On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County.
Seidman, Antell and Lane. The opinion of the court was delivered by Lane, J.A.D. Antell, J.A.D. (dissenting).
[178 NJSuper Page 446] Defendants Sidpaul Corporation (Sidpaul), Paul Zito and Rosalie Zito appeal from the final judgment of the Superior Court of New Jersey, Chancery Division, in favor of codefendant Laurel Gardens Associates directing specific performance of a contract for the sale of real property and dismissing their claim for damages for breach of contract. Plaintiff cross-appeals from so much of the judgment as holds that the purchaser, Laurel Gardens, is responsible for the real estate commission and denying interest on the commission. Laurel Gardens Associates appeals from so much of the judgment as fixes the date for adjustments at the closing at 30 days after the judgment rather than the original closing date fixed by the parties of November 9, 1977 and holds the purchaser responsible for the real estate commission rather than the seller. The primary issue is whether the contract involved omits a term so essential that the contract cannot be recovered upon in equity or at law. We reverse and remand for the entry of judgment dismissing all claims that the parties have against each other.
Barry M. Dechtman, Inc. filed suit to recover real estate commissions in the amount of $200,000 from Sidpaul and Paul Zito, damages against Paul Zito and Rosalie C. Zito for wrongfully preventing defendant Sidpaul from closing under a contract of sale, and damages from Gandria Realty, Inc. for failing to close title and depriving plaintiff of its real estate commission. Laurel Gardens Associates and Gandria Realty, Inc. cross-claimed against Paul Zito, Rosalie C. Zito and Sidpaul to recover compensatory and punitive damages for breach of a contract of sale, for specific performance of the contract of sale and seeking indemnification for any sums that might be found due to plaintiff. Sidpaul, Paul Zito and Rosalie C. Zito crossclaimed against Gandria Realty, Inc. and Laurel Gardens Associates seeking indemnification for any sums found to be due to plaintiff, damages for breach of contract and compensatory and punitive damages for slander of title. The trial court entered judgment:
(1) Plaintiff's commission be paid by Laurel Gardens Associates.
(2) Sidpaul specifically perform the contract of sale with the closing date 30 days from the date of the judgment and adjustments to be made at the date of closing.
(3) The purchase money second mortgage to be taken back by the seller provide that a declaration of default by United States Savings Bank by reason of a "due-on-sale" clause in the first mortgage shall not constitute a default on the second mortgage provided the purchaser continues to tender payment of the monthly sums due on the second mortgage and actively contests any declaration of default or foreclosure proceedings instituted by the first mortgagee and further provided that in the event foreclosure proceedings are instituted by the first mortgagee the seller may apply to the court for just and reasonable safeguards in the event the purchaser is unsuccessful in the foreclosure proceedings.
(4) That in default of closing a certified copy of the judgment may be recorded in the office of the County Clerk which will constitute a transfer and conveyance of the real and personal property of Sidpaul in accordance with the contract of sale with the buyer depositing with the clerk of the Superior Court all monies which were due and payable at the closing date together with a note constituting a personal guarantee by Barry M. Dechtman and a purchase money mortgage in an amount and form as contemplated by the contract of sale as amended by the judgment.
(5) Denying plaintiff's application for interest on the real estate commission.
Dr. Zito is principal stockholder and president of Sidpaul, the owner of Laurel Gardens, a 237-apartment complex in Eatontown, New Jersey. On behalf of Laurel Gardens he signed a listing agreement with plaintiff on November 17, 1976. The listing price was $3,550,000. There was a first mortgage dated August 2, 1972 in the amount of $2,300,000 held by United States Savings Bank of Newark, N.J. By November 1977 the principal amount had been reduced to $2,175,000. The listing agreement stated that the cash required was a total of $800,000, of which $25,000 would be paid at the time the contract of sale was signed.
The first mortgage provided for monthly installments of principal and interest at 8% a year to be paid in the amount of $17,250. Any unpaid balance and interest would be paid 15 years from the date of the mortgage. The mortgage provided that the loan would be "closed for seven (7) years" and thereafter could be paid in full with a penalty of 4% of the unpaid balance in the eighth year, which penalty would decline one-half of 1% each year thereafter until it reached 1%, which would be maintained until expiration of the mortgage. There was a typewritten provision in the mortgage providing that it would become due and payable "in the event there is a transfer of ownership of the stock of the Borrower from those presently holding the same without the consent of the Bank excepting only by the laws of descent and distribution." The body of the mortgage provided that if there was any change in the ownership of the mortgage property, the principal sum with accrued interest "shall, at the option of the Mortgagee, become due and payable immediately, although the period above limited for the payment thereof may not have expired, anything herein contained to the contrary notwithstanding; . . . ."
Barry M. Dechtman and another person decided to purchase Laurel Gardens. For that purpose they formed Gandria Realty, Inc. Dechtman revealed to Zito his interest in purchasing the property and conferred with Zito about the terms of the purchase. Dechtman then engaged an attorney, who drew a proposed
contract which was dated February 14, 1977. The draft provided a purchase price of $1,300,000 over the balance due on the mortgage, which was in the approximate amount of $2,175,000. The sum of $25,000 was to be paid at the signing of the contract, a further sum of $475,000 on closing and the purchaser was to execute and deliver a mortgage of $800,000 at a rate of 6% interest. Paragraph 11 of the draft provided in the first sentence that it was expressly made subject to the purchaser's obtaining within 60 days a mortgage commitment from a financial institution on terms satisfactory to the purchaser. In the event purchaser was unable to obtain the mortgage commitment or the contingency was not waived by the purchaser, then, at the option of the purchaser, the contract could be terminated. The parties met with their attorneys and accountants to confer about the terms of the contract, as a result of which a second contract was prepared by plaintiff's attorney. This form of contract provided for a purchase price of $1,100,000 subject to the balance due on the mortgage. The purchase price was to be paid $25,000 at the signing of the contract, $275,000 on closing and by a mortgage in the amount of $800,000. Paragraph 11 was changed to read:
This Contract is expressly made subject to the following: (a) Approval by United States Savings Bank of Newark, New Jersey, of sale to Purchaser as contemplated herein on or before the date fixed for closing of title hereunder, (b) Purchaser obtaining on or before the date fixed for closing of title hereunder, a mortgage commitment from a financial institution on terms and conditions satisfactory to Purchaser. In the event Purchaser is unable to obtain (a) and (b) above within the time period set forth herein, or said contingencies are not waived by Purchaser, then and in that event, at the option of Purchaser, on written notice to the other party, this Agreement may be terminated and upon such termination, there shall be no further liability one party to the other except the return of the deposit money paid hereunder.
There was then drawn a third draft of the contract, which provided for the same purchase price. Certain changes were made in the provision for the purchase money mortgage. Paragraph 11 was retained. The contract of sale ultimately signed was then prepared by plaintiff's attorney. That contract provided that the purchase price was $3,275,000. The purchase
price was to be paid $25,000 on the signing of the contract, $275,000 on the closing of title and by the execution of a purchase money mortgage in the amount of $800,000. The provision for the purchase money mortgage stated that it would contain a clause that "a default in any first mortgage encumbering the premises shall be deemed a default under this mortgage. . . ." Paragraph 11 was changed to provide:
This Contract is expressly made subject to the following: (a) Approval by United States Savings Bank of Newark, New Jersey, of sale to Purchaser as contemplated herein on or before the date fixed for closing of title hereunder. In the event Purchaser is unable to obtain the above within the time period set forth herein, or said contingency is not waived by Purchaser, then and in that event, at the option of Purchaser, on written notice to the other party, this Agreement may be terminated and upon ...