Opinion
Civ. No. 95-6554 (DRD).
December 3, 1999.
Dennis Estis, Esq., Greenbaum, Rowe, Smith, Ravin Davis, P.C., Iselin, N.J., Attorneys for Plaintiff.
Gerald A. Liloia, Esq., Julian Wells, Esq., Riker, Danzig, Scherer, Hyland Perretti, LLP, Morristown, N.J., Attorneys for Defendants CrossLand Savings, FSB, Carol Mann, John Brinster, Lawrence D. Truppo, George Kondos, Maureen Bauer, and Marc Chernin.
Daniel P. Simpson, Esq., Newman Simpson, Hackensack, N.J., Attorneys for Cliffside Park Associates, Carlyle Associates of Cliffside Park, L.P., Cross Cliff Corp., Carlyle Development Corp., Anchorage Woods Construction, David F. Bengel, Donald O. Stein, William Achenbaum, William R. Stein, and Frederick Oliver.
Stephen L. Petrillo, Esq., Connell, Foley Geiser LLP, Roseland, N.J., Attorneys for Defendants E/G Construction Services, Ltd. and Victor Goldsmith.
William J. Mergner, Jr., Esq., Leary, Bride, Tinker Moran, P.C., Cedar Knolls, N.J., Attorneys for Defendant GT Windows, Inc.
Edward J. Buzak, Esq., Montville, N.J., Attorney for Intervenor-Defendant Building Enclosures Analysis, now known as Panelization Systems International, Inc.
Kenneth A. Bloom, Esq., Andrew M. Moskowitz, Esq., Gartner, Bloom Greiper, P.C., Hoboken, N.J., Attorneys for Defendants GEM Roofing Waterproofing Corp.
Pamela B. Betlow, Esq., James F. Fitzsimmons, Esq., Budd, Larner, Gross, Rosenbaum, Geenberg Sade, P.C., Short Hills, N.J., Christopher P. Morrison, Esq., Smith, Stratton, Wise, Heher Brennan, Princeton, N.J., Attorneys for Howard Industries, Inc.
Mark Seiden, Esq., Milber Makris Plousadis Seiden, LLP, West Paterson, N.J., Attorneys for Defendants Costas Kondylis Associates, P.C. and Constantine Andrew Kondylis.
O P I N I O N
Plaintiff, Carlyle Towers Condominium Association, Inc. (the "Association"), moves for partial summary judgment pursuant to Fed.R.Civ.P. 56 against defendant Republic National Bank of New York, formerly known as CrossLand Federal Savings Bank ("New CrossLand"), and seeks an order holding New CrossLand liable under the New Jersey Consumer Fraud Act and the Planned Real Estate Development Full Disclosure Act as well as holding it liable, as a matter of law, for breach of contract, breach of express and implied warranties, negligence, and misrepresentation. New CrossLand has cross-moved for partial summary judgment against the Association seeking dismissal of all claims in the Association's Second Amended Complaint dealing with windows. New CrossLand has also filed a motion for summary judgment against defendants Carlyle Associates of Cliffside Park, L.P. ("CACP"), and Carlyle Development Corp. ("CDC") on CACP's and CDC's cross-claims for contractual indemnification. Additionally, New CrossLand has filed a motion for summary judgment against defendants Brownsworth, Mosher Doran Engineering Associates, P.C., Building Enclosures Analysis, Inc., Costas Kondylis Associates, P.C., Gem Roofing Waterproofing, Inc., GT Windows Installation Corp., Mosher Doran, Mountain Waterproofing Co., Robert Rosenwasser Associates, Tripod Construction Co., Inc., Tri-State Sol Aire Service Co., Wilkinson Co., Inc., and Wilkstone Contractors, Inc. (collectively, the "Subcontractor Defendants"), on their cross-claims for common-law and/or contractual indemnification. Additionally, defendant GT Windows Installation Corp., EG Construction Services, Ltd., and Kondylis Associates, P.C., have filed separate motions for summary judgment against the Association seeking dismissal of all claims in the Association's Second Amended Complaint dealing with windows. Finally, Defendants Donald O. Stein and William Achenbaum have filed a motion for summary judgment against New CrossLand on its cross-claim for recovery under the Completion Guaranty.
For the reasons set forth below, the Association's motion for partial summary judgment against New CrossLand will be denied. Additionally, New CrossLand's, GT Widows Installation Corp.'s, EG Construction Services, Ltd.'s, and Costas Kondylis Associates, P.C.'s, motions for partial summary judgment against the Association on the windows claims will be granted and that portion of the complaint will be dismissed with prejudice. Furthermore, New CrossLand's motion to dismiss CACP and CDC's cross-claims for indemnification will be granted and those cross- claims will be dismissed. Moreover, New CrossLand's motion for summary judgment against the Subcontractor Defendants will be granted and their cross-claims for common law and/or contractual indemnification will be dismissed. Finally, Stein and Achenbaum's motion for partial summary judgment will be denied.
I. BACKGROUND
A. Factual History
This matter arises from the construction and sale of condominium units at the Carlyle Towers Condominium (the "Condominium"), a high-rise condominium development located on the Palisades in Cliffside Park, New Jersey. From the beginning of its occupancy in 1990 the Condominium has suffered from various defects that will allegedly cost over $15 million to repair.
These facts have been compiled from the statements submitted by the parties pursuant to Local Civil Rule 56.1. Additionally, a flow chart showing the relationships between the defendants is attached to the Opinion and referred to as the Court's Appendix.
The Condominium consists of residential dwelling units located in two towers (North and South) and a lobby or atrium structure connecting the two towers and containing fourteen townhouse-type units, for a total of 370 residential units. The Condominium also consists of a two level parking structure located below the lobby. The complex is situated on four acres of land and has a guest parking lot located on an adjacent piece of property.
The initial sponsor/developer of the Condominium was Cliffside Park Associates ("CPA"), a joint venture formed by CACP, a New Jersey limited partnership, and Cross Cliff pursuant to a joint venture agreement dated November 25, 1987. See Court's Appendix. Between 1987 and 1989, Old CrossLand loaned CPA approximately $102,000,000 to finance the construction of the Condominium. Additionally, during the period of time in which CPA was the sponsor/developer, all of the design drawings and specifications were prepared, the architects, general contractors, and subcontractors were hired, the necessary approvals and permits were obtained, and a large majority of the construction was completed.
CACP was the managing partner of CPA pursuant to the joint venture agreement. Id. The general partner of CACP was CDC. Id. Defendants Achenbaum and Donald Stein were officers and shareholders of CDC and principals of Anchorage Woods Construction Corp. ("Anchorage Woods"), the Condominium's general contractor. Id.
Cross Cliff was a wholly owned subsidiary of Old CrossLand. Id. Defendants Mann, Brinster, and Truppo were officers and/or directors of Cross Cliff, Old CrossLand, and New CrossLand. Id. Kondos was a director of Cross Cliff and an officer of New CrossLand. Id. Kondos and Mann did not become officers and/or directors of Cross Cliff until September 1, 1992.
The joint venture agreement empowered Cross Cliff and CACP to "acquire, sell, mortgage and lease the subject property, borrow and lend money, employ individuals/entities to manage and operate the Condominium, employ professionals, etc." Achenbaum and Donald Stein signed the joint venture agreement and agreed to devote substantial time and attention to the business of the joint venture. From August 1990 when CPA sold its first unit until April 24, 1991, the Condominium was controlled by CPA and its Board member appointees. Among the CPA Board member appointees were Achenbaum and Donald Stein who served as trustees and officers of the Association from June 24, 1990, to July 31, 1991.
In accordance with its obligations under the Building Loan Agreement with Old CrossLand, CPA retained Anchorage Woods as the general contractor for the Condominium. Anchorage Woods, in turn, entered into subcontract agreements with various subcontractors to complete the Condominium. Defendant Brownsworth, Mosher Doran Engineering Associates, P.C., was hired to perform mechanical and electrical engineering services. Defendant Building Enclosures Analysis, Inc., now known as Panelization Systems International, Inc. ("BEA/PSI"), was retained for design and construction consulting, design review, and field testing and/or inspection services. Defendant Costas Kondylis Associates, P.C., was hired to perform architectural services. Defendant Gem Roofing Waterproofing, Inc., was hired to install through-wall flashing. Defendant GT Windows Installation Corp. was retained to provide labor and materials with respect to the installation of windows and doors at the Condominium. Defendant Mosher Doran was hired to perform mechanical and electrical engineering services at the Condominium. Defendant Mountain Waterproofing Co. was retained to supply labor and materials in connection with the installation of caulking, sealant, and elastomeric waterproofing at the Condominium. Defendant Robert Rosenwasser Associates was hired to perform certain structural engineering services. Defendant Tripod Construction Co., Inc., was retained to supply labor and materials in connection with the installation of masonry work, including mortar fill around metal frames, spandrels, and sill flashing. Defendant Wilkinson Co., Inc., was retained to provide labor and materials with respect to the installation of ceramic tile, marble, and granite at the Condominium.
On April 24, 1991, due to CPA's default on an $80,000,000 mortgage from Old CrossLand, CPA transferred its interest in the Condominium to Old CrossLand pursuant to a Conveyance Agreement. At that time, Old CrossLand became the Condominium's new sponsor/developer. Pursuant to the Conveyance Agreement, Old CrossLand assumed certain obligations and liabilities of CPA relating to the Condominium.
On January 23, 1992, Old CrossLand was declared financially unsound by the Office of Thrift Supervision. The Federal Deposit Insurance Corporation ("FDIC") was appointed receiver of Old CrossLand. On January 24, 1992, New CrossLand was organized and chartered as a new federal savings association and the FDIC was appointed its conservator.
By a purchase and assumption agreement of January 24, 1992, the FDIC, as receiver, sold to the FDIC, as conservator, substantially all of Old CrossLand's assets including Old CrossLand's interest in the unsold units at the Condominium. In August 1993, the Office of Thrift Supervision approved the conversion of New CrossLand to a stock association and the FDIC was discharged as conservator.
Occupancy of the South Tower of the Condominium commenced in mid-1990 and in the North Tower in mid-1992. Since at least 1992, residents have been beset by numerous and increasing problems affecting certain elements of the Condominium. These continuing problems include water and/or excessive air infiltration from numerous areas of the building including, but not limited to, the exterior cavity walls and the window units located therein, the parking garage, sanitary/sewer lines, the pool deck area, the guest parking area and main entrance roadway, the floors in the lobby areas, the domestic water supply system, the common area ventilation and smoke evacuation systems, excessive and disruptive elevator noises, missing fire stopping and chaseways, electrical supply deficiencies, leaking and otherwise defective skylights, roof level problems, fencing, entranceway, and revolving door problems, and lobby storefront window problems.
Construction of the South Tower was completed first and the first unit closing took place in or about August 1990. As of April 24, 1991, the date that Old CrossLand became the sponsor/developer, occupancy of the South Tower had already begun but construction of the North Tower was still ongoing and proceeding very slowly. As of January 24, 1992, the date New CrossLand became the sponsor/developer, construction of the North Tower was still incomplete. From January 24, 1992, through November 21, 1994, New CrossLand sold 220 of the 369 units available for sale at the Condominium.
On or about May 4, 1993, with seventy-five percent of the units sold, New CrossLand's control over the Board of the Association ceased and the unit owner members acquired control of the Board.
During New CrossLand's tenure as the sponsor/developer, almost all of the defects in the construction of the Condominium became apparent. The extent of the water infiltration problem became known during a succession of storms in the winter of 1992- 1993. During these storms, the common elements and numerous units in the Condominium experienced substantial damage resulting from severe water infiltration. In response to this problem, the sponsor-controlled Board retained Helpern Architects to conduct a building envelope study at the Condominium. The report confirmed that there was water leakage around the HVAC units, through the windows and window hardware inadequacies, through the sliding doors, and through the expansion joints.
B. Procedural History
On June 25, 1995, the Association, a New Jersey non-profit corporation established under the New Jersey Non-Profit Corporation Act, N.J.S.A. 15A:1-1 et seq., and the New Jersey Condominium Act, N.J.S.A. 46:8B-1 et seq., filed a multi-count complaint in the New Jersey Superior Court in Bergen County. The named defendants were, among others, CPA, Old CrossLand, New CrossLand, certain members of the Associations's Board of Directors appointed by the developer/sponsor, certain principals, officers, and directors of the developer/sponsors, various professionals, the contractor, and various subcontractors. The complaint alleged the existence of numerous design and construction defects in the Condominium and alleged various misrepresentations and unconscionable commercial practices and sought recovery of damages predicated upon common law and statutory claims, including, but not limited to, breach of fiduciary and contractual duties, fraud, misrepresentation, negligence, and claims under the Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-21 et seq. ("PREDFDA"), and the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-2 et seq. ("Consumer Fraud Act").
In October of 1995, New CrossLand filed an answer and cross- claim that denied the operative allegations of the Association's complaint and sought common law indemnification and contribution from all co-defendants. New CrossLand also filed a cross-claim against Stein and Achenbaum seeking judgment against them on the Completion Guaranty. Achenbaum, Stein, William Stein, and Anchorage Woods (collectively, the "Anchorage Woods Defendants") filed an answer and cross-claim in April of 1996 that denied the Association's claims and asserted, inter alia, a cross-claim against New CrossLand for contractual indemnification based on several agreements.
On or about December 27, 1995, the case was removed to federal court by the FDIC as receiver for Old CrossLand, pursuant to 28 U.S.C. § 1441, after New CrossLand filed a third-party complaint against the FDIC in its capacity as receiver on November 15, 1995. On May 7, 1996, the Association filed its Amended Complaint, asserting additional claims arising out of further identified defects and claims relating to the common elements and joining as a defendant, Republic National Bank, which entity had acquired New CrossLand in or around March 1996. In December of 1996, CACP and CDC filed an answer to the Amended Complaint in which they asserted common law claims for indemnification and contribution against all of the co- defendants, including New CrossLand. They also filed a cross- claim against New CrossLand for contractual indemnification.
Defendants Brownsworth, Mosher Doran Engineering Associates, P.C., BEA/PSI, Costas Kondylis Associates, P.C., Gem Roofing Waterproofing, Inc., GT Windows Installation Corp., Mosher Doran, Mountain Waterproofing Co., Robert Rosenwasser Associates, Tripod Construction Co., Inc., Wilkinson Co., Inc., and Wilkstone Contractors, Inc., all filed cross-claims against New CrossLand for common law and/or contractual indemnification.
On August 21, 1997, I determined that the Association had exclusive standing to maintain the claims set forth in Counts Four through Nineteen of the Amended Complaint and that class certification was unnecessary. Accordingly, the original individual plaintiffs were dismissed from the case. Additionally, New CrossLand's motion to dismiss the Anchorage Woods Defendants' claims for contractual indemnification was granted.
II. STANDARD
The Court may grant summary judgment when, drawing all inferences in favor of the non-moving party, the pleadings, supporting papers, affidavits, and admissions on file, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989); Davis v. Portline Transportes Maritime Internacional, 16 F.3d 532, 536 n. 3 (3d Cir. 1994); Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.) (in banc), cert. dismissed, 483 U.S. 1052, 108 S.Ct. 26, 97 L.Ed.2d 815 (1987). The Court's function is not to weigh the evidence and discern the truth of the matter, but to determine whether there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986);Petruzzi's IGA v. Darling-Delaware, 998 F.2d 1224, 1330 (3d Cir.), cert.denied, 510 U.S. 994, 114 S.Ct. 554, 126 L.Ed.2d 455 (1993). An issue is "genuine" if a reasonable jury could possibly hold in the non-movant's favor with regard to that issue. Anderson, 477 U.S. at 248; Miller v. Indiana Hospital, 843 F.2d 139, 143 (3d Cir.), cert. denied, 488 U.S. 870, 109 S.Ct. 178, 102 L.Ed.2d 147 (1988). A fact is material if it influences the outcome of the action under the governing substantive law. Anderson, 477 U.S. at 248.
The moving party bears the burden of establishing that there are no genuine issues of material fact for trial regardless of who bears the ultimate burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the non-moving party bears the burden of proof at trial, as Plaintiff does here, the moving party may satisfy its burden on a motion for summary judgment by showing that the non- moving party has failed to adduce evidence sufficient to establish an essential element that the non-movant would have to prove at trial. Id.
Once that burden is met, the non-moving party "may not rest upon the mere allegations" of its complaint to raise a genuine issue of fact, but must submit evidence specifically showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Robin Const. Co. v. United States, 345 F.2d 610, 614-15 (3d Cir. 1965). If the party opposing the motion fails to do so, the "factual record will be taken as presented by the moving party and judgment will be entered as a matter of law." United States v. City of Hoboken, 675 F. Supp. 189, 192 (D.N.J. 1987).
If the Court determines that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law, then summary judgment may be granted.
III. THE ASSOCIATION NEW CROSSLAND
The Association and New CrossLand have filed cross-motions for partial summary judgment. The Association's motion seeks to have this Court determine that New CrossLand, as a matter of law, is liable for the conduct, acts, and omissions of itself and its predecessor sponsor/developers for breaches of contract and express and implied warranties, negligence, and misrepresentation. Additionally, the Association seeks a determination that New CrossLand violated PREDFDA and the Consumer Fraud Act by failing to disclose certain material facts.
New CrossLand cross-moves for partial summary judgment and seeks an order dismissing with prejudice the claims brought by the Association for the repair and/or replacement of all the windows and window-related hardware at the Condominium. New CrossLand, which is joined in this motion by defendants GT Windows and BEA/PSI, argues that because the windows are not "common elements," the Association lacks standing to bring such claims.
A. The Association's Motion
1. Extent of New CrossLand's Potential Liability
Prior to reaching the substance of the Association's motion it is necessary to first visit the issue of New CrossLand's potential liability. The Association seeks to hold New CrossLand liable for the conduct, acts, and omissions of itself as well as all of its predecessor sponsor/developers. New CrossLand argues, however, that it is not responsible for the acts or omissions of previous sponsors because it did not assume those liabilities in the transfer of assets.The Association's claim that New CrossLand is liable for the conduct of prior sponsors fails because the congressional scheme that governs the transfer of assets that took place here — the Financial Institutions Reform, Recovery and Enforcement Act of 1989, Pub.L. No. 101-73, 103 Stat. 183 et seq. ("FIRREA") — provides that the FDIC, and not a subsequent purchaser of assets, is the successor to a failed thrift's liabilities unless the FDIC expressly designates otherwise, and such designation was not made here.
When Old CrossLand went into receivership, the FDIC became the Receiver of Old CrossLand's assets. As Receiver, the FDIC was the legal successor under FIRREA to "all valid obligations of the insured depository institution." 12 U.S.C. § 1821(d)(2)(H). The question, then, is whether in selling Old CrossLand's assets to New CrossLand, the FDIC passed along the liability of all previous sponsors of the Condominium. FIRREA authorizes the FDIC to organize thrift institutions which will "take over such assets or such liabilities as [the FDIC] may determine to be appropriate." 12 U.S.C. § 1821(d)(2)(F)(I). The statute contemplates that the FDIC will determine which assets and liabilities of a failed thrift should be sold and transferred, and which should be kept. This design facilitates the sale of a failed institution's assets by allowing the FDIC to absorb liabilities itself and guarantee potential purchasers that the assets they buy are not encumbered by additional financial obligations.
The Association claims that FIRREA does not preempt state law in the interpretation of all contracts involving the FDIC or a bank that purchases the assets of a failed institution. Specifically, the Association argues that New Jersey law on successor liability governs and that, even though the Purchase Assumption Agreement listed only certain liabilities assumed, New CrossLand is actually liable for all actions or omissions of its predecessors. This argument is unpersuasive. FIRREA states in relevant part that
the [FDIC] may, as receiver . . . organize a new federal savings association to take over such assets or such liabilities as the [FDIC] may determine to be appropriate.12 U.S.C. § 1821(d)(2)(F). This portion of FIRREA empowers the FDIC to limit the liabilities transferred to new banks. It also preempts state successor liability laws and allows aggrieved parties the opportunity to pursue their claims against the new bank only if that organization assumed that particular liability. Therefore, FIRREA will preempt any state law that seeks to impose successor liability on the purchaser of assets from a failed financial institution.
The Purchase and Assumption Agreement governing the transfer of assets between the FDIC and New CrossLand stated that New CrossLand was assuming only those liabilities specifically enumerated in the agreement. By default, all other liabilities remained the responsibility of the FDIC. Section 2.1 of the Agreement delineates the liabilities assumed by New CrossLand. Liability incurred in connection with units previously constructed and/or sold by CPA or Old CrossLand or liability for unconscionable business practices or other tortious conduct alleged to have been committed by CPA or Old CrossLand are not mentioned in the Agreement. Absent an express transfer of liability by the FDIC and an express assumption of liability by New CrossLand, FIRREA directs that the FDIC is the proper successor to the liability at issue here. See Payne v. Security Sav. Loan Ass'n, 924 F.2d 109, 111-12 (7th Cir. 1991);Vernon v. Resolution Trust Corp., 907 F.2d 1101, 1109 (11th Cir. 1990);Pernie Bailey Drilling Co. v. FDIC, 905 F.2d 78, 80 (5th Cir. 1990);Village South Joint Venture v. FDIC, 733 F. Supp. 50, 51 n. 1 (N.D.Tex. 1990). Accordingly, New CrossLand cannot be held liable for the acts, omissions, or other conduct of prior sponsors.
2. Liability Under the Consumer Fraud Act
With the extent of New CrossLand's potential liability thus defined, other aspects of the Association's motion can be addressed. The Association first argues that New CrossLand is liable for damages under the Consumer Fraud Act. The Consumer Fraud Act states in relevant part that
[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice.
N.J.S.A. 56:8-2. Under this language the Act creates two categories of prohibited conduct. See Chattin v. Cape May Green, Inc., 243 N.J. Super. 590, 598, 581 A.2d 91, 95 (App.Div. 1990), aff'd, 124 N.J. 520, 591 A.2d 943 (1991). The first category consists of the affirmative acts of unconscionable commercial practice, deception, fraud, false pretense, false promise, and misrepresentation. Id. The second category consists of acts of omission like concealment and suppression or omission of material facts. Id.
The New Jersey Supreme Court held in Fenwick v. Kay American Jeep, Inc., 72 N.J. 372, 378, 371 A.2d 13 (1977), that the types of consumer fraud consisting of affirmative acts do not require a showing of intent. The court stated that
[t]he capacity to mislead is the prime ingredient of deception or an unconscionable commercial practice. Intent is not an essential element.Id.; see also D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11, 22, 501 A.2d 990 (App.Div. 1985). However, by the express terms of N.J.S.A. 56:8-2, an essential element of a consumer fraud consisting of an act of omission is that a defendant's act be "knowing." See Fenwick, 72 N.J. at 377, 371 A.2d 13 ("the requirement that knowledge and intent be shown is limited to the concealment, suppression or omission of any material fact").
In support of its Consumer Fraud Act claim, the Association first argues that New CrossLand's failure to disclose that it had not assumed its predecessors' liabilities was a false statement and a violation of the Act. Specifically, the Association claims that New CrossLand violated the Consumer Fraud Act when it failed to state in its amendment to the Public Offering Statement that it did not assume the liabilities of the previous sponsors. This argument is unsound.
Under New Jersey law, a developer cannot dispose of any lot, parcel, unit, or other interest in a planned real estate development, unless he or she first delivers to the potential purchaser on or before the contract date of such disposition a current public offering statement. Portions of both the New Jersey statutes and administrative code enumerate the information that must be contained in the public offering statement. See N.J.S.A. 45:22A-28; N.J.A.C. 5.26-4.2; 5.26-9.1. The information is required so that prospective purchasers are fairly apprised "of the development and the lots, parcels, units or interests therein offered, and . . . all unusual or material circumstances or features affecting the development." N.J.S.A. 45:22A-28(a).
New CrossLand's Purchase and Assumption Agreement with the FDIC explicitly stated that it was only purchasing the certain liabilities listed in the document. The liabilities held by Old CrossLand with regards to the Condominium were not ones which New CrossLand agreed to assume and were not listed in the agreement. After executing the agreement with the FDIC, New CrossLand abided by New Jersey law and filed an amendment to the Condominium's Public Offering Statement (the "POS"). This amendment notified any and all potential purchasers that it was now the sponsor/developer of the Condominium.
Nothing in the applicable statute or administrative code sections requires a developer to mention in the public offering statement that it has purchased the assets of the prior developer but has not assumed the prior developer's liabilities. Therefore, New CrossLand was not required to mention in its POS that it failed to assume Old CrossLand's liabilities. If New CrossLand was not required to divulge this information in the POS, then it logically follows that New CrossLand cannot be held liable for false or fraudulent representations under the Consumer Fraud Act for omitting the information from that document.
The Association also argues that New CrossLand is liable under the Consumer Fraud Act because it allegedly failed to disclose to prospective purchasers the existence of significant defects in the common elements and limited common elements. The Association argues that New CrossLand's failure to disclose this information was an unconscionable commercial practice and fraudulent conduct under the Act.
A review of the record, however, reveals that the Association has failed to submit sufficient evidence to establish, as a matter of law, that New CrossLand knew that the alleged significant defects were of a pervasive nature. Because the conclusion of whether particular conduct constitutes an unconscionable commercial practice is a question usually left for the jury, and the Association has failed to submit adequate evidence to conclude that New CrossLand violated the Consumer Fraud Act as a matter of law, this claim is not ripe for summary judgment. See Perth Amboy Iron Works, Inc. v. American Home Assurance Co., 226 N.J. Super. 200, 211-12, 543 A.2d 1020 (App.Div. 1988), aff'd, 118 N.J. 249, 571 A.2d 294 (1990). Accordingly, this element of the Association's motion will be denied.
3. Liability under PREDFDA
The Association next argues that New CrossLand violated PREDFDA by failing to amend the POS to disclose that it was not liable for the acts, conduct, or omissions of its predecessors and for failing to disclose certain material facts. PREDFDA is a consumer protection statute that was enacted by the New Jersey Legislature to ensure honesty, public understanding, and trust in the sale of complex interests. N.J.S.A. 45:22A-22; Tung v. Briant Park Homes, Inc., 287 N.J. Super. 232, 237, 670 A.2d 1092, 1095 (App.Div. 1996); Abrahamsen v. Laurel Gardens Ltd., 276 N.J. Super. 199, 214, 647 A.2d 869 (Law Div. 1993). PREDFDA states in relevant part that
[a]ny developer disposing of real property subject to this act, who shall violate any of the provisions of section 6 hereof, or who in disposing of such property makes an untrue statement of material fact or omits a material fact from any application for registration, or amendment thereto, or from any public offering statement, or who makes a misleading statement with regard to such disposition, shall be liable to the purchaser for double damages suffered, and court costs expended, including reasonable attorney's fees, unless in the case of an untruth, omission, or misleading statement such developer sustains the burden of proving that the purchaser knew of the untruth, omission or misleading statement, or that he did not rely on such information, or that the developer did not know and in the exercise of reasonable care could not have known of the untruth, omission, or misleading statement.
N.J.S.A. 45:22A-37(a). As a remedial statute, PREDFDA is interpreted expansively and is liberally construed in favor of protecting consumers.Tung, 287 N.J. Super. at 237, 670 A.2d at 1095.
In support of its first argument under PREDFDA, that New CrossLand violated the statute when it failed to amend the POS to disclose its limited liability, the Association points to the statute's language which states that "the developer shall immediately report any material changes in the information contained in an application for registration." N.J.S.A. 45:22A- 27(d) (emphasis added). The Association argues that New CrossLand's assumption of only limited liabilities was a material change and required disclosure in the POS. This argument fails, however, for the same reason it failed under the Consumer Fraud Act discussed above. PREDFDA and its accompanying administrative regulations do not require a developer to disclose this type of information in the POS. Accordingly, New CrossLand cannot be held liable for omitting this information from its amendments to that document.
The New Jersey Administrative Code defines "material change" as "anything having a significant effect on the rights, duties or obligations of the developer or the purchaser." N.J.A.C. 5:26-1.3 .
The Association also argues that New CrossLand violated PREDFDA when it failed to amend the POS to disclose known construction defects to the buying public. The Association claims that New CrossLand is therefore liable for the cost of remedying all construction defects at the Condominium. As previously stated, under PREDFDA, New CrossLand was required to amend the POS if there were any material changes in the information contained in the document. See N.J.S.A. 45:22A- 27(d). In order to be successful in its claim under PREDFDA, the Association must prove that New CrossLand knew of the defects and that they were material enough to require disclosure under New Jersey law. From a review of the record, is appears that the Association has to failed to submit sufficient evidence to decide this matter by summary judgment. There are clear issues of fact as to when New CrossLand was informed of the defects and when it became apparent that the problems were material and pervasive. It was only once the defects were considered to be material and pervasive that New CrossLand was required to disclose the information under PREDFDA. Therefore, a jury must first determine when New CrossLand became aware of the defects before liability under PREDFDA can be imposed. Accordingly, this element of the Association's motion will be denied.
B. New CrossLand's Motion
New CrossLand asserts that it is entitled to partial summary judgment dismissing all claims in the Amended Complaint dealing with the Condominium's windows because the Association lacks the necessary standing to sue. The Association, however, argues that it has exclusive standing to assert the window claims under PREDFDA, common law fraud, and the Consumer Fraud Act because the claims relate to common areas of the premises.
In an opinion dated August 21, 1997, and supplemented on October 20, 1997, I concluded that class certification was unnecessary because the Association had exclusive standing to assert claims dealing with the common elements of the Condominium. See Opinion of August 21, 1997, at 14. Those opinions, as well as the one dated January 7, 1998, did not, however, address whether windows were common elements under the purview of the Association. It is, therefore, necessary to determine whether windows in a Condominium unit are considered to be a common element.
The Association argues that the prior orders and opinions of the Court preclude New CrossLand from arguing that the windows are not common elements. The Association contends that the Court has already ruled that windows are common elements and that the law of the case doctrine prevents New CrossLand from arguing otherwise. See Christianson v. Colt Indus. Operating Corp . , 486 U.S. 800, 815-16, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (stating that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case). The Association, however, has misinterpreted this Court's prior rulings. The Opinion entered on January 7, 1998, concluded that "the Association has exclusive standing to assert the claims in Count 4-19 of the Original Complaint which concerns design and construction defects in the common elements of the Carlyle Towers." See Court Opinion of Jan. 1, 1998, at 2 (emphasis added). No decision was made as to what constituted common elements. Accordingly, New CrossLand is not precluded from arguing that the Association does not have standing to pursue the window claims.
The New Jersey Condominium Act ("Condominium Act"), N.J.S.A. 46:8B-1et seq., specifically defines the term "common elements" to include parking areas, portions of land reserved exclusively for maintenance of condominium property, all elements necessary for the safety of condominium property, and other elements designated in the master deed as common elements. N.J.S.A. 46:8B-3(d).
The term common elements is defined by the Condominium Act as:
(i) the land described in the master deed; (ii) as to any improvement, the foundations, structural and bearing parts, supports, main walls, roofs, basements, halls, corridors, lobbies, stairways, elevators, entrances, exits and other means of access, excluding any specifically reserved or limited to a particular unit or group of units; (iii) yards, gardens, walkways, parking areas and driveways, excluding any specifically reserved or limited to a particular unit or group of units; (iv) portions of the land or any improvement or appurtenance reserved exclusively for the management, operation or maintenance of the common elements or of the condominium property; (v) installations of all central services and utilities; (vi) all apparatus and installations existing or intended for common use; (vii) all other elements of any improvement necessary or convenient to the existence, management, operation, maintenance and safety of the condominium property or normally in common use; and (viii) such other elements and facilities as are designated in the master deed as common elements.N.J.S.A. 46:8B-3(d).
The master deed contains a definition of common elements similar to that contained in the Condominium Act and does not define common elements to include windows. According to the deed, common elements do not include the "units" of the Condominium. Section 2.04 of the master deed, which defines "units," states in relevant part that
The master deed defines common elements to be:
[T]he entire condominium property, improvements thereon and appurtenances thereto, including all parts of the buildings . . . and parking areas . . . all personal property owned by the Condominium Association; and all other elements of any Improvement necessary or convenient to the existence, management, operation, maintenance and safety of the Condominium or normally in common use.Master Deed, Art. V, Sec. 1.03.
[e]ach Unit, regardless of type, also includes all appliances, fixtures, doors, windows, interior walls and partitions, interior stairways, gypsum board and/or other facing material on the walls and ceilings thereof, the inner decorated and/or finished surface of the floors, including all flooring tile, ceramic tile, finished flooring, carpeting and padding, and all other improvements located within such unit described.
Master Deed, Art. V, Sec. 2.04 (emphasis added).
A plain reading of the two controlling documents leads to the conclusion that windows in the individual units at the Condominium are not considered common elements. This conclusion is bolstered by the Association's own documents. In December of 1992, Stephen Gruenstein ("Gruenstein"), the Association's building manager, responded in writing to several unit owners who complained about problems with their windows. Gruenstein stated that
[a]fter reviewing the issue, I have determined that the windows are not owned by the association. Each Unit Owner owns the windows, doors, etc. within their unit. This information is contained in the Public Offering Statement of the Association which you received during the purchase of your unit. Unfortunately, I will not be able to correct the noted problem for you.See Wells Aff. Exhibit 7.
Gruenstein's position was affirmed by the Association's Board of Trustees at their meeting on June 22, 1995. The Board's minutes stated that
Mr. Henick . . . [e]xplained to the Board that a window in his apartment was damaged and when he asked the Building Manager to fix it he was told that the window's repair was the unit owner's responsibility. Dr. Chryssanthou stated that the Association has a responsibility to maintain and repair the common elements but it is not responsible for windows and other privately owned elements within a unit.Id. Exhibit F.
The Association obviously concluded several years ago that windows were not common elements and were the responsibility of the unit owner. Its contention now that windows are common elements is not only contrary to the wording of the Condominium Act and the Master Deed, but is also in direct contravention to its own policies as outlined in Gruenstein's letter to unit owners in 1992 and the Board's minutes in June of 1995. Because windows are not considered to be common elements, the Association does not have standing to sue on these claims. Accordingly, New CrossLand's motion will be granted and this portion of the Association's Amended Complaint will be dismissed.
IV. NEW CROSSLAND, CACP CDC
Due to CPA's default on its loans with Old CrossLand, on or about April 24, 1991, the two parties decided to enter into a conveyance agreement and other related written agreements including a general assignment and assignment of construction contract. Under these agreements, CPA transferred and conveyed its interest in the unsold units at the Condominium to Old CrossLand in exchange for forgiveness of the outstanding debt.
New CrossLand has filed motions for summary judgment against both CACP and CDC on their crossclaims for contractual indemnification allegedly arising out of the conveyance and other related agreements. New CrossLand argues that the conveyance agreement does not support CACP and CDC's crossclaim for contractual indemnification and that there was no intent on the part of Old CrossLand to indemnify them. CACP and CDC oppose the motion and argues that they are entitled to contractual indemnification because they are direct party beneficiaries of the indemnification provisions contained in the conveyance agreement and related documents.
A. Standard
The intent of the parties is paramount in contract interpretation.Joseph Hilton Associates, Inc. v. Evans, 201 N.J. Super. 156, 171, 492 A.2d 1062 (App.Div.), certif. denied, 101 N.J. 326, 501 A.2d 977 (1985). In construing contracts for indemnification, recovery ordinarily will be "denied against the indemnitor unless an intent to indemnify is unequivocally spelled out in a contract, surrounding circumstances, and the objects to be attained by the parties." Stier v. Shop Rite of Manalapan, 201 N.J. Super. 142, 150 (App.Div. 1985). However, an express reference to indemnification in the contract will not be required "if the intent otherwise sufficiently appears from the language and circumstances." Id. at 151.
B. Text of the Agreements
Section 2.02 of the Conveyance Agreement, entitled "Consideration to Transferor," provides in pertinent part:
The parties acknowledge that the consideration being given to Transferor in exchange for the performance of the obligations to be performed pursuant to the terms hereof by Transferor is as follows:
(a) The conveyance of the Property to CrossLand subject to the Mortgage.
(b) The assumption by CrossLand of those obligations or liabilities which are described in the Disclosure Statement attached hereto as Exhibit G and incorporated herein by this reference (the "Disclosure Statement"), which shall include the assumption by CrossLand pursuant to the Deed, Contract Assignment, Assignment of Construction Contract and General Assignment of the obligations and liabilities represented by the Contracts, Service Contracts, Construction Contracts, Leases, Licenses and Permits, all as more particularly set forth in said assignments and in Exhibits F, I, J, K, L and M.See Wells Aff. Exhibit C, at 10 (footnote added).
The "Transferor" in the Conveyance Agreement consists of CPA, CACP, and Cross Cliff Corp.
The "Transferor" in the Conveyance Agreement consists of CPA, CACP, and Cross Cliff Corp.
Article VI of the Conveyance Agreement, which is entitled "Obligation to Third Parties," states in full that
[i]t is expressly understood and agreed that [Old] CrossLand is not assuming any of the obligations or liabilities incurred by the Transferor in the use, operation, service or maintenance of the Property, unless expressly stated in this Agreement, or in any of the Contract Assignment, General Assignment, or Assignment of Construction Contract. Transferor acknowledges and agrees that the acceptance by [Old] CrossLand of the Deed pursuant to the terms of this Agreement and the assignment to [Old] CrossLand of various contracts and agreements pertaining to the property shall not create any obligations on the part of [Old] CrossLand to third parties which have or may have claims of any kind whatsoever against the Transferor with respect to the Property, and that [Old] CrossLand does not assume, or agree to discharge, any liabilities pertaining to the Property which occurred prior to the Closing Date except as expressly stated herein or in any of the Contract Assignment, General Assignment, or Assignment of Construction Contract. No person not a party to this Agreement shall have any "third party beneficiary" or other rights hereunder.Id. at 29.
Section 9.03 of the Conveyance Agreement, entitled "Assumption of Sponsor Obligation," provides in full that
[f]rom and after the Closing, [Old] CrossLand Savings shall save and hold Transferor harmless from and against any losses, damages, costs or expenses, including attorneys' fees, as a direct or indirect result of [Old] CrossLand's performance or nonperformance of any of its obligations as Sponsor.Id. at 35-36.
Section 9.24 of the Conveyance Agreement, which outlines the sponsor's obligations, provides in full that
[i]n accordance with the terms of this Agreement and as set forth in the Deed, [Old] CrossLand is succeeding to the interests of Transferor as Sponsor under the Master Deed. In connection therewith, [Old] CrossLand agrees that it shall take all steps reasonably necessary in a timely manner to apply for and obtain from the New Jersey Department of Community Affairs all approvals necessary to approve of [Old] CrossLand as successor Sponsor and to assure and permit the continued marketing, sale and conveyance of Units with the least possible disruption of such marketing, sales or conveyances of Units.Id. at 42-43.
The Assignment of Construction Contract also contains language dealing with the assumption of obligations and indemnification. It provides that
Assignee hereby assumes all of the Assignor's obligations under the Contract, but only to the extent that the contract requires that such obligations be performed from and after the date hereof. Assignee agrees to indemnify and hold Assignor harmless for any and all costs, liability, damage or expense, including, without limitation, reasonable attorneys' fees and disbursements, originating subsequent to the date hereof and arising from the breach of Assignee of the covenant contained in this section.
Id. Exhibit D, at 3 (footnotes added).
The "Assignee" of the Assignment of Construction Contract was Old CrossLand.
The "Assignor" of the Assignment of Construction Contract were CACP, Cross Cliff Corp., and CPA.
The "Assignee" of the Assignment of Construction Contract was Old CrossLand.
The "Assignor" of the Assignment of Construction Contract were CACP, Cross Cliff Corp., and CPA.
The General Assignment between the parties makes only brief mention of any indemnification. The Assignment states in relevant part that
Assignor agrees to indemnify and hold Assignee harmless from and against any loss or damage Assignees may suffer and any and all claims that may be asserted against Assignee by anyone arising out of or connected with Assignor's failure to have fully performed and discharged any obligations referred to in this Agreement, which were required by their terms to have been fully performed prior to the date hereof. Assignee hereby agrees to indemnify and hold Assignee harmless from and against any loss or indemnify and hold Assignor harmless from and against any loss or damage Assignor may suffer and any and all claims that may be asserted against Assignor by anyone arising out of or connected with Assignee's failure to fully perform and discharge the obligations assumed by Assignee pursuant to this Assignment.
Id. Exhibit E, at 2 (footnotes added).
The "Assignor" in the General Assignment were CACP, Cross Cliff Corp., and CPA.
The "Assignee" in the General Assignment was Old CrossLand.
The "Assignor" in the General Assignment were CACP, Cross Cliff Corp., and CPA.
The "Assignee" in the General Assignment was Old CrossLand.
3. Analysis of the Agreements
The terms of the Conveyance Agreement and the other related documents are unambiguous and do not support CACP and CDC's claim that they are contractually indemnified by New CrossLand. The above cited sections of the parties' agreements lend support to these conclusions: First, Section 9.03 of the Conveyance Agreement evidences the contracting parties' intent to limit CPA's entitlement to indemnification for liabilities arising only after it ceased acting as the sponsor. Likewise, The Assignment of Construction Contract explicitly states that Old CrossLand's indemnification of CACP, CPA, and Cross Cliff was for things arising subsequent to the date of the agreement. There is no indication in these passages that show an intent by the parties to indemnify acts or omissions that took place prior to the transfer.
Additionally, Article VI of the Conveyance Agreement expressly states that Old CrossLand was not assuming any of the Transferee's obligations or liabilities unless they were explicitly stated in the Agreement. The Conveyance Agreement and other related documents say nothing about Old CrossLand indemnifying the Transferors for things occurring prior to the transfer of assets.
Finally, the language of the General Assignment states that Old CrossLand would be indemnified by CPA, CACP, and Cross Cliff for liabilities arising while CPA was the sponsor of the Condominium. The plain language of the General Assignment, as well as the other related agreements, do not provide for the indemnification of CACP or CDC by Old CrossLand. It is apparent from these documents that the parties did not intend for Old CrossLand to indemnify CACP or CDC for acts and omissions that took place prior to the assignments.
4. FIRREA
Not only do the agreements fail to support CACP and CDC's arguments, but their claims are also barred by FIRREA. As previously stated, under FIRREA the FDIC has the power to sell an asset of a failed financial institution and retain a related liability. See Kennedy v. Mainland Sav. Ass'n, 41 F.3d 986, 990- 91 (5th Cir. 1994). When the FDIC and New CrossLand entered into an agreement to sell certain assets, the written document explicitly stated that New CrossLand would assume only those liabilities specifically stated in the agreement. Article II of the Purchase and Assumption Agreement, which governed the liabilities assumed by New CrossLand, did not list contingent or unliquidated liabilities for the Condominium as assumed liabilities. Accordingly, New CrossLand's motion to dismiss the cross-claims for indemnification will be granted.
V. NEW CROSSLAND SUB-CONTRACTOR DEFENDANTS
New CrossLand has also filed a motion for partial summary judgment seeking an order dismissing the cross-claims asserted by the Subcontractor Defendants for common-law and/or contractual indemnification. Of the twelve Subcontractor Defendants, only BEA/PSI, Wilkinson Company, Inc., Wilkstone Contractors, Inc., GT Windows, Gem Roofing Waterproofing, Inc., and Costas Kondylis Associates, P.C., filed opposition to New CrossLand's motion. At oral argument, Wilkinson Company, Inc., Wilkstone Contractors, Inc., GT Windows, Gem Roofing Waterproofing, Inc., and Costas Kondylis Associates, P.C., withdrew their opposition to New CrossLand's motion. BEA/PSI stands alone in opposing New CrossLand's motion.
In New Jersey, absent an express agreement allocating the burden of damages, the equitable doctrine of common law indemnification shifts liability from one who is secondarily liable to one who is primarily liable. See Harley Davidson Motor Co., Inc. v. Advance Die Casting, Inc., 150 N.J. 489, 497-98, 696 A.2d 666 (1997); Promaulayko v. Johns Manville Sales Corp., 116 N.J. 505, 511, 562 A.2d 202 (1989); Mettinger v. W.W. Lowenstein, Inc., 292 N.J. Super. 293, 315, 678 A.2d 1115 (App. Div. 1996), aff'd, 153 N.J. 371, 709 A.2d 779 (1998). The reasoning behind this policy is that the one who is able to control the risks and distribute the costs should be the one who bears the burden of the risks. Harley Davidson Motor Co., 150 N.J. at 498; Promaulayko, 116 N.J. at 513.
Applying this doctrine to the present case, it is not possible for New CrossLand to be held liable to any of the Subcontractor Defendants for common law indemnification. New CrossLand did not design, manufacture, or install the windows or any other portion of the Condominium. In fact, most if not all of the major construction at issue in this case was completed prior to New CrossLand taking over as the sponsor of the project. Because New CrossLand cannot be deemed primarily liable for any of the defects in the Condominium, it cannot be held liable to the Subcontractor Defendants for common law indemnification. Accordingly, New CrossLand's motion will be granted.
It is also not possible for New CrossLand to be held liable to the Subcontractor Defendants for contractual indemnification. The Subcontractor Defendants have failed to produce any agreements that expressly and unequivocally provide for their indemnification by New CrossLand. See Ramos v. Browning Ferris Indus. of South Jersey, Inc . , 103 N.J. 177, 191, 510 A.2d 1152 (1986); Leitao v. Damon G. Douglas Co . , 301 N.J. Super. 187, 191, 693 A.2d 1209 (App.Div.), certif . denied , 151 N.J. 466, 700 A.2d 879 (1997). Even if these defendants had produced indemnification agreements, they would not be entitled to coverage because such agreements are not enforceable where the party seeking indemnification was at fault for the damage. See N.J.S.A. 2A:40A-1.
VI. STEIN, ACHENBAUM NEW CROSSLAND
Defendants Stein and Achenbaum have filed a motion for partial summary judgment against New CrossLand seeking dismissal of its cross-claim for recovery under the Completion Guaranty. Specifically, Stein and Achenbaum claim that they were expressly released from their obligations under the Completion Guaranty, that they were effectively discharged from any obligation under the Completion Guaranty when Old CrossLand released CPA from its duties under the Building Loan Agreement, or that Old CrossLand and New CrossLand waived their rights under the Completion Guaranty. New CrossLand opposes the motion and argues that both Stein and Achenbaum are still liable under the Completion Guaranty.
A. Express Agreement
Stein and Achenbaum first claim that they were expressly released from their obligations under the Completion Guaranty. An examination of the evidence and the agreements between the parties, however, lead to a different conclusion. The portion of the Completion Guaranty at issue here states that:
[Stein and Achenbaum] unconditionally guarantee to [Old CrossLand] the due performance of all the Borrower's obligations under the Building Loan Agreement and the Mortgage, including its obligations for the payment of all legal and other costs or expenses paid or incurred by you in the enforcement thereof against the Borrower or us, and further unconditionally guarantee that the representations and warranties made by the Borrower in Article IV of the Building Loan Agreement are true as of the date hereof, and that each Requisition under said Building Loan Agreement, by whomsoever made, shall constitute a personal affirmation on the part of each of us that at the time thereof said representations and warranties are true and correct.See Hanusek Cert. Ex. N. Additionally, the Building Loan Agreement states that CPA would
cause the construction thus begun to be prosecuted with diligence and continuity in a good and workmanlike manner in accordance with the Plans . . . ; use only materials, fixtures, furnishings and equipment in connection with construction of [the Condominium] that are not used or obsolete; and complete construction . . . in accordance with the Plans on or before the Completion Date free and clear of defects and liens.Id. Ex. L. Furthermore, Section 9.22 of the Conveyance Agreement provides in full that
Stein and Achenbaum hereby acknowledge that the completion guaranty remains in full force and effect strictly in accordance with its terms as it relates to the Mortgage and Loan Agreement in existence as of the date the Completion Guaranty was made and shall remain in full force and effect, notwithstanding the consummation [of] the transactions contemplated by this Agreement, including, but not limited to, the delivery and acceptance of the Deed.Id. Ex. O, at 42. Finally, the Release Agreement provides in relevant part that
Stein and Achenbaum shall not be released from any obligation or liability which they may have under that certain Completion Guaranty, dated as of May 17, 1989 given by Stein and Achenbaum in favor of [Old] CrossLand, but only to the extent they are liable thereunder.Id. Ex. Q, at 3.
The express written terms of the applicable agreements reproduced above unambiguously state that Stein and Achenbaum were not released from their obligation under the Completion Guaranty. Stein and Achenbaum's argument that certain portions of the Conveyance Agreement and Release do in fact discharge them from responsibility under the Completion Guaranty is unpersuasive. A contract will be enforced according to its terms and a court will not rewrite its terms merely because one party has second thoughts sometime in the future. See K. Belle Assoc., Inc. v. Lloyd's Underwriters, 97 F.3d 632, 637 (2d Cir. 1996). The terms of the agreements clearly state that Stein and Achenbaum were not released from their liability under the Completion Guaranty.
The Completion Guaranty is expressly governed by New York law.
B. Effective Discharge
Stein and Achenbaum next argue that they were effectively discharged from any obligation under the Completion Guaranty when Old CrossLand released CPA from its duties under the Building Loan Agreement. The terms of the relevant documents, however, do not support this claim. First, Section 2.02 of the Conveyance Agreement explicitly states that Old CrossLand assumed only specified liabilities, of which the claims in this litigation were not included. See Hanusek Cert. Ex. O. Additionally, Article VI of the Conveyance Agreement provides in relevant part that
[i]t is expressly understood and agreed that [Old] CrossLand is not assuming any of the obligations or liabilities incurred by the Transferor in the use, operation, service or maintenance of the Property . . . and that [Old] CrossLand does not assume, or agree to discharge, any liabilities pertaining to the Property which occurred prior to the Closing Date.Id.
Faced with the plain language of these agreements, Stein and Achenbaum cannot plausibly contend that they had been discharged from all liability merely because CPA was released from certain obligations and liabilities. The agreements cited above clearly state that CPA was only released from liabilities and obligations arising after the date of closing. Those obligations not assumed by Old CrossLand through these agreements remained with CPA. The general rule that the discharge of a primary obligor automatically results in the discharge of the guarantor is inapplicable because CPA was not released from all of its obligations. Accordingly, Stein and Achenbaum were not effectively discharged from their obligation under the Completion Guaranty.
C. Waiver
Stein and Achenbaum's final argument in support of their motion for partial summary judgment is that they are not liable to anyone because Old CrossLand and New CrossLand waived their rights under the Completion Guaranty. They specifically argue that New CrossLand is estopped from suing them on the Completion Guaranty because, after New CrossLand acquired the Condominium asset, it terminated its affiliate, Anchorage Woods, as general contractor and thereby prevented Stein and Achenbaum from "completing" construction of the Condominium.
Stein and Achenbaum's waiver and estoppel argument fails for several reasons. First, Stein and Achenbaum have not established the essential estoppel element of detrimental reliance on any alleged waiver by New CrossLand. See Hospital Computer Sys., Inc. v. Staten Island Hosp., 788 F. Supp. 1351, 1358 (D.N.J. 1992) (equitable estoppel requires reliance on the conduct of the party to be estopped and a prejudicial change in position based on that reliance). Stein and Achenbaum have failed to establish that they detrimentally relied on New CrossLand's replacement of them on the construction of the Condominium. Additionally, New CrossLand is only seeking to hold Stein and Achenbaum liable for CPA's performance pursuant to the Building Loan Agreement prior to the conveyance of the Condominium to Old CrossLand. Stein and Achenbaum were intimately involved in the project during that time and no detrimental change in position could have taken place.
Second, Stein and Achenbaum's argument that New CrossLand should be estopped from enforcing the Completion Guaranty because it never served them with notice of an alleged default or breach is unpersuasive. The Completion Guaranty specifically states that Stein and Achenbaum waived and relinquished the rights accorded to guarantors by applicable laws. Among the rights given up was notice of default.
Additionally, the Completion Guaranty expressly states that any delay on the lender's part in exercising its rights under that document will not constitute a waiver of those rights. Stein and Achenbaum's contention that New CrossLand "abandoned" their right to hold them liable under the Completion Guaranty is inconsistent with the agreement the parties signed. The explicit language of the Completion Guaranty, therefore, is controlling on this issue.
Finally, New CrossLand did not suggest by any other words or conduct that it was waiving its rights under the Completion Guaranty to hold Stein and Achenbaum liable for defects in CPA's performance pursuant to the Building Loan Agreement. Accordingly, Stein and Achenbaum's motion for partial summary judgment on New CrossLand's cross-claim will be denied.
VII. CONCLUSION
For the reasons set forth above, the Association's motion for partial summary judgment against New CrossLand will be denied. New CrossLand's, GT Widows Installation Corp.'s, EG Construction Services, Ltd.'s, and Costas Kondylis Associates, P.C.'s, motions for partial summary judgment against the Association on the windows claims will be granted and that portion of the Second Amended Complaint will be dismissed. New CrossLand's motion to dismiss CACP and CDC's cross-claims for indemnification will be granted. New CrossLand's motion against the Subcontractor Defendants will be granted. Stein and Achenbaum's motion for partial summary judgment will be denied. An appropriate order will issue.
O R D E R
The following motions having been filed in this case;
1. The motion of plaintiff, Carlyle Towers Condominium Association, Inc. ("Plaintiff"), for summary judgment against defendant Republic National Bank of New York, formerly known as CrossLand Federal Savings Bank ("New CrossLand");
2. The motions of New CrossLand, GT Widows Installation Corp., EG Construction Services, Ltd., and Costas Kondylis Associates, P.C., for summary judgment against Plaintiff on claims concerning the unit windows of the Carlyle Tower Condominium;
3. The motion of New CrossLand for summary judgment against defendants Carlyle Associates of Cliffside Park, L.P. ("CACP"), and Carlyle Development Corp. ("CDC"), on CACP's and CDC's cross- claims for contractual indemnification;
4. The motion of New CrossLand for summary judgment against subcontractor defendants Brownsworth, Mosher Doran Engineering Associates, P.C., BEA/PSI, Costas Kondylis Associates, P.C., Gem Roofing Waterproofing, Inc., GT Windows Installation Corp., Mosher Doran, Mountain Waterproofing Co., Robert Rosenwasser Associates, Tripod Construction Co., Inc., Tri-State Sol Aire Service Co., Wilkinson Co., Inc., and Wilkstone Contractors, Inc. ("Subcontractor Defendants), on the subcontractor claims for common-law and/or contractual indemnification;
5. The motion of defendants Donald O. Stein and William Achenbaum for summary judgment against New CrossLand on New CrossLand's cross-claim for recovery under the Completion Guaranty; and the Court having heard oral argument on June 25, 1999, and for the reasons set forth in an opinion of even date;
IT IS this day of July, 1999, hereby ORDERED as follows:
1. Plaintiff's motion for partial summary judgment against New CrossLand be and hereby is DENIED;
2. New CrossLand's, GT Widows Installation Corp.'s, EG Construction Services, Ltd.'s, and Costas Kondylis Associates, P.C.'s, motions for partial summary judgment against Plaintiff as to claims for damages related to the windows at Carlyle Towers be and hereby is GRANTED and all claims in Plaintiff's Second Amended Complaint dealing with windows in non-common areas be and hereby are DISMISSED with prejudice;
3. New CrossLand's motion for partial summary judgment against defendants CACP and CDC be and hereby is GRANTED and CACP's and CDC's cross-claim against New CrossLand for common law and/or contractual indemnification be and hereby is DISMISSED with prejudice;
4. New CrossLand's motion for partial summary judgment against the Subcontractor Defendants be and hereby is GRANTED and the Subcontractor Defendants' cross-claims against New CrossLand for indemnification be and hereby are DISMISSED with prejudice;
5. Defendants Donald O. Stein's and William Achenbaum's cross-motion for partial summary judgment against New CrossLand be and hereby is DENIED.