BELVERON PARTNERS FUND IV JV, LLC VS. FRANKLIN SQUARE ASSOCIATES (L-2803-17, CAMDEN COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4024-17T4
BELVERON PARTNERS
FUND IV JV, LLC, MOUNT
CARMEL HOUSING, INC, and
FRANKLIN SQUARE NEW
JERSEY AFFORDABLE, LLC,
Plaintiffs-Appellants,
v.
FRANKLIN SQUARE
ASSOCIATES, a New Jersey
Limited Partnership,
Defendant-Respondent.
____________________________
Argued March 12, 2019 – Decided August 8, 2019
Before Judges Yannotti and Rothstadt.
On appeal from the Superior Court of New Jersey, Law
Division, Camden County, Docket No. L-2803-17.
Courtney A. Sullivan (Venable LLP) of the Virginia
bar, admitted pro hac vice, argued the cause for
appellants (Venable LLP, attorneys; Courtney A.
Sullivan and Brian L. Schwalb (Venable LLP) of the
Virginia bar, admitted pro hac vice, of counsel and on
the brief; Patrick J. Boyle and Michael A. Guerra, on
the brief).
Ronald L. Israel argued the cause for respondent
(Chiesa Shahinian & Giantomasi, PC; attorneys;
Ronald L. Israel, Melissa A. Salimbene and Brigitte M.
Gladis, on the brief).
PER CURIAM
Plaintiff Belveron Partners Fund IV JV, LLC (Belveron) and its assignee,
plaintiff Franklin Square NJ Affordable LLC (Franklin Square Affordable),
whose sole member is plaintiff Mount Carmel Housing, Inc., appeal from the
Law Division's March 29, 2018 orders denying their motion for summary
judgment and granting defendant Franklin Square Associates, LLP's cross-
motion for the same relief, dismissing plaintiffs' complaint. The complaint
sought the return of the deposit that plaintiffs paid towards the purchase of real
estate.
The motion judge entered the orders after determining that plaintiffs did
not have a right to cancel the contract although he recognized that the parties'
agreement contained a provision permitting cancellation. However, he found
that the contract's right to cancel could never be exercised by plaintiffs because
at the agreement's "inception[, it] had no meaning . . . ." We reverse because we
conclude that the motion judge erroneously construed the parties' agreement.
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The material facts are not disputed. On February 2, 2017, Belveron
contracted with defendant to purchase property in Glendora for $24 million and
pursuant to their contract, paid a $480,000 deposit towards the purchase that was
to be held in escrow by a title company pending closing or termination.
Under the contract, Belveron, as the purchaser, could terminate for any
reason during a "feasibility period." The feasibility period began on the date of
contracting and ran "through and including the fortieth . . . day thereafter."
Under Section 7(a), Belveron represented that it had authority to enter into the
agreement and "carry out Purchaser's obligations under [the] Contract."
However, the contract also contained conditions precedent described as
"Ratification Provisions," which if not satisfied, allowed either party to
terminate the contract within two days of the end of the feasibility period.
Specifically, Section 5 of the contract stated, in relevant part, as follows:
(a) Purchaser's performance of its obligations
hereunder is subject to the satisfaction of the following
conditions: (i) Seller must furnish Purchaser with
evidence of receipt of all necessary approvals of the
sale of the Seller's Property by its members and/or
board of directors, as applicable (ii) ratification of this
[c]ontract by Purchaser's board of directors . . . .
....
(e) In the event either of the conditions specified in
Section 5(a)(i) or 5(a)(ii) (collectively, the
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"Ratification Conditions") has not been satisfied prior
to expiration of the [f]easibility [p]eriod, each of
Purchaser and Seller shall have two (2) business days
to exercise the right to notify the other party that it is
terminating this [c]ontract, in which case the Purchaser
shall receive a refund of the [d]eposit. In the event that
Purchaser and Seller each fail to terminate the
[c]ontract in accordance with this Section 5(e), the
Ratification Conditions shall be deemed satisfied.
[(Emphasis added).]
Belveron immediately assigned its rights under the contract to Franklin
Square Affordable. As required by the agreement, Belveron advised defendant
of the assignment on March 9, 2017 and Franklin Square Affordable assumed
the status of "Purchaser" under the contract.
On March 14, 2017, Franklin Square Affordable initially attempted to
terminate the contract during the feasibility period based upon its determination
that it should be paying less for the property. However, when defendant advised
that the feasibility period had expired a day earlier, Franklin Square Affordable
withdrew its notice of termination.
The next day, Belveron and Franklin Square Affordable sent an email
advising defendant that they were terminating the contract pursuant to Section
5. The email stated that "the Purchaser has been unsuccessful in obtaining the
necessary ratification described in Section 5(a)(ii) . . . ."
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On March 20, 2017, defendant demanded the escrow agent release to it
the deposit paid by Belveron. Franklin Square Affordable and Belveron
objected to defendant's demand, and requested the return of the deposit.
However, the escrow agent refused to release the deposit to either party and
requested the parties resolve the issue. By July 2017, the matter remained
unresolved.
On July 14, 2017, plaintiffs filed their complaint alleging that defendant
breached the contract by refusing to direct the escrow agent to release the deposit
to plaintiffs after they terminated the contract. Defendant answered and denied
the allegations and in February 2018, the parties filed cross-motions for
summary judgment, arguing whether plaintiffs properly cancelled the contract
under Section 5 of their agreement.
The motion judge considered the parties' oral arguments and denied
plaintiff's motion and granted defendant's, placing his reasons on the record on
March 29, 2018, in an oral decision. The judge concluded that the term "board
of directors" in the contract was unambiguous and because neither purchaser
had a board of directors, there could be no ratification under Section 5. He
determined that the clause had no meaning and thus the purchasers could not
rely upon the provision to terminate the contract. This appeal followed.
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On appeal plaintiffs argue that the motion judge erred by "literally
construing the term 'Board of Directors'" in deciding that plaintiffs could not
exercise their rights under Section 5 because they were limited liability
companies managed by members rather than corporations managed by boards of
directors. Plaintiffs contend that the contract obviously imposed "mirror
obligations" on the purchaser and the seller by requiring ratification by their
respective controlling decision makers. In the alternative, they contend that if
we conclude that Section 5 is ambiguous, we "should remand the matter to allow
the parties to present extrinsic evidence of intent."
Our review of a ruling on summary judgment is de novo, applying the
same legal standard as the trial court. Lee v. Brown, 232 N.J. 114, 126 (2018).
We review the trial court's legal determination de novo. Templo Fuente De Vida
Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016). In
doing so, we owe the trial court no deference as to its "interpretation of the law
and the legal consequences that flow from established facts . . . ." Manalapan
Realty, LP v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Summary
judgment shall be granted when there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law. R. 4:46-2(c). "The
interpretation of a contract is ordinarily a legal question for the court and may
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be decided on summary judgment unless 'there is uncertainty, ambiguity or the
need for parol evidence in aid of interpretation . . . .'" Celanese Ltd. v. Essex
Cty. Improvement Auth., 404 N.J. Super. 514, 528 (App. Div. 2009) (alteration
in original) (quoting Great Atl. & Pac. Co. v. Checchio, 335 N.J. Super. 495,
502 (App. Div. 2000)).
In our review of disputed contract terms, we apply well-established
guiding principles. A court interpreting a contract seeks "to ascertain the
'intention of the parties to the contract as revealed by the language used, taken
as an entirety . . . , the situation of the parties, the attendant circumstances, and
the objects the parties were striving to attain.'" Borough of Princeton v. Bd. of
Chosen Freeholders of Mercer, 333 N.J. Super. 310, 325 (App. Div. 2000)
(alteration in original) (quoting Cruz-Mendez v. ISU/Ins. Servs., 156 N.J. 556,
570-71 (1999)).
An appellate "court must consider contractual language in the context of
the circumstances at the time of drafting and . . . apply a rational meaning in
keeping with the expressed general purpose. [I]f the contract into which the
parties have entered is clear, then it must be enforced as written." Serico v.
Rothberg, 234 N.J. 168, 178 (2018) (alterations in original) (quoting In re Cty.
of Atlantic, 230 N.J. 237, 254-55 (2017)). "Contracts should be read 'as a whole
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in a fair and common sense manner.'" Manahawkin Convalescent v. O'Neill,
217 N.J. 99, 118 (2014) (quoting Hardy ex rel. Dowdell v. Abdul-Matin, 198
N.J. 95, 103 (2009)). Courts generally give contractual terms their plain and
ordinary meaning. Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 191 (App.
Div. 2002). "A party that uses unambiguous terms in a contract cannot be
relieved from the language simply because it had a secret, unexpressed intent
that the language should have an interpretation contrary to the words' plain
meaning." Ibid.
"Where the terms of an agreement are clear, [courts] ordinarily will not
make a better contract for the parties than they have voluntarily made for
themselves, nor alter their contract for the benefit or detriment of either,
particularly in a commercial, arms-length setting." Carroll v. United Airlines,
Inc., 325 N.J. Super. 353, 358-59 (App. Div. 1999). In determining the parties'
intent, "[t]he document . . . must be read as a whole, without artificial emphasis
on one section, with a consequent disregard for others. Literalism must give
way to context." Borough of Princeton, 333 N.J. Super. at 325. "A basic
principle of contract interpretation is to read the document as a whole in a fair
and common sense manner." Porreca v. City of Millville, 419 N.J. Super. 212,
233 (App. Div. 2011) (quoting Hardy, 198 N.J. at 103).
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"A contract 'should not be interpreted to render one of its terms
meaningless.'" Ibid. (quoting Cumberland Cty. Improvement Auth. v. GSP
Recycling Co., 358 N.J. Super. 484, 497 (App. Div. 2003)). If the language used
by the parties "would bring about an unreasonable or absurd result, or would
defeat the manifest intention of the parties and the object and purpose of entering
into the contract[,]" we give the language the meaning obviously intended by
the parties. Booth v. United States Fid. & Guar. Co., 3 N.J. Misc. 735, 737
(1925).
Applying these settled rules, we conclude that the motion judge's literal
application of the words stated in Section 5 was contrary to the obvious intent
of the parties to require their governing bodies to approve the contract as a
condition precedent to the parities' performance of the obligations under the
contract. "A condition in a promise limits the undertaking of the promisor to
perform, either by confining the undertaking to the case where the condition
happens, or to the case where it does not happen." Duff v. Trenton Beverage
Co., 4 N.J. 595, 605 (1950). Although "condition precedents are 'disfavored by
the courts.' . . . because the 'failure to comply with a condition precedent works
a forfeiture[,]'" condition precedents are enforceable when expressed clearly and
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unambiguously. Liberty Mut. Ins. Co. v. President Container, Inc., 297 N.J.
Super. 24, 34 (App. Div. 1997) (citations omitted).
The motion judge's literal reading of the contract deprived the parties of
the benefit of a term that was negotiated by, as found by the judge, "sophisticated
parties" during the course of a "sophisticated transaction." There is no
reasonable explanation for giving defendant an opportunity to obtain approval
from its controlling members and at the same time, limit plaintiffs' ability to
obtain the same approval from a board of directors that both parties knew never
existed.
Defendant's suggestion that the disputed clause could be applicable if at
some point plaintiffs assigned the contract to a corporate entity was not
supported by any evidence that was the basis for the difference in the clause that
addressed defendant as compared to plaintiffs. We conclude that Section 5,
taken as whole, expressed the intention that each party have an opportunity to
secure their governing entities' approval before either was obligated to perform,
regardless of the form of ownership of each entity. To read the agreement as
suggested by defendant and as applied by the motion judge renders Section 5
meaningless and allows for an absurd result.
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Under these circumstances, to the extent the error in the contract's drafting
was attributable to plaintiffs, as the motion judge correctly determined, between
the "sophisticated businesspeople" involved, it made no difference "who
drafted" the contract. See Pacifico v. Pacifico, 190 N.J. 258, 267-68 (2007)
(contra proferentem, which "requires a court to adopt the meaning that is most
favorable to the non-drafting party. . . . is only available in situations where the
parties have unequal bargaining power [not where] both parties are equally
'worldly-wise' and sophisticated ").
Reversed and remanded for vacating the March 29, 2018 orders and entry
of orders granting plaintiffs summary judgment and denying defendant's motion
for the same relief. We do not retain jurisdiction.
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