JEROME MCCANN VS. WHITEHALL MANOR CONDOMINIUM ASSOCIATION, INC. (L-1581-16, SOMERSET COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE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-4086-19
JEROME MCCANN, MARY ANN
VASTINO, and ERIN MCGOWAN,
Plaintiffs-Respondents/Cross-
Appellants,
v.
WHITEHALL MANOR
CONDOMINIUM ASSOCIATION,
INC.,
Defendant-Appellant/Cross-
Respondent.
______________________________
Submitted November 8, 2021 – Decided November 24, 2021
Before Judges Rothstadt and Mayer.
On appeal from the Superior Court of New Jersey, Law
Division, Somerset County, Docket No. L-1581-16.
Jeffrey S. Mandel, attorney for appellant/cross-
respondent.
Anthony X. Arturi, Jr., attorney for respondents/cross-
appellants.
PER CURIAM
This matter returns to us after a remand. See McCann v. Whitehall Manor
Condo. Ass'n, Inc., No. A-3338-16 (App. Div. June 29, 2018). Defendant
Whitehall Manor Condominium Association, Inc. (Association) appeals from a
May 28, 2020 order granting summary judgment in favor of plaintiffs Jerome
McCann, Mary Ann Vastino, and Erin McGowan and ordering the Association
to indemnify and reimburse plaintiffs for legal fees in the amount of $65,439.80.
Plaintiffs cross-appeal from the same May 28, 2020 order, disallowing a
portion of their attorney's fees, in the amount of $11,204.79, incurred while
defending the prior appeal. We reverse and remand the matters to the trial court.
We presume the parties are familiar with the facts from our prior opinion.
McCann (slip op. at 1-2). Plaintiffs are former members of the Association's
board of trustees and did not seek reelection. After departing as board members,
the Association claimed plaintiffs failed to turn over documents belonging to the
Association. Specifically, the Association sought access to an email account
plaintiffs maintained during their time as board members.
Plaintiffs advised the email account was closed and, therefore, could not
grant access to the Association. Consequently, the Association filed suit against
plaintiffs in the Chancery Division seeking access to the email account and other
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relief. The matter was resolved, in part, upon the entry of an April 29, 2016
consent order, directing plaintiffs to "make every effort to reactivate the [email]
account."
A few days after signing the consent order, the Association filed a
stipulation dismissing the Chancery Division action without prejudice.
However, plaintiffs never agreed to, or even signed, the stipulation of dismissal.
Thus, plaintiffs asserted the Association unilaterally dismissed the action.
Consistent with the consent order, plaintiffs contacted the email account
service provider to reactivate the email account. Because the email account was
not restored, the Association moved to enforce plaintiffs' compliance with the
consent order. The Chancery Division judge denied the motion, finding
plaintiffs substantially complied with the terms of the consent order.
Plaintiffs then requested the Association indemnify them and pay
$22,594.26, representing legal fees associated with defending the Chancery
Division action. Plaintiffs claimed the Association's voluntary dismissal of the
Chancery Division action triggered indemnification under the Association's
bylaws. Paragraph 2 of the bylaws provided:
Each Trustee, officer or committee member of the
Association shall be indemnified by the Association
against the actual amount of net loss, including counsel
fees, reasonably incurred or imposed upon him in
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connection with any action, suit or proceeding to which
he may be a party by reason of his being or having been
a Trustee, officer or committee member of the
Association, except as to matters for which he shall be
ultimately found in such action to be liable for gross
negligence or willful misconduct.
Plaintiffs claimed entitlement to attorney's fees under the indemnification
provision absent any finding of gross negligence or willful misconduct. The
Association declined to pay plaintiffs' legal fees.
On August 8, 2016, the Association filed a motion to reinstate the
Chancery Division action and vacate the April 29, 2016 consent order. In
denying the motion, the Chancery Division judge held:
Although [the Association] refers to a stipulation of
dismissal and, indeed, entitled the document that was
filed with the court unilaterally as a [s]tipulation of
[d]ismissal, it was not a stipulation. It was a unilateral
dismissal filed by [the Association]. There were certain
"whereas"'s in it. They're not binding on the
[plaintiffs]. The [plaintiffs] [were] not a signatory to
that. It was a dismissal. It was a dismissal without
prejudice under the court rules.
Based on that ruling, plaintiffs renewed their request for legal fees under the
indemnification provision in the bylaws.
Because the Association failed to pay the demanded attorney's fees,
plaintiffs sued the Association for breach of contract in a separately filed action
in the Law Division. Plaintiffs filed an order to show cause and requested
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summary disposition of their claim. On the return date of the show cause
hearing, the Law Division judge, treating the matter as a summary action, held
"plaintiffs [we]re entitled to indemnification for the costs and fees ." The judge
concluded there could be no finding of gross negligence or willful misconduct
against plaintiffs because the Association voluntarily dismissed its claim. In a
March 3, 2017 order and written decision, the judge directed the Association to
pay plaintiffs the sum of $31,108.39.
The Association appealed the March 3, 2017 order. On June 29, 2018,
this court vacated that order on procedural grounds. See McCann, slip op. at 5-
6. We remanded the matter to the motion judge because "there was no motion
filed by [plaintiffs] to proceed summarily, and the Association did not consent
to summary disposition." Id. at 5. We instructed the trial court to "permit the
parties to argue why the matter should, or should not, proceed summarily, and
allow the Association to file an answer, affirmative defenses, and counterclaim,
and engage in any discovery that may be necessary to adjudicate the matter on
the merits." Id. at 6.
The Association then filed an answer and counterclaim on September 3,
2018. In its pleading, the Association sought a declaration that its bylaws did
not require payment of plaintiffs' attorney's fees. The Association's
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counterclaim asserted claims against plaintiffs for computer fraud, trespass,
conversion, and breach of duty.
Plaintiffs filed a motion to proceed summarily on their request for
attorney's fees pursuant to the indemnification provision. The Association
cross-moved to disqualify plaintiffs' counsel. In a November 9, 2018 order, the
judge held she would conduct a plenary hearing for the Association to adduce
proofs in support of disqualifying plaintiffs' counsel.
Prior to the plenary hearing, plaintiffs' counsel subpoenaed records from
the Association's prior counsel. The Association moved to quash the subpoena.
In a March 5, 2019 order, the judge stated she would review the subpoenaed
records in camera. The Association produced records for the court's review.
Prior to the judge's decision, the Association withdrew its motion to disqualify
plaintiffs' counsel.
On October 16, 2019, plaintiffs' attorney asked the judge to decide the
previously filed motion to proceed summarily on the indemnification issue.
On October 25, 2019, the Association filed a motion to compel discovery
and a motion for partial summary judgment. In its partial summary judgment
motion, the Association asserted the indemnification provision did not compel
payment of plaintiffs' legal fees incurred in the Chancery Division action.
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The judge concluded no further discovery was necessary. Because the
Association moved for partial summary judgment, the judge held the
Association could not claim any materially disputed facts nor request additional
discovery. The judge rejected the Association's argument that plaintiffs were
not entitled to recoup attorney's fees under the indemnification provision and
suggested plaintiffs move for summary judgment on the issue.
On February 19, 2020, plaintiffs filed a motion for summary judgment
seeking indemnification for legal fees incurred in the Chancery Division action.
In granting plaintiffs' motion, the judge concluded the Association's bylaws
compelled indemnification absent a finding of gross negligence or willful
misconduct. The judge determined the language in the bylaws "was
intentionally drafted to afford broad indemnity. The indemnity provision clearly
indemnified a board member who acted with simple negligence." The judge
further explained there was never a finding of liability in the Chancery Division
action because the Association voluntarily dismissed that case. The judge also
found plaintiffs' filing of the Law Division action for indemnification "was
procedurally necessitated by the [Association's] intentional withdrawal of its
claims" in the Chancery Division action before plaintiffs could request
indemnification.
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Plaintiffs subsequently submitted an affidavit of services in support of
their legal fees. The judge granted $31,108.39 in fees associated with the initial
action and included an additional $34,330.99 for fees incurred by plaintiffs on
the remand. However, the judge excluded fees incurred by plaintiffs on the
original appeal.
On appeal, the Association argues the motion judge erred in determining
plaintiffs were entitled to attorney's fees under the bylaws' indemnification
clause. The Association further claims it required additional discovery before
the judge could render any determination on the issue. The Association also
contends the fees awarded were unreasonable and the judge never addressed the
reasonableness of the requested fees. In their cross-appeal, plaintiffs argue the
judge incorrectly excluded their attorney's fees incurred on the appeal.
We review a grant of summary judgment using the same standard that
governs the motion judge's decision. RSI Bank v. Providence Mut. Fire Ins.
Co., 234 N.J. 459, 472 (2018) (citing Bhagat v. Bhagat, 217 N.J. 22, 38 (2014)).
In applying that standard, we consider "whether, after reviewing 'the competent
evidential materials submitted by the parties,' in the light most favorable to [the
non-moving party], 'there are genuine issues of material fact and, if not, whether
the moving party is entitled to summary judgment as a matter of law.'" Grande
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v. Saint Clare's Health Sys., 230 N.J. 1, 24 (2017) (quoting Bhagat, 217 N.J. at
38); accord R. 4:46-2(c). "An issue of material fact is 'genuine only if,
considering the burden of persuasion at trial, the evidence submitted by the
parties on the motion, together with all legitimate inferences therefrom favoring
the non-moving party, would require submission of the issue to the trier of fact.'"
Grande, 230 N.J. at 24 (quoting R. 4:46-2(c)). We owe no special deference to
the motion judge's legal analysis. RSI Bank, 234 N.J. at 472 (citing Templo
Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189,
199 (2016)).
We first consider the Association's claim that there were contested
material facts precluding summary judgment and further discovery was required
before final disposition of the matter. We agree.
The Association argues there were genuine issues of material fact
regarding the intent of the indemnification provision. When interpreting a
contract, the court's goal is to ascertain the "intention of the parties to the
contract as revealed by the language used, taken as an entirety; and, in the quest
for intention, the situation of the parties, the attendant circumstances, and the
objects they were thereby striving to attain . . . ." Driscoll Constr. Co., v. State,
Dept. of Transp., 371 N.J. Super. 304, 313 (App. Div. 2004) (citing Onderdonk
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v. Presbyterian Homes of N.J., 85 N.J. 171, 184 (1981)).
Well-settled contract law provides "[c]ourts enforce contracts 'based on
the intent of the parties, the express terms of the contract, the surrounding
circumstance and the underlying purpose of the contract.'" Manahawkin
Convalescent v. O'Neill, 217 N.J. 99, 118 (2014) (quoting Caruso v.
Ravenswood Devs., Inc., 337 N.J. Super. 499, 506 (App. Div. 2001)). "When
the terms of [a] . . . contract are clear, it is the function of a court to enforce it
as written and not to make a better contract for either of the parties." Cypress
Point Condo. Ass'n v. Adria Towers, L.L.C., 226 N.J. 403, 415 (2016) (alteration
in original) (quoting Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960)).
However, where the contractual provision is subject to more than one
reasonable interpretation, it is ambiguous, and the "court may look to extrinsic
evidence as an aid to interpretation." Templo Fuente De Vida Corp., 224 N.J.
at 200) (quoting Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J.
231, 238 (2008)). "Ambiguities are resolved by the fact finder, relying on such
evidence as 'the language used, the surrounding circumstances, and the
objectives sought to be achieved.'" Longport Ocean Plaza Condo., Inc. v. Robert
Cato & Assocs., Inc., 137 Fed. Appx. 464, 466 (3d Cir. 2005) (quoting Pepe v.
Twp. of Plainsboro, 337 N.J. Super. 209, 215 (App. Div. 2001)). If "such
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evidence fail[s] to resolve the ambiguity, however, an indemnity clause must be
strictly construed against the indemnitee." Ibid.Based on the indemnification provision, plaintiffs argue they are entitled
to recover legal fees incurred in "any action, suit or proceeding." They contend
the language of the provision is clear and unambiguous. On the other hand, the
Association claims the indemnification clause is inapplicable to first-party
claims, such as the claim asserted by the Association against plaintiffs.
According to the Association, the provision was intended to apply only to
potential third-party claims against board members, such as claims asserted by
condominium unit owners.
Generally, "an indemnification agreement must be based upon 'the
indemnitee's claim to obtain recovery from the indemnitor for liability incurred
to a third party.'" Invs. Sav. Bank v. Waldo Jersey City, LLC, 418 N.J. Super.
149, 159 (App. Div. 2011) (quoting Travelers Indem. Co. v. Dammann & Co.,
592 F. Supp. 2d 752, 766-67 (D.N.J. 2008), aff'd, 594 F.3d 238 (3d Cir. 2010)).
An indemnity provision is inapplicable "when presented as a shield against
claims asserted against the indemnitee by the indemnitor. It is only when the
indemnitee is found liable to a third party that the indemnification agreement
may be triggered." Ibid. "[U]nder a contract of indemnity, 'the promissor
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undertakes to protect the promissee against loss or liability to a third person . . .
.'" Feigenbaum v. Guaracini, 402 N.J. Super. 7, 18 (App. Div. 2008) (quoting
Fengya v. Fengya, 156 N.J. Super. 340, 345 (App. Div. 1978)).
"An intention to indemnify against [a] certain loss or liability must be
expressed in such clear and unequivocal terms that no other meaning can be
ascribed to the language." 42 C.J.S. Indemnity § 6. Courts in other jurisdictions
"have generally declined to infer indemnification obligations arising from an
indemnitee/indemnitor suit if the contractual language does not expressly refer
to or explicitly contemplate such circumstances and the context does not suggest
that the contracting parties were specifically concerned with prospective
litigation between themselves." Luna v. Am. Airlines, 769 F. Supp. 2d 231, 244
(S.D.N.Y. 2011).
Here, the judge never addressed whether the indemnification provision
covered the Association's first-party claim against plaintiffs. The judge found
the indemnification provision enforceable without addressing the case law
limiting indemnity contracts to a promise to protect the promisee against loss or
liability to a third person. Feigenbaum, 402 N.J. Super. at 18.
Even in cases where a party may be entitled to indemnification, fees
incurred in enforcing an indemnification contract may not be recoverable absent
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express language allowing such fees. See Simko v. C & C Marine Maint. Co.,
594 F.2d 960, 969 (3d Cir. 1979) (remanding for the court to consider separately
fees incurred in defense of an action and fees incurred in enforcing the right to
indemnification). The courts of several states hold that absent a specific
contractual provision allowing for the recovery of attorney's fees in establishing
the right to an indemnity, such fees cannot be recovered. See Nova Rsch., Inc.
v. Penske Truck Leasing Co., 405 Md. 435, 447 (2008); Klock v. Grosodonia,
674 N.Y.S.2d 187, 188 (4th Dep't 1998); Tack's Steel Corp. v. ARC Const. Co.,
821 N.E.2d 883, 889 (Ind. Ct. App. 2005); Pennant Serv. Co., Inc. v. True Oil
Co., LLC, 249 P.3d 698, 710-11 (Wyo. 2011); Oldenburg Grp. Inc. v. Frontier-
Kemper Constructors, Inc., 597 F. Supp. 2d 842, 845 (E.D. Wis. 2009) (applying
Michigan law). See also 42 C.J.S. Indemnity § 24 (stating that unless
"specifically provided for by contract," the availability of attorney's fees "is
limited to defense of the claim indemnified against, and no recovery can be had
for attorney's services and expenses incurred in establishing the right to
indemnity.").
Viewing the record in the light most favorable to the Association, we are
satisfied there is a genuine issue of material fact as to whether the language in
the indemnification clause contemplated recovery of attorney's fees in a first-
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party claim between the Association and plaintiffs. The scope of the
indemnification provision is a fact-sensitive question, and its interpretation turns
on the intention of the parties. Here, the parties dispute the intent of the
indemnification provision and whether the clause covers a first-party action
between the Association and plaintiffs or is limited to a third-party action against
plaintiffs. Under these circumstances, the judge improvidently granted
summary judgment in favor of plaintiffs.
We next consider the Association's claim the motion judge erred in
granting summary judgment without discovery. Generally, where discovery is
incomplete, summary judgment is inappropriate, at least where it is clear that
one of the parties seeks discovery. See Crippen v. Cent. Jersey Concrete Pipe
Co., 176 N.J. 397, 409 (2003). We review discovery matters for abuse of
discretion. Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc., 230 N.J.
73, 79 (2017).
In directing a remand in the prior appeal, we stated the trial court should
allow the parties to "engage in any discovery that may be necessary to adjudicate
the matter on the merits." During oral argument on the motion, the Association's
counsel stated the parties conducted only "limited discovery" because they were
awaiting a decision from the motion judge on previously filed motions. Based
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on the absence of discovery contemplated by the Association, the judge
prematurely granted summary judgment in favor of plaintiffs.
Moreover, the Association was entitled to discovery on its counterclaim
against plaintiffs. However, because the case was marked as disposed on the
court's automated case management system after the judge granted summary
judgment on plaintiffs' claims, any discovery requests related to the
Association's counterclaim were rendered moot. Having reviewed the record
and the language in our prior opinion, the judge should have allowed more
fulsome discovery before deciding plaintiffs' summary judgment motion. We
are satisfied the judge abused her discretion in awarding summary judgment
based on the limited exchange of discovery.
We take no position on the remanded issues and the assigned judge should
consider the matters anew. Additionally, the judge should allow discovery as
directed in our remand instruction on the prior appeal. Similarly, the judge
should address whether the Association intends to pursue its counterclaim as
that claim was never addressed by the motion judge after the case was marked
"disposed" without an adjudication of the counterclaim or the Association's
voluntary dismissal of that claim.
Based on our remand, we decline to address the issue of attorney's fees.
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The issue must await the trial court's determination regarding plaintiffs'
entitlement to recover attorney's fees under the indemnification provision. In
the event there is a request for attorney's fees in the future, the judge should
address the reasonableness of the requested fees as contractual damages under
the bylaws' indemnification provision consistent with governing case law1 and
Rule of Professional Conduct 1.5(a). In addition, the judge should explain, with
the requisite specificity, his or her calculation of any awarded counsel fees.
Reversed and remanded for further proceedings consistent with this
opinion. We do not retain jurisdiction.
1
In determining reasonableness of a fee request, a judge should consider "the
hourly rate of 'the prevailing attorney in comparison to rates for similar services
by lawyers of reasonably comparable skill, experience, and reputation' in the
community.'" Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 387 (2009)
(quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21 (2004)). While there is
no precise formula for the reasonableness analysis, "[t]he ultimate goal is to
approve a reasonable attorney's fee that is not excessive." Id. at 388.
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