ROBERT J. PACILLI et al. v. IRA J. McMANUS et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4059-04T34059-04T3

ROBERT J. PACILLI and

RONALD ZECK,

Plaintiffs-Respondents,

v.

IRA J. McMANUS and LESLIE McMANUS,

Defendants-Appellants.

_____________________________________

 

Submitted January 9, 2006 - Decided January 27, 2006

Before Judges C. S. Fisher and Yannotti.

On appeal from the Superior Court of New Jersey, Chancery Division, Gloucester County, Docket No. C-103-04.

Archer & Greiner, attorneys for appellants (Stephen M. Fogler, on the brief).

Holston, MacDonald, Uzdavinis, Eastlack & Ziegler, attorneys for respondents (Samuel J. Myles and William F. Ziegler, on the brief).

PER CURIAM

On April 16, 2003, plaintiffs Robert J. Pacilli and Ronald Zeck (Zeck) entered into a contract with defendants Ira J. McManus (McManus) and Leslie McManus, under which defendants agreed to sell and plaintiffs agreed to buy, certain real property in East Greenwich Township. Plaintiffs brought this action for specific performance of the contract and defendants filed a counterclaim in which they assert certain claims including a claim for fraud and breach of the duty of good faith and fair dealing. Defendants appeal from an order entered April 4, 2004 which granted summary judgment in favor of plaintiffs, ordered specific performance of the agreement by defendants and dismissed defendant's counterclaims with prejudice. We reverse.

I.

We briefly summarize the relevant facts drawn from the record before the trial court. Plaintiffs wanted to purchase defendants' property in connection with their acquisition of the adjacent tract owned by Mary Sorbello. The properties were to be developed as a subdivision called Kings Gate South.

Zeck states in his certification that he negotiated the agreement with McManus and they agreed that plaintiffs would be afforded 18 months to obtain necessary governmental approvals after a 60-day "due diligence" period. Zeck asserts that McManus also agreed "that one extension provision for up to 6 months would be acceptable."

The contract was executed by the parties on April 16, 2003. It provides for the sale by defendants of some 42.07 acres of real property at a price $36,000 per approved building lot, with a minimum purchase price in the amount of $936,000. Section 3 of the agreement states that the buyers are entitled to a "due diligence" period of 60 days from the date of the agreement in which to investigate the "status and condition" of the property. Upon the signing of the agreement, the buyers are required to deposit $25,000 with an escrow agent and the deposit is to be held pending the expiration of the "due diligence" period, when it is to be released to the sellers and applied to the purchase price.

Section 4(a) of the contract additionally provides that the agreement is "specifically contingent" upon the buyers obtaining within 18 months from the end of the "due diligence" period "unqualified, final, non-appealable approvals" from municipal, county, State or other governmental authorities for subdivision, variances, site plans, conditional use and other permits, licenses, consents, waivers and such other approvals as may be required for the development of the property. The buyers "shall use due diligence and reasonable efforts in pursuing the [a]pprovals." Section 4(a) also states that, "Time is of the essence."

Furthermore, section 4(b) of the contract provides that the sellers agree to cooperate with the buyers "in connection with the application for and processing of the [a]pprovals and to execute such documents as may be reasonably requested" for that purpose. Section 4(c) states as follows:

[i]n the event that Buyer is unable to obtain the Approvals as described in this Contract by the expiration of the Approval Period, then Buyer, at its sole option, may either (i) cancel this Agreement, in which case this Agreement shall become null and void and neither party shall have any further liability or obligations to the other party under this Agreement or (ii) consummate the closing of title to the Property and Buyer shall pay Seller the Purchase Price.

In addition, section 7.1 states in pertinent part:

Under the terms set forth in this Agreement, Seller hereby agrees to convey title to the Property, by Bargain and Sale Deed, with Covenant As To Grantor's Acts, and Buyer agrees to pay the Purchase Price and close title to the Property ("Settlement") within 30 days after Buyer's receipt of the last required Approvals. Buyer may elect to waive the approval contingency and elect to proceed to settlement. Under no circumstances however shall Settlement occur later than 18 months from the date a fully executed copy of the contract is delivered to the Buyer. If Buyer has not proceeded to settlement by the 18th month from the date the contract is executed by all parties then, and in that event, this contract shall be null and void regardless of the status of the required Approvals. In the event, the contract is deemed null and void by Buyer's failure to complete settlement by the date contemplated herein, then Seller shall keep all monies paid under the terms of this contract, free of any claim by Buyer, and the parties shall be free of any further liability to each other. Time is of the essence.

Moreover, section 9(b) of the agreement provides:

I[n] the event the Buyers require additional time to obtain Governmental approvals, beyond the 20 months, then the buyers shall pay the Seller $2,000.00 per month for each month up to a total of six (6) additional months which shall be credited to the original purchase price.

Zeck says that in the summer of 2003, he met with McManus to discuss the plans and the layout for the development. Zeck states that defendants were going to retain a parcel of their property, and McManus did not want his neighbors in close proximity to his lot and home. Therefore, Zeck had the engineers move the lot lines and increase defendants' remainder lot to 2.7 acres.

McManus also wanted to retain a small stone shed on his property but Zeck advised him in August 2004 that the shed could not remain. McManus was aware that plaintiffs had filed an application for final subdivision approval and it was granted in September 2004. However, Zeck states, "At no time prior to mid-December, 2004 did [McManus] indicate to me, either verbally or in writing, that he was unhappy with the deal, that he did not understand that the time for closing was measured as 18 months from the end of due diligence, or 20 months, or that he was taking the position that he could cancel the contract."

In his certification, plaintiffs' counsel William Ziegler (Ziegler) states that plaintiffs submitted an application for preliminary subdivision approval for Kings Gate South to East Greenwich Township. The development included defendants' property and the 16-acre "Sorbello site" which was then under contract for purchase. The application was scheduled to be heard by the Township Planning Board on November 13, 2003.

Ziegler says that at or around this time, he learned that taxes were due on defendants' property for the third quarter of 2003. On October 29, 2003, Zeck met with defendants and requested that they execute a "Consent of Owner" form which was required by the Township before the Planning Board would consider the subdivision application. According to Ziegler, McManus initially refused to execute the form; however, on or about November 3, 2003, McManus advised Ziegler that he had executed the form and would pay the taxes due on the property.

The matter came before the Planning Board on November 13, 2003 but was adjourned to a special meeting on December 2, 2003, at which the Board approved the application and granted preliminary subdivision approval. The Board granted plaintiff's application for final subdivision approval at its September 22, 2004 meeting and adopted a resolution on October 19, 2004 memorializing that action.

Ziegler says that it was his "recollection at the time" that plaintiffs were required to close title on the purchase of defendants' property 18 months after the end of the "due diligence" period or they could extend the time to obtain necessary governmental approvals. Ziegler asserts that he "was in the process" of preparing letters to defendants scheduling a closing date when he received a call from defendants' attorney John Miller, III, (Miller) who asked whether Ziegler's clients were prepared to close. Ziegler told Miller that his clients were prepared to close but he said that it was his understanding that plaintiffs had until the end of December 2004 to do so. Ziegler asserts that he and Miller "discussed the matter" and scheduled December 2, 2004 as the closing date. Ziegler confirmed that date in a letter dated November 2, 2004.

Ziegler states that Miller advised him that defendants would have difficulty clearing title on their side of the transaction because a plat was not yet ready for filing. Ziegler asserts he told Miller that, in the circumstances, "it would probably be most appropriate for the buyers to simply invoke the extension provision of the contract, pay [defendants] $2,000 and extend for a period of one or two months until the plat is available for recording." According to Ziegler, "Miller did not disagree."

In a letter dated November 18, 2004, Ziegler confirmed that plaintiffs were ready, willing and able to close. On November 29, 2004, Zieger called Miller and left a message asking whether he should forward to him the check for the extension of the approval period. Miller did not respond to the letter or call. Nevertheless, on November 29, 2004, Ziegler forward a $2,000 check to defendants.

Defendants thereafter retained Archer & Greiner to represent them in the transaction. Stephen M. Fogler (Fogler), an attorney with that firm, wrote to plaintiffs and informed them that because plaintiffs had not closed within 18 months after the execution of the contract, the agreement was null and void and defendants were entitled to keep the deposit monies. Fogler also stated that plaintiffs did not have a right under section 9(b) of the contract to extend the closing date because that section of the agreement pertains solely to the exercise by a governmental entity of its eminent domain power.

McManus submitted a certification in which he asserts that the agreement specifically provides that settlement must occur within 18 months after the agreement is executed or the agreement is null and void. That date was October 16, 2004. Plaintiffs failed to close prior to that date. McManus also states that plaintiffs did not request, and were not given, an extension of the 18-month deadline. He further asserts, "At no time after October 16, 2004 did either my wife or I, or anyone acting on our behalf, ever agree to a modification or reinstatement of the expired Agreement."

Miller also submitted a certification. He says that, prior to October 16, 2004, he did not have any communication with plaintiffs. Miller asserts that, in his initial conversation with Ziegler, he advised him that the contract had expired. Miller denies that he ever stated that the contract remained in effect or had been reinstated. Miller additionally says that he never agreed to a December 2, 2004 closing date, or any other closing date, and he was not authorized by defendants to do so.

As we stated previously, plaintiffs commenced this action seeking specific performance of the agreement. They filed a verified complaint and sought the issuance of an order requiring defendants to show cause why an order should not be entered ordering defendants to perform. Defendants filed an answer and counterclaim, and moved for partial summary judgment seeking dismissal of plaintiffs' complaint. The judge heard argument and rendered a decision from the bench on March 18, 2005.

In her decision, the judge found that defendants waived their right to declare the contract null and void because of plaintiffs' failure to close by October 16, 2004. The judge first noted that the provision of the contract requiring settlement within 18 months after execution of the agreement was irreconcilable with the provisions establishing the time within which plaintiff must obtain governmental approvals. The judge found that defendants' had not acted with the understanding that October 16, 2004 was the "time is of the essence" closing date.

The judge stated that defendants' conduct before October 16, 2004 did not "evince a desire to proceed as quickly as possible." The judge pointed out that defendants were responsible for "some delay due to a failure to have taxes paid on the subject property and reluctance and initial refusal to execute a consent of owner form." In the judge's view, this conduct made it "inequitable without some other notice that" the contract required closing by October 16, 2004.

The judge also found that defendants' conduct after October 16, 2004 did not "show an intent to hold plaintiffs to strict compliance with that date." The judge noted that until Fogler's December 14, 2004 letter, defendants never provided notice that they would hold plaintiffs to the "time is of the essence" closing date in section 7.1. The judge added that plaintiffs' investment in the approval process also was a significant factor for the court's consideration. She stated:

It frankly defies a reasonable explanation that the defendants would be permitted to initially refuse to sign the consent [of] owner form, not promptly pay the real estate taxes, which were clearly their obligation, in order to promptly advance the approval process, and then be able without any notice to the plaintiffs to say, well, now your contract's null and void and we get to keep the deposit. It just does not make sense.

The judge accordingly entered judgment for plaintiffs and dismissed defendants' counterclaims. This appeal followed.

Defendants raise the following contentions for our consideration: 1) the judge's finding that defendants were responsible for some delay in plaintiffs' pursuit of their development approvals is without support in the record; 2) the judge erroneously found that defendants waived their right to enforce the "time is of the essence" closing date; and 3) the judge erred in treating plaintiffs' order to show cause as a motion for summary judgment.

II.

Summary judgment may be granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. R. 4:46-2(c). Furthermore, "[a]n issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." Ibid. A genuine issue of material fact does not exist if there is "a single, unavoidable resolution of the alleged disputed issue of fact. . . ." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202, 213 (1986)). In an appeal from an order granting summary judgment, we consider whether the motion judge correctly applied these standards. Prudential Property Ins. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We are convinced that the judge departed from these principles and erred in granting summary judgment in favor of plaintiffs.

First, there is a genuine issue of material fact as to whether the parties intended to establish a "time is of the essence" closing date 18 months after the date when they executed the contract. Section 7.1 of the contract so provides. That section of the agreement also states that, if settlement does not occur by that date, the contract is null and void.

However, section 7.1 is inconsistent with the sections of the agreement requiring plaintiff to obtain necessary governmental approvals and establishing the time frame within which that is to occur. Section 4(a) provides that plaintiff must obtain those approvals within 18 months after the 60-day "due diligence" period and section 4(c) allows either party to cancel the contract in the event approvals are not obtained within that time frame. Moreover, section 9(b) of the contract expressly states that the 20-month period for obtaining governmental approvals may be extended up to six months, in the event the buyers require additional time.

"The fundamental rule in construing contracts calls for the ascertainment of the intention of the parties in the light not only of the language used but also of the surrounding circumstances and the objects sought to be attained by them under their agreement." Cozzi v. Owens Corning Fiber Glass Corp., 63 N.J. Super. 117, 121 (App. Div. 1960)(citing Stern v. Larocca, 49 N.J. Super. 496, 501 (App. Div. 1958)). The judicial role is to search "for the reasonably certain meaning of the language used, taken as an entirety, considering the situation of the parties, the attendant circumstances, the operative usages and practices, and the objects the parties were striving to achieve...." Ibid. (quoting George M. Brewster & Son v. Catalytic Constr. Co., 17 N.J. 20, 32 (1954)).

We are convinced that the record was insufficient for the judge to rule, as a matter of law, that the parties did not intend to be bound by section 7.1 of the agreement. The judge made her findings on this critical issue based on facts in the certifications of the parties and their attorneys. When the matter came before the court, there had been no discovery in the case. In our view, the statements in those certifications did not provide a sufficient factual foundation for a determination as to whether the parties intended the transaction to close no later than October 16, 2004, as required by section 7.1, notwithstanding the other provisions of the agreement which give plaintiff a longer period of time to obtain necessary governmental approvals.

Summary judgment is particularly inappropriate when a written provision of the agreement is "doubtful" and there is a need for parol evidence to aid the trier of fact in interpreting the contract. Great Atl. & Pac. Tea v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000)(citing Michaels v. Brookchester, Inc., 26 N.J. 379, 387 (1958), and Garden State Buildings v. First Fidelity Bank, 305 N.J. Super. 510, 525 (App. Div. 1997), certif. denied, 153 N.J. 50 (1998)). Because the provisions of the agreement pertaining to the "time is of the essence" closing date are ambiguous and uncertain, further evidence is required to establish the intent of the parties in respect of the closing date.

Second, the judge erred in finding that defendants' conduct before the putative October 16, 2004 "closing date" did not show a "desire to proceed as quickly as possible." The record does not support this finding. As we stated previously, there is some evidence that in early November 2003, defendants refused to execute the "Consent of Owner" form and had not paid taxes that were due and owing on the subject property for the third quarter. It is undisputed that the Planning Board would not entertain plaintiffs' application for preliminary subdivision approval unless the form was completed and the taxes paid.

However, there is no evidence that defendants' actions delayed the Planning Board's consideration of the application. The matter was scheduled for the Board's November 13, 2003 meeting. Defendants completed the "Consent of Owner" form and paid the property taxes before that meeting. The Board deferred consideration of the application to its December 2, 2003 meeting because of time constraints, not because of any action or failure to act on the part of defendants. The record therefore does not establish that the defendants delayed the Planning Board's consideration of plaintiffs' application.

Third, the judge erred in finding that defendants' conduct after October 16, 2004 showed that defendants did not intend to hold plaintiffs to strict compliance with that closing date. There is a genuine issue of material fact as to whether the parties agreed that the transaction could close after October 16, 2004.

Zeck states in his certification that prior to mid-December 2004, McManus never conveyed any dissatisfaction with the deal and never conveyed an understanding that closing had to occur earlier than 18 months after the "due dilgence" period. In his certification, Ziegler suggests that he was not sure when closing was required under the agreement. He states that he discussed the matter with Miller and they agreed to close on December 2, 2004.

However, Miller denies that the parties ever agreed to a December 2 closing. Miller asserts that he told Ziegler that the contract was no longer in effect and he never agreed to reinstate the agreement, or extend the time under section 9(b) for plaintiffs to obtain governmental approvals. McManus also states that the agreement became null and void because the transaction did not close on October 16, 2004 and neither he nor his wife ever agreed to modify or reinstate the agreement.

We therefore reverse the order granting summary judgment in favor of plaintiffs and dismissing defendants' counterclaims. The parties may, of course, renew their respective applications in the trial court after they have been afforded an opportunity for discovery and a more complete record is developed. In light of our determination, there is no need to address defendants' alternative assertion that the judge erred by treating plaintiffs' order to show cause as a motion for summary judgment.

Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

 

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A-4059-04T3

January 27, 2006