June 27, 2012
MARTIN HELLER AND NELSON'S CORNER TRUST U/T/A/D JULY 25, 1985, PLAINTIFFS-RESPONDENTS,
LAUREN J. GARDNER TRUST U/T/A/D JUNE 24, 1993, DAVID GARDNER TRUST U/T/A/D MARCH 11, 1986 AND JAMIE I. GARDNER TRUST U/T/A/D JUNE 24, 1993. DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2225-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically June 13, 2012
Before Judges A.A. Rodriguez and Reisner.
This case arises from a dispute over a shopping center owned by Nelson's Corner Associates, L.L.C. (hereafter, Nelson's Corner Associates or the L.L.C.). Three members of the L.L.C., defendants Lauren J. Gardner Trust, David Gardner Trust, and Jamie I. Gardner Trust, appeal from the following trial court orders in favor of the remaining members, plaintiffs Martin Heller and Nelson's Corner Trust (the Allen Trust)*fn1 December 17, 2010, granting partial summary judgment declaring Lawrence
W. Gardner's April 27, 2010 letter to be a "Put Offering Notice" and ordering defendants to finalize the sale to plaintiffs of their membership interests in the L.L.C.; February 18, 2011, denying a stay of the December 17 order and confirming the property's fair market value to be as determined by plaintiffs' appraisers; May 9, 2011, denying defendants' motion for reconsideration, a stay of the closing, and related relief; and September 23, 2011, awarding plaintiffs $150,000 in counsel fees. We affirm the orders on appeal.
In 2004, plaintiffs and defendants entered into an Operating Agreement (Agreement) to form Nelson's Corner Associates, a limited liability company in which each party was a designated member. The purpose of the L.L.C. was to manage a shopping center in Hillsborough which Lawrence Gardner and Martin Heller had built decades earlier. By 2004, Gardner had transferred his interest in the shopping center to trusts for his three children. At the time the parties created the L.L.C., plaintiffs owned a combined 66 2/3% membership interest in the L.L.C., and each defendant owned an individual 11 1/9% membership interest or 33 1/3% collectively. Pursuant to the Agreement, defendants appointed Gardner as a designee to act on behalf of each defendant trust. Gerald D. Allen was appointed as the designee for the Nelson's Corner Trust (also known as the Allen Trust). Ibid.
The Agreement contained a mechanism, known as a put offering notice, by which one or members could require the other members to buy out their shares. Under the terms of the Agreement, "upon receipt of the Put Offering Notice, the Responding Member shall be obligated to purchase the Membership Interest of the Initiating Member at the purchase price set forth in subsection (b) of this Section 6.03." The Agreement provided that "closing shall occur thirty-one (31) days following receipt of the Put Offering Notice."
The Agreement set the purchase price at "an amount equal to eighty percent (80%) of the 'net fair market value' of the Company determined in accordance with Section 10 of this Agreement, multiplied by the Membership Interest of the Initiating Member." Section 10.01(b) provided that the "value of such interest in the Company shall be determined as follows: The Members shall jointly appoint two (2) appraisers, which appraisers shall then jointly determine the fair market value of the assets of the Company. All such appraisers shall be members of the American Institute of Real Estate Appraisers." The purchase price "shall be paid by promissory note of the Company in a sum equal to the purchase price and payable on a direct amortization basis over a twenty (20) year period, but to be due and payable ten (10) years from the date of closing," at an annual interest rate "no greater than" twelve percent nor "less than" eight percent.
Section 11.03 provided that, should a dispute arise between Members, "any Member may require arbitration of such dispute," but if the arbitration did not conclude in sixty days the Member had the option of filing a lawsuit instead. Under Section 11.04, "should any litigation be commenced between the parties hereto or their representatives or should any party institute any proceeding . . . , the party prevailing in such litigation shall be entitled to, in addition to such other relief as may be granted, to a reasonable sum as and for his attorneys' fees and court costs in such litigation."
On April 27, 2010, Gardner, on behalf of defendants, sent a letter which on its face served a put offering notice on "Nelson's Corner Associates, L.L.C., c/o The Heller Group," pursuant to Section 6.03 of the Agreement. The letter was delivered to Martin Heller, who was the president of the Heller Group and, under the terms of the Agreement, also served as the L.L.C.'s property managing member. Because the April 27, 2010 letter is central to this dispute, we quote it in full:
April 27, 2010
Nelson's Corner Associates, L.L.C. c/o The Heller Group 180 Main Street Madison NJ 07940 Dear Martin, After our conversation today, April 27, 2010, I read the procedure on the operating agreement and how it should take place if a partner wishes to sell. Page 17 section 6: Transferability of Membership Interests which designates the requirement in the operating agreement for acceptance of membership interest.
I thought it would be best to write this letter as we do have another partner associated with us in Nelson Corner Associates LLC, which I believe might become an adversary to my request as well as the money amounts that I feel my interest is worth. As per page 19 paragraph 6.03-Put Option. This letter should be construed as a put offering notice.
In our conversation you mentioned a swap as to how the sale price should possibly work for tax purposes. At this time this does not phase me, as the various trusts involved in this sale shall have to work out the tax ramifications that are agreeable by each trust. The 3 trusts involved in the partnership agreement are; Jamie I. Gardner and David B Gardner as trustees of Lauren J. Gardner trust. It seems that in the Amendment Partner Agreement, Lawrence W. Gardner and David B. Gardner have the right to act on behalf of the trust. Hopefully between myself and you, we shall be able to work out a fair price for the 1/3 interest in Nelson's Corner Associates LLC. I do not wish to have to go through the expense of an appraiser, however until you and I agree to establish a value of the buyout, a problem could occur with any of us. Therefore, I would like to discuss with you the timing as well as the procedures of establishing a price we both feel comfortable with. I am requesting an accounting for the year ending 2009 as well as a decision on how to work out a value as to disbursement of the monies.
In closing, I am enclosing copies of the agreement of the various trusts and myself as well as the agreements of each trust. If we can agree on a cap rate, this would help in establishing a value.
Again I am writing to you since our relationship has been extremely positive over the years and hopefully will continue in this Endeavour.
Lawrence Gardner [Emphasis added.]
In a letter dated April 30, 2010, a law firm representing Heller and the Allen Trust*fn2 , notified defendants that their clients accepted the put offer and designated two qualified appraisers "for purposes of determining the net fair market value of the assets of the Company." However, in a letter dated May 6, 2010, defendants' counsel responded that the April 27, 2010 letter was not intended as a put offering and did not provide the required notice because "the letter was not sent to the Members of Nelson's Corner Associates, L.L.C., but instead only to Martin Heller."
On May 12, 2010, defendants' counsel sent a letter rejecting the appraisers selected by plaintiffs as "unacceptable," without giving reasons why they were not acceptable and without proposing any alternate appraisers. Defendants' counsel also insisted that it was not yet necessary to select appraisers because the April 17 letter was not a put offer, and urged plaintiffs to engage in continued negotiations over the transfer of defendants' membership in the L.L.C.
Plaintiffs' appraisers completed their report on May 31, 2010, valuing the L.L.C.'s net fair market value at $9,147,383.
On May 13, 2010, pursuant to Section 11.03 of the Agreement, plaintiffs commenced an arbitration proceeding by filing a statement of claim with the American Arbitration Association, seeking a declaration that the April 27, 2010 letter constituted a "Put Offering Notice," and a judgment compelling defendants to cooperate in the appraisal process and sell their membership interests in the L.L.C. However, on July 12, 2010, plaintiffs voluntarily dismissed the arbitration pursuant to Section 11.02 of the Agreement, because the matter had not been resolved within sixty days. Instead, they filed a Law Division complaint against defendants seeking, in relevant part, a declaratory judgment that the April 27 letter constituted a valid and enforceable put offering notice or in the alternative claiming that defendants breached the Agreement by refusing to cooperate in the appointment of appraisers. Defendants filed an answer and counterclaim seeking an accounting of the L.L.C., demanding that Heller be replaced as the L.L.C.'s property manager, and seeking a declaratory judgment that the April 27 letter was not a put offering notice.
Following limited discovery, plaintiffs filed a motion for partial summary judgment concerning the validity of the put offer notice and the appraisal.*fn3 In opposing the motion, defendants submitted a counter-statement of material facts based on a certification from Gardner, giving his version of the events surrounding the sending of the April 27 letter.
Gardner's certification was significant for what it said and what it did not say. He described two conversations with Heller. In the first, "in or about late April 2010," Gardner "explained to Heller that while the Gardner trusts would be interested in selling their interest in Nelson's Corner [L.L.C.], they had no intention of following the specific mechanisms and restrictions set forth in the Operating Agreement for a 'put offering' sale." Obviously, by his own admission, Gardner was well aware of the put offering clause of the Agreement and how it worked.
According to Gardner, after a few days he again spoke with Heller, who told him that Gerald Allen, the representative of the Allen Trust, was "not returning his calls." Heller suggested to Gardner that Gardner "write a strong letter to prompt discussions of a potential buy out of the Gardner trusts' interest in Nelson's Corner." In his certification, Gardner asserted that, after that conversation with Heller, he "wrote the April 27, 2010 letter to Heller, which he requested, and referred to the 'put offering' under Section 6 . . . for the purpose of acting as a stimulus to get all of the members to discuss and explore a potential buy out transaction." According to Gardner, before he wrote the letter, he and Heller agreed "that the members would not proceed with a put offering transaction pursuant to the terms contained in Section 6.03 of the Operating Agreement." However, contrary to those assertions in Gardner's certification, his April 27 letter did not merely "refer" to the possibility that he would make a put offer in the future if the matter were not otherwise resolved. Instead, the letter unequivocally stated that he was making a put offer.
Solely for purposes of the summary judgment motion, plaintiffs admitted that Heller and Gardner had the conversations described in Gardner's certification. However, they contended that those facts were not material, because after those conversations, Gardner sent a letter that on its face explicitly made a put offer, rather than merely referring to the possibility that he would make such an offer in the future. They also argued there was no evidence that Heller ever told Gardner to actually make a put offer or that he told Gardner that if he made such an offer Heller would refrain from accepting it.
During oral argument of the partial summary judgment motion, counsel for both sides agreed that Gardner and Heller were highly experienced businessmen, and that Gardner in particular had "40 years of experience" in the real estate field. Defendant's counsel agreed that both men were "sophisticated in the . . . transaction area."
Immediately after hearing oral argument, Judge Hansbury placed an opinion on the record explaining his reasons for enforcing the April 27 letter as a put offer under section 6.03 of the Agreement and for concluding that the offer was properly served on plaintiffs:
There's no question in my mind that the notice of April 27th is a put notice in compliance with the terms of the agreement. That's very clear.
[I]n fact it couldn't be more clear. As per Page 19, 6.03 put option, "This letter shall be construed as a put offering notice."
. . . . [T]he legal issue is, is the defendant entitled to have facts considered outside the scope of this letter in making a decision whether the letter really is a put notice. There's no case cited in [defendants'] brief that allows me to go beyond the four corners of this letter.
There is absolutely no dispute that I can see that . . . Mr. Gardner wants to sell the property. What he doesn't want to do is to comply with the contract that he signed.
. . . . [T]he third party [Gerald Allen, acting for the Allen Trust] has . . . every right to enforce this agreement. He knew nothing about this conversation. The facts that are stipulated do not say that . . . Mr. Heller induced the defendant to specifically exercise the put option.
. . . The put notice is clear. We talked about the fact that it was sent to one party. . . . And I think this is important, too. It was sent to Nelson's Corner Associates LLC, in care of the Heller Group. That's general notice. That's not notice specific to Mr. Heller.
But in addition to that, it's just common sense, . . . and Parkway v. Curry, [162 N.J. Super. 410 (N.J. Dist. Ct. 1978)], makes it clear to me that if an agreement says you have to send notice to all three parties, but two of them are willing to waive that notice and, in fact, found out about it otherwise . . . the benefit is not for the sender of the letter. The benefit is for the receiver of the letter. So, under Parkway, they've waived the notice. [Plaintiffs are] happy to exercise the option.
On December 17, 2010, the judge entered an order declaring that the April 27, 2010 letter constituted a "Put Offering Notice" in accordance with Section 6.03 of the Agreement; and ordering "that defendants shall forthwith engage in the procedures contained in Section 6.03 of the Operating Agreement to finalize the sale of defendants' entire membership interest in Nelson's Corner Associates, L.L.C." Immediately thereafter, on December 22, 2010, plaintiffs' counsel sent defendants a letter notifying them that plaintiffs intended to rely upon the May 31, 2010 appraisal to calculate the purchase price and scheduling the closing for January 21, 2011.
On December 30, 2010, defendants filed a motion for reconsideration, which the judge denied. In the course of denying the motion, he declined to consider a new expert report defendants submitted critiquing plaintiffs' appraisal reports. Notably, while defendants' report criticized the approach used by plaintiffs' appraisers, the report did not state that the May 31, 2010 appraisal placed an incorrect value on the L.L.C.; nor did the report offer an alternate valuation number.
The judge found that defendants had unreasonably failed to respond to plaintiffs' repeated requests that they cooperate with the appraisal process. He also found that defendants could have submitted the expert report with their original motion papers and it was improper to attempt to supplement the record by filing a reconsideration motion. The judge entered an order dated February 16, 2011 denying defendants' application for a stay of the closing, deeming fair market value to have been determined by the May 31, 2010 appraisal, and ordering the closing to take place on or before March 21, 2011. Thereafter, the transaction closed and defendants transferred their shares in the L.L.C. to plaintiffs.
Pursuant to the Agreement, which permitted the winning party in a dispute under the Agreement to collect counsel fees from the losing party, plaintiffs' counsel submitted a fee application seeking approximately $221,000. The application included proof of the reasonableness of the firm's hourly rates as compared to other firms, together with voluminous and detailed billing records. Defendants submitted opposition, objecting to the fees for the initial arbitration and for the closing costs, a separate fee claim for Mr. Allan's personal counsel which defendants claimed was duplicative of work done by plaintiffs' primary law firm, redactions to certain invoices, and fees for other hours claimed to be excessive or duplicative. They also challenged the hourly rate being charged and the award of fees for defending against an interlocutory appeal.
In a detailed oral opinion placed on the record on September 23, 2011, Judge Hansbury found that the hourly rate charged was reasonable and it was appropriate for the trial court to award fees for the interlocutory appeal. However, he reduced the overall requested fee award considerably. He denied the almost $16,000 fee application for the arbitration, because the Agreement did not permit fees for arbitration; he denied the $12,000 in fees for the closing, because it would have occurred even without the litigation; he denied the fee request of about $7000 for Mr. Allen's separate counsel; and he reduced the requested court costs. After considering the value and quality of the services rendered, the outcome achieved, the difficulty of the litigation, and other applicable factors, the judge awarded a total of $150,000, which was about $70,000 less than plaintiffs requested.
On this appeal, defendants argue that the trial court erred in granting partial summary judgment on the issue of whether the April 27 letter constituted a put offering; that the trial court erred in requiring the parties to use plaintiffs' appraisal report in establishing valuation; and that the fee award was excessive.
Having thoroughly reviewed the record in light of the applicable law, we conclude that the "put offer" issue was ripe for summary judgment, and judgment on that issue was properly granted in plaintiffs' favor; the trial judge did not abuse his discretion in declining to grant reconsideration and in declining to consider defendants' untimely submission on the appraisal issue; and the trial judge did not abuse his discretion in arriving at a fee award. Defendants' arguments to the contrary are completely without merit and, except as addressed below, they do not warrant further discussion. R. 2:11-3(e)(1)(E). We affirm substantially for the reasons stated in Judge Hansbury's thorough statements of reasons on these issues. We add the following comments.
Our review of the trial court's grant of summary judgment is de novo, following the same standard employed by the trial judge. Prudential Prop. & Cas. Ins. Co., Inc. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We consider whether there are material facts in dispute and, if not, whether the undisputed facts viewed in the light most favorable to the non-moving party nonetheless entitle the moving party to judgment as a matter of law. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "Even when credibility may be an issue, '[i]f there exists a single, unavoidable resolution of the alleged disputed issue of fact, that issue should be considered insufficient to constitute a 'genuine' issue of material fact.'" Liberty Surplus, supra, 189 N.J. at 450 (quoting Brill, supra, 142 N.J. at 540).
In this case, we agree with Judge Hansbury that there was nothing ambiguous about Gardner's April 27 letter. See Nester v. O'Donnell, 301 N.J. Super. 198, 210-11 (App. Div. 1997). It was an unambiguous put offer, sent by a sophisticated real estate developer with forty years' of transactional experience. In claiming that his put offer was not genuine, Gardner is somewhat like the attorney in Liberty, who applied for malpractice insurance knowing that he had missed a statute of limitations in filing a clients' lawsuit, yet who claimed he subjectively believed there were no possible outstanding claims against him when he completed the insurance application. The claim is unsustainable in light of the objective evidence to the contrary. See Liberty, supra, 142 N.J. at 540.
We acknowledge that parol evidence is admissible in construing a contract, not to change the contract's unambiguous terms, but to put the words in context. See Conway v. 287 Corporate Ctr. Assoc., 187 N.J. 259, 268-70 (2006); YA Global Investments, L.P., v. Cliff, 419 N.J. Super. 1, 11 (App. Div. 2011).
The polestar of construction is the intention of the parties to the contract as revealed by the language used, taken as an entirety; and, in the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain are necessarily to be regarded. The admission of evidence of extrinsic facts is not for the purpose of changing the writing, but to secure light by which to measure its actual significance. Such evidence is adducible only for the purpose of interpreting the writing--not for the purpose of modifying or enlarging or curtailing its terms, but to aid in determining the meaning of what has been said. So far as the evidence tends to show, not the meaning of the writing, but an intention wholly unexpressed in the writing, it is irrelevant. [Conway, supra, 187 N.J. at 269 (quoting Atlantic Northern Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301-02 (1953)).]
Applying those principles to the parol evidence in this case, Gardner's certification was not sufficient to warrant disregarding the clear language of his letter. There was no evidence of fraud. As noted earlier, Gardner never attested that Heller told him to made a put offer, or that Heller promised him that any put offer he made would be disregarded. See Filmlife, Inc. v. Mal "Z" Ena, Inc., 251 N.J. Super. 570, 574-75 (App. Div. 1991) (citing Winoka Village, Inc . v. Tate, 16 N.J. Super. 330, 333-34 (App. Div. 1951)). Gardner's certification carefully avoided making such a claim; instead, he attested that Heller asked him to send a letter "referring" to the put offer section of the Agreement in order to motivate Allen to participate in a buy-out process. But that is not what Gardner did. He sent a letter, inferentially expressing his understanding that Allen might be uncooperative in effectuating a sale of defendants' membership shares, and then explicitly making a put offer. Plainly, whatever he and Heller had discussed earlier, Gardner had decided to take the next step and force a buy-out.
The remainder of his letter -- discussing ways by which the parties might avoid the expense of an appraisal, which Gardner obviously knew the Agreement required as part of the buy-out process, and ways in which the Gardner trusts might mitigate some of the tax implications of a buy-out -- did not contradict the legal force and effect of his put offer. Nowhere in his letter did he say that the put offer was conditioned on the parties avoiding an appraisal or that it should be considered withdrawn if that condition could not be met. Nor did he state that the put offer would be withdrawn if the Gardner trusts were dissatisfied with the tax consequences of a buy-out. If Gardner secretly intended to send a put offer which he could later enforce or repudiate at his option, the plain language of his letter was inadequate to permit him to do so, and plaintiffs were not bound by his unexpressed intentions. Conway, supra, 187 N.J. at 269; see also Chance v. McCann, 405 N.J. Super. 547, 563-65 (App. Div. 2009).
We likewise find no merit in defendants' claim that the judge deprived them of the opportunity to participate in selecting the appraisers. We agree with Judge Hansbury that defendants waived that opportunity. See Knorr v. Smeal, 178 N.J. 169, 177-78 (2003). They were repeatedly offered the chance to participate in selecting appraisers and wrongfully refused to do so, based on their legally unsustainable claim that Gardner's letter did not constitute a put offer.
We find no abuse of the trial court's discretion in declining to consider defendants' expert report, which was improperly filed for the first time on their motion for reconsideration. See Del Vecchio v. Hemberger, 388 N.J. Super. 179, 189 (App. Div. 2006); Cummings v. Bahr, 295 N.J. Super. 374, 384-85 (App. Div. 1996). Consequently we need not consider that evidence, because it was not properly before the trial court. We note, however, that before Judge Hansbury, and even on this appeal, defendants did not argue that the net fair market value set by plaintiffs' appraisers was too low. Nor do they contend that they could get a better price for their shares today, or that the interest rate set by the put offer clause (between eight and twelve percent) is unfair or unfavorable to them, particularly in the current economic climate.
Finally, on this record we find no basis to depart from our usual deference to a trial judge's decision on a motion for counsel fees. "'[F]ee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion.'" Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)). Judge Hansbury obviously gave plaintiffs' application a thorough review, reduced it significantly, and made an award based on appropriate factors. We find no grounds to second-guess his decision.*fn4