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Feig v. Spirit of the Spung

April 27, 2009


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1307-06.

Per curiam.


Argued: March 11, 2009

Before Judges Cuff and Baxter.

In this appeal, we review an order dismissing plaintiffs' complaint and referring the matter in dispute to arbitration. We reverse.

Plaintiffs Randal Feig and Tammie Feig entered into a contract with defendant Spirit of the Spung, Inc., t/a Great Northeastern Enterprises, for construction of a single family home. The contract required plaintiffs to pay a $22,495 deposit and to promptly apply for a mortgage loan in the amount of $337,425. It also contained a mortgage contingency. If plaintiffs were unable to obtain a commitment for a mortgage loan within forty-five days of receipt of a fully executed copy of the contract, then either party could elect to terminate the contract. Defendant*fn1 could elect to obtain financing for plaintiffs but had thirty days to do so.

In the event plaintiffs defaulted or breached the contract prior to closing, defendant could elect to retain all amounts paid by plaintiffs as liquidated damages. The contract also provided that any dispute or claim arising out of or related to the contract or any breach or interpretation of the contract would be resolved by arbitration.

Plaintiffs paid the deposit. The parties hotly dispute whether plaintiffs diligently pursued the financing required to close the transaction, and thus whether defendant could elect to retain the deposit or seek other damages.

On or about August 14, 2005, plaintiffs filed a complaint against defendant and others in which plaintiffs alleged they made diligent efforts to obtain a mortgage but were unable to do so. They sought return of the deposit paid by them. In its counterclaim, defendant alleged that plaintiffs breached their obligation to immediately and diligently pursue financing to complete the transaction. Defendant also alleged that it entered a contract with a third party incurring damages. On January 17, 2007, plaintiffs filed an amended complaint in which they alleged that the refusal by defendant to return their deposit not only breached the contract but also violated the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -30. They sought contract damages, treble damages and attorneys' fees.

In August 2007, defendant filed a motion for summary judgment and an order enforcing the arbitration clause of the contract. By order dated January 25, 2008, the complaint was dismissed and the dispute was referred to arbitration.

Arbitration of disputes is a highly favored dispute resolution method. Martindale v. Sandvik, Inc., 173 N.J. 76, 92 (2002); Barcon Assocs. v. Tri-County Asphalt Corp., 86 N.J. 179, 186 (1981). The Supreme Court has clearly stated its respect for this dispute resolution forum on many occasions. See generally Muhammad v. County Bank of Rehoboth Beach, 189 N.J. 1, 23 (2006), cert. denied, 549 U.S. 1338, 127 S.Ct. 2032, 167 L.Ed. 2d 763 (2007); Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001); Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993); Barcon Assocs., supra, 86 N.J. at 186. This court has also held that the parties may agree to submit a broad range of claims and disputes to arbitration, and parties may waive remedies created by statute in favor of arbitration. See Quigley v. KPMG Peat Marwick, LLP, 330 N.J. Super. 252, 259 (App. Div.) (enforcing arbitration of discrimination claim as provided by an employment agreement), certif. denied, 165 N.J. 527 (2000). On the other hand, when a party to an agreement invokes rights and remedies conferred by statute, an agreement to arbitrate claims arising from or related to the agreement is enforceable only when it clearly and unmistakably waives the statutory right or remedy. Garfinkel, supra, 168 N.J. at 135.

Here, the arbitration provision states in general terms that any dispute arising out of or related to the contract shall be submitted to arbitration. Paragraph 37 provides:

Any controversy, dispute or claim arising out of or relating to this Contract, as now or hereafter amended, or any breach or interpretation thereof shall be settled by arbitration in accordance with the commercial arbitration rules then in effect of the American Arbitration Association. The award rendered in any such arbitration shall be binding and conclusive on the parties and judgment thereon may be entered in any court of competent jurisdiction.

This paragraph does not clearly and unmistakably waive any statutory right or remedy, such as the rights and remedies provided by the CFA. Accordingly, referral of the dispute to arbitration was not proper ...

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