PER CURIAM.
Defendants/third-party plaintiffs David Binet (Binet) and Esther Binet (Esther) appeal from various trial court orders and a judgment entered on February 2, 2009, that (1) awarded plaintiff Maurice Deutsch (Deutsch) damages in the amount of $120,500, together with prejudgment interest; (2) declared Deutsch to be the owner of the property at 208 Imperial Court in Lakewood, New Jersey (the Property); (3) awarded Deutsch any surplus proceeds up to $132,550 in the event of a foreclosure sale of the Property; (4) ordered the Binets to pay Deutsch $2000 per month for the use and occupancy of the Property commencing December 1, 2007; and (5) discharged two lis pendens filed by the Binets in January 2006 and March 2007. We affirm.
In December 2003, Binet signed a contract to purchase a house located at 200 Imperial Court, with an anticipated closing date of June 1, 2004. The contract was subsequently modified for the purchase of the Property, with closing to take place on August 1, 2004. However, Binet's low credit score precluded him from obtaining a mortgage loan to finance the purchase. Therefore, Binet and "a long-time friend," third-party defendant Abraham Censor
On January 11, 2006, the Binets filed a complaint against Censor seeking a constructive trust to secure their interest in the Property and an order compelling Censor to execute a deed transferring title to them. They also filed a notice of lis pendens the same day. The next day, January 12, 2006, Censor executed a mortgage and security agreement in the sum of $240,000 in favor of Deutsch. The mortgage was recorded on January 23, 2006.
Approximately two months later, on March 29, 2006, Binet, Censor, and Deutsch signed a four-page settlement agreement (the Settlement Agreement) that purported "to settle the claims and disputes between them" concerning the Property and two loans given to Binet and Censor by Deutsch. Also involved in the negotiations was Benzion Frankel (Frankel), a New York attorney. The Settlement Agreement stated that Binet would pay Deutsch the total sum of $145,500 in eight installments, with the last payment on or before November 1, 2006. Regarding the Property, the contract stated:
Under the terms of the Settlement Agreement, Binet was to receive the deed and assignment "[u]pon full performance" of his payment obligations. If Binet breached or defaulted, the escrow agent, Frankel, was authorized to return the deed to Censor and the assignment of mortgage to Deutsch.
Pursuant to the Settlement Agreement, Binet paid a total of $25,000 to Deutsch with the last payment on September 1, 2006. On December 13, 2006, Censor executed a deed granting the Property to Deutsch. The deed was recorded on December 27, 2006.
On January 10, 2007, Deutsch filed a complaint against Binet and his wife, Esther, alleging that Binet had breached the Settlement Agreement. The complaint sought (1) enforcement of the Settlement Agreement; (2) "declaratory judgment . . . that [Binet] breached and [was] in default of the Settlement Agreement"; (3) declaratory judgment that the Binets had no interest in the Property; (4) an order discharging the notice of lis pendens filed by the Binets; (5) declaratory judgment that the Binets had no right of possession or interest in the Property; (6) a writ of possession in favor of Deutsch; (7) judgment against Binet for the balance due under the Settlement Agreement; and (8) interest, counsel fees, and costs of suit.
In their answer, counterclaim, and third-party complaint filed on March 28, 2007, the Binets claimed that they were "no longer bound by the obligations of the Settlement Agreement" because Deutsch and Censor committed a material breach by failing to deposit the executed deed and assignment of mortgage into escrow.
The court entered a case management order scheduling discovery on March 31, 2008. The order stated that interrogatories were to be served by April 10, 2008, and answered by May 15, 2008, and that all depositions were to be completed by June 1, 2008.
In April 2008, Deutsch filed a motion for summary judgment, ejectment, and sanctions. In a supporting certification, Deutsch stated he was "ready, willing and able" to sign a deed to Binet and to assign the mortgage he was holding on the Property to Binet as soon as he received "all sums due and owing to [him] under the Settlement Agreement." He also certified that his attorney, Frankel, "was never notified as to whom the mortgage should be assigned to." Additionally, Frankel confirmed in his certification that he was unable to prepare a deed and an assignment of the mortgage to be placed in escrow because Binet was either unable or unwilling to identify the entities or the individuals that were to receive the documents. Frankel certified: "Despite several attempts to obtain the information, I was never told to whom I should place title in, nor was I ever told to whom the mortgage of [Deutsch] should be assigned to." The Binets opposed the motion, claiming that "the validity of the [Settlement] Agreement, the circumstances of its execution and the specifics of performance of each party of their respective obligations need[ed] to be developed through the discovery process."
Before the court ruled on Deutsch's motion, Censor filed a motion to dismiss the Binets' third-party complaint. The motion and an accompanying certification by Censor's attorney alleged that the Binets had failed to respond to interrogatories and document requests as required by the court's March 31, 2008 case management order.
The parties appeared for oral argument on May 23, 2008. At that time, the court noted the parties had resorted to self-help rather than seeking judicial enforcement of the Settlement Agreement and that neither party "acted with clean hands." Nevertheless, it ordered the parties to proceed with depositions and reserved judgment on Deutsch's summary judgment motion. On May 29, 2008, J.P. Morgan Chase Bank commenced foreclosure proceedings on the Property.
Both Frankel and Deutsch were deposed on May 30, 2008. Frankel testified that although he had represented Deutsch "a handful" of times in the past, including a loan to Censor, he acted only as a "facilitator" or "go-between" when the Settlement Agreement was negotiated. Frankel also stated that Binet was represented during the negotiations by Morris Birenbaum. According to Frankel, he waited for Binet "to form an entity" to receive the deed and assignment and had "many, many phone calls" with Birenbaum, but ultimately "was told that Mr. Binet and Mr. Birenbaum did not know where [the documents] would be going" and that he "would be advised."
Deutsch testified Frankel was acting as his attorney during the settlement negotiations. He further testified that he had provided "[m]ore than 15" loans to Censor amounting to "at least" $240,000 by 2006, and that he had loaned Binet $100,000 in "early 2000," which by 2006 had accumulated interest of "somewhere between $75,000 and $90,000." Deutsch stated that since receiving the loan, Binet had avoided him "for years on end," so he was willing to compromise on a reduced sum in exchange for actual payment. Following negotiations, Frankel told Deutsch that he would have to sign an assignment of mortgage "as soon as [Binet] determined who the recipient would be." Deutsch also indicated that after payments from Binet had ceased, he requested a deed to the Property from Censor.
The Binets answered Deutsch's first set of interrogatories on June 4, 2008. Although they did not state whether they had made mortgage payments on the Property, they indicated that they had paid all maintenance and utility costs since October 2004. In addition, the answers stated that Binet had contacted Censor in December 2005 "to notify him that he was prepared to refinance the mortgage" and that Censor responded with "a demand for $10,000.00 in return for executing a Deed." The Binets also indicated that payments under the Settlement Agreement were made as scheduled until July 2006.
Nevertheless, on June 6, 2008, the court dismissed the third-party complaint against Censor pursuant to Rule 4:23-5, citing the Binets' failure to timely respond to Censor's interrogatories and document requests in accordance with the schedule imposed by the March 31, 2008 case management order. On June 13, 2008, the Binets' filed a motion to reinstate the pleading, which was ultimately unsuccessful.
On June 20, 2008, the court heard further arguments on Deutsch's summary judgment motion. Deutsch and Censor essentially argued they were entitled to summary judgment based on the Settlement Agreement, and the Binets asserted this relief would be premature because further discovery was needed. In addition, the Binets' attorney advised the court that they did not have sufficient funds to satisfy the terms of the Settlement Agreement but could obtain the money within sixty to ninety days. The court reserved judgment and ordered all parties and attorneys to appear in person on July 16, 2008.
The next hearing occurred on July 17, 2008. After allowing the attorneys to present additional arguments, the court found that the Settlement Agreement was "clear," "unambiguous," and "enforceable." The court's decision, which was memorialized in a July 25, 2008 order, required (1) Deutsch to execute a deed and assignment of mortgage to the person or entity named by Binet, and (2) Binet to pay Deutsch $25,000 within thirty days after the deed and the assignment of the mortgage were filed with the court. The order also stated that the failure to make the payment would be considered "a material breach of the Settlement Agreement." Deutsch submitted an original deed and assignment to the court on July 30, 2008, with the grantee designated as "L.H. Development Group, LLC," a company owned exclusively by Binet.
Censor was deposed on July 24, 2008. He testified that he did not negotiate the contract to purchase the Property and did not pay "any of the money to purchase the house." According to Censor, Binet assigned him the purchase contract for the Property "approximately five to six weeks" prior to closing, but they had a verbal agreement that Binet would become the true owner once "[c]ertain outstanding monies," had been "taken care of." These "monies" included $150,000 to $200,000 that Censor claimed to have personally "lent [to Binet's] company" and $100,000 that he "borrowed on [Binet's] behalf." Censor also testified that Esther did not participate in any of his dealings or discussions with Binet.
The parties again appeared before the court on September 12, 2008. At the outset, the court noted that Binet had failed to pay $25,000, as required by the July 25, 2008 order. Counsel for the Binets explained that Binet failed to make the payment because "he [didn't] have the money." The court then entered a judgment against Binet in the amount of $25,000 and scheduled the matter for an evidentiary hearing. The order memorializing this decision was entered on October 1, 2008.
A trial was held on January 6 and 7, 2009, to determine the merits of Deutsch's remaining claims and the Binets' claim that they were the equitable owners of the Property. Deutsch called Binet as the first witness. Binet testified that his "business background" was in construction and that, in 2001, he had commenced employment with "Dynamic," a "real estate company." Binet indicated that he made $120,000 per year in this position from 2003 to 2006 before Dynamic closed in 2007, leaving him with no income in 2007 and 2008.
Binet further stated that although he negotiated the contract to purchase the Property and contributed $160,000 of his family's money toward the purchase, his low credit score prevented him from obtaining a mortgage loan. Therefore, the Property was purchased in Censor's name, and Binet paid Censor to obtain two mortgage loans for the purchase. However, Binet acknowledged he was responsible for the mortgage payments. He also testified that he discussed the arrangement with Esther, and she was "aware that Mr. Censor owned the home."
Binet said that he "didn't try" to refinance the mortgages because his "credit score was not sufficient enough to get it done." He further stated that on December 15, 2005, he provided Censor with $30,000—$20,000 to be given to Deutsch, and $10,000 to Censor "for keeping the house in his name"—but Censor demanded an additional $10,000. According to Binet, the $20,000 for Deutsch was partial repayment for a separate $50,000 loan that Deutsch had given him.
In addition, Binet confirmed that during the subsequent settlement negotiations he was represented by Morris Birenbaum. Binet further stated that he was not acting on behalf of Esther at that time and that Esther only found out that the Settlement Agreement existed "through the Court proceedings." Binet also accounted for the difference between the $50,000 loaned to him by Deutsch and the $145,500 that he agreed to pay in the Settlement Agreement as "some profit to Deutsch" and "to help out Censor" because "he needed money."
Binet admitted that he never contacted Frankel to advise him of the name in which he wanted the deed and assignment prepared. He also acknowledged that after making $25,000
The next witness was Deutsch, who testified that he had loaned Binet $100,000, not $50,000, in 1999 or 2000 and that Binet "hadn't paid [him] back a dime." He further stated that by 2006, Censor owed him approximately $400,000.
Deutsch confirmed that Binet had paid him $25,000 under the Settlement Agreement and indicated that despite "repeatedly" asking Binet for payment, he received few responses:
Deutsch also testified that when Censor deeded the Property to him, Censor "led [him] to believe that the house [was] entirely his and that he had every right to do what he did." Deutsch indicated that he believed the Property had been placed in Censor's name because Binet owed Censor money. In addition, Deutsch testified that he "did not oppose" the foreclosure action.
Esther testified on January 7, 2009. After stating she was born in Israel and had a "very limited" English vocabulary, Esther gave a synopsis of the roles she and her husband played:
Esther stated that at the time of the purchase, she believed that she and her husband owned the Property and that she had no knowledge of Censor's involvement. However, Censor called the house in 2007 and told her that the house was in his name. According to Esther, she never saw the Settlement Agreement and never gave Binet "permission to make any deal to give [her] home away."
Esther testified that she had no knowledge of the foreclosure proceeding, even though she was aware that her husband was not making mortgage payments. She further testified that when she discussed the matter with her husband, he told her he was "in touch with the lawyer and . . . taking care of it." In addition, Esther stated that she trusted her husband to "take care of whatever was supposed to be taken care of."
Following closing arguments, the court rendered an oral decision on January 7, 2009. With regard to Esther, the court stated:
Therefore, the court found that the Settlement Agreement was enforceable only against Binet, and judgment was entered against him in the amount of $120,500:
The court declined to enforce the Settlement Agreement's $175-per-day late payment penalty but awarded Deutsch prejudgment interest from September 1, 2006. In addition, the court concluded that it was "inequitable and unfair" for the Binets "not to pay anything" while they remained in the Property. Therefore, it ordered them to pay Deutsch $2000 per month for the use and occupancy of the Property commencing on December 1, 2007, after Binet stopped paying the mortgages. A judgment memorializing the court's decision was entered on February 2, 2009. The judgment also discharged the two lis pendens on the Property.
On February 11, 2009, the court denied the Binets' motion for reconsideration. They filed a notice of appeal on March 9, 2009,
When reviewing the July 25, 2008 order for summary judgment, we use the same standard as the trial court.
Our review of the determinations made following the January 2009 trial is more limited. We must uphold the court's factual findings where they are "supported by adequate, substantial and credible evidence."
As the trial court recognized, settlement agreements are contracts to be honored and enforced by the courts.
A material breach is one that "`goes to the essence of a contract,'"
After considering these factors, we agree that Deutsch's failure to place the deed and assignment in escrow did not constitute a material breach of the Settlement Agreement that would have excused Binet's failure to (1) keep the existing mortgages current, and (2) pay the sum of $145,500 to Deutsch. Pursuant to the Settlement Agreement, Binet was not entitled to receive the deed and the assignment because he never performed his payment obligations and never advised Deutsch of the name or entity he wished to designate as grantee. Moreover, Deutsch's alleged "breach" was a problem with a clear-cut remedy. As the trial court observed, "a simple motion" would have resolved the issue. Under these circumstances, we find no justification for Binet's failure to comply with the terms of the Settlement Agreement.
In their third point, the Binets contend that the Settlement Agreement "is unenforceable because it cannot be disclosed or serve as proof of liability."
The Binets claim that the Settlement Agreement's confidentiality clause, contained in paragraph fourteen, renders it "inadmissible and therefore, unenforceable." They cite no authority for this proposition. Moreover, adoption of the Binets' position would render any contract with a confidentiality provision unenforceable, a result that would be squarely at odds with the Court's predisposition toward settlement.
We next address the Binets' claim that the judgment should be reversed because the Settlement Agreement was an "unconscionable contract of adhesion." The Court has recognized that adhesion contracts "necessarily involve indicia of procedural unconscionability."
Here, the thrust of the Binets' argument is that the economic relationship between Binet and Deutsch placed the former "at a terrible bargaining disadvantage." However, the record reveals that Binet was represented by counsel throughout the settlement negotiations and that he successfully negotiated to omit any provision that would impact his initial lawsuit against Censor. Moreover, Binet testified that he reviewed the Settlement Agreement with counsel prior to signing it. Given these facts, we reject the claim that the Settlement Agreement is unconscionable and unenforceable.
In point five, the Binets assert that Censor's transfer of title to Deutsch was "a textbook example of unclean hands and should never have enjoyed the sanction of the Court." We do not agree.
Application of the doctrine of unclean hands rests within the discretion of the trial court.
As previously noted, the Settlement Agreement required Censor to "execute a deed in recordable form to Binet or an entity to be formed" and to place the deed in escrow "pending full performance by Binet." If that had been done, the transfer of title from Censor to Deutsch would not have occurred. Nevertheless, pursuant to the July 30, 2008 order, Deutsch ultimately executed and filed with the court a deed to the Property, whereas Binet has consistently failed to fulfill his payment obligations. We therefore find no misuse of discretion or legal error in the court's decision to enter judgment in favor of Deutsch; to impose a use and occupancy fee for the fair rental value of the Property,
Next, we consider the Binets' claim that the court erred by dismissing and refusing to reinstate their third-party complaint against Censor. They argue that these decisions prevented them from "establishing the priority of their claim of ownership over the Censor [m]ortgage and [d]eed given to Deutsch." We disagree.
In this case, the court dismissed the third-party complaint without prejudice on June 6, 2008. At that time, the Binets had provided answers to interrogatories but had not responded to Censor's request for documents. Those followed by mail on June 19, 2008. Once this discovery was completed, the court should have granted the Binets' cross-motion to reinstate the third-party complaint. The failure to do so constituted error.
However, we are satisfied that the error was not clearly capable of producing an unjust result.
Counsel for the Binets acknowledged at the outset of the trial that Binets' claims against Censor and Deutsch were almost identical because the Binets sought to quiet title to the Property. Moreover, the disputes between the Binets and Deutsch were ultimately decided on their merits, and we find no error in the trial judge's substantive analysis. Furthermore, we conclude from our review of the record that the Binets were afforded a full and fair opportunity to present their claims and there has been no showing that the result would have been any different if the third-party claim against Censor had been reinstated. We therefore find the failure to reinstate the Binets' claim against Censor to be harmless error.
Finally, we decline to consider the arguments raised in point seven. As the Binets themselves concede, Esther's individual interests were not fully litigated in the trial court. Moreover, Esther asserted those interests in a separate complaint. Therefore, we do not address them here.
The Binets' remaining arguments are without sufficient merit to warrant additional discussion.
Affirmed.
