October 6, 2008
ARLINGTON RIDGE CONDOMINIUM ASSOCIATION, PLAINTIFF,
CARL DE CAVALCANTE, POLIZZI BULIDERS, INC., POLIZZI, INC., AND STATEWIDE DEVELOPERS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLANTS,
WILLIAM ROETTGER AND KIPCON, INC., THIRD-PARTY DEFENDANTS-RESPONDENTS.
On appeal from Superior Court, Law Division, Hudson County, Docket No. L-1774-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 10, 2008
Before Judges Payne and Waugh.
Third-party plaintiffs Carl DeCavalcante, Polizzi Builders, Inc., Polizzi, Inc., and Statewide Developers, Inc., appeal from the dismissal on summary judgment of their third-party complaint against third-party defendants William Roettger and his employer Kipcon, Inc., as well as subsequent denial of their motion for reconsideration. We affirm.
This action arises out of the construction of a condominium complex in Kearney, New Jersey. In 2000, plaintiff Arlington Ridge Condominium Association filed suit (HUD-L-4587-00) against Midland Estates, Inc., the builder of the condominium complex, alleging various causes of action relating to construction deficiencies at the complex. Midland filed a counterclaim, seeking further payment for work done on the project. The matter was referred for mediation and settled. The settlement called for Midland to perform certain remediation work at the complex and for Arlington Ridge to pay Midland $36,800 "in full and final settlement of the matter."
Kipcon, acting through Roettger, served as Arlington Ridge's consultant and expert during the litigation. Pursuant to the settlement agreement, Roettger was to prepare specifications for the remedial work and then to inspect the work performed by Midland.
Although there was no such requirement in the written settlement agreement, Midland took the position that the remedial work had to be performed during the summer of 2003. Roettger did not attempt to contact Midland about formulating the required specifications until August 15, 2003 because of (1) a delay in the resolution of the financial arrangements between Arlington Ridge and Kipcon; and (2) Roettger's involvement on other projects. Roettger and Midland's representative did not actually make contact until September 3, 2003. At that time, Midland took the position that the "window of opportunity" had closed and that the work would not be performed because it was then involved in other projects.
Arlington Ridge filed a motion pursuant to Rule 1:10-3, seeking to enforce the settlement agreement. According to the third-party plaintiffs, Midland opposed the motion, arguing that its failure to perform the work was caused by Roettger and Kipcon's failure to act in a timely manner.*fn1 The motion was granted and judgment was entered against Midland for $166,670.17. Midland did not appeal.
When Arlington Ridge discovered that Midland was defunct and had no assets, it filed the present action against the third-party plaintiffs. According to the amended complaint, DeCavalcante was an officer of Midland and signed the settlement agreement on its behalf. Arlington Ridge alleged that DeCavalcante engaged in fraud because, at the time the settlement agreement was negotiated and signed by him on Midland's behalf, he knew that Midland had no workforce or assets to complete its obligations under the settlement. The corporate entities, which had interlocking directorships and ownership with Midland, were alleged to have engaged in civil conspiracy, fraudulent transfers, and breach of a settlement in a related litigation, of which Arlington Ridge claimed to be the third-party beneficiary.
The third-party plaintiffs filed an answer and third-party complaint against Roettger and Kipcon. After setting forth the operative allegations of fact, the single-count third-party complaint made the following allegations:
5. As a result of settlement negotiations during the mediation sessions, Midland Estates, Inc. entered into a Settlement Agreement with the plaintiff herein on or about November 27, 2002. A written Settlement Agreement memorializing the settlement between plaintiff herein and Midland Estates, Inc. was executed on or about June 5, 2003.
6. Third party plaintiffs relied upon representations made by third party defendants with regard to certain obligations that third party defendants agreed to undertake during the settlement negotiations at the mediation sessions as consideration for entering into the Settlement Agreement. Specifically, third party plaintiffs relied upon third party defendants' representations that third party defendants would take on certain obligations as conditions precedent to Midland Estates, Inc.'s obligation to perform work pursuant to the Settlement Agreement.
7. Third party defendants breached their obligations under the Settlement Agreement.
8. As a direct and proximate result of third party defendants' breach of their obligations pursuant to the Settlement Agreement, Midland Estates, Inc. was unable to perform their obligations under the Settlement Agreement.
9. As a direct and proximate result of Midland Estates, Inc.'s inability to perform its obligations under the Settlement Agreement due to the aforesaid breaches by third party defendants, the plaintiff herein obtained a Judgment against Midland Estates, Inc. on June 25, 2004 in the amount of $116,670.17, plus costs, attorney's fees and interest.
The third-party defendants filed an answer, denying the material allegations of the third-party complaint. They also filed cross-claims for contribution and indemnification against Arlington Ridge.
On March 29, 2007, Roettger and Kipcon filed a motion for summary judgment. The basic premise of the motion was that, because neither Roettger nor Kipcon were parties to the settlement agreement, they had no legally enforceable obligations to Midland or the third-party plaintiffs. In opposing the motion, the third-party plaintiffs argued: (1) Midland had an express or implied contract with Roettger and Kipcon, to which the third-party plaintiffs were successors in interest; and, alternatively, (2) Roettger and Kipcon breached the duty of care owed to the third-party plaintiffs with respect to the implementation of their responsibilities as set forth in the settlement agreement, and that the third-party plaintiffs were harmed by the breach of that duty.
On May 11, 2007, the motion judge heard oral argument and, in a brief oral decision, granted Roettger and Kipcon's motion.
The defendant third party plaintiffs argue that there was an express and implied contract between Midland Estates and [Roettger/Kipcon] by virtue of the third party defendant[s'] express agreement with Arlington Ridge.
The facts, however, indicate that Arlington Ridge was -- was the party that hired the third party defendants and that Arlington Ridge was -- was the party that contracted with the third party defendant to provide engineering consulting services.
Thus, the third party defendants were providing specifications based on their obligation to Arlington Ridge, not based on any obligation owed to Midland Estates.
Moreover, the defendants/third party plaintiffs -- the defendant/third party plaintiffs argue that the third party defendants owed a duty to them because the third party defendants were present during the settlement agreement between Arlington Ridge and Midland Estate and because it was foreseeable that the defendants would suffer damages as a result of the third party defendant[s'] delay in providing specifications.
Even if the Court were to accept the defendant/third party plaintiff's argument that the third party defendants owed them a duty by virtue of a settlement agreement, the third party defendant[s'] obligation to perform, that is to provide the engineering specifications, did not arise until Arlington -- Arlington Ridge paid the third party defendants for their services.
Because the third party defendants' duty to provide services pursuant to the Arlington Ridge, Midland Estate settlement agreement did not arise until the third party defendants were in fact paid, it can't be said that they breached a duty to the third party plaintiffs.
An appropriate order was entered the same day.
Arlington Ridge and the third-party plaintiffs entered into a settlement on June 12, 2007, which terminated the litigation and caused the order dismissing the third-party complaint to become final. The third-party plaintiffs filed a motion for reconsideration on June 29, 2007. They argued that the motion judge had failed to address their argument that, even if Roettger and Kipcon had no obligation to act until Arlington Ridge paid Kipcon in July 2003, there was a question of fact as to whether Roettger's subsequent delay in contacting Midland was a breach of that duty and a cause of damage to the third-party plaintiffs.
Because counsel for Roettger and Kipcon never received the motion papers, the motion was unopposed on its return date, July 20, 2007, and was granted. The motion judge wrote his reasons for granting the motion at the foot of the order.
The basis for the application is essentially proof that Plaintiff, Arlington Ridge, had paid Third Party Defendant's bill (Kipcon) and that Kipcon/Roettger took no action on Plaintiff's behalf for over 5 weeks. These facts were not presented in the original motion for summary judgment, so they were not overlooked by the Court. In the interest of justice, the Court has considered the new facts and find[s] that they create a genuine issue of material fact as to whether Kipcon/Roettger breached its obligation to perform services to Plaintiff to effectuate a settlement agreement.
However, on August 10, 2007, that order was vacated by consent, based upon the failure of counsel for the third-party plaintiffs to serve counsel for Roettger and Kipcon.
On August 21, 2007, the third-party plaintiffs re-filed their motion for reconsideration, which was heard on September 20, 2007. The motion judge denied the motion, finding that "the movant ha[d] not shown a change in the law . . . on the relevant issues" and that there was not "any new or additional information for the Court to consider in the interest of justice." The notice of appeal was filed on November 20, 2007.
The motion judge granted summary judgment primarily because he concluded that Roettger and Kipcon had no enforceable legal obligation to Midland or the third-party plaintiffs. He also opined that, even if they did, their obligation was not triggered until Arlington Ridge paid Kipcon. Consequently, his granting of summary judgment and denial of the motion for reconsideration must be affirmed if he correctly ruled that there was no duty. Only if we conclude that there was a legally enforceable duty do we have to reach the issue of whether the motion judge erred in granting the motion for summary judgment because of a genuine issue of material fact as to whether the third-party plaintiffs were harmed by Roettger's delay in contacting Midland after Kipcon was paid by Arlington Ridge.
As we have often recognized, an appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). Generally, the court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1996); see also R. 4:46-2(c).
There was clearly no written contract between Midland and Roettger or Kipcon. The only written contract in this case was the settlement agreement between Arlington Ridge and Midland. The third-party plaintiffs cite Wanaque Borough Sewerage Auth. v. Twp. of W. Milford, 144 N.J. 564, 574 (1996), for the proposition that an express contract can be written or oral, which is undoubtedly true. However, we discern no factual basis in the record before us to support the third-party plaintiffs' assertion that there was any express oral contract between Midland and Roettger or Kipcon.
While DeCavalcante explains in his certification why he wanted to have Roettger or someone else on behalf of Arlington Ridge involved in the formulation of the specifications and the approval of the work, there is nothing in his certification suggesting facts from which a rational fact finder could conclude that Midland entered into any sort of contractual arrangement directly with either Roettger or Kipcon for that purpose. In addition, there do not appear to be facts upon which such a fact finder could conclude that there was any consideration for such a contract, inasmuch as Kipcon was to be paid by Arlington Ridge for Roettger's service, not by Midland. See Oscar v. Simeonidis, 352 N.J. Super. 476, 484 (App. Div. 2002).
Whatever role Roettger and Kipcon had under the settlement agreement, their duty of loyalty was to Arlington Ridge. Had Roettger or Kipcon actually entered into a side agreement with Midland, they would have breached their duty to Arlington Ridge, which was clearly relying on their loyalty and good faith in establishing the requirements for the remedial work and, more importantly, approving the work to be performed by Midland. Such a contractual arrangement would have been void on public policy grounds. See Loesch v. Vassiliades, 17 N.J. Super. 306, 310 (App. Div. 1952) ("[A]n agreement, the object or necessary tendency of which is to place a person owing a duty to a third person, in a position where he is under obligations inconsistent with such duties . . . . is void, even though in fact it has no such bad effect.").
The same considerations apply to the third-party plaintiffs' second legal theory, that there was "an implied-in-fact contract." As the Supreme Court noted in Wanaque Borough Sewerage Auth., supra, 144 N.J. at 574, "contracts implied in fact are no different than express contracts, although they exhibit a different way or form of expressing assent than through statements or writings." Courts find such "implied promises by interpretation of a promisor's word and conduct in light of the surrounding circumstances." Ibid.
Again, there is nothing in DeCavalcante's certification, or anywhere else in the record, to provide a factual basis for finding a contract "implied-in-fact." That Roettger was, as the third-party plaintiffs argue, present for the mediation sessions and was, in his own words, the "person most familiar with the scope of the work," simply does not even suggest that he entered into any sort of contractual relationship with Midland. The record is quite clear that Roettger was present at the mediation sessions to advise Arlington Ridge with respect to construction deficiencies allegedly attributable to Midland. He was then going to act as Arlington Ridge's agent in formulating the plans for the remediation work to be performed by Midland and approving the work once it was completed. Additionally, as noted above, the "implied-in-fact contract" posited by the third-party plaintiffs would have been void on public policy grounds.
Third-party plaintiffs' reliance on Jansen v. Salomon Smith Barney, Inc., 342 N.J. Super. 254 (App. Div.), certif. denied, 170 N.J. 205 (2001), is misplaced. That case involved the issue of whether the putative beneficiaries of two retirement accounts were bound by the decedent's agreement to arbitrate any claims against the financial advisor. We concluded that they were. Id. at 260. In doing so, we noted that the plaintiffs' causes of action, whether viewed as sounding in tort or contract, were derivative of the decedent's rights. Id. at 258. As already explained, Midland had no enforceable contract with Roettger or Kipcon.
Third-party plaintiffs also rely on cases such as Carvalho v. Toll Bros. & Developers, 143 N.J. 565 (1996), and Carter Lincoln-Mercury, Inc. v. Emar Group, Inc., 135 N.J. 182 (1994), suggesting that, because Roettger and Kipcon could have foreseen that Midland or its successors in interest would be harmed by their failure to perform under their contract with Arlington Ridge, we should find that they had a duty to the third-party plaintiffs to perform in a timely manner. Whether such a duty exists is a matter of law to be considered by the court, not a question of fact for a jury. Carvalho, supra, 143 N.J. at 572.
Even if the harm is foreseeable, the duty does not necessarily exist. Carter Lincoln-Mercury, Inc., supra, 135 N.J. at 194. In determining whether a duty exists, the courts must also consider fairness and public policy, which in turn involves the balancing of factors such as the relationship of the parties, the nature of the attendant risk, the opportunity and ability to exercise care, and the public interest in the proposed solution. Acuna v. Turkish, 192 N.J. 399, 413-14 (2007); Carvalho, supra, 143 N.J. at 572-73; Carter Lincoln-Mercury, Inc., supra, 135 N.J. at 194-95. For the reasons that follow, we decline to find a duty under the circumstances of this case.
We will assume, for the purposes of this opinion, that Roettger and Kipcon could have foreseen that their professional negligence in performing their duties to Arlington Ridge could cause some harm to others. However, we do not find a factual basis for the third-party plaintiffs' assertion that Roettger or Kipcon could foresee that a delay in commencing their work for Arlington Ridge would cause Midland's total inability to perform its obligations under the settlement agreement, the resulting judgment against Midland, or the suit against the third-party plaintiffs. This is not a case in which there is an allegation that Roettger and Kipcon were negligent in their preparation of the plans for the scope of work or approval of the work once completed. Here, the issue is delay in commencing the work.
The overarching premise of the third-party plaintiffs' claim is that Roettger and Kipcon breached a duty by failing to make timely contact with Midland. While DeCavalcante asserts in his certification that he "made it clear to [Arlington Ridge] that the remediation work needed to be performed during the summer months of 2003," that requirement is not contained in the settlement agreement. The settlement agreement has an integration clause providing that the agreement "represents the entire AGREEMENT between them and supersedes all prior agreements or understandings, written or oral." In addition, DeCavalcante does not assert that he made the unwritten time limit "clear" to Roettger or Kipcon. Consequently, there is no factual basis in the record for a finding that Roettger or Kipcon knew that there was a contractual requirement that the work be completed during the summer, even if they knew that Midland wanted to get the work done in that time frame.*fn2
Even if foreseeability were present, after the balancing of factors such as the relationship of the parties, the nature of the attendant risk, the opportunity and ability to exercise care, and the public interest, Acuna, supra, 192 N.J. at 413-14, we would not find a duty to Midland or the third-party plaintiffs on the part of Roettger or Kipcon. We have already analyzed the relationship between the parties and concluded that Midland could not have formed a contractual arrangement with Roettger or Kipcon, because their duty of loyalty was to Arlington Ridge.
With respect to the nature of the attendant risk and the ability to exercise care, we have noted that the purported time constraints upon which the third-party plaintiffs rely were not included in the settlement agreement and were not, as far as the record is concerned, communicated to Roettger or Kipcon. We see no public policy advantage to imposing a duty under the circumstances before us.
There is a strong public policy argument against finding a duty, one related to the entire controversy doctrine raised by Roettger and Kipcon. They have argued that the claims set forth in the third-party complaint are barred by the entire controversy doctrine. They contend that Midland, the third-party plaintiffs' predecessor in interest, should have brought Roettger and Kipcon into the initial action at the time Arlington Ridge sought to enforce the settlement agreement and that its failure to do so precludes Midland, and therefore the third-party plaintiffs, from doing so in the current action.
The cases cited in support of their argument, however, pre-date the amendment of Rule 4:30A that eliminated the mandatory party joinder requirement. See Pressler, Current N.J. Court Rules, comment 1 on R. 4:30A (2009). Consequently, we must conclude that the entire controversy doctrine itself is inapplicable.
However, considerations related to the issue-preclusion principles of res judicata and collateral estoppel militate against finding a duty in this case. Both Midland, whose interests the third-party plaintiffs assert, and the third-party plaintiffs themselves have, in fact, already had opportunities to assert the delay attributed to Roettger, who was acting as Arlington Ridge's agent, in defending the claim made against them by Roettger's principal, Arlington Ridge. Public policy does not favor their being given another opportunity.
First, when Arlington Ridge moved to enforce the settlement agreement, Midland could have defended on the basis that Roettger's failure to act in a timely manner precluded the relief sought by Arlington Ridge because Roettger was its agent. In fact, according to the brief filed by the third-party plaintiffs, Midland actually made that argument and it was unsuccessful. Thus, third-party plaintiffs concede that the issue was actually decided against them. Second, assuming that they were not collaterally estopped from raising the issue because of either their failure to raise it or the adverse decision in the original action, Tarus v. Borough of Pine Hill, 189 N.J. 497, 520 (2007), the third-party plaintiffs could have defended the claims made against them by Arlington Ridge on the same basis. Instead, they chose to settle with Arlington Ridge and seek to revive their previously dismissed claims against Roettger and Kipcon. The settlement potentially prejudiced Roettger and Kipcon, who might now need to bring Arlington Ridge back into the case as a fourth-party defendant in order to prosecute their claims for contribution and indemnification against Arlington Ridge.*fn3 The third-party defendants should not be allowed yet another opportunity to relitigate the same issue.
In summary, we conclude that (1) neither Roettger nor Kipcon had a judicially enforceable duty to Midland or the third-party plaintiffs under the circumstances of the case; and (2) there was no contractual relationship, express or implied-in-fact, between Midland, or the third-party plaintiffs, and Roettger or Kipcon. There being no legally cognizable claim, we need not reach the issue of whether there was a genuine issue of material fact with respect to the alleged delay between the time Arlington Ridge paid Kipcon and the date on which Roettger contacted Midland.