September 17, 2009
CHRISTOPHER HAYDEN AND ELIZABETH HAYDEN, PLAINTIFFS-APPELLANTS,
ANTHONY E. D'AMICO, INDIVIDUALLY, ANTHONY E. D'AMICO, T/A D'AMICO CONSTRUCTION, INDIVIDUALLY, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Civil Part, Morris County, Docket No. L-2327-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 2, 2009
Before Judges Payne and Waugh.
Plaintiffs Christopher and Elizabeth Hayden appeal from the trial court's affirmance of an arbitration award entered in their favor against defendant D'Amico Construction, L.L.C. (D.C.). On appeal, plaintiffs argue that the trial court erred by not amending the award to entitle them to treble damages as well as making Anthony D'Amico personally liable for the award. We affirm.
We glean the following facts from the record.
In April 2004, plaintiffs were seeking a contractor to renovate their home. They had worked with an architect and had blueprints available for prospective contractors to look at in order to prepare their bids. It is unclear from the record, but it appears that plaintiffs were referred to D'Amico by their architect, Michael V. Testa.
After only speaking on the phone, plaintiffs forwarded D'Amico a copy of the blueprints for the proposed renovations. D'Amico inspected plaintiffs' home, when they were not present, and prepared a contract for their review on April 26, 2004. The contract listed the price of the proposed renovations as $78,255, and contained a payment schedule requiring $15,000 in total before the start of the work and then additional payments tied to different milestones in the construction process. The contract was signed by D'Amico and also by Elizabeth Hayden. The name as it appears on the letter head of the contract is "D'Amico Construction." Nowhere in the contract is there a reference to D'Amico Construction operating as a limited liability corporation or other type of business entity.
By August 4, 2004, plaintiffs had written two checks to "D'Amico Construction" totaling $15,000. The checks were endorsed by "Anthony E. D'Amico" as well as "D'Amico Construction." Plaintiffs concede that, in July 2004, they began receiving invoices from "D'Amico Construction, LLC."
Work began on the plaintiffs' home in the fall of 2004 and progressed such that plaintiffs paid an additional $43,450. In early December 2004, plaintiffs approached D'Amico to discuss their concern about a pitch in the garage roof. According to D'Amico, he offered to reconstruct the roof and share the costs with the plaintiffs, but they declined his offer.
On December 8, 2004, plaintiffs' then attorney sent a letter to D'Amico informing him that he had advised plaintiffs to "have a home inspection performed by a licensed structural engineer/home inspector and a report prepared so that the work completed  to date c[ould] be reviewed and assessed by an independent professional."
On December 10, 2004, the Washington Township Police Department responded to a call at plaintiffs' residence. Elizabeth Hayden reported that D'Amico had "sent a crew to the location to retrieve items he believed belonged to him." She was informed by the police that since the "true ownership of the items was not discernible," she would need to proceed with a civil action if she wished to pursue the matter.
The professional engineer hired by the plaintiffs to inspect D'Amico's work issued his report on December 14, 2004. He found seven items not in compliance with the original plans or building permits, including the pitch of the garage roof. The report was forwarded to D'Amico, and several letters from plaintiffs' counsel seeking to discuss the matter followed.
In April 2005, an architect retained by D'Amico issued a report stating that the blueprints were incomplete, specifically with respect to the roof line. In response, Testa prepared a report refuting these statements.
In June 2005, plaintiffs obtained a bid of $57,000 to make any necessary corrections to the work already completed on their home and to finish the renovations.
Plaintiffs' complaint was filed in the Law Division on August 18, 2006. They alleged among other things: breach of contract; general negligence; fraud; and violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -181. The matter was scheduled for trial in December 2007. Shortly before the trial date, the parties consented, off the record, to having the matter resolved through arbitration. A letter prepared by plaintiffs' counsel, on December 28, 2007, stated that the parties had agreed "to submit the  matter to binding arbitration." (Emphasis added). This categorization was again used by plaintiffs' counsel in a letter dated February 11, 2008, requesting further adjournment of trial because the "binding arbitration [was] scheduled to take place on March 6th and 7th." (Emphasis added).
After hearing the matter, the arbitrator issued his decision on March 17, 2008. He concluded that plaintiffs had contracted with D.C. as opposed to D'Amico individually. He further found:
5. As the contract clearly falls within the purview of the provisions of the Consumer Fraud Act[,] N.J.S.A. 56:8[-1 to -181,] and the provisions of the Home Improvement Practices rules of the New Jersey Administrative Code,  N.J.A.C. [13:45A-16 to -16.2]. Respondent cannot be given credit for extras in as much as they were not contracted for in accordance with the requirements of the law requiring they be in writing in the manner prescribed.
6. Likewise Respondent was guilty of certain technical violations of the laws such as the requirement that a start and end date of the work be incorporated into the agreement. The proofs of the actions of the Respondent however did not rise to the level of unconscionable business practices as prohibited by the act, nor were the technical violations causative of any of the damages sustained by the Claimant. As a result the Claimants are not entitled to treble damages but the law requires that legal fees be assessed.
Plaintiffs were awarded $24,045 in damages, the difference "between the amount of the contract and the cost of completion plus sums paid to the Respondent," and $6,500 in attorney fees.
On April 29, 2008, plaintiffs moved before the trial court to amend the arbitrators award. In their motion papers, they requested that the award be modified to "(1) render judgment against Anthony E. D'Amico individually and (2) award $72,135 in treble damages." At oral argument on the motion, the trial judge reserved decision based on a proposed settlement offer. On June 4, 2008, plaintiffs' counsel informed the court that settlement had not been reached and requested that the court decide the motion.
On August 4, 2008, plaintiffs' motion was denied in its entirety. The trial judge, who provided a brief statement of reasons on the order, confirmed the arbitrator's award. Plaintiffs moved for reconsideration, arguing again that they did not contract with D.C., but rather with D'Amico individually, and also that they had not agreed to binding arbitration. The motion for reconsideration was denied on October 7, 2008.
Plaintiffs filed their notice of appeal on December 8, 2008. The trial judge issued a supplemental opinion on February 19, 2009.
Plaintiffs raise the following points on appeal:
THE COURT SHOULD REVERSE THE DECISION BELOW AND MODIFY THE ARBITRATION AWARD TO CONFORM W[I]TH NEW JERSEY LAW.
IF THE TRIAL RECORD FAILS TO CLARIFY WHAT ARBITRATION THE PARTIES AGREED TO CONDUCT IN LIEU OF TRIAL, THEN THE PROPER REMEDY SHOULD HAVE BEEN TO APPLY THE LESS RESTRICTIVE ARBITRATION ACT OR, ALTERNATIVELY, VACATE THE AWARD ENTIRELY AND REMAND THE MATTER FOR TRIAL ON THE MERITS. APPLYING AN ARBITRATION ACT THAT DOES NOT PROVIDE FOR ANY JUDICIAL REVIEW AND WHICH PLAINTIFFS NEVER AGREED TO ARBITRATE UNDER IS UNFAIR.
Plaintiffs appeal turns on whether their case was submitted to arbitration under the Alternative Procedure for Dispute Resolution Act, N.J.S.A. 2A:23A-1 to -30 (APDRA), or the Arbitration Act, N.J.S.A. 2A:23B-1 to -32, because each act offers a different standard for judicial review. The decision to refer the matter to arbitration was made off the record so we do not have the benefit of a verbatim account of the proceeding that resulted in the decision to send the matter to arbitration. However, such a record is not necessary to resolve the issue.
There are two means by which parties can invoke the APDRA.
Any provision in a written contract whereby the parties agree to settle by means of alternative resolution, as provided in this act, (1) any controversy that may arise from the contract or from a refusal to perform the contract or (2) any written agreement whereby the parties to an existing controversy agree to use alternative resolution as provided in this act, whether the controversy arose out of a contract or otherwise, is valid, enforceable and irrevocable, except upon such grounds as exist at law or in equity for the revocation of a contract. In order for the provisions of this act to be applicable, it shall be sufficient that the parties signify their intention to resolve their dispute by reference in the agreement to "The New Jersey Alternative Procedure for Dispute Resolution Act." [N.J.S.A. 2A:23A-2(a) (citation omitted).]
The construction contract between plaintiffs and D.C. contains no arbitration provision, thereby eliminating the possibility that plaintiffs can invoke the APDRA under subsection (1). Additionally, we cannot find in the record a "written agreement whereby the parties... agree to use alternative resolution as provided in [the APDRA]." While plaintiffs' counsel refers to "the Court's order to submit the  matter to binding arbitration" in his December 28, 2007, letter, no such order is contained in the record and the trial judge, in her supplemental opinion, states that no such order exists. We note an order of disposition dated February 15, 2008, dismissing the case without prejudice as it was scheduled for binding arbitration. Because the APDRA was not invoked by the plaintiffs prior to submitting the matter to arbitration, they can not now seek to invoke its procedures and rules.
The Arbitration Act is much broader in its application than the APDRA. N.J.S.A. 2A:23B-3(c) states: "On or after January 1, 2005, this act governs an agreement to arbitrate whenever made with the exception of an arbitration between an employer and a duly elected representative of employees under a collective bargaining agreement or collectively negotiated agreement." Unlike the APDRA, there is no requirement in N.J.S.A. 2A:23B-3(c) that the agreement be in writing or that it make specific reference to the Arbitration Act.
Additionally, N.J.S.A. 2A:23B-6(a) provides that: "An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract." "Record" is defined in N.J.S.A. 2A:23B-1 as "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form." Plaintiffs' counsel stated in letters, which are certainly a "record" within the definition provided, to opposing counsel and the court that the parties were submitting the matter to "binding arbitration." Both because of the broad reach of the Arbitration Act and the concession of the plaintiffs through their counsel, we find that the plaintiffs submitted to arbitration as governed by the Arbitration Act.
"[T]he scope of review of an arbitration award is narrow. Otherwise, the purpose of the arbitration contract, which is to provide an effective, expedient, and fair resolution of disputes, would be severely undermined." Fawzy v. Fawzy, ___ N.J. ___, ___ (2009) (slip op. at 16). N.J.S.A. 2A:23B-23(a) details the situations in which a court can vacate an arbitration award:
(1) the award was procured by corruption, fraud, or other undue means;
(2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;
(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 act, so as to substantially prejudice the rights of a party to the arbitration proceeding;
(4) an arbitrator exceeded the arbitrator's powers;
(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection pursuant to subsection c. of section 15 of this act not later than the beginning of the arbitration hearing; or
(6) the arbitration was conducted without proper notice of the initiation of an arbitration as required in section 9 of this act so as to substantially prejudice the rights of a party to the arbitration proceeding.
N.J.S.A. 2A:23A-24(a) allows for the modification of an award when:
(1) there was an evident mathematical miscalculation or an evident mistake in the description of a person, thing, or property referred to in the award;
(2) the arbitrator made an award on a claim not submitted to the arbitrator and the award may be corrected without affecting the merits of the decision upon the claims submitted; or
(3) the award is imperfect in a matter of form not affecting the merits of the decision on the claims submitted.
In addition to the above statutory reasons, a court may modify or vacate an arbitration award when the award is "contrary to existing law or public policy." Borough of Glassboro v. Fraternal Order of Police, Lodge No. 108, 197 N.J. 1, 9 (2008) (citations omitted).
On appeal, plaintiffs challenge the factual finding of the arbitrator that they contracted with D.C. and not with D'Amico individually.*fn1 However, the factual findings of an arbitrator under the Arbitration Act are binding both on the trial court and this court, therefore we will not disturb this portion of the award. Amalgamated Transit Union, Local 1317 v. DeCamp Bus Lines, Inc., 382 N.J. Super. 418, 421 (Law Div. 2005) ("The arbitrator's factual findings are not subject to review by this court.").*fn2
Plaintiffs also argue that the arbitrator erred by not awarding them treble damages as required by the Consumer Fraud Act, specifically N.J.S.A. 56:8-19. After finding that D.C. had violated unspecified provisions of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -181, and the Home Improvement Practice rules, N.J.A.C. 13:45A-16 to -16.2, the arbitrator determined that D.C.'s violations were merely "technical violations" precluding plaintiffs from recovery of treble damages. However, "the Consumer Fraud Act makes no distinction between 'technical' violations and more 'substantive' ones." BJM Insulation & Const., Inc. v. Evans, 287 N.J. Super. 513, 518 (App. Div. 1996).
N.J.S.A. 56:8-19 states:
Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefore in any court of competent jurisdiction. In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest. In all actions under this section, including those brought by the Attorney General, the court shall also award reasonable attorneys' fees, filing fees and reasonable costs of suit.
If the arbitrator found that plaintiffs suffered damages as a result of a violation of the Consumer Fraud Act, plaintiffs were indeed entitled to treble damages. Cox v. Sears Roebuck & Co., 138 N.J. 2, 23 (1994) ("[A]n award of treble damages and attorneys' fees is mandatory under N.J.S.A. 56:8-19 if a consumer-fraud plaintiff proves both an unlawful practice under the Act and an ascertainable loss.").
To violate the Consumer Fraud Act, a person must commit an "unlawful practice," either as described in N.J.S.A. 56:8-2 or the regulations permitted under N.J.S.A. 56:8-4. Because we are bound by the factual findings of the arbitrator, we accept that the plaintiffs' only damages resulted from D.C.'s breach of contract and not from the violations of the Home Improvement Practice rules. The arbitrator found that D.C. had breached the construction contract by "fail[ing] to perform the contract... and perform[ing] certain work improperly." However, a breach of contract alone is not sufficient justification for the awarding of treble damages, there needs to be "substantial aggravating circumstances present," Cox, supra, 138 N.J. at 18, such as "bad faith or lack of fair dealing," id. at 20, to elevate the breach to the level of "unconscionable commercial practice." N.J.S.A. 56:8-2. Compare Cox, supra, 138 N.J. at 20 (finding that improper construction created a "dangerous condition" but absence of "bad faith or lack of fair dealing" precluded finding of unconscionable commercial practice) with New Mea Constr. Corp. v. Harper, 203 N.J. Super. 486, 501 (App. Div. 1985) (finding that poor workmanship and substitution of inferior quality materials in addition to breach of contract constituted unconscionable commercial practice in violation of the Consumer Fraud Act).
The arbitrator found "the proofs of the actions of [D.C.] did not rise to the level of unconscionable business practices."
As previously noted, we will not disturb the factual findings of an arbitrator, Amalgamated Transit Union, supra, 382 N.J. Super. at 421, and therefore accept that no "substantial aggravating factors" existed warranting the award of treble damages.
In conclusion, we affirm the trial judge's determination that the parties subjected themselves to binding arbitration under the Arbitration Act. That Act allows for limited judicial review and based on the record on appeal, there is no basis, either statutorily or recognized by the courts, on which to overturn the arbitrators award.