February 25, 2009
F.P.P.E. CONSULTING ENGINEERS, INC., PLAINTIFF-RESPONDENT,
LOUIS S. MORDA AND MARY LOUISE MORDA, DEFENDANTS-APPELLANTS, AND KEYSTONE BUSINESS PRODUCTS, INC., DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Salem County, Docket No. L-234-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 30, 2009
Before Judges C.L. Miniman and Baxter.
Defendants, Louis and Mary Louise Morda, appeal from a February 25, 2008 order that granted the cross-motion of plaintiff, F.P.P.E. Consulting Engineers, Inc., to enforce a settlement agreement, and at the same time denied defendants' motion to enforce the version of the settlement agreement they had proposed. Defendants also appeal from an April 11, 2008, order that denied their motion for reconsideration. At issue during the motion hearings was the question of whether, as plaintiff claimed, defendants had agreed to release any potential engineering malpractice claims against plaintiff, or whether, as defendants claim, the scope of the release was limited to dismissal of the specific claims that were contained in plaintiff's complaint and defendants' counterclaim. We reverse.
On February 13, 2003, the parties entered into a contract in which plaintiff agreed to provide all engineering services necessary to enable defendants to obtain major subdivision approval of an eighty-eight acre parcel of property defendants owned in Pilesgrove Township. Although the estimated contract price was $120,000, defendants had paid plaintiff a total of $237,649 before terminating plaintiff's contract on May 19, 2006. After plaintiff was terminated, defendants hired new engineers to continue the engineering work begun by plaintiff.
Approximately two months later, on July 29, 2006, plaintiff filed a complaint in the Law Division demanding payment of $96,353 that plaintiff contended was still owed on the contract. Defendants filed a counterclaim alleging consumer fraud, breach of contract, common law fraud and slander of title. On March 21, 2007, the parties, each represented by counsel, participated in court-ordered mediation. Mediation was successful with each side agreeing to the dismissal of its claims against the other.
On March 23, 2007, a few days after the mediation was completed, defendants' counsel wrote to plaintiff's counsel confirming the settlement terms. We quote that letter in its entirety because that letter played a central, perhaps dispositive, role in the judge's decisions in plaintiff's favor. Defendants' counsel wrote:
This will confirm we had mediation this week on Tuesday[,] March 20, 2007. There was discussion at the mediation that both parties would waive their claims. There was also discussion as to the use of the existing CAD [computer assisted drawing] disk information. At the end of the mediation, we were told by the mediator, that your clients wanted 30 days to review the matter then they would let us know if they are going to dismiss the complaint or not.
You advised on the morning of March 23[,] 2007, that you and your clients were willing to dismiss the case. After that conversation, I talked to my client and he said he would be willing to dismiss it so long as he can use the engineering work that was done by [plaintiff]. My client has already [paid plaintiff] $200,000.00 and we do not want to have any "hang nails" on this case.
Accordingly, assuming your client is willing to allow my client to use the work that he had already paid for, my client is willing to dismiss any and all claims against your client and is willing to forego any concerns he might have had with your client as an engineer.
If that were [sic] acceptable to you, I would ask that you draft the releases and we move forward to settle this case.
Two months later, in approximately May 2007, plaintiff's counsel forwarded an eight-page proposed release and settlement agreement, which included a release by defendants of any future claims of engineering malpractice against plaintiff. In relevant part, plaintiff's proposed release provided:
8. . . . It is the intent of the undersigned that this be a full, complete, and General Release of all such actions, causes of actions, etc., including, but not limited to such actions, causes of actions, that are discovered after the date of this instrument, and which relate to any matter, cause, circumstance or thing existing on or prior to the date of this instrument. . . . The parties do further hereby covenant and agree that the effect of this Agreement and Release includes but is not limited to, the elimination of any and all liability on the part of the plaintiff with regard to the subsequent use, modification or future application of the Major Subdivision Plans prepared by plaintiff for defendants' project, which Plans were ordered by the court to be released to defendants by order dated October 20, 2006, including the elimination of any and all warranties, express or implied, with respect to such Plans.
9. Unknown Claims. Each party acknowledges that there is a risk that subsequent to the execution of this Agreement and Release, that they discover, incur or suffer from claims which are unknown or unanticipated at the time this Agreement and Release was executed, . . . and which, if known by the party by the date that this Agreement and Release is being executed, may have materially affected their decision to execute this Agreement and Release. Each party acknowledges that they are assuming the risk of some unknown and unanticipated claims and agree that the Agreement and Release of the other party and the other party's Releasees applies thereto.
During the spring and summer of 2007, the parties exchanged considerable correspondence concerning the turnover of the CAD discs plaintiff had already prepared so that those drawings could be used by defendants' new engineer.
The record reflects that in August 2007, defendants were advised by their land use attorney, Gary D. Thompson, of potential engineering malpractice issues involving plaintiff. Thompson wrote to the lawyer who was representing defendants in the instant action advising him that "he should not enter into a global settlement with [plaintiff]." Thompson advised defendants' attorney that the new engineer might be able to modify the subdivision plans prepared by plaintiff in a fashion that would avoid the necessity of defendants being required to submit a costly and amended major subdivision proposal. If that modification could successfully be made, Thompson explained, there would be no malpractice claim, but it was too early to tell.
In January 2008, some seven months after plaintiff forwarded the proposed settlement documents to defendants, defendants moved for enforcement of the settlement. Specifically, they sought an order enforcing the settlement but preserving their right to proceed against plaintiff on a potential engineering malpractice claim. Plaintiff cross-moved to enforce the version of the settlement and release that it had forwarded to defendants months earlier, which would require defendants to release plaintiff from all claims "discovered after the date of this instrument" as well as any claims pertaining to plaintiff's liability for the "future" use of the drawings plaintiff prepared. In support of its cross-motion, plaintiff contended that it would not have relinquished nearly $100,000 in unpaid professional fees and electronic versions of its engineering subdivision plans unless it obtained a release of all present and future claims. Plaintiff consequently sought an order compelling defendants to sign the eight-page settlement and release plaintiff had forwarded in May 2007.
During argument on the motion, plaintiff's counsel conceded that the issue of engineering malpractice was never raised or discussed during the mediation. The following discussion occurred between plaintiff's counsel and the judge:
[PLAINTIFF'S COUNSEL]: I would agree that the issue of malpractice was never raised during the mediation, never discussed at all, I'll concede that.
THE COURT: Yes. And nobody had any concept that there was going to be--no one had any inkling that there was a potential malpractice claim against your client, right,--
[PLAINTIFF'S COUNSEL]: Absolutely not.
THE COURT: --on either side?
[PLAINTIFF'S COUNSEL]: I agree 100 percent, but for the defendants to take the position that this issue of alleged malpractice rests solely on the future acts of a Planning Board is ridiculous.
After oral argument of the motions, the judge rendered an oral decision, holding that the version of the settlement document prepared by plaintiff accurately represented the settlement terms the parties reached during the court-ordered mediation on March 20, 2007. The judge reasoned:
The question becomes: did the exchange of letters, and in particular, the March 23, 2007 letter, act as a general release for any and all claims relating to [plaintiff] and its relationship to [defendants]? And I find that it does.
Arguments, the oral arguments that were here, plus the papers that were submitted, suggest that that language was just focusing on claims that were ripe at that time and there [were] potential professional ethical claims that the [defendants] were contemplating against [plaintiff] and its principal . . . . But when you go through the language, it is not ambiguous in any way. It's "any and all claims." It is not "any and all claims that presently exist." It's . . . basically as broad as it can be. And I find that the release that's contemplated in the settlement memorialized by the letters was just that, a general release.
So I'm going to enforce the settlement as memorialized in the draft settlement document previously [prepared by plaintiff].
The judge granted plaintiff's cross-motion and denied defendants' motion in an order of February 25, 2008. On appeal, defendants argue the judge erred in interpreting the agreed-upon settlement as a general release of not only present claims, but also any possible future claims. They maintain that in general, claims arising after a settlement is reached are not deemed released because any such future claim was not within the contemplation of the parties. Relying on Bilotti v. Accurate Forming Corp., 39 N.J. 184, 203-04 (1963), they maintain that claims arising contemporaneously with, or subsequent to, the actual settlement are not discharged unless expressly stated. They further contend that the language in their attorney's March 23, 2007 letter--"forego[ing] any concerns [defendants] might have had with your client as an engineer"--refers only to defendants' waiver of any right to proceed against plaintiff because of plaintiff's initial refusal to turn over the CAD discs, and not to the release of any possible claim of engineering malpractice.
Consequently, defendants argue that they are entitled to the reversal of the order of February 21, 2008, and the entry of an order on remand requiring the deletion of any language in the settlement documents that would release plaintiff from any engineering malpractice claim. In the alternative, defendants maintain that there was sufficient controversy about the terms of the settlement reached on March 20, 2007, as to require the judge to have conducted a plenary hearing before ruling in plaintiff's favor.
On April 11, 2008, the court denied defendants' motion for reconsideration, reasoning "that the correspondence from [defendants' lawyer dated March 23, 2007] is clear and unambiguous, and it clearly releases--indicates that his client is willing to release [plaintiff] basically from anything relating to this project."
"As a general rule, courts should enforce contracts as the parties intended" by "discern[ing] and implement[ing] the common intention of the parties." Pacifico v. Pacifico, 190 N.J. 258, 266 (2007). Once the parties' intent has been determined, no court may disregard it to "create a new or better contract or to add to, subtract from, modify, or alter any terms of the agreement." Commc'ns Workers of Am., Local 1087 v. Monmouth County Bd. of Soc. Servs., 96 N.J. 442, 452 (1984). Moreover, a settlement acts as a release only in respect of those claims that the parties actually released, or intended to release. Goncalvez ex rel. Goncalvez, 188 N.J. Super. 620, 629 (App. Div. 1983). Ultimately, the scope of any release is determined by the intention of the parties:
A general release, not restricted by its terms to particular claims or demands, ordinarily covers all claims and demands due at the time of its execution and within the contemplation of the parties. . . .
Claims or demands arising contemporaneously with delivery, however, are not discharged unless expressly embraced therein or falling within the fair import of the terms employed. [Bilotti, supra, 39 N.J. at 203-04.]
Here, the trial judge was faced with the question of whether defense counsel's letter of March 23, 2007 was intended to release possible engineering malpractice claims. It is clear from the record that defendants did not become aware of the possibility of any such claim until Thompson's letter of August 2007, which was five months after defendants' attorney wrote the letter of March 23, 2007 summarizing the terms of the settlement that had been reached at the mediation three days earlier. Thus, it was impossible for defendants to have released a malpractice claim of which they had no reason to know. At the time of the court-ordered mediation, the case was nothing more than a straightforward collection case. Indeed, during the February 1, 2008 oral argument of the motions, plaintiff's counsel conceded that there was no discussion during the court-ordered mediation of any malpractice claim or the release of any such claims.
Even though we conclude that defendants could not have intended to release the specific malpractice claim that Thompson later advised them of, the parties' intentions still remain unclear. The record does not enable us to determine whether defendants were intending to release all claims that they possessed up until that time or whether, instead, the settlement included an intention to release plaintiff from all future, but unspecified and unknown, claims. The March 23, 2007 letter alone does not answer that question.
Consequently, the motion judge was required to make a credibility determination, which could not be made on the basis of a review of the conflicting certifications that were presented. Bruno v. Gale, Wentworth & Dillon Realty, 371 N.J. Super. 69, 76-77 (App. Div. 2004). The motion judge's reliance on the March 23, 2007 letter, when its terms were so vague, was error. The judge's findings of fact cannot be supported by adequate, substantial and credible evidence, and therefore a plenary hearing was required. Ibid. We reverse and remand for a plenary hearing to determine whether the parties reached an agreement to release only the claims contained in the 2006 complaint and counterclaim, or whether, instead, the parties intended a general release of all present and future claims.
Reversed and remanded for a plenary hearing. We do not retain jurisdiction.
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