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Kassis v. Blue Ocean Holdings, L.L.C.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Nov 1, 2016
DOCKET NO. A-5200-14T1 (App. Div. Nov. 1, 2016)

Opinion

DOCKET NO. A-5200-14T1

11-01-2016

ADIB KASSIS AND GLORIA KASSIS, Plaintiffs-Respondents/Cross-Appellants, v. BLUE OCEAN HOLDINGS, L.L.C., d/b/a FIDELIS CONSTRUCTION, FIDELIS CONSTRUCTION AND DEVELOPMENT, and EDWARD HOKAYEM, Defendants-Appellants/Cross-Respondents.

Farber Brocks & Zane, L.L.P., attorneys for appellants/cross-respondents (David J. Bloch, of counsel and on the brief). Tesser & Cohen, attorneys for respondents/cross-appellants (Steven Cohen and Matthew Lakind, on the brief).


NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3. Before Judges Yannotti and Fasciale. On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-4846-15. Farber Brocks & Zane, L.L.P., attorneys for appellants/cross-respondents (David J. Bloch, of counsel and on the brief). Tesser & Cohen, attorneys for respondents/cross-appellants (Steven Cohen and Matthew Lakind, on the brief). PER CURIAM

In this dispute pertaining to a residential-home renovation project, Blue Ocean Holdings, L.L.C., d/b/a Fidelis Construction, Fidelis Construction and Development, and Edward Hokayem (defendants) appeal from a June 26, 2015 order confirming an arbitration award entered against them and rendering judgment in favor of Adib Kassis and Gloria Kassis (plaintiffs) in the amount of $94,479.59. Plaintiffs cross-appeal from the same order denying their request for counsel fees and costs associated with an order to show cause (OTSC) they filed seeking to confirm the award. On the appeal, we reverse that part of the order awarding counsel fees, costs, and personal liability against Mr. Hokayem, and we affirm on the cross-appeal.

Fidelis Construction and Development (the contractor) entered into a written contract with plaintiffs to renovate their home. Adib Kassis and Mr. Hokayem, on behalf of the contractor, executed the contract. The contract required the parties to arbitrate all controversies or claims associated with the construction work.

Defendants filed a demand for arbitration seeking payment for services rendered. Plaintiffs denied defendants' allegations, filed a counterclaim seeking damages arising from alleged construction defects and violations under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -204, and asserted CFA affirmative defenses. Plaintiffs also contended that Mr. Hokayem was personally liable for their damages.

The arbitrator rejected defendants' claim in its entirety. He awarded plaintiffs $23,275.94 in construction defect damages. That amount was comprised of $13,760.94 for water damage on the second floor of the residence; $3465 for a pool-house pipe break; $4385 for an exterior repair to the pool house; and $1665 for a damaged front door. The arbitrator also awarded plaintiffs $58,480.15 for counsel fees and $12,723.50 for administrative costs associated with the arbitration proceedings. The award, which the arbitrator memorialized in writing, specifically stated that "[a]ll claims and counterclaims [not] expressly granted herein are hereby denied." He made no findings as to plaintiffs' CFA allegations, and did not explain the basis for his decision to deny defendants' claim.

Plaintiffs filed a verified complaint and OTSC seeking to confirm the arbitration award. In response, defendants argued the court should vacate the part of the award imposing counsel fees and costs. They asserted that the only basis for such an award would have been if plaintiffs succeeded on either their CFA claims or defenses. Defendants reasoned that because the arbitrator dismissed plaintiffs' CFA claims, and did not specifically find that plaintiffs successfully asserted any CFA affirmative defense to defendants' claim for payment for services rendered, there existed no basis for the award of counsel fees or costs. Defendants also maintained that the award against defendants improperly imposed personal liability against Mr. Hokayem.

The judge rejected defendants' arguments and confirmed the entire award. The judge acknowledged that the arbitrator did not explain the basis for his findings or conclusions. As a result, the judge stated "it would be inappropriate for this [c]ourt to presume that any one explanation for the [a]rbitrator's decision is more likely than the other." However, the judge concluded that even if the arbitrator dismissed the CFA claims, "nothing in the award[] indicated that [p]laintiffs' affirmative defenses arising under the [CFA] were also dismissed."

On the appeal, defendants argue the judge erred by refusing to modify the arbitration award. They maintain he should have vacated the imposition of counsel fees, costs, and personal liability against Mr. Hokayem. On the cross-appeal, plaintiffs argue primarily that the judge erred by failing to award them additional counsel fees associated with filing this lawsuit and appeal.

We begin by addressing defendants' contention that the judge erred by failing to modify the arbitration award by vacating the imposition of counsel fees and costs.

In New Jersey, agreements to arbitrate contractual disputes made after January 1, 2003 are governed by the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32 (Arbitration Act). After a resolution is reached, "an arbitrator's award must be reduced to a judgment by a court, through the application of one of the parties, to confirm the award." Kimm v. Blisset, L.L.C., 388 N.J. Super. 14, 28 (App. Div. 2006), certif. denied, 189 N.J. 428 (2007); N.J.S.A. 2A:23B-22. Defendants argue part of the award should be vacated pursuant to N.J.S.A. 2A:23B-23(a)(4), which allows vacation of the award if "an arbitrator exceeded the arbitrator's powers." Defendants contend the arbitrator exceeded his powers because he was without authority to impose counsel fees, costs, and impose personal liability against Mr. Hokayem.

Generally, New Jersey courts apply the "'American Rule,' under which a prevailing party cannot recover attorney's fees from the loser." Mason v. City of Hoboken, 196 N.J. 51, 70 (2008). However, the Arbitration Act provides that an arbitrator "may award reasonable attorney's fees and other reasonable expenses of arbitration if such an award is authorized by law in a civil action involving the same claim or by the agreement of the parties to the arbitration proceeding." N.J.S.A. 2A:23B-21(b). On this record, there is no basis to impose counsel fees or costs.

Under certain circumstances involving the CFA, a court may award counsel fees and costs. The court has stated that "[f]or the purposes of eligibility for payment of reasonable attorneys' fees and costs, the [CFA] makes no distinction between a person who raises the Act's provisions in an affirmative claim and one who pleads it as a defense." BJM Insulation & Constr., Inc., 287 N.J. Super. 513, 516 (App. Div. 1996); see Delta Funding Corp. v. Harris, 189 N.J. 28, 49 (2006). And, a party alleging consumer fraud under the CFA "can recover reasonable attorneys' fees, filing fees, and costs if that plaintiff can prove that the defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss and thus cannot recover treble damages." Cox v. Sears Roebuck & Co., 138 N.J. 2, 24 (1994). However, in this case, the arbitrator denied plaintiffs' CFA counterclaim, and made no findings as to plaintiffs' CFA affirmative defenses to defendants' claims. As the judge said, "it would be inappropriate for this [c]ourt to presume that any one explanation for the [a]rbitrator's decision is more likely than the other." Therefore, the CFA did not provide authority for the award of attorney's fees and costs, and the arbitrator exceeded his powers by awarding counsel fees and costs to plaintiffs.

N.J.S.A. 2A:23B-21(b) allows an arbitrator to award counsel fees authorized by the agreement. While there is no question that sufficient notice was given to defendants about plaintiffs' intent to seek counsel fees, and that such fees were predicated in the CFA, the Arbitration Act requires more than just notice. See Block v. Plosia, 390 N.J. Super. 543, 556 (App. Div. 2007) (stating that an arbitrator may award counsel fees and costs if authorized by statute or by the parties' agreement, subject to "the principles of fair notice"); see also Rock Work, Inc. v. Pulaski Constr. Co., Inc., 396 N.J. Super. 344, 357 (App. Div. 2007) (concluding that even though "the Arbitration Act does not use the term 'expressly,' . . . it would appear that the [] Act requires an express contract"), certif. denied, 194 N.J. 272 (2008). Here, there was no agreement, express or otherwise.

We now turn to defendants' argument that the judge erred by confirming the arbitration as to Mr. Hokayem personally. They maintain he was shielded from liability by his status as an officer of the corporation. We agree with defendants that there is no evidence in the record to show Mr. Hokayem signed the contract in his individual capacity, rather than on behalf of the contractor.

As a general matter, "[a] corporation acts only through its agents." African Bio-Botanica, Inc. v. Leiner, 264 N.J. Super. 359, 363 (App. Div.), certif. denied, 134 N.J. 480 (1993). "[A]n agent who enters into a contract for an undisclosed or for a partly disclosed principal is personally liable on the contract; an agent who contracts on behalf of a fully disclosed principal is not personally liable on the contract." Id. at 363-64 (citing Looman Realty Corp. v. Broad St. Nat'l Bank of Trenton, 32 N.J. 461, 476-78 (1960)).

Defendants argue that Mr. Hokayem, principal of Blue Ocean Holdings, L.L.C., signed the construction contract on behalf of his companies, and that the structure of the contract indicated he was not acting in his personal capacity but only on behalf of the company. The contractor is listed in the contract as Fidelis Construction and Development. The arbitrator did not find, contrary to the contentions on appeal, that the contractor was not registered in New Jersey to perform home improvement work. As a result, we conclude the arbitrator exceeded his powers by including in the award personal liability against Mr. Hokayem.

On the cross-appeal, we reject plaintiffs' argument that the judge erred by not awarding costs and attorney's fees associated with confirming the arbitration award and on this appeal.

The decision to award attorney's fees is discretionary, and we apply an abuse-of-discretion standard of review. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001). The court "will disturb a trial court's determination on counsel fees only on the rarest occasion, and then only because of a clear abuse of discretion." Barr v. Barr, 418 N.J. Super. 18, 46 (App. Div. 2011) (citations and internal quotation marks omitted). A court has abused its discretion "if the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error in judgment." Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005). We see no abuse of discretion here.

As to the imposition of post-judgment counsel fees, the Arbitration Act provides in relevant part:

b. A court may allow reasonable costs of the summary action and subsequent judicial proceedings.

c. On application of a prevailing party to a contested judicial proceeding pursuant to section 22, 23, or 24 of this act, the court
may add reasonable attorney's fees and other reasonable expenses of litigation incurred in a judicial proceeding after the award is made to a judgment confirming, vacating without directing a rehearing, or substantially modifying or correcting an award.

[N.J.S.A. 2A:23B-25(b), (c) (emphasis added).]

Moreover, the same principles that guide a court's determination of attorney's fees as to the arbitration proceedings applies to post-judgment award of fees. Absent an express agreement between the parties for the award of attorney's fees or statutory justification, the "American Rule will prevail," prohibiting the shifting of fees. Rock Work, supra, 396 N.J. Super. at 357. Here, there was no express agreement or statutory justification for the award of counsel fees and costs for the trial court proceedings.

On the appeal, we affirm the order upholding plaintiffs' construction defect/poor workmanship award, but reverse that part of the order confirming the arbitration award imposing counsel fees, costs, and personal liability against Mr. Hokayem. On the cross-appeal, we affirm. I hereby certify that the foregoing is a true copy of the original on file in my office.

CLERK OF THE APPELLATE DIVISION


Summaries of

Kassis v. Blue Ocean Holdings, L.L.C.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Nov 1, 2016
DOCKET NO. A-5200-14T1 (App. Div. Nov. 1, 2016)
Case details for

Kassis v. Blue Ocean Holdings, L.L.C.

Case Details

Full title:ADIB KASSIS AND GLORIA KASSIS, Plaintiffs-Respondents/Cross-Appellants, v…

Court:SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Date published: Nov 1, 2016

Citations

DOCKET NO. A-5200-14T1 (App. Div. Nov. 1, 2016)