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Krajewski v. Urgo


June 6, 2007


On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Bergen County, Docket No. C-161-04.

Per curiam.


Argued May 2, 2007

Before Judges Wefing, Yannotti and Messano.

We consolidate these appeals for the purposes of this single opinion. In A-3790-05, plaintiff Janet Krajewski appeals from the February 21, 2006, order that 1) denied her motion to enforce a settlement agreement previously entered, or, alternatively to vacate the dismissal of the litigation and reinstate the matter for trial, and 2) granted defendants' motion to enforce the settlement. We have carefully considered plaintiff's contentions in light of the record and applicable legal standards. We reverse and remand the matter for further proceedings consistent with this opinion. As a result, the appeal of defendants Nicola Urgo, improperly pled as Nicholas Urgo, Angelo Giacchi, and Anjen Development L.L.C.'s (collectively "Anjen") in A-5747-05, which sought our review of the judge's stay of his February 21, 2006, order, is moot and hereby dismissed.

The litigation has its genesis in a real estate transaction involving property located at 84 Cooper Avenue in Long Branch (the "Property"). Plaintiff's verified complaint alleged that she had advanced monies to Anjen, and its two members, Urgo and Giacchi, in return for a forty percent equity interest in a joint venture to be formed amongst them for the purchase and development of the Property. Plaintiff alleged that the owner of the Property, NPH Enterprises Inc. (NPH), entered into an agreement of sale with Anjen, but subsequently filed suit alleging Anjen had breached the agreement in failing to secure mortgage financing in accordance with the sales contract. During discovery, plaintiff indicated that she would provide the joint venture with sufficient monies to close the purchase without the need for mortgage financing.

That lawsuit eventually settled and Anjen's rights to purchase the property were preserved. However, plaintiff alleged that despite their earlier representations, Urgo and Giacchi, unilaterally reduced her equity interest in the venture to twenty percent and failed to provide her with any information regarding the purchase and development of the Property. She commenced suit against Anjen and NPH and in her complaint alleged various causes of action seeking injunctive and equitable relief.

Anjen filed its answer denying plaintiff's allegations and asserting plaintiff had breached her promise to fund the acquisition of the Property. In its counterclaim, Anjen contended plaintiff had committed fraud by refusing to provide the necessary acquisition monies.

While this litigation was pending, and on notice to plaintiff, NPH conveyed the property to another entity, defendant 84 Cooper LLC (84 Cooper), a limited liability company comprised of Anjen, which owned a sixty percent interest, and Applied 84 Cooper LLC (Applied), which owned a forty percent interest. Plaintiff voluntarily dismissed her claim against NPH and filed an amended complaint asserting claims against 84 Cooper.

After extensive mediation efforts proved unsuccessful, the matter came before the court for trial. On May 16, 2005, with the judge's assistance, the parties ultimately reached a settlement which plaintiff's counsel placed upon the record.

The plaintiff [] will acquire a thirty percent interest in the entity known as 84 Cooper []. [She] will pay the sum gross of $362,500 for her thirty percent interest. From that she will receive a credit for the sum of approximately $40,000 for monies heretofore paid when she was involved in efforts to acquire the property at the initial stages of this matter []. With credit for that payment . . . in exchange for her thirty percent interest, [plaintiff] will pay the sum of $322,500.

Plaintiff also agreed to pay Urgo a "finder's fee" of "ten percent of sixty percent of the net sales price" if the Property was sold.

Lastly, the parties agreed to enter into an "operating agreement" for the development or sale of the Property. Plaintiff's counsel placed this portion of the agreement on the record.

The parties will enter into an operating agreement similar in form to the operating agreement which now exists between [Applied] [] and Anjen . . . . [Plaintiff] will become part of that entity either through her own name or an entity to be formed for (sic) her behalf, and the percentage distribution of equity ownership in that entity . . . to be comprised of three persons rather than two will be thirty percent [plaintiff], thirty percent Anjen and forty percent [Applied].

The operating agreement will also provide that neither [plaintiff] nor in conjunction with Anjen [] will have the right to veto a sale of the property, even though collectively they would be majority owners and have a combined total of sixty percent. [Emphasis added.]

Counsel for Anjen clarified that plaintiff's contribution would be made directly to Anjen, but otherwise agreed with the settlement agreement as stated by plaintiff's counsel. Counsel for 84 Cooper indicated the "settlement as related by [plaintiff's counsel] sounded correct." However, he added,

I believe what we will do is amend the operating agreement for 84 Cooper. We will not form a new entity. That seems the most sensible way.

Plaintiff's counsel and Anjen's counsel both concurred and the litigation was dismissed.*fn1

Trouble soon arose, however, when the parties attempted to actually amend the operating agreement to include plaintiff. In early June, 2005, plaintiff's counsel contacted defense counsel, noted the existing operating agreement's complicated financial structure, and stated his understanding of the settlement and plaintiff's position within the new joint venture. He supplied a draft amended operating agreement to reflect this.

Counsel for Anjen responded by indicating there was some "error in [plaintiff's counsel's] understanding of the resolution of this matter." Counsel for 84 Cooper, however, responded in greater detail to the proposed amended agreement. In doing so, he succinctly referenced the essential difference between the existing agreement and plaintiff's proposed amendment.

The one issue not addressed in the settlement was the priority return and return of capital contributions. As the Operating Agreement currently stands, in any distributions Anjen and 84 Cooper would receive return of their investment plus interest according to their investment percentages before any proceeds were distributed to the equity holders . . . .

With [plaintiff] assuming one-half of the Anjen interest, it is logical that she would now be entitled to one-half of Anjen's return and priority return, if and when any monies are distributed. Nevertheless, I understand your position that she should assume Anjen's capital position in the LLC, dollar for dollar, which would [] entitle her to all of Anjen's capital and priority return. However, this was never addressed [at the time of the settlement] and [] it needs to be worked out between plaintiff and Anjen. 84 Cooper does not take a position . . . . [Emphasis added.]

When continued discussions between the parties could not resolve the dispute, plaintiff moved to enforce the settlement agreement and Anjen cross-moved to enforce the settlement and declare plaintiff in default for not having tendered the settlement amount of $322,500. The motion judge entered an order on September 14, 2005, that denied plaintiff's and defendants' application to enforce the settlement without prejudice, denied defendants' request to hold plaintiff in default with prejudice, and again referred the matter to mediation.

The mediation was unsuccessful. Plaintiff re-filed her motion to enforce the settlement or, alternatively, to set the settlement aside and vacate the dismissal of her complaint; Anjen moved to "reinstate [its] cross-motion to declare plaintiff in default." Plaintiff argued that amending the existing operating agreement and giving her credit for only fifty percent of her cash contribution would significantly dilute her return on the investment and was not what she agreed to when she settled the case. She noted the thirty percent interest she agreed to was a compromise from the forty percent she sought in her complaint and she would not have settled the case for any less.

Anjen countered that plaintiff possessed the existing operating agreement when she settled the case and should have considered the effect of its terms upon her interest in the joint venture. Anjen argued that plaintiff did not perform her due diligence before agreeing to the settlement and now, in hindsight, realized her return would not be as great as she anticipated.

After oral argument, without any plenary hearing, the motion judge rendered his written decision. He noted that plaintiff, "a sophisticated business woman," had a copy of the existing operating agreement before settling the case, and "wonder[ed] why . . . [she] did not pay more attention and/or more aggressively dispute" the agreement's financial terms. As to plaintiff's argument that her interpretation of the settlement was a significant compromise from her initial demand, the judge found this argument "less than compelling," concluding plaintiff "cannot fairly argue her implicit position on the disputed provision should be upheld contrary to the explicit provisions set forth in her presence."

The judge then determined, "[T]he parties' intentions are clear . . . . The provision regarding the return of capital investments was to remain in the operating agreement." He noted "the plaintiff is experiencing second thoughts as to the settlement," after "t[aking] a second look" at the operating agreement, and "performing certain calculations," which "could have occurred before the settlement was finalized."

The judge denied plaintiff's motion and granted Anjen's cross-motion to enforce the settlement, specifically ordering plaintiff 1) to pay the settlement amount to Anjen within ten days of the order, and 2) simultaneously execute the operating agreement with the following modifications: a) plaintiff would be a member of 84 Cooper with a thirty percent equity interest subordinated to the return of members' initial capital investments; b) neither plaintiff nor Anjen "singly or together" could veto the sale of the property despite their majority interest; and c) the first ten percent of any distribution to plaintiff and Anjen would go to defendant Urgo. The order required all other terms of the operating agreement to remain unchanged. On June 6, 2006, the judges entered an order staying the earlier order subject to certain conditions.

Plaintiff argues that the motion judge should have granted her request to enforce the settlement in accordance with her understanding of its terms -- that she was obtaining a thirty percent equity interest in the joint-venture without subordination to any capital return or priority positions contained in the operating agreement; alternatively, she seeks reversal of the judge's order and reinstatement of her complaint for trial. Defendants counter by arguing the motion judge correctly determined that the settlement agreement was unambiguous and plaintiff's "second thoughts" do not provide a basis to set the settlement aside.

We begin by reviewing some basic principles. "A settlement agreement between parties to a lawsuit is a contract." Nolan v. Lee Ho, 120 N.J. 465, 472 (1990). Since the "[s]ettlement of litigation ranks high in our public policy," Jannarone v. W.T. Co., 65 N.J. Super. 472, 476 (App. Div.), certif. denied, 35 N.J. 61 (1961), "settlement agreements will be honored 'absent a demonstration of fraud or other compelling circumstances.'" Nolan, supra, 120 N.J. at 472 (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 125 (App. Div.), certif. denied, 94 N.J. 600 (1983)).

Unless there is "an agreement to the essential terms" by the parties, however, there is no settlement in the first instance. Mosley v. Femina Fashions Inc., 356 N.J. Super. 118, 126 (App. Div. 2002), certif. denied, 176 N.J. 279 (2003). Thus, a party seeking to vacate the settlement must "show compelling circumstances" "only where a contract of settlement is actually held to exist." Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 475 (App. Div. 1997) (citing Nolan, supra, 120 N.J. at 472). On a disputed motion to enforce a settlement, the court should hold a hearing unless the available competent evidence is such that the judge can resolve the disputed factual issues in favor of the non-moving party. Ibid.

In the case at hand, it is clear that the parties' understanding of the settlement, to the extent it required plaintiff's entry into the joint venture's operating agreement, was significantly disputed. Based solely upon certifications filed by plaintiff and defense counsel and without any evidential hearing, we fail to discern how the motion judge concluded plaintiff had not properly considered the consequences of the existing operating agreement or had "second thoughts" about the settlement.

While we might otherwise determine the appropriate remedy would be to remand the matter for a plenary hearing on the critical issue -- what the parties intended by requiring plaintiff to execute an operating agreement "similar in form" to the existing one -- we are convinced that no settlement was actually reached in this case because there was never agreement as to the meaning of this essential component of the settlement.

The record discloses that within days of the court appearance, all three attorneys involved had different understandings of the agreement. Plaintiff apparently believed she would be executing an operating agreement that would provide her with a thirty percent equity interest in the Property and her return would not be subordinated to any capital return or other priority returns. Anjen viewed the settlement as providing plaintiff one-half of Anjen's sixty percent pre-settlement interest in the joint venture; thus, despite having its initial capital investment essentially returned through plaintiff's settlement payment of $322,500, Anjen contended the existing operating agreement required it and plaintiff to share in the return of capital on a fifty-fifty basis. Lastly, although it took no particular position, 84 Cooper immediately recognized that "one issue not addressed" by the settlement was whether plaintiff, by paying $322,500 to Anjen was acquiring Anjen's capital interest in the operating agreement or not. As counsel for 84 Cooper noted, "this need[ed] to be worked out between plaintiff and Anjen."

We conclude that there never was an agreement between the parties as to the essential terms of plaintiff's role in the post-settlement joint venture agreement. We therefore reverse the motion judge's order enforcing the settlement in favor of Anjen and reject plaintiff's contention that we should enforce her version of the settlement. We grant plaintiff's requested alternative relief and remand the matter for further proceedings consistent with this opinion.

The order under review in A-3790-05 is reversed, the appeal docketed as A-5747-05 is dismissed.

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