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Romano v. Chapman

March 06, 2003


On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. C-180-01.

Before Judges Stern, Coburn and Collester

The opinion of the court was delivered by: Stern, P.J.A.D.


Argued February 4, 2003

Plaintiffs appeal from an order of the Chancery Division, entered on February 4, 2002, denying their application for injunctive relief, dismissing their complaint for specific performance by defendants, and vacating prior temporary restraints. *fn1 The order was premised on the trial judge's findings of fact which concluded, after an examination of the certifications and dispositions presented, that the parties' agreement was properly terminated under the "three day review" provision of their form real estate sales contract. The trial judge relied upon our opinion in Levinson v. Weintraub, 215 N.J. Super. 273, 277 (App. Div. 1987), certif. denied, 107 N.J. 650 (1987), which stated that so long as "attorney disapproval is registered within three days there can be no contract, regardless of prior approvals." The trial judge further concluded that the contract becomes "binding at the end of the three-day period and not if and when the attorneys approve the terms," so that since the defendants' counsel "disapproved of the contract . . . within the three day period, defendants properly terminated the contract," notwithstanding the prior approval of both counsel.

The material facts are not in dispute. The parties entered into a form real estate sales agreement, prepared by a real estate broker, on Wednesday, September 19, 2001. The agreement included the standard "three day review" provision.

On Friday, September 21, 2001, the attorneys for the respective parties spoke by telephone, and the buyers' attorney's "only requested change" was an amendment to permit the buyers to purchase the property in the name of a holding company. The sellers' attorney acknowledged the changes and faxed a letter approving the changes back to plaintiffs' attorney, together with a letter declaring that the attorney review was complete. That letter read:

Enclosed is a copy of the Contract of Sale relative to the above matter. It is acceptable to the sellers as executed. As you advised me, the only change requested by the buyers is that they be able to assign the Contract to an entity which will be formed by them to own the property.

This change is acceptable to the sellers. Accordingly, attorney review is completed as of today's date.

Under separate cover, I will forward to you back title information.

Very truly yours, *fn2 Thereafter, on the same day, the buyers' attorney wrote sellers' counsel, with a copy sent by fax, stating, among other things, "I have reviewed the contract of sale and your addendum which memorialized our discussion of earlier today. All are acceptable and attorney review is confirmed as complete." On Monday, September 24, 2001, a new buyer finalized what sellers deemed to be a better offer, and defendant Robert Chapman, still within the three day review period, as calculated by the form provision concerning "counting the time," *fn3 hand delivered a letter to plaintiffs' attorney from defendants' counsel stating that the attorney "hereby disapprove[s] the Contract of Sale" pursuant to the attorney review clause. *fn4 Plaintiffs' attorney thereafter called the sellers' counsel, and wrote him on September 26, to the effect that the contract was not "lawfully voided" and that plaintiffs desired "to continue with the Contract." Of course, no closing thereafter occurred.

Plaintiffs argue that the history of the "attorney review" clause indicates that it was not designed to prevent the creation of a binding contract "before the running of the three days" so long as the parties' attorneys have approved its contents; that Levison is distinguishable because it involved an attorney as agent acting as the seller and not acting as an attorney in entering the contract; and that the attorney disapproval in this case was not delivered to the plaintiffs personally, as required by the agreement, but to their attorney as well as the broker, and therefore was unenforceable.

The narrow legal issue before us, based on uncontested facts, is whether the "three day review" period was designed to permit each party to consult with counsel and obtain legal advise with respect to the contract, therefore confirming a binding agreement once the attorneys for both parties agree to the language of the previously executed agreement, or whether the three day period was designed to permit a "timeout period", or period of reflection "to accommodate a rethinking of the entire transaction," see Levison, supra, 215 N.J. Super. at 277, in which the parties can consider whether they want to go through the transaction. We are more than satisfied that the history behind the provision reflects that it was designed to give the parties an opportunity for their respective attorneys to review the form agreement, and that once the agreement is approved by the attorney, as the agent for the party, the agreement remains binding upon the client if accepted in that form by the other party. Of course, the attorney could reject the agreement under the three-day review provision, could recommend revisions to the contract, or even seek an extension of the three-day review period for a mutually agreeable time. Kutzin v. Pirnie, 124 N.J. 500, 508- 09 (1991). Moreover, parties can have the attorney wait to the last moment to approve the agreement, or take no position at all before the midnight hour, thereby giving the client an opportunity to reflect and reverse the decision. But here counsel for the sellers indicated approval of the agreement in a form approved by the purchasers, and the trial judge should not have permitted defendants to withdraw from the agreement.

Under its plenary authority over the practice of law, N.J. Const. art. VI, § II, ¶ 3, in 1983, the Supreme Court authorized the use by licensed real estate brokers and sales persons of form residential real estate sales agreements and approved the consent judgment executed by retired Justice Mark A. Sullivan following a public hearing and resolution of a dispute between the New Jersey State Bar Association and the New Jersey Association of Realtors. New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Boards, 93 N.J. 470 (1983), modified 94 N.J. 449 (1983). A reading of the Supreme Court's decision and order makes clear that the dispute, and concern of the Court, related to the unauthorized practice of law by realtors, and the need for parties to residential real estate agreements to have the opportunity to consult with counsel about the transactions they had entered. The Court quoted at length from Justice Sullivan's opinion which included the following: The proposed settlement accommodates the interests of realtors and attorneys by allowing the realtor to consummate the contract ...

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