STEVEN TIGAR v. ROBERT RAPP

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2439-11T3

STEVEN TIGAR AND T & M

PALLET, INC.,

Plaintiffs-Respondents,

v.

ROBERT RAPP AND RAPP BROTHERS

PALLET SERVICE, INC.,

Defendants-Appellants.

_________________________________________________

April 4, 2013

Submitted December 5, 2012 - Decided

Before Judges Fuentes and Hayden.

On appeal from the Superior Court of New Jersey, Chancery Division, Warren County, Docket No. C-16005-09.

Florio Perrucci Steinhardt & Fader, L.L.C., attorneys for appellants (Donald E. Souders, Jr., of counsel and on the brief; Veronica P. Hallett, on the brief).

AnthonyP. Ambrosio,attorney for respondents.

PER CURIAM

Defendants Robert Rapp and Rapp Brothers Pallet Service, Inc. (RBP) appeal from a February 17, 2012 Chancery Division order enforcing a July 6, 2011 settlement agreement. For reasons that follow, we affirm.

The record shows that in 2007, plaintiff T & M Pallet, Inc. (T & M) was a closely-held corporation, owned equally by plaintiff Steven Tigar and his brother Randy, which made and repaired pallets. In December 2007, Rapp and Philip Gleason,1 a thirty-year employee of RBP, agreed to obtain a one-third ownership interest each in T & M by signing a stock purchase agreement with Tigar and his brother. Under the terms of the purchase agreement, Rapp and Gleason each committed to assume all of T & M's debt, estimated at $600,000, and in return, acquire one-third of T & M's stock shares. The purchase agreement reduced Tigar s ownership to one-third and extinguished his brother s ownership.

Shortly after the stock purchase agreement went into effect, the T & M partners' relationship deteriorated rapidly and drastically. According to Tigar, Rapp did not assume T & M's debt obligation as required by the stock purchase agreement, and was siphoning money from T & M to his own company, RBP. As a result, Tigar and T & M filed a civil complaint against defendants on February 11, 2009, alleging fraud by both defendants, and breach of fiduciary duty, conversion, negligence, breach of contract, and intentional infliction of emotional distress by Rapp individually. Defendants filed a counterclaim, alleging breach of contract, unjust enrichment, and unfair business practices.

During the litigation, the parties consented to utilize a court-appointed forensic accountant, Raymond R. Ciccone, C.P.A., to examine T & M's and RBP's business records. Ciccone issued a report of his investigation, dated March 7, 2011, and agreed at the parties request to mediate the dispute. In his report, the accountant stated the following:

We would also like to bring to your attention the T & M Stock Purchase Agreement []. According to Article II, it states that in consideration for the stock in T & M, the buyer and the company shall assume the debt of the company. The contract does not appear to quantify the exact debt of T & M however we were told by Steven Tigar that the amount was in excess of $600,000. Since our analysis indicates that Rapp owes T & M $80,966, consideration should be given to assessing whether the contract was legally fulfilled by Rapp.

The parties, utilizing Ciccone s mediation services and his report, reached a settlement on May 11, 2011. At the settlement hearing before Judge Allison E. Accurso, Rapp s attorney summarized the agreement, emphasizing that "subject to all the foregoing being accomplished, all the parties claims, counterclaims, et cetera, that are set forth in the litigation will be dismissed with prejudice." When the attorney questioned Rapp about his understanding of and agreement with the terms of the settlement the following exchange took place:

Q: And we also had the benefit of the court-appointed accountant Mr. Ciccone and his assistance and expertise in discussing the issues that we ve now settled today in court?

A: That s correct.

Q: You understand that we ve settled the case in a final way, correct?

A: Correct.

Q: And subject to your making certain payments related to the trailers and to the plaintiffs in the case, the case is now over. Do you understand that?

A: I understand.

Q: And that any claims that you had against the plaintiffs and any claims that they have against you pursuant to the settlement will be dismissed with prejudice, correct?

A: Yes.

At no time during this hearing did any party specifically mention the T & M stock or ownership of the company.

The parties' May 11, 2011 oral agreement was incorporated into a final consent judgment and settlement agreement on July 6, 2011. The agreement required Rapp to pay to T & M a total of $65,000 and to make additional payments for certain flat bed trailers in T & M s possession. Additionally, subject to the terms of the agreement, all claims and defenses that were asserted, or could have been asserted in the within action were dismissed with prejudice. The settlement agreement defined claims as each and every civil claim, civil complaint, civil cause of action, whether known or unknown, asserted or unasserted, plead[ed] or unplead[ed] . . . which related to [the] underlying agreement pursuant to which Rapp was to acquire T & M as litigated in the above-captioned matter.

After Rapp failed to make his initial payment due under the settlement, plaintiffs filed an order to show cause to enforce the agreement. Tigar contended in his moving papers that Rapp also refused to turn over the stock, claiming that he still owned one-third of T & M. Rapp responded that he never specifically agreed to surrender his shares and that the settlement agreement was silent about the company stock. Thus, he claimed, the shares remained his since a contrary result would be tantamount to reforming the settlement agreement after the fact.

Judge Accurso held a hearing on December 13, 2011. Rapp testified that after the May 11 settlement conference, he believed he still owned his one-third ownership interest in T & M because neither his stock nor company ownership were discussed at the hearing. He acknowledged that he did not make a demand during the negotiations for the shares as the stock ownership was a very minor thing on [his] mind that day. He also asserted that he did not think about the stock because the stock had no value. Later during his testimony Rapp claimed that the stock could be worth millions of dollars. Rapp told the judge that when he left the court on May 11, 2009, he thought he, Tigar, and Gleason would continue to have a one-third interest each in T & M and would run the business together.

After Rapp's testimony and counsels' arguments, Judge Accurso determined that the terms of the settlement agreement required Rapp to relinquish his shares. The judge stated that there was no dispute that the stock purchase agreement was intended to create an infusion of cash to address T & M's mounting debt and, in return, Rapp was to run the company as a one-third owner. According to Ciccone s investigation, the judge observed, not only did Rapp fail to assume and pay off the debt, he siphoned nearly $80,000 out of T & M. The core of plaintiffs complaint was that Rapp did not comply with the terms of the stock purchase agreement and, thus, did not have a right to a one-third ownership in the first place. The judge noted that Rapp had not provided another expert report during the litigation demonstrating a contrary view of T & M s business records.

Furthermore, Judge Accurso found that Rapp s testimony was not credible. The judge did not believe that after years of contentious litigation Rapp thought he would be able to keep his shares, and did not find convincing Rapp's testimony that there was no meeting of the minds. The judge concluded:

I come to the conclusion [that Rapp retaining the stock] was something that neither party had in mind at the time. I come to the conclusion that both parties understood that these shares were being relinquished, and Mr. Rapp only subsequently determined that he would not give up these shares. I don t believe there was another person in the courtroom who would have understood that these shares weren t part of this transaction. It s inconceivable that these claims would have been settled without giving up of these shares. If Mr. Rapp believed differently he needed to say so. In fact, I don t believe he said so because I don t believe he thought anything different at the day of the settlement. I think that later on he determined that he doesn t have to relinquish these shares.

I m going to enforce the settlement. I m going to order the payments to be made, the shares, the certificates, if they ve ever been issued.

An order enforcing the agreement was entered on February 17, 2012. This appeal followed.

On appeal, defendants request that we reverse the trial court's order because the requirement to relinquish Rapp s shares was not a condition of, or contained in, the settlement agreement. On the other hand, plaintiffs contend that the purpose of the litigation was to force Rapp to relinquish his shares and ownership of the company, as Rapp had never paid the promised consideration in order to truly own the shares. Thus, plaintiffs argue, by settling all claims between the parties, Rapp gave up his claim to the shares and ownership in the company. Moreover, plaintiffs maintain "given the facts as outlined in plaintiffs' complaint and defendants' counterclaim, it is unfathomable that the parties could continue to maintain a civil and productive business relationship.

Our review of a trial court's interpretation of a contract is de novo. Kas Oriental Rugs, Inc. v. Ellman, 394 N.J. Super. 278, 285 (App. Div.), certif. denied, 192 N.J. 74 (2007). Public policy in New Jersey favors settlement of litigation and a settlement agreement is a contract that should be enforced by the courts like other types of contracts. Pascarella v. Bruck, 190 N.J. Super. 118, 124-25 (App. Div.), certif. denied, 94 N.J. 600 (1983). Settlement agreements must be construed in reference to the entire agreement, not "selective reference to [its] individual clauses." In re Fairfield Gen. Corp., 75 N.J. 398, 413 (1978). A court's role is to "discern and implement the common intention of the parties" considering "what is written in the context of the circumstances at the time of drafting and to apply a rational meaning." McMahon v. City of Newark, 195 N.J. 526, 546 (2008) (citation omitted).

Utilizing these well-established principles of interpretation, we agree with the judge's interpretation that "all claims" settled by the parties included Rapp's claim to ownership of the stock and the business. The agreement was not ambiguous when it stated that the term claims related to the "underlying agreement pursuant to which Rapp was to acquire T & M as litigated in the above-captioned matter." Moreover, by agreeing to give up all claims that each had against the others, it is rational to conclude that plaintiffs and defendants agreed to release claims for either T & M ownership or payment of its debt obligation. In contrast, it is not reasonable to conclude that plaintiffs gave up all claims for payment for the shares but agreed to have Rapp retain ownership in T & M when, in plaintiffs view, he never paid for the stock.

Additionally, the trial judge found Rapp's testimony concerning his understanding of the terms of the settlement agreement to be unworthy of belief. We will defer to the factual findings of a "trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with competent, relevant and reasonably credible evidence as to offend the interests of justice." Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting In re Trust Created By Agreement Dated Dec. 20, 1961, ex rel. Johnson, 194 N.J. 276, 284 (2008)). "Because a trial court hears the case, sees and observes the witnesses, and hears them testify, it has a better perspective than a reviewing court in evaluating the veracity of witnesses." Ibid. (quoting Cesare v. Cesare, 154 N.J. 394, 411-12 (1998)). Accordingly, we will defer to the trial judge s determination that Rapp's testimony, that he believed he still owned the shares that were the subject matter of the suit, was unbelievable in the context of the contentious and hard-fought litigation.

In sum, construing the settlement agreement in the context of the conditions under which it was entered, we are satisfied that trial judge's interpretation of the settlement agreement was grounded in the law and consistent with the circumstances under which it was drawn.

Affirmed.

1 Gleason was not a party to this lawsuit but has a separate action pending against defendants.