Opinion
DOCKET NO. A-4832-10T4
03-04-2013
HIGHLAND CAPITAL CORP., Plaintiff-Respondent. v. DONNA P. DENIER M.D., P.C. and DR. DONNA DENIER, individually, Defendant-Appellant.
James Colavito argued the cause for appellant (Philip M. Lustbader and David Lustbader, P.A., attorneys; David Lustbader, on the brief). Fredda Katoff argued the cause for respondent (Peretore & Peretore, P.C, attorneys; Frank Peretore and Ms. Katcoff, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Fuentes, Koblitz, and Haas.
On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-4765-09.
James Colavito argued the cause for appellant (Philip M. Lustbader and David Lustbader, P.A., attorneys; David Lustbader, on the brief).
Fredda Katoff argued the cause for respondent (Peretore & Peretore, P.C, attorneys; Frank Peretore and Ms. Katcoff, on the brief). PER CURIAM
Defendant Donna Denier, M.D., individually and as the sole shareholder of the professional corporation she formed to operate her medical practice, appeals from the order of the Law Division enforcing a consent judgment that, in defendant's view, does not accurately reflect the terms of the underlying agreement. After a careful review of the record, we agree with defendant and reverse. The salient facts follow.
Although the professional corporation is technically a separate party, we will refer to "defendant" in the singular.
I
Defendant entered into a lease with Digirad Corporation (Digirad) for a "Cardius 1," a piece of medical equipment described by Digirad as a cardiac imaging device. Plaintiff Highland Capital Corp. financed the lease. The terms of the lease were memorialized in a five-page document. Defendant agreed to pay $3566 per month, for a term of sixty-three months. The lease term began on September 19, 2006. Defendant made her last payment in May 2009.
DIGIRAD, http://www.digirad.com/systems_index.html (last visited Feb. 22, 2013).
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In November 2009, plaintiff filed suit against defendant for breach of contract, seeking an accelerated balance of the rent due under the lease in the amount of $168,230.34; this amount included late charges and interest. Plaintiff also demanded immediate and permanent possession of the equipment. After joinder of issue, which included a counterclaim by defendant, the trial court granted plaintiff's motion for summary judgment, limited to liability, memorializing this ruling in orders dated November 17, 2010, and December 30, 2010.
The court held a proof hearing on damages on February 28, 2011. On that date, the parties reported to the trial court on the record that they had reached a putative settlement of the dispute. The following colloquy between counsel and the trial judge describes the salient terms of the settlement:
THE COURT: [Y]ou [(addressing plaintiff's counsel)] want to place the terms of the settlement on the record?The Judge then asked defense counsel to confirm plaintiff's counsel's recitation of the settlement terms:
[PLAINTIFF'S COUNSEL]: Yes, Your Honor. I'm pleased to tell the Court that we have in fact resolved this. These will be the terms:
The defendant[] ha[s] agreed to enter a judgment - - consent to a judgment in the sum of $145,000. The documents will indicate that the plaintiff will forebear from executing on the judgment in the event there is no default. So if there is default, we can go ahead and levy. But we will be filing the judgment.
Within 21 days of today, the defendant will pay the sum of $25,000 in a lump sum to Highland Capital, Corp.
Within 45 days of today, the defendant[] will start making monthly payments in the amount of $2,778 plus tax of $239.60. Those payments will be made over the term of 36 months. The defendant will be able to keep the equipment as long as there's no default. In the event of default, she will cooperate in returning the equipment. Also, in the event of default, we're able to levy on the judgment, but, of
course, there would be a credit given for any payments that are made.
And those are the basic terms of the settlement.
[DEFENSE COUNSEL]: Yes, Judge. Just to clarify, which is - - I'm sure - - the amount of - - the $2,778 plus tax of $239.60, that's per month for a period of 36 months beginning 45 days from now; and that, yes, it is agreed upon that - - that if and when there is a default, then the - - the plaintiffs have [sic] a right to seek an enforcement of the judgment, but the plaintiffs have [sic] agreed to not enforce the - - that judgment unless the defendant actually default [sic].
And Judge, also, that this is also in fact assuming all payments are made by the defendant for the agreed terms for the 36-month period, that this subject equipment is in fact hers and she will be the sole owner of the - - of the equipment.
THE COURT: Okay. So if - - once these install[ment] payments are completed, then the equipment will belong to the defendant.
[DEFENSE COUNSEL]: Yes, Judge.
THE COURT: Okay. All right.
[DEFENSE COUNSEL]: And - -
[PLAINTIFF'S COUNSEL]: I'm sorry, assuming, of course, the first payment of 20 grand is paid and all the monthly, she'll be the - -
THE COURT: Well, of course.
[DEFENSE COUNSEL]: All payments.
[PLAINTIFF'S COUNSEL]: Yes.
THE COURT: Now the first payment is 21 days from today?
[PLAINTIFF'S COUNSEL]: That's correct.
[DEFENSE COUNSEL]: Of $25,000.
THE COURT: And the first monthly installment is 45 days from today?
[PLAINTIFF'S COUNSEL]: That's correct, Your Honor.
[DEFENSE COUNSEL]: Yes, Judge.
And, of course, the defendant[] ha[s] a right to prepay in advance if [she] do[es] have the amount greater that the agreed amounts.
THE COURT: Very good. Anything else?
[PLAINTIFF'S COUNSEL]: No, that's it. I'll prepare the paperwork and, you know, circulate it accordingly.
THE COURT: Okay. Great.
[PLAINTIFF'S COUNSEL]: Thank you.
THE COURT: Thank you very much. Good job, gentlemen.
Despite these initial indications of amicable resolution, and the clarity and specificity of the terms outlined on the record, the parties thereafter were unable to agree on how to best memorialize the terms of the consent judgment. In light of this impasse, the parties wrote to the trial court requesting a hearing to resolve the dispute. On March 28, 2011, the trial court conducted a telephone conference with counsel.
After hearing from both sides, the trial court acknowledged that the form of judgment submitted by plaintiff's counsel did not include key details of the settlement placed on the record on February 28, 2011, including, but not limited to, defendant's right to own the equipment if she faithfully made all of the payments due under the settlement. Despite recognizing these deficiencies, the trial court declined to accept the form of order submitted by defense counsel.
The telephone conference proved to be ineffective in terms of getting the parties to agree on a final version of the consent judgment. Counsel for both sides continued to correspond with the trial court and submit their own versions of the relief requested. On April 29, 2011, the trial court judge signed a proposed "consent judgment" that had been prepared by plaintiff's counsel, which was not acceptable to defendant. The order provided that judgment was entered against defendant, "individually, jointly[,] and severally." The order awarded plaintiff "immediate and permanent title and possession of each and all of the leased equipment . . . [and] in the event Plaintiff takes possession of the collateral, Plaintiff may dispose of same and keep the proceeds without providing a credit to defendant[] because the underlying transaction was a true lease." (Emphasis added.) Finally, the trial court released "all replevin or other bonds posted by plaintiff" in connection with this action and absolved plaintiff of any "further liability thereunder."
II
On appeal, defendant argues that the trial court did not have the authority to enter the consent judgment because she never consented to it and it "materially changed the terms of the settlement placed on the record." Defendant focuses on the language in the consent judgment that authorizes plaintiff to "dispose of [the equipment] and keep the proceeds without providing a credit to defendant[]." Defendant seeks that we vacate the consent order and remand the matter to the trial court for the entry of a judgment that reflects the terms agreed to by the parties on the record and consistent with the underlying loan documents.
Plaintiff argues that the trial court's judgment properly reflects the terms of the settlement. According to plaintiff, defendant's tactics are intended only to delay paying what she agreed to pay under the settlement and the original loan documents. If we were to determine that the judgment should be amended, plaintiff asks that we "omit the no credit language," remove the term "consent" from the judgment, make the amendment nunc pro tunc, and order defendant to pay "all arrearages under the settlement agreement immediately."
We are satisfied that the legal principles governing the enforcement of settlements as legally binding agreements favors defendant's position. As a matter of public policy, the courts of this State favor the enforcement of settlement agreements. Nolan v. Lee Ho, 120 N.J. 465, 472 (1990); Jannarone v. W.T. Co. , 65 N.J. Super. 472, 476-77 (App. Div.), certif. denied, 35 N.J. 61 (1961). This policy acknowledges the self-evident "'notion that the parties to a dispute are in the best position to determine how to resolve a contested matter in a way which is least disadvantageous to everyone.'" Jennings v. Reed, 381 N.J. Super. 217, 226-27 (App. Div. 2005) (quoting Peskin v. Peskin, 271 N.J. Super. 261, 275 (App. Div.), certif. denied, 137 N.J. 165 (1994)). "Consequently, courts 'strain to give effect to the terms of a settlement wherever possible.'" Id. at 227 (quoting Dep't of Pub. Advocate v. N.J. Bd. of Pub. Utils., 206 N.J. Super. 523, 528 (App. Div. 1985)).
Our Supreme Court has defined a consent judgment as "'an agreement of the parties under the sanction of the court as to what the decision shall be.'" Cmty. Realty Mgmt. v. Harris, 155 N.J. 212, 226 (1998) (quoting Stonehurst at Freehold, Inc. v. Twp. Comm. of Freehold, 139 N.J. Super. 311, 313 (Law Div. 1976)). While a consent judgment is of the nature of both a contract and a judgment, it is not strictly a judicial decree, but rather in the nature of a contract entered into with the solemn sanction of the court. Ibid. Settlement agreements are thus generally governed by contract law principles. Brundage v. Estate of Carambio, 195 N.J. 575, 600-01 (2008) (citing Thompson v. City of Atl. City, 190 N.J. 359, 379 (2007)).
Given the contractual nature of consent judgments, no settlement agreement exists unless the parties agree on "the essential terms of the agreement." Mosley v. Femina Fashions Inc., 356 N.J. Super. 118, 126 (App. Div. 2002), certif. denied, 176 N.J. 279 (2003). If the parties agree on the essential terms "and manifest an intention to be bound by those terms, they have created an enforceable contract." Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992) (citing W. Caldwell v. Caldwell, 26 N.J. 9, 24-25 (1958)).
Final settlements should not be vacated absent compelling circumstances. Brundage, supra, 195 N.J. at 601 (citing Nolan, supra, 120 N.J. at 472). "An agreement to settle a lawsuit is a contract which, like all contracts, may be freely entered into and which a court, absent a demonstration of 'fraud or other compelling circumstances,' should honor and enforce as it does other contracts." Pascarella v. Bruck, 190 N.J. Super. 118, 124-25 (App. Div.) (quoting Honeywell v. Bubb, 130 N.J. Super. 130, 136 (App. Div. 1974)), certif. denied, 94 N.J. 600 (1983). To vacate a settlement agreement, there must be "clear and convincing evidence" warranting such action. DeCaro v. DeCaro, 13 N.J. 36, 42 (1953).
Additionally, the court "has no power to add to that judgment." Long v. Mertz, 21 N.J. Super. 401, 403 (App. Div. 1952). It is not the court's function to make a contract for the parties or to supply terms that have not been agreed upon. Temple v. Clinton Trust Co., 1 N.J. 219, 225 (1948). "'Courts cannot make contracts for parties. They can only enforce the contracts which the parties themselves have made.'" Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960) (quoting Sellars v. Cont'l Life Ins. Co., 30 F.2d 42, 45 (4th Cir. 1929)).
Once all essential terms of a settlement have been agreed upon, it becomes binding and enforceable as any other contract. A settlement agreement need not be in writing to be enforceable. See Pascarella, supra, 190 N.J. Super. at 124. In Pascarella, the court explained that the fact that an agreement is oral, rather than written, "is of no consequence." Ibid. "Where the parties agree upon the essential terms of a settlement, so that the mechanics can be 'fleshed out' in a writing to be thereafter executed, the settlement will be enforced notwithstanding the fact the writing does not materialize because a party later reneges." Lahue v. Pio Costa, 263 N.J. Super. 575, 596 (App. Div.) (citing Bistricer v. Bistricer, 231 N.J. Super. 143, 145 (Ch. Div. 1987)), certif. denied, 134 N.J. 477 (1993).
Parties to a settlement will therefore be bound by the terms placed on the record. In Brown v. Kennedy Memorial Hospital, the parties negotiated a consent judgment providing for a certain amount in favor of the plaintiff and agreeing that the judgment would allocate liability in percentages between two defendants in accordance with a prior jury verdict. 312 N.J. Super. 579, 585-86 (App. Div.), certif. denied, 156 N.J. 426 (1998). The plaintiff objected to the form of the written consent judgment, claiming that it failed to include recovery provisions consistent with the Comparative Negligence Act, N.J.S.A. 2A:15-5.1 to -5.4. Id. at 596.
The defendants in Brown contended that the terms of the consent judgment accurately reflected the terms of the settlement agreement as negotiated on the record. Ibid. Since the form of the judgment accurately reflected counsels' stipulations as placed on the record, the trial court compelled the plaintiff's counsel to perform the judgment as prepared. Id. at 597.
On appeal, we affirmed the trial judge's actions because the plaintiff's counsel had failed to mention the Comparative Negligence Act when the proposed judgment terms were placed on the record. Ibid. The parties had simply agreed to maintain the proportional responsibility determined by the jury at trial, and that was reflected in the judgment. Ibid. We held that there was no basis to modify the settlement terms; the oral agreement was reflected in the form of judgment and had been properly enforced. Ibid.
Against this legal backdrop, we are satisfied here that the trial court erred by entering a "consent judgment" that was hotly contested by defendant. In this context, the term "consent" was rendered meaningless. The trial court also erred in granting plaintiff's request to allow it to retain title to the equipment and keep all proceeds of sale, even absent default by defendant. This unilateral modification in the judgment materially altered the original terms of the agreement, to the clear detriment of defendant.
As we made clear twenty years ago in Pascarella, supra:
[T]he practice of spreading the terms of the agreement upon the record, although a familiar practice, is not a procedure requisite to enforcement. That the agreement to settle was orally made is of no consequence, and the failure to do no more than, as here, inform the court of settlement and have the clerk mark the case
as settled has no effect on the validity of a compromise disposition.
[190 N.J. Super. at 124.]
We thus vacate the consent judgment entered by the trial court on April 29, 2011, and remand for the trial court to either: (1) enter a form of judgment to which all parties can agree; or (2) if the parties are unable to agree on a form of order, dismiss the case as settled without further elaboration. Whether one or both parties have breached the settlement agreement is not an issue in this appeal, because the trial court has not ruled on this question.
Reversed and remanded. 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