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Arco Construction Group, Inc. v. Sinowest Financial Services

A-0169-10T2 (N.J. Super. App. Div. 2011) (Unpublished)

ARBITRATION — New Jersey law allows for modification of an arbitration award when the award is imperfect in a matter of form not affecting the merits of the controversy.

A restaurant contracted with a construction company to do renovations to its space. The contract identified three separate owners of the restaurant. Two of the owners signed the contract personally and as owners; the last, a corporate entity, endorsed the agreement by way of an agent. The contract had a mandatory arbitration clause. Numerous change orders were executed during the course of construction until the restaurant was destroyed by a fire.

The contractor filed a construction lien for what it believed was unpaid. In response, the restaurant’s property owner served a written demand on the construction company to commence suit to establish its lien claim. The construction company did so in a complaint filed to foreclose on its lien and to stay the proceedings pending arbitration. The complaint named both the restaurant and the restaurant’s property owner as defendants, describing each one as a separate corporation. The restaurant and restaurant’s property owner filed a joint answer, acknowledging that each was in fact a corporation.

The construction company filed its arbitration demand naming only the restaurant as a defendant. The construction company later explained that, at the time it filed its arbitration demand, it did not know that the restaurant was merely a registered trade name of the restaurant’s property owner. The restaurant submitted a witness list in which it identified the restaurant owner as a potential witness. A week later, the restaurant filed an answer and counterclaim, in which it asserted that no monies were due and owing under the contract, and alleging that it was the construction company that owed money to the restaurant. During the hearing, each side presented testimony and dozens of documents. The restaurant argued that no award should be entered against it because it was not a party to the contract. The arbiter rejected that argument and also denied the restaurant’s counterclaim.

The construction company filed a motion to confirm the arbitration award and to enter judgment against the restaurant’s property owner, doing business as the restaurant. In reply, the attorney representing the restaurant’s property owner and the restaurant argued that the restaurant’s property owner was never a party to the arbitration and that no award had been entered against that company. In response, the construction company pointed to the records on file with the Division of Commercial Recording to establish that the restaurant was an alternate or fictitious name of the restaurant’s property owner. The construction company argued that the two were one and the same entity, and judgment should be entered against both because one did not exist without the other. Further, the two businesses had the same business address and principal. The lower court found that there was a defect in the pleadings and, because the restaurant’s property owner was never listed as a party, judgment could not be entered against it. The construction company moved for reconsideration, but the lower court denied the motion because no new arguments were presented.

On appeal, the Appellate Division found that the lower court erred in not reaching the issue of whether the restaurant and the restaurant’s property owner were one and the same. By statute, a court is required to confirm an arbitration award unless one of the parties petitions the court for modification of the award within thirty days. Thus, the lower court was not without authority to at least consider the construction company’s request that the arbitration award be modified.

Specifically, the Court noted that New Jersey’s law allows modification of an arbitration award when the award is imperfect in a matter of form not affecting the merits of the controversy. Here, the lower court failed to consider the statute because it erroneously concluded that a defect in the arbitration award prevented it from entering judgment against the restaurant’s property owner. The Court remanded for determination of whether modification of the arbitration award was proper.

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