On appeal from the Superior Court, Law Division, Ocean County.
Ashbey and Landau. The opinion of the court was delivered by Ashbey, J.A.D.
[247 NJSuper Page 375] Plaintiff (seller) Jack Krupnick, a real estate developer, agreed to sell a 13.40 acre parcel in Lakewood to defendants (buyers) Michael Guerriero and William Pennisi. Under the contract the seller was to obtain many governmental approvals prior to closing. The agreement also called for the buyers to make a $300,000 deposit on the $1,100,000 purchase price, which
was secured by a note and mortgage. There was no provision in the contract for the disposition of this sum upon the buyers' default.
When the matter did not close, plaintiff seller retained the deposit and brought an action against defendant buyers for cancellation of the mortgage. Defendant buyers counterclaimed for return of their deposit, claiming that seller had breached the contract. The trial court found that, by failing to close, the buyers breached the contract and allowed the seller to retain as damages $100,000 of the $300,000 deposit.
Plaintiff seller appeals from the denial of his demand for the full $300,000 and defendant buyers' cross-appeal from the court's conclusion that it was the buyers, rather than the seller, who breached the contract. We affirm on the cross-appeal and reverse and remand on the appeal.
We need not review all of the facts concerning time of the essence notices which persuaded the court that defendant buyers breached the contract. See Stamato v. Agamie, 24 N.J. 309, 315, 131 A.2d 745 (1957). The judge's conclusion was that a February 8, 1988 letter by defendant buyers' attorney did not effectively make time of the essence, while a March 9, 1988 letter by plaintiff seller's attorney did. That conclusion was supported by the record and must be respected. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-484, 323 A.2d 495 (1974). It being undisputed that the buyers did not appear on the March 21, 1988 return date, when the seller was present, ready, willing and able to close title, it was the buyers who breached the contract.
What remains at issue is the remedy. The seller testified to certain consequential damages: advertising expense of $2,172.25; real estate taxes of $7,785.42; engineering fees of $52,708.30; legal fees associated with contract litigation of $21,567.80; insurance of $821 and miscellaneous expenses of $2,351.42. The seller complained of some $116,000 lost interest on the $700,000 due at closing. The judge found the seller had
not established any actual diminution in property value and that many of the seller's expenses accrued to seller's benefit. He held that $300,000 was an excessive deposit. Having concluded that the true sales price was $1,000,000, not the $1.1 million set forth in the contract,*fn1 the judge ruled that 10 percent, $100,000, was a reasonable deposit to be retained, and that the remaining $200,000 was to be returned to buyers.
The main case cited by appellant is Oliver v. Lawson, 92 N.J. Super. 331, 333, 223 A.2d 355 (App.Div.1966), certif. denied 48 N.J. 574, 227 A.2d 133 (1967), where we permitted the seller to retain $20,000 on a $215,000 contract even though the seller had sold the property at no significant loss. In Oliver we related the deposit to the seller's unquantified expenses for taxes, liability insurance premiums on vacant nonincome-producing land, costs to keep a liquor license in effect, loss of interest on the anticipated purchase price, and legal and other incidental expenses incurred as a result of the default. Id. at 336-337, 223 A.2d 355. We also noted that where the seller sought to retain the deposit and not to seek damages from a defaulting buyer, the buyers had the burden of showing unjust enrichment to prevent the retention. Subsequently, in Ruane Development Corp. v. Cullere, 134 N.J. Super. 245, 252, 339 A.2d 229 (App.Div.1975), we held, citing Oliver, that the normal measure of damages is the difference between the contract price and the market value of the property, but where the deposit of $17,000 on a $175,000 contract price exceeded the $5,000 difference between the contract price and the price at which the property ultimately sold, the seller was permitted to retain the deposit. In Central Steel Drum Co. v. Gold Cooperage, Inc., 200 N.J. Super. 251, 262-263, 491 A.2d 49 (App.Div.), certif. denied 101 N.J. 303, 501 A.2d 960 (1985), we held that where a deposit of $50,000 on a contract to buy all of the assets of a business for $650,000 was specifically covered by a liquidated
damage clause, it could be retained by the seller, citing Oliver and Ruane. It was undisputed that, following the signing of the contract, there had been a great decline in the value of the business. We noted that, "an inference can be made that the [liquidated damage] clause was a reasonable attempt to ...