This case presents an issue of law of first impression in this State. The question presented is whether the executors of the estate of decedent Dorothy Curtis may sell certain property which was owned by her to one Gino Formoso where a stipulation and an agreement with respect to such real estate had previously been approved by the court approving the conveyance to the Northern Valley Association for the Preservation of the Abram Demaree Homestead*fn1 by the guardian of Dorothy Curtis. At that time Dorothy Curtis was incompetent but alive. It is the position of Formoso and the executors that the failure to transfer prior to the death of Dorothy Curtis left the guardian with no authority, and this court without jurisdiction, to enforce the settlement made on the record.
Both case law and common sense dictate that the settlement be enforced and that the executors be directed to convey to the
Friends of Demaree the property in question under the terms and conditions made and agreed upon among the Friends of Demaree, Gino Formoso and the guardian ad litem.
The history of this matter is little in dispute. Prior to March 1, 1979 there existed a certain power of attorney from Dorothy Curtis to her attorney. That power was utilized on her behalf, and a contract was entered into between Dorothy Curtis and Gino Formoso for the sale of the piece of property in Closter, New Jersey. The contract was contingent upon Formoso's obtaining a variance authorizing the utilization of the property in question as a restaurant. He acted under the contract and expended moneys to repair the premises and to acquire the variance. Nonclosure of title was occasioned by a question raised by the title company with respect to the competency of Dorothy Curtis at the time she executed the power of attorney. On March 1, 1979 Dorothy Curtis was declared a mental incompetent and Richard C. Keel was appointed guardian of her person and property. On March 15, 1979 Formoso tendered $10,000 as a deposit for the acquisition of the property in question (the sale price being $100,000), and the guardian sought approval from the court for the sale of the property of the incompetent under a new contract which was entered into between the guardian and Formoso. This new contract was substantially similar to the contract entered into prior to March 1, 1979. On May 21, 1979, the return day of the guardian's motion to approve the contract of sale, counsel for the Friends of Demaree advised the court formally that the Friends of Demaree wished to make an offer to purchase the property.
It appears that as early as August 4, 1978 the Friends of Demaree had expressed an interest in purchasing the property, and that desire to purchase was reaffirmed by a letter dated April 3, 1979 to the guardian. On May 21, 1979 the court, after listening to the parties, advised the applicant-guardian, the Friends of Demaree and Formoso that the property would be sold on May 23, 1979 to the highest bidder, and that Formoso
would be protected to the extent that he had expended money "out of pocket" relying on the contract. Formoso was asked to file an affidavit concerning these expenditures and he, in fact, did so.
On May 23, 1979 the parties met and settlement negotiations took place. Initially, agreement was not reached, and the court was about to set forth on the record its ground rules for an auction of the property when a last-minute accord was agreed upon among the guardian, Formoso and the Friends of Demaree. The transcript of May 23, 1979 is clear. The court, after the settlement was placed upon the record, directed in furtherance of that settlement, that an order was to be submitted authorizing the guardian to sell to the Friends of Demaree upon the terms agreed upon by the parties. Basically, the settlement was that the Friends of Demaree would pay to the guardian $105,000 ($5,000 more than the estate would have received had it been sold to Formoso) and, in addition thereto, the Friends of Demaree would have to pay to Formoso the sum of $21,596.63, representing his out-of-pocket expenses. That is, the Friends of Demaree were paying, or were to pay, a total of $126,596.63 on certain terms, all as set forth on the record. The court readily approved this agreement in the incompetent's interest, since the estate was receiving $5,000 more than it would have under the contract with Formoso, and Formoso was being reimbursed for his out-of-pocket expenses up to that date. Further, the public interest was being served. Inherent in the discussions between the parties, and most relevant with respect to the attitudes of the parties, was the fact that the house on the property in question is over 200 years old. The expressed desire of the Friends of Demaree was to preserve this landmark. To protect Formoso, however, one of the items agreed upon on May 23, 1979 was that if for a period of ten years, the Friends of Demaree intended to sell the property in question for a commercial use, Formoso would then have the right of first refusal to purchase the same. Both parties submitted forms of an order,
but no order was ever agreed upon or signed. The matter was to have been heard by the court when Mrs. Curtis died.
It has been argued that the contract approved by the court during the life of Mrs. Curtis, while it involved a purchase price of $5,000 more than that agreed to by Formoso, contained a reverter clause to the New Jersey Historical Society while, initially, the contract between Formoso and the guardian contained a reverter clause with the reverter running not to the Historical Society but to Curtis -- that is, the Curtis family. The reverter clause in both instances was conditioned upon the purchaser maintaining for a period of 20 years the historic, architectural integrity of ...