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Centex Homes Corp. v. Boag

March 28, 1974


Gelman, J.s.c., Temporarily Assigned.


[128 NJSuper Page 386] Plaintiff Centex Homes Corporation (Centex) is engaged in the development and construction of a luxury high-rise condominium project in the Boroughs of Cliffside Park and Fort Lee. The

project when completed will consist of six 31-story buildings containing in excess of 3,600 condominium apartment units, together with recreational buildings and facilities, parking garages and other common elements associated with this form of residential development. As sponsor of the project Centex offers the condominium apartment units for sale to the public and has filed an offering plan covering such sales with the appropriate regulatory agencies of the States of New Jersey and New York.

On September 13, 1972 defendants Mr. and Mrs. Eugene Boag executed a contract for the purchase of apartment unit No. 2019 in the building under construction and known as "Winston Towers 200." The contract purchase price was $73,700, and prior to signing the contract defendants had given Centex a deposit in the amount of $525. At or shortly after signing the contract defendants delivered to Centex a check in the amount of $6,870 which, together with the deposit, represented approximately 10% of the total purchase of the apartment unit. Shortly thereafter Boag was notified by his employer that he was to be transferred to the Chicago, Illinois, area. Under date of September 27, 1972 he advised Centex that he "would be unable to complete the purchase" agreement and stopped payment on the $6,870 check. Centex deposited the check for collection approximately two weeks after receiving notice from defendant, but the check was not honored by defendants' bank. On August 8, 1973 Centex instituted this action in Chancery Division for specific performance of the purchase agreement or, in the alternative, for liquidated damages in the amount of $6,870. The matter is presently before this court on the motion of Centex for summary judgment.

Both parties acknowledge, and our research has confirmed, that no court in this State or in the United States has determined in any reported decision whether the equitable remedy of specific performance will lie for the enforcement of a contract for the sale of a condominium apartment. The closest decision on point is Silverman v. Alcoa Plaza Associates,

37 A.D. 2d 166, 323 N.Y.S. 2d 39 (App. Div. 1971), which involved a default by a contract-purchaser of shares of stock and a proprietary lease in a cooperative apartment building. The seller, who was also the sponsor of the project, retained the deposit and sold the stock and the lease to a third party for the same purchase price. The original purchaser thereafter brought suit to recover his deposit, and on appeal the court held that the sale of shares of stock in a cooperative apartment building, even though associated with a proprietary lease, was a sale of personalty and not of an interest in real estate. Hence, the seller was not entitled to retain the contract deposit as liquidated damages.*fn1

As distinguished from a cooperative plan of ownership such as involved in Silverman, under a condominium housing scheme each condominium apartment unit constitutes a separate parcel of real property which may be dealt with in the same manner as any real estate. Upon closing of title the apartment unit owner receives a recordable deed which confers upon him the same rights and subjects him to the same obligations as in the case of traditional forms of real estate ownership, the only difference being that the condominium owner receives in addition an undivided interest in the common elements associated with the building and assigned to each unit. See the Condominium Act, N.J.S.A. 46:8B-1 et seq.; 15 Am. Jur. 2d, Condominiums and Cooperative Apartments, at 977 et seq.; Note, 77 Harv. L. Rev. 777 (1964).

Centex urges that since the subject matter of the contract is the transfer of a fee interest in real estate, the remedy of specific performance is available to enforce the agreement under principles of equity which are well-settled in this state. See Hopper v. Hopper, 16 N.J. Eq. 147 (Ch. 1863); 5A Corbin on Contracts § 1143 (1964); 11 Williston on Contracts

§ 1418A (3d ed 1968); 4 Pomeroy, Equity Jurisprudence (5 th ed. 1941), § 1402, Restatement Contracts § 360.

The principle underlying the specific performance remedy is equity's jurisdiction to grant relief where the damage remedy at law is inadequate. The text writers generally agree that at the time this branch of equity jurisdiction was evolving in England, the presumed uniqueness of land as well as its importance to the social order of that era led to the conclusion that damages at law could never be adequate to compensate for the breach of a contract to transfer an interest in land. Hence specific performance became a fixed remedy in this class of transactions. See 11 Williston on Contracts (3 d ed. 1968), § 1418A; 5A Corbin on Contracts § 1143 (1964). The judicial attitude has remained substantially unchanged and is expressed in Pomeroy as follows:

While the inadequacy of the damage remedy suffices to explain the origin of the vendee's right to obtain specific performance in equity, it does not provide a rationale for the availability of the remedy at the instance of the vendor of real estate. Except upon a showing of unusual circumstances or a change in the vendor's position, such as where the vendee has entered into possession, the vendor's damages are usually measurable, his remedy at law is adequate and there is ...

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