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NOT FOR PUBLICATION WITHOUT THE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

2

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

3

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

4

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.

A-2040-17T4

5

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.

A-2040-17T4

6

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 . . . .

A-2040-17T4

7

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 . . . .

A-2040-17T4

8

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 . . .

A-2040-17T4

9

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

10

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

11

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

A-2040-17T4

12

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.

A-2040-17T4

13

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

A-2040-17T4

14

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

A-2040-17T4

15

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

16

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.

A-2040-17T4

17

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.

A-2040-17T4

18

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

A-2040-17T4

19

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

20

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

A-2040-17T4

21

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

A-2040-17T4

22

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

A-2040-17T4

23

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,

A-2040-17T4

24

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

A-2040-17T4

25

$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

A-2040-17T4

26

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

A-2040-17T4

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

A-2040-17T4

28

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

A-2040-17T4

29

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.

A-2040-17T4

30