NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

PER CURIAM.

The commercial bond financing agreement for the purchase of property here included a provision for "deferred interest" which became due and owing if the principal balance was not paid during the first eleven months of the bond's thirtieth year. In this appeal, we consider whether such deferred interest constitutes an unenforceable penalty.

Jaffe Spindler Company, LLC (Jaffe) was the owner of property in Jersey City. On December 22, 1982, Old Gold Associates purchased the property from Jaffe with financing provided by a thirty-year bond issued by the New Jersey Economic Development Authority (NJEDA). The $2,100,000 bond was secured by a mortgage against the property. Defendant New Gold Equities Corp. (New Gold) assumed the rights and obligations under the bond agreement in 1990.

The yearly interest rate on the bond was 13% (base rate). However, the agreement only required New Gold to make monthly interest-only payments at a reduced interest rate ranging between 6.29% and 7.62%. The difference between the actual interest paid and the 13% base rate was the "deferred interest." The agreement provided that the deferred interest "shall be accrued, but payment thereof shall be deferred until the entire remaining principal amount of this Bond becomes due and payable, whether at maturity, by acceleration or otherwise." The maturity date of the bond was December 22, 2012.

A "voluntary prepayment" clause in the bond agreement allowed for a waiver of the deferred interest. Under this provision, if the principal was paid off at any time during the first eleven months of year thirty (between January 22, 2012 and November 22, 2012), the deferred interest that had accumulated over the previous twenty-nine years would be deemed waived. If the principal was not paid during the eleven-month window before the bond matured, New Gold would owe both the principal and $3,714,864 in deferred interest.

New Gold did not pay the principal amount during the eleven-month voluntary prepayment window period before the bond matured. On December 22, 2012, New Gold paid the final monthly interest installment and the principal amount of $2,100,000 due under the bond; New Gold did not pay the $3,714,864 in deferred interest. In February 2013, Jaffe advised the NJEDA that New Gold had not paid the deferred interest and that it would file suit within ten days if it remained unpaid.

In March 2013, New Gold filed a complaint in the Chancery Division against Jaffe and the bond trustee1 seeking damages and demanding judgment discharging all mortgages, liens and encumbrances on the property securing the bond. Jaffe asserted a counterclaim for mortgage foreclosure and possession. Jaffe also filed a foreclosure action against New Gold and the property due to New Gold's failure to pay the deferred interest on the bond.

Summary judgment motions and cross-motions were brought by Jaffe and New Gold in both the equity and foreclosure actions. At oral argument, New Gold opposed summary judgment in the equity action, arguing it was premature since discovery was not complete, and in the alternative, there were genuine issues of material fact concerning whether the deferred interest provision was unenforceable as a disguised penalty.2 The judge denied New Gold's request for additional discovery, finding the issue before him was a legal one to determine the nature of the deferred interest provision.

Under order of August 28, 2013, the judge granted summary judgment for Jaffe in the equity action, dismissing all New Gold's claims with prejudice. The judge determined the deferred interest provision was not a penalty because it was "simply due at maturity" and not a payment required as result of a breach of the agreement. He found the contract terms were "clear and unambiguous."

Partial summary judgment was granted to Jaffe in the foreclosure action and the matter was transferred to the foreclosure unit for entry of final judgment. New Gold appeals from the order granting Jaffe partial summary judgment in the foreclosure action and the final judgment of foreclosure.

We review a grant of summary judgment under the same standard as the chancery judge. Rowe v. Mazel Thirty, LLC, 209 N.J. 35, 41 (2012) (citing Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010)). We must determine whether there are any genuine issues of material fact when the evidence is viewed in the light most favorable to the non-moving party. Id. at 38, 41 (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 529 (1995)). "The inquiry is `whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill, supra, 142 N.J. at 536). "[T]he legal conclusions undergirding the summary judgment motion itself [are reviewed] on a plenary de novo basis." Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 385 (2010).

New Gold argues that the judge erred in not looking "past the plain terms of the Bond agreement to try to determine the true meaning and intent of the Deferred Interest provision." It argues the provision is unenforceable as a disguised penalty. New Gold reiterates its argument that further discovery was necessary to "bolster its claim" that the deferred interest provision was intended to "coerce timely payment of the principal during the Bond's final year."

We briefly address the discovery issue. During oral argument, the judge asked New Gold's counsel several times what discovery it required, and the purpose such discovery would serve towards the court's determination of this legal issue. Counsel responded he would depose "Goldman, from Jaffe who I believe is one of the trustees of Jaffe Spindler" and the purpose was to "determine whether this is a penalty or not."

The determination of whether the deferred interest provision was an unenforceable penalty is a question of law. As we have stated, "[t]he interpretation or construction of a contract is usually a legal question for the court, suitable for a decision on a motion for summary judgment." Driscoll Const. Co., Inc. v. State, Dept. of Transp., 371 N.J.Super. 304, 313 (App. Div. 2004) (citation omitted). The judge found the bond's provisions to be "clear and unambiguous," thus foreclosing the need for any discovery of the original parties' intent. The intent behind the deferred interest provision would have had no impact on the judge's analysis, as "[i]t is the effect of the Agreement that is determinative, regardless of whatever subjective motivation might be ascribed to one or another of the participants." Apfel v. Budd, Larner, Gross, Rosenbaum, Greenberg & Sade, 324 N.J.Super. 133, 144 (App. Div.), certif. denied, 162 N.J. 485 (1999). We see no reason to disturb his ruling.

We turn then to the deferred interest provision. We have defined "penalty" as "the sum a party agrees to pay in the event of a breach, but which is fixed, not as a pre-estimate of probable actual damages, but as a punishment, the threat of which is designed to prevent the breach." Rosen v. Smith Barney, Inc., 195 N.J. 423, 427 (2008) (emphasis added) (quoting Wasserman's Inc. v. Twp. of Middletown, 137 N.J. 238, 248-49 (1994)); see Westmount Country Club v. Kameny, 82 N.J.Super. 200, 205 (App. Div. 1964) ("Parties to a contract may not fix a penalty for its breach. The settled rule in this State is that such a contract is unlawful."). Accordingly, the definition of "penalty" is two-fold: (1) the provision at issue must require payment as a result of a "breach," and (2) it must be punitive in nature.

New Gold did not breach this bond agreement. The obligation to pay the deferred interest was only triggered as a consequence of New Gold's failure to pay the principal in the first eleven months of the bond's thirtieth year. The voluntary prepayment provision allowed New Gold to avoid paying several million dollars in accrued interest that was otherwise due upon maturity of the bond. Had New Gold paid the principal in the eleven-month window, it would have reaped the continued benefit of only paying the lower 6-7% interest rate rather than the 13% base rate under the contract.

We reject New Gold's argument that the judge should have looked past the plain language of the bond and examined the intent of the parties. Having found the provision clear and unambiguous, the judge was not required to look further. See Cnty. of Morris v. Fauver, 153 N.J. 80, 103 (1998) (holding that where the terms of an agreement are clear, the agreement must be enforced as written). As the judge stated:

We discern nothing to support the conclusion that the voluntary prepayment provision, which was an integral part of the bond agreement, was an unenforceable penalty.

Affirmed.