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Konieczny v. Micchie

A-1122-96T2 (N.J. Super. App. Div. 1997) (Unpublished)

CONTRACTORS; WARRANTIES; ARBITRATION—Under the Homeowners Warranty Act, a homeowner electing arbitration cannot later go to court over issues that could have been addressed in the arbitration but were not. Claims that could have been, but were not, raised by the homeowner against the home inspector, can later be brought to court.

A general contractor built a house that the purchaser inspected before closing. No problems were found during the course of the inspection and the purchaser closed title. Two months later, the purchaser submitted a “punch list” of problems for the contractor to rectify. Dissatisfied with the response to this letter, the purchaser requested arbitration to resolve the issues. Both parties agreed to binding arbitration. The arbitrator concluded that some, but not all, of the issues raised by the purchaser were valid and that some of the initial work required correction. The purchaser then attempted to withdraw from the arbitration proceedings and filed suit with the Law Division, but that Court granted summary judgment to all defendants on the grounds that the purchaser’s initiation of binding arbitration proceedings constituted an election of remedies which barred all others.

The Appellate Division agreed that based on statutory law, res judicata and collateral estoppel, initiation of procedures to enforce a remedy constituted an election barring all other remedies. Having opted for binding arbitration, the purchaser could not seek additional relief, even for claims respecting defects not submitted to arbitration. The purchaser’s election of remedies subsumed all claims for damages from the contractor. Statutory law clearly states that even the initiation of procedures is sufficient to bar all other remedies. Further, the legislative purpose of the New House Warranty and Builders’ Registration Act is to waive judicial remedy upon election of a prompt, convenient and cost-saving means of resolving disputes concerning construction defects. The Court refused to grant the option to file a claim in court simply because the purchaser was dissatisfied with the results of the arbitration.

Since the statute relied on by the purchaser only applied to builders, the question remained whether those same claims against the home inspector were barred under any issue-preclusive standard. Another question was whether an arbitration award should have issue-preclusive effect in favor of a defendant that was not a party to the arbitration proceedings. As to the first question, the Appellate Court cited case law holding that arbitration awards were issue preclusive where there is (a) a clear issue of fact and (b) the procedure for resolution is substantially similar to that used in judicial adjudication. As to the second issue, the Court stated that collateral estoppel permits a defendant who was not a party to an action involving a common plaintiff to use a finding of fact from that action to preclude litigation. Courts have referred to this as defensive collateral estoppel. The guide established by precedent is whether a party has had his day in court on an issue, not whether he has had it against a particular litigant. In this case, the Court found that the purchaser had a full and fair opportunity to litigate the issues in the prior proceeding and that there were no other circumstances justifying relitigation of the same issues. The Court stated that the prior forum afforded the purchaser an opportunity to join, present and determine those issues against the home inspector. However, the Court did not preclude the purchaser from asserting claims against the inspector that were not raised during the arbitration proceeding. The Court rejected the entire controversy doctrine in this instance because the inspector could not have been joined in the arbitration proceeding with respect to these additional claims.


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