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Gladstone v. Berk

Decided: May 17, 1989.


On appeal from the Superior Court, Law Division, Mercer County.

Long, Muir, Jr. and Keefe. The opinion of the court was delivered by Long, J.A.D.


[233 NJSuper Page 229] These cases arise out of a relatively straightforward real estate deal pursuant to which plaintiffs Roger Gladstone, David Nussbaum and John Krantz agreed to buy an apartment complex in Lawrence Township owned by defendant Harvey Berk. The essential terms of the deal were negotiated and reduced to writing in a letter from Harvey*fn1 to his attorney. Briefly, Harvey agreed to sell the complex to plaintiffs for $7,470,000 subject to an adjustment in the price pending the outcome of a rent control suit. Harvey then received two higher offers for

the property and reneged on the deal with plaintiffs. Plaintiffs filed a complaint for specific performance and a notice of lis pendens. Count one of the complaint demanded that Harvey convey the property. Count two alleged that Harvey and his realtor, defendant Leo Josephs, acted in bad faith in soliciting new purchasers and were therefore liable to plaintiffs for compensatory and punitive damages.*fn2

In a series of orders, the trial judge granted plaintiffs' motion for partial summary judgment for specific performance against Harvey and ordered Harvey to cooperate with plaintiffs by permitting them to inspect the books and records relating to the property and to assist plaintiffs in their attempt to convert the property to condominiums or a cooperative. He also prohibited Harvey from conveying an interest in the property to anyone else if such conveyance would adversely affect plaintiffs' contract rights.

Harvey waived his right to appeal the specific performance order and indicated a desire to sell to plaintiffs. Nevertheless, he refused to provide plaintiffs with the documentation and inspections necessary to complete the deal. During this period (late 1986), Harvey attempted to qualify for more favorable treatment under the pre-1987 Internal Revenue Code by arranging a transfer of the property to his father, defendant Irving Berk. A closing apparently took place on December 31, 1986, but after review by tax experts it was decided that the deal with Irving would not qualify for more favorable tax treatment. Accordingly, "the transactions were voided and all documents were returned."

In January 1987, plaintiffs moved for an order to compel Harvey to provide the information they needed. Harvey filed a cross-motion for an order allowing him to amend his answer to assert a counterclaim for damages based on plaintiffs' alleged

delay, and for an order setting March 4, 1987 as a firm closing date. In essence, Harvey took the position that plaintiffs had misrepresented that they had enough money to close. The trial judge ordered Harvey to make the requested documents available to plaintiffs, to allow plaintiffs access to the premises, to provide an accounting within an extended period and denied Harvey's cross-motion in its entirety.

Following a conference attended by counsel for the parties, the judge entered an order setting a firm closing date of August 3. On June 19, 1987, plaintiffs moved for an order compelling Harvey to provide the information necessary to complete the proposed deed and affidavit of title which had been forwarded to him.

Before that motion was heard, plaintiffs learned from Harvey's lawyer that Harvey was married, that his wife, Carolyn, refused to relinquish her dower rights in the property, and that Harvey had conveyed the property to Irving. Plaintiffs' counsel noted that a title search did not reveal any conveyance to Irving, but there was "substantial confusion" as to the exact status of title. With respect to the dower problem, plaintiffs sought to obtain clear title "by admeasuring [Carolyn's] dower interest and having payment therefor remitted out of the proceeds at closing." At argument on July 10, 1987, Harvey's lawyer maintained that Carolyn could not be divested of her right to dower. However, he assured the court that the transaction with Irving was done solely for tax purposes and that there was no problem with Irving conveying. The trial judge adjourned the scheduled closing, granted plaintiffs the right to amend their pleadings to assert claims against Irving and Carolyn, ordered Harvey to assist plaintiffs in ascertaining the whereabouts of Irving and Carolyn, and ordered Harvey to complete an affidavit of title.

On August 11, 1987 plaintiffs filed an amended complaint alleging that Carolyn had an inchoate dower interest in the property, seeking an order extinguishing Carolyn's dower

rights and substituting in lieu thereof a specific sum which would represent the value of those rights (count four). The complaint also named Irving Berk and sought an order declaring that he had no interest in the property (count five).

Carolyn filed an answer to the complaint alleging that she was not a party to the contract and that the court lacked authority to compel her to release her dower rights and accept money. Plaintiffs had difficulty effecting service on Irving. In September, 1987, they were advised by Harvey's lawyer that Irving lived at a particular address in Florida. Plaintiffs' counsel served the complaint at that Florida address by certified mail, return receipt requested, on September 8, 1987. The summons and complaint were returned unclaimed with a notation that a forwarding order had expired. On September 18, 1987, plaintiffs were advised that the Florida address was still good, but that Irving also resided in Brooklyn. On September 21, plaintiffs served Irving by sending the summons and amended complaint to him by certified mail at the Florida address and by regular mail at the Brooklyn address. The certified mailing to Florida was returned and no response was received from the pleadings served in Brooklyn. From the record, it appears that actual service on Irving was effected on September 21, 1987. Before Irving could answer, plaintiffs moved for summary judgment. At argument on October 16, 1987, counsel for Carolyn argued that Carolyn never signed the contract, did not consent to the conveyance of property, and objected to admeasurement of her dower rights. Counsel for Irving represented that he had spoken to Irving, that Irving had not been served, and would not consent to any order that said that he engaged in any wrongdoing.

The trial judge concluded that service on Irving was adequate and, that at any rate, his lawyer had represented that the purported transfer of the property to Irving was voided and the title remained with Harvey. With respect to Carolyn, the judge reasoned:

The facts are that the property was acquired by Harvey J. Berk for purposes other than his principal marital residence with Mrs. Berk. Since May 1, 1982, he had authority to alienate the property without her consent per N.J.S.A. 3B:28-3. By enacting this statute, the Legislature provided that although pre-existing dower survives, its holder cannot obstruct conveyances of property. Rather, the ...

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