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ARNHOLD v. OCEAN ATLANTIC WOODLAND CORP.

February 28, 2001

ELDA ARNHOLD, AND BYZANTIO, LLC, PLAINTIFFS,
v.
OCEAN ATLANTIC WOODLAND CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Keys, United States Magistrate Judge

MEMORANDUM OPINION AND ORDER

Before the Court is Defendant Ocean Atlantic Woodland Corporation's ("Ocean Atlantic") Motion to Enforce Settlement Agreement. Because the Court finds that ocean Atlantic breached a material term of the Settlement Agreement, and for the reasons set forth below, Ocean Atlantic's Motion is denied with prejudice. Furthermore, the Court finds that the Settlement Agreement, entered into between the parties on October 26, 2000, has been properly terminated, pursuant to its terms, and accordingly, Ocean Atlantic has no rights with respect to the Property at issue in the case sub judice.

FACTUAL BACKGROUND

This controversy illustrates the truth inherent in the cliche: "There are two sides to every story." After reading Ocean Atlantic's Memorandum in Support of its Motion To Enforce Settlement Agreement ("Def.'s Memo."), the Court was led to believe that there was no significant context to paragraph 15*fn1 of the October 26, 2000 Settlement Agreement, and that, therefore, Ocean Atlantic's noncompliance with the unambiguous terms of this paragraph was merely technical, and certainly not a material breach. However, after reading Plaintiff's Response, and carefully observing the testimonial demeanor of the witnesses at the February 14-15, 2001 hearing, the Court finds that paragraph 15 was not drafted in a vacuum, but rather has an almost four-year contentious history, and was certainly an essential (if not "the" essential) term of the Settlement Agreement.

A. The Context Behind the Year 2000 Settlement Agreement

The Plaintiffs are Elda Arnhold, a 78-year-old woman and life-long farmer who owns and lives on her family farm outside of Plainfield, and Frank Argoudelis, also a life-long farmer, and his family ("Byzantio) who own a farm adjoining the Arnhold farm. On August 6, 1997, the Arnhold and Argoudelis families (hereinafter referred to collectively as the "Sellers" or "Plaintiffs") entered into a contract to sell their farm land (i.e. the Property) to Ocean Atlantic, a large land development company, for the purchase price of $7,560,000. This original contract contemplated an initial closing by November, 1997, and required that the initial closing, or specified conditions for closing, occur no later than August 6, 1998, or either party would have the right to terminate the contact.*fn2

Not surprisingly, the First Closing did not occur on August 6, 1998. According to Plaintiffs, Ocean Atlantic did not work diligently to facilitate closing and, consequently, failed to meet the deadlines set forth in the contract. Ocean Atlantic, on the other hand, claims that Plaintiffs refused to cooperate with needed steps to facilitate the First Closing.*fn3 Despite the abundant hearing testimony concerning these issues it is not germane to the present controversy as to whom was at fault in these initial disagreements. The critical point is that, in 1998, the parties' business relationship deteriorated, and the First Closing did not occur. (Tr. at 100.)*fn4

Nevertheless, the parties agreed to a series of date extensions, which were embodied in the First Amendment, executed on November 10, 1997*fn5 (Plaintiff's Exh. 2*fn6), and then a Second Amendment, executed on or about April 14, 1999 (Plaintiff's Exh. 1). The Second Amendment extended the First Closing date to no later than November 30, 1999, but, once again, the First Closing did not occur by this date. According to Plaintiffs, Ocean Atlantic failed to abide by its promises and obligations, for example, by failing to seek final engineering approval from the Village of Plainfield, which would have triggered a mandatory closing date within 30 days thereafter. Conversely, on or about November 8, 1999, Ocean Atlantic maintained that the Village of Plainfield had imposed, on August 23, 1999, a moratorium on sewer permits until December 2001, which necessitated an extension of the November 30, 1999 closing date.*fn7

Believing that Ocean Atlantic was concocting yet another delay tactic, on November 22, 1999, Plaintiffs filed a lawsuit in federal court for declaratory judgment that the contract would be terminated if the First Closing did not occur by November 30, 1999, pursuant to the Second Amendment. Ultimately, Judge Holderman denied Plaintiffs' summary judgment motion, and in the Fall of 2000, the parties settled the lawsuit by entering into the October 26, 2000 Settlement Agreement (also referred to as the Third Amendment), the relevant document at issue in this case.

B. The Settlement Agreement and Ensuing Controversy

A few days before the scheduled trial, the parties entered into the Settlement Agreement, and Plaintiffs dismissed their lawsuit with prejudice. Although Plaintiffs and Ocean Atlantic insist that different parts of the Settlement Agreement were material and significant, the Court finds, based on the almost four-year contentious background between the parties, the circumstances surrounding the execution of the Settlement Agreement (including letters written back and forth between the parties in negotiating the Settlement Agreement (discussed infra)), and the testimony at the hearing, that the following were material aspects of the Settlement Agreement: (1) there would be one closing for the full purchase price of the Property (as opposed to three, as the initial contract had contemplated); (2) there would be a final, "drop-dead" date for closing, the language of which was encompassed in paragraph 15; and (3) the issue of the sewer moratorium would be waived.

According to Plaintiffs, they would not have entered into the Settlement Agreement — and, correspondingly, dismissed their lawsuit with prejudice — if Ocean Atlantic had not agreed to paragraph 15, which stated in no uncertain terms that January 25, 2001 would be a final, absolute date for closing. (Tr. at 305-06, 313.) After an almost four-year relationship, involving several ineffectuated closing dates, two amendments to the initial contract, and two federal lawsuits, Plaintiffs wanted the certainty that by one particular date (in this case, January 25, 2001)*fn8, either a closing would occur, or the contract would be terminated. Indeed, the whole premise behind their lawsuit for declaratory judgment stemmed from Ocean Atlantic's failure to close by November 30, 1999, as set forth in the Second Amendment. Therefore, it is entirely believable that Plaintiffs would not have settled the lawsuit — and dismissed it with prejudice — unless they were guaranteed an absolute, final, "drop-dead" date for closing in the Settlement Agreement.

Besides the unambiguous language of paragraph 15, Plaintiffs' insistence on a final, "drop-dead" closing date can be gleaned from the correspondence between the parties during the settlement negotiations. For example, in a September 7, 2000 letter from William Farrell, counsel for Ocean Atlantic, to Theodore Poulos, counsel for Plaintiffs, Mr. Farrell acknowledged that Plaintiffs would consider settlement only if the agreement included: (1) an amendment to the existing contract setting a closing date or dates without the possibility of extensions or delays; (2) the absolute right of Plaintiffs to terminate the contract in the event of failure to close on the set closing date(s); (3) that such closing date(s) would occur "quickly"; and (4) that payment of the full purchase price would be made ...


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