating physician requesting that "any legal action in which [Glory] is a participant [] be delayed until he has more improvement in his ability to process information." In particular, the doctor stated, "[a]lthough [Glory] has progressed with physical and occupational therapy, as well as speech therapy, he still has some decrease in memory and cognition which would make it difficult for him to process information properly."

The panel denied the adjournment request and proceeded with the hearing. At the conclusion of the proceedings on October 10, 2007, after determining that the parties had no further evidence to present, the panel cancelled the hearing dates of October 17 and 18, 2007. On October 12, 2007, the panel issued a second scheduling and procedure order that provided in relevant part:

2. [Defendant Four G's] may serve and file with the [AAA] case manager an affidavit by [] Glory by October 31, 2007.

3. [Defendant Four G's] may serve and file with the AAA case manager additional documents relating to a proffered consent order with the New Jersey [DEP] as to the interpretation of matters in issue in this proceeding by October 31, 2007.

4. The parties may serve and file with the AAA case manager post-hearing briefs . . . presenting their legal and factual arguments, including any comments or objections relating to the supplemental submissions allowed by paragraphs 2 and 3 above. The parties shall include in their briefs comment about the precise remedies proposed. The briefs shall be served and filed by November 7, 2007.

The panel concluded that, after review of the above submissions, it would decide if further testimony was necessary and, if so, schedule the testimony through the AAA case manager; if no further testimony was necessary, it would close the hearing.

On October 30, 2007, Four G's forwarded Glory's certification to the AAA. After the parties made further submissions, the panel entered an award on December 5, 2007. The panel found that plaintiff "properly terminated the agreement pursuant to the provisions of paragraph 15 (e) because Development Approvals, as that term is defined in the agreement, did not appear 'likely to be obtained.'" Specifically, it explained that the LOI from the DEP "contained ambiguities that the [DEP] was unwilling to change. Those ambiguities meant that a 'valid and effective' LOI 'substantially in conformance' with the project contemplated by the agreement appeared 'not likely to be obtained' from the DEP."

Furthermore, the panel concluded that plaintiff was not in default under the agreement at the time it elected to terminate it. Accordingly, the panel awarded plaintiff $1,510,000, to be paid by defendants jointly and severally, together with post-award interest.

On December 20 and 21, 2007, Four G's received two letters from the DEP addressing the ambiguities in its previously issued LOIs. Consequently, on January 3, 2008, Four G's requested that the panel reconsider its decision as the letter had not been available during the hearing, and as such, constituted newly-discovered evidence. The panel denied Four G's request that it consider the letters because it did not have authority to do so.

On January 16, 2008, plaintiff filed a summary action, seeking to confirm the arbitration award. In opposition, Four G's argued that the award should be vacated because the panel improperly refused to postpone the hearing after Four G's had established good cause for the postponement, and refused to consider evidence that was material to the controversy. Alternatively, Four G's argued for modification of the award, because it believed West was solely responsible for repayment of the deposit monies.

At the conclusion of the February 8, 2008 hearing, the court determined that Four G's had not proffered any evidence in support of the procedural errors asserted. Accordingly, the court adjourned the matter to provide the parties time to submit certifications as to why they believed that the court should, or should not, vacate the award under N.J.S.A. 2A:23B-23a(3).

After the parties submitted their certifications, the hearing continued on March 14, 2008. As to the procedural issues, Four G's argued that it was improper to have held the arbitration hearing when Glory could not attend, because he was the individual who had negotiated the agreement on behalf of Four G's. In addition, Four G's asserted that the panel had improperly refused Four G's request to depose a DEP employee.

Concerning the issue of defendants' joint and several liability, Four G's argued that the $1,500,000 deposit went to West. Four G's asserted that it never accepted liability because it did not execute the note or mortgage securing the return of the deposit monies.

West countered that any allocation of liability between defendants should have been raised as an issue before the panel, or brought as a cross-claim in the matter before the court.

Because the issue was not so asserted, West contended that the matter was improperly before the court. The court agreed, determining that any dispute between the sellers had not been raised in the arbitration proceeding and "that if there were any credits due and owing between the sellers, that there's nothing to prohibit the sellers from seeking remedies at law."

As to Four G's procedural arguments, the court stated:

The [a]rbitration [p]anel was aware of Mr. Glory's medical condition . . . . However, there was no written request to . . . extend the hearing for the purpose of allowing Mr. Glory to further rehabilitate himself. The [c]court . . . sought to review the medical records of Mr. Glory to see what his condition was at and around the time of the [a]rbitration hearing. Those records, for whatever reason, are sparse, if nonexistent. The only thing the [c]court has to review is a one-page letter from [] the treating physician who comes to a net opinion that his cognitive abilities were hampered but doesn't provide the [c]court with any basis to come to a conclusion on its own as to what Mr. Glory's cognitive abilities were. Unfortunately, there was no demand for an adjournment in writing or otherwise reflected in some type of record that the [c]court can seize upon other than this one letter that was presented at the time of the hearing when all of the [a]rbitrators were there, when they certainly had expended time to travel to the location, as well as the other parties. Four G's did have the opportunity to protect themselves from this eventuality. In fact, the [a]rbitrators, if they had been a little quick to make this determination, provided Four G's an opportunity to supplement the record. As that time there's nothing before the [c]court today to suggest that Four G's attempted to demand a further expansion of the record to permit Mr. Glory to participate. Certainly the [panel] has to make a determination as to what extensions are appropriate. And while . . . the [c]court ultimately may have come to a different conclusion had the matter been before the Superior Court, the parties elected to avoid dispute resolutions for this period and chose AAA [a]rbitration.

The [c]court cannot come to the determination that the [a]rbitrators' denial of the initial postponement in early October was so improvidently granted as to deny the opportunity for Four G's to receive justice. Accordingly, on April 2, 2008, the court entered an order confirming the award.


Four G's first argues that the trial court erred in confirming the arbitration award because the panel should have postponed the hearing because of Glory's ailing health. Four G's contends that Glory possessed knowledge relevant to the contract dispute and, although Glory was permitted to supply an affidavit post-hearing, he was not able to witness the proceedings or hear the testimony of other witnesses. In addition, Four G's asserts that the panel improperly refused to permit the deposition of a DEP representative prior to the hearing.

An arbitration award is presumed valid. Del Piano v. Merrill Lynch, 372 N.J. Super. 503, 510 (App. Div. 2004), certif. granted, 183 N.J. 218, certif. dismissed as improvidently granted, 195 N.J. 512 (2005). Accordingly, a party "seeking to vacate it bears a heavy burden." Ibid. On appeal from a trial court's decision denying a motion to vacate an arbitration award, our review is de novo, that is, "'[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Id. at 507 (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

When parties agree to arbitrate, they grant the arbitrator the power "to issue an award that resolves a dispute." Kimm v. Blisset, 388 N.J. Super. 14, 26 (App. Div. 2006). However, this does not mean that the arbitrator's authority is unlimited. Ibid. Instead, "[t]he traditional formulation of an arbitrator's powers is embodied in the common law doctrine of functus officio." Ibid. Simply put, that doctrine provides that an arbitrator's power "is terminated immediately after making a final decision and is then at an end, regardless of the correctness of that decision." Ibid.

Arbitration is solely "a creature of contract." Id. at 25. Accordingly, "the duty to arbitrate, and the scope of the arbitration, are dependent solely upon the parties' agreement."

Ibid. (quoting Singer v. Commodities Corp., 292 N.J. Super. 391, 402 (App. Div. 1996)). Therefore,

[i]f they have not agreed in advance, the parties cannot, for example, force an arbitrator to give reasons for an award or to write a decision explaining his or her view of the facts. Neither can they appeal from the award as they could if they had proceeded to litigate their matter in court.

Rather, the rights of the parties following issuance of an award, in the absence of an agreement to the contrary, are entirely governed by statute. [Ibid.]

After January 1, 2003, arbitration agreements are governed by the Act, N.J.S.A. 2A:23B-3. That Act "codifies [the State's] policy favoring arbitration." Malik v. A. Fred Ruttenberg, 398 N.J. Super. 489, 494-95 (App. Div. 2008). Pursuant to N.J.S.A. 2A:23B-22, on an action to confirm the award, "the court shall issue a confirming order unless the award is modified or corrected pursuant to section 20 or 24 of this [A]ct or is vacated pursuant to section 23 of this [A]ct." However, "the [Act] precludes judicial interference with an arbitrator's award except in extremely limited circumstances." Id. at 495; see also Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 358 (1994) ("Basically, arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators.").

The grounds for vacating an arbitration award under the Act are limited to the six reasons contained in N.J.S.A. 2A:23B-23a. That statute provides in pertinent part, on the filing of a summary action, the trial court may vacate an arbitration award if: "(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to section 15 of this [A]ct, so as to substantially prejudice the rights of a party to the arbitration proceeding . . . ." N.J.S.A. 2A:23B-23a. The other five subsections of the statute are not applicable to this matter. In addition, N.J.S.A. 2A:23B-24 provides only three limited grounds on which a trial court may modify or correct an arbitration award, none of which are applicable here.

Four G's primary argument is that it was prejudiced as a result of the denial of an adjournment so that Glory could testify at the arbitration hearing. We disagree.

In June 2007, Four G's notified plaintiff that Glory had suffered a stroke. At that time, it requested an extension of the upcoming discovery deadlines and an adjournment of the hearing dates then scheduled for early September 2007. Plaintiff agreed to the extension and adjournment. With the panel's agreement, the hearing was rescheduled for October 9, 10, 17 and 18, 2007.

On October 3, 2007, just one week before the hearing was to begin, counsel for Four G's sought another adjournment of the hearing due to his vacation plans. The panel denied that request. Thereafter, on the first morning of the hearing, counsel for Four G's objected to the commencement of the hearing. In addition to his vacation, counsel argued for the first time that the hearing should be adjourned because Glory's failed health prevented him from attending. He attached to his written objection a letter from Glory's physician, dated October 9, 2007, requesting that all legal proceedings in which Glory was involved be postponed until he was more cognitively acute. However, the doctor neither supported his opinion with any documentation, nor expressed a time when Glory would be able to appear at the arbitration proceeding. The medical exhibits included in the trial court record are from examinations in May, having little relevance upon Glory's condition at the time of the hearing in October.

The arbitrators denied Four G's request, presumably on the basis it was untimely and unsupported by appropriate evidence. Accordingly, we determine that the trial judge properly denied Four G's request to vacate the award on the ground that the panel did not postpone the hearing for Glory to attend. Four G's failed to meet its burden demonstrating that the panel failed to postpone the hearing "upon showing of sufficient cause for postponement". N.J.S.A. 2A:23B-23a(3).

Moreover, even if the panel improperly denied Four G's request for an adjournment of the arbitration hearing, we conclude that the panel's decision was harmless. Although the panel proceeded with the hearing, it entered a second scheduling order, permitting post-hearing submissions by the parties, including certifications by Glory and any letters that the DEP would issue interpreting their previous LOIs. The panel refrained from closing the hearings until it could determine whether, from the post-hearing submissions, further testimony was required.

On October 30, 2007, Four G's submitted Glory's certification; however, that certification merely provided that Glory believed plaintiff was taking care of a septic permit issue in dispute between the parties. It did not address the ambiguous LOIs or any matter relating to plaintiff's alleged breach of contract. Accordingly, Four G's has failed to make a "showing of sufficient cause for postponement" that has substantially prejudiced its rights in the arbitration. N.J.S.A. 2A:23B-23a(3).

Four G's argues next that it was prejudiced by the panel denying it "the opportunity to present testimony by a representative of the [DEP]." This argument has no merit.

N.J.S.A. 2A:23B-17b grants an arbitrator discretion to permit a party to submit a deposition of any witness for use as evidence at the hearing. Generally, however, because extensive discovery is adverse to arbitration's purpose of efficiency in dispute resolution, depositions are not commonplace in arbitration the way that they are readily used in the court system. See Charles J. Moxley, Jr., Discovery in Commercial Arbitration: How Arbitrators Think, Dispute Resolution Journal, Aug. - Oct. 2008 (2008) (As opposed to courts, "[a]rbitrators have a strong belief that witnesses should testify only once, and that is at the hearing. So there is no need to incur the expense of earlier (and generally protracted) depositions.").

Here, Four G's allegation of prejudice arises from the panel's denial of its request to take deposition of a DEP employee. In denying its request to depose the DEP representative, the panel members offered Four G's an alternative: they would issue a subpoena that would be enforceable in New Jersey courts so that the DEP employee could testify at the hearing. Accordingly, Four G's had an avenue to pursue if it wished to present the testimony of the DEP employee, but it did not pursue it. In fact, it did not request a subpoena for the DEP employee and omitted the employee's name from the list of witnesses to be called at the hearing. Accordingly, we find no prejudice to Four G's.

Four G's argues next that the panel should have considered the DEP letters it received after the award had been rendered. However, AAA rules specifically provide that an arbitrator may not reconsider the merits of a claim after the award is made; Rule 48 of the Real Estate Industry Arbitration Rules provides that, "[w]ithin 20 days after the transmittal of an award, any party, upon notice to the other parties, may request that the arbitrator correct any clerical, typographical, technical, or computational error in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided." (Emphasis added). This is further supported by the doctrine of functus officio previously discussed. See also Kimm, supra, 388 N.J. Super. at 26 (explaining that an arbitrator's authority is terminated after an award is rendered). Because it lacked the authority to consider anything regarding the dispute after the award was issued, the panel properly excluded the two letters from evidence.

Four G's has failed to make a showing that the arbitrators "refused to consider evidence material to the controversy" to warrant vacation pursuant to N.J.S.A. 2A:23B-23. As the Court of Errors and Appeals has stated, "[w]hat the appellant apparently seeks is an examination of the evidence and a finding by this court that the award of the arbitrators is unreasonable as against the weight of the evidence. It cannot have such review on appeal." Deakman v. Odd Fellows Hall Ass'n, 110 N.J.L. 304, 306 (E & A 1933); see also Empire Fire & Marine Ins. Co. v. GSA Ins. Co., 354 N.J. Super. 415, 421 (App. Div. 2002) (holding that unless the parties agree otherwise, "the appropriate judicial scope of review does not encompass errors of law or facts").


Four G's also argues that "the trial court[']s decision to confirm the arbitration award should be reversed where it has returned an unjust result." It contends that, "[t]o now uphold a decision reached by the [a]rbitrators finding Four G's jointly and severally liable where Four G's neither received any of the advance deposits paid by the [p]laintiff to [West] nor executed a [m]ortgage or [m]ortgage note for its proper[t]y is patently unfair and is an unjust result." Not so.

Initially, Four G's does not offer this court any legal authority to support its argument. This is presumably so because there is no provision in N.J.S.A. 2A:23B-23a for a vacation of an arbitration award which produces an unjust result. Moreover, because the arbitrator's decision, imposing joint several liability on the defendants is based on a reasonable interpretation of the contract language, we are satisfied that the panel did not "return[] an unjust result."

The agreement designated defendants, collectively, as the "seller" and plaintiff as the purchaser of the property. Although it did not address whether the defendants would be jointly and severally liable in the event of their breach, it did provide that, "[i]n the event the Advance of Purchase Price of [$750,000 and/or $1,500,000] whichever amount has been advanced to Seller is not paid to Purchaser within six (6) months from date of termination, Purchaser may exercise forthwith all legal rights available to Purchaser . . . ." Because defendants were collectively referred to as the seller in the agreement, the agreement essentially provided that both defendants would be liable for return of plaintiff's deposit monies. By awarding plaintiff $1,510,000*fn2 and holding defendants jointly and severally liable, that is exactly what the arbitrators did.

The panel not only rendered a reasonable award, but also properly limited its award to the issues presented in arbitration. In their demand for arbitration, defendants sought the forfeiture of plaintiff's deposit. Plaintiff counterclaimed, requesting that the agreement be terminated and defendants return its deposit monies. At no time did Four G's file a cross-claim against West for indemnification, notwithstanding its allegation that West was the holder of the deposit monies. Thus, the panel decided all issues presented in the arbitration.

Simply put, apportionment of liability between defendants in the event they were held liable was not a matter submitted to arbitration; conversely, the issues submitted were whether plaintiff properly terminated the agreement and whether plaintiff was entitled to the return of its deposit monies. Although Four G's concedes that allocation of liability was not an issue raised in arbitration, it argues that it was not raised in the proceeding because the issue of liability between it and West only arose after the award was rendered. We conclude that the argument is without merit. Because the issue was not presented in arbitration, it cannot be the subject of a summary action in the Law Division for confirmation. See Kimm, supra, 388 N.J. Super. at 26 (an arbitrator has no authority to make determinations on the merits of a dispute after an award has been rendered).

As noted by Judge Wellerson, the issue of liability between defendants is fundamentally "a separate action" from the confirmation proceedings. The judge explained that:

[t]he [c]court finds that any dispute between the [defendants] is not an area for the [a]rbitrators to determine and that if there were any credits due and owing between the sellers, that there's nothing to prohibit the sellers from seeking remedies at law. Certainly the [a]rbitration hearing was established in order to resolve the dispute between the purchasers and the sellers. That was the function of the [a]rbitration [p]anel and that was the determination to which they came to.

Accordingly, the arbitrators did not exceed their power in holding defendants jointly and severally liable for the return of plaintiff's deposit monies.*fn3 Ibid.


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