SM GULF INC. v. GULF OIL, LP
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0647-17T3
S&M GULF INC., LEDGEWOOD
PETROLEUM, LLC, and J&M
GULF, INC.,
Plaintiffs,
and
GULF EXPRESS, INC.,
Plaintiff-Appellant,
v.
GULF OIL, LP, and PMG
NEW JERSEY II, LLC,
Defendants-Respondents,
and
BLUE HILL FUELS, LLC, and CH
REALTY VII/CG NORTH EAST
BLUE HILLS, LLC,
Defendants.
_________________________________
Submitted January 9, 2019 – Decided January 28, 2019
Before Judges Reisner and Mawla.
On appeal from Superior Court of New Jersey,
Chancery Division, Bergen County, Docket No. C-
000059-16.
Kimm Law Firm, attorneys for appellant (Michael S.
Kimm, on the brief).
Lerch, Early & Brewer Chtd., attorneys for respondents
Petroleum Marketing Group, Inc., PMG Northeast,
LLC, and PMG New Jersey II, LLC (Stuart A.
Schwager, on the brief).
Pepper Hamilton, LLP, attorneys for respondent Gulf
Oil, LP (Arthur C. Young and Stephanie L. Jonaitis, of
counsel and on the brief).
PER CURIAM
Plaintiff Gulf Express, Inc. appeals from a September 25, 2017 order
denying its motion to vacate a settlement agreement and a stipulation of
dismissal it signed with defendants PMG New Jersey II, LLC, (PMG) and Gulf
Oil, LP (Gulf). We affirm.
The following facts are taken from the motion record. Commencing in
2003, plaintiff became a franchisee of Gulf. Pursuant to a franchise agreement
executed in 2003, and later amended in 2015, plaintiff operated a gas station and
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convenience store in Fort Lee. In March 2016, plaintiff and other franchisees,1
filed a complaint alleging a violation of the New Jersey Franchise Act, N.J.S.A.
56:10-1 to -31, naming Gulf and Blue Hills Fuels, LLC, (Blue Hills) as
defendants. The complaint sought temporary and preliminary injunctive relief
to halt the sale to a third party of the equity in Blue Hills, which owned over 220
gasoline station properties in seven northeastern states, including New Jersey,
and the right to supply gas to those stations. Plaintiffs asserted they should have
been afforded the opportunity to purchase their franchise premises from Gulf
pursuant to a right of first refusal clause contained in their respective franchise
agreements.
Following a preliminary hearing, the motion judge entered a consent order
granting preliminary injunctive relief. The parties then commenced
negotiations, which yielded a settlement agreement that they signed on
September 22, 2016. As a result of the settlement, a stipulation of dismissal was
signed and filed with the court.
The settlement agreement set forth a mechanism for plaintiffs to purchase
the franchise premises. In pertinent part, it stated:
1
Plaintiffs S&M Gulf, Inc., Ledgewood Petroleum, LLC, and J&M, Gulf, LLC
have not filed appeals from the order under consideration.
A-0647-17T3
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The PMG Defendants shall give the Franchisees
options to purchase ("the Purchase Options") PMG NJ's
interests in the Franchise Premises . . . PMG NJ's
leasehold interest in such premises[], through the
following procedures:
(a) The Franchisees and the PMG Defendants
shall obtain their own separate appraisals (each
individually, an "Appraisal" and together, the
"Appraisals") of each of the Franchise Premises . . . the
lease between the PMG Defendants and their landlord
. . . by independent MAI-certified appraisers, and shall
simultaneously exchange such appraisals through their
counsel of record by no later than two . . . business days
after the full execution of this Agreement by all the
Parties (the "Exchange Date"). Notwithstanding the
foregoing, . . . it is agreed that the PMG Defendants
shall, by the Exchange Date, provide J&M's counsel
with a copy of the . . . PMG Defendants' Appraisal of
their leasehold interest . . . . Within thirty . . . days of
its receipt of such documents, J&M shall complete its
Appraisal of the PMG Defendants' leasehold interest
. . . and provide such Appraisal to the PMG Defendants'
counsel . . . .
(b) If, as to any Franchise Premises . . . the
difference, if any, in the appraised values of any of the
Franchise Premises . . . pursuant to the Appraisals (the
"Appraisal Difference"), is ten percent . . . or less, the
Franchisee of that particular Premises shall have the
option to purchase the PMG Defendants' interest in
such Premises for a price that is equal to the lower of
the two . . . Appraisals plus fifty percent . . . of the
Appraisal Difference. . . .
(c) If the Appraisal Difference for any given
Franchise Premises is more than ten percent . . . , then
either (i) the Franchisee of those Franchise Premises
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may elect to purchase the PMG Defendants' interest in
such Premises for a price that is equal to the PMG
Defendants' Appraisal, or (ii) if the foregoing election
is not made, the Franchisee of those Franchise Premises
and the PMG Defendants shall retain an independent
MAI-certified appraiser (an "Independent Appraiser"),
who shall be selected by the [court] from the list of
seven MAI-certified appraisers attached hereto as
Exhibit A (each, a "Potential Independent Appraiser"),
to render an appraisal of those premises or lease, as the
case may be (an "Independent Appraisal"). If [the
court] is to select the Independent Appraiser, the
Franchisee and the PMG Defendants through their
respective counsel shall request in writing, enclosing a
copy of Exhibit A, that he select one of the Potential
Independent Appraisers and [the court]'s selection shall
be binding upon the Franchisee and the PMG
Defendants. Upon selection of the Independent
Appraiser by [the court], said Independent Appraiser
shall be jointly engaged by the Franchisee of those
Franchise Premises and the PMG Defendants to
promptly appraise the Franchise Premises . . . .
Contemporaneously with the joint engagement of the
Independent Appraiser, the PMG Defendants and the
Franchisee shall each provide their respective
Appraisals to the Independent Appraiser. The cost of
the Independent Appraisal shall be borne equally by the
Franchisee of those particular Franchise Premises and
the PMG Defendants. Where an independent Appraisal
is obtained for any given Franchise Premises, the
Franchisee shall have the option to purchase the
Franchise Premises . . . for a price that is equal to the
Independent Appraisal.
The settlement agreement also stated each party had "completely read[,] . . .
understood[,] . . . and . . . fully accept[ed] the terms of [the] [a]greement."
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Plaintiff decided to exercise the purchase option set forth in the settlement
agreement with respect to the property in Fort Lee. Valuations were conducted
by appraisers retained by plaintiff and defendants, respectively. Defendants'
appraisal provided a final value of $3,650,000. Notably, it did not include the
convenience store business in the valuation as a going concern. Plaintiff's
appraisal was $2,300,000, and also did not include a valuation of the business
as a going concern. Because the $1,350,000 difference between the two
appraisals was greater than the ten percent threshold set forth in the settlement
agreement, defendants asked the motion judge to select an independent appraiser
pursuant to the terms of the settlement agreement. In response, plaintiff filed an
order to show cause seeking to reinstate the complaint, enforce the settlement
agreement, and require defendants to accept plaintiff's valuation.
The motion judge denied plaintiff's application without prejudice and
entered an order appointing a third independent appraiser, as required by the
settlement agreement, to resolve the impasse. The judge concluded the parties
had agreed upon the third appraisal as a dispute resolution mechanism, and that
he would allow it "to run its course while preserving the rights to have judicial
intervention in the event that [the] end result is unsatisfactory to any party."
A-0647-17T3
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Before the independent appraisal could be conducted, plaintiff filed a
motion to vacate the settlement agreement and the stipulation of dismissal.
Pursuant to Rule 4:50-1(a), (d), and (f), plaintiff claimed the parties failed to
achieve a meeting of the minds, mutual mistake, and lack of consideration.
Specifically, plaintiff argued there had been no common understanding
regarding what would be appraised, namely, the fee simple property interest on
which plaintiff operated the gas station and convenience store, or the property
interest and the convenience store as a going concern.
The motion judge denied plaintiff's motion. Plaintiff sought
reconsideration and the judge again denied its motion stating, "[i]t is merely a
[r]e-presentation of that which has already been presented and rejected by the
court." The independent appraisal ordered by the judge proceeded and valued
plaintiff's franchise premises at $3,400,000.
Plaintiff renewed its motion to vacate the settlement agreement and
stipulation of dismissal, asserting the appraisals required by the settlement
agreement did not define what was included in "franchise premises." The
motion judge denied the motion in the September 25, 2017 order, now on appeal.
The judge stated he
agree[d] with PMG that the settlement agreement, in
fact, does define the term . . . franchise premises. The
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settlement agreement provides . . . that the recital
clauses set forth above are made an integral part of this
agreement and are true and correct . . . .
The first recital in the settlement agreement
defines the term . . . franchise premises as follows: . . .
Whereas . . . the franchisees were . . . independently
owned franchisees of Blue Hills and operated retail
gasoline stations in New Jersey pursuant to written
agreements with Blue Hills . . . franchise agreements,
on properties they've leased from Blue Hills and
operated under the Gulf-registered trademark brand . . .
the . . . franchise premises, . . . selling motor fuel they
purchased from Blue Hills.
Now, three things about that. Number one they
do define what they consider to be a franchise premises.
Number two those references to Blue Hills really are
no[t] germane as they pertain to PMG, from whom
PMG derived its rights.
And, number three, . . . the first parentheses, . . .
was franchise agreements. The second parentheses . . .
was franchise premises.
The seventh recital also refers to the . . .
Franchise Premises . . . .
So for those reasons, I find that . . . what the
parties intended by "franchised premises" is in fact
reflected in the settlement agreement.
As for the appraisals themselves, the motion judge noted plaintiff had not
challenged their competency or asserted the valuation methodology deviated
from standard appraisal practice. The judge also noted "[t]he independent
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appraiser did not find itself disabled from carrying out its assignment based on
any inability to identify exactly what it was to appraise."
Most importantly, the motion judge quoted from the PMG's appraisal,
which stated the valuation reflected "real property . . . [and] do[es] not . . .
reflect a going-concern valuation. . . . [T]herefore, there is no business
allocation[.]" Additionally, the judge recited the following from the
independent appraiser report:
We are of the understanding that PMG . . . owns the real
property and has no interest in the going concern
operating from the premises. As the real property and
going concern appear to be two separate, unrelated
entities, we are of the opinion that franchise premises
relates solely to the real property.
Thus the judge concluded "the value [the independent appraiser] gave, like the
value that [PMG's appraiser] gave, was of the franchise premises and was of the
actual property located in Fort Lee."
The judge concluded there had been no mutual mistake. He stated:
What was valued was the price a willing,
uncoerced buyer would be willing to pay to a willing,
uncoerced seller for this premises. This was, as [the
court] indicated, an arm's length transaction between
corporate parties represented by counsel. There was no
mutual mistake as to what was to be valued. One party
had a different understanding of whether or to what
extent the going-concern value of the convenience store
and/or gas station would feature into the analysis.
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That private, unshared understanding of what
could and could not be included in the valuation does
not provide a basis for the [c]ourt to vacate the
settlement when that which was produced was, in fact,
in accordance with the plain language of what the
settlement provides for.
Plaintiff's motion was denied. This appeal followed.
I.
The decision whether to grant a motion for relief from a final judgment
under Rule 4:50-1 "is left to the sound discretion of the trial court[.]" Mancini
v. EDS ex rel. N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993).
"The [r]ule is 'designed to reconcile the strong interests in finality of judgments
and judicial efficiency with the equitable notion that courts should have
authority to avoid an unjust result in any given case.'" US Bank Nat'l Ass'n v.
Guillaume, 209 N.J. 449, 467 (2012) (quoting Mancini, 132 N.J. at 334). "The
trial court's determination . . . warrants substantial deference, and should not be
reversed unless it results in a clear abuse of discretion." Ibid. An abuse of
discretion occurs "when a decision is 'made without a rational explanation,
inexplicably departed from established policies, or rested on an impermissible
basis.'" Id. at 467-68 (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123
(2007)).
A-0647-17T3
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On appeal, plaintiff argues there was no meeting of the minds and
contends the parties had different interpretations of the rights being sold.
Plaintiff asserts the inclusion of the going concern was beyond the scope of
appraisal. It argues the settlement agreement is void because the term "franchise
premises" was not defined. Therefore, plaintiff asserts there was a mutual
mistake because the parties were bargaining under the same mistaken belief and
lacked a common understanding of a critical term. We disagree.
The Supreme Court has stated:
As a general rule, courts should enforce contracts as the
parties intended. Similarly, it is a basic rule of
contractual interpretation that a court must discern and
implement the common intention of the parties. The
court's role is to consider what is written in the context
of the circumstances at the time of drafting and to apply
a rational meaning in keeping with the "expressed
general purpose."
[Pacifico v. Pacifico, 190 N.J. 258, 266 (2007)
(citations omitted).]
Also, we have noted:
where the terms of a contract are clear and
unambiguous there is no room for interpretation or
construction and the courts must enforce those terms as
written. The court has no right "to rewrite the contract
merely because one might conclude that it might well
have been functionally desirable to draft it differently."
Nor may the courts remake a better contract for the
parties than they themselves have seen fit to enter into,
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or to alter it for the benefit of one party and to the
detriment of the other.
[Karl's Sales & Serv., Inc. v. Gimbel Bros., 249 N.J.
Super. 487, 493 (App. Div. 1991) (citations omitted).]
We conclude, as the motion judge did, that plaintiff's arguments regarding
a lack of common intent and mutuality of mistake are without merit. The facts
do not support plaintiff's claim the contract was ambiguous or misunderstood by
the parties, the appraisers, or the motion judge. The dispute here did not turn on
an interpretation of the terms of the settlement agreement because neither
defendants' appraisal, nor the independent appraisal, included a valuation of the
convenience store business as a going concern. The appraisals, including
plaintiff's, may have been divergent, but valued the same object. For these
reasons, the denial of plaintiff's motion to vacate the settlement agreement was
not an abuse of discretion.
Affirmed.
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