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Riefolo Construction Company v. Victorian Stables Inc.

A-0660-98T1 (N.J. Super. App. Div. 1999) (Unpublished)

ARBITRATION—An arbitrator’s failure to award interest on unpaid payments where specifically provided for in a contract is not the type of error that a court will correct.

A construction dispute was arbitrated pursuant to a specific provision in the contract. The contract also contained a provision providing for interest on unpaid payments from the date that the original payment was due. The arbitration award gave the contractor the entire amount of its claim and then gave the owner a credit for slightly more than its counterclaim. There was no mention of pre-award interest in the award which stated that “[t]his award is in full settlement of all claims and counterclaims submitted to this arbitration.” The successful contractor filed a complaint in the Chancery Division seeking modification and conformation of the arbitration award. Specifically, it sought to have pre-award interest included within the award and sought to hold the president of the corporate owner jointly and severally liable. The Chancery division judge granted both requests. On appeal, the owner and its president objected. The New Jersey arbitration statute permits a court to modify or correct an award in three circumstances, one of which is “[w]here there was an evident miscalculation of figures or an evident mistake in the person, thing or property referred to therein.” The lower court believed that the “arbitrator’s failure to award interest amount[ed] to a blatant mistake… .” The Appellate Division disagreed, holding that “the modification of the arbitration award cannot be viewed as a mere ‘evident miscalculation of figures’ as the claim for interest was submitted to the arbitrator but no award of interest was apparently made.” “Where the dispute has been [sic] finally been disposed of by arbitration, the import of the arbitration award is not thereafter subject to judicial interference in an independent proceeding.” Citing a New Jersey Supreme Court case, the Court said, “[b]asically, arbitration awards may be vacated only for fraud[,] corruption, or similar wrong doing on the part of the arbitrators. It can be corrected or modified only for very specifically defined mistakes as set forth in [the statute].” Here, the Court felt it was clear that the failure to award pre-award interest did not amount to fraud, corruption or similar wrongdoing.

The corporate owner’s president contended that the contract contained no guarantee provision. The Court pointed out, however, that a Rider to the contract provided that in the event of an assignment, the president “shall continue to be personally responsible for the financial terms of said contract.” Specifically, the president signed the contract above the words, “owner signature” and signed the Rider above his name. That clause established the intent of the parties that he be liable under the contract. The president also argued that the lower court erred in holding him liable for the amount of the award because he was not a party to the arbitration. The Court rejected that argument, holding that the president certainly had notice of the arbitration and the right to participate in or control the arbitration. “Under such circumstances, we hold he should be bound by the result.”


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