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Holobeam, Inc. v. Tandy Corp.


March 25, 2010


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7796-07.

Per curiam.


Argued December 8, 2009

Before Judges Grall, Messano, and LeWinn.

Holobeam, Inc. (Holobeam) owned commercial property in Paramus, New Jersey, which it leased to Tandy Corporation, presently known as RadioShack, on January 6, 1994. The term of the lease was fifteen years; Section 18 contained the following provision which is pertinent to the issues on appeal:

Tenant may assign this Lease or sublet the whole or any portion of the Demised Premises; provided, however, in the event of any such assignment or subletting, Tenant shall remain obligated under this Lease unless and until its obligations are terminated in writing by Landlord. [(Emphasis added).]

On June 16, 1997, RadioShack assigned its lease with Holobeam to CompUSA, Inc. (CompUSA). RadioShack thereupon vacated the premises and CompUSA took occupancy. CompUSA never entered into a lease directly with Holobeam.

Sometime in September 2007, CompUSA began experiencing financial difficulties and vacated the property. Gordon Brothers acquired the business in order to begin an orderly liquidation. CompUSA subsequently went out of business nationwide.

On October 22, 2007, Holobeam filed a complaint against RadioShack and CompUSA alleging that they had defaulted under the terms of the lease by "failing, refusing and neglecting to timely make the monthly rental payments...." On March 6, 2008, RadioShack filed a cross-claim against CompUSA for indemnification and "under the Joint Tortfeasors Contribution Act for any judgment [Holobeam] may recover."

Holobeam and Gordon Brothers negotiated a settlement as part of CompUSA's liquidation workout. On March 31, 2008, the parties executed an Assignment of Claim which contained two paragraphs describing the value of Holobeam's claim against CompUSA. In the first paragraph, Holobeam asserted a claim for $1,227,335.25, which was later revised to $1,274,401.80. At the conclusion of the document, however, appears the following paragraph:

The undersigned [Holobeam] agrees to assign its Claim to Gordon Brothers but disputes the amount set forth above and asserts that in a proceeding under the United States Bankruptcy Code, including through the application of section 502 (b)(6) of the Bankruptcy Code, the Claim would be determined in the amount of $2,016,534.10.

Holobeam appended a statement supporting its claim for $2,016,534.10, consisting of: (1) rent from September 1, 2007 through September 30, 2009; (2) property taxes from January 1, 2008 through September 30, 2009; (3) utilities for "Winter 2008" and "Winter 2009"; and (4) maintenance and repair expenses.

CompUSA settled with Holobeam for 34.22 cents on each dollar of its defined claim of $1,274,401.80, resulting in a settlement amount of $436,100.30. The Assignment of Claim contained a "carve-out provision," preserving Holobeam's right to pursue any claims it had against RadioShack.

On November 12, 2008, Holobeam and CompUSA entered into a consent order stating that all of Holobeam's claims against CompUSA were dismissed without prejudice, and providing further that "any other claims by or against Defendant CompUSA..., including the cross-claim by Defendant RadioShack... as against Defendant CompUSA, Inc., shall remain valid, effective and undisturbed by this Consent Order...."

RadioShack thereafter filed a motion for summary judgment on its cross-claim for indemnification by CompUSA. On December 5, 2008, the trial judge entered an order granting the motion and providing that "CompUSA shall indemnify and hold harmless RadioShack from all loses [sic] arising from the Holobeam suit...."

On February 23, 2009, RadioShack settled with Holobeam for $1,100,000. CompUSA requested a hearing before the trial judge on the reasonableness of the settlement, and such a hearing was held on April 6, 2009.

CompUSA contended that the settlement was unreasonable because Holobeam had already assigned $1,274,401.80 of its claim against RadioShack to Gordon Brothers in exchange for CompUSA's settlement of $436,100.30. Therefore, according to CompUSA, Holobeam's maximum recovery was in the range of $800,000 to $900,000 ($2,016,534.10, the damages originally alleged, minus $1,274,401.80, the amount assigned to Gordon Brothers). CompUSA maintained that it should only be required to indemnify RadioShack in that range and, therefore, the $1,100,000 settlement was unreasonable.

At the hearing, Holobeam's attorney, Richard J. Kapner, testified as to the intent of the parties in executing the Assignment of Claim. Kapner stated that CompUSA prepared and presented the Assignment of Claim to Holobeam as a means to quickly recoup some of Holobeam's losses since CompUSA was considering filing for bankruptcy. Kapner further testified that at the time of the negotiations, he was under the impression that he had to participate in a settlement agreement; otherwise CompUSA would be bankrupt and it would take years for Holobeam to recoup its losses. Kapner further testified that the original Assignment of Claim was modified, at Holobeam's request, specifically to include the carve-out provision to preserve Holobeam's claims against RadioShack as guarantor of the lease.

Kapner noted that Holobeam disputed the $1,274,401.80 claim presented by CompUSA and asserted that the true claim amount was $2,016,534.10. Therefore, Kapner stated, no claim for $1,274,401.80 was ever assigned to Gordon Brothers.

At the conclusion of the testimony, the trial judge found that the Assignment of Claim amounted to a contract of adhesion, because Holobeam was forced either to accept the terms or to risk never collecting any payment from CompUSA. Had Holobeam rejected the contract, the trial judge noted, "they would have possibly been engaged in protracted litigation possibly with an empty building, possibly carrying on for years." The judge ruled:

In this case, looking at this matter from the landlord, they're presented with getting some cents on the dollar or possibly getting nothing and then pursuing the ultimate guarantor in this matter which was the original tenant which would be Radio Shack [sic].

In addition, Mr. Kapner indicated that the agreement or the contract was written by prior counsel for CompUSA. The law is clear, when an ambiguity appears in a written agreement the writing is to be strictly construed by the draftsman....

In this case, viewing all the factors and the totality of the circumstances, looking at the potential claims that were out there bearing in mind that the landlord was almost compelled to enter into the settlement with CompUSA, looking at what the potential exposure was to... Radio Shack [sic] which is rent for the entire term from the time CompUSA vacated until the end of the lease, property taxes, utilities,... additional rent including landscaping, electric, fire suppression, roof repairs,... and attorney's fees, this [c]court finds that the settlement of $1.1 million was more than reasonable. That the credit that should have been given to CompUSA was not the $1.2 [million] as set forth in the assignment, but rather the amount of money that was actually received from CompUSA.

That being said, the [c]court deems that the settlement is reasonable and will enter the appropriate judgment.

The judge thus found that the appropriate credit to CompUSA was $436,100.30. Therefore, Holobeam's remaining damages totaled $1,580,433.80 -- $2,016,534.10, (overall damages) minus $436,100.30 (amount paid by CompUSA). Consequently, the judge found, the $1,100,000 settlement was reasonable.

On appeal, CompUSA raises the following contentions for our consideration:



A. RadioShack Must Prove Its Settlement Was Reasonable to Recover from CompUSA

B. The Trial Court's Rulings

C. Holobeam's Assignment of Claim Operated to Reduce Its Potentially Recoverable Damages, and thus RadioShack's Settlement was Unreasonable

D. The Trial Court's Determinations as to the Interpretation of the Assignment of Claim and Reasonableness of RadioShack's Settlement is [sic]

Subject to a De Novo Standard of Review RadioShack was not a party either to the Assignment of Claim executed on March 31, 2008, or to the consent order entered on November 12, 2008. In fact, both the assignment and the consent order expressly preserved Holobeam's right to pursue damages from RadioShack and RadioShack's concomitant right to indemnification by CompUSA.

Under these circumstances, we reject CompUSA's arguments regarding the interpretation of the Assignment of Claim as well as the effect of that document upon CompUSA's indemnification obligation to RadioShack. Those arguments "are without sufficient merit to warrant discussion in a written opinion...." R. 2:11-3(e)(1)(E).

Suffice it to say, the trial judge found that the Assignment of Claim was ambiguous; therefore, the judge properly admitted extrinsic evidence to determine "the alleged proper interpretation of the language used [in that document]." Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 192 (App. Div. 2002). As noted, Kapner testified that Holobeam never assigned $1,274,401.80 to Gordon Brothers in exchange for payment of $436,100.30, asserting that such a contention would make no sense in light of the carve-out provision preserving Holobeam's claims against RadioShack.

In determining the reasonableness of the settlement between Holobeam and RadioShack, the trial judge implicitly rejected the argument CompUSA raises here, namely that a proper interpretation of the Assignment of Claim would reduce Holobeam's damages by $1,274,401.80. We concur with the trial judge's determination that the Assignment of Claim contained no clear agreement on the precise amount assigned.

Moreover, Holobeam had two independent claims: (1) a debtor/creditor claim that was assigned to Gordon Brothers in the Assignment of Claim; and (2) the contractual claim against RadioShack pursuant to the lease provisions. The Assignment of Claim was not a quid pro quo limiting Holobeam's right and ability to recover from RadioShack. Therefore, the dollar amount purportedly assigned is immaterial to Holobeam's claim against RadioShack; only the amount actually paid by CompUSA is pertinent to that claim.

Moreover, we are satisfied that the trial judge's finding that Holobeam's settlement with RadioShack was reasonable is "supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). That determination is, therefore, binding on appeal. Ibid.

Pursuant to RadioShack's lease with Holobeam, it was obligated to pay the landlord for all costs, taxes and maintenance. After CompUSA vacated the property, the rent arrears alone amounted to $1,735,781.25. When property taxes, utilities, maintenance and repair expenses were added, the total amount of RadioShack's obligation to Holobeam under the lease was $2,016,534.10.

When reduced by the sum of $436,100.30 that CompUSA paid to Holobeam under the Assignment of Claim, the amount of $1,580,433.80 was still owed to Holobeam. RadioShack was liable for this amount by virtue of the lease terms. Therefore, the judge determined, and we concur, that the $1,100,000 settlement between Holobeam and RadioShack was reasonable.



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