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Lahue v. Costa

Decided: April 8, 1993.


On appeal from the Superior Court of New Jersey, Chancery Division, Essex County.

J.h. Coleman, Shebell and Conley. The opinion of the court was delivered by Conley, J.A.D.


[263 NJSuper Page 579] These three consolidated appeals arise from an oral settlement of five separate pieces of litigation between the parties that plaintiff, Robin A. Lahue, contended defendant, Anthony Pio Costa, III, had agreed to on January 22, 1991, and thereafter reneged on. Plaintiff filed a motion to enforce which, following three days of testimony from the critical players in the negotiations, the trial Judge granted. A final judgment enforcing the settlement was entered May 14, 1991. Subsequently, defendant's motion for reconsideration was denied by an order entered September 10, 1991. Defendant appealed both orders (A-1050-91T2) and refused to execute documents needed to effectuate the settlement. A motion to compel execution was granted and an order was entered November 20, 1991. Defendant appealed that order (A-1647-91T2). Defendant's third appeal (A-0076-91T2) is from a probate consent judgment required under the settlement and, as such, entered by the trial court on July 19, 1991. We affirm.

Plaintiff and Anthony Pio Costa, III, defendant are siblings. When their father died in 1974, he left substantial property and business interests to his wife, Rosalind, and his two children. These properties and business interests involve: 1) Anton Company, a partnership in which defendant and plaintiff are equal partners and which owns improved properties, identified as B4, B5, B7, B9, B11 and B14, in an industrial park, and which also owns vacant land in Riverdale, Montville and Mansfield; 2) Windbeam Company, a partnership in which plaintiff and defendant are equal partners and which owned or owns properties that have been or are being condemned by the State; 3) a residuary trust of which the parties are the remaindermen and their mother the income beneficiary, and which owns vacant property in Riverdale, Montville, Mansfield, Pequannock, Denville, Mount Arlington and Roxbury; 4) Pio Costa Enterprises, a partnership in which the residuary trust and Rosalind are equal partners and which, similar to Anton Company, owns buildings, identified as B1, B2, B3, B6, B8, B15, B16, in the same industrial park where the Anton Company properties are located.

Over the years, numerous disputes arose between the parties, leading to the filing of five separate complaints. In June 1987, plaintiff filed an action, Lahue v. Pio Costa, et al., Docket No. C-6805-87 (the Anton case), seeking to dissolve and distribute the assets of the Anton Company. In October 1987, she filed another action, Lahue, et al. v. Pio Costa, el al., Docket No. C-7763-87, seeking to recover damages for Pio Costa's alleged "looting" of a family-owned company. In February 1989, she filed a probate action, In the Matter of the Estate of Anthony Pio Costa, III, Deceased, Docket No. 11216-D, seeking both an accounting of the residuary trust and the removal of defendant as a trustee. In January 1990, defendant filed an action against plaintiff, Albergato, et al. v. Lahue, Docket No. C-43-90, seeking to dissolve a business partnership between them. In August 1990, he filed a second complaint in In the Matter of Anthony Pio Costa, II, Docket No. 11216-D seeking confirmation

of a sale of trust property pursuant to a contract with Pio Costa Enterprises.*fn1

Serious negotiations over settlement of all of the litigation between the parties began in May 1990 and continued through to the end of November 1990 when a basic agreement to a "global" settlement was sketched out. During these negotiations, defendant was represented primarily by Donald A. Richards, and plaintiff primarily by Kenneth J. Norcross.

The thrust of the global settlement was that "everyone wants to get rid of everyone else." Because of the complexity of the interrelationships between the parties in their various property and business interests, the terms of such a settlement were extensive and complicated by the potential triggering of the Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 to -13 (ECRA), in the event of a transfer of properties or interests in properties. But as crystallized in November 1990, and as described by Mr. Norcross, the terms of such a settlement were:

[Robin] would receive from Windbeam, the Berlin property, that would be in redemnification of all her interests in Windbeam, except for a one -- one percent interest as a general partner, because if we had done it for the full interest, that would have been an ECRA trigger. So, I leave her in as a one percent general partner of Windbeam. Tony -- Robin would then sell that one percent general partnership interest to Tony and Tony would pay her one dollar. You can now take advantage of the -- of the exclusion from ECRA, because you have a sister to brother transfer of that one percent interest. Okay. On -- Anton property, and the -- the global settlement, Tony was going to receive the 11 -- no, Tony was going to be redeemed out of Anton and he would receive the Tonyspecial [sic] capital account property. Whatever that -- that is. And that would be an ECRA trigger. He would have to take care of that. He would also receive the B9, B -- was -- is -- B7, B9.

[Anthony would be] [r]edeemed out of Anton. He would receive fee simple. His -- his Tony or special capital account property, whatever that is. He would also receive the B7 and B9 properties. Now, as I just told you, if the B7 and B9

properties had actually physically been transferred, that would have been an ECRA trigger. So, instead of transferring B7, B9 properties, we're going to master lease them from Anton to Tony for a 90-year term, for the rent of $1, that would not be an ECRA trigger. So, Tony would be the master lessee. He would be right, to receive as master lessee, the fee interest, in those properties, upon -- ECRA, he would trigger at any time at his option. That's the way to go --

The lessor would be the Anton partnership and the lessee at that point would be Tony. That's the situation -- will change very quickly, but that's what it would be right at that time. Tony would be redeemed out, except for one percent general partnership interest. That one percent interest would be sold. Robin -- Robin for $1. Once again, voiding ECRA. Now, the residuary trust would be bifurcated. We would form two -- well, form one new trust called the Robin trust. The Robin trust. Rosalyn [sic] remains as incumbent officiary. And Robin would be the only remainder. Ideal would be she's then going to forfeit her interest in the residuary or the -- the -- give up her interest in the residuary trust. The Robin trust. The -- similarly, the Pio Costa Enterprises, is going to be bifurcated. The way we're going to just do that is form a partnership which the Robin partnership. Now, in this bifurcation, the residuary -- oh, sorry. I have to go back. Anton -- Tony was also going to get out the Montville and Mansville properties out of Anton. He gets them in fee simple. Those are vacant lands. Not ECRA triggers. Okay.

To bifurcate the residuary trust, in that bifurcation, we would send the Riverdale, Denville and Mount Arlington properties over to the Robin trust and fee simple. And the other properties would be -- remain in the residuary trust. The other properties being Pequannock and Montvale, to stay in the residuary trust. With respect to the PCE properties, which now we're talking about here, they are these B1, 2, B1, 2, 3, 6, 8, 15, 16, we had similarly -- have a master lease concept where the B-1 and B6 properties would be liened by PCE to the Robin partnership. Okay. So the Robin partnership would be the master lessee. Again, to $1 for 90 years. The Robin partnership would have a right to require fee simple title in those properties, upon compliance and ECRA and required subdivision approvals. Because again, PCE is one block and lot. All right. We then enter into a like kind exchange.

Now, the Robin partnership and Tony will engage in a like kind of exchange. The Robin partnership were -- will transfer the least hold interest on B1 and B6 to Tony and Tony is going to transfer the B7 property to the Robin partnership. And also the B10 property to the Robin partnership. That is, he is going to cause Windbeam to transfer the B10 property down to the Robin partnership. Okay. So then, in the interest of the Robin partnership, go up to Tony and Windbeam and in exchange for the B7 and the B10 property coming down. Okay. Now, the -- and this B10 property coming down is also going to be a master lease concept and initially, but again, giving you the right fee simple, when you comply with ECRA.

. . . .

What will happen, when all is said is done is that Robin Anton and the Robin partnership and Robin trust, all of these entities are essentially after everything is gone, Robin, they are -- they are entities referred to them generally as Robin. All four Robins [sic] interest. Similarly, Tony is -- Tony's trust, Windbeam, PCE, residuary trust, all for Tony. All right. When all is said and done, under the global settlement, Robin will either own, be the master lessee and the master lessor of all -- all the properties in the Route 46 side of the block. And Tony and his related entities will be either the owner, master lessee, master -- master lessor of everything on the P -- on the Bloomfield Avenue side of the park. So, by doing those series of transactions, you've effected a division of the park. Since essentially right down the middle, which was the purpose now.

Drafts of various documents needed to effectuate a settlement along these lines were prepared by Mr. Norcross and sent to defendant's attorneys.

By January 1991, however, no agreement had been reached. On January 22, 1991 the Anton case was scheduled for trial. Defendant was at that time represented by William M. Laufer and Robert Smith; plaintiff was represented by Mr. Norcross and Eileen A. Lindsay. Both Norcross and Lindsay were confident about the outcome of the Anton litigation which sought the dissolution of the parties' partnership involved in that company. But they all knew judicial dissolution of the partnership would cause property transfers that would potentially trigger ECRA. "So, [Mr. Norcross] said, to [Mr. Laufer], that if there was some way we could settle, just Anton and -- and structure it in such a way to minimize the transactional kind of costs, we would be willing to do it."

Because both parties indicated to the trial Judge that settlement was a possibility, the trial did not commence immediately. Negotiations initially focused on the Anton case solely. By late morning, however, negotiations had recommenced on the global settlement, which became known as the modified global settlement. Ultimately, according to Mr. Norcross, an agreement as to division of the properties, was reached:

Okay. The Anton and Robin and Tony are partners of Anton. Robin, Tony are the remaindants of the residuary trust. Robin, income beneficiary of trust. Rosalyn [sic], residuary trust of PEC. Okay. B7, B9, would be leased by Anton to Tony, same master lease arrangement. We talked about before.

Residuary trust would be bifurcated, so -- have to be Robin trust and residuary trust. Robin would give up her interest in the residuary trust. Robin would be the remaindant of Robin trust and Rosalyn [sic] would be the income beneficiary of Robin trust. The partnership would also be bifurcated. The Robin partnership, which of -- which, the Robin trust, Rosalyn [sic] would be the partner, the B1, B6 properties, would be the master lease by PCE to the Robin partnership. Tony, Robin partnership would then enter into an exchange. Tony would sign this lease hold [sic] interest in the B7 B9 properties and Robin partnership would transfer, signed her interests, signs interest in the B1, B6 properties. So that when all is said and done, Tony and Rosalyn [sic] on one side of the transaction, owned all of the PCE side of the park and Robin, Rosalyn [sic] on the other side, owned all the Anton properties. This division of the raw land, Tony would keep the Montville, Pequannock properties, and he would get the Montville property out of Anton. The other properties would -- are residuary trusts, would go over to Robin trust. On the property, vacant land, owned by Anton, stay in Anton.

Q. And how specific -- specifically in terms of division of property, how did this differs [sic] from the global settlement in November?

A. Mansfield properties not going to Tony. And Windbeam keeps the B10 property. And Robin effectively keeps the B9 property.

This division of property, Mr. Norcross initially indicated, defendant "sort of agreed" to early on during the negotiations. But defendant was concerned that he was not getting the properties in fee simple and so asked for the Riverdale property. Mr. Norcross' response was negative at that point and he then wanted to begin the Anton trial. According to Mr. Norcross, the following then occurred:

This -- Mr. Pio Costa -- went back and I was prepared to start the trial. I was suggesting to Robin strongly, strongly, that we start the trial. And that we terminate the Discussions with Bill, with Bill Louffer and Tony. Eileen was ready to go. I think she was chomping at the bit in fact. We wanted to start to try it. I came back in the courtroom and our conversation was essentially like that. Like okay, let's get the trial ready. You know, Robin, you're going on the witness stand, blah, blah, blah. We're getting ready. Bill comes in and said, Ken, come out here. They wanted to make another proposal.

This proposal consisted of a list of nine points. Mr. Norcross discussed them with plaintiff. He told her "I really thought that you know, we thought -- should just terminate the Discussions with Tony. We weren't getting any -- just wasn't worth it. What I thought she had given far too much . . . . [W]e were very confident that would be successful in trial. We were

prepared. And I told her we just should just get it going." She was willing, however, to respond to the nine points.

Mr. Norcross discussed with defendant and Mr. Laufer plaintiff's position on the proposal; some of the points she conceded, others she did not. He again suggested they start the trial. Mr. Norcross testified, however, that:

Tony said -- he said no, no. He says, you said something different. I think we can do something here. Then we went through thelist [sic].

I started going through my list. Said, let's forget about the $50,000. He said the limited indemnity was fine with him. He said he would not pay the $2 million. Therefore, the limited indemnity would kick in after he had incurred $2 million of cost. He said the split of the property and in accordance with the schedule was acceptable.

Specifically where the Riverdale property would go -- go in to Robin. He affirmed the $300,000 payment to Robin would be paid right -- first refusal of -- was acceptable. He said he still wanted to have a permanent easement. The construction yard. He said the description on the sides was acceptable. And he -- the split of the Riverdale proceeds was acceptable. He said. But, let he make something clear he said. When I say the split of the Riverdale proceeds, I also mean that if the State of New Jersey gives -- gives an easement to permit, so that the -- the sanding and gravel on the Riverdale property can be mine that I want 50 percent of the property -- profits from that mining activity. Now, apparently, when 287 was put in, cut off this piece of the Riverdale property, so that you hit -- didn't have I guess, an ingress -- ingress sufficient for industrial vehicles which were required in order to mine the sanding and gravel. That's on that property. So, it's if an easement could be obtained through the State of New Jersey, the condemnation proceeds, he felt that he should also get 50 percent of the profits from the mining and sanding gravel on the Riverdale property. I went back into the courtroom.

He discussed defendant's additional demands with plaintiff, and again recommended they begin the trial. Mr. Laufer came into the courtroom and:

[H]e asked me to come out. And we stood right outside the door and he said Ken, you know, we're really only apart on the construction yard and the profits of the Riverdale mining activity. And, you know, I sort of acknowledged that. And he said, I tell you what, I says, Tony will take five years on the construction yard and 50 percent on the profits and we can put this -- we get this done. I said, I said, well, I'll go talk to Robin. I went inside and Robin said go out and find out if there's anything else. And I can -- I remember getting right up and going right out, because I should have thought to ask if there was anything else. So, I went right out in the hall. They were down

here at the end of the hall. Bob Smith was sitting on that bench. That's against -- of the back of the wall. Tony was sitting on that, on the bench. I believe Bill was sort of standing in the middle. When I came out, I said, is there anything else? Tony stood up, says, no. And -- and Bill Louffer goes -- goes to Tony, anything Tony? Anything at all? Like that. Tony says no, no, nothing. That's it. So, I said, fine. I came back into -- into the room and we started talking about the -- about the -- those last two issues.

Further negotiations occurred over these "last two issues" without agreement -- Mr. Laufer told Mr. Norcross that "it's going to have to be five years and 50 percent."

It was then close to four o'clock. Plaintiff's attorney, in preparation for commencing the trial, requested that the trial Judge hear a preliminary motion. He told the attorneys he would hear the motion the next morning before the trial started. The following then occurred:

Bill, Bill Louffer [sic] was then getting ready to -- to leave. He said, you guys change your mind, give me a call. Just the last two issues, he said. You know, start of trying to settle the settlement to -- to Robin. Says it's just these last two issues. Not that big of a deal. If you look at everything, if you change your mind, give me a call. I live in Chester. My name is in the book.

After defendant and his attorneys left the court house, plaintiff and her attorneys remained and continued the Discussion:

Robin and Michael and Eileen and I sat and we talked and we talked about where we had been, where we were going and how things looked. We just talked for a while. Talked about this issue. We were -- we -- we were saying, you know, really think we can win in the litigation. You can call it off. We'll be -- we'll be here tomorrow. Let's litigate it. We can go. Robin was saying no, it's been a long time. This will settle. Everything -- we can call put it away. She and Michael talked for some period of time and she was saying, well, maybe we'll take four years at which time I said, no, Robin. If you're going to do it, just do it. Just give him the point. Give him -- him five years, 50 percent, if you can accept the fact that he's, you know, in your affairs. Likewise then, just take it, just take it. Then she said, well, we will see if he'll pay rent. I said what kind of rent would be appropriate? She said $3,000 a month. I said, I'll ask. So, she told me to call Bill Louffer [sic], say that we -- we would accept Tony's final two points.

She thus agreed on the final remaining issues.

Mr. Norcross was not immediately able to reach Mr. Laufer to tell him that plaintiff had agreed. Later that night he did speak to him at his house:

I can't remember if he called me back or if I called him back, to tell the truth. I can't remember that particular detail, but we conducted again, late that evening I said, that Robin was willing to give Tony his last two -- last two points. And I wanted to clarify that. I made it clear that we -- we were talking about 50 percent of the profits. Talking about five years on the construction yard, talking about the very limited indemnity. I said, but, Robin, this, you know, you know, I guess I expressed my view that the equities of this, the -- really, favor Tony quite a bit. I said, you know, that we thought that Tony should pay rent for the construction yard and I suggested $3,000 a month. He said fine. He will call Tony, give -- get back to me. He called me back a relatively short time later and said everything is fine with Tony, but he's not going to pay the rent. I said, that's fine. Then he said what do we do about Simon, because we have the trial scheduled the next day. And I said, I'll call -- I'll tell Eileen to give Judge Simon a call early in the morning and tell ...

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