STEVEN O. MEGLIO et al. v. TAYLOR REAL ESTATE, INC., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1992-05T31992-05T3

STEVEN O. MEGLIO and JENNIFER

MEGLIO,

Plaintiffs-Appellants,

v.

TAYLOR REAL ESTATE, INC., JACK

KEENAN, ROSALIND KEEGAN,

Defendants,

and

ECOLOGICAL ONE SOURCE INSPECTIONS,

INC.,

Defendant-Respondent.

 
___________________________________

Argued October 23, 2006 - Decided November 6, 2006

Before Judges Lintner and C.L. Miniman.

On appeal from the Superior Court of

New Jersey, Law Division, Essex County,

L-6658-03.

James A. Scarpone argued the cause for appellants (Scarpone Staiano & Savage, attorneys; Mr. Scarpone and James J.

Savage, of counsel and on the brief).

Joseph W. Denneler argued the cause for respondent (Zarwin, Baum, DeVito, Kaplan, Schaer & Toddy, attorneys; Mr. Denneler,

on the brief).

PER CURIAM

Plaintiff homeowners, Steven and Jennifer Meglio, appeal the order dismissing their complaint against defendant, Ecological One Source Inspections, Inc., and enforcing the binding arbitration provision of a home inspection contract. They also appeal the judge's denial of their motion for reconsideration. We affirm both orders.

We combine the substantially undisputed facts and procedural history. In January 2003, plaintiffs entered into a contract to purchase a home located at 133 Devon Road, Essex Fells, New Jersey. Plaintiffs retained defendant, a licensed home inspection company, to inspect the house. The parties' initial agreement was allegedly made during a telephone call between plaintiff Steven Meglio and defendant's representative, Michael Fitzpatrick.

A home inspection was conducted on or about February 8, 2003, and defendant issued a Home Inspection Report. Attached to the report was a contract entitled "INVOICE, AUTHORIZATION AGREEMENT, STANDARDS OF PRACTICE AND TERMS." According to the terms of the contract, plaintiffs declared that they read both sides of the document and understood and accepted "the stated scope, purpose and limitations of the STANDARDS AND TERMS." Plaintiffs agreed to a fee of $450 for a home inspection and report. The contract stated, "[a]cceptance of the inspection report(s) constitutes acceptance of the terms of the Authorization." The first page of the contract contained the following arbitration provision:

In the event of "any dispute controversy, interpretation or claim(s), including claims(s) for, but not limited to, breach of contract, any form of negligence, fraud or misrepresentation arising out of, from or related to, this contract or arising out of, from or related to the inspection or inspection report shall be submitted to final and binding arbitration under the Rules and Procedures of the Expedite Arbitration of Home Inspection Disputes of CONSTRUCTION ARBITRATION SERVICES, INC. The decision of the Arbitrato[r] appointed thereunder shall be final and binding and judgment on the Award may be entered in any Court of competent jurisdiction."

This exact same language was reiterated on the bottom of the second page of the contract, under the paragraph entitled "DECLARATION AND AUTHORIZATION."

The Home Inspection Report did not indicate any major structural concerns and plaintiffs, therefore, went forward with the purchase of the house. After the closing, plaintiffs began to remodel the house and discovered evidence of prior fire damage. Plaintiffs claimed that work performed for the former owners "to repair [the] fire damage, was substandard, shoddy and violated applicable building codes." According to plaintiffs, because of the previous "substandard" work, their remodeling cost $300,000 more than the original estimate in order to repair and replace the fire-related defects in the house.

Plaintiffs instituted suit against defendant, alleging negligence for failing to discover the fire-related damage and for breach of implied warranty to furnish inspection services with reasonable care. They also named the seller, real estate agent, and broker, claiming they "concealed, suppressed or failed to disclose" the fire, the damage it caused, and the construction and alterations work made to the home as a result of the fire.

Defendant answered, raising as its Seventh Separate

Defense, the lack of subject matter jurisdiction, pursuant to the arbitration provision of the home inspection contract. On December 5, 2003, Judge Bernstein entered the order dismissing plaintiffs' complaint against defendant, indicating, "the matter is subject to a binding arbitration agreement." Plaintiffs filed a demand for arbitration with Construction Arbitration Services, Inc. In their unsuccessful motion for reconsideration, filed while arbitration was pending, plaintiffs relied upon the then recent decision in Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577 (App. Div.), certif. denied, 181 N.J. 545 (2004), and asserted that the arbitration clause did not clearly and specifically inform what was subject to arbitration.

Following an arbitration hearing, the arbitrator awarded $5450 in damages, consisting of the $450 home inspection fee and $5000 to replace the rotted sill under the perimeter of the home. Plaintiff moved to confirm the arbitration award as a final judgment, N.J.S.A. 2A:23B-22 and R. 4:42-2. Judgment was entered on December 17, 2004. On January 28, 2005, we denied plaintiffs' motion seeking leave to appeal the order compelling arbitration. Plaintiffs then settled their claims against the other named defendants and filed this appeal.

On appeal, plaintiffs essentially argue that there was no mutual agreement to be subject to binding arbitration because the agreement was unilaterally imposed on them and they found themselves in an unequal bargaining position. They also contend that the arbitration provision was: (1) written in small print, indistinguishable from other type used; (2) hidden and deceptively labeled; and (3) misleading, because it contained no language informing them that they were waiving their right to a jury trial and it did not provide a clear understanding as to the nature of the arbitration imposed.

In rendering his initial decision, Judge Bernstein concluded:

Although the arbitration clause in the present case was not discussed before the completion of the home inspection, the clause was in the agreement supplied to the plaintiff when the plaintiff received the inspection report. The document indicated by accepting the report, plaintiff was also accepting the invoice which clearly contained the arbitration clause.

The clause was not written in smaller print or hidden. It's basically a one-page form. Basically there's no testimony at all that the plaintiff made any attempts to change, alter or otherwise modify the agreement. The clause clearly read that it applied to negligence and contractual claims arising from the agreement. Furthermore, since the plaintiff did not allege fraud in connection with this agreement, the arbitration clause is valid.

Resolving the motion for reconsideration against plaintiffs, Judge Bernstein observed:

In this case, the arbitration clause was contained on the base paragraph of the agreement with underlining and capit[a]l letters to emphasize the method of arbitration. The exact same terms, so that there was not a question regarding any conflict in terms, were repeated in bold face, albeit somewhat smaller -- at least in bold face on the terms and conditions section.

The clause in itself appears to be clear and [un]ambiguous as including any dispute, controversy or interpretation of the -- or claims incurred or breach or negligence are to be submitted to final and binding arbitration.

I'm convinced that the language appears to be clear on its face as to the scope and intent of the arbitration clause. And, therefore, I'm going to deny plaintiff's motion.

We affirm substantially for the reasons expressed by Judge Bernstein. Nevertheless, we add the following comments.

Our Legislature has codified its endorsement of arbitration agreements in N.J.S.A. 2A:23B-1 to -32. "Moreover, New Jersey courts also have favored arbitration as a means of resolving disputes." Martindale v. Sandvik, Inc., 173 N.J. 76, 84 (2002). Thus, "[a]n agreement to arbitrate should be read liberally in favor of arbitration." Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993) (citations omitted). Nevertheless, an arbitration provision "must also be read in light of its effect on the consumer's right to sue." Ibid. Thus, a clause that deprives "a citizen of access to the courts should clearly state its purpose . . . to assure that the parties know that in electing arbitration as the exclusive remedy, they are waiving their time-honored right to sue." Ibid.

Defendant's arbitration provision clearly encompassed "breach of contract, [and] any form of negligence" arising out of the contract, the inspection or the inspection report. It further specifically informed the reader that such controversy "shall be submitted to final and binding arbitration" and that the arbitrator's decision "shall be final and binding and judgment on the Award may be entered in any Court of competent jurisdiction." Plaintiffs' assertion that the arbitration provision was misleading and did not adequately inform them of the nature of the proceeding is unavailing. So too are their claims that the provision was buried or hidden in the body of the agreement.

Plaintiffs do not argue that the controversy falls outside the scope of the arbitration agreement or that the arbitration clause is insufficiently clear to include statutory claims. See, e.g., Martindale, supra, 173 N.J. at 94-96; Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132-36 (2001) (considering whether the language in an arbitration clause clearly and unmistakably waived plaintiff's statutory remedies under the Law Against Discrimination); Rockel, supra, 368 N.J. Super. at 585-87; Gras v. Assocs. First Capital Corp., 346 N.J. Super. 42, 54-57 (App. Div. 2001) (considering whether the arbitration clauses were sufficiently clear to waive the plaintiff's statutory claims under the Consumer Fraud Act), certif. denied, 171 N.J. 445 (2002). Indeed, the arbitration clause here expressly included the very type of claim plaintiffs now seek to have decided by the court.

We make the following observations regarding plaintiffs' claim that the contract was unconscionable as a unilateral contract of adhesion. The failure "to read a contract does not excuse performance unless fraud or misconduct by the other party prevented one from reading." Young v. Prudential Ins. Co. of Am., 297 N.J. Super. 605, 619 (App. Div.) (citation omitted), certif. denied, 149 N.J. 408 (1997). "'A party who enters into a contract in writing, without any fraud or imposition being practiced upon him, is conclusively presumed to understand and assent to its terms and legal effect.'" Rudbart v. N. Jersey Dist. Water Supply Comm'n, 127 N.J. 344, 353 (quoting Fivey v. Pa. R.R. Co., 67 N.J.L. 627, 632 (E. & A. 1902)), cert. denied, 506 U.S. 871, 113 S. Ct. 203, 121 L. Ed. 2d 145 (1992).

When determining whether to enforce the terms of an adhesion contract, a court must look "not only to the take-it-or-leave-it nature or the standardized form of the document but also to the subject matter of the contract, the parties' relative bargaining positions, the degree of economic compulsion motivating the 'adhering' party, and the public interests affected by the contract." Id. at 356. Thus, in Lucier v. Williams, 366 N.J. Super. 485, 492-93 (App. Div. 2004), we found that a provision in a "take-it-or-leave-it" home inspection agreement, limiting liability to $500, was unconscionable and against public policy. We concluded that the bargaining power of the parties was unequal because the impact of the limited liability clause was "negligible to the home inspector while potentially severe to the home buyer." Id. at 499.

The use of arbitration as an alternate forum in the subject contract does not implicate the same considerations here as found in Lucier. To the contrary, "[i]t can no longer be doubted that where parties to a contract choose arbitration as the alternative forum for dispute resolution, such choice is in accord with the public policy of this State, and will be afforded respectful recognition with only a narrow scope of judicial review." Allgor v. Travelers Ins. Co., 280 N.J. Super. 254, 260 (App. Div. 1995) (citing In re Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349 (1994)); see also Marchak, supra, 134 N.J. at 281 ("[A]rbitration is a favored form of relief . . . [and] arbitrators function with the support, encouragement, and enforcement power of the State." (citations omitted)); Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179, 186 (1981) (noting that the legislature has encouraged arbitration and courts have favored arbitration because of the significant advantages arbitration offers to parties); Alamo Rent A Car, Inc. v. Galarza, 306 N.J. Super. 384, 389 (App. Div. 1997) (recognizing "the strong public policy in our state favoring arbitration as a means of dispute resolution and requiring a liberal construction of contracts in favor of arbitration" (citations omitted)). Accordingly, we affirm.

 

Plaintiffs sought $244,000, which was the difference between the initial estimate for the remodeling work and the estimate received after discovery of the fire damage, plus approximately $70,000 in additional costs.

(continued)

(continued)

11

A-1992-05T3

November 6, 2006