Medford Commons, LLC v. Lexon Ins. Co.
| Decision Date | 26 December 2019 |
| Docket Number | DOCKET NO. A- 2040-17T4 |
| Parties | MEDFORD COMMONS, LLC, Plaintiff, v. LEXON INSURANCE COMPANY and BOND SAFEGUARD INSURANCE COMPANY, jointly and severally, Defendants. TOWNSHIP OF MEDFORD, Intervenor-Plaintiff, v. LEXON INSURANCE COMPANY and BOND SAFEGUARD INSURANCE COMPANY, jointly and severally, Defendants. LEXON INSURANCE COMPANY and BOND SAFEGUARD INSURANCE COMPANY, Third-Party Plaintiffs-Respondents, v. FREEDMAN COHEN DEVELOPMENT, LLC, CARL FREEDMAN, Individually, and MITCHELL COHEN, Individually, Third-Party Defendants-Respondents. MEDFORD VILLAGE EAST ASSOCIATES, Third-Party Defendant/Fourth-Party Plaintiff-Appellant, v. MEDFORD COMMONS, LLC, TOWNSHIP OF MEDFORD, FREEDMAN COHEN DEVELOPMENT, LLC, CARL FREEDMAN, Individually, MITCHELL COHEN, Individually, PENNONI ASSOCIATES, Fourth-Party Defendants-Respondents. |
| Court | New Jersey Superior Court — Appellate Division |
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Before Judges Koblitz, Whipple and Gooden Brown.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-0222-08.
Peter Jay Boyer argued the cause for appellant (Hyland Levin Shapiro LLP, attorneys; Peter Jay Boyer, on the brief).
Joseph T. Carney argued the cause for respondent Lexon Insurance Company and Bond Safeguard Insurance Company (Brown & Connery, LLP, attorneys; William M. Tambussi and Joseph T. Carney, on the brief).
Andrew Bruce Cohn argued the cause for respondent Medford Commons, LLC (Kaplin Stewart Meloff Reiter & Stein PC, attorneys; Andrew Bruce Cohn, on the brief).
Stephen McNally argued the cause for respondent Pennoni Associates, Inc. (Chiumento McNally LLC, attorneys; Stephen McNally, on the brief).
Christopher J. Norman argued the cause for respondent Medford Township (Christopher J. Norman, attorney; Christopher J. Norman and George J. Botcheos, Jr., on the brief).
Sherry S. Cohen argued the cause for respondents Freedman Cohen Development, LLC, Carl Freedman, and Mitchell Cohen (Kotlar, Hernandez & Cohen, attorneys; Justin M. Cohen, on the brief).
Plaintiff Medford Commons, LLC sued Lexon Insurance Company and Bond Safeguard Insurance Company (collectively Lexon), the issuer of a surety bond, to recover money plaintiff spent completing an affordable housing project. As the surety, Lexon paid out under the bond to allow plaintiff to completeconstruction after the redevelopers, Medford Crossings North (MCN) and Medford Crossings South (MCS), defaulted on the project. Lexon, in turn, brought a third-party complaint against its indemnitors, Medford Village East (MVE), Freedman Cohen Development, LLC (FCD), Carl Freedman and Mitchell Cohen. MVE brought a fourth-party complaint against FCD, Medford Commons, Pennoni Associates, Inc. (Pennoni) and the Township of Medford (Township), as well as five principals of FCD: Mitchell Cohen, Carl Freedman, Chris Conlon, Peter Ripka and Todd Cooper (collectively fourth-party defendants).
MVE appeals from the grant of summary judgment requiring it to indemnify Lexon. It also appeals the grant of summary judgment in favor of the fourth-party defendants. MVE's central argument is that it was not obligated to indemnify Lexon under the General Agreement of Indemnity (Indemnity Agreement) because the scope of the project had changed without the Township Planning Board's required approval and without MVE's consent. We reject this proposition. The Township engineer had the authority to approve changes to the affordable housing project without the need for Planning Board approval or consent of the signatories. Nor did the court err in granting summary judgment prior to taking depositions. It also did not err in determining that MVE receivedsufficient consideration for entering the Indemnity Agreement even though the value of MVE's property may not have risen as much as anticipated. The consideration was the ability of the project to go forward. We therefore affirm summary judgment requiring MVE to indemnify Lexon.
We reverse the grant of summary judgment to the fourth-party defendants, because MVE's claims against the fourth-party defendants did not depend on the outcome of Lexon's indemnity claims against MVE. MVE did not have an opportunity for discovery on those claims. We also vacate the counsel fee award to Lexon and remand for reconsideration and a more thorough statement of reasons.
MVE and its principal, Stephen Samost, owned approximately 280 acres of land located on both sides of Route 70 in Medford. In 1995, MVE reached an agreement with the Township concerning the property's redevelopment. Disputes arose and in 1996, MVE instituted litigation that was eventually settled in 2005, when MVE and the Township agreed that the site would be designated as a commercial and residential redevelopment area. The Township would condemn the property and then sell it to third-party developers to be developed in phases.
Christopher Noll, engineer for the Township Planning Board, certified that the site plan approved by the Planning Board contained "[three] major components: a large retail shopping center, a market-rate residential housing development and a [sixty]-unit affordable rental housing development." Plaintiff and the Township selected MCN and MCS1 as the redevelopers for the project. In late April 2006, MVE, the Township, MCN and MCS entered into agreements to implement the redevelopment plan.
Pursuant to the agreements, one of the two properties was to be closed by August 2006; however the closing did not occur and MVE declared a default. A resolution was reached in January 2007 that allowed for the affordable housing component of the project to proceed while MVE, MCN and MCS attempted to work out their remaining issues. As a result, Pennoni became the overall project engineer.
Also in January 2007, Noll prepared an estimate for the developer's cost of the affordable housing project of $1,932,258.2 The performance guarantee estimate was "for the above referenced project," which was referred to as "COAH Residential."
The Performance Surety Bond (Bond) between MCS as principal, and Lexon as surety, on behalf of plaintiff as one of the obligees, was signed the following month. It stated:
Pursuant to municipal ordinance . . . the principal hereby furnishes a . . . bond in the amount of $1,932,258[] (not to exceed 120 percent of the cost of the improvements, as certified by the municipal engineer) . . . guarantying full and faithful completion of improvements approved by the approving authority, in lieu of completing the required improvements prior to the granting of final approval. This [B]ond shall remain in full force and effect until such time as all improvements covered by the [B]ond have been approved or accepted by resolution of the municipal governing body, except that in those instances where some of the improvements are approved or accepted by resolution of the governing body upon certification by the municipal engineer, partial release from the [B]ond shall be granted in accordance with N.J.S.A. 40:55D-53.
Among the stated conditions, the surety was permitted, "in its sole discretion . . . [to] make a monetary settlement with the municipality as an alternative to completing the work." In addition:
In the event that the principal and the approving authority agree to changes in the scope of work, the obligations of the surety under this [B]ond shall not be affected so long as the cost of the work does not exceed 120 percent of the municipal engineer's certified estimate . . . .
The Bond further provided that "[t]he estimate dated January 15, 2007 and revised February 5, 2007 by the municipal engineer of the cost of this work is attached hereto and made a part hereof."
The Indemnity Agreement between MVE, MCN, MCS, FCD, Freedman, Cohen and Lexon was signed in March 2007. It provided that "in consideration of the premises, and the payment by [Lexon] of the sum of One ($1.00) Dollar to each of the [i]ndemnitors . . . and for other good and valuable considerations," the indemnitors, MVE, MCN, MCS, FCD, Freedman and Cohen:
will indemnify and save [Lexon] harmless from and against every claim, demand, liability, cost, charge, suit, judgment and expense which [Lexon] may pay or incur in consequence of having executed, or procured the execution of, such bonds . . . or in bringing suit to enforce the obligation of any of the [i]ndemnitors under this [a]greement.
The agreement further provided:
In addition, the Indemnity Agreement provided that the indemnitors' "liability shall be construed as the liability of a compensated [s]urety, as broadly as the liability of [Lexon] is construed toward [plaintiff]."
In March 2007, the Township, plaintiff and MVE also entered into the Affordable Housing Development Agreement (AHDA), in which MCN and MCS, as redevelopers, agreed to provide the bond to complete the affordable...
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