YU BONG KIM v. S.G.J. RESTAURANT CORP., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2952-05T52952-05T5

YU BONG KIM,

Plaintiff-Appellant,

v.

S.G.J. RESTAURANT CORP.,

Defendant/Third-Party

Plaintiff/Respondent,

v.

BOROUGH OF PALISADES PARK, a

Municipal Corporation of the

State of New Jersey,

Third-Party Defendant/

Respondent.

______________________________________

 

Submitted November 28, 2006 - Decided January 4, 2007

Before Judges Skillman and Lisa.

On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-106-04.

Basile Birchwale & Pellino, attorneys for appellant (Stephen F. Pellino, on the brief).

Gittleman, Muhlstock & Chewcaskie, attorneys for respondent S.G.J. Restaurant Corp. (Steven Muhlstock, of counsel and on the brief).

Respondent Borough of Palisades Park did not file a brief.

PER CURIAM

In May 2001, plaintiff contracted to purchase a restaurant from defendant. The parties entered into two separate contracts, one for the real estate on which the restaurant was located and the other for the assets of the business including a liquor license. The contracts cross-referenced each other and were clearly intended to be components of a single integrated transaction for the sale of the restaurant premises and business.

The purchase price for the real estate was $2,500,000, with $300,000 to be paid as a deposit before closing, $2,000,000 to be financed by a mortgage, and the remaining $200,000 to be paid six months after closing. The closing occurred on November 27, 2001, and there is no dispute concerning plaintiff's payment of full amount provided under the real estate contract.

The purchase price for the business assets was $500,000, which was to be paid over a three-year period commencing seven months after the closing and to be secured by a purchase money mortgage that was subordinate to the mortgage provided under the real estate contract. The note and mortgage memorializing this part of the agreement provided for 6% interest. The principal and interest were to be paid by thirty-six monthly installments of $15,210.97.

This obligation was made subject to the following condition, which was set forth in the real estate contract:

The lot abuts 11th Street and Sano has claimed adverse use as to the portion of the lot abutting 11th Street. The street is not owned by the owner of Lot 14 Block 418 but is a dedicated street on the filed map. As such, there can be no adverse use against a municipality. The present owner of the premises abutting 11th Street cannot maintain any action as it is not the owner of that portion of 11th Street. Seller will forgo the balance of the Purchase Money Mortgage, $500,000.00 should Seller be unable to acquire that portion of 11th Street abutting lot 14 Block 418 or be unable to have the Sano use of the premises terminated.

The purchase money mortgage plaintiff executed at the November 27, 2001 closing also set forth this condition, with minor variations in language that are not material to the issues presented by this appeal.

The Borough of Palisades Park did not vacate its interest in 11th Street during the three-year term of the note and purchase money mortgage, and plaintiff did not make any payments under the note.

Before expiration of that term, plaintiff brought this action against defendant for a declaration that his obligation under the note and purchase money mortgage had been discharged because defendant had failed to satisfy either of the conditions of that obligation. Defendant filed a third-party complaint against Palisades Park seeking to compel the municipality to vacate its interest in 11th Street.

In August 2005, after expiration of the three-year term of the note and purchase money mortgage, Palisades Park adopted an ordinance that allegedly vacated its interest in the portion of 11th Street adjoining the restaurant property. Following the adoption of this ordinance, defendant filed a motion for summary judgment, claiming that the conditions of plaintiff's obligation under the note and purchase money mortgage had been satisfied.

In opposition to this motion, plaintiff submitted a certification that stated in pertinent part:

2. The contract for the property in question was signed in or about June 2001. At this time, all parties understood that there were two problems with the property. The first problem was that it was bisected by 11th Street, a paper street that had never been improved by the Borough of Palisades Park. 11th Street ran diagonally across the eastern edge of the property, and eventually 11th Street ran into State Highway 63, commonly known as Bergen Boulevard. The seller's prior use of what was actually 11th Street as a parking lot had apparently not been disturbed by the Borough. However, I had visions of expanding the building on the lot and would need the area encompassed by 11th Street to do so. The seller indicated that it would have no problem having the Borough vacate 11th Street prior to closing and would thus be able to convey title of same.

3. The second problem with the property was related to the first. The owner of the property just to the north of the property I was to purchase was Sano's Towing. Sano's was using a portion of 11th Street that was in front of its property. However, Sano's was also using a portion of 11th Street that was directly east of Lot 14, one of the lots I was to purchase from the seller. My information at the time was that Sano's claimed that it was entitled to use this portion of the property and was, in fact, doing so. The seller also promised that it would have Sano's use of that part of 11th Street terminated.

4. Accordingly, we agreed that the seller would do two things: have the Borough vacate 11th Street so that it would form a part of the property to be conveyed, and would also have Sano's use of that part of 11th Street which was directly in front of Lot 14 terminated. Both parties recognized that the property was not worth the stated purchase price if these two conditions were not met. Language that memorialized the Defendant's obligation to satisfy these two conditions was placed in the contract. It was my understanding that the purchase price would be reduced by $500,000 if the seller was not able to meet these two conditions.

5. Closing of title took place on November 27, 2001. As of that date, the seller had not satisfied the two conditions. Accordingly, it was agreed that the seller have an additional period of time, approximately 7 months from the date of closing, to satisfy these two conditions. At the closing, I signed a mortgage and note in favor of the Defendant in the principal amount of $500,000. That mortgage was subject to the Defendant's obligation to fulfill the two conditions as previously stated in the contracts. Payments under the mortgage and note were not to begin until July 1, 2002 (approximately 7 months following the closing) in order to give the seller additional time to fulfill the conditions. It was my understanding, and I believe also the seller's understanding, that if the conditions were not fulfilled by July 1, 2002, the mortgage and note would be deemed satisfied, in effect reducing the purchase price by $500,000 as agreed.

6. I have reviewed the ordinance adopted by the Borough of Palisades Park purportedly vacating that portion of 11th Street to the east of the property I purchased from the Defendant. I am not a surveyor, and do not know if the portion of 11th Street apparently vacated by the ordinance corresponds to that portion of 11th Street directly to the east of my property.

7. From the date of closing to the present day, my neighbor to the north, Sano's Towing, has continued to use a portion of 11th Street to the east of my property.

Defendant did not submit any certification disputing the factual allegations in plaintiff's certification. Instead, in support of its motion, defendant relied solely upon the contract documents, note, purchase money mortgage and ordinance vacating a portion of 11th Street.

The trial court rejected the allegations in plaintiff's certification and granted defendant's motion, stating in an oral opinion:

I think that the agreement basically with respect to the time, it's silent as to the time within which this vacation of the street was to be obtained. It was obtained. Albeit a couple of years down the road from when it all started.

It may have been the intention that it be done promptly. But that wasn't put in the Contract. So, I can't make a new contract for the people. So, it appears not to be an unreasonable time.

. . . .

As to the second point of the adverse use, it's not been established, I don't see it established as a fact that would have to be tried that there is, in fact, any use that could be considered adverse since by definition within the very paragraph it says you can't have adverse possession.

So, even if the purpose [sic] there is an interloper, your client now owns the property. All he has to do is post it.

Then if the person refuses to honor the posting, perhaps then you could say look, it was your obligation to make sure he gets off. I'm going to start an action against him. You pay for it.

But we are not there yet, and I'm not saying that I would say that that has to be done.

Based on this ruling, the trial court granted a summary judgment that not only dismissed plaintiff's complaint but also entered judgment in defendant's favor for $607,418.16, representing the principal amount of $500,000 of the note secured by the purchase money mortgage plus interest on that sum from July 2002 to the date of judgment.

Plaintiff filed a motion for reconsideration that argued among other things that defendant was not entitled to a judgment in its favor on the note because it had never filed a counterclaim seeking affirmative relief. Defendant filed a cross-motion seeking leave to file a counterclaim as within time. The trial court denied plaintiff's motion and granted defendant's motion, thus reaffirming the $607,418.16 judgment in its favor.

On appeal, plaintiff argues that the trial court erred in granting defendant leave to file a counterclaim as within time and in granting defendant summary judgment. We conclude that the court did not abuse its discretion in granting defendant leave to file a counterclaim out-of-time. See Kernan v. One Washington Park, 154 N.J. 437, 457 (1998). However, the court erred in granting defendant summary judgment.

The contract documents, note, purchase money mortgage and ordinance vacating a portion of 11th Street do not demonstrate on their face that defendant satisfied the conditions of plaintiff's obligation under the note and purchase money mortgage. Moreover, plaintiff's certification in opposition to defendant's motion for summary judgment showed the existence of material issues of fact regarding defendant's satisfaction of those conditions. Although the contract documents did not set a deadline for the satisfaction of those conditions, plaintiff asserted in his opposing certification that "[i]t was [his] understanding, and I believe also [defendant's] understanding that if the conditions were not fulfilled by July 1, 2002, the mortgage and note would be deemed satisfied, in effect reducing the purchase price by $500,000 as agreed."

Furthermore, even if plaintiff was unable to establish that defendant agreed to a July 1, 2002 deadline for satisfaction of those conditions, a reasonable time would be implied. Mazzeo v. Kartman, 234 N.J. Super. 223, 231 (App. Div. 1989). What constitutes a reasonable time "is usually an implication of fact and not of law" and must be "deriv[ed] from the language used by the parties considered in the context of the subject matter and the attendant circumstances, in aid of the apparent intention." Ibid. (quoting West Caldwell v. Caldwell, 26 N.J. 9, 28 (1958). Therefore, "it is presumed that the reasonable time issue is a fact question for the jury[.]" Mango v. Pierce-Coombs, 370 N.J. Super. 239, 257 (App. Div. 2004).

In this case, the conditions for plaintiff's obligation to pay the $500,000 principal of the note for the purchase of the business assets were not satisfied until, at the earliest, August 2005, when Palisades Park adopted an ordinance vacating part of 11th Street, which was more than three-and-a-half years after the closing and several months after expiration of the term of the note. Under these circumstances, we are satisfied that the determination of whether defendant satisfied those conditions within a reasonable period of time could not be decided on a motion for summary judgment.

In addition, there are factual issues as to whether defendant satisfied the conditions even in August 2005. Although defendant submitted an ordinance vacating a portion of 11th Street in support of its motion, it is not clear from the face of that ordinance and tax map that the part of the street bisecting plaintiff's property was vacated.

Furthermore, plaintiff's certification alleged that "[f]rom the date of closing to the present day, my neighbor to the north, Sano's Towing, has continued to use a portion of 11th Street to the east of my property." Consequently, there is also a factual issue as to whether defendant has satisfied the condition that Sano's use of the property be terminated.

Finally, even if defendant has now satisfied the conditions of plaintiff's obligation under the note and purchase money mortgage, its delay in satisfying those conditions may provide a basis for relieving plaintiff from the responsibility for payment of interest during the intervening period.

Accordingly, the order granting defendant leave to file a counterclaim as within time is affirmed. The order granting defendant summary judgment is reversed.

 

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A-2952-05T5

January 4, 2007