February 15, 2008
JAMES A. HUDDY AND LORETTA A. HUDDY, H/W, PLAINTIFFS-APPELLANTS,
NUSKO, LLC, SHAWN YESKO, AND MICHAEL NACINOVICH, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-37-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 24, 2007
Before Judges Cuff and Lihotz.
Plaintiffs appeal from two Law Division orders dated June 9, 2006. The first order denied plaintiffs' motion to enforce an April 1, 2005 consent order filed in the litigation. The second order granted defendants' cross-motion to enforce a settlement evidenced by a letter from defendants' counsel to plaintiffs' counsel dated November 15, 2006 and dismissed the matter with prejudice. Because we conclude additional factfinding is necessary, we reverse and remand for a plenary hearing.
Plaintiffs James A. Huddy and his wife Loretta A. Huddy received notice of a sheriff's sale initiated by a judgment creditor, in an action separate from this matter. The execution sought sale of plaintiffs' home to satisfy an $80,000 debt. Defendants Shawn Yesko and Michael Nacinovich offered to lend plaintiffs the funds necessary to satisfy their debt.
At plaintiffs' request, Yesko and Nacinovich returned to plaintiffs' home on December 14, 2004, the morning of the sheriff's sale. The parties executed a "personal note" that provided plaintiffs would borrow $100,000 payable in thirty days. The note also stated:
Mr. James A. Huddy and Mrs. Loretta A. Huddy and Nusko[,] LLC will sign and notarize but not record a quitclaim deed as collateral on the property located at 1 Jaywood Manor[,] Brick, N.J. 08723. This quitclaim deed will be held by Nusko[,] LLC in the event of default by Mr. James A. Huddy, Mrs. Loretta A. Huddy or both. Nusko[,] LLC will record the quitclaim deed and take legal ownership of the property. Mr. James A. Huddy and Mrs. Loretta A. Huddy will have fourteen days to vacate the property. Mr. James A. Huddy and Mrs. Loretta A. Huddy will take no legal action or otherwise to remain [sic] on the property in the event of default.
As stated in the note, plaintiffs executed a quit claim deed listing Yesko and Nacinovich as grantees. In exchange, plaintiffs received two bank checks that totaled $80,000. Plaintiffs used the funds to satisfy the judgment and the sheriff's sale was cancelled.
Plaintiffs' attorney contacted Yesko and Nacinovich prior to the note's due date. Counsel secured an extension for payment of the debt until January 18, 2005, and a reduction of the interest owed from $20,000 to $2,000. These amendments were memorialized in a writing dated January 7, 2005. On January 20, 2005, Yesko and Nacinovich recorded the quit claim deed after plaintiffs had not repaid the obligation.
Plaintiffs' attorney again contacted Yesko and Nacinovich. On January 25, 2005, the parties, accompanied by their legal representatives, engaged in discussions to resolve the dispute. These efforts culminated in the execution of a seven-page "Settlement Agreement." Defendant Nusko, LLC, Inc. (Nusko), and plaintiffs, are listed as the parties to the agreement. The document expressed the parties' intent to modify their initial agreement to allow plaintiffs until February 4, 2005 to repay $95,000, which represented the $80,000 principal loan, $2,000 interest, a $3,000 "extension fee," and $10,000 to satisfy defendants' legal fees. Defendants agreed not to take possession or enforce their ownership of the realty until after the payment deadline.
Once plaintiffs paid the $95,000, Nusko would execute a quit claim deed returning the realty to plaintiffs. In the event plaintiffs defaulted, occupancy of the realty was subject to the terms of a one-year occupancy agreement; Nusko would pay the first and second mortgages and plaintiffs would pay the utilities and taxes; the realty would be listed for sale at a listing price of $1,695,000; and the proceeds of sale, less the realtor's six percent commission, the obligations allocated between the parties by the agreement, and the payment of Nusko's attorneys fees, would be equally divided between plaintiffs and Nusko.
Plaintiffs did not provide payment pursuant to the terms of the Settlement Agreement. Instead, they filed an order to show cause with temporary restraints, and a verified Chancery Division complaint seeking to limit their debt to the principal loaned, regain title to their home, and void the Settlement Agreement because it was executed under duress.
The parties again commenced negotiations and reached an accord submitted as a consent order dated April 1, 2005. The terms of that order required Yesko and Nacinovich to execute a bargain and sale deed transferring the realty to Loretta A. Huddy. In exchange plaintiffs would execute an $80,000 mortgage note in favor of Nusko "together with lawful interest at the prime rate of interest as published in the Wall Street Journal calculated from December 14, 2004." Payment was due in thirty days. A mortgage on the realty, subordinate to the existing two liens that totaled $1,026,000, secured repayment of the note. Further, the Settlement Agreement was declared "legally void." Plaintiffs' counsel agreed to record the deed and mortgage.
On May 11, 2005, when plaintiffs had not made payment, defendants issued a notice of intent to foreclose as required by the Fair Foreclosure Act, N.J.S.A. 2A:50-53 to -68. On June 8, 2005, plaintiffs recorded the bargain and sale deed and defendants' mortgage. On July 13, 2005, plaintiffs satisfied a mortgage debt to Commerce Bank in the amount of $200,000. This second mortgage recorded against the property was superior to defendants' debt.
Thereafter, defendants filed a motion to enforce the April 1, 2005 consent order pursuant to Rule 1:10-3, and additionally, requested payment of counsel fees. After argument, the motion judge determined defendants were entitled to further discovery to discern whether plaintiffs acted in derogation of the consent order.
American Servicing Company, the lien holder with first priority filed a foreclosure action naming plaintiffs and Nusko as defendants. The first lien totaled $826,000. Defendant also pursued foreclosure.
On October 17, 2005, plaintiffs advised defendants that they received approval for a loan to satisfy defendants' debt. Plaintiffs requested defendants to confirm the total amount of the debt then due. Defendants submitted a pay-off statement listing principal and interest. Defendants also issued discovery requests and noticed plaintiffs for depositions on November 17, 2005. Shortly thereafter, defendants' attorney contacted plaintiffs' counsel to discuss a settlement of the pending litigation.
On November 14, 2005, defendants received a fax from Central Title Agency (CTA), the agency handling plaintiffs' closing, requesting "current pay[-]off information for the Nusko Mortgage including 'atty fees.'" Yesko faxed a letter to CTA showing that as of November 15, 2005, the balance due was $106,907.22, representing $80,000 principal, $3,849.98 interest, and $23,057.24 for attorneys fees incurred as a result of litigation with plaintiffs.
The following day defendants' counsel spoke to and corresponded with plaintiffs' counsel. His letter stated:
This shall confirm our conversation on this date. The depositions scheduled for Thursday, November 17, 2005, have been adjourned due to the current medical condition of Mr. Huddy . . . . If this matter does not settle, I would like to reschedule the depositions of Mr. and Mrs. Huddy for November 28, 2005.
Subsequently, we have learned that your clients intend to refinance tomorrow, November 16, 2005. It is my understanding, through my clients, that Mr. and Mrs. Huddy will payoff my clients a total amount of $106,844 from the proceeds of said refinance, which I understand that sum will be forwarded directly to my clients by [CTA] . . . . Once my clients have received this amount, this case is settled.
Neither plaintiff nor their attorney responded to this correspondence.
Plaintiffs closed on their loan and CTA issued a check to Nusko in the amount of $106,930.54. Plaintiffs assert they "paid the monies demanded in order to secure clear title to their home and complete the refinance transaction." Accompanying the check was an "acknowledgment form," stating defendants had "demanded payment of . . . attorneys fees" in the amount of $23,057.24. Defendants assert they "did not sign this acknowledgment inasmuch as the statement was untrue."
On February 14, 2006, plaintiffs filed an application to enforce the consent order and require defendants to disgorge the sums paid in excess of the principal due asserting that defendants violated the criminal usury statute, N.J.S.A. 2C:21-19, the Consumer Fraud Act, N.J.S.A. 56:8-1 to -167, and other consumer protection statutes. In their supporting certification, plaintiffs denied that the November 2005 payment was in settlement of the parties' dispute, alleging defendants had "demanded that the plaintiff[s'] pay a total of $26,907.22 in interest and fees for an $80,000 loan that was outstanding for 321 days and corresponding to an interest rate in excess of thirty eight percent (38%) per annum and refused to release their mortgage unless the plaintiffs paid the full amount demanded."
Defendants justified the amount paid asserting that counsel's November 15, 2005 letter was an offer to resolve all litigation. When plaintiffs did not object, did not exercise their post-closing three-day right of rescission, and assented to release defendants' check in the amount requested, they acted to accept the offer to terminate all disputes in exchange for the payment. Alternatively, defendants suggest they were entitled to repayment of the principal of $80,000; interest of $3849.98; attorneys fees pursuant to Rule 4:42-9(a)(4) of $838 and additional counsel fees of $23,057.24 pursuant to the frivolous litigation statute, N.J.S.A. 2A:15-59.1.
Oral argument was held on June 9, 2006. The motion judge denied plaintiffs' newly asserted causes of action for consumer fraud and violation of other consumer protection statutes. She noted that defendants were entitled to interest under the agreement, and the issue for disposition was whether defendants properly requested and received attorneys fees. The motion was carried to allow counsel to address the legal basis for an attorney fee award.
When the matter was finally heard, the motion judge denied defendants' application for payment of attorneys fees bottomed on N.J.S.A. 2A:15-59.1. The motion judge then stated the following:
[T]he Huddys were . . . undergoing certain financial difficulties. However, there had been a long course of negotiations between the parties with regard to this loan. The loan was extended in an effort to [stave-] off foreclosure of the primary mortgage on the property . . . . There was . . . a settlement [the Consent Order] which occurred beforehand. There were allegations of default under the settlement and non-payment under the settlement, and that provided at that point in time in November 17th, 2005[,] when [plaintiffs] closed, they knew that they would be and agreed to pay $106,907.54 to satisfy whatever claims were presented by Nusko and by the defendants. Therefore, it was held during the three[-] day re[s]cis[s]ion period. There still was no objection to the disbursement of the funds, and then the funds were disbursed to the defendants and the defendants represented upon once they received this amount, the case is settled. So I think upon a payment of that amount[,] the case was settled. The Huddys are precluded from going back and did not reserve any rights under that notwithstanding -- and I am very sympathetic to their financial problems, but they did[,] at that point in time[,] purchase a settlement and, therefore, the defendant[s'] motion to enforce the settlement is granted.
Plaintiff[s'] . . . motion to enforce the [Consent Order] is denied since I find the parties entered into a subsequent settlement. The matter is dismissed.
On appeal plaintiffs argue that no legal basis exists to award the legal fees claimed by defendants because neither the note or mortgage nor the consent order make provision for the payment of fees. Plaintiffs maintain defendants were required to file a motion pursuant to Rule 4:50-1 to "alter or amend" the consent order in order to obtain attorneys fees. As this argument is raised for the first time on appeal, we decline to address it. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
Plaintiffs additionally assert that upon entry of the consent order, no dispute between the parties remained to be resolved. Our review of the record convinces us that this contention is without merit, Rule 2:11-3(e)(2), as it ignores not only that defendants filed an application to enforce the terms of the consent order, but also that the motion judge permitted defendants the opportunity to conduct further discovery as stated in the October 13, 2005 order.
Dismissing these arguments, however does not resolve the question advanced by defendants: that is, whether a subsequent settlement was reached to terminate all outstanding litigation in exchange for the payment.
As a general rule, courts should enforce contracts as the parties intended. Pacifico v. Pacifico, 190 N.J. 258, 266 (2007). The language of the November 15, 2005 correspondence states: "Once my clients have received this amount, this case is settled." This correspondence alone, sent on the eve of the refinance, does not unequivocally confirm the existence of a newly negotiated settlement agreement, let alone its terms and conditions. In our view, the question presented requires a credibility determination, which could not be made on the basis of a review of conflicting certifications. See Bruno v. Gale, Wentworth & Dillon Realty, 371 N.J. Super. 69, 76-77 (App. Div. 2004) (plenary hearing necessary to resolve conflicting factual contentions in certifications).
Because the motion judge's findings of fact cannot be supported by adequate, substantial, and credible evidence, Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974), we reverse and remand for a plenary hearing on whether the parties reached an agreement to resolve all pending litigation in exchange for payment of a sum representing defendants' legal fees. We are mindful that this decision additionally reopens the outstanding claims raised by defendants in their unresolved enforcement motion.
Reversed and remanded for a plenary hearing and necessary further proceedings consistent with this determination.
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