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Camden Empowerment Zone Corp. v. Cooperative Business Assistance Corp.

January 7, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. C-186-05.

Per curiam.


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 ...

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