ALBERT HARRISON, III v. DR. MICHAEL JONES

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5081-11T3

ALBERT HARRISON, III and

MARGARET HARRISON,

Plaintiffs-Respondents,

v.

DR. MICHAEL JONES and

TARA K. JONES,

Defendants/Third-Party

Plaintiffs-Appellants,

and

CENTRAL JERSEY EMERGENCY

MEDICINE ASSOCIATES, P.C.,

Defendants,

v.

A & M HARRISON CONSTRUCTION

CO., INC.,

Third-Party Defendant-

Respondent.

_______________________________________

February 7, 2013

Argued January 8, 2013 Decided

Before Judges Yannotti and Harris.

On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-4033-09.

John J. Marinan argued the cause for appellants (Mr. Marinan and Lomurro, Davison, Eastman & Munoz, attorneys; Tracy A. Armstrong, of counsel; Mr. Marinan, on the brief).

Steven Pfeffer argued the cause for respondents (Levin, Shea & Pfeffer, attorneys; Mr. Pfeffer, on the brief).

PER CURIAM

Third-party plaintiffs Dr. Michael Jones (Dr. Jones) and Tara K. Jones (collectively, the Joneses) appeal from an order entered by the Law Division on May 11, 2012, denying their motion to modify an arbitration award, and granting a motion by plaintiffs Albert Harrison, III (Harrison) and Margaret Harrison to confirm the award. We affirm.

Harrison is the owner of A & M Harrison Construction Co., Inc. (A & M), a company that engages in commercial and residential construction. The Joneses entered into a contract with A & M to build a 6,200 square foot addition to their home, at a cost of $825,000. A & M and the Joneses also entered into a written addendum to the contract, in which the Joneses agreed to pay A & M an additional $150,000 for the work. Among other things, the addendum stated that, if A & M did not complete the work, A & M would retain 30 percent of the $150,000, and the balance would be returned to the Joneses.

It appears that, at some point in time, Harrison made a personal loan of $160,000 to Dr. Jones and defendant Central Jersey Emergency Medicine Associates, P.C. (CJEMA), a group of physicians that includes Dr. Jones.

A dispute arose concerning A & M's performance of the construction contract, and in June 2009, the Joneses terminated the agreement. In July 2009, counsel for A & M demanded payment of monies allegedly due under the construction contract. On July 15, 2009, A & M filed a construction lien, claiming that $257,500 was due on the contract.

Plaintiffs filed a complaint against CJEMA and the Joneses, seeking monies due on the aforementioned loan and the construction contract. The Joneses, in turn, filed a third-party complaint against A & M, in which they asserted, among other things, a claim under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, as amended by the Contractors Registration Act N.J.S.A. 56:8-136 to -152, and under the home improvement regulations adopted by the Division of Consumer Affairs to implement these statutory provisions, N.J.A.C. 13:45A-16.1 to -17.14.

Thereafter, the Joneses filed a motion for summary judgment on their claims. The Law Division judge considered the motion on March 4, 2011, and granted partial summary judgment in favor of the Joneses. In an order dated March 4, 2011, the judge found that A & M: (1) failed to include its contractor registration number on the contract, in violation of N.J.A.C. 13:45A-17.11(d)(2); (2) did not include a provision allowing the Joneses to cancel the construction contract within three days after they received it, as required by N.J.S.A. 56:8-151(b); and (3) did not attach its certificate of commercial general liability insurance to the contract, as required by N.J.S.A. 56:8-151(a)(2). The order also stated that the Joneses' application for summary judgment on their claim for damages and an award of counsel fees, pursuant to the CFA, was denied without prejudice.

On June 23, 2011, the Joneses, CJEMA and A & M agreed to submit the remaining issues in the case to binding arbitration. An arbitrator was appointed and he conducted hearings in the matter on ten days between September 19, 2011 and November 9, 2011. On February 17, 2012, the arbitrator issued a written decision and award.

In his decision, the arbitrator noted that he was bound by the motion judge's determination that A & M had committed certain technical violations of the CFA and the home improvement regulations. The arbitrator found, however, that the Joneses had not established that they sustained an "ascertainable loss" as a result of those technical violations, which is required for the award of damages under the CFA.

The arbitrator noted that there was no dispute that A & M failed to obtain written change orders before proceeding with work outside the contract. The arbitrator nevertheless found that while the Joneses "incurred additional costs to complete their home, there can be no dispute that they were aware of these additional costs, and that they requested, and permitted the scope of the [p]roject to expand well beyond the original architectural drawings." The arbitrator also stated that the amount charged by A & M for any work outside the original scope of the contract was reasonable, and the construction had been completed "in a workmanlike manner."

The arbitrator additionally stated that the Joneses' failure to establish an ascertainable loss did not preclude an award of counsel fees. The arbitrator concluded, however, that such an award was not warranted because it was Dr. Jones's conduct "that caused or contributed to the culture in which the violations took place."

The arbitrator noted that Dr. Jones and Harrison had "a very honest and sincere friendship" which transcended a business relationship. He pointed out that Dr. Jones had entrusted Harrison with the duty to build the home for his family, without requiring written agreements for significant change orders, and Harrison had loaned hundreds of thousands of dollars to Dr. Jones.

The arbitrator said that Dr. Jones was not a "financial neophyte" and Harrison was a "sophisticated builder of commercial and residential real estate," who had an "honorable, but curious desire" to help those he viewed as his friends. The arbitrator stated that neither Dr. Jones nor Harrison wanted their agreements in writing.

The arbitrator concluded that, under the circumstances, the Joneses should be equitably estopped from seeking counsel fees under the CFA. The arbitrator stated that, allowing the Joneses to invoke remedies under the CFA would not further the Legislature's objectives but would lead to "a result that is unfair and inequitable."

The arbitrator also determined that the Joneses were entitled to a credit of $45,800 for certain building allowances due to them under the construction contract. In addition, the arbitrator found that the Joneses were entitled to $7,500, which was the amount they had incurred in legal fees to remove the construction lien that A & M had filed improperly.

The arbitrator additionally determined that A & M had not presented evidence to support its claims against the Joneses for additional construction manager fees and for certain extra work. Furthermore, the arbitrator found that Dr. Jones and CJEM owed Harrison $155,000 on the loan Harrison made to them. The arbitrator memorialized his determinations in an award dated February 12, 2012.

The Joneses thereafter moved in the trial court to modify the award, and plaintiffs sought an order confirming the award. The court entered an order dated May 11, 2012, denying the Joneses' motion and granting plaintiffs' motion. In addition, the court denied the Joneses' motion to stay the entry of the judgment or the execution of the judgment. This appeal followed.

The Joneses argue that: (1) they are entitled to an award of counsel fees, as well as trebled damages, as a result of A & M's violations of the CFA and the home improvement regulations; (2) Harrison is personally liable for damages and counsel fees awarded pursuant to the CFA; and (3) the trial court had the statutory authority under CFA to award them treble damages and counsel fees. We have thoroughly reviewed the record and conclude that these arguments are without merit.

As we stated previously, after the trial court granted partial summary judgment in their favor, the Joneses agreed to submit the remaining issues in this case to binding arbitration. The arbitrator heard the matter and rendered a final decision, refusing to award the Joneses damages or counsel fees on the claims under the CFA. The Joneses argue that the trial court erred by refusing to award them the damages and fees.

The Arbitration Act allows a court to vacate an arbitration award:

(1) the award was procured by corruption, fraud or undue means;

(2) the court finds evident partiality 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 a showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to [N.J.S.A. 2A:23B-15], 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, . . . ; or

(6) the arbitration was conducted without proper notice . . . .

[N.J.S.A. 2A:23B-23(a).]

The Arbitration Act also sets forth the grounds upon which a court may modify or correct an arbitration award:

(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 . . . ; or

(3) the award is imperfect in a matter of form not affecting the merits of the decision on the claims submitted.

[N.J.S.A. 2A:23B-24(a).]

Judicial relief from an arbitration award under N.J.S.A. 2A:23B-23(a) and 24(a) is limited. Fawzy v. Fawzy, 199 N.J. 456, 470 (2009). Furthermore, in an arbitration involving private parties, a court may not vacate or modify an arbitration award on the basis of a perceived mistake of law, unless the parties have contractually agreed to expand the scope of judicial review to allow for such relief. Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 358 (1994) (citing Perini v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 548-49 (1992) (Wilentz, C.J., concurring)).

We are convinced that the Joneses failed to establish any basis in the Arbitration Act for the relief they are seeking. There is no basis under N.J.S.A. 2A:23B-23(a) to vacate the award, nor is there any ground to modify the award under N.J.S.A. 2A:23B-24(a). The Joneses' argument that the arbitrator committed legal error by failing to award them treble damages and counsel fees under the CFA is not a cognizable basis to set aside the award where, as here, the parties have not agreed to expand the scope of judicial review to encompass the claimed errors of law. Tretina, supra, 135 N.J. at 358 (citing Perini, supra, 129 N.J. at 548-49) (Wilentz, C.J., concurring)).

We note, however, that the Joneses did not establish any basis for the award of damages under the CFA. N.J.S.A. 56:8-19 permits the award of "threefold" damages to any person who suffers "any ascertainable loss" as a result of an act or practice declared unlawful under the CFA. To secure an award of damages under N.J.S.A. 56:8-19, the consumer must establish that he or she sustained a loss "'as a result of' the unlawful practice." Lee v. Carter-Reed Co., 203 N.J. 496, 522 (2010) (quoting N.J.S.A. 56:8-19).

Here, the motion judge found that A & M committed certain technical violations of the CFA and the home improvement regulations, but the arbitrator determined that the Joneses sustained no monetary loss as a result of those violations. The arbitrator awarded the Joneses $45,800 but the award was not for any loss sustained "as a result of" A & M's statutory and regulatory violations but was instead an award of monies due to them under the terms of the construction contract. Thus, the record supported the arbitrator's determination that the Joneses were not entitled to treble damages under the CFA.

Moreover, the arbitrator's refusal to award the Joneses counsel fees was not a basis for modifying the award. As we have explained, the arbitrator determined that, under the particular circumstances of this matter, it would be inequitable to award the Joneses counsel fees based on the violations of the CFA and the home improvement regulations. Among other things, the arbitrator noted that Dr. Jones and Harrison had a unique personal relationship that transcended their business dealings, and neither Dr. Jones nor Harrison wanted all of their agreements regarding the construction work to be in writing. Although the Joneses maintain that the arbitrator erred as a matter of law in denying their claim for counsel fees, they failed to establish that either N.J.S.A. 2A:23B-23(a) or N.J.S.A. 2A:23B-24(a) empowers the court to modify the award on this basis.

Affirmed.