Opinion
DOCKET NO. A-5165-13T4
05-09-2016
PATRICK EMOGENE and FLEURETTE CHERISME, Plaintiffs, v. UBS WARBURG REAL ESTATE SECURITIES, INC., Defendant-Respondent, and US REAL ESTATE SERVICES, INC., s/h/a US REAL ESTATE SERVICES and USRES, INC., Defendant-Appellant. US REAL ESTATE SERVICES, INC., Third-Party Plaintiff, v. MARCON GROUP LTD. and DOUG SMOLEV, Third-Party Defendants. MARCON GROUP LTD. and DOUG SMOLEV, Fourth-Party Plaintiffs, v. PROPERTY AND CASUALTY INSURANCE COMPANY OF HARTFORD, Fourth-Party Defendant.
Gottesman, Wolgel, Flynn, Weinberg & Lee, P.C., attorneys for appellant US Real Estate Services, Inc. and USRES, Inc. (Stewart W. Lee and Charlotte S. Licker, of counsel and on the briefs). Scura, Wigfield, Heyer & Stevens, LLP, attorneys for respondent UBS Warburg Real Estate Securities, Inc. (Christopher Heyer, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Alvarez, Haas and Manahan. On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1128-11. Gottesman, Wolgel, Flynn, Weinberg & Lee, P.C., attorneys for appellant US Real Estate Services, Inc. and USRES, Inc. (Stewart W. Lee and Charlotte S. Licker, of counsel and on the briefs). Scura, Wigfield, Heyer & Stevens, LLP, attorneys for respondent UBS Warburg Real Estate Securities, Inc. (Christopher Heyer, on the brief). PER CURIAM
Defendant-appellant US Real Estate Services, Inc. (USRES) appeals from the January 21, 2014 and May 30, 2014 orders that grant summary judgment and reasonable attorneys' fees and costs in favor of defendant-respondent UBS Warburg Real Estate Securities, Inc. (UBS). We reverse.
We derive the following from the record. Plaintiffs Patrick Emogene and Fleurette Cherisme (collectively, plaintiffs) occupied the first floor of a multifamily dwelling located in Irvington, New Jersey (Irvington Property). On December 5, 2009, Emogene left his residence around 5:30 p.m. and descended down the front stairs. As Emogene descended the stairs, he lost his balance — due to the movement of the second step — and fell forward. Emogene suffered injuries as a result of the fall.
UBS obtained ownership of the Irvington Property by deed in lieu of foreclosure on July 20, 2009; approximately five months before Emogene's accident. Although Emogene made verbal complaints about the condition of the stairs to a previous owner of the Irvington Property, UBS was not aware of the complaints at the time of Emogene's fall and injury.
The loan which UBS foreclosed was provided by a corporate affiliate of UBS, known as UBS AG dba UBS Special Servicing Group, that is no longer in existence.
On February 8, 2011, plaintiffs filed a complaint against UBS. Plaintiffs alleged that UBS inspected and maintained the Irvington Property in a negligent manner, among other allegations. Plaintiffs filed a first amended complaint on September 21, 2011, which added defendant USRES. UBS filed an answer to plaintiffs' first amended complaint on October 18, 2011. Its answer included a cross-claim for contractual indemnification against USRES.
Plaintiffs filed a second amended complaint on January 24, 2012. On August 27, 2013, UBS filed a motion for summary judgment to dismiss plaintiffs' second amended complaint, on the grounds that UBS lacked actual or constructive knowledge of the conditions that caused Emogene's accident and injury. In its motion, UBS also sought summary judgment as to its cross-claim against USRES for contractual indemnification, including reimbursement of reasonable attorneys' fees and litigation costs.
On October 24, 2013, USRES filed a motion for summary judgment on plaintiffs' second amended complaint. USRES argued that it did not have actual or constructive knowledge of the conditions alleged to have contributed to Emogene's accident and injury. USRES also filed a motion for leave to file a fifth-party complaint asserting claims of contribution and indemnification, among other allegations.
Prior to obtaining title to the Irvington Property on July 20, 2009, UBS AG, the corporate parent of UBS, entered into a "Master Agreement: REO Services" (Master Agreement) with USRES dated August 24, 2007. The Master Agreement, among other terms and conditions, established duties and responsibilities for the parties and their subsidiaries and affiliates, concerning the management and maintenance of the Irvington Property. Accompanying the Master Agreement was a "Transaction Schedule," an agreement for services for a specific property.
We were not provided with the Transaction Schedule for the Irvington Property.
Article 12, Section 12.2, of the Master Agreement, titled "Indemnification by Supplier[,]" provides:
Supplier will, at its sole cost and expense, indemnify, defend and hold harmless Customer and its affiliates and subsidiaries, and their respective officers, directors, employees, contractors, agents, representatives, successors and assigns (collectively, "Customer Indemnitees") from and against any and all Losses suffered or incurred by any of them arising out of or in connection with a Claim of or for any of the following, whenever made:
. . . .
12.2.3 for death or bodily injury, or the damage, loss or destruction of real or tangible personal property of third parties (including employees of Customer and Supplier and their respective subcontractors) brought against a Customer Indemnitee and alleged to have been caused by the fault or negligence of Supplier, its officers, personnel (including
Supplier Personnel), agents and/or representatives; or
12.2.4. as a result of the negligence, gross negligence, willful or criminal misconduct, or breach of this Agreement by Supplier, or any subcontractors or any of Supplier's personnel[.]
For the purpose of clarity, when the Master Agreement refers to "Customer," it is in reference to UBS, while the use of the term "Supplier" is in reference to USRES.
As noted in section 12.2 above, USRES was liable for any and all "Losses" that were suffered in connection with an applicable "Claim." Pursuant to Article 12, section 12.1, titled "'Claim' and 'Losses' Defined[,]" of the Master Agreement:
"Claim" means any demand, or any civil, criminal, administrative, or investigative claim, action, or proceeding (including arbitration) asserted, commenced or threatened against an entity or person. "Losses" means all judgments, awards, settlements, liabilities, damages, liens and claims, and all related costs, expenses and other charges suffered or incurred as a result of or in connection with a Claim, including reasonable attorneys' fees and disbursements, costs of investigation, litigation, settlement and judgment, and any taxes, interest, penalties and fines with respect to any of the foregoing.
On January 21, 2014, after oral argument on the motions, the judge initially held:
I will deny [m]otions both by [USRES] and [UBS] against plaintiff. It is unclear in this . . . case whether the condition [of the stairs] was patent or latent. Even if I were to accept the fact that neither defendant nor its agent could have known of snow, an issue of fact exists as to whether
it knew or should have known of any defect in the stair. And because of that [s]ummary [j]udgment would be inappropriate. And I would note in that regard that the property had been in UBS's hands for approximately five months prior to this particular accident. And therefore at least the span of time is sufficient that one could not conclude as a matter of law that it should not have known of the defect that was found to exist at the time that the accident occurred.
As far as the [m]otion for [s]ummary [j]udgment by UBS against [USRES] is concerned, I do not accept the argument that the Master Agreement failed to apply in this case. . . .
Well in any case[,] there were two agreements, and I see nothing to suggest in this case that the Master Agreement was not applicable. My understanding is that the grounds for saying the indemnification provision of the Master Agreement was inapplicable . . . no longer applies here, because I . . . will find that Marcon was not the agent of UBS. Finding absolutely no basis . . . for a claim that UBS retained Marcon in connection with this particular transaction.
The following colloquy then occurred:
[THE COURT]: I was hesitating, and I may change my ruling. I know [USRES' counsel] argued that there had been nothing that specifically identified this particular property as falling within the Master Agreement; is that correct?
[USRES' COUNSEL]: Yes.
[THE COURT]: And that you would normally expect a notification of some sort?
[USRES' COUNSEL]: Yes that's what is provided under the terms of the Master Agreement itself.
[THE COURT]: All right. I will change my ruling in that respect. If the Master Agreement is applicable in this case, then I would find that indemnification would be applicable. However[,] I figure it does remain an issue of fact in so far as there have been no proofs that [USRES] was notified of this particular property and its responsibilities under the particular Master Agreement.
I'm sorry, I realize I'm waffling back and forth on this. But I have further considered the issue. Although [USRES] said that it was not aware of any responsibilities under the agreement, it in fact performed under the agreement. And I would find that sufficient to find knowledge on its part. So I will grant [s]ummary [j]udgment by UBS against [USRES], and find that the indemnification provision is applicable in the circumstances.
The accompanying order stated:
(1) Summary Judgment is hereby granted to [d]efendant UBS Warburg as follows:
. . . .
(b) The Court finds that [d]efendant UBS Warburg is entitled to summary judgment with respect to its cross-claim against [d]efendant [USRES] that, pursuant to that certain Master Agreement dated August 24, 2007, [d]efendant USRES is required to defend, indemnify and hold [d]efendant UBS Warburg harmless from and against any and all liability, costs and expenses, including reasonable
attorneys' fees, up to and including the date of this Order pursuant to the Master Agreement between [d]efendant UBS Warburg and [d]efendant USRES, and that [d]efendant USRES shall hereby defend, indemnify and hold [d]efendant UBS Warburg harmless from and against any and all liability, including reasonable attorneys' fees and litigation costs, relating to or resulting from the litigation at bar;
(c) Defendant USRES shall reimburse [d]efendant UBS Warburg for its reasonable counsel fees, costs and expenses incurred by [d]efendant UBS Warburg in the defense of this action[.]
On appeal, we apply the same standard as the trial court in the granting of a motion for summary judgment. Townsend v. Pierre, 221 N.J. 36, 59 (2015). Summary judgment is appropriate where the evidence shows that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). The competent evidential materials presented to the court must be viewed in the light most favorable to the non-moving party. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); see also Bagnana v. Wolfinger, 385 N.J. Super. 1, 8 (App. Div. 2006) (citing R. 4:46-2(c)).
When interpreting a contract, this court applies a de novo standard of review. Kieffer v. Best Buy, 205 N.J. 213, 222-23 (2011). As such, we will pay "no special deference to the trial court's interpretation and look at the contract with fresh eyes." Id. at 223; see also Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995).
We first address the issue of choice of law. Article 14, section 14.3, of the Master Agreement, titled "Governing Law and Jurisdiction[,]" provided for a choice of law.
In all respects the Master Agreement and each Transaction Schedule will be governed by and construed in accordance with the substantive laws of the State of New York without regard to conflict of law principles. Any claim or action brought by one of the Parties [in] connection with the Master Agreement or a Transaction Schedule will be brought in the appropriate Federal or State court located in the County of New York, and the Parties irrevocably consent to the exclusive jurisdiction of such court.
Our Supreme Court has held that "'[o]rdinarily, when parties to a contract have agreed to be governed by the laws of a particular state, New Jersey courts will uphold the contractual choice if it does not violate New Jersey's public policy.'" N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 568 (1999) (quoting Instructional Sys., Inc. v. Computer Curriculum Corp., 130 N.J. 324, 341 (1992)). UBS and USRES are sophisticated commercial entities who agreed that any claim or action brought by the parties would be governed by the laws of the State of New York. In reaching our determination, we will apply New York law predicated upon the commercial status of the parties and our conclusion that the applicable New York law governing indemnification agreements does not violate this state's public policy. See N.J.S.A. 2A:40A-1.
The parties also made a choice of forum, although neither party raised this as an issue when litigation was instituted in the Superior Court of New Jersey.
It is uncertain whether the judge applied New Jersey or New York law when interpreting the Master Agreement and Transaction Schedule in reaching her decision to grant summary judgment.
Under New York law, the "fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent[.]" Greenfield v. Phillies Records, 780 N.E.2d 166, 170 (N.Y. 2002). "'The best evidence of what parties to a written agreement intend is what they say in their writing.'" Ibid. (quoting Slamow v. Delcol, 594 N.E.2d 918, 919 (N.Y. 1992)). Therefore, "a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms[.]" Ibid.; see also W.W.W. Assocs. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990).
"'The principle of common-law, or implied, indemnification permits one who has been compelled to pay for the wrong of another to recover from the wrongdoer the damages it paid to the injured party.'" George v. Marshalls of MA, Inc., 878 N.Y.S.2d 143, 148 (N.Y. App. Div. 2009) (quoting Curreri v. Heritage Prop. Inv. Tr., Inc., 852 N.Y.S.2d 278, 281 (N.Y. App. Div. 2008)). "The right to contractual indemnification depends upon the specific language of the contract." Canela v. TLH 140 Perry St., LLC, 849 N.Y.S.2d 658, 659 (N.Y. App. Div. 2008). The promise to indemnify "should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding circumstances." George, supra, 878 N.Y.S.2d at 148-49. "'[A] party seeking contractual indemnification must prove itself free from negligence, because to the extent its negligence contributed to the accident, it cannot be indemnified therefor.'" Bellefleur v. Newark Beth Israel Med. Ctr., 888 N.Y.S.2d 81, 83 (N.Y. App. Div. 2009) (quoting Cava Constr. Co., Inc. v. Gealtec Remodeling Corp., 871 N.Y.S.2d 654, 656 (N.Y. App. Div. 2009)); see also Gen. Oblig. Law § 5-322.1; Reynolds v. Cty. of Westchester, 704 N.Y.S.2d 651, 652 (N.Y. App. Div. 2000). "In contrast, where a question of fact exists regarding the owner's negligence, a conditional order of summary judgment for contractual indemnification must be denied as premature." Bellefleur, supra, 888 N.Y.S.2d at 83-84.
In application of New York law, we hold that the order of January 21, 2014 granting summary judgment in favor of UBS for contractual indemnification and costs against USRES was in error. Saliently, the judge held in denying UBS' motion for summary judgment as to plaintiffs' complaint, there were genuine issues of material facts in dispute regarding whether UBS engaged in negligent conduct which was a cause of Emogene's injury. Given this finding, the order granting summary judgment was "premature." Ibid.
We next address the order of May 30, 2014. In reaching the decision in support of that order, the judge held, "I note that this is not a case in which the defense and indemnification obligations of [USRES] encompass acts of negligence on the part of UBS Warburg." This was in reference to the express language regarding indemnification in the Master Agreement. However, while the language of the Master Agreement's indemnification provision requires merely an allegation of negligence against USRES to trigger its application, the language is in discord with the substantive law of New York; the choice of law elected by the parties.
Notwithstanding the judge's analysis of the scope of the indemnification clause, the judge addressed the issue of negligence as to UBS and USRES. The judge held, "Evidence in the matter demonstrates that, although UBS Warburg had an ownership interest in the property at issue, it had delegated all inspection and repair obligations to [USRES] and had no knowledge of the condition of the property other than that obtained from [USRES] and its agents." This "negligence" holding legally and factually conflicted with the judge's prior decision of January 21, 2014 denying UBS' motion for summary judgment on plaintiffs' claim due to a potential finding of its negligence. Aside from this conflict, the judge did not provide a basis for the prior decision's "reconsideration." See R. 1:7-4(a).
Finally, in addition to the reasons noted above, we conclude from our review of the record that at the time the orders were entered there was a continuing genuine factual dispute between UBS and USRES as to the issues of delegation and knowledge. As such, the grant of summary judgment was erroneous.
In a July 28, 2014 letter, USRES apprised the Appellate Division that all issues and claims, aside from those on appeal here, were disposed of by way of court order or settlement. --------
Reversed. 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