GRANDVIEW AT RIVERWALK PORT IMPERIAL CONDOMINIUM ASSOCIATION, INC. VS. K. HOVNANIAN AT PORT IMPERIAL URBAN RENEWAL II, LLC (L-2560-13, HUDSON COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2308-17T2
GRANDVIEW AT RIVERWALK
PORT IMPERIAL CONDOMINIUM
ASSOCIATION, INC.,
Plaintiff,
v.
K. HOVNANIAN AT PORT
IMPERIAL URBAN RENEWAL
II, LLC, K. HOVNANIAN
DEVELOPMENTS OF NEW
JERSEY, INC., and HOVNANIAN
ENTERPRISES, INC.,
Defendants-Appellants,
and
RTKL NEW JERSEY ARCHITECTS,
P.A.,
Defendant-Respondent,
and
AG CONSTRUCTION; WHITESTONE
CUSTOM BUILDERS; MEGA
CONSTRUCTION CORP.; QUAKER
WINDOWS & DOORS; MAPLEWOOD
BUILDING SUPPLY; BENFATTO
CONSTRUCTION; AITEC LLC;
GICOMELLI TILE; BAMCO, INC.;
PHOENIX GLAZING; CHARLES L.
KANE; CLEM'S ORNAMENTAL
IRONWORKS, INC.; ARCHITECTURAL
RESTORATION & WATERPROOFING;
SOUTH SHORE CONSTRUCTION;
EASTERN WATERPROOFING &
RESTORATION; PAULUS,
SOKOLOWSKI & SARTOR; THE
MCLAREN ENGINEERING GROUP;
RAMCO CONSTRUCTION;
K. HOVNANIAN HOMES a/k/a and/or
d/b/a K. HOVNANIAN HOMES, LLC
and/or K. HOVNANIAN HOMES, INC.;
K. HOVNANIAN/SHORE
ACQUISITIONS, LLC.; K. HOVNANIAN
CONSTRUCTION MANAGEMENT,
INC.; PILLARI, LLC; HEAVY
CONTRACTORS; MUESER RUTLEDGE
CONSULTING ENGINEERS; MAX
HVAC, INC.; JERSEY FIRESTOP, LLC;
F&G MECHANICAL CORPORATION;
K. HOVNANIAN COMPANIES, LLC;
K. HOVNANIAN NORTHEAST, INC.
a/k/a and/or d/b/a K. HOVNANIAN
COMPANIES NORTHEAST, INC.;
K. HOVNANIAN ENTERPRISES, INC.;
BLUEFIN CONSTRUCTION CORP.;
K. HOVNANIAN CONSTRUCTION II,
INC.; K. HOVNANIAN COOPERATIVE,
INC.; MAPLEWOOD BUILDING
SPECIALTIES, INC.; SAY SERVICE
A-2308-17T2
2
CO., INC.; ROLF JENSEN &
ASSOCIATES, INC.; K. HOVNANIAN
HOLDINGS NJ, LLC; and
K. HOVNANIAN DEVELOPMENT OF
NEW JERSEY II, INC.,
Defendants.
Argued May 1, 2019 - Decided August 13, 2019
Before Judges Accurso, Vernoia and Moynihan.
On appeal from the Superior Court of New Jersey,
Law Division, Hudson County, Docket No. L-2560-
13.
Donald E. Taylor argued the cause for appellants
(Wilentz, Goldman & Spitzer, PA, attorneys; Donald
E. Taylor, of counsel and on the briefs; Richard J.
Byrnes and Daniel A. Cozzi, on the briefs).
Gary C. Chiumento argued the cause for respondent
(Chiumento McNally, LLC, attorneys; Gary C.
Chiumento, of counsel and on the brief; Jordan S.
Tafflin and Paige M. Bellino, on the brief).
PER CURIAM
Defendant K. Hovnanian at Port Imperial Urban Renewal II, LLC
appeals from the denial of its post-trial motion seeking indemnification from
RTKL New Jersey Architects P.A. for the $3 million in damages the jury
awarded plaintiff Grandview at Riverwalk Port Imperial Condominium
Association, Inc. for Hovnanian's breach of express warranty and consumer
A-2308-17T2
3
fraud. Because we find the parties did not contract for Architects to indemnify
Hovnanian for those damages, we affirm.
Narrowed to the issues presented on appeal, the key facts of plaintiff's
case against Hovnanian and Architects are easily summarized. Hovnanian
acquired a residential development project, Grandview at Riverwalk Port
Imperial, in West New York from the original developer in June 2003.
Architects had worked for the original developer, and Hovnanian contracted
with it to complete the design of the 132-unit building and provide
construction contract administration services. Hovnanian issued a public
offering statement to purchasers of units at Grandview providing that "the
Common Elements are fit for their intended use."
The plans Hovnanian submitted to, and obtained approval from, the
Town of West New York called for a "Type 2B" building, requiring use of
fire-retardant-treated wood. In May 2004, a consultant Hovnanian hired to
review Architects's plans for insurance purposes questioned whether the
building had the necessary fire rating to meet the requirements of a Type 2B
building.
In February 2005, Architects advised Hovnanian the existing plans
called for untreated plywood in the floor assemblies, contrary to Type 2B
A-2308-17T2
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requirements. Architects raised the possibility of applying fire-retardant
chemicals to the plywood already installed, but was not sure whether the "local
authority" would accept this solution, as it did not involve treating the wood
with a "pressure process" at the manufacturer. Architects noted that "[t]his
could be a very sensitive topic" that "may require a review and approval by
both the building department and the fire marshal."
Hovnanian and Architects met in April 2005 to discuss the problem, by
which time more than half the plywood had already been installed and
Hovnanian was not willing to consider solutions that would disrupt the
construction schedule. The parties discussed "several solutions" that "centered
on converting the assembly" from a Type 2B building classification to a "Type
3A" classification by either adding an additional sprinkler system or "filling
the void space" in the floor assemblies with a non-combustible material to
satisfy Type 3A requirements.
Hovnanian summarized the meeting and next steps in an email noting
"[t]iming is critical," and the matter "must be handled properly." The email
stated the modification "needs to be presented to the town building department,
either as a request or in the form of an advisory that we are changing from a
2B to a 3A," and that Architects was to "produce a detail of their official,
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professional recommendation for the revised assembly, bearing in mind the
costing issues discussed in the selection of materials."
Architects responded by email, stating:
We believe that the use of the plywood (untreated or
treated) at the deck assembly in [Grandview] should
require that it be classified as a Type 3A (non-
combustible/combustible) construction type under
BOCA 96. It was my understanding that the strategy
was that we would raise this as a concern and make
this a recommendation to the local authority along
with describing the action necessary to accomplish
that change and allow them to react. We believe they
will see the situation the same way but until they do so
we have not presumed anything.
An internal Hovnanian email a few days later, principally concerning
permits for another building, noted:
This is all further complicated by the expected fire
assembly changes for the floors being developed by
[Architects] for both buildings [including Grandview].
As I said in that action plan, we need to be extremely
thoughtful on how all of that is presented. I am
expecting draft materials from [Architects] this
weekend and will need to review and approve by the
first of the week.
This may be another situation where we may need to
use some political capital to expedite approvals of the
changes.
Architects drafted a formal letter to Hovnanian dated April 18, 2005, (1)
outlining the issue with having plywood in Type 2B construction, (2) stating
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the classification of Grandview "may need to be changed to a Type 3A," (3)
recommending "that this situation be reviewed with the local code authority as
soon as possible," (4) detailing the alterations that would be implemented if
the change to Type 3A was accepted, and (5) offering assistance to Hovnanian
in resolving the issue with the local authority. Hovnanian forwarded
Architects's letter to the construction code official in West New York, noting
that "some of the details may warrant a revision from the current Type 2B
Construction Classification to a Type 3," and advising it would prepare
"formal submissions of the revised plans" and forward them to the code
official within two weeks.
Architects prepared plans for the revised building classification in May,
which Hovnanian hand-delivered to West New York. Hovnanian's
representative admitted at trial that he never saw any documentation approving
the Type 3A plans and could not recall whether the local authority ever
responded to the requested change in classification. Architects requested an
"updated status of the resubmittals" from Hovnanian on June 29, 2005.
Hovnanian responded that it had met with officials the day before about
changes to a different building, but "[b]eyond that, they have made no further
comments or requests as a result of the changes" relating to Grandview.
A-2308-17T2
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There is nothing in the record to show that Hovnanian took any steps to
obtain approval of the classification change beyond hand-delivering the plans,
nor anything to show that West New York ever approved it. The town issued a
certificate of occupancy for the 132 residential units in Grandview in
November 2006. Although Hovnanian several times amended its public
offering statement, it never disclosed that West New York had not approved
the plans changing the building's classification from Type 2B to Type 3A.
Plaintiff's architectural expert testified that the conversion from Type 2B
construction to Type 3A was a "major change," and that when Architects
discovered Grandview did not meet the requirements of Type 2B construction,
it should have told Hovnanian to stop all work and ensured West New York
approved the classification change before proceeding. The expert further
opined that Grandview, as constructed, would not meet the Type 3A
requirements.
The expert testified Grandview was constructed with "western deck
framing," meaning that "you build a wall, then you build the floor, and then
build a wall on top of that floor, then you build a floor." He explained that a
Type 3A building should have "a solid masonry wall" on the exterior where
the floor "wouldn't interrupt the structure load path of the exterior wall ."
A-2308-17T2
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According to the expert, the exterior walls of Grandview could collapse in a
fire, which would not occur had they been built properly in accordance with
the requirements of a Type 3A building.
Plaintiff's expert concluded that the exterior walls of Grandview, as
constructed, were not fit for their intended purpose. The expert acknowledged
that West New York could have permitted Hovnanian to deviate from the
BOCA code, thus allowing the walls as constructed, but opined a waiver after
construction would be inappropriate because it would not render the building
safer in a fire. According to the expert, a waiver "won't slow the fire down.
Fire doesn't know you have a waiver."
Responding to questions posed by a specifically detailed verdict sheet,
the jury found plaintiff proved Architects was negligent in the design of
Grandview, and that Hovnanian failed to meet an express promise that the
common elements would be fit for their intended purpose. The jury found
plaintiff suffered damages of $4 million, for which Hovnanian was responsible
for $3 million and Architects responsible for $1 million. As to consumer
fraud, the jury found plaintiff proved Hovnanian "omitted an important and
significant fact . . . with the intent that others would rely" thereon in
connection with the sale of the units by stating the common elements "would
A-2308-17T2
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be fit for their intended use," and that plaintiff had proved an ascertainable loss
of $3 million, trebled to $9 million.
The indemnification clause at issue provides as follows:
Architect hereby agrees to assume the entire
responsibility and liability for any and all injuries or
death of any and all persons and any and all losses or
damages to property caused by or resulting from or
arising out of any negligent act, error or omission on
the part of the Architect, its agents, officers,
employees, subcontractors or servants in connection
with this Agreement or with the prosecution of the
work hereunder, whether covered by the insurance
specified herein or not. Architect shall indemnify, and
save harmless Owner, its agents, officers, employees,
affiliated entities from any and all claims. losses,
damages, fines or penalties, legal suits or actions
including reasonable attorney's fees, expenses and
costs which may arise out of any and all such claims,
losses, damages, legal suits or actions for the injuries,
deaths, losses and/or damages to persons or property.
[(Emphasis added).]
The trial court judge denied Hovnanian's motion for indemnification
prior to trial, finding the issue would not be ripe until the jury had assessed the
negligence of Architects, if any. After trial, when the motion was renewed, the
judge denied indemnification based on the language of the clause and the jury's
findings. Specifically, the judge found the language of the clause was clear
A-2308-17T2
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that Architects had only agreed to indemnify Hovnanian for Architects's
negligence, not for Hovnanian's own negligence.
Further, the judge noted the case did not go to the jury on a negligence
theory against Hovnanian, that claim having been dismissed on summary
judgment prior to trial. Finding the breach of warranty claim against
Hovnanian "completely separate," the judge concluded Hovnanian was seeking
indemnification for its own "broken promises" not permitted by the language
of the clause. He further found that affording Hovnanian "this broad
indemnity for all fault related to the actions of [Architects]" would offend New
Jersey public policy. Although the judge acknowledged "that without the
negligence of [Architects], the issues of the breach of warranty" would never
have arisen, he concluded
[i]t is the actions after the notification of the problem
and the efforts taken essentially to cover up the
problem solely at the hand of [Hovnanian] and without
any proof of any involvement in this endeavor by
[Architects] that sounded the death knell for any
indemnification, even if one were to be found under
the terms of the agreement.
Hovnanian appeals, arguing Architects is contractually obligated to
indemnify Hovnanian for the damages awarded against it by the jury because
A-2308-17T2
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they arose out of Architects's negligence in designing the building contrary to
code requirements. We disagree.
We review questions of contract interpretation de novo, with no special
deference to the trial court's interpretation of the agreement. Kieffer v. Best
Buy, 205 N.J. 213, 222-23 (2011). Although we do not subscribe to the trial
court judge's view that the nature of the claim, tort or breach of warranty, is
meaningful1 or that public policy would bar Hovnanian's indemnification
1
To the extent the judge's remarks on the record could be construed to suggest
that indemnification was precluded as a matter of law by the fact that
plaintiff's claim against Hovnanian sounded in breach of warranty while its
claim against Architects sounded in tort, we disagree. The nature of the claim
is not dispositive. One can easily imagine a scenario in which a developer
relied in good faith on an architect's design, knew nothing of possible code
violations, obtained all necessary approvals from the local authority, and
discovered long after construction was completed that a problem existed in the
common areas of a building. The developer's liability for breach of warranty
in that scenario would be based solely on its ownership of a building with a
code violation. See, e.g., Reyes v. Egner, 404 N.J. Super. 433, 458 (App. Div.
2009) (noting "an owner of property is 'directly responsible for compliance'
with the building codes, even if a developer who previously had title to the
property had built the offending component of the dwelling" (quoting DKM
Residential Props. Corp. v. Twp. of Montgomery, 363 N.J. Super. 80, 93 (App.
Div. 2003), rev'd on other grounds, 182 N.J. 296 (2005))), aff'd, 201 N.J. 417
(2010). In such a circumstance, the developer would be entirely without fault,
and thus entitled to indemnification under a clause such as the one in the
parties' contract, regardless of whether that claim sounded in tort or contract.
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here,2 we have no hesitation in concluding the trial court was correct that
Architects does not owe Hovnanian indemnification under their agreement.
Indemnity provisions are construed in accordance with the general rules
for construction of contracts with one important caveat: ambiguities are
strictly construed against the indemnitee. Mantilla v. NC Mall Assocs., 167
N.J. 262, 272 (2001). In keeping with that principle, "a contract will not be
construed to indemnify the indemnitee against losses resulting from its own
negligence unless such an intention is expressed in unequivocal terms."
Ramos v. Browning Ferris Indus. of S. Jersey, Inc., 103 N.J. 177, 191 (1986).
Here, the plain language of the indemnification clause makes clear
beyond any doubt that Architects only agreed "to assume the entire
responsibility and liability for . . . any and all losses . . . caused by or resulting
from or arising out of any negligent act, error or omission on the part of the
Architect . . . in connection with this Agreement or with the prosecution of the
work hereunder" (emphasis added). The clause thus provides only that
2
Where an indemnitee is partially but not solely at fault, as here, public
policy does not preclude indemnification. Leitao v. Damon G. Douglas Co.,
301 N.J. Super. 187, 192 (App. Div. 1997) ("Even in the context of an
indemnity agreement in a construction contract, it is not against public policy
for the indemnitor to promise to hold harmless the indemnitee for the
indemnitee's own negligence as long as the indemnitee is not solely at fault .").
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Architects will indemnify Hovnanian for Architects's own negligence and
nowhere suggests that Architects would be responsible to indemnify
Hovnanian for Hovnanian's own conduct. As an intent by Architects to
indemnify Hovnanian against losses resulting from Hovnanian's own conduct
"is neither expressed in unequivocal terms, nor reasonably implied," Carvalho
v. Toll Bros. & Developers, 278 N.J. Super. 451, 466 (App. Div. 1995)
(citation omitted), the agreement cannot be construed to afford Hovnanian
indemnification for its own conduct.
The trial court judge properly rejected, as do we, Hovnanian's claim that
the evidence established its liability was merely passive; that it first learned of
an issue with Type 2B code compliance at the April 2005 meeting, that
Architects provided a solution to the problem on the same day, and that it was
unaware that Architects's revised plans were not compliant with the
requirements for a Type 3A building. We acknowledge that was the case
Hovnanian presented to the jury. But there was certainly other evidence in the
record to permit the jury to conclude that Hovnanian was aware of the problem
with the untreated plywood as early as May 2004 when its consultant raised
questions about the building's fire rating, that it knew Architects's proposed
solution of reclassifying the building required the town's approval and
A-2308-17T2
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certainly knew that it proceeded with construction without ever securing that
approval or amending the public offering statement.
Most important, the jury's verdict makes plain it found both Architects
and Hovnanian separately responsible for the damages plaintiff suffered. In
charging the jury, the trial judge instructed it could find liability on multiple
claims but could not duplicate damages. Specifically, the judge charged:
In reviewing the evidence in this case, you should
consider each of the plaintiff's claims as separate and
distinct claims. You may, considering the evidence,
decide to find for the plaintiff on any one of the
claims, all of the claims or none of the claims. If,
however, you find for the plaintiff on one or more of
the claims, the award of damages may not be included
in the awards or damages for other claims based on
the same losses or harm suffered by the plaintiff.
A review of the verdict sheet shows the jury did exactly as the judge
instructed. It found plaintiff suffered a total of $4 million in damages as a
result of Grandview's code deficiencies, that $1 million of those damages was
attributable to Architects's negligence, and $3 million was attributable to
Hovnanian's breach of warranty and consumer fraud. By separating
Architects's portion of fault and attributing the entirety of the $3 million in
damages for Hovnanian's breach of warranty to plaintiff's ascertainable loss
A-2308-17T2
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under the Consumer Fraud Act, the jury only assigned those damages to
Hovnanian it found were based on Hovnanian's own fault.
Accordingly, although Hovnanian is undoubtedly correct that its own
breach of warranty would not have occurred but for Architects's negligence,
the jury's verdict established conclusively that Architects's negligence was not
the sole cause of Hovnanian's breach. See Ramos, 103 N.J. at 191 ("To be
entitled to indemnification as one who is secondarily or vicariously liable, a
party must be without fault.").
Affirmed.
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