Before Judges Pressler, Wallace and Carchman.
The opinion of the court was delivered by: Wallace, Jr., J.A.D.
This appeal involves the application of a liquidated damages clause in a contract for the sale of real estate. The Law Division Judge granted summary judgment in favor of plaintiff, Naporano Associates, L.P., concluding that defendant, B & P Builders, breached the contract. In a separate hearing on damages, the Judge concluded that plaintiff was not limited to the liquidated damages provision in the contract and granted plaintiff compensatory damages. Defendant appeals. We reverse.
Plaintiff was the owner of the premises know as 1017 St. Georges Avenue in Colonia (the premises). On January 23, 1996, defendant entered into a contract of sale to purchase the premises from plaintiff for the sum of $130,000 and paid a deposit of $100. In March 1996, the parties entered into an addendum to the contract reducing the purchase price to $128,000 and requiring an additional deposit of $12,800. The addendum provided in part:
In the event that the closing does not take place on or before May 1, 1996 through no fault of Seller, Buyer shall be deemed to be in default under the terms of the within Contract and the deposit shall automatically and without notice be paid over to Seller as liquidated damages.
Defendant was also given the right to extend the closing date for two additional months by paying a non-refundable extension fee of $2,000 for each additional month. Defendant paid plaintiff $12,800 for the additional deposit and on May 1, 1996, defendant paid plaintiff $2,000 to extend the closing date until June 1, 1996.
According to Ralph Mocci, an officer of defendant, he had discovered that the New Jersey Department of Transportation (NJDOT) contemplated condemnation proceedings for a portion of the premises. As a result, defendant did not wish to have closing on the contract until the condemnation issue was resolved.
On June 4, 1996, plaintiff's attorney wrote to defendant's attorney, informing him that defendant had defaulted under the terms of the contract by failing to close by May 31, 1996, or to pay the $2,000 extension fee. The letter also stated that the contract was terminated and that he was releasing the $12,800 deposit he held in escrow to the plaintiff.
Defendant's attorney replied by letter that NJDOT had informed his client that the property was the subject of a condemnation proceeding, that NJDOT had given notice of such to plaintiff, and that a hearing had been scheduled for June 10, 1996, at which NJDOT would meet with the officials in Woodbridge and the public to discuss the condemnation proceedings. The letter also stated that defendant agreed to provide the $2,000 extension fee to his office *fn1 to be held in trust pending ultimate resolution of the condemnation proceedings.
Plaintiff's counsel replied by letter dated June 6, 1996, that his client had never received notice from NJDOT of the condemnation proceedings or the meeting. Counsel further stated that plaintiff would not accept the $2,000 extension fee and that defendant's failure to meet the May 31 deadline for the extension was a default, entitling plaintiff to retain the deposit as liquidated damages.
Defendant's attorney replied the next day and enclosed a copy of the notification that his client had received from NJDOT about the improvements to the road in front of the premises. He also noted that defendant had been informed that NJDOT plans had been sent to plaintiffs at P.O. Box 5158, Newark, New Jersey. He requested that plaintiff's counsel contact him to discuss the matter.
Plaintiff's attorney responded by letter on June 13, 1996, that "unless plaintiff receives the $2,000 extension fee by June 14, 1996 it would insist upon immediate release of the $12,800 deposit." Plaintiff also agreed to apply the forfeited deposit towards the purchase price if the $2,000 was received by June 14, 1996, and closing of title occurred before July 1, 1996.
Apparently, defendant did not reply to the June 13, 1996 letter. Plaintiff then relisted the property for sale and reduced the asking price. On October 24, 1996, plaintiff entered into a contract of sale with a new buyer, Rabia Awan, for the ...