JOHAN KAFIL et al. v. VINCENZO ANELLO et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1514-05T51514-05T5

JOHAN KAFIL and MONICA KAFIL,

Plaintiffs-Appellants,

v.

VINCENZO ANELLO and CATHERINE

ANELLO,

Defendants-Respondents.

_________________________________________________

 

Argued October 17, 2006 - Decided November 27, 2006

Before Judges Kestin and Payne.

On appeal from Superior Court of New

Jersey, Chancery Division, Morris County,

C-203-03.

Peter R. Bray argued the cause for

appellant (Bray, Chiocca & Miller,

attorneys; Mr. Bray on the brief).

Joseph C. Nuzzo argued the cause for

respondent.

PER CURIAM

Plaintiffs, the contract purchasers of a one-half interest in commercial property, appeal from an order of the chancery court enforcing the terms of a settlement between plaintiffs and defendants that terminated plaintiffs' interest in the property when plaintiffs, who were making extensive improvements to the property, were unable to obtain a final certificate of occupancy (C.O.) by June 15, 2005. We affirm.

Defendants were the owners of commercial property located on Route 23 North in Pequannock Township. In April 1998, plaintiffs entered into a five-year agreement with defendants, with two five-year renewal options, to lease the property, commencing on October 1, 1998, for a rental payment of $3,000 per month. At the time, the property was in a state of disrepair. The lease acknowledged that fact and provided that it was "Tenants' intent to renovate the existing structures on the premises so that a new building will stand on the property which Tenant may then sublease." The lease further required plaintiffs, at their sole expense, to make "on site improvements such as paving, landscaping, curbing[,] lighting and any other such improvements required by the [preexisting] municipal site plan approval," to commence construction by April 26, 1998, and to construct a new septic system.

Simultaneously, the parties entered into a contract for the sale of a one-half interest in the property in its "as is" condition by defendants to plaintiffs for a purchase price of $100,000 plus payment of a mortgage on the premises in the amount of $112,732.83. The contract, like the lease, contained an agreement by plaintiffs "to immediately commence to complete in a timely fashion those improvements to be made to the premises, in accordance with municipal approvals heretofore secured by Seller and reviewed and accepted by the Buyer." Closing was to occur on October 1, 2003, the date of the expiration of the initial term of lease agreement.

The closing did not take place as scheduled. On October 14, 2003, plaintiffs rescheduled the closing for October 28, 2003 and specified that time was of the essence. When defendants failed to appear on the new closing date, on November 14, 2003, plaintiffs filed suit to compel specific performance. Plaintiffs' suit was eventually referred to mediation, and on March 22, 2005, a settlement agreement was executed and, thereafter, a stipulation dismissing plaintiffs' suit was filed.

The handwritten settlement agreement provided that plaintiffs would deliver $55,000 to the mediator and, upon simultaneous delivery to the mediator by defendants of a deed to the property to be held in escrow, the $55,000 would be released to defendants. The deed would transfer ownership interest in the property to a limited liability corporation (LLC) in which the four parties each maintained a one-quarter interest. Paragraph 4 of the settlement agreement provided:

Plaintiff shall complete all work necessary (at his sole cost) to obtain a final Certificate of Occupancy for [illegible]. Said C.O. shall be obtained no later than June 15, 2005. In the event that said C.O. is not obtained by such date, then the mediator shall return the Deed to the Defendant, and Plaintiff shall have no further rights in or to the property. If the C.O. is obtained on or before June 15, 2005, as soon as it is obtained the mediator shall release to Plaintiff the Deed being held in escrow.

Paragraph six of the agreement addressed the preparation of an LLC operating agreement and a "certificate of formation," and paragraph eight of the agreement stated:

This Agreement contemplates the preparation of further documents. In the event there is any dispute regarding these documents, the parties desire not to litigate those issues. They further acknowledge that this Agreement is binding and enforceable. Therefore, the parties agree to submit any and all such disputes to the mediator and shall each submit to the mediator a "not-to-exceed" two page memorandum. The mediator shall, within 2 business days of receipt of both memoranda, render a decision, which decision shall be final, binding, non-appealable and enforceable in Court.

On May 12, 2005, counsel for defendants sent to counsel for plaintiffs a copy of a thirty-four item punch list of remaining work to be completed on the premises, prepared by the Pequannock Township Construction Official, along with a letter that stated in part:

As you can see the amount of items on the punch list seems to be substantial. June 15 is going to be here before we know it and as I have indicated previously we will insist on strict compliance with the settlement agreement and no further delays.

* * *

If a certificate of occupancy is not received on or before the time period set forth in the settlement agreement we will insist on the return of the deed back to my clients from the mediator, pursuant to the settlement agreement.

On the same date, plaintiffs' counsel informed defendants' attorney that plaintiffs had been advised by the Township that it would issue a Certificate of Compliance. However, a Certificate of Occupancy would not be issued "until the Township determines the particular use of the premises which is dependent upon the tenant." Counsel therefore suggested that the parties commence marketing the property "in order to secure the Certificate of Occupancy in a timely fashion."

No C.O. was issued by June 15, 2005, and in a letter to the mediator dated June 17, 2005, counsel for defendants requested the return of the deed as required by the settlement agreement.

On June 20, 2005, the Township Construction Official informed plaintiffs in a letter that all "Uniform Construction Code inspections (Building, Plumbing, Electrical, and Fire) have been scheduled and approved." However, the letter stated additionally that "further permitting and approvals will be necessary prior to receiving a Certificate of Occupancy."

On June 30, 2005, plaintiffs' counsel informed the mediator that the Township would not issue a final C.O. until a tenant was selected for the premises, but that it would issue a temporary C.O. The letter further stated that "[i]n the meantime, [plaintiff] Mr. Kafil intends to continue to complete the site plan requirements pursuant to the site plan resolution of 1991." Counsel's letter concluded with an assertion of substantial compliance with the settlement agreement and an argument that the deed should not be returned as defendants had demanded, an argument that defendants opposed in further correspondence to the mediator on July 5, 2005.

Although a temporary C.O. was in fact issued on June 30, 2005, effective to August 29, 2005, it was conditioned upon completion of "site work as per approved" and stated that if the work was not completed, the property owner would be "subject to fine or an order to vacate." The work required was described as follows:

gas to roof, water service, bathrm finish, wire (1) 240v. 60 amp feed for rooftop unit, wired (1) 120 v. 20 cr with Lt/switch GFI, wire new 5 gal water heater (1) 20 amp circuit, Fire Alarm system [sic]

No reference was made to the need to identify a tenant.

On July 19, 2005, the mediator returned the deed to defendants, having found that plaintiffs had failed to comply with the terms of the settlement agreement. Following the return of the deed, plaintiffs filed a motion in their prior action "to enforce the [settlement] agreement." Following extended argument, the motion was denied by the Chancery Division judge, who ruled that: "Plaintiff has failed to obtain a final certificate of occupancy by June 15, 2005 as mandated by the Settlement Agreement. The language of that Agreement is clear and unambiguous. Plaintiffs have no rights to the Deed." A motion for reconsideration was likewise denied. Plaintiffs have appealed both orders.

I.

Despite arguments to the contrary, we are satisfied that the plain language of paragraph four of the settlement agreement provided authority to the mediator to return the deed to defendants upon receipt of evidence that plaintiffs had not obtained a final (or even a temporary) C.O. by the June 15, 2005 deadline. The construction of the settlement agreement, which is a contract, Nolan ex rel. Nolan v. Lee Ho, 120 N.J. 465, 472 (1990), is governed by contract principles that require, in the absence of an ambiguity, that contractual terms be given their plain and ordinary meaning. M.J. Paquet, Inc. v. N.J. Dept. of Transp., 171 N.J. 378, 396 (2002). Here, paragraph four required that a final C.O. be obtained by June 15, 2005, and provided: "In the event that said CO is not obtained by such date, then the mediator shall return the deed to the Defendant and Plaintiff shall have no further rights in or to the property." The direction to the mediator, which implicitly required a determination as to whether a final C.O. had issued, could hardly have been more clearly expressed.

We are also persuaded, after consideration of the principles of law that we have just cited, that the Chancery Division judge was not precluded from hearing plaintiffs' motion as the result of paragraph eight of the settlement agreement. We construe that provision, which limits recourse to the courts, as unambiguously applicable only to disputes regarding the language of the documents to be drafted that related to the LLC, as discussed in paragraph six. This dispute does not concern those documents. The court thus properly rendered a decision in the matter. Although that decision coincided with that of the mediator, we find nothing to suggest that, in rendering it, the court based its decision on anything other than the evidence before it and the arguments of counsel. We thus reject plaintiffs' arguments to the contrary.

We also disagree with the argument, raised by defendants, that plaintiffs were required to seek relief by way of a motion to vacate a judgment pursuant to R. 4:50-1. The record establishes that plaintiffs did not seek to set aside the settlement and to reopen their prior litigation. Their intent was to "enforce" that settlement. However, we cannot agree with plaintiffs' construction of the word "enforce," finding their interpretation of the unambiguous terms of the agreement so as to permit untimely performance to be at variance with the agreement's plain meaning.

Although a settlement may, like any other contract, be modified, such modification requires mutual assent, evidence of which is wholly lacking in this case. William Lewis v. Travelers Ins. Co., 51 N.J. 244, 253 (1968). In the absence of evidence of modification, the chancery judge appropriately enforced the agreement as written. Zuccarelli v. State of N.J. Dept. of Envtl. Prot., 326 N.J. Super. 372, 380 (App. Div. 1999), certif. denied, 163 N.J. 394 (2000).

We reject plaintiffs' argument that because the settlement agreement did not contain a "time-of-the-essence" clause, the time limit for receipt of a final C.O. should have been extended by the court. In support of their position, plaintiffs rely on Forrest v. Forrest, 241 N.J. Super. 239 (App. Div. 1990). However, in contrast to the matter before us, the Forrest case concerned the closing provisions of a real estate contract that were interpreted in accordance with precedent applicable to that particular subject, and inapplicable here. Moreover, the course of conduct of the parties as demonstrated by the record before us and, indeed, the provisions of the settlement agreement itself, demonstrate clearly that, because of a history of delay, time was of the essence in this transaction. Further, the record, unlike that in Forrest, does not support plaintiffs' position that they would have been able to comply with the settlement's terms within a reasonable time after June 15, 2005. In fact, they have offered no evidence of their ability to obtain the final C.O. that the agreement required at any reasonable time. In these circumstances, any modification of the agreement by the court would not have been sustainable. As we stated in Forrest,

We doubt that many settlements would be achieved if courts were free to later adjust material terms thereof to meet judicial notions of fairness, and then to order compliance with the adjusted "settlement."

[Id. at 243.]

In support of their argument for modification of the settlement agreement, plaintiffs claim that literal enforcement of the agreement results in an inequitable forfeiture of the sums expended by plaintiffs in improving the property. However, the Supreme Court has held:

Although it is true that equity abhors a forfeiture, equity's jurisdiction in relieving against a forfeiture is to be exercised with caution lest it be extended to the point of ignoring legal rights. Thus if parties choose to contract for a forfeiture, a court of equity will not interfere with that contract term in the absence of fraud, accident, surprise, or improper practice.

[Dunkin' Donuts of Am. v. Middletown Donut Corp., 100 N.J. 166, 182 (1985) (citations omitted).]

We are satisfied that none of the conditions that would have permitted the court's interference with implementation of the contract between plaintiffs and defendants exist in this case and that a hearing was not required to more fully explore them. Plaintiffs have claimed that defendants committed fraud and that they interfered with plaintiffs' attempts to obtain tenants. However, plaintiffs allegations in this regard are nonspecific in nature and unsupported by any competent evidence, and thus they do not raise a factual dispute as to why a timely C.O. was not obtained. U.S. Pipe and Foundry Co. v. Am. Arbitration Ass'n, 67 N.J. Super. 384, 399-400 (App. Div. 1961).

Plaintiffs claim that the parties were ignorant of the requirements of a final C.O. at the time of the settlement, but that ignorance is belied by their counsel's concessions to the contrary at oral argument. Plaintiffs argue that, if only given additional time, they could have complied with the settlement agreement. However, the terms of the agreement did not permit delay. Moreover, the record demonstrates that, as late as October 7, 2005, a final C.O. had not been issued, despite what appears to have been continued work at the site by plaintiffs following the return of the deed in July.

In sum, we are satisfied that the unambiguous language of the settlement agreement required the mediator to return the deed to the property to defendants when presented with uncontested evidence of noncompliance with the settlement's unambiguous terms, and we find no legal or equitable grounds that would compel an alteration of those terms. We find plaintiffs' remaining arguments to the contrary to lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

The court's orders denying plaintiffs' motion and request for reconsideration are therefore affirmed.

 

At oral argument of this appeal, defense counsel stated that the $55,000 represented the parties' settlement of past-due amounts payable by plaintiffs on the lease.

This portion of the agreement was cut off in duplicating the document for inclusion in the record. However, the missing language does not appear to be material to matters on appeal.

The provisions of the Alternative Procedure for Dispute Resolution Act governing contractual disputes, N.J.S.A. 2A:23-1 to -19, are inapplicable in this case because the parties did not agree to be bound by that Act. Mt. Hope Dev. Assocs. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 145-46 (1998).

(continued)

(continued)

13

A-1514-05T5

November 27, 2006