JOHN J. ZENNARIO, Plaintiff–Respondent, v. OLEG RAGULIN and TATIANA ZADONSEAIA, Defendants–Appellants.
In this appeal, we consider the arguments of defendants, the contract purchasers of a Middlesex Borough residence, that the judgment in favor of plaintiff, the seller, should be set aside because: (1) there was no meeting of the minds regarding the property's location in a flood zone; (2) plaintiff breached the implied covenant of good faith and fair dealing; (3) there was a mutual mistake of fact; (4) the contract did not survive the attorney review period; and (5) the action is barred by the entire controversy doctrine. We find no merit in these arguments and affirm.
At a bench trial, the judge heard evidence that plaintiff John J. Zennario is a licensed real estate broker and a principal in Stern & Dragoset, Inc., which was the listed real estate agent for the property. Unable to broker a sale, plaintiff himself purchased the property in 2009 for $150,000. After making renovations, plaintiff relisted the property in September 2009 for $289,000.
In April 2010, the property was shown to defendant Oleg Ragulin by another broker; plaintiff was not present. Ragulin made a $220,000 offer, signed a contract on his and his wife's behalf, and provided a $1000 deposit. At trial, the broker testified he reviewed the contract with Ragulin, who also testified he read the entire document before signing. Paragraph 20(e) of the contract states that “[b]uyer acknowledges that the [p]roperty is within a flood hazard area, and [b]uyer waives [b]uyer's right to void this [a]greement for such reason.” 1 Plaintiff rejected the offer but responded that he would sell for $240,000. Plaintiff (seller) and defendants (buyers) agreed on a $230,000 purchase price and signed a new contract.
On May 6, 2010, during attorney review, the buyers' attorney 2 wrote to seller's attorney.3 He rejected the contract of sale unless seller agreed to fourteen amendments, one of which was the following proposed amendment to paragraph 20(e):
Buyers shall have fourteen (14) days after conclusion of attorney review to determine if property is in a flood zone. If it is, buyers shall have the right to cancel the contract.
Seller's attorney replied on May 10, 2010, rejecting the proposed amendment to paragraph 20(e) in the following unequivocal way:
Not acceptable. My client disclosed in the listing agreement that in fact, the property is located in a flood zone and in fact, will obtain a quote for flood insurance for your clients.
Buyers' attorney responded by making handwritten notations on a copy of the letter of seller's attorney. He then faxed these notes to seller's attorney. In the left margin of the paragraph relating to the proposed flood zone amendment, buyers' attorney wrote “ok.” And, on the last page, buyers' attorney wrote: “Acceptable. Attorney review is complete. 5/10/10.” He then initialed at the end of the document.
On May 12, 2010, buyers' attorney wrote to seller's attorney, stating he was “instructed to cancel this contract due to the fact that the buyers have received estimates for the flood insurance and it is too expensive.” 4 Seller's attorney responded on May 19, 2010, writing that “the disclosure of the flood zone issue was resolved in attorney review” and that seller “is expecting full performance” of the contract. He also reminded buyers' attorney that “[t]he second deposit is due.” In subsequent communications, sellers insisted on buyers' performance, and buyers requested return of their $1000 deposit, which seller refused.
On October 8, 2010, buyers filed a small claims complaint against Stern & Dragoset based on a refusal to return buyers' $1000 deposit. Seller was not named as a party to that suit. Buyers obtained a default judgment against Stern & Dragoset.
On December 23, 2010, the property was sold to a third person for $190,000. Thereafter, seller filed suit against buyers, alleging their breach of the contract and seeking compensatory damages based on the purchase price ($230,000) set forth in the parties' contract less the sale price ($190,000) later obtained, together with the additional costs ($12,831.44) incurred by seller in maintaining the property in the interim. Buyers filed a counterclaim, alleging breach of contract, fraud in the inducement, and misrepresentation.
On the eve of trial, buyers moved for dismissal, arguing seller's failure to respond to their small claims complaint against Stern & Dagoset barred seller's assertion of these claims in this later, separate action. The judge denied that motion, and at the conclusion of a bench trial, the judge found in seller's favor, awarding $52,831.44 in damages. The judge found buyers' testimony that their attorney was not authorized to make his May 10, 2010 response during attorney review was not credible,5 and that a binding contract was validly formed during attorney review. Judgment was entered in seller's favor on January 8, 2013.
Buyers appeal, arguing:
I. THE LOWER COURT ERRED IN FINDING THAT THERE WAS AN OFFER AND ACCEPTANCE AS TO THE ESSENTIAL TERMS OF THE CONTRACT AND THAT THE COST OF FLOOD INSURANCE WAS A NON–ESSENTIAL TERM OF THE CONTRACT.
II. [SELLER] DID NOT PERFORM PURSUANT TO THE CONTRACT AND, THEREFORE, HE CANNOT RECOVER UNDER THE CONTRACT.
III. EVEN IF THE PARTIES HAD A CONTRACT, [SELLER] BREACHED THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING AND CANNOT RECOVER UNDER THE CONTRACT.
IV. THERE WAS A MUTUAL MISTAKE OF FACT AND THE CONTRACT IS NOT ENFORCEABLE.
V. THERE WAS NO CONTRACT. THE CONTRACT WAS DISAPPROVED ON MAY 6, 2010. THE [BUYERS] DID NOT SIGN THE MAY 10TH ADDENDUM LETTER. THE [BUYERS] DID NOT PROVE BY CLEAR AND CONVINCING EVIDENCE THAT THE THIRD PARTY WHOM [SIC] SIGNED THE LETTER ON BEHALF OF EACH OF THE [BUYERS], HAD THE AUTHORITY OF EACH OF THE [BUYERS]. THE LOWER COURT ERRED IN MAKING IT [BUYERS'] BURDEN TO DISPROVE AUTHORITY.
VI. THIS ACTION SHOULD HAVE BEEN DISMISSED BY THE LOWER COURT PURSUANT TO THE ENTIRE CONTROVERSY DOCTRINE.
We find insufficient merit in these arguments to warrant further discussion in a written opinion. R. 2:11–3(e)(1)(E). We add only the following brief comments.
The judge's findings as to the circumstances surrounding the formation of the contract and the authority of buyers' attorney to act on their behalf at that time are based on evidence in the record and, therefore, command our deference. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483–84 (1974); Stephenson v. Spiegle, 429 N.J.Super. 378, 382 (App.Div.2013). Indeed, the evidence overwhelmingly demonstrated that the attorney had the authority to bind buyers during attorney review.
We first observe there was no dispute that buyers authorized their attorney's first letter. What buyers attempted to convince the trial judge of was that the attorney's later communication on May 10, 2010 – when their attorney relented to seller's refusal to modify paragraph 20(e) – was inconsistent with buyers' instructions to him. Buyers were not entitled to pick and choose which of their attorney's representations were authorized without communicating the absence of authority to the seller, who otherwise had the right to assume all the attorney's representations were authorized.
Contrary to buyers' argument, our decision in Lobiondo v. O'Callaghan, 357 N.J.Super. 488 (App.Div.), certif. denied, 177 N.J. 224 (2003), did not require that seller prove by clear and convincing evidence that buyers' attorney was authorized. It would stand on its head the manner in which residential real estate is transferred in this State if parties were not permitted to assume attorneys are authorized to speak for their clients. Well-established agency principles permit a party to a transaction to assume another's attorney is authorized to speak until otherwise informed. See, e.g., Sears Mortgage Corp. v. Rose, 134 N.J. 326, 337–38 (1993); Mann v. Interstate Fire & Cas. Co., 307 N.J.Super. 587, 596 (App.Div.1998); Rodriguez v. Hudson Cnty. Collision Co., 296 N.J.Super. 213, 220 (App.Div.1997); Lampley v. Davis Mach. Corp., 219 N.J.Super. 540, 548–49 (App.Div.1987). In urging a different standard, buyers have read too much into Lobiondo, in which we determined in significantly different circumstances – for example, no party in Lobiondo was represented by counsel during formation of the contract – that Lobiondo was required to prove by clear and convincing evidence that O'Callaghan was authorized to speak for his wife, who had not been involved in any negotiations, in conveying to Lobiondo an oral right of first refusal. Lobiondo, supra, 357 N.J.Super. at 496–97. Unlike Lobiondo, the contract here was reduced to writing and both sides were represented by counsel; seller was entitled to assume the authority of buyers' attorney to bind his clients. If buyers' attorney acted inconsistently with their wishes, buyers' remedy lies elsewhere.
We lastly reject buyers' entire-controversy argument. Seller was not obligated – in the context of the small claims
action – to assert the claims he pleaded and pursued in this action for the simple reason that buyers did not name seller as a party to the small claims action.
1. FN1. The preprinted form stated that this provision was to be “delete[d] if not applicable.” It was not deleted.
2. FN2. This was not the same attorney who represents buyers in this appeal.
3. FN3. Both buyers testified they received and reviewed this letter.
4. FN4. The evidence adduced at trial revealed that buyers received quotes ranging from $2650 to $3800 per year.
5. FN5. The original trial date was adjourned at buyers' request because the attorney who communicated for them during attorney review was on vacation and not available. Buyers, however, did not call the attorney to testify when the trial later occurred.