NEMCO CONSTRUCTION CORP. v. AARK CONSTRUCTION GROUP, LTD., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1401-05T11401-05T1

NEMCO CONSTRUCTION CORP.,

individually and in a

representative capacity

under Article 3-A of the

New York State Lien Law on

behalf of all other

beneficiaries of certain

trust funds,

Plaintiff-Respondent,

v.

AARK CONSTRUCTION GROUP, LTD.,

Defendant-Respondent,

and

GLASS GARDENS, INC.,

Defendant-Appellant,

and

EDUARDO DUTRA; TERRY R.

GLASS; IRVING GLASS; NEW

JERSEY NATIONAL BANK;

SHOP-RITE OF ROCKAWAY

ASSOCIATES, INC.; ROCKAWAY

SHOP-RITE ASSOCIATES, INC.;

SHOP-RITE OF PEARL RIVER

ASSOCIATES, INC.; PEARL RIVER

SHOP-RITE, INC.; SHOP RITE OF

ENGLEWOOD ASSOCIATES, INC.;

and GLF REALTY CO., INC.,

Defendants.

 

AARK CONSTRUCTION GROUP, LTD.,

Plaintiff-Respondent,

v.

GLASS GARDENS, INC.,

Defendant-Appellant,

and

NEMCO CONSTRUCTION CORP.

Defendant-Respondent,

and

FRANK J. CONSOLI TRUCKING

CO., INC.; BLUE CIRCLE

MATERIALS, INC.; PROGRESSIVE

BRICK COMPANY; and THE TRANE

COMPANY, a division of

AMERICAN STANDARD, INC.,

Defendants.

 
 

Argued January 17, 2007 - Decided April 24, 2007

Before Judges Coburn, Axelrad and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, BER-L-3857-98 and BER-C-223-98.

Alan S. Pralgever argued the cause for appellant (Wolf Block Brach Eichler, attorneys; Mr. Pralgever and Bobby Kasolas, on the brief).

Judah D. Greenblatt argued the cause for respondent Nemco Construction (Greenblatt, Softness & Lesser, attorneys; Mr. Judah D. Greenblatt, on the brief).

Reiter & Zipern, attorneys for respondent AARK Construction Group, Ltd., did not file a brief.

PER CURIAM

This appeal arises from the trial court's confirmation of an arbitration award that resolved disputes concerning the construction of a ShopRite Supermarket in Paramus. Defendant Glass Gardens, Inc., (Glass) appeals from orders of the Law Division entered on August 29, 2005, October 11, 2005, and October 14, 2005. We affirm; and we remand the matter to the trial court for further proceedings consistent with this opinion.

Glass is the owner of the property; AARK Construction Group, Ltd., (AARK), was the general contractor for the project; and Nemco Construction Corp. (Nemco) was the site subcontractor of AARK. On February 10, 1998, AARK terminated Nemco. On March 30, 1998, Nemco filed a construction lien claim under the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1 to -38, in the amount of $462,081, comprising $195,423 for base contract work and $266,658 for extra work. On April 22, 1998, Nemco filed a complaint in the Law Division against AARK for breach of contract, against Glass for lien foreclosure and against various principals of AARK and Glass for trust fund diversion. Glass counterclaimed against Nemco, alleging that Nemco had defaulted on the subcontract, and that Nemco's construction lien was overstated. Glass also asserted a cross-claim against AARK. AARK counterclaimed against Nemco and cross-claimed against Glass, alleging that: (1) Glass breached the prime contract; (2) AARK was entitled to indemnification from Glass for any damages due Nemco; and (3) all claims arising out of the breach of the prime or subcontract were required to be asserted in arbitration. On May 7, 1998, AARK filed its own construction lien claim against the project. On August 11, 1998, AARK filed a complaint in the Chancery Division for monies due from Glass for work performed on the project.

On December 10, 1998, AARK filed a demand for arbitration with the American Arbitration Association. On January 26, 1999, an order was entered, granting an unopposed motion to consolidate the two cases in the Law Division. On February 9, 1999, Judge Stark entered an order directing that the parties proceed to arbitration and staying all proceedings in the consolidated action.

On September 1, 1999, AARK and Glass settled. Glass agreed to pay AARK $125,000 in settlement of all claims between them, except for Nemco's claim for damages arising out of the removal of unsuitable soil from the project site. On that issue, Glass agreed to indemnify AARK for any portion of the award arising from the removal of unsuitable soil above and beyond the amount specified by contract.

Five years and twenty hearings later, the arbitrators issued an award on June 29, 2005, granting Nemco's claim for the contract balance of $195,423, together with $208,650 for extra work, including a substantial part of Nemco's claim for removal of unsuitable soil in the amount of $168,000. The arbitrators awarded AARK $67,556 on its counterclaim of $309,254 against Nemco and denied Glass' claims.

On July 15, 2005, Nemco moved to vacate the stay of February 9, 1999; to confirm the arbitration award; to foreclose its construction lien; to enter judgment; and to obtain an award of attorneys' fees. On August 10, 2005, AARK cross-moved, seeking to dismiss Nemco's claims against AARK's principal, Eduardo Dutra, and to allocate the liability and benefits under the arbitration award between it and Glass, pursuant to the settlement agreement. On August 11, 2005, Glass cross-moved to vacate the arbitration award, discharge Nemco's construction lien, and for attorneys' fees based upon Nemco's overstatement of its construction lien.

On August 17, 2005, Judge Stark conducted a telephone conference with counsel to advise that one of the arbitrators was her second cousin and to afford the parties an opportunity to object to her deciding the motions, if they so chose. No one voiced an objection to Judge Stark continuing to preside over the motions.

On August 19, 2005, Judge Stark heard argument on the cross-motions. On August 29, 2005, the judge issued a written decision that: (1) vacated that portion of the February 9, 1999, order staying the action pending completion of arbitration proceedings; (2) confirmed the arbitration award of June 29, 2005; (3) entered judgment against Glass and AARK, jointly and severally, in the amount of $336,517; (4) entered judgment foreclosing Nemco's construction lien in the amount of $336,517, together with interest from June 29, 2005, until paid; and (5) ordered Glass to pay Nemco's counsel attorneys' fees and costs, in an amount to be determined upon the filing of a certification of services. A confirming order was entered on the same day.

On September 14, 2005, Glass filed a motion seeking to: (1) recuse or disqualify Judge Stark; (2) stay the entry of judgment pending appeal; and (3) certify the existing orders as final. After Nemco's counsel submitted a certification of services, Glass filed an objection to the award of counsel fees and costs but did not raise any specific objections to the services rendered, nor to the amounts charged. On October 11, 2005, Judge Stark issued a written decision, denying: (1) the request for recusal or disqualification; (2) a stay of the entry of judgment; and (3) the request to certify the existing orders as final. On the same day, the judge entered a confirming order and awarded Nemco's counsel $10,000 in attorneys' fees and costs.

On October 14, 2005, another confirming order was entered that: (1) entered judgment in favor of Nemco against Glass and AARK, jointly and severally, in the amount of $336,517, together with interest from June 29, 2005, in the amount of $2,960; (2) confirmed Nemco's construction lien claim against Glass' in the amount of $336,517, together with interest until paid; (3) foreclosed Nemco's construction lien and issued a writ of execution; (4) directed Glass to pay $10,000 to Nemco's counsel for services rendered subsequent to issuance of the arbitration award; and (5) dismissed Nemco's claims under the New York State Lien Law against the individual defendants.

On appeal, Glass argues:

POINT I.

JUDGE ISABEL B. STARK SHOULD HAVE RECUSED AND DISQUALIFIED HERSELF FROM THIS ACTION BECAUSE SHE IS THE COUSIN OF THE LEAD ARBITRATOR STEVEN E. BRAWER, ESQ., AND COULD NOT AVOID THE APPEARANCE OF IMPROPRIETY AS A CONSEQUENCE OF HER FAMILIAL RELATIONSHIP WITH ONE OF THE ARBITRATORS.

POINT II.

THE TRIAL COURT ERRED IN FINDING THAT ANY CONSTRUCTION LIEN ISSUES WERE ADDRESSED IN ARBITRATION WHEN HER OWN ORDER PRECLUDED THESE CONSTRUCTION LIEN ISSUES FROM BEING ADDRESSED IN ARBITRATION, AND THE RECORD CLEARLY SUPPORTS THAT NO LIEN ISSUES WERE HEARD DURING THE ARBITRATION PROCEEDING.

A. NO LIEN ISSUES WERE ADDRESSED DURING THE ARBITRATION HEARING.

B. NEMCO'S CONSTRUCTION LIEN CLAIMS AND GLASS' DEFENSE AND COUNTERCLAIM OF WILLFUL OVERSTATEMENT WERE NOT PART OF THE ARBITRATION PROCEEDING SINCE THEY ARE STATUTORY AND THEREFORE NOT ARBITRABLE.

POINT III.

THE TRIAL COURT ERRED BY DETERMINING GLASS' DEFENSE TO NEMCO'S CONSTRUCTION LIEN CLAIM WAS "FRIVOLOUS"[] AND ERRED BY AWARDING ATTORNEYS FEES TO NEMCO, WHEN THE RECORD IS UNDISPUTED THAT NEMCO ADMITS IT WILLFULLY OVERSTATED ITS LIEN.

POINT IV.

JURISDICTION OF THE LIEN ISSUES AND THE ENTIRE MATTER SHOULD HAVE BEEN VENUED IN THE CHANCERY DIVISION.

POINT V.

JUDGE STARK ERRED IN COMPLETELY FAILING TO ADDRESS GLASS' MOTION TO CERTIFY HER JUDGMENT AS FINAL PURSUANT TO R. 4:42-2 AND ALSO ERRED IN RANDOMLY AWARDING $10,000.00 IN LEGAL FEES TO NEMCO.

We have carefully considered Glass' arguments in light of the record, the pertinent law, and the arguments of counsel, and we are satisfied that none of them is of sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(A) and (E). We affirm substantially for the reasons expressed by Judge Stark in her written opinions of August 29, 2005, and October 11, 2005. Nonetheless, we add the following comments.

Following Judge Stark's decision on August 29, 2005, Glass filed a motion on September 14, 2005, seeking to recuse or disqualify Judge Stark from having presided over the post-arbitration motions because she is the second cousin of the lead arbitrator, citing R. 1:12-2, N.J.S.A. 2A:15-49, and the Code of Judicial Conduct. The motion was denied. On appeal, Glass argues that Judge Stark should have granted its motion for recusal, and the disqualification should have been retroactive, entitling Glass to a new hearing and determination on Nemco's motion to confirm and Glass' cross-motion to vacate the arbitration award. Glass requests that we reverse the denial of its motion to recuse or disqualify the motion judge and vacate the orders of August 29, 2005, and October 11, 2005.

Procedurally, Glass' motion to recuse or disqualify the judge should have been brought prior to argument on the motions. R. 1:12-2; N.J.S.A. 2A:15-50. Although one could argue that there was insufficient time to file a motion for recusal between the time Judge Stark announced her relationship to the arbitrator and the return date of the motions, we are satisfied that there was more than sufficient time to raise an objection and bring a motion, whether written or oral, to recuse Judge Stark before she issued her written decision, which occurred twelve days after she announced her relationship to the arbitrator and ten days after oral argument. Having waited sixteen days' post-decision to file the motion for recusal or disqualification, we are satisfied that Judge Stark properly denied the motion. To entertain motions for recusal post-decision would allow parties to play fast and loose with the court rules by permitting a party to withhold an objection until after the court's decision, and if dissatisfied, file a motion for recusal in the hope of obtaining a second bite at the apple.

Substantively, neither the Code of Judicial Conduct, nor Rule 1:12-2 or N.J.S.A. 2A:15-49 requires the disqualification of a judge, who is a second cousin to an arbitrator, from hearing and determining cross-motions to confirm or vacate the arbitration award. Rule 1:12-2 provides in pertinent part that a judge shall be disqualified and not sit on any matter, if the judge "(a) is by blood or marriage the second cousin of or is more closely related to any party in the action; [or] (b) is by blood or marriage the first cousin of or is more closely related to any attorney in the action." R. 1:12-1(a) and (b) (emphasis added). Here, the judge was not related to a party to the action, and the arbitrator, although an attorney-at-law, was not an attorney in this action. Similarly, N.J.S.A. 2A:15-49 does not require recusal. The statute proscribes a judge from presiding over matters where the judge is related within the third-degree to a party to the action. Again, the judge was not related to any party to the action, and her relationship to the arbitrator, as a second cousin, is that of "next of kin in the sixth-degree of kinship," not third-degree. See In re Fisher's Estate, 17 N.J. Super. 207, 208-09 (Cty. Ct. 1952). The same is true of Cannon 3C(1)(d)(ii) of the Code of Judicial Conduct.

Glass also argues that the judge should have granted its motion because the judge's relationship to the arbitrator presents an appearance of impropriety, citing Cannon 2 of the Code of Judicial Conduct. Because the judge's relationship to the arbitrator was not one that required disqualification under the rules, statute or Code of Judicial Conduct, and the judge disclosed her relationship to the parties prior to ruling on the motions, we discern no appearance of impropriety.

At oral argument, Glass requested that we remand this matter to the trial court for the purpose of conducting a hearing in order to allocate liability and benefits under the arbitration award between Glass and AARK, pursuant to the September 1, 1999, settlement agreement. As previously noted, this issue was raised below but not resolved by the August 29, 2005, decision on the motions, with the judge stating that a plenary hearing would be conducted on a future date to be set by the court. However, the hearing was not conducted before the notice of appeal was filed, and we were advised at oral argument that the issue remains viable.

After the filing of the two lawsuits and the arbitration proceeding, Glass and AARK entered into a settlement agreement on September 1, 1999, by which Glass paid to AARK $125,000 in settlement of all claims between the two parties, except as to certain claims of Nemco for the removal of unsuitable soil. As to Nemco's claims, Paragraphs 4 and 5 of the settlement agreement provide as follows:

4. Nemco's Claims.

A. Pass through claims. AARK agrees to be liable for any and all pass through claims due Nemco and/or any other subcontractor except as otherwise provided herein. With regard to Nemco, all claims will be considered pass through claims, including, but not limited to the retaining wall and sanitary sewer, except those specifically excepted in Section 4B.

B. Unsuitable Soil. Nemco has claimed an extra for the removal of unsuitable soil. If it is determined during the Arbitration that Nemco is entitled to additional compensation for removal of unsuitable soils, then Glass has agreed to indemnify AARK for the face amount determined by the panel to be due Nemco, unless it is determined that AARK issued a Proceed Order to Nemco other than Proceed Order 02-02. However, Glass did not agree and did not authorize any additional work to remove unsuitable soils, and if AARK directed Nemco to do work in connection with the removal of unsuitable soils, and if AARK directed Nemco to do work in connection with the removal of unsuitable soil, then AARK shall be solely responsible to Nemco for same. Glass has, of course, disclaimed any liability for the removal of unsuitable soil except for a limited quantity which it approved in Change Order and Proceed Order 02-02, and paid totaling $84,336.37 because Glass believes the performance of such work was part of the Prime Contract, plans and specifications. AARK agrees to waive its right against Glass for AARK's proportionate share of overhead and profit in connection with Nemco's claim for unsuitable soil.

C. Nemco's Termination Claims. AARK shall be solely responsible for the satisfaction and payment of all amounts which are finally determined to be due and owing to Nemco from AARK for the alleged wrongful termination of Nemco's Subcontract.

5. In the aforesaid arbitration and related litigation, Nemco has asserted direct causes of action against Terry Glass and Irving Glass for violations of the New York Trust Fund Act. In addition, Nemco has asserted direct causes of action against Eduardo Dutra for violations of the New York Trust Fund Act. In the event that Nemco prevails on these claims, and notwithstanding anything else to the contrary, the satisfaction of those New York Trust Fund Act claims shall remain with the parties against whom they were filed.

The settlement agreement was entered into by Glass and AARK only, and resolved only the issues between those two parties, as asserted in the two lawsuits and the arbitration proceeding. The agreement has no effect on Nemco's construction lien or subsequent judgment. Accordingly, the unresolved dispute between Glass and AARK regarding the obligation as between them for satisfaction of Nemco's judgment is remanded. The judgment is otherwise affirmed.

Affirmed and remanded. We do not retain jurisdiction.

 

We note that the notice of appeal indicates that the orders appealed from are final, that is, all issues as to all parties were disposed of in the Law Division. That is not accurate because the motion judge did not resolve the issue of allocation of liability for the satisfaction of Nemco's judgment, as between Glass and AARK under the September 1, 1999, settlement agreement. The motion judge stated in her decision of August 29, 2005, that she would conduct a plenary hearing to resolve the issue, but the hearing was not conducted. Generally, we would dismiss the appeal as interlocutory. R. 2:2-3(a); Parker v. City of Trenton, 382 N.J. Super. 454, 458 (App. Div. 2006). However, we grant leave to appeal nunc pro tunc in the interest of substantial justice, the parties having addressed all other issues and argued the appeal. Caggiano v. Fontoura, 354 N.J. Super. 111, 125 (App. Div. 2002).

In remanding this matter, we are aware that Judge Stark has retired since the filing of this notice of appeal, and that the issue will have to be resolved by a different trial judge.

(continued)

(continued)

15

A-1401-05T1

April 24, 2007