PAPARONE HOUSING COMPANY, INC. v. THE WYNFORD GROUP, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1003-06T31003-06T3

PAPARONE HOUSING COMPANY, INC.,

a New Jersey Corporation,

Plaintiff-Respondent,

v.

THE WYNFORD GROUP, BLUE FOOT

STABLES, MAIN LINE REALTY GROUP,

MAIN LINE REALTY, INC., PINEDGE

ASSOCIATES, KEN DILULLO,

JOSEPH SAMOST, IVA SAMOST, LINDA

SAMOST, ELLEN SAMOST, EIL

INVESTMENTS, EIL INVESTMENTS, L.P.,

WYNFORD INC., KENNETH STELIGA,

THE STELIGA CORP., MAIN LINE REALTY

GROUP, L.L.C., LINELIV, L.L.C.,

COOPER RIDGE,

Defendants,

and

COOPER RIDGE, L.P.,

Defendant-Appellant,

and

STEPHEN D. SAMOST,

Defendant-Respondent.

_________________________________________________

 

Submitted December 12, 2007 - Decided

Before Judges Axelrad, Payne and Messano.

On appeal from Superior Court of New Jersey,

Chancery Division, Camden County, C-5-01.

Levy, Angstreich, Finney, Baldante,

Rubenstein & Coren and Genova, Burns &

Vernoia, attorneys for appellant (Steven E.

Angstreich, Paul N. Bonavita, Angelo J.

Genova and Jonathan S. Goodgold, of counsel

and on the brief).

Flaster, Greenberg, P.C., attorneys for

respondent Paparone Housing Company, Inc.,

(Kenneth S. Goodkind and Vincent J. Nolan

III, of counsel and on the brief).

Stephen D. Samost, respondent, filed a pro

se brief.

PER CURIAM

Defendant, Cooper Ridge, L.P., appeals from an order for specific performance, certified as final, that requires it to transfer property known as Phase II of Highpoint II to plaintiff, Paparone Housing Company, Inc., in accordance with a written contract, executed on March 31, 1998, between plaintiff and The Wynford Group, a development company controlled, along with other real estate and development entities, by defendant Joseph Samost, a prominent South Jersey real estate entrepreneur. On appeal, Cooper Ridge, the sole appellant, argues that (1) plaintiff failed to demonstrate the existence of a valid, enforceable and reasonably definite contract between it and Cooper Ridge; (2) neither the doctrine of equitable estoppel nor that of partial performance applies to the transaction; (3) the transfer of the land at issue constitutes an unduly harsh remedy; and (4) the named defendants did not violate any implied covenant of good faith and fair dealing justifying the relief that was granted. We affirm.

As in much real estate sale and development litigation, the facts of this matter are complex, involving a multitude of business entities essentially controlled by one person, Joseph Samost, and a contractual sale agreement whose structure and content was impelled at the time of its inception by tax considerations and expressions of good faith, rather than the niceties of contract law. Although Phase I of the sale was timely consummated, litigation resulting from the refusal by Joseph's son and business associate, Stephen, to relinquish an easement that violated an existing settlement delayed development and, hence, closing on Phase II of the property sale. Then, when business and personal relationships soured between Joseph and Stephen, and Stephen asserted temporary control over the property at issue, Stephen repudiated interim agreements extending the date for closing on that phase of the sale and, while expressing a willingness to negotiate terms more favorable to him, Stephen declared the 1998 sale agreement pertaining to the land to be at an end.

As a consequence, on January 3, 2001, plaintiff filed suit in the Chancery Division against Stephen and various entities with a relationship to the sale transaction: The Wynford Group, Blue Foot Stables, Main Line Realty Group, Main Line Realty, Inc., Pinedge Associates, and Cooper Ridge, L.P. A second suit, naming as defendants EIL Investments and EIL Investments, L.P. was consolidated with the main action in June 2004.

While suit was in progress, Joseph reasserted control of the property and, for a substantial period, acquiesced or cooperated in plaintiff's efforts to obtain sewer approvals and otherwise develop the property. However, recognizing that the property had increased in value over time and as the result of plaintiff's development efforts, eventually Joseph, as well, sought to avoid the Phase II sale. As the result, on July 13, 2004, plaintiff added Joseph to the litigation as a defendant, along with Wynford, Inc., Main Line Realty Group, L.L.C., Lineliv, L.L.C., Cooper Ridge, and various other individuals and entities that were either fictitious or later dismissed from the litigation. Plaintiff's suit asserted, among others, claims of breach of contract, breach of the covenant of good faith and fair dealing, interference with contract by Stephen, violations of the Consumer Fraud Act, fraud, quantum meruit, and unjust enrichment in connection with the uncompleted real estate transaction, and it sought specific performance and both compensatory and punitive damages.

In 2004, the chancery judge granted plaintiff's motion to restrain the transfer of the Phase II property, as well as other properties at issue, by defendants, and it additionally granted a motion by Stephen to dismiss plaintiff's specific performance claims against him. On February 14, 2005, a consent judgment was signed, whereby defendant Main Line Realty Group, L.L.C., acknowledged that it was the successor in interest to defendant Main Line Realty Group, which in turn was the successor in interest to defendant Main Line Realty, Inc., as well as the assignee of defendant The Wynford Group, the party that executed the 1998 sale agreement with plaintiff. Main Line Realty Group L.L.C. further acknowledged that it was legally obligated to sell and convey title to the property at issue to plaintiff once it had acquired title from the nominal property owner, Cooper Ridge, L.P., the ultimate successor to defendant Blue Foot Stable, which owner the property at the time of the 1998 sale agreement with plaintiff. However, that additional conveyance was resisted.

When the equitable issues remaining after the execution of the consent judgment were tried in the Chancery Division, a partial judgment was entered in plaintiff's favor. In a lengthy oral opinion, placed on the record on July 11, 2006, the trial judge found essential control by Joseph over all the real estate and development entities involved in the transaction. Additionally, he found bad faith on the part of Joseph Samost, as well as his son Stephen, in refusing to consummate the sale. Finding equitable grounds to do so, the judge granted specific performance of the 1998 sale agreement, concluding that the covenant of good faith and fair dealing had been violated, and that defendants were estopped from disavowing that agreement. The chancery judge certified the judgment as final pursuant to R. 4:42-2, reserving plaintiff's damages claim for later trial. A subsequent motion for reconsideration was denied, but a stay of the partial judgment was granted.

I.

The record supports the following abbreviated summary of the evidence in this matter. In early 1998, plaintiff's principal, Thomas Paparone, a builder, entered into negotiations with Joseph and Stephen Samost, a trained attorney who worked in that capacity, as well as others, for the Samost businesses, to purchase land in Voorhees Township, known as Highpoint II, consisting of seventy-three residential building lots, drainage basins, and open space. At the time of the negotiations, final subdivision and sewer approvals had been granted only with respect to twenty-four of the lots. As a consequence, the deal was structured in two phases that required plaintiff to immediately purchase the twenty-four lots for $1,800,000 and to purchase the remaining forty-nine lots by January 2, 2000 for an additional $4,045,000, paid in two installments, once the necessary development approvals had been obtained by the seller. Title to Highpoint II was held by defendant Blue Foot Stables, an unincorporated entity at the time owned by Joseph, Stephen, and their wives, but effectively controlled by Joseph, as were all of the other defendant entities in which Joseph held an interest.

As the result of Joseph's desire to avoid capital gains taxes on the transaction, the property was first to be transferred from Blue Foot to The Wynford Group, a development company administered at Joseph's direction by Henry DiLullo, a "second son" to Joseph, and controlled by Joseph. Wynford would then transfer the property to plaintiff.

On March 31, 1998, plaintiff and Wynford entered into a formal contract for both phases of the sale of Highpoint II. Pursuant to that contract, Wynford was required, at its expense, by January 2, 2000, to obtain Phase II final, non-appealable subdivision approval from Voorhees Township, as well as to obtain necessary sewer system construction approvals from local and state authorities. The agreement also contained an undertaking to provide easements for access, utility lines and facilities, storm water and drainage, and other facilities "from any adjacent property owned by Seller or an affiliate in favor of any portion of the Property purchased by Buyer." An additional easement over the Phase II property was granted to the seller to permit "access to a residential, single family community to be located in Evesham Township, Burlington County, New Jersey, which is not precluded by [a prior] Order and Stipulation of Settlement" with Voorhees Township and Township residents.

Blue Foot, the owner of Highpoint II, was not a signatory to the agreement. However, plaintiff was assured by Stephen Samost, the seller's attorney and, at the time, a part owner of Blue Foot, that the formality was immaterial, because Joseph controlled all of the entities. As the result of prior successful business dealings between Thomas Paparone and Joseph Samost, in connection with the purchase of properties known as Sanctuary and Highbridge, which deals were similarly structured, the assurances were accepted.

Phase I closed on April 5, 1998, after Blue Foot deeded it to Wynford in an informal sale transaction for consideration of $1,700,000. However, matters did not proceed as smoothly with respect to Phase II.

First, in a letter of June 11, 1998, Voorhees Township advised plaintiff and Stephen that the easement granted across Phase II property to provide access to a residential development in Evesham violated the settlement that Stephen had previously reached in litigation with Voorhees and certain of its residents. A stop order was issued precluding work on Phase I and the issuance of any approvals on Phase II. Despite a prior oral agreement by Stephen with plaintiff to remove the reservation, should Voorhees object, Stephen refused Voorhees's demand. Ensuing litigation by Voorhees was not resolved until August 22, 2000 when the reservation was declared invalid. Although the stop work order was lifted with respect to Phase I during litigation, the stop order with respect to Phase II was not, delaying issuance of necessary approvals.

Second, in July 1998, a dispute arose between Joseph and Stephen Samost regarding the ownership of the Samost family properties, including Highpoint II, Phase II. Litigation was commenced, first in federal, and then also in state court. Stephen claimed that, between July 1998 and June 2000, he was not consulted by Joseph regarding the status of High Point's Phase II. According to testimony at trial, Stephen, as an attorney, previously had been instrumental in obtaining the approvals necessary for the development of the Samost land holdings. His work ceased.

While the easement and Samost suits were ongoing, Wynford took no action to obtain the necessary site plan and sewer construction approvals for Phase II. As a result of the inactivity, to an extent compelled by Voorhees's stop orders, an amendment to the sale agreement was signed on November 23, 1999 by plaintiff and DiLullo, on behalf of The Wynford Group and Mainline Realty Group, a partner in The Wynford Group, that extended the closing date on that phase to January 2, 2001, and stated additionally that "settlement shall take place immediately upon the execution of the final plans by the Township of Voorhees." According to plaintiff, Joseph was present when the extension was signed.

In June 2000, plaintiff sought a second extension to sixty days after Voorhees signed the plans for Phase II, and sewer was available for the project, as well as building permits. The requested extension, dated June 9, 2000, was executed in July of that year by DiLullo and witnessed by Joseph, although he later disavowed his consent to the agreement's terms.

In the absence of any effort by Wynford, DiLullo or Joseph to obtain the approvals necessary for Phase II construction, with their consent and, at times, assistance, plaintiff, denominating itself as contract owner, proceeded to do so a complicated and expensive process requiring extensive modifications to the proposed sewer system, relocation of the pump station and force main from adjoining property to that of plaintiff, and approvals by multiple governmental entities.

On July 21, 2000, an tentative settlement was reached in the federal litigation involving the Samost properties. Pursuant to that settlement, Stephen was to receive title to properties that included Highpoint II, Phase II, although in fact he never obtained a legally recognized ownership interest in that property. During the period of Stephen's purported ownership, he refused to recognize the extension agreements reached between plaintiff and DiLullo, taking the position that the sale agreement between plaintiff and Wynford had terminated on January 1, 2000 and that plaintiff had failed to require an extension of the sale agreement between the property's owner, Bluefoot, and the developer, Wynford or, after transfer of its interest, Main Line Realty Group. As Stephen wrote in a letter dated September 29, 2000 regarding the Phase II property:

I have had numerous discussion with both [counsel] Mr. Washburn and Mr. Paparone regarding this matter. There is no agreement in place to sell the property to Wynford, and I have consistently advised Mr. Washburn and Mr. Paparone of that. Unbeknownst to me, during the past year your client negotiated an extension of his agreement with Mr. Paparone. I was provided with a copy of that agreement by Mr. Washburn and Mr. Paparone a few weeks ago.

Although we are not obligated to sell the property to Mr. Paparone or his company, and although we have offers for more money per lot for the site, I have advised both Mr. Paparone and Mr. Washburn that we will negotiate to sell the property to them, so long as payment for the balance of the site is made early next year.

Stephen's attempted renegotiation of the transaction was not successful.

Despite Stephen's position with respect to the termination of the sale contract, on November 20, 2000, plaintiff was informed, in a letter written with Joseph's approval on behalf of Main Line Realty Group, L.L.C. by Kenneth Steliga, who succeeded to DiLullo's position upon DiLullo's death, that Wynford had assigned its interest in Highpoint II, Phase II to Main Line Realty Group, and that the sale agreement was still in effect. The letter stated:

Please be advised that the March 31, 1998 Agreement of Sale for the Highpoint development between The Wynford Group and Paparone Housing Co., as extended by Extension Agreement dated November 23, 1999, and further extended by Amendment dated June 9, 2000, remains in full force and effect. By assignment, The Wynford Group assigned said Agreement of Sale to Main Line Realty Group.

As the preparer of the March 31, 1998 Agreement of Sale, Stephen D. Samost, is aware that said Agreement provided Paparone Housing Company, Inc. the right to purchase the entire Highpoint development from The Wynford Group. Said Agreement also provided for the extension evidenced by the November 23, 1999 Extension. The further extension was required due to among other issues, sewer capacity not having been finalized and the need for resolution of the reservation of easement issue.

In May 2001, after the present litigation had been instituted, the federal settlement was modified to provide that "[t]he property known as Highpoint II shall not be transferred to Stephen D. Samost but shall remain with the entity which presently holds title."

In 2002 and 2003, as plaintiff sought to secure needed approvals for the development, Joseph revealed to Kenneth Steliga that he no longer sought to consummate the sale of the property to plaintiff, having determined that he could receive more money for it from a third party. According to Steliga, Joseph offered him a financial reward if Steliga successfully fought plaintiff's suit and the property was then sold to another. Steliga claimed that he refused the deal, which Joseph later denied was ever offered.

Having received all necessary approvals, plaintiff attempted to close on Phase II in October 2003, writing to Joseph to request a closing date, but receiving no response. Joseph was made a party to plaintiff's ongoing litigation in June 2004. In February 2005, the consent judgment was entered by which Main Line Realty Group, L.L.C. acknowledged that, as assignee of Wynford and successor to other Main Line entities, it was obligated to sell and convey title to Phase II to plaintiff once it acquired title from Cooper Ridge, Blue Foot's successor. Main Line also declared the agreement between Wynford and plaintiff to be valid and enforceable. Nonetheless, at trial, Joseph, asserting the separate identity of Cooper Ridge, resisted specific performance of the sale agreement by claiming, among other things, that (1) the oral agreement between The Wynford Group and Blue Foot Stables for the transfer of Phase II was legally invalid; (2) the doctrines of promissory and equitable estoppel were inapplicable; (3) reasonable reliance by plaintiff on representations by defendants had not been demonstrated; (4) none of the parties acted as agent of Blue Foot; (5) no change of position on plaintiff's part as the result of representations on Blue Foot's behalf had been shown; (6) part performance by plaintiff was not established; (7) there was no evidence that Blue Foot had consented to the extension agreements executed by plaintiff and Wynford; (8) even if the extensions were recognized as valid, closing did not occur in a reasonable time; (9) DiLullo's business interests were separate from those of the Samosts, and no evidence demonstrated that either he or the Wynford group was an instrumentality for Joseph or Blue Foot; (10) plaintiff misrepresented his authority when obtaining approvals from Voorhees Township, and its inequitable conduct barred the equitable remedy sought; and (11) the terms of any sale by Blue Foot to Wynford were too vague to be enforceable.

In his July 11, 2006 opinion following trial of the specific performance issue, the chancery judge accepted plaintiff's position that it was entitled to specific performance of the sale contract, having at all times acted in good faith in attempting to consummate the sale. The judge found both Joseph and Stephen to lack credibility. As a substantive matter, the judge concluded on the basis of the evidence presented that Joseph divided his business activities, consisting of the purchase and sale of land and the development of property, in a manner that permitted him to realize capital gains benefits from property sales while paying taxes at ordinary income rates as a developer. The entities controlled by Joseph were principally organized to further his sale activities, separate Joseph's name from his development activities, and to insulate Joseph from additional tax liability. Nonetheless, and despite any nominal ownership interest by other individuals or entities, Joseph retained total control of the sale and development companies, particularly after Stephen's departure from the business, "micromanaging" every aspect of the entities' business dealings and disregarding corporate and other business forms. As a consequence, although no agreement existed for the transfer of Highpoint II by Bluefoot Stables to Wynford, and although DiLullo nominally controlled Wynford, no agreement was necessary because of Joseph's actual control of both entities. "[Joseph] created Wynford and he created Bluefoot and he created Henry [DiLullo]. And if Henry crossed him, Henry would be out." The judge found:

The fact that there was no written agreement to transfer property from Bluefoot to Wynford is not at all surprising. The evidence overwhelmingly establishes that Henry DiLullo and any companies that he nominally owned -- and I underline nominally -- including Wynford, were, at most, simply shells, were simply vehicles for the Samost family, particularly Joseph.

The judge additionally found that plaintiff's reliance on assurances of the validity of the two-step process for transfer of ownership in the property at issue, despite the lack of a formal contract between Blue Foot and Wynford, was reasonable as the result of prior similarly-structured, uneventful, dealings involving the Samost entities. He found that the delays in closing were occasioned both by Stephen's unlawful requirement of an easement across Phase II property and the resulting litigation and stop orders, and by the internecine disputes between Joseph and Stephen and the additional litigation that those disputes spawned.

The judge found that Joseph and his agents had both encouraged and to an extent cooperated individually and through agents in plaintiff's efforts to obtain the approvals necessary for development of the land that Wynford had contracted to procure, that plaintiff as contract purchaser was authorized to seek those approvals, and that at no point did Joseph indicate to plaintiff that its efforts were unauthorized. Of significance to the judge was the fact that at no time did Joseph seek to return plaintiff's deposit on the property, despite contractual provisions permitting that relief if the required approvals were not obtained by the date specified in the sale agreement.

After further review of the evidence, the judge found defendants to be estopped from avoiding their obligations to plaintiff, and that detrimental reliance by plaintiff upon defendant's representations had been demonstrated. The judge held:

Equity demands that Paparone receive the benefit of its bargain because the defendants, through their inaction, silence, omission and representations, and perceived, reasonably perceived acceptance, did nothing to alert the plaintiff here, Paparone, to believe that they would not proceed and that the transfer of Phase II would [not] proceed as contemplated . . . .

Defendants' actual conduct, including the transfer of Phase I in accordance with the agreement, allowed Paparone to expend time and resources procuring the permits that were Wynford's responsibility under the agreement. And further, [the negotiation of] extensions of the closing date for Phase II when Wynford, the Court finds, through its own fault, failed to procure . . . in a timely fashion the necessary [municipal] agreements . . . and the approvals . . . induced Paparone's reliance on [defendant's] representations that Phase II of the agreement would be completed.

The judge additionally ruled that the facts permitted the application of the doctrine of apparent authority to hold Joseph responsible for the conduct of DiLullo, Steliga, Stephen and Wynford. He applied the doctrine of waiver, finding that defendants by their inaction, silence and acquiescence to plaintiff's development efforts had relinquished any right to disregard the agreement. The judge found ratification of the agreement by Joseph's consent to the second extension and to plaintiff's continued efforts to obtain approvals. Additionally, as previously noted, the judge found that the defendants had breached their duty of good faith and fair dealing in connection with the sale transaction by precipitating the easement litigation, failing to obtain required approvals, shifting the blame to plaintiff when it did so, continuously shifting title to Phase II among entities controlled by the Samosts until ordered to desist, and then disclaiming any obligation by Blue Foot and its successors to cause title to be transferred to plaintiff.

II.

We begin our analysis of Cooper Ridge's arguments with the familiar principle that we will not disturb the factual findings upon which a judgment in a non-jury trial is based unless a manifest denial of justice would result from their preservation. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974). If the trial judge's findings are supported by relevant, credible evidence, they are binding on us upon appeal. Id. at 484. However, the judge's interpretation of the law is not entitled to any particular deference. Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995).

On appeal, Cooper Ridge challenges the judge's order for specific performance of the sale of the Phase II property, attacking many of the bases upon which the judge based that order. According to Cooper Ridge:

Among the errors both legal and factual committed by the Court include, but are not limited to: its determinations that Paparone was entitled to specific performance of an Agreement that Cooper Ridge was not a party to; its determination that Cooper Ridge should be compelled to specifically perform a contract that was never contemplated or agreed to by the parties; that Wynford and DiLullo were the alter ego of Joseph Samost with respect to performance of the Agreement; and that the doctrines of waiver, estoppel, agency and the implied covenant of good faith and fair dealing supported judgment in favor of Paparone for specific performance of the [Wynford/Paparone] Agreement.

In order to obtain the relief that was granted, plaintiff was required to demonstrate (1) the existence of a valid and enforceable contract; (2) contractual terms that were sufficiently clear to enable the court to determine, with reasonable certainty, the duties of each party and the conditions under which performance was due; and (3) that an order compelling performance would not be oppressive to the opposing party. Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 598-99 (App. Div.), certif. denied, 183 N.J. 591 (2005). Not only must the plaintiff establish a legal right to recovery, it must also establish to the court's satisfaction that imposition the remedy of specific performance is equitable in the circumstances presented. Id. at 599.

Cooper Ridge contends that plaintiff failed to meet its burden with respect to each of the three conditions for specific performance, first arguing that plaintiff failed to demonstrate the existence of a valid, enforceable and reasonably definite contract between it and Cooper Ridge, or its predecessor, Blue Foot. Cooper Ridge supports this argument by noting that it was not a signatory to the agreement between plaintiff and Wynford, and that plaintiff was not a signatory to the oral agreement between Blue Foot and Wynford. Cooper Ridge claims that, in order to have found a valid contract between plaintiff and Cooper Ridge, the trial judge must have enforced the oral agreement between Blue Foot and Wynford. However, Cooper Ridge contends, the court was not empowered to do so, because plaintiff never sought specific performance of the oral agreement and because the agreement terminated upon Wynford's failure to close on Phase II in January 2000 and upon plaintiff' failure to seek an extension of that agreement. Further, Cooper Ridge contends that any oral agreement between Blue Foot and Wynford was fatally indefinite because it did not specify the consideration to be paid by the latter to the former at closing.

By these hypertechnical arguments, Cooper Ridge is, in reality, attacking the trial judge's underlying conclusion that the agreement to sell Phases I and II of the Highpoint development was, in essence, a deal between Joseph Samost and plaintiff, and although the sale was structured as a two-step transaction between designated Samost real estate and development entities that required a transfer of the property by Blue Foot to Wynford and then a further transfer by Wynford to plaintiff, that sale mechanism was established solely for tax reasons and should be disregarded for purposes of this litigation as the result of Joseph's admitted control over all of the shell entities comprising his real estate empire, including Blue Foot and Wynford.

We find that conclusion to have been amply supported by evidence that included Joseph's admissions in connection with his complaints, certifications and statements in the federal and state litigation against Stephen; the testimony and certifications of Stephen regarding his father's control; testimony by Stephen, Joseph's wife Iva, and Steliga with respect to DiLullo's role in the Samost businesses and the direction of his activities by Joseph; DiLullo's deposition testimony that the finances of "his" companies were not separate from those of Joseph's companies and that he took direction from Joseph and Stephen; the testimony of Steliga regarding intermingling of assets; and testimony by Iva regarding Joseph's control of the family's businesses and her own lack of involvement, despite her nominal role as a sometime part owner of some of those businesses. Additional evidence was provided by the sale agreement itself, which contemplated the granting of easements by Samost entities, other than Blue Foot or Wynford, that maintained nominal control over adjoining properties.

In circumstances in which Blue Foot and Wynford operated merely as alter egos of Joseph in a sale transaction structured, as it was, solely to reduce Joseph's tax burden, we regard it to have been unnecessary for plaintiff to have sought specific performance of the oral agreement between Blue Foot and Wynford, to have independently sought an extension of any oral sale agreements between those entities when he obtained the extensions of the sale agreement from Wynford (notably, with Joseph's knowledge and consent), or to have quantified the consideration to be paid by Blue Foot/Cooper Ridge to Wynford upon the transfer of Phase II to plaintiff. The judge was entitled to disregard the formal aspects of the sale and to conclude that a binding agreement existed between plaintiff and Joseph that Blue Foot and its successors, as Joseph's instrumentalities, were required to honor. See Clusman v. Wall-Murray Corp., 133 N.J. Eq., 353, 357-58 (E. & A. 1943) (right to specific performance of a contract to sell real estate acknowledged despite the fact that title to the property was held by a corporate entity that was not a party to the contract when both the entity and the purported selling corporation were "family concerns" and "mere dummies" for the head of the family business); B.J.I. Corp. v. Larry W. Corp., 183 N.J. Super. 310, 317-18 (Ch. Div. 1982) (recognizing as valid an action for specific performance of a contract for the sale of real estate, despite the fact that title to the property was held by a different corporation than that with which the purchasers had contracted, where the two corporations were located at the same address, used the same attorney and registered agent, and the same principal was involved in both).

We are also not persuaded by Cooper Ridge's argument that the oral agreement between Blue Foot and Wynford terminated in January 2000 when closing on Phase II failed to occur. In this regard, Cooper Ridge relies in part upon Stephen's statements informing plaintiff that he was not bound by either of the extensions executed in the matter and that the sale agreement was terminated. However, at the time he did so, Stephen lacked authority to terminate the sale contract, having no legal interest in the property, because that property had by then been transferred from Blue Foot to Cooper Ridge, L.P., an entity in which he had no ownership interest, and because he never obtained title to the property as the result of the proposed settlement of the federal litigation. Moreover, when the revised settlement was entered, Steliga's letter, written with Joseph's consent, acknowledged that the extensions remained operative and the sale contract continued to be in effect. For the reasons that we have previously stated, we regard the extension agreements to have effectively bound Blue Foot, as well as Wynford. Any further argument that plaintiff failed to close within a reasonable time cannot be sustained in light of the ample evidence in the record that the extended delay that occurred was solely the result of litigation spawned by Stephen and Joseph.

III.

Cooper Ridge argues as well that, by ordering specific performance, the trial court improperly reformed the sale agreement to include Blue Foot as a party when it was, in fact, never bound by that written agreement. We disagree, determining that by holding Joseph, in his Blue Foot role, to the deal, the judge did not engage in any improper reformation, but merely held the true party in interest accountable to plaintiff. "It is well established that courts of equity will go behind the form of a contract or relationship to its substance." Kugler v. Koscot Interplanetary, Inc., 120 N.J. Super. 216, 230 (Ch. Div. 1972). Further, "equity will not suffer a wrong without a remedy." Walensky v. Jonathan Royce Int'l, 264 N.J. Super. 276, 279 (App. Div.), certif. denied, 134 N.J. 480 (1993). Nothing suggests to us that the trial judge went beyond his "broad range of discretion to fashion the appropriate remedy in order to vindicate a wrong consistent with principles of fairness, justice, and the law." Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999). "[A] court of equity should not permit a rigid principle of law to smother the factual realities to which it is sought to be applied." Ibid.

As Cooper Ridge acknowledges, a court may reform a contract where "'the written instrument fails to express the real agreement or transaction,' either through a mistake common to both parties, or through the mistake of one party accompanied by the fraudulent knowledge and procurement of the other." Bruenn v. Switlik, 185 N.J. Super. 97, 103-04 (App. Div.) (quoting Brodzinsky v. Pulek, 75 N.J. Super. 40, 48 (App. Div.), certif. denied, 38 N.J. 304 (1962) and Downs v. Jersey Central Power & Light Co., 117 N.J. Eq. 138, 141 (E. & A. 1934)), certif. denied, 91 N.J. 536 (1982). Although, to reach the conclusion that reformation is warranted, there must be clear and convincing proof "that the contract in its reformed, and not original form is the one that the contracting parties understood and meant it to be; and as, in fact, it was but for the alleged mistake in its drafting," ibid., such proof exists in the present case as the result of the consummation of Phase I and prior deals under contracts with a similar structure and as the result of Joseph's acts of ratification, until such time as he realized that he could obtain more money for the developed property by breaching his agreements with plaintiff.

IV.

In a further argument, Cooper Ridge contends that the trial judge improperly employed the doctrine of estoppel in ordering specific performance by it.

Estoppel has been defined as

the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed . . . as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse.

[Carlsen v. Masters, Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979) (quoting Highway Trailer Co. v. Donna Motor Lines, Inc., 46 N.J. 442, 449, cert. denied, sub nom, Vernon Fire Ins. Co. v. Highway Trailer Co., 385 U.S. 834, 87 S. Ct. 77, 17 L. Ed. 2d 68 (1966) (quoting 3 Pomeroy, Equity Jurisprudence 804 (5th ed. 1941)).]

It is founded upon "the fundamental principles of justice and good conscience, and is invoked in order to accomplish equity." Casey v. Brennan, 344 N.J. Super. 83, 117 (App. Div. 2001), aff'd o.b., 173 N.J. 177 (2002).

The doctrine of estoppel may be utilized, even in instances in which there has been noncompliance with the Statute of Frauds, N.J.S.A. 25:1-13(b), to effect the transfer of land when the party seeking enforcement, in reasonable reliance on a contract, has so changed its position that injustice can be avoided only by specific enforcement. Iacono v. Toll Bros., 225 N.J. Super. 87, 93 (App. Div.), certif. denied, 113 N.J. 329 (1988); see also Restatement (Second) of Contracts 129 (1981).

In order to invoke an estoppel in these circumstances, plaintiff was required to prove (1) a clear and definite promise, (2) made with the expectation that the promise will be relied upon, (3) reasonable reliance on the promise, (4) and substantial detriment as a result. Lobiondo v. O'Callaghan, 357 N.J. Super. 488, 499 (App. Div.), certif. denied, 177 N.J. 224 (2003). Our previous statement of the facts in the matter discloses ample support for our conclusion that plaintiff met its burden in establishing its right to an estoppel. We likewise find sufficient support for the trial court's conclusion that Joseph, by and through his shell companies, waived his right to avoid the sale of Phase II to plaintiff. The record discloses no unclean hands on plaintiff's part that would serve to render this relief unavailable to it.

V.

In its final arguments, Cooper Ridge challenges the trial judge's conclusion that the relief granted was supported by the doctrine of partial performance, which, like estoppel, can serve to validate a transaction that would otherwise be barred by the Statute of Frauds, Lahue v. Pio Costa, 263 N.J. Super. 575, 599 (App. Div.), certif. denied, 134 N.J. 477 (1993), but only when the party's change in position cannot be fully compensated by restitution or damages. Id. at 600.

In this regard, Cooper Ridge argues that any expenditures made by plaintiff to obtain approvals for Phase II can be recovered in the damages trial to be held in the matter. However, that argument does not take into consideration the integrated nature of the Highpoint II development, and plaintiff's reasonable expectation that his expenditures of time, effort and funds to develop the property would be for the benefit of the full seventy-three lots, not the mere twenty-four that he possessed as the result of the successful completion of the Phase I sale.

Cooper Ridge also claims that the remedy imposed is too harsh, because it can no longer transfer the property to Main Line, as the result of its bankruptcy, and because of the increased tax liability it will incur if required to convey the property directly to plaintiff. However, such results could easily have been avoided by a transfer of the property at the time that plaintiff, justifiably, sought to close in 2003.

As a final matter, Cooper Ridge contests the judge's finding of a breach of the implied covenant of good faith and fair dealing. See, e.g., Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997). But we again disagree with Cooper Ridge's position, finding the conduct of Stephen in attempting to repudiate the deal and of Joseph in actually doing so, without any reasonable basis for termination other than the desire for additional revenue, to amply support the judge's finding.

In sum, we discern no grounds to disturb the trial judge's determination to look behind the shell entities involved in this transaction to the real party in interest, Joseph Samost. Further, we concur with the trial judge's conclusion that once that step was taken, evidence was manifest of bad faith and grounds for an estoppel, justifying the order of specific performance entered in this matter. We regard any additional arguments to the contrary by Cooper Ridge to lack sufficient merit to warrant discussion in this opinion. R. 2:11-3(e)(1)(A) and (E).

Accordingly, the order of the trial court is affirmed.

 

Although Cooper Ridge, L.P. is the only party to have perfected an appeal in this matter, briefing by Stephen Samost has been filed in which affirmative relief has been sought. Stephen asserts that he was mistakenly included as a defendant in the order granting specific performance and requests the removal of his name from that document. We do not read the court's order as Stephen proposes, noting that specific performance is required only of those defendants "with an interest in the Property." Stephen has no such interest in Phase II. We decline the requested relief insofar as it refers to specific performance in connection with other properties in which Stephen may have an interest. As the result of Stephen's failure to perfect an appeal in this matter, we decline to consider the remainder of his arguments, found under the argument heading "The Trial Court's Order and Opinion Violate Its Prior Rulings, The Court Rules, and The Due Process Rights Of Stephen D. Samost," which principally attack the judge's credibility findings and the scope of his decision.

The dismissed defendants were Ken DiLullo, a now-deceased business associate; Iva Samost, Joseph's wife; Linda and Ellen Samost, Joseph's daughters; Kenneth Steliga, a business associate succeeding to DiLullo's interests; and The Steliga Corp.

Phase II was initially owned by Blue Foot Stables. It was transferred to Cooper Ridge, a general partnership, on January 7, 1999, and to Cooper Ridge L.P. on October 1, 1999. The restraints were deemed necessary to preclude further transfers among Samost entities, and the necessity of identifying and joining additional parties to the litigation.

The agreement permitted closing on twenty-four of the Phase II lots on January 2, 2001 if sectionalization was approved by Voorhees Township.

The Wynford Group had two partners: Wynford, Inc., whose sole director was Joseph, and Main Line Realty, Inc, which was wholly owned by Henry DiLullo, but also controlled by Joseph.

The sale agreement provided in paragraph 6, captioned "Development Activities," "(a) Subsequent [sic] to closing, Seller shall be obligated to obtain approval of the plans for the balance of the Property, including CCMUA and NJDEP approval to construct and operate the sanitary sewer system, which sanitary sewer plans may include a sewer pump station and force main on an adjacent property that is owned by an affiliate of the owner of the Property. . . . The parties anticipate that the builder of the adjoining Berlin Township senior citizen development will construct the pump station force main and that Buyer shall be obligated to reimburse said third party developer for the pro-rata costs of the pump station and force main . . . . In the event the Approvals necessary to construct the pump station and force main have not been obtained by January 2, 2001, then in that event Seller shall return the deposit to Buyer. Thereafter, neither party shall have any further liability to the other, and this Agreement shall be null and void and of no further force or effect."

The trial judge found that Stephen had misrepresented the sale price as less than $100 in an affidavit of consideration prepared by Stephen, allegedly at Joseph's insistence, to avoid double payment of transfer taxes.

By then, Blue Foot's interest had been transferred to Cooper Ridge and then to Cooper Ridge L.P. Stephen had no interest in either of the Cooper Ridge entities.

For instance, in a first amended complaint filed in the federal litigation, it was alleged on Joseph's behalf that: "In conducting his business, Joseph, as would any astute businessman, sought to minimize his exposure for taxes and personal liability. Each parcel was titled in the name of a corporate or partnership entity, owned and controlled by Joseph. A separate entity would develop the property. If two or more parcels were consolidated for development purposes, they would often be transferred to yet another entity, which would take title to the entirety of the land. Hence, the business was operated through a network of corporate and partnership entities controlled and owned by Joseph." In the state litigation, Joseph asserted that he started acquiring real estate in 1953 and continued to acquire, develop and sell real estate up to the time of the complaint. He certified: "Some of the properties that I purchased and owned were put in the names of my family members over the years. Despite the fact that property was put in the names of family members, I remained the true and equitable owner."

It is significant that one of the two general partners in The Wynford Group, which Joseph claimed was DiLullo's business, was Wynford, Inc., an entity whose sole owner and director was Joseph, thereby making him an owner of the entity.

Evidence in connection with the sale of Phase I disclosed that Wynford paid Blue Foot $100,000 less than the price paid by plaintiff for the property, utilizing that "spread" to operate its business. However, evidence also suggests that payment of Wynford's operating expenses did not depend on such sales, but rather, that money was supplied by Joseph to DiLullo on an as-needed basis.

Because the extension agreements merely preserved the status quo, we do not regard them as violative of any federal or state court orders restraining conveyance of the property.

(continued)

(continued)

33

A-1003-06T3

January 11, 2008