On appeal from the Superior Court, Appellate Division, whose opinions are reported at 178 N.J. Super. 444 (1981).
For reversal and remandment -- Justices Pashman, Clifford, Schreiber, Handler, Pollock and O'Hern. For affirmance -- None. The opinion of the Court was delivered by Schreiber, J.
This case requires us to decide whether the terms of a contract for the sale of real estate are sufficiently certain to be specifically enforced. A major issue involves the effect of a due-on-sale clause in the existing first mortgage on the premises. The trial court granted specific performance to the Purchaser. A divided Appellate Division reversed, 178 N.J. Super. 444 (1981), and the Purchaser appealed pursuant to R. 2:2-1(a)(2). We reverse substantially for the reasons expressed in Judge Antell's dissenting opinion.
The facts have been detailed in the Appellate Division's opinion. Summarized in pertinent part they are as follows.
Sidpaul Corporation (Sidpaul) owned a 237 unit garden apartment complex in Eatontown. Dr. Paul Zito, the principal shareholder and president of Sidpaul, negotiated the sale of the property to Gandria Realty, Inc., which subsequently assigned the agreement to a partnership, Laurel Garden Associates (Purchaser). Extensive preliminary negotiations began in early February 1977. The parties drew three drafts of the contract before a final contract was made and executed on June 9, 1977.
The purchase price was $3,275,000. Payment was to be made as follows:
$25,000 on execution of the contract
275,000 on closing of title
800,000 by bond and purchase money mortgage; interest at 6% per annum; 10 year term; $200,000 amortization payment at end of 20 months; default in any first mortgage was to be "deemed a default under this mortgage"; the bond to be signed individually by Barry M. Dechtman (his corporation was the broker and he was one of the principals of the buyer).
The balance was reflected in the amount due under a note and first mortgage held by the United States Savings Bank of Newark. The agreement provided that the principal amount due on the note was $2,175,000, and if at closing the principal was less, one-half of the difference would be credited to the Purchaser and one-half to Sidpaul.
The controversy essentially surrounds the contract provision which concerns this mortgage. Paragraph 11 of the contract as finally agreed upon by the parties reads:
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 such termination, there shall be no further liability one party to the other except the return of the deposit money paid hereunder.
The United States Savings Bank mortgage had been executed on August 2, 1972 and represented the permanent financing subsequent to the construction of the garden apartments. The principal amount was $2,300,000 payable in equal monthly installments of $17,250 (principal and interest) for 15 years. The
loan could not be prepaid for seven years. If there were a change in ownership of the property, "then and in such event, the . . . [unpaid] principal sum with accrued interest shall, at the option of the Mortgagee, become due and payable immediately. . . ."
The Purchaser was unable to obtain the consent of the Bank to the proposed conveyance. Eventually the Bank agreed to permit the mortgage to be prepaid, provided it received a premium of 4%. This was not satisfactory to the Purchaser, who then waived the contingency of Bank approval and so advised Sidpaul's attorney. ...