July 21, 2008
LLOYD WILLIAMS, PLAINTIFF-RESPONDENT,
ANTHONY VAN RIEMSDIJK AND ESTRELLA VAN RIEMSDIJK, DEFENDANTS-APPELLANTS, AND STEPHEN CHUKUMBA, JR., CHUKUMBA & COOK, CENTURY 21 A-PLUS REALTY, BRUCE RIFKIN, MAINLINE MORTGAGE LLC, GARY HAMILTON, AND STERLING BANK, DEFENDANTS, AND ANTHONY VAN RIEMSDIJK AND ESTRELLA VAN RIEMSDIJK, THIRD-PARTY PLAINTIFFS,
LASHAI J. WILLIAMS, THIRD-PARTY DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7226-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted April 7, 2008
Before Judges Sabatino and Alvarez.
Defendants*fn1 Anthony Van Riemsdijk and Estrella Van Riemsdijk appeal the denial by a Law Division judge of their motion to enforce the penalty provisions of a settlement agreement. For the reasons that follow, we affirm.
Plaintiff, Lloyd Williams, signed a contract to purchase land from defendants for $179,777. The land was purchased so plaintiff could build a single-family home for resale. After closing, and "significant" investment in the project, plaintiff discovered an on-site septic system could not be installed on the site because of percolation problems. As a result, he filed against all the named defendants, including the Van Riemsdijks, for rescission of the contract, consumer fraud, and similar causes of action. Defendants filed an answer, and sought by way of counterclaim, payment of a $30,000 promissory note and second mortgage they had taken back as an accommodation to plaintiff in order to close on the transaction.
In time, defendants and plaintiff entered into a stipulation of settlement which called for plaintiff to pay defendants the $30,000 originally agreed to as a mortgage take back, upon the following terms:
Plaintiff shall pay to defendants Anthony and Estrella Van Riemsdijk, on their counterclaim, the sum of $30,000.00, without interest, as follows:
a. $10,000.00 on the earlier of October 9, 2006 or the date of execution of this Stipulation by Plaintiff.
b. $3,333.33 on or before November 9, 2006.
c. $3,333.33 on or before December 8, 2006.
d. $3,333.33 on or before January 9, 2007.
e. $3,333.33 on or before February 9, 2007.
f. $3,333.33 on or before March 9, 2007.
g. $3,333.33 on or before April 9, 2007.
. . . All payments shall be paid to the order of Michael C. Rudolph, Esq., P.A. Attorney Trust Account. Plaintiff shall have the obligation to see that payment is delivered to the office of Michael C. Rudolph, Esq., P.A., 154 Boonton Avenue, Kinnelon, New Jersey 07405-2923 not later than 5:00 p.m. on each due date. It is understood that time is of the essence and that, except a[s] provided in paragraph 6 of this Stipulation of Settlement, if payment is not made on time, plaintiff's obligation shall be as set forth in Paragraph 4.
The stipulation also provided:
If Plaintiff is in default in the payment of any of the installments set forth above, Defendant shall have the right, to enter judgment against Plaintiff as follows:
a. For $30,000.00 less the amount of any installment paid on account.
b. For interest in the amount of $4,400.00 through and including September 30, 2006.
c. Interest on the unpaid balance of the settlement at the rate of 7% per year from and after October 1, 2006.
d. Attorney's fees and costs in the amount of $12,500.00 on [defendants'] counterclaim.
e. Application for a judgment shall be on notice to Anil K. Arora, Esq., counsel for Plaintiff. Notice may be made solely by telefax transmission and telephone notification. If Plaintiff makes the delinquent payment within 48 hours from receipt by Anil K. Arora, Esq. of the notice, plus a payment of $530.00 to defray the counsel fees and the costs of defendants Anthony and Estrella Van Riemsdijk for making application for judgment, the default shall be deemed to have been cured.
. . . Notwithstanding the provisions contained in paragraph 4, plaintiff shall have the right to reduce the amount of the settlement to $25,000.00 by making payments aggregating $25,000.00 on or before December 29, 2006. Payments shall be made to the attorney trust account of Michael C. Rudolph as set forth in paragraph 5. Under no circumstances shall plaintiff be entitled to extend the deadline of December 29, 2006 to reduce his obligation under this Stipulation of Settlement.
On May 9, 2007, defendants filed a notice of motion styled as a request for "Relief in Aid of Litigants' Rights - - failure of plaintiff to complete making installment payments required under stipulation of settlement." In support of the application, defendants' attorney supplied his own certification and that of his law office secretary. His certification says in pertinent part:
On December 29, 2006, I let my secretary leave early. The New Year's week-end was almost upon us; things were quiet; and I generally closed early before the Christmas and New Year's holidays, as do most attorneys with whom I am acquainted. According to our payroll records, my secretary left at 3:10. When she leaves before me, she locks the door and turns out the lights in her office. Because my law office is in my house, I can still work in my personal office. I leave from an interior stairway to our living quarters. . . . I remained in the office on December 29th until about 5:15-5:30. To my knowledge, no one came to the office door. If someone had knocked, I would have heard it. The plaintiff has my number, but he did not call. When I returned home that evening, there was an envelope that had been slipped under the door. I could see the envelope was from plaintiff, but I did not open it, because there was nothing to be done at that time. I put the envelope down, intending to give it to my secretary after the week-end. Unfortunately, I misplaced the envelope, and we did not find it until January 12, 2007. . . .
My secretary opened the envelope and said that it contained two checks, one for $5000.00 and one for $3,333.33, bringing the total payment to $25,000.00. My secretary deposited both of them, not noticing that one of them was post-dated for January 20, 2007. My secretary's certification filed in support of this motion describes the checks and how they were handled. Because my secretary deposited both checks, I assumed that both had been dated December 29, 2006.
As set forth in the certification of defendants' attorney's secretary, she left her employer's office between 3:00 and 3:30 p.m. on December 29, 2006. When she left, she locked the office door.
Defendant's application sought to compel plaintiff to pay an additional $5,000 in principal, interest of $4,400, seven percent annual interest calculated retroactive to October 1, 2006, and attorneys fees and costs of $12,500, all as called for by the stipulation of settlement. Plaintiff filed a notice of cross-motion seeking a judgment declaring that the settlement agreement was satisfied in full. The motion judge denied defendants' request, but did not rule on plaintiff's request for relief. An order was signed denying defendants' request, although the order did not award affirmative relief to plaintiff. It is clear from the judge's written and oral decision that he found that plaintiff was in full compliance with the stipulation of settlement. This appeal followed. No response has been filed by plaintiff.
When the checks were located, the defense attorney's secretary made photocopies prior to deposit. The checks were deposited on some unknown date, and cleared. On January 25, 2007, while preparing a mortgage discharge as called for by the settlement agreement, the secretary noticed that one of the checks had been post-dated to January 20, 2007.
As a result of the discovery, defendants' attorney wrote to plaintiff's first attorney, demanding the additional $5,000 in principal, and reminding counsel that interest would be due if any payments were late. That attorney notified defendants' counsel that her client believed he had made the aggregate $25,000 payment on a timely basis, and that any further communications should be sent to plaintiff directly.
A second attorney filed the cross-motion on plaintiff's behalf, and appeared for plaintiff at oral argument. That attorney's certification did not explain plaintiff's purpose in supplying a post-dated check; it did little but reiterate defendants' factual allegations. At oral argument, plaintiff's attorney took the position that by virtue of the belated deposit of the checks, and the fact that they cleared, defendants' essentially obtained the benefit of their bargain with plaintiff, and should not be entitled to additional relief.
On appeal, defendants contend, as they did before the motion judge, that plaintiff materially breached the settlement agreement when he delivered a post-dated check later than 5:00 p.m. on December 29. Therefore, it is their position that plaintiff should be held to the provisions of the settlement which require him to pay additional substantial sums on an agreement which called for a total payment, if timely made, of only $25,000.
A settlement agreement is construed pursuant to contract principles. Nolan v. Lee Ho, 120 N.J. 465, 472 (1990). In fact, such agreements are generally honored in the absence of clear and convincing evidence "'of fraud or other compelling circumstances.'" Ibid. (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 125 (App. Div.), certif. denied, 94 N.J. 600 (1983)).
A breach is material if it "goes to the essence of the contract." Ross Sys. v. Linden Dari-Delite, Inc., 35 N.J. 329, 341 (1961). By adding language to the effect that "time is of the essence," defendants, whose attorney drafted the stipulation of settlement, intended to make timeliness of payment an essential provision of the agreement. "Breaches of such provisions generally are material breaches which relieve the non-breaching party from its duty to perform." Linan-Faye Constr. Co. v. Hous. Auth. of Camden, 995 F. Supp. 520, 524 (D.N.J. 1998).
Breach of contract for failure to comply with a time is of the essence clause typically occurs when there has been an actual delay in performance. See id. at 522-25 (material breach when time is of the essence and $450,000 installment payment is made nearly a month after the due date); Koolvent Aluminum Awning Co. of N.J. v. Sperling, 16 N.J. Super. 444, 447-48 (App. Div 1951) (material breach when time is of the essence and delivery of goods is delayed by a month); but cf. Vermont Marble Co. v. Baltimore Contractors, Inc., 520 F. Supp. 922, 928 (D.D.C. 1981) (slight delay does not give subcontractor right to rescind contract despite "time-is-of-the-essence" clause). In this case there was actually no delay, merely an attempt at delay. Accordingly, we find that there was no material breach of the stipulation of settlement.
Through no volitional act of his own, plaintiff's effort at making the last payment effective only after the December 29 deadline failed. In other words, defendants obtained the result they had been promised despite plaintiff's puzzling conduct. The checks were received in the afternoon or early evening of December 29, were deposited after having been misplaced without complaints being made about timelines, and cleared.
The motion judge said:
Defendants' position is entirely unsupportable. Plaintiff delivered checks on the required date, for the required amount, and said checks cleared without incident. Clearly, the penalty provisions written into the settlement agreement were designed to compensate Defendants and punish Plaintiff for any prejudice suffered by Defendants as a result of Plaintiff's breach of the agreement. Under the present circumstances, however, Defendants have suffered no prejudice.
A close reading of defendants' attorney's certification, as opposed to oral argument, makes clear he cannot conclusively establish the time of delivery, other than it occurred in the late afternoon or early evening hours of December 29, 2006. His complaint about plaintiff's performance, that the checks may have been delivered after 5:00 p.m., cannot be proven. If his office door was locked after 3:30 p.m. because of the holiday, the time of delivery could not have logged in with any exactitude, and it was no doubt for that reason that no complaint was made about plaintiff's conduct until after it was learned one of the checks was post-dated.
Through innocent oversight in his office, the checks were not located until January 12, 2007, were properly deposited after being found, and cleared without incident. But for his secretary's acute observation as she was preparing the mortgage discharge, defendants would have been none the wiser as to plaintiff's effort at delaying payment of his last installment. In this case there was actually no delay, merely an attempt at delay, which due purely to chance, failed. We therefore conclude that plaintiff has discharged his obligations pursuant to the stipulation of settlement.
The motion judge couched his decision in terms of lack of prejudice to defendant. We find instead that defendants failed to prove a material breach, as the checks were deposited and cleared in precisely the same manner as would have been the case had they been delivered timely and properly dated as called for in the agreement. An order will be affirmed on appeal if it is correct, even if we do not adopt the specific reasoning of the trial judge. Isko v. Planning Bd. of Livingston, 51 N.J. 162, 175 (1968). Accordingly, we affirm.