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Marchionda v. Peachtree Estates, Inc.

A-3253-01T3 (N.J. Super. App. Div. 2003) (Unpublished)

CONTRACTORS; NEW HOME WARRANTY—Where a home builder’s contract limits a homeowner to claims that can be made under the new home warranty, if the homeowner elects arbitration and can’t convince the arbitrator that an alleged defect is covered by the warranty, it cannot base a suit on a different theory.

Homeowners sued a builder for defective masonry work. The sales contract limited the builder’s liability to those items covered by the new homeowner warranty, and, with respect to those items, limited the remedy to requiring the builder to repair the items. The homeowners discovered cracked bricks and submitted a claim for arbitration under the new homeowner warranty. The arbitrator determined that the new homeowner warranty only covered structural issues and that the homeowners’ cracked bricks constituted an aesthetic issue not covered by the warranty. The homeowners then sued the builder, claiming that either the builder installed defective brick or it caused the defects through poor workmanship. The builder moved for summary judgment, claiming that the homeowners knew or should have known of the defective bricks or workmanship at the time of the arbitration claim. It argued that, once the homeowners elected to submit the claims to an arbitrator, the exclusive method of redress was in that arbitration proceeding. Since the homeowners failed to prove defective masonry or installation as part of the arbitration process, they were barred from raising it later in a civil suit. The lower court granted summary judgment in the builder’s favor, noting that the homeowners could have obtained an expert witness to demonstrate to the arbitrator that the cracked bricks were defects. The homeowners appealed, claiming that since the bricks were not covered under the homeowner’s warranty, as found by the arbitrator, they could still sue for damages in a civil action. The Appellate Division affirmed. The Court noted that the sales contract specifically limited the builder’s liability to claims covered under the new homeowner warranty. The Court also noted that, with respect to their claim for defective masonry, the homeowners had sufficient information (at the time of the arbitration claim) to pursue their claim and since they failed to do so, they were barred from raising the issue at a later date.

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