On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In this appeal, the Court must determine whether the parol evidence rule bars admission of extrinsic evidence to explain the meaning of a bonus provision in a lawyer's retainer agreement.
Defendants 287 Corporate Center Associates, through its individual partners ("Associates"), purchased a 39.1-acre tract in Bridgewater Township, known as Lot 12, Block 6401. Associates planned to develop the property for sale or lease. Subsequently, Bridgewater split zoned the property for residential and commercial use. Lot 12 is located near the confluence of Routes 22 and 287. When Route 287 was constructed, the resulting realignment of Foothill Road made it impossible for traffic to enter or exit from Lot 12.
Associates contacted attorney Bernard Conway to investigate the possibility of suing Bridgewater for its actions in essentially rendering Lot 12 undevelopable. On July 13, 1994, Conway forwarded to Associates a memorandum, a retainer agreement, and a draft of a federal complaint against Bridgewater. The memorandum explained the process of litigation, outlined the federal cause of action, and noted that the retainer agreement provided for a bonus to be paid if Conway was "successful in obtaining a zone change and the property [was] either sold or the partnership [was] successful in constructing a building and selling or renting it in the future." The retainer agreement also provided for a bonus fee of $375,000 "[s]hould the lawsuit produce any modification of the zone change which permits construction of any type, residential or commercial or the sale or lease of the property to a third person." If the bonus was earned, it was to be paid in three annual installments of $125,000 each year following the sale or lease of the property or issuance of a certificate of occupancy from the township.
Associates signed the retainer agreement and authorized Conway to file the complaint in federal court. Bridgewater moved to dismiss the complaint, which was granted. Defendants appealed to the Third Circuit Court of Appeals. The appeal was assigned for mediation. In compliance with the mediation program, Conway submitted a letter explaining that the "[o]nly possible way" for his clients to develop Lot 12 was "to have the municipality zone it one way or the other, residential or commercial, and provide access to Foothill Road." Conway attended a mediation session. Because Conway was being considered for a state judicial appointment, he arranged to have attorney Roy Kurnos replace him as Associates' attorney. Conway prepared a memo to Kurnos outlining the status of the case. He mentioned the mediation session and that the judge expected to settle the case, "[w]hich means they are going to have [to] re-zone and give us some access to Foothill Road." Conway then said it was all "academic if, in fact, we can get two things: 1. an access to Foothill Road and a change of the zone, not necessarily to office and land but to high density residential."
Conway was appointed to the Superior Court, and Kurnos assumed the representation of Associates in the litigation. On March 4, 1996, Bridgewater voted to rezone Lot 12 to a single commercial zone. Apparently, the federal action was never settled because the Third Circuit affirmed the district court's dismissal of the complaint.
At some point, Conway met with Associates to confirm that the bonus provision in the retainer agreement was still in force. Associates replied that the conditions for the bonus were not satisfied because the access issue was never resolved and the property had not been developed. Conway filed a complaint against Associates seeking a declaration of his contractual rights and injunctive relief. Following Conway's death, Catherine M. Brown Conway, the executrix of Conway's estate, pursued the action on behalf of the estate. Prior to trial, the court ruled that the memorandum and federal complaint were not admissible on the issue of the parties' intent in entering into the bonus arrangement because the retainer agreement was unambiguous. The trial court awarded Conway's estate the $375,000 bonus plus legal fees and interest. Associates appealed. In an unpublished opinion, the Appellate Division reversed and held that the trial court should have considered extrinsic evidence of the parties' intent. At the retrial, the trial court concluded that the parties intended that to earn the bonus both a zoning change and access to the property were required. The Appellate Division affirmed.
The Supreme Court granted Brown Conway's petition for certification.
HELD: Extrinsic evidence was properly admitted to explain the meaning of the bonus provision in the lawyer's retainer agreement.
1. The parol evidence rule prohibits the introduction of evidence that tends to alter an integrated written document. Restatement (Second) of Contracts § 213 (1981). This Court has followed an expansive view of the parol evidence rule, and considers all of the relevant evidence that will assist in determining the intent and meaning of the contract. In Atl. Ne. Airlines v. Schwimmer, 12 N.J. 293 (1953), this Court explained, "[e]vidence of the circumstances is always admissible in aid of the interpretation of an integrated agreement. This is so even when the contract on its face is free from ambiguity." Id. at 301-02. Within the constraints described in Schwimmer, this Court allows a thorough examination of extrinsic evidence in the interpretation of contracts. This Court permits a broad use of extrinsic evidence to achieve the ultimate goal of discovering the intent of the parties. (pp. 11-13)
2. The question is whether the language in the retainer agreement indicating that Conway was entitled to a bonus if the lawsuit produced "any modification of the zone change which permits construction of any type, residential or commercial or the sale or lease of the property" was intended to mean the roadway access to the property was also required before the bonus was earned. Associates produced extensive evidence to demonstrate that roadway access to the property was required before the bonus could be earned, including the memorandum and complaint that accompanied the retainer letter, the position letter in the federal mediation and Conway's status memo to Kurnos. (pp. 13-15)
3. The evidence presented at trial was more than sufficient to support the trial court's conclusion that "proofs show . that rezoning and access was the intent of the parties at the time of the undertaking and to the extent the retainer agreement says otherwise or could be interpreted otherwise, it is construed against the draftsman in favor of the position asserted by [Associates]." The evidence clearly established that the parties intended the bonus would be earned only if Conway was successful in obtaining both a zoning change and access to the property to permit development. Because access to the property was not attained, the bonus was not earned. (pp. 15-16)
The judgment of the Appellate Division is AFFIRMED.
JUSTICE RIVERA-SOTO has filed a separate, DISSENTING opinion, concluding that the majority misapplies the parol evidence rule. He finds the written retainer agreement to be a clear integrated agreement that is free from ambiguity, and would reverse the Appellate Division and reinstate the August 7, 2002, judgment.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, and ALBIN join in JUSTICE WALLACE's opinion. JUSTICE RIVERA-SOTO filed a separate, dissenting opinion.
The opinion of the court was delivered by: Justice Wallace, Jr.
The issue presented is whether the parol evidence rule bars admission of extrinsic evidence to explain the meaning of a bonus provision in a lawyer's retainer agreement when the written terms of the agreement appear to be clear. In the first trial of this matter, the court denied admission of extrinsic evidence to interpret the terms of the retainer agreement and found that the condition requiring a bonus, a zoning change, was satisfied. The Appellate Division reversed and held that the trial court should have considered extrinsic evidence of the parties' intent. At the second trial, the court concluded that the parties intended that to earn the bonus both a zoning change and access to the property were required. The Appellate Division affirmed. We hold that extrinsic evidence was properly admitted to explain the meaning of the bonus provision and affirm the judgment of the Appellate Division.
In 1981, defendants 287 Corporate Center Associates (Associates),*fn1 a New Jersey partnership, through its individual partners, Angelo Cali, John Cali, and Edward Leshowitz, purchased a 39.1-acre tract in Bridgewater Township, known as Lot 12, Block 6401. Defendants planned to develop the property for subsequent sale or lease, but numerous issues had to be resolved before development could occur. Subsequently, Bridgewater split zoned the property for residential and commercial use.
Lot 12 is an irregularly shaped tract located near the confluence of Routes 22 and 287. Its southern boundary runs along Route 287 with lots abutting the property on all other sides. Frontier Road runs parallel to Route 287 and along the southeastern boundary of Lot 12. Access to Lot 12 from Frontier Road is limited because the intersection of Frontier Road and Route 22 allows only limited-use traffic.
Prior to the construction of Route 287 in the early 1980's, Foothill Road bordered Lot 12. However, when Route 287 was constructed, Foothill Road was rerouted to pass over Route 287, eliminating access from Lot 12 to Foothill Road. That realignment made it impossible for traffic to enter or exit from Lot 12.
In April 1993, Associates contacted attorney Bernard Conway to investigate the possibility of suing Bridgewater for its actions in essentially rendering the property undevelopable. Conway conducted background work but did not enter into any formal fee arrangement with defendants at that time. In 1994, Conway and defendants began exploring the merits of a lawsuit against Bridgewater for taking the property without compensation. On July 13, 1994, Conway forwarded to defendants a memorandum, a retainer agreement, and a draft of a federal complaint against Bridgewater. The memorandum explained the process of litigation, outlined the federal cause of action, and noted that the retainer agreement provided for a bonus to be paid if ...