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Tri-Tech Environmental Engineering, Inc. v. Nutley Board of Education

August 30, 2010


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9675-08.

Per curiam.


Argued May 18, 2010

Before Judges Carchman, Parrillo and Lihotz.

Plaintiff Tri-Tech Environmental Engineering, Inc. appeals from a Law Division judgment granting relief to defendant Nutley Board of Education. After a summary hearing, the court dismissed plaintiff's complaint, which sought to enforce a May 5, 2008 Mutual Release and Settlement Agreement (Settlement Agreement) that resolved a dispute regarding enforcement of the parties' management services contract pending in arbitration. The court also granted defendant's request to rescind, as legally unenforceable, the Settlement Agreement and a related Rider to the initial management services contract. Consequently, plaintiff was ordered to return monies previously paid under the terms of settlement. Further, the order dismissed the remaining counts of defendant's counterclaim and permitted the parties to return to arbitration.

On appeal, plaintiff advances these arguments. First, it challenges as error the court's denial of its request for enforcement of the Settlement Agreement. Second, claiming procedural and substantive errors, plaintiff posits that although its enforcement claims could have been determined in a summary proceeding, disposition of defendant's claim of unilateral mistake required a plenary hearing. We reject plaintiff's arguments that the trial court erred in denying enforcement of the Settlement Agreement. However, we agree the entry of judgment for defendant and rescission of the Settlement Agreement without benefit of an evidentiary hearing constituted reversible error. We conclude disputed material issues were presented in the pleadings, obviating summary disposition. Accordingly, we reverse the judgment and remand for further hearing.

The facts are taken from the parties' pleadings, as well as certifications and documents submitted in support of or in opposition to the relief requested in the summary proceeding. The parties' relationship began with the January 20, 2001 execution of a construction management agreement (Agreement). Under the terms of the Agreement, plaintiff was to provide management services for the remodeling and renovation of defendant's seven school facilities (the project). It was anticipated that a single referendum would fund the large-scale project, budgeted at $40,000,000, and that it would be completed over twenty-four months. Plaintiff's fees for the services delineated in the agreement were stated as a percentage of the project's cost, and payment was contingent on defendant's securing successful funding through the voter-approved referendum. However, in 2002, the electorate twice rejected the proposal. Therefore, completion of the project as initially proposed was abandoned.

Defendant modified the project and targeted referenda to focus on funding the renovation of specific school buildings, rather than the entire district. For example, in April 2003, the voters approved a $4,872,673 referendum for renovation of the high school. Thereafter, in 2004, a $23,700,000 referendum was adopted to fund the refurbishing of the middle school, and in 2006, a $38,500,000 referendum was approved to cover the costs associated with modernization of the district's five elementary schools and completing work on the high school.

It is noted that in the 2006 referendum, funding was comprised of "a grant from the State of New Jersey in the amount of $15,142,217; and... bonds in the principal amount of $23,357,783." The 2006 referendum budgeted $1,300,000 for construction management costs.

It is not disputed that from October 2000 to sometime in 2007, plaintiff provided, and defendant paid for, limited architectural, engineering, technical, and planning services related to the school building renovations and other unrelated contracts. The extent and nature of the services plaintiff rendered are not detailed in the record.

Significantly, the defeat of the 2002 referenda and subsequent change in the project's scope and manner of completion did not immediately trigger modification of the Agreement. On May 24, 2004, a single page "Contract Amendment" was executed, which added an anti-assignment provision and clarified the conditions of debarment, suspension or disqualification of the construction manager. See N.J.A.C. 17:19-4.1(a)(13). No mention was made of the significant alterations to completion of the original project.

In July 2007, defendant advised plaintiff that, based on the 2006 referendum, "the significantly reduced scope of work obviated the need for construction management services, in light of the lack of coordinated work by multiple trades and the availability of required engineering oversight of the work." Plaintiff contested this "termination" of its services and, as provided under the Agreement, filed for arbitration on July 19, 2007, asserting defendant had repudiated and materially breached the Agreement by "affirmatively blocking plaintiff from fulfilling [its] terms." Plaintiff sought damages in excess of $3,600,000.

Prior to the scheduled date of arbitration, the parties settled the dispute. The settlement terms were reflected in two simultaneously executed documents: a Rider amending the initial Agreement and a related Settlement Agreement.

On May 5, 2008, defendant adopted a resolution approving the Settlement Agreement, which authorized payment to plaintiff of $2,725,000, of which $750,000 was to be paid immediately and the balance satisfied pursuant to a schedule of semi-annual expenditures between June 1, 2008 and June 1, 2012. Defendant's resolution stated "approval of the settlement is expressly conditioned upon the opinion of bond counsel that the settlement obligation can be funded from the 2006 [r]eferendum [funds]." The Rider outlined the terms of payment for plaintiff's continued construction management services, capped "for the years 2008 to 2010" and without limit for "calendar year 2011 and thereafter."

The Settlement Agreement also stated that the payments are all unconditional, absolute and guaranteed and shall be made on the dates set forth therein, irrespective of any future suspension or termination of the [Rider] for any reason and at any time. In... the event that any payment set forth in paragraphs 2(a) through 2(i) is not made within sixty (60) days of the due date set forth therein, then and in that event, [plaintiff] shall apply to the Superior Court of New Jersey, for entry of judgment for the total amount set forth in paragraphs 2(a) through 2(i), plus the amount of costs and counsel fees incurred to enforce this [Settlement Agreement], less credit for payments made by [defendant] to the date of said application.

The following day, bond counsel sent a letter to defendant's attorney, conditionally authorizing the payment to plaintiff "for its construction management services from the bond proceeds authorized at the [2006 referendum]" as follows:

[Defendant] may pay this additional amount from the [2006 referendum] bond proceeds provided that (i) all the work that was approved by the New Jersey Department of Education, Office of School Facilities and included in the [2006 referendum] has been completed; and (ii) the total amount expended for the work and related fees on the [2006 referendum] does not exceed $39,760,000.*fn1

Defendant's counsel notified plaintiff of bond counsel's opinion, stating the Settlement Agreement and Rider "satisfie[d] the condition contained in the [r]esolution" regarding funding of the Settlement Agreement from the 2006 referendum. Despite its request, plaintiff was not provided a copy of bond counsel's written opinion. This interpretation of bond counsel's opinion, and the assurance of satisfaction with the expressed conditions of the Settlement Agreement, apparently was error.

Beginning in May 2008, plaintiff resumed the provision of services under the Settlement Agreement and the Rider, and defendant made the $750,000 payment. Thereafter, defendant did not make the payment due on June 1, 2008. "[F]or tax purposes," plaintiff delayed in submitting its invoice until October ...

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