Horng Technical Enterprise Co. v. Sakar International, Inc.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 10-3648
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HORNG TECHNICAL ENTERPRISE CO., LTD.
v.
SAKAR INTERNATIONAL, INC.;
DOES 1 through 100, inclusive
Sakar International, Inc.,
Appellant.
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 06-cv-00816)
District Judge: Honorable Stanley R. Chesler
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Submitted Under Third Circuit LAR 34.1(a)
June 22, 2011
Before: CHAGARES, JORDAN and GREENAWAY, JR., Circuit Judges.
(Filed: June 23, 2011)
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OPINION OF THE COURT
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JORDAN, Circuit Judge.
Sakar International, Inc. (“Sakar”), appeals an order of the United States District
Court for the District of New Jersey enforcing the settlement agreement between Sakar
and Horng Technical Enterprise Co., LTD. (“Horng”) on June 4, 2010 (the “Settlement
Agreement”). Sakar argues that the District Court erred in concluding that the Settlement
Agreement was enforceable even though a contractually-required signatory failed to sign
within the prescribed 30-day period. For the following reasons, we will affirm.
I. Background
Sakar, a New York corporation with its principal place of business in New Jersey,
is an importer and wholesaler of computer accessories. Horng, a Taiwanese corporation
with its principal place of business in Taiwan, was a manufacturer of computer
accessories.
In 2004, Horng delivered over $900,000 worth of computer accessories to Sakar in
California and Michigan. In 2005, Horng sued Sakar in California state court over
Sakar‟s alleged failure to pay for those accessories. The suit was subsequently removed
to federal court and transferred to the District of New Jersey. Sometime thereafter,
Horng was officially dissolved as a result of its failure to timely elect a Board of
Directors. A Taiwanese liquidator, Mr. Chang Wen-Fong (the “Liquidator”), who was
authorized to pursue litigation and other claims on behalf of Horng, continued the
litigation. On June 2, 2010, the parties proceeded to trial, and on June 4, 2010, the third
day of trial, the case settled and was dismissed with prejudice.
2
The handwritten Settlement Agreement, which was read into the record prior to
the order of dismissal, provided that Sakar would pay $250,000 to the trust account of
Horng‟s counsel in exchange for dismissal of the case and a release of liability. The
Settlement Agreement also provided that the Liquidator must, within 30 days of June 4,
2010, sign the Settlement Agreement and mutual release and that the United States
District Court for the District of New Jersey would retain jurisdiction to enforce the
Settlement Agreement.1
Thereafter, the parties struggled to agree on a more formal memorialization of the
Settlement Agreement and the procedures related to its signing. On June 29, 2010, after
multiple exchanges, Horng sent to Sakar a revised memorialization of the Settlement
Agreement reflecting the multiple demands made by Sakar. Horng indicated that the
Liquidator would sign the settlement documents and requested that Sakar also sign. On
June 30, 2010, Sakar responded with two additional demands and indicated that it would
seek redress from the Court if Horng refused to accede to those demands. On July 8,
2010, Horng forwarded a further revised memorialization of the Settlement Agreement to
Sakar reflecting Sakar‟s latest demands and again requested that Sakar sign the
documents.
The next day, July 9, 2010, Sakar responded that the Liquidator had failed to sign
within the 30-day period and so had failed to comply with the Settlement Agreement. In
1
Because of the Fourth of July holiday, the parties appear to have considered
July 6, 2010, as the end of that 30-day period.
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response, Horng filed a Motion to Enforce the Settlement Agreement. On August 11,
2010, while litigation continued, the Liquidator signed the settlement documents.
After receiving the parties‟ positions in writing, the District Court held a
teleconference with them. Sakar argued that the 30-day provision was a “time is of the
essence” clause and that, by not having the Liquidator‟s signature by July 6, 2010, Horng
had breached the Settlement Agreement and excused Sakar from performing. The
District Court disagreed, concluding that the 30-day provision was not a “time is of the
essence” clause and that some of the delay was attributable to Sakar imposing multiple
conditions “which were neither explicitly or implicitly included in the agreement which
was reached before the Court.” (App. at 12.) Accordingly, the Court ordered Sakar to
honor the Settlement Agreement and pay the $250,000 within 15 days.
Sakar timely appealed.
II. Discussion2
Federal courts exercising diversity jurisdiction generally apply the substantive law
of the state in which they sit. Yohannon v. Keene Corp., 924 F.2d 1255, 1265 (3d Cir.
1991). Under New Jersey law, the “„validity of a contract is to be determined by the law
2
The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have
jurisdiction pursuant to 28 U.S.C. § 1291. Contract interpretation, i.e., determining the
meaning of contract terms, entails resolving questions of fact, and we review those
factual findings for clear error. John F. Harkins Co., Inc. v. Waldinger Corp., 796 F.2d
657, 659 (3d Cir. 1986). In contrast, contract construction, i.e., determining the legal
operation of a contract, entails resolving questions of law, and our review of those
questions is plenary. Id.4
of the place of contract,‟” Cal. Natural, Inc. v. Nestle Holdings, Inc., 631 F. Supp. 465,
470 n.3 (D.N.J. 1986) (quoting Colozzi v. Bevko, 110 A.2d 545 (N.J. 1955)), which, in
this instance, is New Jersey. New Jersey law provides that, “if parties agree on essential
terms and manifest an intention to be bound by those terms, they have created an
enforceable contract.” Weichert Co. Realtors v. Ryan, 608 A.2d 280, 284 (N.J. 1992).
That is so even if the initial writing is considered informal and is expected to be followed
by “the execution of a more formal document.” Berg Agency v. Sleepworld-Willingboro,
Inc., 346 A.2d 419, 422 (N.J. Super. Ct. App. Div. 1975).
Here, the Settlement Agreement calls for payment of a definite sum in exchange
for a release from liability. Those terms are the essence of the settlement, and each party
manifested an intent to be bound by those terms by signing the Settlement Agreement.
The Settlement Agreement, then, was an enforceable contract, notwithstanding the
parties‟ desire to execute a more formal document after the fact.
Furthermore, the District Court did not err in determining that the Settlement
Agreement required Sakar‟s performance, notwithstanding the Liquidator‟s having failed
to sign within 30 days. The Court‟s factual findings support two alternative bases for
affirmance. First, given the duration of the litigation and lack of explicit “time is of the
essence” language in the Settlement Agreement, it was not error to find that time was not
of the essence with respect to the Liquidator‟s signature. The Liquidator‟s failure to sign
within the specified period was thus not a material breach that would excuse Sakar from
performing. See 14 WILLISTON ON CONTRACTS § 43:7 (4th ed. 2011) (observing that,
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“where there is no indication in the contract or finding that time is of the essence, a
failure to perform the contract on the exact date specified is not deemed such a breach as
will justify nonperformance by the other party”); cf. Linan-Faye Constr. Co., Inc. v.
Hous. Auth. of City of Camden, 995 F. Supp. 520, 523 (D.N.J. 1998) (noting that
conditioning performance on timely payment does not make time of the essence such that
a delinquent payment will constitute a material breach excusing the other party‟s
nonperformance).
Second, given Sakar‟s several additional demands during the 30-day period, it was
not error to find that Sakar had, at least in part, contributed to the untimeliness of the
Liquidator‟s signature. Considering the Liquidator‟s signature as a condition precedent
to Sakar‟s performance, Sakar would not be excused from performing, since it
contributed to the failure of the condition. See 15 WILLISTON ON CONTRACTS § 46:14
(4th ed. 2011) (observing that a condition precedent to a party‟s performance is waived
where that party “contributes to the delay [of the other party‟s timely performance]”); cf.
Allstate Redevelopment Corp. v. Summit Assocs., Inc., 502 A.2d 1137, 1141 (N.J. Super.
Ct. App. Div. 1985) (noting that, where a party “has acted in bad faith, that party will not
escape liability on a contract even though the other party has failed to satisfy a condition
precedent”).
III. Conclusion
For the foregoing reasons, we will affirm.
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