STRAUS ASSOCIATES II VS. MURRAY BERMAN Â (C-000102-15, BERGEN COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE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-5578-15T3
STRAUS ASSOCIATES II and 11 HISTORY
LANE OPERATING COMPANY, LLC d/b/a
CAREONE AT JACKSON,
Plaintiffs-Respondents,
v.
MURRAY BERMAN,
Defendant-Appellant,
and
JACKSON HEALTH CARE ASSOCIATES,
Defendant.
________________________________
Submitted October 3, 2017 - Decided October 24, 2017
Before Judges Reisner and Mayer.
On appeal from Superior Court of New Jersey,
Chancery Division, Bergen County, Docket No.
C-000102-15.
McCusker, Anselmi, Rosen & Carvelli, PC,
attorneys for appellant (William P. Munday and
Louis C. Formisano, on the briefs).
Cole Shotz, PC, attorneys for respondents
(Michael D. Sirota, Joseph Barbiere, and
Michael R. Yellin, of counsel and on the
brief).
PER CURIAM
Plaintiffs Straus Associates II (Straus) and 11 History Lane
Operating Company, LLC d/b/a CareOne at Jackson (CareOne) filed
suit against defendants Murray Berman (Berman) and Jackson Health
Care Associates (JHCA) for specific performance of a partnership
agreement between Straus and Berman. Defendant Berman now appeals
from orders of the Chancery Division granting plaintiffs' motion
to enforce the settlement, denying defendant's cross-motion to
enforce the settlement, and denying defendant's motion for
reconsideration. We affirm.
The facts giving rise to this action are undisputed. Straus
and Berman each own a fifty percent partnership interest in JHCA.
JHCA owns and manages property in Jackson, New Jersey (the
Property). CareOne was a long-term tenant on the Property. Prior
to the expiration of CareOne's lease, Straus and Berman disagreed
on the lease renewal terms. Plaintiffs filed suit against Berman
and JHCA for specific performance seeking to compel renewal of the
lease or, in the alternative, to compel Berman to purchase Straus's
interest in JHCA.
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The parties requested mediation in an effort to resolve their
dispute. The trial judge agreed and referred the matter to a
retired federal district court judge to serve as mediator. With
the assistance of the mediator, the parties reached a settlement
and drafted a mediation settlement agreement (Agreement). The
Agreement stated:
[I]t is agreed among the parties that
Plaintiff, or its assigns, will pay Defendant
Murray Berman ("Berman"), $7,500,000.00 in
exchange for Berman's assignment to 11 History
Lane Operating Company, LLC, or its assigns,
of any and all interests in Jackson HealthCare
Associates. Closing to occur within six months
or sooner, but not before January 2, 2016,
upon not less than 30 days' notice. Rents
pursuant to the Lease, shall continue to be
timely paid and distributed until Closing.
Formal general releases and final settlement
agreement to be exchanged in due course.
The Agreement was signed by the mediator and counsel for the
parties.
Three weeks after signing the Agreement, Berman's attorney
sent a draft final settlement agreement to Plaintiffs' attorney.
Section 8.15 of the draft final settlement agreement read as
follows:
Like-Kind Exchange. Berman may elect to
structure the sale of the Partnership Interest
within the meaning of Section 1031 of the
Internal Revenue Code by assigning its rights,
but not its obligations, hereunder to a
qualified intermediary as provided in Income
Tax Regulations Section 1.103(k)-1(g)(4) on or
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before the Closing Date, and Straus hereby
agrees to cooperate therewith, provided that
(a) they will not be required to incur any
costs as a result of such like-kind exchange,
(b) the Closing Date shall not be adjourned
by reason thereof and such like kind exchange
shall not delay consummation of this
transaction, (c) Straus will incur no expense,
liability obligation, in connection with said
structuring, other than acknowledging and
consenting to exchanging party's assignment in
connection with such exchange, (d) Straus
shall have no obligation to take title to any
real property in connection with such
exchange, and (e) Straus shall make no
representation or warranty in connection with,
and shall have no responsibility for,
compliance by such exchange with the Internal
Revenue Code or any regulations thereunder.
This term was acceptable to Straus, and the parties subsequently
exchanged revised drafts of the final settlement agreement. The
language of section 8.15 remained unchanged throughout the
revision process.
Two months later, plaintiffs' attorney sent a copy of a final
settlement agreement which set the closing date for January 29,
2016. The next day, Berman's attorney replied: "[T]he change from
30 days' notice to January 29, 2016 closing is not acceptable.
Client is setting up a 1031 exchange." The parties then agreed
to a closing date of February 25, 2016, and plaintiffs' counsel
circulated a final settlement agreement for execution. Only one
ancillary document, an assignment of partnership interest
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conveying Berman's interest in JHCA to Straus, entitled Exhibit
"A," was annexed to the final settlement agreement.
Three weeks prior to the February 2016 closing date, Berman's
attorney revised the final settlement agreement. The revision
changed section 8.15 as follows: "(d) Plaintiffs shall have no
obligation to take title to any real property in connection with
such exchange, other than the Property . . . ." This change would
have allowed Berman to use a "drop and swap" mechanism to
effectuate a 1031 exchange, whereby JHCA would deed a one-half
tenancy-in-common interest in the Property to Berman, who would
then convey the Property interest to a new entity owned by Straus,
in exchange for the $7,500,000 purchase price. Plaintiffs objected
to the change. Berman refused to move forward without the "drop
and swap" provision. Plaintiffs served Berman a notice of default
based upon Berman's refusal to proceed with the closing.
One month after the closing date, plaintiffs filed a motion
to enforce and compel performance of the Agreement. Plaintiffs
argued that the Agreement established a contract for the sale of
Berman's partnership interest in JHCA to Straus, and that Berman's
addition of the drop and swap language was an improper attempt to
materially change the parties' Agreement.
Berman cross-moved to enforce and compel performance of the
Agreement or, in the alternative, to restore the matter to the
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trial calendar. Berman asserted the parties agreed during the
mediation to conduct the sale as a 1031 exchange, but decided it
need not be included in the signed agreement as it would be fleshed
out in the formal written agreement to follow. Berman argued that
the 1031 exchange was a material term of the Agreement because it
allowed Berman to defer approximately $2,500,000 in taxes. Berman
claimed that plaintiffs agreed to a 1031 exchange, and a drop and
swap was the only way to effectuate such an exchange.
During oral argument on the enforcement motions, plaintiffs
argued that the Agreement set forth the essential terms requiring
Straus to buy out Berman's interest in JHCA. Plaintiffs denied
that a 1031 exchange was part of the mediation discussions.
Plaintiffs maintained that Berman's draft final settlement
agreement never included documents necessary to effectuate a drop
and swap as the method for transferring the Property. According
to plaintiffs, the drop and swap was a new and unacceptable term.
Berman argued that the thirty days' notice provision in the
Agreement was included to allow for the completion of a 1031
exchange, and evidenced the parties' intent that the transaction
occur as a 1031 exchange. Berman argued that the 1031 exchange
was an essential term of the settlement. Berman asked the court
to compel plaintiffs to consent to the drop and swap, or declare
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the Agreement null due to a failure of mutual assent on a material
term.
Examining the undisputed evidence, the judge determined that
the Agreement drafted by the mediator and signed by the parties
contained the material terms of the settlement: (1) sale of
Berman's interest in JHCA to CareOne or its assigns; (2) sale
price of $7,500,000; (3) closing in under six months, but not
before January 2016; (4) 30 days' notice; and (5) continued
distribution of rent until closing. The judge found no evidence
of a 1031 exchange as a requirement or essential term of the
Agreement.
Accordingly, the judge granted plaintiffs' motion to enforce
the Agreement, struck the addition to Section 8.15, and ordered
closing within thirty days. The judge denied Berman's cross-
motion. The judge also denied plaintiffs' fee application, finding
that such a provision was not contained in the Agreement.
Berman moved for reconsideration seeking to compel
performance of the draft final settlement agreement, including a
1031 drop and swap exchange, or restore the matter to the trial
calendar. Plaintiffs opposed Berman's reconsideration motion.
While his reconsideration motion was pending, Berman declined to
close by the deadline established in the court's May 13, 2016
order. The judge denied the reconsideration motion.
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On appeal, Berman argues that the judge erred by: (1) failing
to view the competent evidence in the light most favorable to him;
(2) failing to find that structuring the sale as a "like-kind"
exchange under 26 U.S.C.A. § 1031 was an essential term of the
settlement; (3) enforcing a contract wherein the parties failed
to agree on an essential term; and (4) declining to hold a plenary
hearing to resolve disputed issues of fact.
"A settlement agreement between parties to a lawsuit is a
contract." Nolan v. Lee Ho, 120 N.J. 465, 472 (1990).
"Interpretation and construction of a contract is a matter of law
for the court subject to de novo review." Fastenberg v. Prudential
Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div. 1998).
"Accordingly, we pay no special deference to the trial court's
interpretation and look at the contract with fresh eyes." Kieffer
v. Best Buy, 205 N.J. 213, 223 (2011).
A motion for reconsideration is reviewed for abuse of
discretion. Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div.
1996). Reconsideration is appropriate only in those cases "in
which either 1) the [c]ourt has expressed its decision based upon
a palpably incorrect or irrational basis, or 2) it is obvious that
the [c]ourt either did not consider, or failed to appreciate the
significance of probative, competent evidence." D'Atria v.
D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990).
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In support of his argument that the judge failed to view the
competent evidence in the light most favorable to him, Berman
relies on Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 474-75 (App.
Div. 1997), and contends that the judge should have conducted an
evidentiary hearing related to the parties' agreement of the 1031
exchange. According to Berman, the evidence that should have been
considered in the light most favorable to him included: (1) the
30 days' notice provision in the Agreement; (2) the inclusion of
section 8.15 in the draft final settlement agreement to which
plaintiffs did not object; and (3) the certification of Berman's
attorney stating the parties agreed to a 1031 exchange during the
mediation.
The Amatazzo case turned on whether a settlement existed. In
that case, the parties negotiated and exchanged drafts of a
settlement agreement, but the defendant never executed an
agreement. Id. at 471—73. When the plaintiff in Amatazzo moved
to enforce the agreement, the defendant claimed his attorney lacked
authority to settle. Id. at 473. Based on those facts, we found
that the trial judge erred in enforcing the settlement and remanded
for an evidentiary hearing. Id. at 476.
Berman's reliance on Amatazzo is misplaced, as the parties
here agreed upon a settlement that was reduced to writing and
signed. Moreover, because both parties filed motions to enforce
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the Agreement, neither party disputed the existence of a written
settlement.
The question in this case is whether a 1031 exchange was
contemplated as part of the settlement, not whether there was a
settlement. Accordingly, an evidentiary hearing was not required.
Moreover, because mediation communications are privileged, and
plaintiffs have not expressly waived such privilege, Berman's
argument that information could be provided through an evidentiary
hearing is unavailing. See N.J.S.A. 2A:23C-4; N.J.R.E. 519(a).
See also Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C.,
215 N.J. 242, 263 (2013).
Further, the parties' exchange of post-mediation documents
does not support Berman's contention that the parties agreed to
the drop and swap provision at mediation. Berman's attorney did
not include the supposedly agreed-on term – "other than the
Property" - in the final settlement agreement when he drafted it
and sent it to plaintiffs' counsel three weeks after the Agreement
was signed. Instead, he added it many drafts later, shortly before
the February 2016 closing date.
Berman also argues that the judge erred in failing to find
the 1031 exchange was an essential term of the Agreement. Berman
cites Lahue v. Pio Costa for the proposition that "[w]here the
parties agree upon the essential terms of a settlement, so that
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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."
263 N.J. Super. 575, 596 (App. Div.), certif. denied, 134 N.J. 477(1993). Berman claims that the parties agreed to a 1031 exchange
during the mediation, but declined to write the provision into the
Agreement. Berman contends that the 1031 exchange was an agreed-
upon essential term, and the use of a drop and swap to accomplish
the exchange was merely "mechanics" to be implemented in the final
agreement.
Berman misconstrues the legal meaning of "essential" terms
to a contract. A contract's terms are essential when they are
necessary to produce a complete transaction. See, e.g. Berg Agency
v. Sleepworld-Willingboro, Inc., 136 N.J. Super. 369, 375 (App.
Div. 1975). In Berg, the judge held that a signed letter of intent
was a binding contract, notwithstanding the parties' intent to
produce a subsequent formal lease agreement, where the letter
contained the basic terms essential to creating a lease. Id. at
375—76.
The Agreement in this case, like the agreement in Berg,
contains all of the essential terms for a settlement. Berman
agreed to relinquish his interest in the joint partnership, which
both parties agree was the essence of the settlement. The
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Agreement contained terms identifying the interest to be
transferred, the parties to the transfer, the price, the timeline,
and the financial obligations of the parties pending closing.
Thus, there are no missing terms essential to complete the
transfer. Berman's argument misperceives terms essential to form
a contract with terms that he subjectively deemed essential in
order to settle. Berman signed the Agreement which contained
clear terms, manifesting his intent to be bound by that Agreement.
See Comerata v. Chaumont, Inc., 52 N.J. Super. 299, 305 (App. Div.
1958) ("[T]he fact that parties who are in agreement upon all
necessary terms may contemplate that a formal agreement yet to be
prepared will contain such additional terms as are later agreed
upon will not affect the subsistence of the contract as to those
terms already unqualifiedly agreed to and intended to be
binding.").
Berman's brief does not address denial of his motion for
reconsideration. There is no argument explaining how the judge
abused his discretion in denying Berman's reconsideration motion.
Nor do we find any such abuse from the record. Berman failed to
raise any new facts or controlling decisions not previously
considered by the judge. See R. 4:49-2. Berman's dissatisfaction
with the judge's ruling is not a basis for reconsideration.
D'Atria v. D'Atria, supra, 242 N.J. Super. at 401.
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Plaintiffs request costs and attorney's fees in accordance
with Section 7.2 of the final settlement agreement. However,
plaintiffs did not file an appeal or a cross-appeal. Therefore,
the issue is not properly before us and we decline to consider it.
Affirmed.
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