On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-541-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo, Lihotz and Messano.
Defendants Benjamin Ringel and Armstrong Capital, LLC appeal from final orders of the Law Division granting summary judgment in favor of plaintiffs Riad Development Company, LLC, Abdel-Rehim A. Riad, Nagda K. Riad, Abir Riad Catovic, and Amira Riad (collectively, Riad), and entering judgment against defendants in the amount of $900,000, plus interest at 18% annually, and attorneys' fees and costs of $104,073.86. We affirm.
The relevant facts are largely undisputed. In 2003, Riad Development, wholly owned by Abdel-Rehim A. Riad, entered into an agreement with Armstrong Sutton Plaza, LLC,*fn1 principally owned by Benjamin Ringel, an attorney, for the sale of Riad's shopping mall, named Sutton Plaza Shopping Center, in Mount Olive. Initially, the agreed upon price was $21.5 million, as stated in the contract of sale dated June 20, 2003. As closing approached, however, Ringel was short the funds by $1 million, and as a result, renegotiated a new purchase price of $20.5 million. In connection with the reduced price, Armstrong Capital, LLC, also principally owned by Ringel, made contractual promises -- the so-called "Split-Dollar Agreements" -- to pay monies to Riad Development for use by the Riad family to fund the premiums on a life insurance policy.
The "Split-Dollar Agreements," which are the center of the present dispute, are comprised of four documents: the Letter Agreement, the Private Split Dollar Agreement (PSDA), the Collateral Assignment Split-Dollar Life Insurance Agreement (Collateral Agreement), and the Unconditional Guaranty (Guaranty) (collectively, the Split-Dollar Agreements). Among them, the PSDA is the principal agreement setting forth the general obligations of the parties. Pursuant to Article 1 of the PSDA, the Riad family established the Riad Family Irrevocable Life Insurance Trust (Trust) to purchase a "second-to-die" split-dollar life insurance policy from Massachusetts Mutual Insurance Company (Mass Mutual) on the lives of AbdelRehim A. Riad and his wife, Nagda K. Riad, with a guaranteed death benefit of $3.5 million. Articles 3 and 10 of the PSDA set forth Armstrong Capital's obligation as the "Principal Payor" to advance $100,000 to the Trustees, daughters Abir Riad Catovic and Amira Riad, thirty days before the due date of the annual premium, and to maintain the policy "by paying all premiums as they come due" for a period of 10 years, thus totaling $1 million in premium payments.
The agreement was structured in such a way that Armstrong Capital would have an absolute right to repayment of the $1 million in premiums but only upon the happening of certain conditions. Under Article 4, Armstrong Capital was only entitled to repayment "[i]f the Policy matures as a death benefit claim while this Agreement remains in force" or "the Trustees or their successors . . . surrender the Policy," but only so long as any repayment was made in accordance with Article 7. Article 7 provides that defendants are not entitled to repayment unless the death benefits paid while the PSDA remains in force, including the return of all premiums paid, exceeds $3.5 million.*fn2 The agreement was to remain in force, pursuant to Article 8, entitled "Termination of Agreement," until "the death of the second-to-die of the Insureds (or, if earlier, a surrender of the Policy under the second sentence of Article 4 of this Agreement) and the full payment to the Principal Payor of the Payor's Premiums payable hereunder."
In the event that Article 4's repayment provision went into effect, Article 5 provided for the creation of a Collateral Assignment Agreement, in which Armstrong Capital was assigned an interest in the death benefits equal to its paid premiums. Indeed, should no death benefits actually become payable under the Policy, for any reason other than surrender, Article 7 terminated Armstrong Capital's right to repayment. Repayment would not include interest, as the deal was structured as a $100,000 per year below-market no-interest loan from Armstrong Capital to Riad Development, with imputed interest to the Riads for federal income tax purposes.
Article 10 of the PSDA set forth the conditions of default, which would occur if Armstrong Capital failed (1) to pay the premiums when due; (2) to pay its debts; (3) to maintain its existence as a Delaware limited liability company in good standing; and (4) to perform its obligations under the Letter Agreement. Upon default, by operation of the acceleration and forfeiture clauses in Article 10, $1 million would become immediately payable to plaintiffs, at 18% interest, and defendants' right to repayment would terminate:
1. the full amount of all premiums due under the Policy shall immediately be and become due and payable . . . and shall bear interest at the rate of eighteen percent (18%) per year from the date of acceleration until paid; and
2. this Agreement shall terminate and the Principal Payor shall forfeit all rights in and to repayment of all or any portion of the Payor's Premium paid to the Trustees as of the date of such declaration buy the Trustees, and all rights of the Principal Payor under the collateral assignment shall terminate and become null and void.
Also upon default, the "Principal Payor" was obligated to pay all "costs and expenses of collection, investigation, defense and documentation thereof, including reasonable attorneys' fees" incurred by the Riads in enforcing the agreement.
Ringel was personally not a party to the Split-Dollar Agreements except for the Guaranty. The Guaranty was entered into between Ringel, the Riad family and Riad Development, and provided that Ringel agreed to personally "secure the obligations of Armstrong under the PSDA." In that vein, however, the PSDA, which was entered into between Riad Development and Armstrong Capital, provided that "[t]his Agreement and the documents referred to herein constitute the entire agreement between the parties," and "any other agreements . . . are hereby superseded and revoked." The Guaranty is not referred to in the PSDA. The PSDA does, however, refer to both the Collateral Agreement and the Letter Agreement. The Letter Agreement, which was entered into between Armstrong Capital and Riad Development, provides in paragraph ...