Opinion
DOCKET NO. A-5932-13T1
04-07-2016
FIRST GENERAL CONSTRUCTION CORPORATION, Third-Party Plaintiff/Appellant, v. WESTAMPTON COURTS CONDOMINIUM ASSOCIATION, WESTAMPTON COURTS CONDOMINIUM ONE ASSOCIATION, and WESTAMPTON COURTS CONDOMINIUM TWO ASSOCIATION, Third-Party Defendants/Respondents.
Paul C. Jensen, Jr. argued the cause for appellant (Folkman Law Offices, P.C., attorneys; Mr. Jensen, of counsel and on the briefs). Patricia Hart McGlone argued the cause for respondents (McGovern Legal Services, LLC, attorneys; Ms. McGlone, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz and Fasciale. On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-684-07. Paul C. Jensen, Jr. argued the cause for appellant (Folkman Law Offices, P.C., attorneys; Mr. Jensen, of counsel and on the briefs). Patricia Hart McGlone argued the cause for respondents (McGovern Legal Services, LLC, attorneys; Ms. McGlone, on the brief). PER CURIAM
Third-party plaintiff First General Construction Corporation (FGCC) appeals from a July 11, 2014 order denying its motion to enforce a settlement agreement (the agreement) with third-party defendants Westampton Courts Condominium Association, Westampton Courts Condominium One Association, and Westampton Courts Condominium Two Association (collectively WCCA).
The parties entered into the agreement settling litigation pertaining to a construction project (the project). The judge denied the motion concluding FGCC breached the agreement and was equitably barred from seeking enforcement. Following our review of the record and applicable law, we conclude the judge failed to consider whether any determined breach was material, which would relieve WCCA of its obligations. As a result, we reverse, remand, and direct the judge to review the motion anew and determine whether there was a material prior breach of the agreement by FGCC or whether other relief to reimburse WCCA was satisfactory. We leave to the judge's discretion whether to conduct an evidentiary hearing to accomplish this task on remand.
I.
WCCA owned the property under construction, and hired FGCC to serve as the general contractor for the project. Plaintiff Fante's Plumbing Heating and Air Conditioning, Inc. performed work as FGCC's subcontractor. WCCA failed to pay FGCC, which arguably prevented FGCC from paying plaintiff. Plaintiff filed a complaint against FGCC seeking $20,000 on a book account. FGCC then filed a third-party complaint against WCCA seeking $792,262.88 on a breach of contract claim.
Pursuant to the agreement, WCAA was obligated to make an initial payment to FGCC of $158,000; make 300 monthly payments of $3,148.40, totaling $944,520; and pay $42,000 to a separate subcontractor. In exchange for these payments, FGCC agreed to dismiss its third-party complaint; obtain final inspections and approvals for the project; "correct shortcomings" in its construction contract with WCCA; and settle an unrelated matter (the Castle litigation).
WCCA made the initial payment and paid the $42,000, but only made six of the monthly installment payments. FGCC encountered overheating heat pumps, which led to the parties' dispute regarding responsibility for remediating this problem. FGCC maintained that the issue fell outside of its contractual obligations, and sought payment; WCCA asserted FGCC must correct the overheating problem and remained unwilling to pay for the repairs or the work. Moreover, FGCC was unable to fully resolve the Castle litigation, although it deposited $35,600 into an escrow account purportedly for that purpose. Additional matters arose including legal actions by FGCC's attorney seeking payment and difficulties with the bank that financed the project.
Within the six-year statute of limitations period, FGCC filed a motion to enforce the settlement agreement. FGCC contended it substantially complied with the terms of the agreement and argued WCCA breached the agreement by not making monthly payments. WCCA opposed the motion, arguing the agreement was null and void due to FGCC's failure to settle the Castle litigation, which constituted a material breach. The judge rendered an oral opinion immediately following oral argument. He concluded FGCC breached the agreement by not resolving the Castle litigation. The judge also determined that the principles of laches and equitable estoppel barred FGCC from seeking enforcement of the agreement.
FGCC filed the motion using the docket number associated with its third-party complaint against WCCA.
On appeal, FGCC argues the judge erred by (1) failing to determine whether a material breach of the agreement occurred; (2) relying on the doctrines of laches and equitable estoppel; and (3) disposing of the motion without conducting an evidentiary hearing.
II.
On appeal, FGCC argues the judge erred by failing to analyze whether it materially breached the agreement. It further asserts its inability to fully resolve the Castle litigation and address the overheating pumps individually or collectively did not amount to a material breach permitting WCCA to ignore its contractual obligations. At oral argument before us, both parties agreed the judge did not undertake a material-breach inquiry. We conclude this omission requires reversal.
We begin our analysis with the well-established principle that "[a] settlement agreement between parties to a lawsuit is a contract," Nolan v. Lee Ho, 120 N.J. 465, 472 (1990), and is generally "governed by principles of contract law." Thompson v. City of Atl. City, 190 N.J. 359, 379 (2007). "The interpretation of a contract is subject to de novo review by an appellate court." Vosough v. Kierce, 437 N.J. Super. 218, 241 (App. Div. 2014) (quoting Kieffer v. Best Buy, 205 N.J. 213, 222 (2011)), certif. denied, 221 N.J. 218 (2015). "Fundamental to our jurisprudence relating to settlements is the principle that '[t]he settlement of litigation ranks high in our public policy.'" Brundage v. Estate of Carambio, 195 N.J. 575, 601 (2008) (alteration in original) (quoting Jannarone v. W.T. Co., 65 N.J. Super. 472, 476 (App. Div.), certif. denied, 35 N.J. 61 (1961)).
"When there is a breach of a material term of an agreement, the non-breaching party is relieved of its obligations under the agreement." Nolan, supra, 120 N.J. at 472 (emphasis added). The question of whether a breach is material is for the trier of fact. Magnet Res., Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 286 (App. Div. 1998).
Determining whether a material breach occurred requires the fact-finder to identify the mutual obligations undertaken by the parties to the agreement. Only then can the judge determine whether any breach is material or an essential element of the agreement so as to excuse further performance by the other party. Chance v. McCann, 405 N.J. Super. 547, 565-66 (App. Div. 2009).
We have described a material breach as:
Where a contract calls for a series of acts over a long term, a material breach may arise upon a single occurrence or consistent recurrences which tend to "defeat the purpose of the contract." [citation omitted][.] In applying the test of materiality to such contracts a court should evaluate "the ratio quantitatively which the breach bears to the contract as a whole, and secondly the degree of probability or improbability that such a breach will be repeated." [citation omitted][.]
[Magnet Res., Inc., supra, 318 N.J. Super. at 286 (first and third alteration in original) (quoting Medivox Prods., Inc. v. Hoffmann-La Roche, Inc., 107 N.J. Super. 47, 59 (Law Div. 1969))].The Restatement (Second) of Contracts § 241 (1981) sets forth the following criteria to determine whether a breach is material:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;Here, the parties dispute whether the failure to successfully address the issue of overheating heat pumps and resolve the Castle litigation constituted a material breach of the agreement.
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
[Neptune Research & Dev., Inc. v. Teknics Indus. Sys., Inc., 235 N.J. Super. 522, 532 (App. Div. 1989) (quoting Restatement (Second) of Contracts § 241 (1981)).]
The issue of whether the overheating pumps constituted a material breach was raised but not fully addressed by the judge. --------
We note that FGCC asserts it obtained an independent estimate of $8,100 to fix the overheating heat pumps, the cost of which represents approximately .87 percent of WCCA's total obligation under the agreement. And as to the Castle litigation, the record reflects generally an increased cost to WCCA of approximately $17,577.97, or about 1.89 percent of the total agreement.
Here, the judge served as the trier of fact, but did not undertake a material-breach analysis. Consequently, any finding that WCCA was relieved from performing under the agreement was made prematurely. On remand, the judge should consider all relevant factors including these quantitative contentions that these two issues represented a small portion of the overall agreement.
III.
FGCC contends the judge erred by failing to conduct an evidentiary hearing to determine whether it substantially complied with the agreement and, if so, whether WCCA was entitled to any credits. FGCC includes its view of the facts which support the position WCCA frustrated its attempts to resolve the heating pump problems and Castle litigation. These, as well as WCCA's competing assertions were not evaluated by the motion judge.
A disputed motion to enforce a settlement agreement is governed by the same standard as a motion for summary judgment. Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 474-75 (App. Div. 1997) (citing Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995)) (requiring that a hearing be held "unless the available competent evidence, considered in a light most favorable to the non-moving party, is insufficient to permit the judge, as a rational factfinder, to resolve the disputed factual issues in favor of the non-moving party"). In reviewing such a decision, we apply the same standard as the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.) (citing Antheunisse v. Tiffany & Co., 229 N.J. Super. 399, 402 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989)), certif. denied, 154 N.J. 608 (1998).
The record contains these assertions by the parties: As to the heat pumps, FGCC contends it was under no obligation to repair or replace the heat pumps because such repairs fell outside FGCC's contract with WCCA. FGCC argues that even though the installed heat pumps met the architect's specifications, it nevertheless obtained a quote of $8,100 to fix the problem. FGCC maintains WCCA unreasonably rejected the quote and refused to make any payment to repair or replace the pumps.
And as to the Castle litigation, FGCC asserts WCCA frustrated its attempts to fully resolve the matter. It is undisputed that the parties were dissatisfied with painting work performed by Castle, which led to the Castle litigation. FGCC placed money in escrow to either repair the improper painting work or settle the Castle litigation. FGCC contends WCCA eventually settled the Castle litigation, but no findings were made resolving whether FGCC substantially complied with the agreement or whether WCCA frustrated FGCC's attempts to do so.
As demonstrated by these recitals, the parties' positions differed, which required a full airing of the facts and a determination of these disputes. On remand, the judge must undertake a full review, including potentially conducting an evidentiary hearing.
IV.
We also conclude FGCC's attempt to enforce the agreement is not barred by laches or equitable estoppel. The motion judge's comments in this regard are erroneous.
FGCC's motion to enforce the agreement is grounded on a breach of contract claim. The statute of limitations for recovery upon a contractual claim is six years. N.J.S.A. 2A:14-1. In February 2014, FGCC filed its motion to enforce the agreement. FGCC contends the six-year period expired in November 2014, as the last missed installment payment from WCCA was due in November 2008.
Estoppel is an equitable doctrine designed to "prevent injustice by not permitting a party to repudiate a course of action on which another party has relied to his detriment." Knorr v. Smeal, 178 N.J. 169, 178 (2003). "Estoppel . . . requires the reliance of one party on another." Ibid. "[T]o establish equitable estoppel, [the moving party] must show that [the nonmoving party] engaged in conduct, either intentionally or under circumstances that induced reliance, and that [the moving party] acted or changed [its] position to [its] detriment." Ibid. Such is not the case here.
Although WCCA indicates it has been prejudiced because it is unable to assert a fraud claim against FGCC for misrepresenting what work was completed at the time FGCC submitted its bills, WCCA brought a fraud claim in its counter-claim to FGCC's third-party complaint. WCCA alleged FGCC violated the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, by "submitting erroneous bills for payment to [WCCA] and its insurance carrier, which effectively misrepresented the work completed at the time such bills were produced." It then entered into the agreement and settled all the claims associated with the construction project. WCCA cannot now say it was denied the opportunity to bring its fraud claim.
The judge also erred in invoking the equitable doctrine of laches. Whether or not an action that is governed by a statute of limitations is time barred should be determined on the basis of that statute and not on the basis of the equitable doctrine of laches." Dynasty Bldg. Corp. v. Ackerman, 376 N.J. Super. 280, 288 (2005); see also Kopin v. Orange Prods., Inc., 297 N.J. Super. 353, 373 (App. Div.) (stating a "statute of limitations applies to legal actions while laches applies to equitable actions"), certif. denied, 149 N.J. 409 (1997). In rare and limited circumstances, New Jersey courts may apply laches in legal actions governed by a statute of limitations. See Fox v. Millman, 210 N.J. 401, 422 (2012) (stating laches might apply "to shorten an otherwise permissible period for initiation of litigation . . . [in] only the rarest of circumstances and only overwhelming equitable concerns would allow for that result").
The doctrine of laches "cannot operate to extend laches broadly to cases governed by statutes of limitations." Id. at 423.
On the contrary, such an extension would replace the regular and predictable time
limits fixed by our Legislature through the statutes of limitations with a system in which no lawyer or litigant could be confident of the time that would govern the initiation of litigation. Substituting the equitable doctrine of laches for the clear guidance expressed in statutes of limitations would create a chaotic and unpredictable patchwork in which the only certainty would be the inconsistency of outcomes as different judges or, as in this matter, juries, evaluated timeliness individually. We see no reason to conclude that our regular, predictable, and uniform system of fixing timeliness through application of the statutes of limitations should be replaced with such an approach.
[Ibid.]
Here, FGCC's motion to enforce the settlement agreement, filed on February 11, 2014, was filed within the appropriate statute of limitation period of six years, and therefore application of laches is inappropriate.
Even if we were to apply the equitable doctrine of laches to the facts of this case, it would not be a basis to deny FGCC's motion. In general, "[l]aches will bar the prosecution of an equitable claim if the suitor has inexplicably, inexcusably[,] and unreasonably delayed pursuing a claim to the prejudice of another party." In re Estate of Thomas, 431 N.J. Super. 22, 30 (App. Div. 2013). The delaying party must have "had sufficient opportunity to assert the right in the proper forum and the prejudiced party acted in good faith believing that the right had been abandoned." Knorr, supra, 178 N.J. at 181. We conclude FGCC did not "inexplicably, inexcusably[,] and unreasonably" delay filing its motion to enforce the agreement. Thomas, supra, 431 N.J. at 30.
FGCC's delay in filing resulted from its belief that Susquehanna Bank was actively working to collect from WCCA. It only learned Susquehanna Bank was not actively trying to recover the settlement funds in mid-2013. FGCC brought the motion to enforce the settlement thereafter. WCCA had no basis to believe FGCC gave up its right to collect payments under the settlement agreement because Susquehanna Bank had levied all amounts under the settlement agreement against WCCA's opposition. Thus, there was no reasonable basis to conclude that WCCA relied on FGCC's abandonment of the claim. Thus, we conclude that the delay was not unreasonable.
V.
Finally, we reject WCCA's contention FGCC was barred from entering into the agreement because its corporate structure was dissolved.
FGCC's corporate charter was not dissolved, it was revoked. The charter was revoked for failure to file annual reports and submit the accompanying annual fee. In Asbestos Workers Local Union No. 32 v. Shaughnessy, 306 N.J. Super. 1, 2-4 (App. Div. 1997), we found that revocation of a corporate charter for failure to pay annual fees was not similar to revocation for failure to pay taxes. Asbestos Workers suggests that FGCC could enter into the settlement agreement and perform as a corporation even with revoked status because the minimal procedural failure was not detrimental to its corporate status.
A dissolved corporation can continue its existence for the purpose of winding up its affairs by:
(a) collecting its assets;
(b) conveying for cash or upon deferred payments, with or without security, such of its assets as are not to be distributed in kind to its shareholders;
(c) paying, satisfying and discharging its debts and other liabilities; and
(d) doing all other acts required to liquidate its business and affairs.
[N. J.S.A. 14A:12-9(1).]
In addition, "the corporation may sue and be sued in its corporate name and process may issue by and against the corporation in the same manner as if dissolution had not occurred." N.J.S.A. 14A:12-9(2)(e); see also Lancellotti v. Maryland Cas. Co., 260 N.J. Super. 579, 583 (App. Div. 1992) (stating a dissolved corporation is allowed to prosecute and defend law suits). WCCA's contention FGCC could not enter the settlement agreement because it was dissolved is unfounded. As a dissolved corporation, FGCC had the right to sue and be sued.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION