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Cranford Building Associates, L.L.C. v. Township of Cranford


July 16, 2009


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-737-08.

Per curiam.


Submitted April 21, 2009

Before Judges Wefing and Parker.

Defendant Township of Cranford (Township) appeals from an order entered on July 8, 2008 granting summary judgment in favor of plaintiff, Cranford Building Associates (CBA), in the amount of $300,000, plus pre-judgment interest, and dismissing the Township's counterclaim with prejudice. We reverse and remand in part and modify in part.

CBA was the contracted redeveloper for the Cranford Crossings project. In December 2003, CBA and the Township entered an agreement whereby CBA was to construct a parking garage (parking garage agreement). The parking garage agreement provided that CBA would prepare and propose the project with a guaranteed maximum price not to exceed $5,580,000. In May 2004, CBA began to solicit bids for the construction project and subsequently advised the Township that the project cost would exceed the maximum price. CBA wanted to exclude certain items in order to bring the cost within the guaranteed maximum. The Township disagreed and invoked the arbitration clause in Article 12 of the agreement. The parties commenced arbitration, and in July 2007, the arbitrator issued a scheduling order for hearing dates on July 23, 26 and 27, 2007.

On July 11, 2007, however, the Township received a letter from CBA's counsel requesting the Township's approval for CBA to transfer the project to East Coast Residential Associates, LLC (East Coast) pursuant to Article 4 of the redevelopment agreement. The Township then contacted CBA and suggested that, in light of the proposed transfer, the Township and CBA meet in an effort to resolve their dispute before the arbitration. The parties agreed to meet on July 26, 2007 and the arbitration was adjourned.

The Township maintains that after "intense" negotiations, the parties agreed to settle the dispute for $300,000. The Township's attorney and administrator advised CBA that they would recommend the proposed settlement to the Township Committee but that it would have to be approved by formal resolution before it could be adopted. The American Arbitration Association (AAA) was nevertheless advised that the matter had settled and the arbitration should be cancelled.

In the meantime, the Township was addressing the transfer of the project to East Coast. The Township maintains that it "was adamant that any transfer of the [project] was contingent upon the settlement of any and all issues between the Township and CBA." In addition, the Township advised that the settlement was contingent upon its funding the settlement amount with a bond ordinance.

The parties continued to negotiate and ultimately agreed on a payment of $250,000 which was set forth in mutual releases. The $250,000 amount was recommended to the Township Committee at its September 25, 2007 meeting. On that date, the Township Committee adopted a resolution approving CBA's transfer of the project to East Coast subject to CBA's execution of the assignment and assumption agreement (assignment agreement) and mutual release and satisfaction by CBA of all its obligations under the parking garage agreement. The mutual release stated that the settlement amount was $250,000, and the Township Committee specifically approved the mutual release. In a supplemental Bond Ordinance, the Township Committee provided funds for the settlement.

The Township claims that CBA never executed the mutual release or the assignment agreement, nor did it satisfy all of its obligations under the parking garage agreement. Nevertheless, CBA transferred the project to East Coast. Because CBA failed to meet its obligations, the Township declined to pay the $250,000 settlement amount to CBA.

In March 2008, CBA filed a complaint to enforce the purported settlement agreement in the amount of $300,000. CBA subsequently moved for summary judgment and the Township cross-moved for retroactive leave to file a counterclaim and third-party complaint. After hearing argument on the motions, the trial court granted CBA's motion and entered judgment in its favor in the amount of $300,000. The Township's cross-motion was denied and its counterclaim was dismissed with prejudice. It is that order from which the Township now appeals and argues that the trial court erred (1) in failing to recognize that a governing body must approve a settlement; (2) "in granting summary judgment because there were significant material issues in dispute;" and (3) in dismissing the Township's counterclaim with prejudice.

In its statement of reasons, the trial court relied on the parties' cancellation of the arbitration and the Township's adoption of the resolution and the bond ordinance as evidence of the settlement. It is obvious, however, that there was at least one significantly disputed issue in that the mutual release called for a $250,000 payment, rather than the $300,000 claimed by CBA and awarded by the court. Moreover, there was substantial correspondence and documentary evidence indicating that the Township required a global settlement in consideration of the $250,000 payment.

In considering a motion for summary judgment, the trial court must not decide issues of fact; it must only decide whether there are such issues. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). In determining whether there is a genuine issue of fact, the trial court must decide "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." Ibid. We apply the same standard in our review of the trial court's grant of summary judgment. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

Ordinarily, we favor the strong public policy of settling litigation. Pascarella v. Bruck, 190 N.J. Super. 118, 125 (App. Div.), certif. denied, 94 N.J. 600 (1983). But, government entities, particularly municipalities, cannot settle a case until the governing body has adopted an ordinance or resolution approving the settlement. Jersey City v. Roosevelt Stadium Marina, Inc., 210 N.J. Super. 315, 327 (App. Div. 1986), certif. denied, 110 N.J. 152 (1988). Formal action is required of government bodies when consenting to settlement of litigation. Ibid. "The unauthorized consent of a municipal attorney cannot bind the governing body." Ibid. Consequently, there is a substantial factual dispute with respect to the terms of the settlement that must be resolved by a factfinder after hearing all of the evidence. Accordingly, we reverse the grant of summary judgment and remand the matter for further proceedings in the trial court.

The Township further argues that the trial court erred in dismissing its counterclaims with prejudice. We agree. CBA maintains that the Township's counterclaims are procedurally barred by Rule 4:67-4(a), which provides that in summary actions, "[n]o counterclaim or cross-claim shall be asserted without leave of court." Although the rule provides that leave be sought to assert counterclaims in summary proceedings, it does not prohibit the assertion of such claims. Perretti v. RanDay's County Kosher, Inc., 289 N.J. Super. 618, 624 (App. Div. 1996). The rule is designed simply "to afford the trial court an opportunity to manage the litigation between the necessary parties, [to] provid[e] for expeditious resolution of those issues that can be addressed quickly, and more thorough[ly] develop[e] . . . those that require plenary treatment." Ibid. In Perretti, the defendants failed to seek leave before filing a counterclaim, and the trial court dismissed it. Id. at 265. We reversed, reinstating the counterclaim and remanding the case to the Law Division. Ibid. Here, we adopt a similar approach.

The Township raised six counterclaims against CBA and other parties. The counterclaims made allegations ranging from CBA's failure to satisfy its obligations under the parking garage and redevelopment agreements to breach of a financial tax agreement between the Township and CBA.

The parking garage agreement explicitly provided that any disputes arising therefrom would be resolved through binding arbitration. New Jersey has a strong public policy in favor of arbitration and N.J.S.A. 2A:24-1 authorizes the courts to recognize and enforce arbitration agreements to resolve disputes in an alternative forum. Wein v. Morris, 194 N.J. 364, 375-76 (2008) (quotation omitted); see also County Coll. of Morris Staff Ass'n v. County Coll. of Morris, 100 N.J. 383, 390 (1985); Littman v. Morgan Stanley Dean Witter, 337 N.J. Super. 134, 148-49 (App. Div. 2001).

Accordingly, since the parking garage agreement provides for arbitration of claims arising thereunder, to the extent that the counterclaims arise under the parking garage agreement, they must be submitted to arbitration in accordance with that agreement. We, therefore, modify the order to the extent that the counterclaims raising issues beyond the parking garage agreement shall be dismissed without prejudice so that defendant can reassert them in the Law Division.

Reversed and remanded in part; modified in part.


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