FIELDS DEVELOPMENT GROUP CO., Plaintiff–Respondent, v. 79–01 ASSOCIATES, LLC, Defendant–Appellant, ERNEST H. GELMAN, Defendant.
Defendant 79–01 Associates, LLC, appeals from the March 28, 2012 order of the Law Division granting summary judgment in favor of plaintiff Fields Development Group Co., and ordering its attorney, defendant Ernest H. Gelman, to remit the deposit being held in trust by him to plaintiff. Following our review of the arguments advanced on appeal, in light of the record and applicable law, we affirm.
We consider the facts in the light most favorable to defendant. On April 30, 2004, plaintiff entered into a contract to purchase defendant's property located at 203–207 Van Vorst Street, Jersey City. Plaintiff was required to make two payments in the amount of $250,000, to Gelman to be held in escrow. The remaining $4.5 million purchase price was to be paid upon the closing of title. The contract provided that closing was to take place on December 20, 2004, “but in any event at least 45 days following DEP [Department of Environmental Protection] approval as defined later in this contract.” After the due diligence period, defendant was obligated to demolish the existing structures on the property, the cost of which was to be advanced by defendant but reimbursed by plaintiff at closing, except for certain environmental charges. Defendant, however, failed to demolish the structures.
Up until 2003, an affiliate of defendant had operated a chemical manufacturing facility at the property, and under the Industrial Site Recovery Act (ISRA), N.J.S.A. 13:1K–6 to –14, defendant was required to clean up any contamination prior to transfer of the property. Pursuant to the contract, defendant agreed that it would either (1) clean the property to DEP satisfaction and obtain a no further action letter, or (2) submit a remedial action work plan (RAWP) to the DEP, obtain DEP approval, and enter into a remediation agreement with DEP. Defendant was responsible for the environmental compliance costs.
The contract contained three clauses addressing termination. Paragraph 15 provided that “[t]his contract may be cancelled by Buyer:
(a) by written notice to Seller during the due diligence period defined in ¶ 25 herein. Such notice shall not require any cause or justification; or
(b) upon the final rejection by DEP of Seller's remedial action work plan (RAWP) so as to prevent or materially impair development of the site for multi-family residential development pursuant to existing zoning as more fully set forth in ¶ 27 herein.
If Buyer has not duly elected to terminate this contract pursuant to this subpara. (a) or (b) above, the Contract deposit shall be retained by Seller as liquidated damages, unless seller is unable to deliver [ ] title materially in accordance with the terms of this Contract, in which event the Contract Deposit and the additional Contract Deposit shall be repaid to Buyer, with interest, if any, earned on that deposit and thereupon this Contract shall be deemed terminated and cancelled and the parties will be released of [sic] liability to each other.
Paragraph 27, in relevant part, provided that:
If DEP approves the RAWP with such conditions that will prevent or materially hinder Buyer's development for multi family residential housing pursuant to existing zoning and such determination shall become final, Buyer shall have the right but not the obligation to rescind this contract by written notice, in which case the Contract Deposit shall be returned to Buyer with interest, and all rights and obligations of the parties hereunder shall be deemed terminated and canceled. However, prior thereto, Seller shall have the right to pursue all remedies and rights of appeal available to Seller to have DEP modify the approved RAWP so it will not prohibit or materially hinder Buyer's development for multi family residential housing pursuant to existing zoning. Upon exhaustion or expiration of thos[e] remedies and rights of appeal taken by or available to Seller, Buyer may rescind the contract in accordance with the terms set forth herein if Seller has not been able to provide an acceptable RAWP approval from DEP.
Conditional approval by DEP of the RAWP which does not prohibit or materially impair the Buyer's right to develop the site for its stated purposes, shall not entitle Buyer to rescind.
Finally, paragraph 30 of the contract states:
DEP RAWP Approval. In the event that Seller does not have a DEP approved RAWP that will not prohibit or materially hinder Buyer's development for multi family residential housing pursuant to existing zoning, on or before May 2, 2005[,] despite reasonable efforts by Seller to obtain such approval, either party may elect to terminate this contract, whereupon Buyer's deposit(s) pursuant to this contract shall be returned to Buyer, with interest and upon such refund the rights and obligations to the parties herein shall be cancelled and terminated. However, Buyer may within 10 days of notice to terminate from Seller nevertheless agree to close title pursuant to a DEP Remediation Agreement with a credit to Buyer against Purchase Price sufficient to satisfy Seller's outstanding ISRA obligation, to be determined by the third party environmental consultant pursuant to ¶ 36 of this Agreement to the extent that the parties do not otherwise agree in writing.
Defendant did not submit an initial RAWP to DEP until September 27, 2005, over four months after the May 2, 2005 date for final approval by DEP, contemplated by paragraph 30. Plaintiff did not object to this late submission, and in fact paid the second $250,000 deposit during the intervening period. On June 29, 2006, plaintiff made a $500,000 nonrefundable tax prepayment to the Jersey City Department of Finance, to obtain a future tax abatement. In June 2007, defendant received a “tax sale warning notice” resulting from untimely receipt of plaintiff's payment, and plaintiff paid the delinquent balance on June 8, 2007.
DEP did not approve the initial RAWP submitted by defendant, but instead made comments and asked for more delineation and remediation than had been proposed by defendant. Plaintiff and defendant attended a July 2008 meeting with DEP, and after giving drafts to plaintiff to review, defendant submitted an amended RAWP to DEP on February 12, 2009.1
In paragraph 27 of the contract, the parties acknowledged that the sale is subject to ISRA and that defendant had the obligation to:
(i) obtain a written determination from DEP that all obligations under ISRA that are triggered by this transaction, have been satisfied such that DEP issues a conditional or unconditional No Further Action (NFA) letter for this case before or after closing; or (ii) assign to Buyer and for Buyer to assume all obligations required to satisfy ISRA pursuant to a Remediation Agreement to be signed by Buyer pursuant to the provisions of ¶ 36 hereof (ISRA compliance).
Defendant did not fulfill its ISRA obligation and therefore was never able to proceed to closing.
On March 23, 2009, Gelman sent plaintiff a letter requesting authorization to release $300,000 from the deposit for defendant's use to demolish the existing structure on the property. The letter also stated that:
[t]he contract is nearing five years from its execution. All of its relevant dates have long since passed. If this request for release of the contract deposit is not favorably responded to within ten days of the date of this letter, I will suggest to my client that it authorize my refund of the entire Contract Deposit, including interest thereon, on the condition that its acceptance will constitute a mutual agreement by which the contract between the parties is terminated and cancelled.
Plaintiff's attorney responded on May 22, 2009, in relevant part, as follows:
Please excuse the delay in responding to your recent correspondence, however, it was occasioned by my client's good faith efforts to make the project viable under your proposal. Unfortunately, they have come to the conclusion that the current circumstances, environmental issues, anticipated delays and an uncertain commencement date for construction require them to inform you that the transaction cannot be concluded at this time. The original Agreement has long expired or been rendered void by the environmental delays and other issues faced by the Seller. It is not possible to proceed.
Accordingly, please accept this letter as our request for return of the deposit and accumulated interest from your trust account. You know this is done with great reluctance as my clients have persisted in their efforts to make this work over nearly five years. We would respectfully request that your client contact Fields if and when the current roadblocks are removed or become less daunting. They remain committed to assisting ․ with demolition or other local issues.
In a June 15, 2009 letter, Gelman agreed to return the deposit if plaintiff met several conditions, which included assigning all plans, approvals, and permits without any additional fees, a summary demolition proposal, and a release of defendant. Plaintiff responded on November 4, 2009, agreeing to some conditions, but refusing to release the plans and demanding immediate release of the deposit. Defendant refused to do so, and plaintiff sent another letter on May 6, 2011, demanding the deposit plus interest.
On May 18, 2011, plaintiff filed a complaint against defendant and Gelman, alleging breach of contract and exercise of unlawful dominion over the contract deposit. Defendant filed an answer and counterclaims, seeking dismissal of plaintiff's complaint and alleging a breach of contract entitling defendant to keep the deposit. Following discovery, both parties moved for summary judgment. On March 28, 2012, the motion judge granted summary judgment in favor of plaintiff, ordering Gelman to refund the deposit. It is from that order that defendant appeals.2 We denied defendant's motion for a stay of the motion judge's order.
Defendant argues the motion judge misinterpreted the contract, that plaintiff did not properly terminate the contract, that it was entitled to keep the deposit, and that equitable estoppel barred plaintiff from terminating the contract.
In reviewing a grant of summary judgment, we apply the same standard as the motion judge. EMC Mortg. Corp. v. Chaudhri, 400 N.J.Super. 126, 136 (App.Div.2008) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445–46 (2007)); see also R. 4:46–2(c) (entitling moving party to judgment as a matter of law “if the pleadings ․ show that there is no genuine issue as to any material fact challenged”).
We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J.Super. 224, 230 (App.Div.), certif. denied, 189 N.J. 104 (2006).
[A] determination whether there exists a “genuine issue” of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.
[Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).]
We then decide “whether the motion judge's application of the law was correct.” Atl. Mut. Ins. Co., supra, 387 N.J.Super. at 231. In doing so, we owe no deference to the motion judge's conclusions on the issues of law, and review those de novo. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
“As a general rule, courts should enforce contracts as the parties intended. Similarly, it is a basic rule of contractual interpretation that a court must discern and implement the common intention of the parties.” Pacifico v. Pacifico, 190 N.J. 258, 266 (2007) (citations omitted). In construing a contract, the court should “consider what was written in the context of the circumstances under which it was written, and accord to the language a rational meaning in keeping with the expressed general purpose.” Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953) (citing Casriel v. King, 2 N.J. 45 (1949)); see also Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 221 (1979) (To construe contract language, courts may consider, in addition to the text, “the circumstances leading up to the formation of the contract, custom, usage, and the interpretation placed on the disputed provision by the parties' conduct.”).
The crux of the judge's decision concerning ISRA compliance was that each party could terminate the contract if DEP approval was not obtained by the May 2, 2005 deadline. Defendant now claims that plaintiff waived that right by failing to exercise it within a reasonable time, even though defendant did not submit an initial RAWP to DEP until September 27, 2005, over four months beyond the May 2, 2005 date. By not timely submitting the application, defendant breached the terms of the contract. Secondly, defendant was obligated to undertake the demolition, which it has never done.
The motion judge determined that the parties waived strict compliance of the May 2, 2005 deadline, extending it for a reasonable time thereafter. The judge stated:
Both parties, pursuant to Paragraph 30, had a right to terminate after May 2, 2005. Neither party exercised that right. The law in this state provides that a deadline that is waived is extended for a reasonable period of time. Salvatore v. Trace, 109 N.J.Super. 83 (App.Div.1969)[, aff'd o.b., 55 N.J. 362 (1970).] Stated another way, “When it has been demonstrated that a party has acted inconsistently with the attempt to make the time of performance of the essence, whether the conduct precedes or follows the closing date, a waiver will be found and the parties will be deemed to have extended the time for performance for a reasonable period of time.” Marioni v. 94 Broadway, Inc., 374 N.J.Super. 588, 607–608 (App.Div.)[, certif. denied, 183 N.J. 591 (2005).]
In her opinion, the judge recounted the correspondences and the actions of the parties during the years subsequent to the dates fixed for DEP approval and the closing date. She then found that there was nothing in the record to indicate that plaintiff waivered in rescinding the contract, instead plaintiff acted in good faith and elected to rescind only when it became clear that defendant was nowhere close to obtaining DEP approval. The judge's factual findings are well-supported by the record.
The conduct of the parties can take the place of a written amendment. A “writing requirement may be expressly or impliedly waived by the clear conduct or agreement of the parties or their duly authorized representatives.” Home Owners Constr. Co. v. Borough of Glen Rock, 34 N.J. 305, 316 (1961); see also Lewis v. Travelers Ins. Co., 51 N.J. 244, 253 (1968) (“[T]he parties did not thereby disable themselves from amending, supplementing or replacing the contract by a later agreement made orally or by conduct objectively manifesting a new understanding.”); Salvatore, supra, 109 N.J.Super. at 91 (observing that contracting parties can waive a writing requirement through their conduct).
We note that “[e]very party to a contract ․ is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract.” Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). The covenant of good faith and fair dealing calls for parties to a contract to refrain from doing “anything which will have the effect of destroying or injuring the right of the other party to receive” the benefits of the contract. Palisades Props., Inc. v. Brunetti, 44 N.J. 117, 130 (1965); see also Wade v. Kessler Inst., 172 N.J. 327, 340 (2002).
We agree with the motion judge that, based on the course of dealing between the parties, plaintiff had the right to terminate the contract as a result of the inaction of defendant.
Defendant also claims the motion judge ignored its claim for equitable estoppel on the basis of reasonable reliance. This claim is unsupported by the evidence and lacks merit.
“Estoppel is an equitable doctrine, founded in the fundamental duty of fair dealing imposed by law.” Casamasino v. City of Jersey City, 158 N.J. 333, 354 (1999). The doctrine is designed to prevent injustice by not permitting a party to repudiate a course of action on which another party has relied to his detriment. Mattia v. Northern Ins. Co. of New York, 35 N.J.Super. 503, 510 (App.Div.1955). The doctrine is invoked in “the interests of justice, morality and common fairness.” Palatine I v. Planning Bd., 133 N.J. 546, 560 (1993) (quoting Gruber v. Mayor of Raritan Township, 39 N.J. 1, 13 (1962))․ [T]o establish equitable estoppel, plaintiffs must show that defendant engaged in conduct, either intentionally or under circumstances that induced reliance, and that plaintiffs acted or changed their position to their detriment. Miller v. Miller, 97 N.J. 154, 163 (1984).
[Knorr v. Smeal, 178 N.J. 169, 178 (2003).]
Here, defendant breached the terms of the contract, almost from day one, and now asserts it is entitled to an equitable remedy. We disagree. We find this contention to not be supported by the record. It is defendant that had the obligation pursuant to ISRA to undertake the environmental remediation prior to transfer.
We find defendant's remaining contentions to be without sufficient merit to warrant discussion in this opinion. R. 2:11–3(e)(1)(E).
FN1. As of the filing of this appeal, DEP has still not approved a RAWP for the property.. FN1. As of the filing of this appeal, DEP has still not approved a RAWP for the property.
FN2. Gelman has not appealed.. FN2. Gelman has not appealed.