On appeal from Superior Court, Chancery Division, Warren County.
Fritz, Joelson and Petrella. The opinion of the court was delivered by Petrella, J.A.D.
Plaintiff appeals from the denial of an order enforcing specific performance against defendants, and alternatively from the quantum of damages awarded by the Chancery Division judge. We affirm.
The trial of this matter took place in two stages. The first hearing determined defendants' liability under the contract of sale. The judge signed an order for specific performance, but as
indicated hereinafter, he stated that it would be conditioned upon being worked out with respect to the assumption of the existing bank mortgage by plaintiffs or perhaps the partnership entity which was to take title. However, because of the elapsed time and a period of soaring interest rates, the bank increased the cash amount it wanted on the assumption from $20,000 to $250,000. The judge then refused to allow specific performance in those circumstances.
Defendants had entered into an October 8, 1979 agreement with plaintiffs to sell the Valley View apartment complex in Phillipsburg, New Jersey to plaintiffs for a $975,000 purchase price with a $15,000 deposit. The balance of the purchase price was to be satisfied at the closing by the purchasers paying $110,000 and giving the sellers a $140,000 purchase money mortgage, as well as by the assumption of the $710,000 first mortgage held by Perth Amboy Savings Institution (the "bank"), contingent upon the bank's consent to the assumption. The bank indicated that it would only consent to the assumption if the mortgage rate was raised from 10% to 13% or, alternatively, it received a three point payment of $20,000. After plaintiffs rejected those alternatives, defendants agreed to absorb the $20,000 payment.
The agreement had specified a January 2, 1980 closing date. The closing was initially postponed until at least January 4, 1980 and was scheduled for February 1. The closing did not then occur and defendants sought a February 11 closing date. On February 12, 1980 the attorney for defendants wrote to plaintiffs' attorney declaring plaintiffs in default for failing to close. Plaintiffs' attorney responded by a February 20, 1980 letter rejecting the attempt to declare a default and asserting a time of the essence notice for a March 12, 1980 closing at the office of defendants' New York attorney. By a March 5, 1980 letter defendants' attorney rejected the March 12 closing date, reiterated defendants' position that plaintiffs had defaulted, and deemed the deposit moneys liquidated damages. The parties
met to try and resolve the situation on March 31 and attempted a closing but were unsuccessful.
This litigation then ensued. At the trial defendants took the position that they had desired a closing as early as possible because of the high fuel costs. Nevertheless, the Chancery Division judge found that defendants did not actually set a closing date and noted that defendants never made time of the essence. He also concluded that plaintiffs were not precluded from making time of the essence and that plaintiffs could specifically enforce the contract, and that defendants had to offer the $20,000 to the bank to determine if the bank would allow plaintiffs to assume the mortgage. This was, however, in a period of rapidly accelerating interest rates, and the judge in his June 12, 1981 ruling said:
Now, if the mortgage lender wants more money than that, and he may, he may, you have a choice. I would suggest, Mr. Cohn [purchasers' attorney], that you take a fast look to see whether you might contribute to the amount over $20,000. That might be the easiest way to handle it but if you run into a difficulty on it I will -- I will hear you on a couple of hours' notice by telephone.
In other words, if they won't consent unless more than $20,000 is paid and Dr. Weisbrod [plaintiff] isn't immediately agreeable to paying whatever more they want, I'd suggest that you both come in quickly and we'll see what the situation is and what should be ...