WALTERS DEVELOPMENT CO., LLC v. TOWNSHIP OF BARNEGAT

NOT FOR PUBLICATION WITHOUT THE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-0

WALTERS DEVELOPMENT CO., LLC

and MARK MADISON, LLC,

Plaintiffs-Respondents,

v.

TOWNSHIP OF BARNEGAT,

Defendant-Respondent,

and

MENK CORPORATION,

Defendant-Appellant.

___________________________________

December 16, 2016

Argued February 1, 2016 Decided

Before Judges Lihotz, Nugent and Higbee.

On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-1746-09.

Eric I. Abraham argued the cause for appellant (Hill Wallack, LLP, attorneys; Mr. Abraham, of counsel and on the briefs; Christina L. Saveriano, on the briefs).

Richard J. Hoff, Jr. argued the cause for respondents Walters Development Co., LLC and Mark Madison, LLC (Bisgaier Hoff, LLC, attorneys; Mr. Hoff, Jr., on the brief).

Jerry J. Dasti argued the cause for respondent Township of Barnegat (Dasti, Murphy, McGuckin, Ulaky, Koutsouris & Connors, attorneys; Mr. Dasti, of counsel and on the brief).

The opinion of the court was delivered by

HIGBEE, J.A.D.

Defendant Menk Corporation (Menk) filed this appeal from the Law Division's order, entered following remand required by Walters Dev. Co. v. Twp. of Barnegat, No. A-3899-11 (App. Div. Aug. 22, 2013). In our 2013 decision, we ordered the trial court to (1) compute the repayment owed by Menk to defendant Township of Barnegat (Barnegat) due to Barnegat's initial overpayment to Menk and (2) exercise discretion in deciding whether or not to award attorneys' fees to Barnegat. Menk claims the trial court improperly carried out our remand instructions and erred in allocating attorneys' fees. For the reasons that follow, we (1) affirm the trial court's computation of the reimbursement fees owed Barnegat; and (2) affirm the decision to award fees, but remand on the issue of the amount of attorneys' fees.

We reiterate the pertinent portions of the factual and procedural history as stated in our 2013 decision. In 1998, Menk was developing a 1380-unit planned adult community (PAC) in Barnegat. Without upgrades and repairs to its water system, Barnegat could not support the project. Therefore, the two entities entered into a contract (Menk Agreement). The parties agreed that Menk would repair one existing well and construct both an additional well and a water storage tank.

The Menk Agreement and a later addendum provided that Menk "shall be reimbursed or credited the amount of 54% of the Installation Costs plus interest . . . from the proceeds of payments made to [Barnegat] by the 'Future Users.'" This reimbursement percentage was based on the parties' understanding that the newly constructed water facilities would service approximately 3000 units, 1620 more units than necessary to meet Menk's needs. The PAC's 1380 units would constitute 46% of the water facilities output while the remaining 54% would be comprised of future users. They also agreed that Menk was entitled to 100% of the cost of the newly-constructed well. The parties stipulated that the total certified cost for all improvements made by Menk under the agreement, including interest, was $2,885,538.80.

In 2006, Barnegat and affiliated plaintiffs Walters Development Company, LLC, and Mark Madison, LLC (collectively Walters), entered into a similar agreement (Walters Agreement) whereby Walters agreed to make additional improvements to Barnegat's water supply facilities. The parties agreed that Walters would only receive reimbursements after Menk was fully reimbursed under the Menk Agreement.

In 2009, Walters brought suit against Menk and Barnegat by way of an Order to Show Cause and Verified Complaint in Lieu of Prerogative Writs. Walters alleged that as a result of the water facilities constructed by Menk servicing significantly more than the originally intended 3000 units, Menk had been overpaid by Barnegat and that those funds should be transferred to Walters. Barnegat's position was that as nothing more than an escrow agent for the payments made by future users, it would remain neutral and abide by any decision made by the courts.

Along with its answer and counterclaims, Menk filed cross-claims against Barnegat. Specifically, Menk alleged that Barnegat failed to release money owed to Menk, acted inequitably and in bad faith, and was unjustly enriched as a result. Barnegat thereafter filed a motion to dismiss Menk's cross-claim. Menk filed a cross-motion with its response. By way of order and written opinion dated February 21, 2012, the judge granted Barnegat's motion to dismiss Menk's cross-claim and denied Menk's cross-motion.

Barnegat sought reimbursement of its attorneys' fees incurred to respond to Menk's cross-claims. Barnegat asserted that the language of the Menk Agreement entitled attorney fees in the case of litigation between the parties

If either party hereto shall institute any action or proceeding in court to enforce any provision of this agreement or for damages by reason of an alleged breach of any provision of the Agreement, the prevailing party shall be entitled to recover from the losing party its court costs and reasonable attorneys' fees for the services rendered to the prevailing party in such action or proceeding, including appellate proceedings and bankruptcy proceedings. Such attorneys' fees and court costs shall be in addition to any other costs to which such party shall be legally entitled.

After hearing summary judgment motions filed by Walters and Menk, the trial court, citing to both the language of the contract and equitable principles, ruled that Barnegat overpaid Menk $18,945.67 in reimbursements under the Menk Agreement. Menk was ordered to pay Barnegat $198,736.33, $18,945.67 in principal and $179,790.66 in interest. Barnegat's request for attorneys' fees was denied. Menk appealed from those rulings, and Barnegat cross-appealed on the issue of attorneys' fees. Finding the trial court's inclusion of equitable principles into the analysis unnecessary, we affirmed in part and reversed in part, concluding

The [Menk] Agreement and the Addendum read together are clear and unambiguous. Menk is entitled to 54% of the costs of the rehabilitation of well 5 and construction of the water storage tank, which the parties agree is $2,091,299.31, plus interest, plus 100% of the cost for well 6, which the parties agree is $794,239.49, plus interest. The Agreement and the Addendum read together are also clear and unambiguous with regard to the sources of reimbursement to Menk of the amount owed to it. The 1380 aggregate connection fees which have a value of $828,000, should be counted towards the reimbursement of Menk's installation costs. We remand to the motion judge for the computation of the amount that Menk has been reimbursed and the amount owed to it. The motion judge shall then enter an order implementing that result.

. . . .

[W]e remand to the motion judge for his exercise of discretion whether to award attorneys' fees to Barnegat. If the motion judge determines that Menk has been over-reimbursed, then he shall exercise discretion whether Barnegat, as a prevailing party, is entitled to attorneys' fees and litigation expenses.

[Walters, super, slip op. at 25-29.]

On remand, the trial court calculated that Menk was entitled to a reimbursement of $1,095,541.12. Because Menk had already been paid $1,153,112.05, the trial court found Menk to have been overpaid by $57,570.93. The issue of interest was deferred pending further submissions from Menk.

On February 24, 2014, the trial court issued a letter opinion with regard to attorneys' fees. The judge determined Barnegat was entitled to attorneys' fees because Barnegat was a prevailing party. The court noted that Barnegat's original position in the litigation between Walters and Menk was neutral, but Barnegat was forced to change this posture when faced with cross-claims instituted by Menk against it seeking damages. Therefore, the judge found those cross-claims by Menk triggered the contractual fee-shifting provision.

Noting that each count of Menk's amended cross-claim pleads the existence of a valid contract that Barnegat had in some way failed to abide by, the judge determined that Menk's amended cross-claims relabeled its breach of contract claims as quasi-contract claims in order to evade the language of the contract. Therefore, the court found Barnegat was a prevailing party by successfully moving to dismiss Menk's cross-claims.

On June 5, 2014, the judge issued an additional letter opinion addressing the amount of Barnegat's attorneys' fee award. The trial court stated that under the analysis set forth in Singer v. State, 95 N.J. 487, 494 (1984), cert. denied, 469 U.S. 832, 105 S. Ct. 121, 83 L. Ed. 2d 64 (1984), Barnegat was entitled to attorneys' fees. The court found Barnegat's attorneys' fee rate of $175 per hour to be reasonable given the high degree of legal expertise and sophistication required in this case.

With regard to the number of hours, Barnegat's counsel submitted a certification with over a hundred pages of invoices detailing its services in the matter. Barnegat initially sought $85,208.32 in fees but reduced its request to $74,213.95 after Menk argued that some of the invoices fell outside of the fee-shifting provision and that the hourly rate should be reduced by eighty percent, bringing the total fee award to $7865.58. Menk further argued that Barnegat's counsel's certification fails to specify which items relate to defending its own cross-claim and which items relate only tangentially to defending the cross-claim. The trial judge approved Barnegat's request for $74,213.95 in attorneys' fees, simply stating its review of the certification "compels the court to find that the amount of $74,213.95 requested by the Township is reasonable under the circumstances."

Menk appeals from the June 14, 2014 orders, raising several claims, which we will list and address seriatim.

POINT I

THE TRIAL COURT ERRED BY NOT ENFORCING THE TERMS OF THE WATER AGREEMENT AS WRITTEN AND PERFORMED BY THE PARTIES, WHICH WOULD HAVE RESULTED IN MENK BEING OWED AN ADDITIONAL $1,039,791. 55 AS OF DECEMBER 31, 2013.

A trial court's factual findings are owed deference "when such findings are 'supported by adequate, substantial and credible evidence.'" Hess Corp. v. ENI Petroleum US, LLC, 435 N.J. Super. 39, 46 (App. Div. 2014) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)). That court's interpretation of the law and the legal consequences that flow from established facts, however, are not entitled to the same deference and are reviewed de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Contract interpretation is always a question of law. Hess, supra, 435 N.J. Super. at 46. "Accordingly, no special deference is given to the trial court's interpretation; rather, this court 'look[s] at the contract with fresh eyes.'" Ibid. (quoting Kieffer v. Best Buy, 205 N.J. 213, 222-23 (2011)). The role of the court in interpreting a contract is to give "juristic effect" to the intention of the parties, as expressed in the contract. George M. Brewster & Son, Inc. v. Catalytic Constr. Co., 17 N.J. 20, 27-28 (1954).

Under the law of the case doctrine, "a legal decision made in a particular matter 'should be respected by all other lower or equal courts during the pendency of that case.'" Lombardi v. Massao, 207 N.J. 517, 538 (2011) (quoting Lanzet v. Greenberg, 126 N.J. 168, 192 (1991)). The law of the case doctrine "most commonly applies to the binding nature of appellate decisions upon a trial court if the matter is remanded for further proceedings, or upon a different appellate panel which may be asked to reconsider the same issue in a subsequent appeal." Slowinski v. Valley Nat'l Bank, 264 N.J. Super. 172, 179 (App. Div. 1993). "[W]here there is an unreversed decision of a question of law or fact made during the course of litigation, such decision settles that question for all subsequent stages of the suit." Ibid. (quoting State v. Hale, 127 N.J. Super. 407, 410 (App. Div. 1974)).

The purpose of the doctrine is to "'prevent relitigation of a previously resolved issue' in the same case." State v. K.P.S., 221 N.J. 266, 276 (2015) (quoting Lombardi, supra, 207 N.J. at 538). In this way, it is similar to collateral estoppel because it is "guided by the 'fundamental legal principle . . . that once an issue has been fully and fairly litigated, it ordinarily is not subject to relitigation between the same parties either in the same or subsequent litigation.'" K.P.S., supra, 221 N.J. at 277 (quoting Morris Cnty. Fair Hous. Council v. Boonton Twp., 209 N.J. 393, 444 n.16 (Law Div. 1985)). A party cannot attempt "to reargue the merits of what [the Appellate Division] decided in the first appeal." Khoudary v. Salem County Bd., 281 N.J. Super. 571, 575 (App. Div. 1995). Instead, a party is "precluded from relitigating any issues on the remand other than the specific purpose of the remand." Ibid.

Menk argues that the trial court erred by not enforcing the terms of the Menk Agreement as written and performed by the parties, which would have resulted in Menk being owed an additional $1,039,791.55 as of December 31, 2015. To support this argument, Menk reiterates that the trial court's determination that Menk had been over-reimbursed does not comply with the Menk Agreement. Menk cites hornbook contractual interpretation law, alleging that the trial court skipped the legal requirement to construe the Menk Agreement in consideration of the parties' intentions and actual performance. Further, Menk argues that $828,000 was counted twice: once against Menk's 46% share of the water improvements and then against the other developer's obligation for 54% of the water improvements. Thus, according to Menk, it should not owe Barnegat anything, instead it is entitled to $1,039,791.50 plus its $209,775.87 from escrow, totaling $1,249,567.42.

Our 2013 opinion specifically interpreted the Menk Agreement and instructed the trial court as to its obligation on remand. Walters, supra, slip op. at 25. In fact, this court found the Menk Agreement and addendum to be clear and unambiguous when read together. Ibid. The trial court clearly followed the instructions of the Appellate Division from that decision. Menk is attempting to repackage its arguments regarding interpretation of the Menk Agreement. The law of the case doctrine clearly precludes such arguments. The 2013 decision held that the $828,000 "should be counted towards the reimbursement of Menk's installation costs." Id. at 26. The case was remanded only "for the computation of the amount that Menk has been reimbursed and the amount owed to it." Ibid. Therefore, we affirm the decision of the trial court in regard to the computation of the reimbursement fees owed by Menk.

POINT II

THE COURT ERRED BY NOT RULING CONSISTENT WITH ITS REASONING AND RULING IN THE COMPANION SEWER CASE, WHICH NO PARTY CHALLENGED ON APPEAL.

In Menk's next point, it argues that the trial court erred in inconsistently ruling in this matter and the companion sewer case. Menk asserts that in the companion sewer case also involving Barnegat, the exact same provisions were contained in the contract and the connection fees were not allegedly double-counted.

The companion sewer case was never before this Court and, despite its contention to the contrary, Menk's attempted reliance on that case was already rejected by this court in the 2013 decision. Moreover, the case did not involve the Menk Agreement; Walters was not a party to the sewer case; the sewer case never reached the Appellate Division; and the sewer case was distinguished by Judge Grasso. This argument is meritless and is, therefore, dismissed.

POINT III

BARNEGAT IS NOT ENTITLED TO FEES UNDER THE WATER AGREEMENT.

A. BARNEGAT IS NOT A "PREVAILING PARTY" ENTITLED TO REIMBURSEMENT OF LEGAL FEES UNDER THE WATER AGREEMENT.

B. THE ALLEGATIONS AGAINST BARNEGAT DO NOT FALL WITHIN THE SCOPE OF THE FEE SHIFTING PROVISION OF THE WATER AGREEMENT.

C. BARNEGAT IS NOT ENTITLED TO A FEE AWARD BECAUSE ITS EFFORTS WERE NOT "CAUSALLY RELATED TO SECURING THE RELIEF OBTAINED" OR "A NECESSARY AND IMPORTANT FACTOR IN OBTAINING THE RELIEF."

D. EVEN IF BARNEGAT IS A PREVAILING PARTY, THE TRIAL COURT ERRED IN AWARDING BARNEGAT ALL OF ITS FEES IN THIS MATTER.

A trial court's award of counsel fees will only be disturbed where there is a clear abuse of discretion. Packard-Bamberger & Co., Inc. v. Collier, 167 N.J. 427, 444 (2001). A judge abuses his or her discretion when the

decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis. In other words, a functional approach to abuse of discretion examines whether there are good reasons for an appellate court to defer to the particular decision at issue. It may be an arbitrary, capricious, whimsical, or manifestly unreasonable judgment.

[Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (internal quotations and citations omitted).]

New Jersey has a "strong public policy against the shifting of costs." Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 404-05 (2009) (quoting In re Estate of Vayda, 184 N.J. 115, 120 (2005)). "A goal of fee shifting is to discourage parties from using the costs of litigation to gain an advantage over their opponent." Occhifinto v. Olivo Constr. Co., LLC, 221 N.J. 443, 450 (2015). Attorneys' fees are only recoverable "if they are expressly provided for by statute, court rule, or contract." Litton, supra, 200 N.J. at 385. Thus, prevailing parties may seek attorneys' fees where the underlying contract includes a fee-shifting provision. Id. at 386. The party seeking attorneys' fees bears the burden of proving the fees sought are reasonable. Green v. Morgan Props., 215 N.J. 431, 455 (2013). Fee-shifting provisions of contracts are strictly construed. N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 570 (1999).

The standard established in Singer, supra, 95 N.J. at 494, requires the party to "establish that the 'lawsuit was causally related to securing the relief obtained; a fee award is justified if [the party's] efforts are a necessary and important factor in obtaining relief.'" Litton, supra, 200 N.J. at 386 (quoting Singer, supra, 95 N.J. at 494 (internal quotations and citations omitted)).

The calculation of attorneys' fees requires the trial court to determine the lodestar, the "number of hours reasonably expended by the successful party's counsel in the litigation, multiplied by a reasonable hourly rate." Litton, supra, 200 N.J. at 386. The trial court must "evaluate carefully and critically the aggregate hours . . . advanced by counsel for the prevailing party to support the fee application." Rendline v. Pantzer, 141 N.J. 292, 335 (1995). The "court should exercise its discretion to exclude from the lodestar calculation hours for which counsel's documentary support is marginal." Szczepanski v. Newcomb Med. Ctr., 141 N.J. 346, 368 (1995). Also to be excluded are hours found to be "excessive, redundant, or otherwise unnecessary." Rendline, supra, 141 N.J. at 335 (quoting Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990)).

Viewed under the Singer standard, Barnegat was clearly a prevailing party. The trial court correctly found as much based upon the fact that Barnegat had to defend itself against Menk's cross-claims and was successful in doing so. By bringing contract and quasi-contract claims, Menk triggered the fee-shifting provision. This ruling is supported by the record.

The lodestar calculation, however, was incorrect. The court did not adequately address Menk's concerns that many of the hours were related to the companion sewer case. Moreover, despite its initial decision to remain neutral as a co-defendant, Barnegat still had to expend resources to defend itself against Walters. Those fees should not be subject to the fee-shifting provision. Under the unambiguous language of the contract, Barnegat is only entitled to attorneys' fees for its defense against Menk.

Therefore, the case is remanded back to the trial court to more closely evaluate Barnegat's counsel's certifications for attorneys' fees. In conducting that searching review, the trial court is ordered to closely examine and extrapolate the amount of time spent defending against Menk versus against Walters. Moreover, the court must do the same in regard to the time spent on the companion sewer case versus the case at bar.

Counsel fees on appeal should be requested in a motion, therefore, we do not consider this request.

Affirmed in part and reversed and remanded in part.