Rush v. Kuhn, Smith & Harris, Inc.

474 A.2d 1072, 193 N.J. Super. 389, 1984 N.J. Super. LEXIS 979
CourtNew Jersey Superior Court Appellate Division
DecidedFebruary 8, 1984
StatusPublished
Cited by1 cases

This text of 474 A.2d 1072 (Rush v. Kuhn, Smith & Harris, Inc.) is published on Counsel Stack Legal Research, covering New Jersey Superior Court Appellate Division primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rush v. Kuhn, Smith & Harris, Inc., 474 A.2d 1072, 193 N.J. Super. 389, 1984 N.J. Super. LEXIS 979 (N.J. Ct. App. 1984).

Opinion

The opinion of the court was delivered by

BRODY, J.A.D.

This protracted litigation was commenced in 1975 to resolve disputes arising out of the construction of an office building. The issues on these appeals demonstrate the serious problems caused by using arbitration to resolve some aspects of a single, complex controversy and using litigation to resolve others.

[392]*392Plaintiffs are four medical doctors1 and the partnership they formed to build and own a medical office building that each would occupy as a separate tenant. (In their capacity as owners of the property the doctors will be referred to as “partners.” Otherwise they will be referred to as “tenants.”) The partners entered into two contracts, each containing an arbitration clause. One was with defendant Reilly (the architect) and the other with defendant Kuhn, Smith & Harris, Inc. (the contractor). The architect agreed to design the building and the contractor agreed to build it. The. architect employed two consulting engineers, defendant Morris and defendant Fraioli-Blum-Yesselman (the engineers).

A provision in the building contract required completion of the building within 300 days and made time of the essence. The building was not substantially completed until 15 months past the contract deadline. The basic liability issues in the case are factual: who and what caused the delay. Each of the parties blames the others. Additional disputes relate to workmanship and extras.

Reasons for the delay largely originate in the partners’ decision to scale down the project for economic reasons. Charges are made that the architect was too slow and negligent in making the necessary changes, the partners were too slow in approving them, and the contractor was too slow and negligent in implementing them.

The contractor demanded arbitration, the first step anyone took toward a formal resolution of the dispute. Plaintiffs thereupon brought this action to litigate claims of the partnership and of the tenants who were delayed in relocating their offices. Over plaintiffs’ objection that the contractor’s demand for arbitration was out of time, the trial court dismissed and referred to arbitration all claims between the partnership and [393]*393the contractor. The court also acceded to plaintiffs’ request that since there was to be arbitration it should include claims involving the architect because of the arbitration clause in his contract. The judge stated in his letter opinion that the claims to be arbitrated are “dismissed without adversely affecting the claims of the remaining plaintiffs [the tenants] suing in their individual capacities. That part of the complaint which has not been dismissed is stayed pending completion of the arbitration.” The judge also stayed discovery. The order was certified as a final judgment and plaintiffs appealed. This court affirmed substantially for the reasons given by the trial judge.

The arbitration took three years during which there were 21 days of hearings. The contractor alleged damages totaling $325,333.22. The partnership alleged damages totaling about $166,000 and claimed indemnification from the architect for any award it may have to pay the contractor. The architect sought $3,600, the balance of his fee which the partnership had withheld. The arbitrators ruled that the trial judge’s order barred the tenants from proving their damages in arbitration.

By their award the arbitrators ordered the partnership to pay the contractor $137,700 and ordered the architect to pay the partnership $24,400 including the withheld portion of his fee. There is nothing on the face of the award that indicates what those sums represent.

The Law Division confirmed the award over the partners’ objection that it was inconsistent. They had argued that even if the contractor’s award included all the non-delay damages claimed, the remaining sum awarded the contractor far exceeded the sum awarded the partnership against the architect. The premise of this argument is that any delay attributed to the partnership was entirely the fault of the architect who therefore should have been made to indemnify the partnership in full. The partnership appealed the judgment of confirmation and this court affirmed. In an unreported opinion we stated, “Unless otherwise specified in an arbitration agreement, an [394]*394allocation of items supporting the calculation of the award is not required.” We suggested that the award may have been reached through set-offs based on unstated findings that each party was responsible for a percentage of the delay.

After the tenants’ claims were reactivated they were summarily dismissed on the ground that the tenants and the partners are one and the same, and because the partnership lost in arbitration, the tenants are collaterally estopped from asserting that any of the defendants is liable for their damages. The partnership then unsuccessfully moved to set aside the judgment confirming the award on the ground that whereas the order to arbitrate appeared to preserve the tenants’ claims it had the effect of destroying them.

The tenants appeal from the judgment dismissing their claims. In a separate consolidated appeal, the partnership appeals from the order denying its motion to vacate the judgment confirming the award. We reverse the judgment dismissing the tenants’ claims and affirm the order denying the partnership’s motion to vacate the judgment confirming the award.

I

In dismissing the tenants’ claims, the trial judge applied the doctrine of collateral estoppel as it is stated in McAndrew v. Mularchuk, 38 N.J. 156, 161 (1962):

Generally the question to be decided is whether a party has had his day in court on an issue, rather than whether he has had his day in court on that issue against a particular litigant.

The trial judge concluded that the tenants as partners were parties to the arbitration where they had their “day in court” and lost on the issué of who was to blame for the delay. He held that the tenants were therefore precluded by the award from retrying the same issue in court to establish the liability of any of the defendants.

It has been held in other jurisdictions that the doctrine of collateral estoppel applies even though the prior proceeding is an arbitration. Ritchie v. Landau, 475 F.2d 151 (2 Cir.1973); [395]*395ACMAT Corp. v. International Union of Operating Engineers, 442 F.Supp. 772 (D.Conn.1977); Goldstein v. Doft, 236 F.Supp. 730 (S.D.N.Y.1964), aff’d 353 F.2d 484 (2 Cir.1965), cert. den. 383 U.S. 960, 86 S.Ct. 1226, 16 L.Ed.2d 302 (1966); Greenspan v. Doldorf 87 App.Div.2d 884, 449 N.Y.S.2d 535 (App.Div.1982); 6 C.J.S., Arbitration, § 128.

Where part of an entire controversy has been decided in arbitration and part remains to be decided in court, applying the collateral estoppel doctrine would be a major step toward eliminating wasteful and debilitating litigation of issues in court that have already been decided in arbitration.

Collateral estoppel cannot be applied here, however, because the arbitrators made no findings respecting the issues to be retried.

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Related

Rush, Urology Assoc. v. KUHN, SMITH & HARRIS, INC.
474 A.2d 1072 (New Jersey Superior Court App Division, 1984)

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474 A.2d 1072, 193 N.J. Super. 389, 1984 N.J. Super. LEXIS 979, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rush-v-kuhn-smith-harris-inc-njsuperctappdiv-1984.