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OAI BancServices Corp. v. Voros


May 4, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County, Docket No. C-70-96.

Per curiam.


Submitted April 21, 2010

Before Judges Fisher and Espinosa.

In this appeal, we consider whether the equitable manner in which the Chancery judge enforced a stipulation of settlement constituted an abuse of discretion. Even though the order under review does not enforce the letter of the parties' agreement, we affirm because the order fully vindicates -- absent a future change in circumstances -- the essence of the agreement.

We initially note that the appendix contains little information from which we might glean a full understanding of the procedural history of this case. Nevertheless, we can assume from its docket number that the action was commenced in the Chancery Division sometime in 1996. Contrary to Rule 2:6-1(a)(1), the complaint was not included in the appendix. We gather from the preamble of a judgment entered on January 7, 1997, that plaintiff OAI BancServices Corp. "had or will in the near future file for bankruptcy." We have no other way of understanding from the record on appeal what ultimately happened to OAI's complaint. Of greater relevance is the third-party complaint filed in the action against third-party defendants Richard S. Hudec, Jr., and Christopher Hudec; this pleading also was omitted from the appendix contrary to Rule 2:6-1(a)(1).

We assume from the 1997 judgment, which was appended, that third-party plaintiffs John Guistwhite, Robert Voros, and William Voros were awarded $18,113.33, $52,738.33, and $13,425.83, respectively, against Richard S. Hudec, Jr. (Hudec). Other amended materials lead us to conclude that these awards were based on the failure of the third-party defendants to appear for trial and comply with a previous order, which is not appended, that memorialized an earlier settlement. It appears to us that this 1997 judgment did not constitute a full disposition of all claims as to all parties.

Other appended items reveal that New Jersey National Bank (the bank) held a judgment against Guistwhite and Hudec that was entered in a separate Law Division matter. We gather that some aspect of the third-party complaint sought redress from Hudec because of the proceedings and results of the bank's Law Division action.

The record on appeal provides no explanation for the void in the proceedings in this Chancery matter from the entry of the 1997 judgment until the entry of a April 12, 2004 stipulation of settlement. By way of that stipulation, Hudec agreed to pay $180,000 to the third-party plaintiffs by remitting a lump sum of $55,000 by March 31, 2004, and the balance of $125,000 in 60 equal monthly installments, which would commence on April 15, 2004 and continue on the 15th of every month thereafter through March 15, 2009. In exchange, the third-party plaintiffs agreed to provide Hudec with a filed warrant of satisfaction of the bank's judgment against Hudec by April 14, 2004. The stipulation further provided that the monthly payment plan would not commence until the warrant was received by Hudec's counsel. Lastly, the stipulation contained the third-party plaintiffs' agreement to release Hudec "from any and all claims arising out of this litigation or that brought [by the bank in the Law Division that produced the bank's judgment] upon payment in full of the settlement funds."

The record on appeal next reveals that, in late 2007, Hudec moved to compel the third-party plaintiffs to "disgorge" the funds he paid pursuant to the 2004 stipulation. In this motion, Hudec asserted he had made all the payments to date notwithstanding Guistwhite had not furnished the warrant as agreed.*fn1 Even though the stipulation expressly provided the monthly payments need not commence until the warrant was provided, Hudec claimed in his motion papers that he was concerned Guistwhite would "make trouble for him and his business," so he continued paying through February 2007 notwithstanding. For reasons not entirely clear, Hudec asserted he had paid a total of $121,663.50, but finally stopped, with slightly less than $30,000 still due, because Guistwhite failed to provide the warrant even though that failure had continued for nearly three years. Hudec's motion sought return of all funds paid pursuant to the stipulation.

Chancery Judge Michael J. Hogan denied Hudec's motion for reasons set forth in his written opinion. The judge acknowledged there was no doubt that Guistwhite had failed to provide the warrant, but that there was also no reason to believe the bank or any successor in interest "would seek to recover any part of [the] judgment" against Hudec, particularly when, as the judge noted, the record on the motion contained "substantial documentary evidence that tends to show there is no such liability existing against Mr. Hudec." As a result, the judge ordered that Hudec continue to make the monthly payments referred to in the stipulation and ordered that, in lieu of a warrant, Guistwhite indemnify Hudec from any liability on the bank's judgment.

Hudec appealed, arguing we should reverse because, in his view, the judge's decision was "based on an inaccurate finding of facts." He also argues that the order under review violates the entire controversy doctrine, the statute of limitations, and his due process rights. We find insufficient merit in these arguments to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following comments.

Normally, a post-judgment motion seeking enforcement of or relief from a settlement agreement requires that the judge simply identify the parties' mutual promises and compel their enforcement as written when unambiguous, as here. Settlement agreements are, after all, contracts, Nolan v. Lee Ho, 120 N.J. 465, 472 (1990), and are governed by contract principles, Thompson v. City of Atl. City, 190 N.J. 359, 379 (2007).

It is certainly true that courts will generally decline to substitute new or different contractual provisions for those clearly expressed by the parties in their original agreement. See, e.g., Brower v. Glen Wild Lake Co., 86 N.J. Super. 341, 346 (App. Div.), certif. denied, 44 N.J. 399 (1965). However, a judge's undertaking, when equitable jurisdiction is properly invoked, as here, may impose an alternative remedy when that which was precisely prescribed by the parties in their agreement proves difficult or impracticable to meet. When faced with such circumstances, an equity judge should craft a remedy guided by what is both fair and just to both parties while still adhering to the essence of their mutual undertaking. In that sense, following a principled assessment of all relevant circumstances, an equity judge may put aside the parties' formalities in giving meaning to, and breathing life into, the substance of their contract. See, e.g., Applestein v. United Board & Carton Corp., 60 N.J. Super. 333, 348 (Ch. Div. 1960) (recognizing that the "court of conscience never pays homage to the mere form of an instrument or transaction, if to do so would frustrate the law or place justice in chains"), aff'd o.b., 33 N.J. 72 (1960).

Here, the judge recognized that the essence of the promise in the 2004 stipulation to provide a warrant of satisfaction was the functional equivalent of a promise to insulate Hudec from the bank's attempts to collect from him on its judgment. That is, the device the parties envisioned at the time to vindicate Hudec's contractual rights -- obtained in exchange for his payments -- was a warrant of satisfaction, an instrument that would unambiguously express the bank's acknowledgement that Hudec would have no further liability on the judgment. But the circumstances alluded to by the judge -- the apparent practical difficulties in obtaining the warrant coupled with the small likelihood that the bank or its successors would ever pursue Hudec in the future -- made sensible and appropriate the imposition of a remedy different in form but similar in substance. After carefully weighing all these circumstances, Judge Hogan concluded in his cogent and well-reasoned written decision that the most equitable course was to compel Guistwhite to indemnify and hold Hudec harmless from any future attempts by the bank or its successors to collect from Hudec on the bank's judgment. In these peculiar circumstances -- troubled further by Hudec's presentation of a sketchy record in both the trial court and this court -- Hudec has not carried his burden of demonstrating that, in exercising his equitable jurisdiction, the judge abused his discretion.

To be sure, the remedy applied by the judge is not as complete or efficient as that contained in the 2004 stipulation, and may in the future require the further assistance of the court. However, until such time as Hudec can demonstrate the remedy imposed is insufficient, we cannot conclude that the indemnification obligation imposed on Guistwhite is an unjust or inadequate remedy.


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