January 7, 2009
CAMDEN EMPOWERMENT ZONE CORPORATION, PLAINTIFF-APPELLANT,
COOPERATIVE BUSINESS ASSISTANCE CORPORATION, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. C-186-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 1, 2008
Before Judges Lisa and Reisner.
Plaintiff, Camden Empowerment Zone Corporation (plaintiff or CEZC) appeals from the denial of its summary judgment motion and the grant of the summary judgment motion of defendant, Cooperative Business Assistance Corporation (defendant or CBAC). Plaintiff also appeals from denial of its motion for reconsideration. Plaintiff argues that the court misinterpreted the parties' intent and the contractual language, both of which support a finding that funds provided by plaintiff to defendant were to be repaid to plaintiff at the expiration of the parties' agreement. Judge Colalillo found that no reasonable jury could determine that the parties' agreement was anything other than one for a grant of funds by plaintiff to defendant, which would revert to plaintiff only in the event of termination, but not expiration, of the agreement. We agree and affirm.
Plaintiff is a non-profit corporation (non-profit) empowered to administer federal Empowerment Zone Grant Funds (Funds) in the form of grants and loans to non-profits and for-profit businesses. Richard H. Cummings is plaintiff's president. Defendant is a non-profit that makes business loans to small businesses in the Camden and Southern New Jersey area. R. Michael Diemer is defendant's executive director.
In March 1997, plaintiff issued a request for proposal (RFP) seeking proposals for funds for economic development. Defendant submitted a proposal, which was ultimately accepted by plaintiff, and the parties entered into a Grant Agreement, which was effective March 1, 1998 and, by its terms, expired on December 31, 2004. Pursuant to the agreement, plaintiff extended $2 million in funds to defendant. Defendant added these funds to its capital, establishing a revolving fund for loans to small businesses. There is no dispute that defendant complied with all terms of the agreement and successfully administered the funds in the manner contemplated by the agreement. The agreement expired on December 31, 2004 by virtue of the passage of time.
Plaintiff demanded that defendant return to plaintiff any funds on hand through the grant program and provide written assignments of instruments (such as notes, mortgages, security agreements, and the like) acquired by defendant with funds advanced to it by plaintiff under the agreement.
The agreement provided for such a "Rev[er]sion of Ownership of the Small Business Development Fund to CEZC under Certain Circumstances" in the event of the "termination" of the Grant Agreement. The agreement defined "Termination" as an official cessation of this Grant Agreement, prior to the routine Expiration of its term, that results from action taken by the State of New Jersey, the U.S. Department of Housing and Urban Development, the U.S. Department of Health and Human Services or the CEZC in accordance with provisions contained in this Grant Agreement.
The agreement defined "Expiration" as "the routine cessation of the Grant Agreement because its term has ended."
The dispute here revolves around the construction and application of these provisions. By reference to various documents attached to and made a part of the agreement, and by reference to a subparagraph of section eleven of the agreement, plaintiff contends it was the intent of the parties that the reversion should occur in the event of termination or expiration. Defendant, on the other hand, argues that the plain language of the agreement provides for the reversion only in the event of termination, and that reference to extrinsic evidence does not indicate a contrary intention, but indeed supports the interpretation it urges.
Attachment C to the RFP provided that "Successful Applicants will be expected to enter into a contract with the CEZC that may include, but not be limited to, the following provisions," including the Section VI "Termination" provision. That provision listed three grounds for the agreement's termination: (A) the non-availability of funds; (B) by default or for cause; and (C) by termination settlement.
Defendant responded to the RFP on April 20, 1997. Defendant's response was included as Annex B of the eventual agreement of the parties. Defendant's response requested funding to make loans to small and medium-sized businesses in the Camden area, expressing that any funding "will be added to CBAC's existing capital base." Although we have not been furnished with a copy of the deposition transcript that was obviously part of the summary judgment motion record, it appears undisputed based on the colloquy at the hearing on the cross-motions for summary judgment that Cummings admitted in his July 12, 2007 deposition that he understood defendant's response to mean that defendant required and intended the funds to be in the form of a grant, not a loan or repayable advance, without any repayment obligation.
By a September 2, 1997 letter from Cummings to Diemer, plaintiff advised that plaintiff's board of trustees voted to award defendant a contract not to exceed $2 million, and defendant's proposal would be funded contingent upon... satisfactory resolution of the following issues identified by the RFP Evaluation Panel and CEZC Board of Trustees:
3. Establish a legal structure and procedure for the reversion of ownership of the Small Business Development Fund back to CEZC under certain circumstances.
The letter also included a report by plaintiff's RFP Review Panel recommending that "during contract negotiations staff be instructed to... establish a clear process for the reversion of ownership of invested funds back to the CEZC at the end of CBAC's contract."
In a December 15, 1997 letter to Cummings, Diemer referenced an upcoming meeting between the two men and suggested several contract award conditions, including the following, that is relevant to this appeal:
In the case of termination or expiration of the contract, in addition to the conditions set forth in Section 12. Paragraph B. it will be necessary to assign all Notes, Mortgages and other Security instruments to the CEZC. Our attorney will put together the language necessary for this assignment for your acceptance.
Neither Diemer nor Cummings are attorneys. The form of grant agreement had been prepared by plaintiff's attorney. Diemer asked defendant's attorney to draft the language regarding the condition set forth above. In a certification later filed in the litigation, Diemer stated that he was not aware that the Grant Agreement form distinguished between "termination" and "expiration." He thought the terms were interchangeable. But when defendant's attorney undertook the drafting of a supplemental provision to implement the condition discussed above, he was obviously aware of the distinction between the two terms in the agreement. He drafted language that provided for reversion only in the event of termination.
That language, embodied in Annex C-3, was made part of the agreement.
Section 11 of the basic Grant Agreement is entitled "Termination." It provides that "[t]he CEZC may terminate or suspend this Grant Agreement in accordance with the sections listed below." Subsection (A), "Termination by CEZC," provides for termination due to lack of funding by the State. Subsection (B), "Default," allows for termination or other remedies in the event the "Grantee," namely defendant, fails to fulfill or comply with any provisions of the agreement. Subsection (C), "Termination for Cause," authorizes termination in the event the Grantee has jeopardized the safety and welfare of the public, failed to comply with the agreement, or compromised the fiscal or programmatic integrity of the agreement. Subsection (E), "Termination Settlement," provides: "If this Grant Agreement is terminated or has expired under any paragraph of this Section 11," the parties "shall settle or adjust all accounts." (emphasis added).
Those provisions were in the original form of Grant Agreement. However, after receiving from Diemer Annex C-3, Cummings inserted a new subsection in Section 11, which in its entirety provided: "(D) Termination upon Expiration of this Grant Agreement. This Grant Agreement shall expire January 31, 2005."*fn1 According to the colloquy in the trial court, Cummings later testified in his deposition that he should have changed the terms in the definition section of the agreement pertaining to termination and expiration. Diemer did not notice nor was he advised of the existence of the new subsection (D) to Section 11.
The Grant Agreement expressly provides that defendant will perform in accordance with its response to the RFP, which clearly provided that funds advanced by plaintiff would be added to defendant's capital as a grant. There was no contemplation in defendant's response to the RFP or elsewhere in the documents suggesting that these funds were to be treated as a loan or refundable advance. Reversion would only occur in the event of termination.
Plaintiff argued in the trial court, and again argues before us, that Section 11(D) in effect collapses the term "expiration" into the term "termination," making it an event triggering the reversion requirement.
Judge Colalillo rejected plaintiff's argument and accepted defendant's. In deciding the cross-motions for summary judgment, she said:
I am asked to--called upon to interpret, based on the heading of a paragraph, whether or not close to $2 million should revert back to the plaintiffs in this matter. It is an argument that it was the intention of all parties here that this money should be returned. Obviously, during the course of discovery, that could stand well disputed. Mr. Cummings indicates that there were conversations and it was the intent of the parties that this money be returned. Mr. Diemer, obviously, feels otherwise....
I question whether or not parol evidence would play any role, and it does if the contract is not clear, and I must look outside the four corners of this contract in order to determine what, if anything, was meant by the moneys to be returned or not to be returned.
The agreement that's involved here was prepared by [plaintiff's attorneys]. They were preparing this... as a general contract to be used in grant agreements. The parties here changed some provisions around, and based upon the RFP Panel, the question is--and the writings of Mr. Cummings--does under certain circumstances refer to termination, termination and expiration, or actually none of the above because certain circumstances has never been defined in this contract.
The contract provisions really are conflicting except if one were to accept that paragraph 11D's caption converts a termination into an expiration, because the definition of that caption reads quite simply, this grant expires on a certain date, which is not in dispute here.
Upon review of the terms of this contract, C-1 and Annex C-3, I find that the contract terms are clear, unequivocal, concise and unambiguous. The parties here did not set forth any means in which to return any funds upon expiration of a contract, but merely accepted Annex C-3, which provides for conditions of return of the moneys or mortgages or security agreements upon termination. It clearly says within 60 days after termination.
There is no doubt that Annex C-3 was provided for termination of funds in the event of any improper administration or loan deals by defendants or if all funds had not been given to them and no further funds would be sent for this project. At that point, anything that happened then in particular, if there was any negligence or intentional wrongdoing on their part, all moneys and all moneys which had been loaned and resulted in mortgages or security agreements or notes would immediately revert back to the plaintiff for administration.
It's clear, it's unequivocal, I do not find that it conflicts in any way with the letter sent under C-1 by Mr. Diemer, because he's very clear in his letter in saying he's offering the following. And although he mentions termination or expiration in the contract for the rev[er]sion of notes, mortgages or other securities, it was sent for plaintiff's acceptance.
I cannot and will not accept the fact that a caption which is clearly defined, "This grant agreement shall expire January 31, 2005," in any way, shape or form changes that this contract was designed merely to revert back upon termination for cause or otherwise. It's clear, it's unequivocal, it simply defines another expiration date in this matter, and I find that in this matter as both sides ha[ve] contended is ripe for summary judgment just by reading what is in the contract.
And under Brill v. Guardian Life Insurance Company, I find that there are no genuine issues of material fact that are so substantial that legally reading this document, one could find that this money in any way, shape or form was to revert other than through termination of this contract.
Each side had give and take when it came to the preparation of this contract. Each side clearly, if not represented by counsel, had the ability to confer with counsel. So I'm holding on behalf and granting summary judgment on behalf of CBAC in this case.
In rejecting plaintiff's reconsideration motion, the judge further elaborated:
[T]his is a simple contract case... this contract had definitions and [it] defined expiration as expiration means the routine cessation of a contract because its terms have ended.
And, it further defines termination to mean an official cessation of a contract prior to the routine expiration of its term....
This contract was awarded pursuant to an RFP. The RFP was reviewed by a panel Board and the response by CBAC was what was accepted, as far as I understand in this matter.
Both parties prepared this agreement which we are speaking about and it's referred to many, many times through this contract as a grant agreement. Plaintiff contend[s] that it's not an actual grant agreement, although what they say is it's a loan and the monies should be repaid.
I can't even begin to tell you the number of times that the word grant agreement appears here.... Let's just take the two provisions that were referred to, 11d and 11e that say "This grant agreement shall expire January 31 of 2005["] and e it says ["]if this grant agreement is terminated o[r] has expired" not and has expired or has expired.
So one of the arguments is that this is a grant agreement by the language itself, and that's what I was asked to do, interpret the language. There is a lot of other evidence that has been set forth here... extrinsic evidence... under the Parol Evidence Rule, which counsel says that I can use and I should use now and at a later point to determine the intent of the parties, but I think it remains clear that what has been submitted here and what I have been asked to interpret does not constitute, as Mr. Cummings wanted to, expiration and termination as being one in the same thing.
C-1 is a letter from Michael Diemer... and he stated in paragraph three "That in the case of termination or expiration of the contract in addition to the conditions set forth in section 12b it will be necessary to assign all notes, mortgages and other security instruments in this matter back to plaintiff." It then goes on to say "Our attorney will put together the language necessary for the assignment for your acceptance."
Later on [defendant's attorney] prepared this instrument which is part of the agreement and attached as C-3. It was captioned the Revision of Ownership of Small Businesses--Business Development Fund to CEZC under certain circumstances. It then states "Within 60 days after termination of the grant agreement, dated as of February 1, 1998 between the parties that pursuant to the terms of section 11 of the grant agreement," and then it goes on to say
"The funds under the terms of the contract that were not expended or encumbered by CBAC or sums in writing that they are authorized to retain shall be returned as well as the fact that they shall execute and deliver to CEZC written assignments of instrument acquired by CBAC with funds advanced to them under the terms of the agreement including but not limited to notes, mortgages, security agreements, guarantees and related documents which refer back to C-1."
What was C-1? Let me go on before I do. As a result of these provisions, and it's not disputed that C-1 and C-3 are part of this contract of the grant agreement, Richard Cummings... contends that he added provision 11d to the grant agreement contract found on page 12 which has been mentioned but which is captioned termination upon expiration of this agreement.
Underneath that it says ["T]his grant agreement shall expire January 31, 2005.["] He said he placed this provision here to note that the termination and expiration would apply to annex--what's been annexed as C-3.
When deposed he testified that he should have changed the terms in the definition part of the paragraph regarding termination and expiration.
CBAC argues all funds granted to them under this contract should remain with them. Plaintiffs contend that the matter has expired and, therefore, all monies should return to them.
C-1, as I said is Mr. Diemer's letter. The Court finds that what this is or--is part of the contract but all--it is a letter from a non-lawyer to another non-lawyer, both principals in plaintiff's and defense entit[i]es here, saying that my lawyer will send your lawyer the provisions which you must accept or reject, I do not find that it extends an offer or does it convey any term of the contract. It is merely what it is, a letter saying that in the future you will receive from our lawyer contract terms that you may or may not accept.
C-3 speaks for itself. There's been much ado about the terms under certain conditions, but it is clear, it is unequivocal that anything that may happen in this contract would happen upon termination not expiration.
So, what am I left with then? I'm left with 11d, termination upon expiration of this grant agreement. And then it goes onto [sic] state ["T]his grant agreement shall expire January 31, 2005.["]
Termination and expiration were part of this contract and defined as two separate and distinct things. Mr. Cummings wants this Court to accept upon a caption which the Court has considered to [sic] a paragraph in a contract that termination and expiration are one in the same entitling the plaintiffs to the refund of monies in this matter.
Counsel ably has pointed out this isn't even a sentence, and, as I said before, it contradicts the definitions included in this paragraph. It doesn't explain anything and the Court will not, as I said before write a better contract than what the parties wrote for themselves initially.
"Interpretation and construction of a contract is a matter of law for the court subject to de novo review." Fastenberg v. Prudential Ins. Co. of America, 309 N.J. Super. 415, 420 (App. Div. 1998).
Upon our de novo review of the contract and the record (to the extent the summary judgment record has been furnished to us) we conclude that Judge Colalillo correctly determined that no genuine issue of material fact existed as to whether the agreement provided for or the parties intended that defendant would return the funds to plaintiff upon expiration of the agreement. The terms "expiration" and "termination" are clearly defined in the agreement, and they are mutually exclusive of each other. This was a grant agreement, not a loan or management agreement. Reversion would occur only in the event of termination prior to the expiration date. We affirm substantially for the reasons expressed by Judge Colalillo in her thorough oral decisions of October 5, 2007 and December 7, 2007, from which we have extensively quoted in this opinion.