On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6214-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Payne, Simonelli and Accurso.
This case is back to us as the result of the attempt by defendants National Home Insurance Company and Home Buyers Warranty Corporation III to circumvent our holding in Frumer v. National Home Ins. Co., 420 N.J. Super. 7 (App. Div. 2011) (Frumer I). By leave granted, plaintiffs Alon and Michelle Frumer appeal from the August 5, 2011 Law Division order, which granted defendants' motion to compel arbitration of all of plaintiffs' claims against defendants, including claims allegedly arising from defendants' conduct for breach of warranty and bad faith (the non-warranty claims) that were preserved for trial. We reverse, and remand for a jury trial on the non-warranty claims.
In Frumer I, we held as follows:
Where, such as here, the homeowner files a claim against the warranty for workmanship/ systems defects, the warranty clearly and unequivocally establishes binding arbitration as the exclusive remedy. There is, however, no election of remedies for a dispute involving a major structural defect claim. The warranty clearly and unequivocally establishes binding arbitration as the exclusive remedy. We are, therefore, satisfied that the arbitration provisions applicable here reflect an enforceable agreement that establishes arbitration as the exclusive remedy for the dispute involving plaintiffs' claims against the warranty. Plaintiffs' breach of warranty and bad faith claims are preserved and resolution of those claims, if necessary, shall abide the outcome of the arbitration.
Reading Frumer I in its entirety, there is no question that only plaintiffs' claims against the warranty were subject to binding arbitration, and their non-warranty claims were not governed by, or subject to, arbitration under the warranty and were preserved for trial in the Superior Court pending the arbitration's outcome. To interpret or apply Frumer I any other way, as defendants did before the trial court and attempt to do here, is ad absurdum.
Defendants did not file a petition for certification with our Supreme Court, Rule 2:12-3(a), or a motion for reconsideration or clarification with this court, Rule 2:11-6, and they do not challenge Frumer I in this appeal. Thus, the arbitration issue has been decided on the merits and is the law of the case, which must be followed. Lanzet v. Greenberg, 126 N.J. 168, 192 (1991). The trial court violated the law of the case doctrine by considering the arbitration issue anew. See Jersey City Redev. Agency v. The Mack Props. Co. #3, 280 N.J. Super. 553, 562 (App. Div. 1995) (holding that "[i]t is the peremptory duty of the trial court, on remand, to obey the mandate of the appellate tribunal precisely as it is written").
In addition, plaintiffs' non-warranty claims are not claims subject to arbitration. Those claims must be resolved by a jury trial in the Superior Court. See Pickett v. Lloyd's, 131 N.J. 457, 470-71 (1993); Caparrelli v. Rolling Greens, Inc., 39 N.J. 585, 593-94 (1963); Yaroshefsky v. ADM Builders, Inc., 349 N.J. Super. 40, 54 (App. Div. 2002). The issue of bad faith in particular must be determined by the trier of fact. N.J. Title Ins. Co. v. Caputo, 163 N.J. 143, 156 (2000).
We further hold that evidence of damages at trial of the non-warranty claims shall be those flowing directly from the defendants' alleged breach of warranty and bad faith. Reversed and remanded for a trial by jury on plaintiffs' non-warranty claims ...