NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 18, 2013
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4408-10.
Kurt David Raatzs argued the cause for appellant (McDowell Posternock Law, attorneys; Mr. Raatzs, on the brief).
Samuel J. McNulty argued the cause for respondent (Hueston McNulty, P.C., attorneys;
Mr. McNulty, of counsel and on the brief; Edward J. Turro, on the brief).
Before Judges Sabatino, Fasciale and Carroll.
This case arises out of a one-year contract in which appellant, a pool management company, agreed to supply a condominium association with lifeguards and maintenance services for the association's indoor pool. During the term of that contract, a mold infestation was discovered in the pool facilities, prompting government officials to order the pool closed for over seven months while the mold was remediated. The pool management company sued the association for breach of contract, seeking to recover four months of service fees that the association had not paid while the pool was closed.
Over the pool company's objection, the trial court charged the jury that the association's obligation to pay the monthly fees during the period when the pool was closed could be excused under the doctrine of frustration of purpose, a theory that the association had not raised in its affirmative defenses. Having received the guidance of this instruction, the jury found the association was not liable for the four months of disputed fees. The jury also found the pool management company liable on the association's counterclaim for damage it caused to a pool cover.
In this case of first impression, we prospectively hold that the doctrine of frustration of purpose generally should be pleaded in the courts of our state as an affirmative defense by litigants seeking to invoke that doctrine to avoid their contractual duties. Because the frustration doctrine was not expressly raised by the association in this case before trial, and instead was identified, sua sponte, by the trial judge during the charge conference as a more suitable alternative to a proposed charge of impossibility, we reverse the final judgment dismissing the breach of contract claim. To rectify apparent prejudice to the pool company arising from the late notice, we remand for additional discovery focused on that defense, followed by a new trial.
We further direct the trial court, in light of the additional discovery and testimony that may be adduced on remand, to reexamine its finding that the "underlying purpose of [the] contract was conditioned upon the pool being open for use, " and to consider explicitly if that finding concerning the parties' intentions can be reconciled with the contract's provision that "[t]here will be no reduction in charges of the contract amount for any closing."
Lastly, we affirm the counterclaim award and reject appellant's argument that the jury instructions on the counterclaim should have been based upon principles of negligence rather than contract law.
The plaintiff and counterclaim-defendant in this case, JB Pool Management, LLC, ("JB Pool") is a private company that provides lifeguards and pool maintenance services to various customers in New Jersey. Defendant-counterclaimant Four Seasons at Smithville Homeowners Association, Inc. ("Four Seasons" or "the association") is a not-for-profit entity that maintains the common property of a residential community in Galloway Township. The retirement community has approximately 1, 100 houses. The condominium property includes both an outdoor pool and an indoor pool for use by the association's members and their guests.
In or about 2004, JB Pool began entering into annual agreements to provide lifeguard and pool management services to Four Seasons for the indoor pool and the outdoor pool, as well as aerobics classes. Separate contracts were executed for the indoor pool and the outdoor pool. The successive contracts typically covered a full calendar year from January 1 through December 31.
As to calendar year 2008, the relevant period for this lawsuit, the parties' indoor pool contract called for JB Pool to receive an annual fee of $61, 880. The contract specified that the annual fee was to be paid in monthly installments of $5, 688, except for July and August when the monthly installments were reduced to $2, 500.
One lifeguard was to be provided by JB Pool at all times during the hours specified by the contract. Among other things, the lifeguard was responsible for keeping the pool clean, vacuuming it, backwashing the filter, cleaning pool filter cartridges, and maintaining the pool area in a neat and orderly condition. JB Pool was further obligated to provide chemicals to treat the water in the pool, and to test the water daily. The contract also required JB Pool to maintain a $2 million liability insurance policy, naming the association as an additional insured. The indoor pool was scheduled to be open year-round, except for New Year's Day, Thanksgiving, and Christmas.
Significantly for the present dispute, the contract contained the following terms that would apply in the event of a pool closure:
DATES AND TIMES OF SERVICES:
The pool will be open during the stated dates and times with the following exceptions:
1. Inclement weather - [JB Pool] will determine if the weather is unsatisfactory – for pool operation based on the guidelines from the NEW JERSEY STATE SANITARY CODE:
"Outdoor bathing shall be prohibited during an electrical storm."
If the pool is determined not to be able to be opened before 4:00 p.m. on any day, the pool will be closed the entire day. If the pool must be closed at least one hour after 4 p.m. on a given day, then it will not be reopened that day. There will be no reduction in charges as outlined in this agreement. The Customer will be notified of each closing.
2. [JB Pool] will have no liability for its failure to perform this Agreement, or any part thereof, where such failure is attributable to reasons beyond its control, including but not limited to inclement weather, acts of God, acts of war, labor disputes, strikes, riots, fire or other casualty, or customer requested closing. There will be no reduction in charges of the contract amount for any closing.
The 2008 contract further provided that it "shall be governed by the laws of the State of New Jersey." It was signed in November 2007 by JB Pool's president, Jacqueline Bartilucci, and a representative of Four Seasons.
Toward the end of January 2008, shortly after the annual contract period began, mold was discovered in the indoor pool area. The pool was closed while efforts to remediate the mold problem were undertaken, apparently at the direction of the county board of health. Although initially the parties had hoped that the mold problem could be abated quickly, the pool was not reopened until after Labor Day in September 2008. Consequently, the indoor pool was closed for over seven full months ...