BUSSEL REALTY CORP. VS. JOSEPH FRANCO (L-1669-18, MIDDLESEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-4274-19
BUSSEL REALTY CORP.,
Plaintiff-Respondent,
v.
JOSEPH FRANCO, JAY FRANCO
AND SONS, JMJ MUNCHKINS,
LLC, and FIVE STARS
WAREHOUSING &
DISTRIBUTION NJ, LLC,
Defendants,
and
152 RIDGE ROAD PROPERTY,
LLC,
Defendant-Appellant,
and
JOSEPH N. FRANCO,
JAY FRANCO & SONS, INC.,
and JMJ MUNCKINS, LLC,
Defendants/
Third-Party Plaintiffs,
v.
152 RIDGE ROAD PROPERTY,
LLC, FIVE STARS
WAREHOUSING &
DISTRIBUTION NJ, LLC, 1735
JERSEY AVENUE PROPERTY,
LLC, and JOSEPH SAADIA,
Cross Claim Defendants/
Third-Party Defendants.
______________________________
Submitted April 21, 2021 – Decided June 8, 2021
Before Judges Sumners and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Middlesex County, Docket No. L-1669-18.
Fox Rothschild, LLP, attorney for appellant (Brett A.
Berman, of counsel and on the briefs; Jordan B. Kaplan,
on the briefs).1
W. Lane Miller, attorney for respondent.
PER CURIAM
1
Fox Rothschild erroneously listed the appellant as Five Stars Warehousing &
Distribution NJ LLC, on its brief. The appellant, as designated in the notice of
appeal, is 152 Ridge Road Property LLC. In a subsequent letter to the court on
November 6, 2020, Fox Rothschild indicated that its other clients, Five Stars
Warehousing & Distribution NJ LLC, 1735 Jersey Avenue Property LLC , and
Joseph Saadia would not participate in the appeal.
A-4274-19
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On March 9, 2020, the date this matter was scheduled for trial, the parties
placed a settlement agreement on the record in which defendant 152 Ridge Road
Property, LLC, promised to pay plaintiff Bussel Realty Corp. $900,000 over
various dates in exchange for dismissal of Bussel Realty's complaint seeking a
real estate commission. After the parties' efforts to finalize a written settlement
agreement reached an impasse and 152 Ridge Road failed to make its first
instalment payment, the trial judge entered an April 24 order––that was not
appealed––granting Bussel Realty's motion to enforce the settlement agreement.
A successive June 15 order, by a different trial judge, confirmed the April
24 order and entered judgment in favor of Bussell Realty against 152 Ridge
Road in the amount of $560,000 for breach of the settlement agreement.
(Da122-123). In reaching his decision, the judge dismissed 152 Ridge Road's
arguments that: (1) a settlement agreement was not reached because the parties
failed to agree upon essential terms on March 9; and (2) that, alternatively,
enforcement of the settlement was precluded under the doctrines of
impossibility, impracticability, and frustration of performance due to the alleged
cessation of their business income caused by the COVID-19 pandemic. Having
considered the record, the parties' arguments, and applicable law, we agree with
the judge and affirm.
A-4274-19
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I
In March 2018, Bussel Realty, a real estate brokerage firm, filed a
complaint against the sellers Joseph Franco (Franco), Jay Franco and Sons
(JFS), and JMJ Munchkins LLC (JMJ) (collectively, the Franco defendants) and
the buyers Five Stars Warehousing & Distribution NJ LLC (Five Stars) and 152
Ridge Road, seeking $1.1 million in commission from the sale of a warehouse
located at 152 Ridge Road in South Brunswick (the property). An amended
complaint, cross claims, a third-party complaint, and motion practice followed.
We do not discuss the factual details and procedural history of the dispute prior
to the settlement that was placed on the record as they are unnecessary to resolve
this appeal, which centers on the settlement and subsequent enforcement efforts.
Trial was scheduled on March 9, 2020, when the parties appeared in court
and reached a settlement resolving all claims. Due to the "critical" nature of the
settlement terms, the judge had counsel "put the settlement terms on the record,
so that there is no misunderstanding as to how much this case is being settled
for, as well as the terms and conditions of the settlement, and the recourse in the
event there is any default." The following settlement terms were placed on the
record:
1. Bussel Realty was to be paid the sum of $900,000.
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2. The Franco defendants were to pay Bussel Realty
the "sum of $100,000 for which they [were] jointly and
severally responsible for payment . . . to be made within
ten days of the execution of the settlement documents
but in no event later than April 1, 2020."
3. 152 Ridge Road was to "pay the sum of $100,000 to
[Bussel Realty] within ten days of the execution of
settlement documents but in no event no later than April
1[], 2020."
4. The $440,000 escrow being held from the real estate
closing by Montgomery McCracken Walker & Rhoads
LLP (Montgomery McCracken) is to be released to
Bussel Realty upon execution of an agreement by all
parties to the escrow agreement.
5. "The balance of $260,000 [was] to be paid by 152
Ridge Road . . . over a period of [twenty-four] months
in [twenty-four] equal installments, the first installment
to be due May 1[], 2020."
6. "In the event of a default by the Franco defendants
of their payment obligation, [Bussel Realty] will be
able to move before [the] [c]ourt ex parte for an entry
of judgment in the amount due after ten days' notice to
Franco defendants."
7. In the event of a default by 152 Ridge Road, that was
"not cured within ten days . . . [Bussel Realty] can move
for judgment against 152 Ridge Road . . . for the sum
of $1,100,000, less credit for any payments [it makes]
or from the release of the escrow to [Bussel Realty]."
(3T6:22 to 7:5).
8. Defendants did not waive any claims against
Montgomery McCracken for legal malpractice but
agreed not to bring claims against the individual
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attorneys personally.
9. The written settlement agreement was to include
"standard settlement terms regarding confidentiality
and non-disclosure" as well as "non-disparagement by
any party of another."
The parties agreed that no further terms and conditions were reached and
that they would draft a written settlement agreement consistent with their intent
as set forth on the record. At the judge's direction, the parties signed the order
of dismissal based on their settlement.
A month later, Bussel Realty filed a motion to enforce the settlement
because the parties could not come to terms on a written settlement agreement.
A proposed settlement agreement, however, was later signed only by the Franco
defendants.
On April 24, the judge granted the motion and ordered that: (1) "the
settlement placed on the record . . . on March 9, 2020[,] is . . . enforced"; (2)
"each party shall comply with the terms of the settlement placed on the record
. . . , as supplemented by the [s]ettlement [a]greement (unsigned)" submitted by
Bussel Realty's counsel, "provided . . . that the monetary terms and the dates for
payments to [Bussel Realty] remain[ed] as set forth on the record . . . "; and (3)
defendants shall "be deemed to have authorized" the release of the escrow funds
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held by Montgomery McCracken to Bussel Realty. The judge's written
statement of reasons, provided:
After reviewing the papers submitted and the
accompanying exhibits, the [c]ourt first finds that this
matter has been settled as of March 9, 2020. The
[c]ourt finds that all parties freely entered into and
manifested their intention to be bound by the basic and
essential terms of the settlement on March 9, 2020,
which the [c]ourt finds are sufficiently definite as
opposed to vague and ambiguous. As such, the [c]ourt
finds that there was a "meeting of the minds" by all
parties on March 9, 2020.
Moreover, the [c]ourt finds that there is nothing
submitted in the opposition papers to suggest that the
documents as drafted are inconsistent with the intent of
the parties and the terms agreed upon on March 9, 2020.
Notwithstanding the fact that certain confidentiality
terms of the agreement were not decided on March 9,
2020, "[s]o long as the basic essentials are sufficiently
definite, any gap left by the parties should not frustrate
their intention to be bound." Hagrish v. [Olson], 254
N.J. Super [133,] 138 (App. Div. 1992) (citation
omitted).
To that end, the [c]ourt notes that the Franco
[d]efendants have signed and executed the drafted
settlement documents as of March 20, 2020, which
corroborates the fact that the drafted documents are
consistent with what was agreed upon by the parties in
[c]ourt on March 9, 2020.
152 Ridge Road did not appeal the April 24 order.
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In May 2020, Bussel Realty moved before a different judge to enforce the
settlement agreement because 152 Ridge Road failed to make its April 1 and
May 1 payments. Bussel Realty sought judgment in the amount of $560,000
($1,100,000 minus $440,000 (escrow payment) and $100,000 (paid by the
Franco defendants)). 152 Ridge Road, a limited liability company that solely
derives income from rents from this property, opposed relying on a certification
by its controller stating: "[s]hortly after the parties entered into the [a]greement,
the COVID-19 global pandemic struck[,] . . . [which] has so adversely affected
[its] business, that performance under the [a]greement has since been rendered
impractical and impossible." 152 Ridge Road's controller claimed that "by
virtue of Governor Murphy's 'stay-at-home' Executive Orders, all tenants ceased
their use of the [p]roperty[,]" and as a result, "stopped paying rent to 152 Ridge
Road." 152 Ridge Road did not provide any information as to the nature of the
tenants' businesses but stated that prior to the pandemic it had monthly net
revenue of $59552 from the property after payment of its mortgage. Nor does
the record indicate from where 152 Ridge Road would receive additional income
to satisfy its settlement payment obligations of $100,000 on April 1, followed
2
As of March 9, 2020, 152 Ridge road received monthly rental revenues of
$116,185 and had a monthly mortgage payment of $110,230: thus, net income
of $5955.
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by twenty-three equal monthly installments of $10,833.34 and a final payment
$10,833.18, for a total of $260,000.
On June 15, the second judge issued an order together with an oral
decision granting the motion to enforce the settlement agreement and entering
judgment against 152 Ridge Road in the amount of $560,000. The judge
confirmed the April 24 order determining that a settlement was reached by all
parties and rejected 152 Ridge Road's argument that the hardships imposed upon
them by the COVID-19 barred enforcement of the settlement agreement. He
reasoned the doctrines of impossibility and frustration of purpose were not
applicable because
there [was] no legal or physical barrier for [152 Ridge
Road] to pay [Bussel Realty] the agreed-upon amount.
The difficulty [152 Ridge Road] has is its lack of
revenue during the current state of affairs. However,
there is no barrier to [152 Ridge Road] ascertaining
funds from any other means in fulfilling its contractual
obligations. Even though obtaining the funds needed to
fulfill the agreement would undoubtedly be a hardship
on [152 Ridge Road], the hardship does not render the
performance of . . . [152] Ridge Road impossible.
Similarly, the [d]octrine of [f]rustration of [p]urpose
does not apply to the current situation as the purpose of
the agreement is to settle litigation. The COVID-19
pandemic, including all related orders of the New
Jersey Governor and judiciary, do not preclude the
parties from settling up any litigation.
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Therefore, the purpose of the agreement to settle a
dispute has not . . . been frustrated or expunged. The
only frustration in the current situation is . . . [152]
Ridge Road's lack of revenue from (indiscernible).
However, that does not frustrate the entire agreement
when it is only defendant's ability to perform that is at
issue.
So, therefore, the settlement agreement was already
enforced by [the initial judge], and judgment will be
entered.
II
Before us, 152 Ridge Road argues that the second judge erred in enforcing
the settlement agreement because the parties did not reach a meeting of the
minds as to its essential elements. (Db11-Db13). The argument essentially
challenges the April 24 order, but only the June 15 order was identified as being
appealed in the notice of appeal. An order being appealed must be designated
as such in the notice of appeal, R. 2:5-1(e)(3)(i); otherwise, it is not subject to
the appeal process, Campagna ex rel. Greco v. Am. Cyanamid Co., 337 N.J.
Super. 530, 550 (App. Div. 2001). Having said that, for the sake of
completeness and the fact that the June 15 order references the April 24 order,
we will consider the argument. See Innes v. Marzano-Lesnevich, 435 N.J.
Super. 198, 211 n.6 (App. Div. 2014) (holding the court, "in the interests of
justice," considered all issues raised regarding the dismissal of the third-party
complaint, although it was not listed on the notice of appeal).
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Our state has a strong public policy in favor of settlements. Brundage v.
Estate of Carambio, 195 N.J. 575, 601 (2008). Essentially, a settlement
agreement is a contract. Nolan by Nolan v. Lee Ho, 120 N.J. 465, 472 (1990)
(citing Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div. 1983)). "As a
general rule, courts should enforce contracts as the parties intended." Pacifico
v. Pacifico, 190 N.J. 258, 266 (2007) (citations omitted). "[P]arties may orally,
by informal memorandum, or by both agree upon all the essential terms of a
contract and effectively bind themselves thereon, if that is their intention, even
though they contemplate the execution later of a formal document to
memorialize their undertaking." Comerata v. Chaumont, Inc., 52 N.J. Super.
299, 305 (App. Div. 1958). It is well settled that "[a] contract arises from offer
and acceptance, and must be sufficiently definite 'that the performance to be
rendered by each party can be ascertained with reasonable certainty.'" Weichert
Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992) (quoting Borough of W.
Caldwell v. Borough of Caldwell, 26 N.J. 9, 24-25 (1958)). If the parties agree
on the essential terms and agree to be bound by those terms, they have created
an enforceable contract. Ibid. Yet, "a demonstration of 'fraud or other
compelling circumstances,'" can invalidate a settlement agreement. Pascarella,
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190 N.J. Super. at 125 (quoting Honeywell v. Bubb, 130 N.J. Super. 130, 136
(App. Div. 1974)).
We find no fault with the April 24 and June 15 orders providing that the
parties reached an enforceable settlement agreement placed on the record on
March 9. See Griepenburg v. Twp. of Ocean, 220 N.J. 239, 254 (2015) (citing
Rova Farms Resort, Inc. v. Invs. Ins. Co. of Am., 65 N.J. 474, 483-84 (1974)
(recognizing appellate review "give[s] deference to the trial [judge] that heard
the witnesses, sifted the competing evidence, and made reasoned conclusions")).
The March 9 record, as the judge determined on April 24, clearly reflects that
there was a "meeting of the minds" and no genuine dispute that 152 Ridge Road
reached a settlement agreement with Bussel Realty, notwithstanding the parties'
subsequent inability to confirm their agreement in a written document. They
agreed on the essential terms: the amount of money that 152 Ridge Road would
pay Bussel Realty, the dates the payments were due, and Bussel Realty's remedy
in the event of 152 Ridge Road's default. Indeed, 152 Ridge Road has never
disputed the amounts due and the payment dates under the agreement set forth
in court on March 9.
Moreover, finalization of a written settlement agreement largely involved
stalled negotiations about a confidentiality clause; that is, what could be
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disclosed in a motion to enforce the settlement terms in the event of a breach.
Bussel Realty largely agreed with the changes proposed by 152 Ridge Road.
This did not involve the payments to be made and was not an essential term of
the agreement. A settlement agreement was therefore reached.
III
Lastly, 152 Ridge Road argues the judge erred in enforcing the settlement
agreement because business interruption caused by the COVID-19 pandemic
made its performance impossible, or at the very least, impractical, entitling it to
relief under the doctrines of impossibility, impracticability, and frustration of
purpose. We disagree.
Supervening events that make performance of a contract impractical may
excuse performance. See M.J. Paquet, Inc. v. N.J. Dep't of Transp., 171 N.J.
378, 389-90 (2002). "A successful defense of impossibility (or impracticability)
of performance excuses . . . [performance of] contract obligations, where
performance has become literally impossible, or at least inordinately more
difficult, because of the occurrence of a supervening event that was not within
the original contemplation of the contracting parties." JB Pool Mgmt., LLC v.
Four Seasons at Smithville Homeowners Ass'n, Inc., 431 N.J. Super. 233, 246
(App. Div. 2013). "The supervening event must be one that had not been
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anticipated at the time the contract was created, and one that fundamentally
alters the nature of the parties' ongoing relationship." Id. at 245. Both doctrines
are concerned with "[a]n extraordinary circumstance [that] may make
performance [of a contract] so vitally different from what was reasonably to be
expected as to alter the essential nature of that performance." Ibid. (alterations
in original) (quoting Restatement (Second) of Contracts, ch. 11, intro. note at
309 (Am. Law Inst. 1981)). For example, where a seller agrees to deliver goods
to a buyer by a specific date, at a designated port, but the port is subsequently
closed by quarantine regulations, the seller's duty to deliver the goods is
discharged. Restatement (Second) of Contracts, § 261 cmt. b, illus. 1. That
said, the doctrine of impossibility or impracticability is not applicable where the
difficulty is based on market shifts or the financial inability to perform.
Restatement (Second) of Contracts, § 261 cmt. b.
"[U]nder the related doctrine of frustration of purpose, . . . the supervening
event fundamentally has changed the nature of the parties' overall bargain." JB
Pool Mgmt., 431 N.J. Super. at 246. Frustration of purpose "arises when a
change in circumstances makes one party's performance worthless to the other,
frustrating his purpose in making the contract." Id. at 246-47 (quoting
Restatement (Second) of Contracts, § 265 cmt. a). "The frustration must be so
A-4274-19
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severe that it is not fairly to be regarded as the risks that [the party invoking the
doctrine] assumed under the contract." Ibid. (alteration in original) (quoting
Restatement (Second) of Contracts, § 265 cmt. a).
Applying these principles, 152 Ridge Road's claim of impossibility,
impracticability, and frustration of purpose to avoid enforcement of the
settlement agreement is without merit. As a result of the COVID-19 pandemic,
Governor Murphy declared a public health emergency and state of emergency
on March 9, 2020—coincidently, the date the parties placed their settlement
agreement on the record. Exec. Order No. 103 (Mar. 9, 2020), 52 N.J.R. 549(a)
(Apr. 6, 2020). On March 21, Executive Order 107 was signed, requiring all
New Jersey residents to remain at home or at their place of residence unless they
fell within one of the nine enumerated exceptions ("reporting to, or performing ,
their job," is exception number five). Exec. Order No. 107 (Mar. 21, 2020), 52
N.J.R. 554(a) (Apr. 6, 2020). The Governor also ordered "all non-essential retail
businesses" to close because of the pandemic emergency. Ibid. Warehouse
workers, who were required to be on site to perform their physical duties, were
permitted to come in so that warehouses could continue their operations. Ibid.
Further, on April 8, (eleven days after 152 Ridge Road's first payment was
due), Governor Murphy signed Executive Order 122, providing that "the State's
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manufacturing and warehousing businesses, where essential goods are made
and/or stored before delivery to the retail business or consumer, continue to
provide a vital service to the public by fueling our supply chain and continue to
contribute to New Jersey's response to the present pandemic . . . ." Exec. Order
No. 122 (Apr. 8, 2020), 52 N.J.R. 959(a) (May 4, 2020). Essential businesses,
such as warehouses, were permitted to continue to maintain in-person operations
pursuant to Executive Order 107, provided that they implemented designated
safety policies. Ibid.
Given that New Jersey warehouses were permitted to remain open during
the pandemic, 152 Ridge Road's contention that the doctrines of impossibility,
impracticability, and frustration of purpose bar enforcement of the settlement
agreement is unpersuasive because it provided no information as to the identity
of its tenants, how many tenants rented the building, what type of business es
they operated, or when they stopped paying rent. Further, 152 Ridge Road was
not barred from evicting its commercial tenants, as Executive Order 106, signed
on March 19, 2020 (before the first settlement payment was due on April 1),
only suspended landlords from evicting residential tenants. 3 Exec. Order No.
3
On July 14, 2020 (four months after the settlement was placed on the record),
the Supreme Court issued an order authorizing the circumstances in which a
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106 (Mar. 19, 2020), 52 N.J.R. 553(a) (April 6, 2020). 152 Ridge Road's
controller's certification does not assert that the settlement was reached based
solely on the revenue stream from rents that were not made due to the pandemic.
In fact, even if all rents were paid, the net rent income of $5955 would not enable
152 Ridge Road to pay its settlement obligations of $100,000 on April 1,
followed by twenty-three equal monthly installments of $10,833.34 and a final
payment $10,833.18. Accordingly, any loss of revenue because of COVID-19
did not render settlement performance impossible or fundamentally change the
nature of the bargain.
To the extent we have not addressed any of 152 Ridge Road's arguments,
it is because we conclude they lack sufficient merit to warrant discussion in this
opinion. R. 2:11-3(e)(1)(E).
Affirmed.
commercial landlord could begin to take certain steps to resolve disputes with
their tenants. Judge Glenn A. Grant, Notice to the Bar, COVID-19 –
Landlord/Tenant – Amendment of Summons and Complaint Forms (Rules
Appendices); Orders to Show Cause, 226 N.J.L.J. 29 (July 20, 2020).
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