Opinion
DOCKET NO. A-3152-12T1
11-05-2015
Erik M. Corlett argued the cause for appellant/cross-respondent (DeCotiis, Fitzpatrick & Cole, LLP, attorneys; Jeffrey D. Smith, of counsel and on the briefs; Mr. Corlett and Catherine E. Tamasik, on the briefs). Thomas P. Scrivo argued the cause for respondent/cross-appellant (McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys; Mr. Scrivo, on the briefs).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz, St. John and Rothstadt. On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-2395-07. Erik M. Corlett argued the cause for appellant/cross-respondent (DeCotiis, Fitzpatrick & Cole, LLP, attorneys; Jeffrey D. Smith, of counsel and on the briefs; Mr. Corlett and Catherine E. Tamasik, on the briefs). Thomas P. Scrivo argued the cause for respondent/cross-appellant (McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys; Mr. Scrivo, on the briefs). The opinion of the court was delivered by ST. JOHN, J.A.D.
This appeal concerns, among other issues, whether summary judgment on the issue of a breach of contract was proper. Plaintiff, Verge Properties Urban Renewal, LLC (Verge), was granted summary judgment against defendant, The Union County Improvement Authority (UCIA), based upon a breach of a redevelopment contract concerning a project in The City of Linden (City). Upon our review, in light of the record and governing law, we reverse and remand for further proceedings.
We adduce the following facts and procedural history from the record, viewed in a light most favorable to the non-moving party. See Robinson v. Vivirito, 217 N.J. 199, 203 (2014). In November 2000, the City designated a portion of South Wood Avenue as an area in need of redevelopment. The City adopted a redevelopment plan, requesting proposals from developers to purchase the land (Land), and then develop a residential and commercial project, to include on-site parking (Project). As an incentive, the City would entertain long-term tax abatement for the Project.
On March 26, 2001, Dennis Valvano, III, representing a limited liability company yet to be formed, submitted a proposal to develop the Project. Valvano had experience in the City constructing homes and office buildings, including the financing thereof, but had never undertaken a redevelopment project. The expected cost of acquiring the Land and preparing it for construction was anticipated to be $4.472 million, which did not include environmental remediation. Valvano estimated the construction cost for the Project to be $16 million and the construction schedule to be one year.
In October, Valvano formed Verge, and on November 21, 2001, the City awarded Verge the Project. In 2003, Verge's certificate of formation was amended to an urban renewal entity in order to receive a tax abatement pursuant to the Long Term Tax Exemption Law. N.J.S.A. 40A:20-9 to -12. The City and Verge entered into a financial agreement for Long Term Tax Exemption on June 17, 2003.
The UCIA was created pursuant to the County Improvement Authorities Law, N.J.S.A. 40:37A-44 to -135, (the Act). The Act does not confer any taxing power upon the UCIA. The City and UCIA entered into an inter-local services agreement (ISA), dated January 2, 2002, which set forth each of its duties for the Project's redevelopment plan and which designated the UCIA as the redevelopment agency. Section 1.02 of the ISA set forth the UCIA's duties which included: negotiating a developer's agreement among the City, UCIA and the designated developer; negotiating with the Land owners and purchasing or condemning the Land; undertaking demolition and clearance of the Land; conducting environmental studies; supervising project development; and providing project financing. The ISA further provided: "The cost of such services by the Authority shall be repaid by the City after completion of the Project pursuant to the terms and conditions of a repayment agreement between the City and the [UCIA]."
The record does not disclose a repayment agreement. --------
The Redevelopment Agreement
The City, UCIA and Verge entered into a Redevelopment Agreement dated August 15, 2003 (the Agreement). The Agreement provided that the redevelopment would occur in three phases. UCIA would convey the Land for the three phases to Verge as unimproved vacant land, with any necessary environmental remediation completed. Within three months of the date of the Agreement, UCIA was responsible for initiating the process. Within six months of the date of the Agreement, UCIA was to complete the Phase I Land acquisition either through negotiation or by eminent domain. If necessary, UCIA could obtain a three-month extension to acquire the Phase I Land, ending on May 15, 2014.
The Agreement provided that after UCIA had acquired, cleared and remediated the Land, Verge was to purchase it and develop the Project. Verge's aggregate fixed purchase price for the Phase I, II and III Land would be no more than $3 million to be paid as follows: Phase I - $1.1 million, Phase II - $.95 million and Phase III - $.95 million. In addition to the cost of purchasing the Land for resale to Verge, UCIA would incur costs for demolition, environmental remediation, legal fees and relocation of residents and businesses.
Of pertinence to this dispute, Section 2.06 of the Agreement stated:
The [UCIA] agrees that all Project Costs will be funded by the [UCIA] to an amount not to exceed the sum of Six Million Five Hundred Thousand Dollars ($6,500,000.00) to be off-set in part by a reimbursement from [Verge] upon payment of the purchase price set forth in Section 2.05 herein. The City agrees to repay the [UCIA] up to Three Million Five Hundred Dollars ($3,500,000) of Project Costs pursuant to the terms of a repayment agreement and repayment schedule to be approved by the City and the [UCIA], which shall be required as part of the financing to be undertaken by the [UCIA] to fund the Project Costs, as contemplated by the Interlocal Services Agreement. Said repayment agreement shall provide for a credit to the City in the amount of all Project Costs incurred directly by the City. Should the Project Costs exceed $6,500,000.00, [Verge], as its option shall have the right to continue the Project,
provided that [Verge] agrees to reimburse [UCIA] for the Project Costs that exceed $6,500,000.00. However, in the event the [UCIA] provides written notification to [Verge], with a copy to the City, that the Project Costs have or will exceed $6,500,000.00 (the "Cost Notification") and [Verge] does not exercise its option to continue the Project and agree to reimburse the [UCIA] within thirty (30) days of the [Verge's] receipt of the Cost Notification, the [UCIA] may notify [Verge] and the City of its intent to terminate this Agreement immediately with respect to phases that have not commenced and the parties will have no further obligations, except as set forth in this Agreement.There is no dispute that UCIA issued $3.5 million of bonds backed by the City's obligation to fund the debt service.
The City shall not be responsible for any costs associated with any improvements necessary for the development and construction of the Project. Except as specifically set forth herein, the costs of developing the Project Site and of constructing all improvements thereon, including all required infrastructure improvements, shall be borne by the [Verge].
The Agreement set forth time periods for Verge's obligation to commence and substantially complete each phase of the Project. It was obligated to "use its best efforts to comply with the commencement dates and substantial completion dates for" each phase subject to the UCIA granting reasonable extensions as a result of adverse conditions affecting the real estate market. The Agreement also contained an expansive delay provision, which in essence provided that a party is not in default as a result of an enforced delay arising from causes beyond its reasonable control.
If the UCIA defaulted in its obligations under the Agreement prior to conveyance of property for any particular phase, within thirty days of receiving written notice from Verge, UCIA shall "proceed to cure or remedy such default or breach." If the cure is not diligently pursued or not cured within a reasonable time, Verge may institute such proceedings desirable in its opinion to cure and remedy the default. Section 3.22 required Verge to annually deliver a statement to the City and UCIA as to whether any condition or event existed which violated the Agreement.
Sections 4.02 and 4.03 of the Agreement addressed environmental testing and remediation of the Land.
Phase I
The UCIA tried, unsuccessfully, to acquire the Phase I properties through negotiation. Consequently, on November 3, 2004, UCIA filed a condemnation complaint. Environmental testing disclosed significant problems necessitating remediation. In early 2005, the City granted Verge site plan approval even though the Land had not yet been acquired. Extensive litigation ensued among the UCIA and the Phase I hold- out property owners, which was resolved by consent in 2007. On July 7, 2005, in response to a request from Verge, UCIA provided a breakdown of project costs. At that time, of the original $3.5 million, only $190,000 remained. Although, as of that date, UCIA had not conveyed the Phase I Land to Verge nor fully funded the $6.5 million of costs, Verge did not send any notice of default to UCIA or the City.
Thereafter, the UCIA continued to attempt to acquire and remediate the Land. Discussions ensued between UCIA and Verge concerning demolition and remediation work in which UCIA requested Verge to undertake some of the work and accept a credit against the purchase price for the Phase One properties. In early 2006, the UCIA proceeded with the relocation of tenants and disconnection of utilities in the Phase One properties. Verge did not agree to perform the demolition work, but agreed to procure three bids from other contractors to do the work.
In August 2006, the UCIA recognized that the cost for the acquisition of the Land was likely to increase beyond the original estimate of $6.5 million. The UCIA requested a discussion with Verge, concerning who would pay the excess beyond the $6.5 million, and a revision to the Project schedule. In October, UCIA and the City agreed in principle to fund an additional $3 million, which did not materialize. The UCIA requested additional financial information from Verge, which was not provided. At this point, it was evident that the Land costs would substantially exceed the original estimates.
In January 2007, Verge applied for an extension of its site plan approval. In a February 2, 2007 email to Verge, UCIA stated that it was time to determine whether the Project would move forward and requested that Verge agree to amend the Agreement. The City extended Verge's site plan approval on March 13, 2007. In April, UCIA notified Verge that it was commencing demolition and remediation of the Phase One properties.
Verge, through its counsel, by letter dated May 23, 2007, sent a notice of default to UCIA and the City. Verge does not contend, and the record does not support, that Verge at any time prior to this notice sent UCIA any other notice of default. In the May notice, Verge asserted "the failure to timely complete the demolition and remediation of the Phase I Property has been caused by the [UCIA's] and the City's failure to finance and fund the Linden Redevelopment project pursuant to the Agreement." It further contended that the Agreement required the UCIA to fund all project costs in the amount of $6.5 million. Verge asserted because "acquisition and demolition was to occur within six months of August 15, 2003, and in no event beyond the ninety-day extension period, funding of $6,500,000 should have been completed by May 15, 2004." Further, "not only has the Authority failed to obtain any additional funding for the payment of Project Costs, but it cannot do so in the time required under the Agreement, and it cannot cure the default under the Agreement."
On May 31, 2007, UCIA responded that Verge had failed to comply with the Agreement because it had not provided a notice of default on each anniversary of the Agreement. Moreover, UCIA also informed Verge that the Project costs would exceed $6.5 million and that Verge could exercise its right to continue the Project if it assumed responsibility for the additional expenses. UCIA offered to have the Phase I properties ready for construction by the summer of 2007. On August 11, 2008, UCIA purportedly terminated the Agreement on the basis that Verge did not agree to undertake the additional costs beyond the $6.5 million.
In July 2007, Verge filed an amended complaint against UCIA and the City alleging breach of contract (Count I), breach of the duty of good faith and fair dealing (Count II), and other claims. On December 23, 2008, Verge filed a second amended complaint against UCIA and the City.
On December 17, 2010, Verge, UCIA and the City each moved for summary judgment. On March 2, 2011, the court, in a written opinion, determined that UCIA breached the Agreement. The court concluded,
In this case, with respect to UCIA, it is undisputed that UCIA agreed to fund the Project Costs not exceeding $6,500,000 with the expectation that UCIA would be reimbursed by plaintiff upon payment of the purchase price. In this case, there is no dispute that UCIA was only willing to fund $3,500,000. Therefore, there is no material dispute of fact that defendant UCIA breached the contract with plaintiff by failing to fully fund the project.
Verge contended UCIA breached the Agreement by failing to timely initiate and complete the acquisition of the Phase I properties. The judge held that "a question remains for the jury as to whether the breaches were excusable under the circumstances." Verge also asserted UCIA failed to timely complete the relocation, demolition and clearance of the Phase I properties, but the court determined this issue must be decided by the jury. The court granted summary judgment to Verge on defendant's defense of promissory estoppel and to the City because there was no evidence that the City had breached the Agreement.
However, in the last paragraph of the opinion, the judge stated:
In this case, the [c]ourt simultaneously is denying the motions of both Verge and UCIA
for summary judgment as to breach of contract. The [c]ourt found that a material question of fact existed as to whether UCIA and/or Verge breached the contract. The questions of fact revolve around whether Verge is estopped from bringing a claim for breach of contract, whether UCIA failed to fully fund the project, and whether UCIA failed to fulfill its other obligations under the contract.
On March 16, 2011, UCIA filed for reconsideration and requested a determination that Verge was prohibited from seeking lost profits. Verge sought reconsideration of the court's grant of summary judgment to the City. On April 21, 2011, the court refused to reconsider its determination regarding the City, partially granted reconsideration to UCIA and determined that Verge could not seek lost profit damages.
The matter was tried before a jury for six days in December 2012. In both his opening statement and summation, Verge's counsel advised the jury UCIA had the obligation to fund the $6.5 million. In his summation, counsel indicated "[t]he court has already decided the [UCIA] had the obligation to fund the $6.5 million." The judge's instructions to the jury provided:
The [c]ourt has already determined that the UCIA was obligated by the parties' agreement to provide $6.5 million in funding to the Linden Project and that the UCIA did not provide the full amount of that funding. It is for you, however, to determine if the UCIA caused Verge to be damaged or whether any project delays should be excused. . . .
In this case, the [c]ourt has already determined that defendant breached the Redevelopment Agreement by failing to fund $6.5 million to acquire, relocate, demolish and remediate the land.Likewise, the first sentence of the verdict sheet stated, "[t]he court has already decided that the UCIA breached the Redevelopment Agreement because the UCIA failed to fully fund $6,500,000 pursuant to the Redevelopment Agreement."
On December 5, the court denied defendant's motion to dismiss Verge's claims. The jury returned a verdict in favor of Verge and awarded damages. The court denied UCIA's motion for a judgment notwithstanding the verdict (JNOV) or a new trial. UCIA filed a notice of appeal, and Verge filed a notice of cross-appeal.
On appeal, UCIA asserts the trial court erred in its pretrial ruling that it breached the Agreement by failing to fund $6.5 million. It further contends it was error for the court to not grant a JNOV on certain issues and a new trial based on other issues. In its cross-appeal, Verge contends the trial court erred in ruling that it could not seek lost profit damages.
We review the trial court's entry of summary judgment in accordance with the standard set forth in Rule 4:46-2(c). State v. Perini Corp., 221 N.J. 412, 425 (2015) (citations omitted). That standard compels a court to grant summary judgment "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show 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). When there is no issue of fact, and only a question of law remains, an appellate court reviews that question de novo; the legal determinations of the trial court are not entitled to any special deference. Gere v. Louis, 209 N.J. 486, 499 (2012) (citation omitted); Pheasant Bridge Corp. v. Twp. of Warren, 169 N.J. 282, 293 (2001); Manalapan Realty, L.P. v. Twp. Comm. of Twp. of Manalapan, 140 N.J. 366, 378 (1995). When "summary judgment is based on an issue of law, we owe no deference to an interpretation of law that flows from established facts." Perini Corp., supra, 412 N.J. at 425 (citing Town of Kearny v. Brandt, 214 N.J. 76, 91 (2013)).
Contractual interpretation is a legal matter ordinarily suitable for resolution on summary judgment. Celanese Ltd. v. Essex Cnty. Improvement Auth., 404 N.J. Super. 514, 528 (App. Div. 2009). The touchstone for interpretation is the parties' shared intent in reaching the agreement. Pacifico v. Pacifico, 190 N.J. 258, 266 (2007). So long as that intent is evident from the contract's clear, unambiguous terms, the agreement will be enforced as written. Karl's Sales & Serv., Inc. v. Gimbel Bros., Inc., 249 N.J. Super. 487, 493 (App. Div.), certif. denied, 127 N.J. 548 (1991).
To the extent any ambiguity exists, that is, to the extent that a contractual term is susceptible of more than one reasonable interpretation, Powell v. Alemaz, Inc., 335 N.J. Super. 33, 44 (App. Div. 2000), a court may discern the parties' intent from evidence bearing on the circumstances of the agreement's formation, Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 269 (2006), and of the parties' behavior in carrying out its terms, Savarese v. Corcoran, 311 N.J. Super. 240, 248 (Ch. Div. 1997), aff'd, 311 N.J. Super. 182 (App. Div. 1998). "The polestar of contract construction is to discover the intention of the parties as revealed by the language used by them." Karl's Sales, supra, 249 N.J. Super. at 492 (citations omitted). In interpreting a contract, the focus is on "the intention of the parties to the contract as revealed by the language used, taken as an entirety; and, in the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain . . . ." Lederman v. Prudential Life Ins. Co. of Am., Inc., 385 N.J. Super. 324, 339 (App. Div.) (citation and internal quotation marks omitted), certif. denied, 188 N.J. 353 (2006). In that regard, the court may not re-write a contract or grant a better deal than that for which the parties expressly bargained. Solondz v. Kornmehl, 317 N.J. Super. 16, 21 (App. Div. 1998).
Applying these principles, we conclude the language used in Section 2.06 of the Agreement concerning the timing of the UCIA's funding obligation was sufficiently ambiguous to preclude summary judgment. First, the language did not expressly require UCIA to fund by a date certain. It required "all Project Costs will be funded by the Authority to an amount not to exceed the sum of Six Million Five Hundred Thousand Dollars ($6,500,00.00) to be offset in part by reimbursement from [Verge] upon payment of the purchase price set forth in Section 2.05 herein." UCIA's funding obligation arises at the time that Project Costs become due and payable. Therefore, if the Project is delayed, and such delay is not a default by UCIA, the funding obligation would also be delayed. Further, the Agreement could reasonably be construed to allow UCIA to use payments by Verge for Project Costs. As an example, had the UCIA been able to purchase the Phase I properties from third parties for an aggregate amount of $1.1 million or less, it would not have been a breach of the Agreement for the UCIA to schedule simultaneous purchase closings and a sale closing to Verge, and use Verge's payment to pay the sellers.
UCIA contends it is entitled to a new trial because the court improperly instructed the jury that it had breached the Agreement "by failing to fund $6.5 million to acquire, relocate, demolish and remediate the land." Verge responds that because no objection to the charge was raised by UCIA, our standard of review should be plain error. See R. 2:10-2. We disagree. Prior to the trial, UCIA argued the court erred in the decision that UCIA was in breach of the Agreement by failing to fund the money. The court ruled otherwise and, therefore, the charge was factually correct but, as we conclude herein, legally in error.
A proper jury instruction provides "'an explanation of the applicable legal principles and how they are to be applied in light of the parties' contentions and the evidence produced in the case.'" Viscik v. Fowler Equip. Co., 173 N.J. 1, 18 (2002) (quoting Rendine v. Pantzer, 276 N.J. Super. 398, 431 (App. Div. 1994), aff'd as modified, 141 N.J. 292 (1995)). Furthermore, the charge must accurately state the applicable law, outline the jury's function and clearly explain how the jury should apply the legal principles to the facts of the case. Ibid. (citing Velazquez v. Portadin, 163 N.J. 677, 688 (2000)). In determining whether the trial court erred in instructing the jury, a reviewing court must examine the charge as a whole, rather than focus on one portion in isolation. Ibid. (citing Ryder v. Westinghouse Elec. Corp., 128 F.3d 128, 137 (3d Cir. 1997), cert. denied, 522 U.S. 1116, 118 S. Ct. 1052, 140 L. Ed. 2d 115 (1998)).
With these principles in mind, we must consider whether the jury charge and verdict sheet, and statements during the trial that UCIA had breached the Agreement, warrant reversal. We conclude the statements, jury instruction and verdict sheet are of such a nature as to have been clearly capable of producing an unjust result, and therefore we are constrained to reverse and remand for a new trial. Given our decision, we need not address the other issues raised by UCIA in its appeal or the issue asserted by Verge in its cross appeal.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION