KENNETH J. STELIGA, et al. v. GORDON J. OSTRUM, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2660-05T52660-05T5

KENNETH J. STELIGA, TIMOTHY

J. STELIGA and STELIGA HOMES,

Plaintiffs-Appellants,

v.

GORDON J. OSTRUM a/k/a

GORDON J. OSTRUM, JR.,

SHARON E. OSTRUM,

WESTWOOD KNOLLS, INC., and

WESTWOOD KNOLLS ASSOCIATES,

LLC,

Defendants-Respondents.

______________________________

 

Argued February 26, 2007 - Decided April 26, 2007

Before Judges S.L. Reisner and Seltzer.

On appeal from the Superior Court of

New Jersey, Chancery Division, Salem

County, C-17-04.

William C. MacMillan argued the cause for

appellants (Igor Sturm and Associates, attorneys; Mr. MacMillan, on the brief).

William A. Nash argued the cause for

respondents (Nash Law Firm, attorneys;

Mr. Nash, on the brief).

PER CURIAM

Plaintiffs appeal from a January 27, 2006, judgment entered after a bench trial, that dismissed their suit for specific performance of a real estate sales contract and permitted defendants to retain a $25,000 deposit as liquidated damages. We reverse and remand for further proceedings.

The record developed during the four-day trial reveals that on April 4, 2003, plaintiffs and defendants entered into an agreement of sale pursuant to which plaintiffs would buy, and defendants would sell, a multi-acre plot located in Pilesgrove Township. The dispute at trial concerned defendants' claim that plaintiffs failed to settle in accordance with the terms of the contract and plaintiffs' claim that defendants had not fulfilled conditions precedent to their obligation to settle. We summarize briefly the evidence relating to those contentions.

When the agreement was executed, defendants were "in the process of obtaining final subdivision of the Property into eighteen (18) buildable single family lots." The agreement fixed the sale price at $810,000, of which $25,000 was delivered to defendants in escrow. Defendants produced evidence that they had agreed to that price because of an urgent financial need to close as quickly as possible. Plaintiffs understood that need.

Nevertheless, the parties recognized the need to fix responsibility to obtain necessary approvals and to fulfill any conditions imposed by the approving authorities. Accordingly, paragraph 4.9 of the agreement recited that the Pilesgrove Township Planning Board had granted preliminary subdivision approval subject to certain conditions and provided that "[a]ll of the terms and conditions contained in said Resolution are the obligation of Seller, except that (a) required sidewalks will be installed by [plaintiffs]; [and](b) [plaintiffs] will post all required improvement and maintenance bonds."

Paragraph 8 of the agreement made closing "specifically contingent upon [defendants] obtaining final unappealable subdivision approval for the Property from the Pilesgrove Township Planning Board, Salem County, and any other agency having jurisdiction over the subdivision final approval." The same paragraph required that "closing shall take place forty-six (46) days from the date of publication of the resolution granting final subdivision approval."

Finally, paragraph 13.14 provided:

Notwithstanding anything to the contrary set forth above, closing on this transaction is specifically contingent upon Buyer purchasing buildable lots, with all permits being available for the construction of single family residences, including permits for individual septic systems, and private wells, upon submission of applications for same by Buyer and payment of required application fees. Individual septic systems shall be designed by Buyer at Buyer's sole cost and expense, and Buyer shall be responsible for all construction permits.

Final subdivision approval was granted by resolution dated June 16, 2004. The resolution made approval dependent on fulfillment of the conditions imposed in preliminary subdivision and contained more than fifty other conditions. Although some of the conditions remained unmet, defendants began attempting to fix a settlement date with plaintiffs. Despite the failure of plaintiffs to agree to a closing date, defendants never gave notice of a date on which settlement must occur.

Instead, on September 10, 2004, plaintiffs wrote to defendants indicating that plaintiffs "ha[d] repeatedly requested a settlement date and . . . [have] offered to hold funds in escrow to guarantee completion of outstanding items, all to no avail." Defendants then terminated the agreement. Plaintiffs responded on September 17, 2004, asserting that their obligation to settle was conditioned on defendants obtaining all necessary approvals and satisfying all other conditions. Plaintiffs claimed that some of the unsatisfied conditions were "of such magnitude that they cannot be deferred for later compliance or completion after settlement, with escrow funds to guarantee same." Plaintiffs identified those unmet conditions as including approvals from all government agencies, including approval from the Department of Environmental Protection (DEP) for a proposed basin outflow swale, the relocation of which was a condition of subdivision approval. When the matter could not be resolved, plaintiffs instituted this action for specific performance.

The trial court credited defendants' testimony that the contract was executed because plaintiffs had agreed to a quick settlement and were aware of defendants' pressing need for funds. From this, the court concluded

that the parties knew or should have known that it was essential for [defendants] to close the transaction as quickly as possible. Certainly, a "time of the essence" provision can be implied by this Court based on the nature and circumstances of the transaction and evidence of the parties' intent that the time of performance is central to the agreement.

The judge rejected plaintiffs' claim that conditions precedent to the obligation to settle had not been met. He found that the conditions attached to the final approval were immaterial because "[t]here is no provision in the Agreement of Sale as to the satisfaction of any condition set forth in the final approval." The judge concluded that, "these conditions were mostly clerical matters that the Plaintiff[s] could have resolved post-closing" and accepted the testimony of defendants' lawyer "that if satisfaction of these 'clerical/administrative' conditions were required, the Agreement would not have been signed."

The judge discussed and rejected plaintiffs' claims regarding the failure of defendants to provide the DEP approval necessary if wetland disturbance would be associated with the satisfaction of a condition of approval requiring movement of a detention basin and the necessary grading of the outflow swale easement associated with that basin. After hearing testimony from three experts, the judge concluded "that there was no reasonable concern regarding a wetlands problem on the property and, therefore, no valid reason not to close the transaction."

Accordingly, the judge determined that "the Agreement was signed with the understanding that closing would occur immediately after publication of the Planning Board approval" and that the unsatisfied conditions did not excuse plaintiffs' performance. The judge, therefore, found plaintiffs had breached the contract by not settling on the forty-sixth day after publication of the final approval and, pursuant to a contractual provision, allowed defendants to retain the $25,000 deposit as liquidated damages.

On appeal from a judgment entered after a bench trial, we are bound by the judge's factual findings to the extent they are supported by substantial credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). We owe no such deference, however, to the legal conclusions drawn by a judge from those facts. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

We begin our discussion with the evidence supporting the judge's finding that a failure to settle on the forty-sixth day after publication constituted a breach of the agreement because that date for settlement was of the essence. "While a closing date contained in a contract is often viewed as formal rather than essential, if the contract itself provides a clear understanding that time is of the essence, then it is well-settled that prompt performance is essential and the date contained in the contract for closing would be strictly enforced by a court of equity." Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 603 (App. Div.) (internal citations omitted), certif. denied, 183 N.J. 591 (2005). When a contract does not contain a time of the essence clause, either party may fix a date on which closing must occur by providing reasonable notice of the date set for closing. Ibid.

The contract between plaintiffs and defendants does not contain a provision making the date set for closing of the essence of the agreement and no communication from defendant fixed such a date. We do not quarrel with the proposition that the intention of the parties to make time of the essence may be shown by persuasive circumstances. Reade v. McKenna, 99

N.J. Eq. 764, 768 (Ch. 1926), (quoting Orange Soc. of New Jerusalem v. Konski, 94 N.J. Eq. 632, 633 (Ch.), aff'd 95

N.J Eq. 254 (E. & A. 1923)), aff'd, 101 N.J. Eq. 304 (E. & A. 1927). See also Paradiso v. Mazejy, 3 N.J. 110, 114-15 (1949) (quoting Read, supra, 94 N.J. Eq. at 768). Nevertheless, the circumstances must demonstrate persuasively that the parties "intended" the time fixed for settlement to be of the essence.

The trial judge inferred an agreement to make time of the essence from defendants' testimony that they intended time to be of the essence and plaintiffs' knowledge of defendants' desire to close quickly because of that financial situation. We are not persuaded that the factual finding that plaintiffs knew of defendants' financial stress supports a legal conclusion that plaintiffs agreed, on pain of breaching the contract, to settle on the forty-sixth day after publication and the judge did not further explain the basis for his finding.

Moreover, the judge did not consider the impact of defendants' failure to assert that time was of the essence either by serving a time of the essence letter or otherwise on his decision. That failure suggests that the time for settlement set by contract was never intended to be essential. Similarly, the judge did not consider whether the continued efforts of defendants to have plaintiffs agree to a date constituted a waiver of the essential nature of the settlement date if it was intended to be essential to the contract. See Marioni, supra, 374 N.J. Super. at 607-08. There is some merit to plaintiffs' position that notice from defendants of a date certain would have put plaintiffs on notice that some action was necessary and permitted them to obtain a judicial determination of their obligation to settle. Because we resolve the matter on other grounds we need not reach this issue. On remand, however, it may be necessary for the judge to decide if both parties had agreed that settlement must occur on the forty-six day after publication of the resolution giving final site plan and subdivision approval even though that intent was not memorialized. If the judge considers that question, the basis for the decision should be provided.

Even if time was of the essence, however, the plaintiffs claim they were excused from performing because (a) not all approvals had been given as required by paragraph 8, or (b) because, at the time set for settlement, plaintiffs would not have been able to obtain, as required by paragraph 13.14, "all permits . . . for the construction of single family residences

. . . upon submission of applications for same . . . and payment of required application fees."

As to the requirements of paragraph 8, the judge found that final subdivision approval had been granted and that the agreement did not allocate responsibility for meeting conditions imposed by that approval. Nonetheless, one of the conditions of final approval was the fulfillment, allocated to defendants, of the conditions of preliminary approval. Many of those conditions were unfulfilled.

Moreover, although the trial court found that "there were no outstanding approvals from 'other governmental entities'," there was uncontroverted evidence that final approval from the Salem County Planning Board was conditioned on additional engineering work and that as of April 21, 2005, well after the judge found the contract had been breached, the application to the Salem County Planning Board "remains in conditional approval."

The judge recognized the existence of these conditions, but did not discuss whether the parties intended that final approval, no matter the conditions attached, would be sufficient to meet defendants' obligations. Nor did he make any findings as to whether defendants were required to insure the performance of the "ministerial acts" needed to remove the conditions.

Similarly, the judge did not address at all the provisions of paragraph 13.14. One reasonable explanation for the inclusion of that paragraph, although not the only possible interpretation, is that plaintiffs had negotiated for the purchase of property which would allow them to obtain a building permit simply upon application and that they did not wish to purchase property on which construction could not begin immediately. On its face, the paragraph does not draw a distinction between ministerial obligations and substantive obligations. It addresses only the ability of defendant to begin construction immediately upon settlement.

The construction of paragraphs 8 and 13.14 and the consequent determination of plaintiffs' obligation to settle requires an examination of the intent of the parties. "In interpreting a contract, the court's goal is to ascertain the intent of the parties as revealed by the language used, the surrounding circumstances, and the purpose of the contract." Toll Bros., Inc. v. Bd. of Chosen Freeholders of the County of Burlington, 388 N.J. Super. 103, 130 (App. Div. 2006) (citing The Bar on the Pier, Inc. v. Bassinder, 358 N.J. Super. 473, 482 (App. Div.), certif. denied, 177 N.J. 222 (2003)).

The basis for the judge's conclusion that plaintiffs were not excused by the operation of paragraphs 8 and 13.14 was insufficiently tied to the "language used, the surrounding circumstances, and the purpose of the contract." We are unable to determine, in the absence of an explanation from the judge, what was intended by the parties to be implemented by these paragraphs. Since we perceive this to be the crucial element of this litigation, we reverse and remand for consideration of the effect of paragraphs 8 and 13.15 on the obligation to settle and for a further explanation of the decision that the time fixed for settlement must be strictly enforced.

On remand, the judge may, as he chooses, decide the issue on the evidence before him or reopen the record to allow the parties to comment specifically on the issues implicated by paragraphs 8 and 13.14. The judge should also identify with particularity the evidence supporting a position that the parties intended to require settlement on the forty-sixth day after the publication of final approval to be of the essence of the agreement.

Finally, even if the judge should determine that plaintiffs had not breached the contract, he should consider whether specific performance is appropriate. The award of specific performance is discretionary. Marioni, supra, 374 N.J. Super at 599 (citing Friendship Manor, Inc. v. Greiman, 244 N.J. Super. 104, 113 (App. Div. 1990), certif. denied, 126 N.J. 321 (1991)). Whether to grant the remedy depends "not only on whether plaintiff has demonstrated a right to legal relief but also whether the performance of the contract represents an equitable result." Ibid. We express no opinion whether the circumstances here render an award of specific performance appropriate, leaving that issue, to the extent it is viable, to the judge's discretion.

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

 

Plaintiffs do not suggest that the retention of the deposit is inappropriate if the judge's finding that they breached the contract is affirmed.

The judge did not reference defendants' willingness to escrow funds to guarantee satisfaction of all conditions imposed by the final approval.

(continued)

(continued)

13

A-2660-05T5

 

April 26, 2007