MEDFORD COMMONS, LLC VS. LEXON INSURANCE COMPANY (L-0222-08, BURLINGTON 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NOT FOR PUBLICATION WITHOUT THE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- 2040-17T4
MEDFORD COMMONS, LLC,
Plaintiff,
v.
LEXON INSURANCE COMPANY
and BOND SAFEGUARD INSURANCE
COMPANY, jointly and severally,
Defendants.
__________________________________
TOWNSHIP OF MEDFORD,
Intervenor-Plaintiff,
v.
LEXON INSURANCE COMPANY and
BOND SAFEGUARD INSURANCE
COMPANY, jointly and severally,
Defendants.
__________________________________
LEXON INSURANCE COMPANY and
BOND SAFEGUARD INSURANCE
COMPANY,
Third-Party Plaintiffs-Respondents,
v.
FREEDMAN COHEN DEVELOPMENT,
LLC, CARL FREEDMAN, Individually,
and MITCHELL COHEN, Individually,
Third-Party Defendants-
Respondents.
__________________________________
MEDFORD VILLAGE EAST
ASSOCIATES,
Third-Party Defendant/Fourth-Party
Plaintiff-Appellant,
v.
MEDFORD COMMONS, LLC,
TOWNSHIP OF MEDFORD,
FREEDMAN COHEN DEVELOPMENT,
LLC, CARL FREEDMAN, Individually,
MITCHELL COHEN, Individually,
PENNONI ASSOCIATES,
Fourth-Party Defendants-
Respondents.
__________________________________
Argued on October 10, 2019 – Decided December 26, 2019
Before Judges Koblitz, Whipple and Gooden Brown.
On appeal from the Superior Court of New Jersey, Law
Division, Burlington County, Docket No. L-0222-08.
A-2040-17T4
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Peter Jay Boyer argued the cause for appellant (Hyland
Levin Shapiro LLP, attorneys; Peter Jay Boyer, on the
brief).
Joseph T. Carney argued the cause for respondent
Lexon Insurance Company and Bond Safeguard
Insurance Company (Brown & Connery, LLP,
attorneys; William M. Tambussi and Joseph T. Carney,
on the brief).
Andrew Bruce Cohn argued the cause for respondent
Medford Commons, LLC (Kaplin Stewart Meloff
Reiter & Stein PC, attorneys; Andrew Bruce Cohn, on
the brief).
Stephen McNally argued the cause for respondent
Pennoni Associates, Inc. (Chiumento McNally LLC,
attorneys; Stephen McNally, on the brief).
Christopher J. Norman argued the cause for respondent
Medford Township (Christopher J. Norman, attorney;
Christopher J. Norman and George J. Botcheos, Jr., on
the brief).
Sherry S. Cohen argued the cause for respondents
Freedman Cohen Development, LLC, Carl Freedman,
and Mitchell Cohen (Kotlar, Hernandez & Cohen,
attorneys; Justin M. Cohen, on the brief).
PER CURIAM
Plaintiff Medford Commons, LLC sued Lexon Insurance Company and
Bond Safeguard Insurance Company (collectively Lexon), the issuer of a surety
bond, to recover money plaintiff spent completing an affordable housing project.
As the surety, Lexon paid out under the bond to allow plaintiff to complete
A-2040-17T4
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construction after the redevelopers, Medford Crossings North (MCN) and
Medford Crossings South (MCS), defaulted on the project. Lexon, in turn,
brought a third-party complaint against its indemnitors, Medford Village East
(MVE), Freedman Cohen Development, LLC (FCD), Carl Freedman and
Mitchell Cohen. MVE brought a fourth-party complaint against FCD, Medford
Commons, Pennoni Associates, Inc. (Pennoni) and the Township of Medford
(Township), as well as five principals of FCD: Mitchell Cohen, Carl Freedman,
Chris Conlon, Peter Ripka and Todd Cooper (collectively fourth-party
defendants).
MVE appeals from the grant of summary judgment requiring it to
indemnify Lexon. It also appeals the grant of summary judgment in favor of the
fourth-party defendants. MVE's central argument is that it was not obligated to
indemnify Lexon under the General Agreement of Indemnity (Indemnity
Agreement) because the scope of the project had changed without the Township
Planning Board's required approval and without MVE's consent. We reject this
proposition. The Township engineer had the authority to approve changes to
the affordable housing project without the need for Planning Board approval or
consent of the signatories. Nor did the court err in granting summary judgment
prior to taking depositions. It also did not err in determining that MVE received
A-2040-17T4
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sufficient consideration for entering the Indemnity Agreement even though the
value of MVE's property may not have risen as much as anticipated. The
consideration was the ability of the project to go forward. We therefore affirm
summary judgment requiring MVE to indemnify Lexon.
We reverse the grant of summary judgment to the fourth-party defendants,
because MVE's claims against the fourth-party defendants did not depend on the
outcome of Lexon's indemnity claims against MVE. MVE did not have an
opportunity for discovery on those claims. We also vacate the counsel fee
award to Lexon and remand for reconsideration and a more thorough statement
of reasons.
I. Factual Background.
MVE and its principal, Stephen Samost, owned approximately 280 acres
of land located on both sides of Route 70 in Medford. In 1995, MVE reached
an agreement with the Township concerning the property's redevelopment.
Disputes arose and in 1996, MVE instituted litigation that was eventually settled
in 2005, when MVE and the Township agreed that the site would be designated
as a commercial and residential redevelopment area. The Township would
condemn the property and then sell it to third-party developers to be developed
in phases.
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Christopher Noll, engineer for the Township Planning Board, certified
that the site plan approved by the Planning Board contained "[three] major
components: a large retail shopping center, a market-rate residential housing
development and a [sixty]-unit affordable rental housing development."
Plaintiff and the Township selected MCN and MCS1 as the redevelopers for the
project. In late April 2006, MVE, the Township, MCN and MCS entered into
agreements to implement the redevelopment plan.
Pursuant to the agreements, one of the two properties was to be closed by
August 2006; however the closing did not occur and MVE declared a default. A
resolution was reached in January 2007 that allowed for the affordable housing
component of the project to proceed while MVE, MCN and MCS attempted to
work out their remaining issues. As a result, Pennoni became the overall project
engineer.
Also in January 2007, Noll prepared an estimate for the developer's cost
of the affordable housing project of $1,932,258.2 The performance guarantee
estimate was "for the above referenced project," which was referred to as
"COAH Residential."
1
Freedman and Cohen, in their individual capacities, owned MCN and MCS.
2
We round all monetary amounts to the nearest dollar.
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The Performance Surety Bond (Bond) between MCS as principal, and
Lexon as surety, on behalf of plaintiff as one of the obligees, was signed the
following month. It stated:
Pursuant to municipal ordinance . . . the principal
hereby furnishes a . . . bond in the amount of
$1,932,258[] (not to exceed 120 percent of the cost of
the improvements, as certified by the municipal
engineer) . . . guarantying full and faithful completion
of improvements approved by the approving authority,
in lieu of completing the required improvements prior
to the granting of final approval. This [B]ond shall
remain in full force and effect until such time as all
improvements covered by the [B]ond have been
approved or accepted by resolution of the municipal
governing body, except that in those instances where
some of the improvements are approved or accepted by
resolution of the governing body upon certification by
the municipal engineer, partial release from the [B]ond
shall be granted in accordance with N.J.S.A. 40:55D-
53.
Among the stated conditions, the surety was permitted, "in its sole
discretion . . . [to] make a monetary settlement with the municipality as an
alternative to completing the work." In addition:
In the event that the principal and the approving
authority agree to changes in the scope of work, the
obligations of the surety under this [B]ond shall not be
affected so long as the cost of the work does not exceed
120 percent of the municipal engineer's certified
estimate . . . .
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The Bond further provided that "[t]he estimate dated January 15, 2007 and
revised February 5, 2007 by the municipal engineer of the cost of this work is
attached hereto and made a part hereof."
The Indemnity Agreement between MVE, MCN, MCS, FCD, Freedman,
Cohen and Lexon was signed in March 2007. It provided that "in consideration
of the premises, and the payment by [Lexon] of the sum of One ($1.00) Dollar
to each of the [i]ndemnitors . . . and for other good and valuable considerations,"
the indemnitors, MVE, MCN, MCS, FCD, Freedman and Cohen:
will indemnify and save [Lexon] harmless from and
against every claim, demand, liability, cost, charge,
suit, judgment and expense which [Lexon] may pay or
incur in consequence of having executed, or procured
the execution of, such bonds . . . or in bringing suit to
enforce the obligation of any of the [i]ndemnitors under
this [a]greement.
The agreement further provided:
5. [Lexon] shall have the exclusive right to determine
for itself and the [i]ndemnitors whether any claim or
suit brought against [Lexon] or the [p]rincipal upon any
such bond shall be settled or defended and its decision
shall be binding and conclusive upon the [i]ndemnitors.
6. If such bond be given in connection with a contract,
[Lexon] is hereby authorized, but not required, to
consent to any change in the contract or in the plans or
specifications relating thereto . . . .
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7. That it shall not be necessary for [Lexon] to give the
[i]ndemnitors, or any one or more of them, notice of
. . . any fact or information coming to the notice or
knowledge of [Lexon] affecting its rights or liabilities,
or the rights or liabilities of the [i]ndemnitors under any
such bond executed by it, notice of all such being
hereby expressly waived.
In addition, the Indemnity Agreement provided that the indemnitors' "liability
shall be construed as the liability of a compensated [s]urety, as broadly as the
liability of [Lexon] is construed toward [plaintiff]."
In March 2007, the Township, plaintiff and MVE also entered into the
Affordable Housing Development Agreement (AHDA), in which MCN and
MCS, as redevelopers, agreed to provide the bond to complete the affordable
housing portion of the project. The Township engineer's estimate was attached
to the agreement. The AHDA stated that commencement of the construction of
the affordable housing project was a "condition precedent to the issuance of
certain building permits."
On the same date, MVE and plaintiff signed the Access and Infrastructure
Easement agreement (Easement) for the construction of the infrastructure of the
affordable housing portion of the development. The agreement granted plaintiff
an easement to construct the infrastructure improvements. It also stated:
In the event that [g]rantor and [g]rantee cannot agree
as to which of the [i]nfrastructure [i]mprovements . . .
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are "necessary and appropriate" for the development
[or] construction . . . of the [p]roject, the [m]unicipal
[e]ngineer of the Township . . . shall make a
determination with respect [to] such dispute and such
determination shall be conclusive and binding upon the
parties hereto, subject to modification of the plans as
set forth herein.
Also in March 2007, MCS posted the security bond to secure performance
of the infrastructure improvements for the affordable housing component, and
the affordable housing parcel of land was transferred to plaintiff.
In October 2007, MCN and MCS filed for bankruptcy protection prior to
completing the infrastructure improvements under the AHDA. As a result,
plaintiff declared them in default and made a claim against Lexon on the Bond,
and also finished the construction of the affordable housing component.
Noll certified that because of the bankruptcy filing and the timing gap
between the affordable housing construction and the infrastructure
improvements, he considered suggestions by plaintiff, MCN, and MCS "as to
certain temporary modifications and administrative field changes to the site
plans to facilitate the installation of the [i]nfrastructure [i]mprovements for the
affordable housing development portion of the project." In an email sent on
November 20, 2007, plaintiff's principal said he had met with Noll, who "agreed
to allow us to eliminate a costly bit of work on the plans that is not necessary
A-2040-17T4
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and to do so without a plan amendment or formal process." In March 2008,
Pennoni's project engineer wrote a letter to Noll attaching the final site plans for
phase one of the project stating: "Due [to] the nature of the plan changes as
compared to the approved plans for full build out, it is our understanding that
this supplemental information will be reviewed and approved administratively
by your office, and will not be presented to the planning board."
By way of a letter dated March 27, 2008, Samost told the Township's
attorney that MVE would not agree to the modified plans unless it was released
from all liability related to the Bond, the Indemnity Agreement and the AHDA.
Samost stated that MVE had expected benefits of $4 to $5 million to its property
and "[would] not allow the benefits to it to be reduced while remaining liable
for any sums under" the agreements. Samost added that he would "permit the
modifications to the improvements . . . so long as . . . financial security is posted
for the elimination and replacement of those improvements with the permanent
improvements shown on the approved plans."
In a cease and desist letter dated April 10, 2008, Samost told plaintiff's
attorney that the modified improvements wrongfully deprived MVE of the
benefits it had anticipated in order to financially benefit plaintiff. Samost also
A-2040-17T4
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sent a letter to the Township's attorney notifying him of MVE's objections to the
modified improvements.
Noll wrote a letter to the Township Planning & Zoning Office in April
2008 approving modifications and field changes to the site plan. He stated,
"such minor modifications and field changes to the plans were in confo rmance
with the Planning Board [r]esolutions that had been adopted in connection with
the [p]roject and the [a]ffordable [h]ousing [c]omponent." Noll concluded:
It is my professional opinion that the modifications
and field changes that were approved by me and
Medford Township were minimally necessary, and are
administrative and are in conformance with the
[r]esolutions adopted by the Medford Township
Planning Board concerning the [p]roject and the
[a]ffordable [h]ousing [c]omponent.
In February 2008, Lexon made an initial $1,047,745 payment to plaintiff
under the Bond. In September 2015, Lexon and plaintiff settled the remainder
of plaintiff's bond claims by paying an additional $325,285.
II. Motion Court Decisions.
In January 2008, plaintiff filed a complaint for specific performance and
breach of contract against Lexon, which had issued a surety bond to plaintiff .
Plaintiff sought to recover the full amount of the bond, over $1.9 million, for
costs it had incurred in finishing the infrastructure improvements for the
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affordable housing phase of the project. Lexon filed an answer and a separate
third-party complaint against MVE, FCD, Freedman and Cohen seeking
indemnification. 3 In May 2008, MVE filed an answer to the third-party
indemnification complaint and a fourth-party complaint alleging various
contractual and tort claims.
On July 25, 2013, the court entered an order granting summary judgment
on the third-party complaint in favor of Lexon and against MVE, FCD,
Freedman and Cohen, awarding Lexon $1,047,745. On February 21, 2014, the
court signed an order denying MVE's motion for reconsideration, and granting
the Township's motion for summary judgment on MVE's fourth-party complaint.
On November 26, 2014, the court granted plaintiff and Pennoni summary
judgment on the fourth-party complaint.
Lexon moved again for summary judgment against MVE in February
2016, based on its settlement with plaintiff for $325,285. On March 18, 2016,
a second court signed an order awarding Lexon the amount of its settlement. On
December 6, 2016, the second court signed an order granting Lexon $348,806
in counsel fees. On the same date, the second court denied cross-claims for
3
In March 2012, Lexon, Freedman and Cohen, in their individual capacities,
reached a settlement agreement on the third-party complaint in which they
agreed to pay Lexon $250,000 under the Indemnity Agreement.
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contribution and indemnification submitted by MVE, FCD, Freedman and
Cohen.
On December 8, 2017, the second court signed an order for final judgment
as to all remaining claims. MVE was ordered to pay Lexon $1,684,336, which
"include[d] and account[ed] for the [c]ourt's award of attorney's fees and a credit
for payments made by the [FCD] defendants," who had settled. Judgment was
awarded in favor of MVE and against FCD, Freedman and Cohen. The credits
amounted to $1,253,876, leaving MVE with a $430,460 liability to Lexon.
In granting summary judgment to Lexon the first court stated:
[T]here are no genuine issues of material fact which
preclude granting summary judgment . . . . Although
the factual background of this matter is complex, the
question raised is actually fairly straightforward. Is the
general [I]ndemnity [A]greement signed by [MVE]
enforceable against it.
As to the Indemnity Agreement, the court found:
Lexon had the exclusive right to determine for itself and
the indemnitors whether any claim or suit brought
against Lexon shall be settled or defended. Lexon
deemed the letter and lawsuit as such a claim. A loss
occurred, because over $1,000,000 was spent in order
to fund [the] infrastructure improvements . . . . Thus,
all the elements to trigger the indemnitors' obligations
were met, e.g., the required work was not performed;
there was a demand to complete the work and there was
a loss compensable under the [B]ond. There is no
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question that under the [I]ndemnity [A]greement, MVE
is bound by its obligations therein.
The first court also rejected MVE's argument that the changes to the
affordable housing project released it from its obligation under the Indemnity
Agreement:
First, there is nothing in the [I]ndemnity [A]greement
itself that excuses performance under the indemnity for
the modifications in issue. Second, the argument is not
persuasive when all of the documents are read in
context. The [I]ndemnity [A]greement that MVE
signed was limited in scope to the affordable housing
component of the project. The [agreement] must be
construed in that context. It was a critical portion of
the parties' agreement to move forward with the
construction of the affordable housing component of
the Medford Crossing project.
The court further determined that the Indemnity Agreement contemplated
that the scope of the improvements could be modified by the Township engineer
alone. The agreement provided that the Township engineer's determination was
conclusive and binding on the parties. In addition, the court found that the
Township engineer had the authority under the Bond to approve the
modifications:
Although the [B]ond references "approving
authority," such general language should yield to the
specific language which states "the estimate dated
January 15, 2007 and revised February 5, 2007, by the
municipal engineer of the cost of this work is attached
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hereto and made a part hereof." The [B]ond makes
specific references to the cost of the project and
whether it would exceed the municipal engineer's
certified estimate as well as referencing the [AHDA]
which references and requires compliance with the
estimate.
Finally, the court held that MVE was estopped from challenging the
validity of the affordable housing modifications:
MVE had ample notice of the modifications through its
agreement to the [AHDA], [E]asement and [B]ond.
Through these documents, it was fully aware of the
[e]ngineer's estimate for the affordable housing
infrastructure modification. Through its agreement to
these documents, it agreed to this process.
....
MVE had more than a year to raise its objections to the
modified [sic] of the improvements. The affordable
housing component was largely completed before MVE
raised objection, although it had signed the [I]ndemnity
[A]greement, the [AHDA] and the [B]ond, all of which
referenced the engineer's estimate. As such, MVE
cannot fairly or equitably raise objection to the
affordable housing component improvements or avoid
liability under the [I]ndemnity [A]greement.
In denying MVE's motion for reconsideration, the first court added:
A fair reading of all these documents leads to the
conclusion that the [I]ndemnity [A]greement was
limited to the [B]ond and the [B]ond to the affordable
housing component. The [AHDA] referenced the
engineer's estimate. The [B]ond referenced the same
estimate. Therefore, there is no question that the
A-2040-17T4
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indemnity was for the affordable housing component
outlined by the township engineer . . . .
The court applied the same reasoning in granting the Township summary
judgment.
The first court rejected MVE's request for additional discovery on the
claims raised in its fourth-party complaint. The court also rejected MVE's
inverse condemnation claim based on a finding in a related case that MVE still
had property that could be profitably developed for mixed residential and
commercial use to meet its investment backed expectations.
The first court applied the reasoning of its Lexon decision in granting
summary judgment to plaintiff and Pennoni on all the counts of MVE's fourth-
party complaint. It found that all the counts "arise from and turn on the same
common nucleus of facts decided by the [c]ourt" in its Lexon decision.
III. Issues on Appeal.
A. Discovery.
MVE argues that the court erred in granting summary judgment to Lexon,
as third-party plaintiffs, and to the fourth-party defendants in MVE's fourth-
party action against them. It also challenges the denial of its motion for
summary judgment, without permitting discovery, especially depositions.
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A motion for summary judgment should be granted when, considering the
competent evidence presented, "viewed in the light most favorable to the non-
moving party," there is no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of
Am., 142 N.J. 520, 540 (1995). Thus, when there is alleged "a single,
unavoidable resolution of the alleged disputed issue of fact, that issue should be
considered insufficient to constitute a 'genuine' issue of material fact." Ibid."[W]hen the evidence 'is so one-sided that one party must prevail as a matter of
law,'" summary judgment should be granted. Ibid. (quoting Anderson v. Liberty
Lobby Inc., 477 U.S. 242, 252 (1986)).
"[S]ummary judgment . . . normally is not appropriate before the party
resisting such a motion has had an opportunity to complete the discovery
relevant and material to defense of the motion." In re Ocean County Comm'r of
Registration for a Recheck of the Voting Machs., 379 N.J. Super. 461, 478 (App.
Div. 2005). A party challenging a motion for summary judgment on that ground,
however, "must show . . . 'a likelihood that further discovery would supply . . .
necessary information' to establish a missing element in the case." Mohamed v.
Iglesia Evangelica Oasis De Salvacion, 424 N.J. Super. 489, 498 (App. Div.
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2012) (quoting J. Josephson, Inc. v. Crum & Forster Ins. Co., 293 N.J. Super.
170, 204 (App. Div. 1996)).
MVE fails to specify what information further discovery, including
depositions, would reveal to establish a defense to Lexon's third-party complaint
against MVE. Moreover, MVE did not request that depositions take place before
the summary judgment motions as to Lexon were decided, but rather agreed to
an expedited process in a case management order whereby discovery was
deferred while those summary judgment motions were heard. See Wellington
v. Estate of Wellington, 359 N.J. Super. 484, 496 (App. Div. 2003) (holding
summary judgment was not premature where opponent did not object to
proceeding without discovery and did not allege that there were any material
facts in dispute).
B. Interpretation of the Agreements.
1. Suretyship.
"Suretyship is a contractual relation resulting from an agreement whereby
one person, the surety, engages to be answerable for the debt, default or
miscarriage of another, the principal." Allied Bldg. Prods. Corp. v. J. Strober &
Sons, LLC, 437 N.J. Super. 249, 259 (App. Div. 2014) (quoting Eagle Fire Prot.
Corp. v. First Indem. of Am. Ins. Co., 145 N.J. 345, 353 (1996)). This
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relationship typically "involve[s] three parties: 'an obligee who is owed a debt
or duty; a primary obligor, who is responsible for the payment of the debt or
performance of the duty; and a secondary obligor, or surety, who agrees to
answer for the primary obligor's debt or duty.'" Ibid. (quoting Cruz-Mendez v.
ISU/Ins. Servs. of San Francisco, 156 N.J. 556, 568 (1999)). The relationship
has been stated as follows:
A surety, its principal and its indemnitors are
engaged in a commercial business relationship which
establishes, by contract, specific benefits and burdens
to the parties. By issuing its bond, the surety takes the
risk that the principal will fulfill its obligations. If the
principal does not do so, the surety is required to step
in and bear the cost of satisfactorily completing the
project and/or paying the principal's subcontractors and
suppliers. In order to protect itself from potentially
substantial losses, the surety invariably requires the
principal and indemnitors to enter into an indemnity
agreement.
At the heart of the surety-principal relationship is
the intention of the parties—clearly established in the
indemnity agreement—that the surety will be repaid for
all claims paid or expenses incurred as a result of
issuing bonds on behalf of the principal.
[Andre Const. Assoc., Inc. v. Catel, Inc., 293 N.J.
Super. 452, 456–57 (Law Div. 1996).]
"[A] surety is chargeable only according to the strict terms of its
undertaking and its obligations cannot and should not be extended either by
A-2040-17T4
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implication or by construction beyond the confines of its contract." Eagle Fire
Prot. Corp., 145 N.J. at 356 (quoting Monmouth Lumber Co. v. Indemnity Ins.
Co., 21 N.J. 439, 452 (1956)). However, if the language in the bond is
ambiguous, it should be liberally construed in favor of the principal. Ibid.Generally, when an indemnity agreement gives a
surety broad discretion to pay claims triggering the
indemnity agreement, the only defense that an
indemnitor may raise against a claim by the surety for
indemnification is that the surety committed fraud or
collusion or otherwise acted in bad faith in paying the
claim.
[74 Am. Jur. 2d Suretyship § 122 (2019).]
Because a suretyship implicates a contractual relationship, the
construction of its terms is a question of law for the court. Kieffer v. Best Buy,
205 N.J. 213, 222–23 (2011). "The interpretation of the terms of a contract are
decided by the court as a matter of law unless the meaning is both unclear and
dependent on conflicting testimony." Bosshard v. Hackensack Univ. Med. Ctr.,
345 N.J. Super. 78, 92 (App. Div. 2001). Similarly, an indemnification contract
should be interpreted the same way as other contracts. Cozzi v. Owens Corning
Fiber Glass Corp., 63 N.J. Super. 117, 121 (App. Div. 1960). "Cases involving
contract interpretations are particularly suited to disposition by summary
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judgment." CSFB 2001-CP-4 Princeton Park Corp. Ctr., LLC v. SB Rental I,
LLC, 410 N.J. Super. 114, 119 (App. Div. 2009).
"In ruling on a summary judgment motion that involves the interpretation
of a contract, a court must necessarily determine whether there is any genuine
issue of material fact regarding the parties' intentions," such as uncertainty,
ambiguity or the need for testimony. Celanese Ltd. v. Essex Cnty. Improvement
Auth., 404 N.J. Super. 514, 528 (App. Div. 2009). The court should rely on "the
language used, the situation of the parties, the attendant circumstances, and the
objectives the parties were striving to attain." Ibid. Where a contract's terms
are clear and unambiguous, the contract will be enforced as written. See B.D.
v. Div. of Med. Assistance & Health Servs., 397 N.J. Super. 384, 391 (App. Div.
2007). To ascertain the intention of the parties, and to determine whether an
ambiguity exists, a court may consider extrinsic evidence to support the
conflicting interpretations. Conway v. 287 Corp. Ctr. Assocs., 187 N.J. 259,
269 (2006).
2. "Approving Authority" Under the Agreements.
MVE contends that the court erred in determining that the bond term
"approving authority" referred to the Township engineer and not to the Planning
Board. MVE also asserts that the modified plans had to be presented to and
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approved by the Planning Board to be effective in order for MVE to have
received due process. As the motion court found, no requirement in the Bond,
Indemnity Agreement or Easement required that any changes reducing the scope
of the work be approved by the Planning Board.
The Bond guaranteed "full and faithful completion of the improvements
approved by the approving authority." The Bond also stated that extensions may
be allowed by the approving authority, and further provided:
In the event that the principal and the approving
authority agree to changes in the scope of the work, the
obligations of the surety under this [B]ond shall not be
affected so long as the cost of the work does not exceed
120 percent of the municipal engineer's certified
estimate . . . .
The term "approving authority" is defined by N.J.S.A. 40:55D-3 as a
municipality's planning board, unless otherwise designated by ordinance. While
the Bond does not define "approving authority," or reference the statute, it refers
to MCS as having received "preliminary approval by the Planning Board of
Medford Township." When read as a whole, the Bond's reference to "approving
authority" is clearly a reference to the Planning Board. See Hardy v. Abdul-
Matin, 198 N.J. 95, 103 (2009).
The Bond specifically referenced the Township engineer's estimate, and
incorporated it by reference. Any changes in the scope of the work would only
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affect Lexon's obligations under the Bond if the cost of the work exceeded 120
percent of the Township engineer's certified estimate, which did not occur.
There was no requirement that the approving authority formally approve any
changes to the scope of the affordable housing portion of the project.
In addition, the Easement signed by MVE in conjunction with the Bond
and the Indemnity Agreement, provided that if MVE and plaintiff could not
agree as to which of the infrastructure improvements were "necessary and
appropriate" for the affordable housing project, the Township engineer was
authorized to make the "conclusive and binding" determination. The Planning
Board was not given sole authority over approval of changes to the affordable
housing project. See Allied Bldg. Prods., 437 N.J. Super. at 261–62 ("We may
not ignore the general design of the agreement in ascertaining the sense of
particular terms, even one so central as the identity of the obligee."). Similarly,
the general design of the agreements make clear the Township engineer was
authorized to approve changes to the affordable housing plan and approval to
such changes by the Planning Board, where the scope and cost of the plan was
reduced, was not required.
"[T]wo or more writings which are all parts of one transaction relating to
the same subject matter, are to be read and interpreted as one instrument,
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whether or not they refer to each other." Wellmore Builders, Inc. v. Wannier,
49 N.J. Super. 456, 463 (App. Div. 1958). The importance of these provisions
in these instruments, in light of the agreement between the Township and
plaintiff to reduce the scale of the affordable housing project, is that MVE's
knowledge and consent was not a prerequisite to the enforceability of the plan
modification. Nor did plaintiff and the Township act improperly by modifying
the plans. The only prohibition under the agreements was that the modification
not exceed 120 percent of the estimated cost. Moreover, contrary to MVE's
claim, Lexon and plaintiff did not agree to a modification of the Bond itself.
Rather, plaintiff and the Township agreed to narrow the scope of the affordable
housing project.
MVE's obligations under the Indemnity Agreement were not nullified by
plaintiff's agreement with the Township to modify the scale of the affordable
housing project.
3. Consideration.
MVE also contends that the court erred in determining that consideration
for the execution of the Indemnity Agreement was merely one dollar without
considering parol evidence that the consideration also included an anticipated
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$4 to $5 million increase in the value of the property resulting from the
development. We disagree.
In granting summary judgment to Lexon, the first court stated:
MVE contends that the consideration for the
[I]ndemnity [A]greement was $4 to 5 million dollars in
improvements to the overall development . . . that it
says it did not receive. However, the [I]ndemnity
[A]greement provides for consideration of $1 and
execution of the [B]ond, not millions of dollars in
consideration as MVE alleges. Further, the [I]ndemnity
[A]greement clearly states that there are no separate
agreements that alter the obligations between the
contracting parties. . . . unless in writing. . . . As such,
MVE's consideration for the [I]ndemnity [A]greement
was the execution of the . . . [B]ond and $1.00. There
was no other consideration under the [I]ndemnity
[A]greement. The agreement was never modified.
"In general, contracts are enforceable only if they are supported by
consideration." Sipko v. Koger, Inc., 214 N.J. 364, 380 (2014). The sufficiency
of the "consideration does not depend upon the comparative value of the 'things'
exchanged." Seaview Orthopaedics v. Nat'l Healthcare Res., Inc., 366 N.J.
Super. 501, 509 (App. Div. 2004). The consideration need only "be valuable in
the sense that it is something that is bargained for in fact." Ibid. (quoting
Borbely v. Nationwide Mut. Ins. Co., 547 F. Supp. 959, 980 (D.N.J. 1981)).
MVE received the benefit of the Bond as consideration. The Bond permitted
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work on the site to commence. Thus, MVE received something of value in
return for its promise to indemnify Lexon.
C. Counsel Fees.
MVE claims that the court erred by awarding Lexon counsel fees without
a detailed evaluation of the reasonableness of the fees and a statement of
reasons. We agree.
In awarding counsel fees, the court must determine the lodestar, "which
equals the 'number of hours reasonably expended multiplied by a reasonable
hourly rate,'" based on various factors as to the reasonableness of the rate and
the hours expended. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21–23 (2004)
(quoting Rendine v. Pantzer, 141 N.J. 292, 335 (1995)). In order to permit
proper appellate review, the court must state its reasons for awarding the
particular fee, including how it analyzed the reasonableness factors. Id. at 21.
In its July 2013 order, the first court initially determined that Lexon was
entitled to counsel fees under the Indemnity Agreement, but made no award. In
its December 6, 2016 order, the second court awarded Lexon $348,806 in
counsel fees and costs, and wrote that the "fees are reasonable, sufficiently
detailed, and the methods utilized for the billing are also reasonable." No
statement of reasons was issued beyond that. Thus, it cannot be determined
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27
whether the trial court properly applied the factors as to reasonableness. We
reverse and remand for reconsideration and enhanced reasoning.
D. Fourth-Party Defendants.
MVE also argues that the court erred in granting plaintiff summary
judgment because it did not address causes of action MVE had raised beyond
the Indemnity Agreement. MVE also claims that the court erred in granting
summary judgment to the Township and Pennoni solely based on its
determination that summary judgment was properly granted as to Lexon.
We reverse the summary judgment grants in favor of these defendants
because discovery was incomplete, and most of the claims raised by MVE in the
fourth-party complaint are separate and apart from the question of whether MVE
was required to reimburse Lexon under the Bond and the Indemnity Agreement.
In its fourth-party complaint, MVE alleged breach of the Easement by
plaintiff as a result of the change in construction plans; tortious interference with
business relationship against plaintiff and the Township because of th eir failure
to comply with the Easement; conversion against plaintiff and Pennoni to
compel the turnover of the engineering plans; breach of fiduciary duty against
the Township and Pennoni based on the changes to the project plans; trespass
against plaintiff and Pennoni requiring removal of the improvements
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constructed; intentional tort against plaintiff, the Township and Pennoni based
on the changed plans; breach of contract and of implied contract, conspiracy,
fraud, and lack of good faith and fair dealing against all fourth-party defendants
based on the change of plans; specific performance against plaintiff and the
Township of certain condemnation agreements; and inverse condemnation
against the Township based on the changed plans. Summary judgment
dismissing MVE's claims was premature as fourth-party defendants had not
agreed to defer discovery and a number of the counts, including intentional tort
and contractual claims, were distinct from the question of whether MVE was
required to indemnify Lexon.
While these counts are related to Lexon's claims in the sense that they
stem from the dispute over the changed affordable housing plans, the claims are
separate from the question of whether MVE was required to indemnify Lexon,
which was the basis of the third-party complaint. Because the first court rejected
MVE's request for additional discovery as to these fourth-party claims, the
record and evaluation of the merits of the claims are incomplete, and whether
there are disputed issues of material fact is impossible to evaluate.
We affirm the grant of summary judgment to Lexon on its third-party
complaint for indemnification, but reverse its counsel fee award and remand for
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reconsideration and findings. We reverse the court's grant of summary judgment
to the Township, plaintiff and Pennoni on MVE's fourth-party complaint.
Affirmed in part and reversed in part. We do not retain jurisdiction.
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