OBSERVER PLAZA CONDOMINIUM ASSOCIATION, INC., A New Jersey Not–for–Profit Corporation, Plaintiff–Respondent, v. OBSERVER HIGHWAY PLAZA, LLC, JOSEPH SORRENTINO, individually, NEIL SORRENTINO, individually, HERB SYLVESTRE, individually, ESTATE OF ANTHONY NAPOLEON, J–RO PROPERTIES, LLC, SERAFINO REALTY, LLC, and S.T.S. REALTY, LLC, Defendants–Appellants.
OBSERVER HIGHWAY PLAZA, LLC, JOSEPH SORRENTINO, individually, NEIL SORRENTINO, individually, HERB SYLVESTRE, individually, ESTATE OF ANTHONY NAPOLEON, J–RO PROPERTIES, LLC, SERAFINO REALTY, LLC, and S.T.S. REALTY, LLC, Plaintiffs–Appellants, v. OBSERVER PLAZA CONDOMINIUM ASSOCIATION, INC., A New Jersey Not–for–Profit Corporation, Defendant–Respondent.
DOCKET NO. A–3151–11T4A–3339–11T4
-- August 27, 2013
Buttafuoco, Arce & Price, L.L.C., attorneys for appellants (Nicholas R. Buttafuoco, on the brief).Griffin Alexander, P.C., attorneys for respondent (Robert C. Griffin, on the brief).
These consolidated appeals arise out of litigation relating to construction and development of a condominium project in Hoboken known as Observer Plaza. The project consisted of 79 residential units and 103 parking spaces.
Plaintiff, Observer Plaza Condominium Association, Inc. (plaintiff or the condominium association), sued the developer, Observer Highway Plaza, LLC (the developer), its principal, Anthony Napoleon, represented by his estate (the estate), individual defendants Joseph Sorrentino, Neal Sorrentino and Herb Sylvestre (the individual defendants), who participated in the development of the project and were board members of plaintiff while the units were being sold, and J–Ro Properties, LLC (J–Ro), S.T.S. Realty, LLC (S.T.S.), and Serafino Realty, LLC (Serafino) (collectively the real estate companies), formed by the developer to receive condominiums in lieu of distributions of profits from the sale of condominiums.
Plaintiff alleged that the developer and the individual defendants breached contracts and warranties by negligently constructing the condominium building and failing to provide adequate financial reserves for repairs, and that the real estate companies and the developer had failed to pay maintenance fees or emergency assessments on their condominiums. Defendants contended that plaintiff had violated its bylaws by improperly charging emergency assessments and late fees. After four years of litigation and failed mediation attempts, the parties agreed to go to binding arbitration before arbitrator Rosemarie Ruggiero Williams. That agreement was apparently never reduced to writing. They simply proceeded to arbitration before Williams, and the court dismissed plaintiff's complaint with prejudice. Following the arbitration, Williams issued a two-part award in favor of plaintiff; the first part related to construction defects and the second to unpaid maintenance fees and other charges. Although Williams issued a detailed opinion regarding the construction defects, she refused to disclose her reasoning for the maintenance fee award because defendants had failed to pay her fee. Thereafter, plaintiff filed a complaint to confirm the award and defendants filed a separate action to vacate it.
Judge Velazquez heard both matters and confirmed the award, entering judgment against the developer and the individual defendants for construction defects in the amount of $1,582,515.21; the developer for maintenance fees, late charges and attorney fees in the amount of $55,323.79; the real estate companies for maintenance fees, late charges, and attorney fees in the amount of $308,828.01; the estate for maintenance fees, late charges, and attorney fees in the amount of $81,875.84; and the developer, the individual defendants, and the real estate companies for arbitration fees in the amount of $11,287.50. Defendants filed two appeals, one from the order confirming the arbitration award and the other from the denial of their application to vacate the award. We have consolidated the matters and now affirm both orders.
The essential facts can be briefly summarized. Plaintiff contended that defendants' deviation from the architectural plans had resulted in severe construction defects, including: defective balconies; improperly installed exterior insulated finishing system (EIFS) associated with stucco exteriors; freezing pipes in the garage because of improper insulation; a poorly constructed front entrance; and a leaking roof deck.
With respect to the balconies, the parties had stipulated that, according to the plans, an elastomeric coating should have been applied to each balcony, and that the developer had failed to do this. Defendants' expert estimated the repair to cost $79,000. Plaintiff's expert, however, estimated the repair to cost $2.3 million because he maintained that, in order to do the repair correctly, exterior bricks would have to be removed. During the arbitration, plaintiff agreed to defendants' less-expensive alternative, on condition that defendants acknowledge that the less-expensive solution would not work in every instance. Plaintiff expected a failure rate of twenty percent, meaning that twenty percent of the units would require the more costly repair. Thus, plaintiff requested, and Williams awarded, twenty percent of $2.3 million, or $441,950 minus the $79,000 that had already been paid by defendants.
For the EIFS, plaintiff believed that the system had been improperly installed, but defendants' expert opined that the damage was attributable to plaintiff's negligent lack of maintenance of the system. Williams awarded plaintiff $276,000, because defendants had not followed the plans when they installed the EIFS, but reduced the award by twenty percent to account for plaintiff's negligence in not properly maintaining the system. The pipes that were exposed in the garage had not been insulated with heat tape, in partial violation of the plans. The plans had called for “heat trace [on] all above-ground exposed horizontal piping” and for defendants to “provide all required accessories for complete operations systems.” Among the accessories necessary to make the heat trace operational was electrical wiring to energize the heat tape. The arbitrator originally determined to award $59,700, which was the cost to insulate all the exposed pipes in the garage. According to the plans, however, only the horizontal pipes in the garage were to have heat trace.
Accordingly, the arbitrator requested a new estimate which would include the cost of heat trace for only the horizontal pipes. When the new estimate was submitted, however, it exceeded $59,700, because the original estimate was then several years old. Williams determined to limit the award to $59,700 because that was the amount that plaintiff had requested.
After Williams issued Part I of her decision, however, plaintiff's counsel notified her that she had made a typographical error, as she had awarded $15,700 instead of $59,700 for heat trace. $15,700 was an amount that had been quoted for partial repair (“wrapping”) of the garage pipes. Williams responded by immediately correcting the mistake and awarding $59,700, as she had obviously intended.
The parties agreed the building's front entranceway was sinking and that the solution was to shore it up with pilings for support. Nevertheless, they disagreed regarding how many piles to place, with defendants proposing twenty-two piles and plaintiff suggesting seventy-seven. Plaintiff requested $746,930 to properly repair the front entranceway, but defendants believed that the work should cost $260,000. Williams awarded plaintiff $549,300.
In June 2010, plaintiff had discovered water damage in the roof deck. Defendants contended that this issue was not properly part of the arbitration, because plaintiff only noticed the damage after discovery had ended. Defendants raised this concern to Williams, and she permitted defendants' expert to inspect the roof deck. Defendants' expert believed that only a small portion of the roof deck had water damage, and that this was caused by plaintiff's poor maintenance of the EIFS. Because defendants had failed to follow the plans when they installed the EIFS, Williams ultimately awarded $350,000 to repair damage caused by water leakage on the roof deck.
Williams found that most of the defects in the building were caused by the developer's negligence in not following the plans. In addition to the amounts detailed above, Williams also awarded plaintiff $39,765 for unpaid invoices and determined that the individual defendants were jointly and severally liable for the construction defects. Williams, however, made no award for damages in instances where she determined that defendants had not violated any code or had complied with the plans. She also refused to award damages for plaintiff's claim that defendants had failed to provide adequate financial reserves for repairs.
In Part II of the arbitration award, Williams essentially granted plaintiff the maintenance fees it had requested, assessing the developer $55,323; J–Ro $159,793; S.T.S. $73,393; Serafino $75,640, and the estate $81,875. Williams also added late charges and attorney fees to each of the maintenance fee awards.
Defendants contend that Judge Velazquez erred in affirming the arbitration award because the arbitrator exceeded her powers under the Uniform Arbitration Act (UAA), N.J.S.A. 2A:23B–1 to –32. Specifically, defendants argue that Williams exceeded her powers by deciding issues that should not have been included in the arbitration, modified her award without following the proper procedures for doing so, and failed to make a record of the award. Judge Velazquez considered these arguments and rejected them, finding the award untainted by any fraud, corruption, or wrongdoing that would support its vacation under the UAA. The judge found that the arbitrator had properly corrected her clerical error regarding the heat trace; had not exceeded her powers by considering the roof deck issue; and had made an adequate record of her determination, including her award for maintenance fees. We agree.
The UAA provides that an arbitrator may conduct an arbitration in any manner that the arbitrator considers appropriate, with the goal of disposing of the matter fairly and expeditiously. N.J.S.A. 2A:23B–15(a). Arbitrators are not bound by the rules of evidence, and instead may determine the admissibility, relevance, materiality, and weight of any evidence. Ibid. In addition, an arbitrator may permit any discovery that he or she determines to be appropriate, taking into account the goal of making the proceeding fair, expeditious, and cost-effective. N.J.S.A. 2A:23B–17(c).
Although an arbitrator's power to alter or amend an award is limited, Kimm v. Blisset, L.L.C., 388 N.J.Super. 14, 26 (App.Div.2006), certif. denied, 189 N.J. 428 (2007), an arbitrator may correct a computational or clerical error which is apparent on the face of the award and may clarify an award where there is an ambiguity. Id. at 27. An arbitrator must make a record of the award, but all that is necessary to satisfy this requirement is a writing that resolves the dispute, and a signature. N.J.S.A. 2A:23B–19(a).
An arbitrator is not required to give reasons for the award and does not have to write a decision explaining his or her view of the facts. Kimm, supra, 388 N.J.Super. at 26. The goals of arbitration are finality and expedition. Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 364 (1994). Requiring an arbitrator to justify a decision undermines the goal of maintaining arbitration as an alternative to litigation in the courts. Ibid. Arbitrators are given wide latitude, and an appellate court will only vacate an arbitration award upon a showing of fraud, corruption, or similar wrongdoing on the part of an arbitrator. Id. at 355–65.
We are satisfied that Judge Velazquez was correct in finding no basis to overturn the arbitration award. Williams explained that she had made a clerical error when she wrote $15,700 instead of $59,700. Although N.J.S.A. 2A:23B–20 requires a party to an arbitration be given an opportunity to respond to a request by an opposing party for modification of the arbitration award, the statute distinguishes between modification of an award and correction of computational errors. N.J.S.A. 2A:23B–20 and –24. Because the arbitrator was not modifying the award, but correcting an error, the modification was clerical, and no opportunity for defendants to respond was required. Kimm, supra, 388 N.J.Super. at 26.
There is likewise no merit in defendants' arguments regarding the arbitrator's consideration of the roof deck issue. Although the roof deck damage was not discovered until after the close of discovery, defendants addressed this issue with the arbitrator and had their expert examine and provide an opinion as to the cause of the water infiltration. Defendants provided no evidence to Judge Velazquez that this issue had been excluded from the arbitration.
Finally, we reject defendants' contention that the arbitrator failed to make a proper record of her award. With respect to Part I of the arbitrator's decision pertaining to construction defects, Williams detailed her understanding of the facts, the various experts' opinions and how she arrived at the awards for the balconies, the EIFS, the heat tape, the roof deck, and the front entrance. With respect to Part II of her award pertaining to the maintenance fees, however, Williams gave the dollar amount of the award only. Williams advised the parties that, because defendants had failed to pay their portion of her fee, she intended to withhold her six-page opinion explaining Part II of the award pending payment.
Leaving aside that this issue might have been avoided on appeal had defendants paid the $11,287 they acknowledged they owed the arbitrator, there is no question but that Williams's award complied with the UAA. An arbitrator is simply charged with making an award that resolves the dispute. Kimm, supra, 388 N.J.Super. at 26. The only requirement of making a record is that the decision be signed and in writing. N.J.S.A. 2A:23B–19(a). Williams's arbitration award obviously met that standard.