On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. HUD-L-3502-01.
Before Judges Wefing, Fall and C.S. Fisher.
The opinion of the court was delivered by: Fisher, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
By way of this action, plaintiff Joseph Marioni sought specific performance of his contract to purchase property from defendant Roxy Garment Delivery Co., Inc. (Roxy). We agree with his argument that the Chancery judge erred in granting summary judgment dismissing his equitable claims (1) because of questions of fact concerning the propriety of Roxy's attempt to set a time of the essence closing date, (2) because, in contracting with and conveying to another, Roxy could not legitimately believe that plaintiff had forfeited his contractual rights by failing to appear for closing when Roxy had stated its refusal to fully perform its own contractual obligations, and (3) because Roxy waived its right to insist upon plaintiff's performance at the purported time of the essence closing by subsequently agreeing to a new closing date. We also conclude that plaintiff's right to specific performance was not precluded by the fact that Roxy conveyed the property to another in the interim because the subsequent purchaser had actual and constructive notice of plaintiff's contract with Roxy and, thus, could not legitimately claim the status of bona fide purchaser. We remand for further proceedings in conformity with this opinion.
On August 21, 1998, plaintiff entered into a contract to purchase property in Jersey City from Roxy for $170,000. The contract required that, at the time of closing, the property be vacant. Due to considerable problems encountered by Roxy in evicting its tenant, Roxy was in no position to close for approximately two years.*fn1
In October 2000, after the tenant had been removed, the attorneys for the contracting parties discussed the property's condition and the fact that it contained extensive amounts of debris. Despite the contract's requirement that the property be turned over, at closing, in"broom clean" condition, Roxy announced the following in its attorney's letter of October 24, 2000:
My client has requested that I restate his position again. The property is available"as is." Your client contracted to buy this property at a very fair price over three years ago. My client spent thousands of dollars and a great deal of his time in obtaining possession of the property since that time. He is not willing to do anything else to bring this matter to a close.
Time is hereby made of the essence for a closing on November 7, 2000. Should your client fail to take title on that date, we will take all appropriate action.
A week later, plaintiff's attorney reiterated his client's position that Roxy was obligated to turnover the property at closing with all debris removed.
On November 17, 2000, Roxy's attorney returned plaintiff's $12,000 deposit, advising that he was so instructed because Roxy believed that plaintiff"breached the contract by failing to close title pursuant to a notice to do so." In reply, on November 21, 2000, plaintiff's attorney sent back the $12,000 check, again explaining plaintiff's position that the contract required that the property be turned over in broom clean condition; at the same time, plaintiff offered to avoid any resulting litigation by agreeing to a $12,500 escrow for the cleanup of the property.
Later correspondence between these attorneys memorialized the parties' agreement to resolve the dilemma posed by Roxy's unwillingness to abide by the terms of the contract. The parties agreed that the closing would occur on January 3, 2001 and that Roxy would provide a credit of $12,500 for the clean-up of the property. This agreement was confirmed by plaintiff's counsel on December 1, 2000 and, also, by Roxy's attorney on December 13, 2000. On December 13, 2000, plaintiff recorded a notice of settlement with the county clerk.
What was then unknown to plaintiff was that Roxy, through a different attorney, was negotiating to sell the property to defendant John Lindner. On November 21, 2000, defendant Joel Heier, a Roxy officer, met with Lindner. Heier provided Lindner with a copy of plaintiff's contract with Roxy as well as a copy of his attorney's November 17, 2000 letter to plaintiff returning the deposit.*fn2 Heier and Lindner reached an agreement and, on December 8, 2000 -- one week after plaintiff and Roxy had agreed to an escrow for the removal of the debris and a new closing date -- Roxy executed a contract to sell the property to defendant 94 Broadway, Inc. (94 Broadway), a corporation controlled by Lindner. Lindner recorded a notice of settlement on December 11, 2000, two days prior to the recording of a similar document by plaintiff.
Also then unknown to plaintiff, a closing between Roxy and 94 Broadway took place on December 18, 2000, and a deed of conveyance was recorded the next day. Plaintiff learned this when he appeared for the January 3, 2001 closing that his attorney and Roxy's attorney had agreed upon.
On January 11, 2001, plaintiff filed a verified complaint in the Chancery Division against Roxy, two of Roxy's officers (Heier and Bert Miller), 94 Broadway, Linder, and Roxy's attorneys. Plaintiff sought, among other things, specific performance of his agreement with Roxy. On January 18, 2001, the Chancery judge entered an order that restrained 94 Broadway and Lindner (hereafter collectively referred to as Lindner) from making any structural changes to the building, from leasing any portion of the building, and from alienating or transferring ownership of the property, pending further order. Lindner and Roxy soon moved to dismiss the complaint, and plaintiff cross moved for specific performance. The Chancery judge ruled that plaintiff was not entitled to specific performance and, in an order entered on May 29, 2001, dismissed that part of the complaint that sought equitable relief, dissolved the temporary restraints, and transferred the remaining claims to the Law Division. A subsequent motion for reconsideration was denied on August 3, 2001, and plaintiff's motion for leave to appeal was denied by this court.
Approximately two years later, an order was entered in the Law Division that resolved the remaining claims, thus rendering the interlocutory orders of May 29, 2001 and August 3, 2001 final and appealable. Plaintiff filed a timely notice of appeal seeking our review of those orders.
Plaintiff correctly recognized that his entitlement to specific performance initially turned on the status of his contract with Roxy at the time when Roxy contracted with Linder. Plaintiff claims that his contract with Roxy had never been terminated, that Roxy's attempts to terminate the contract in November 2000 were wrongful, and that Roxy's attempt to set a time of the essence closing that plaintiff refused to appear for were inconsequential. As a result, plaintiff claimed that his contractual rights remained intact throughout and that the subsequent Lindner-Roxy contract could not eviscerate his equitable rights because Lindner was not a bona fide purchaser.
In light of these contentions, plaintiff's right to specific performance must be analyzed in two stages. The first stage relates to his contract relationship with Roxy and the events that caused Roxy to believe, incorrectly, that plaintiff had breached the contract by failing to appear for a closing on November 7, 2000. The second stage relates to the question of whether Roxy was entitled, when the plaintiff-Roxy contract did not close on November 7, 2000, to contract with Lindner, and whether Lindner was a bona fide purchaser whose rights were superior to plaintiff's.
Before considering the practical effect of the events and circumstances revealed by the record on appeal, we first make the following observations about the remedy of specific performance that illuminate the way.
In general, to establish a right to the remedy of specific performance, a plaintiff must demonstrate that the contract in question is valid and enforceable at law, Jackson v. Manasquan Sav. Bank, 271 N.J. Super. 136, 144 n.8 (Law Div. 1993); 25 Williston, Contracts (Lord ed., 2002), § 67:2 at 186,*fn3 that the terms of the contract are"expressed in such fashion that the court can determine, with reasonable certainty, the duties of each party and the conditions under which performance is due," Salvatore v. Trace, 109 N.J. Super. 83, 90 (App. Div. 1969), aff'd o.b., 55 N.J. 362 (1970); accord Barry M. Dechtman, Inc. v. Sidpaul Corp., 89 N.J. 547, 552 (1982),*fn4 and that an order compelling performance of the contract will not be"harsh or oppressive," Stehr v. Sawyer, 40 N.J. 352, 357 (1963); Ridge Chevrolet-Oldsmobile, Inc. v. Scarano, 238 N.J. Super. 149, 155 (App. Div. 1990).
As these and other related precepts indicate, the right to specific performance turns not only on whether plaintiff has demonstrated a right to legal relief but also whether the performance of the contract represents an equitable result. That is, after determining that the purchaser has a legal right to recovery, a court of equity must make a further determination that has been said to be discretionary. See, e.g., Friendship Manor, Inc. v. Greiman, 244 N.J. Super. 104, 113 (App. Div. 1990) (specific performance is a"discretionary remedy resting on equitable principles"), certif. denied, 126 N.J. 321 (1991). As explained by Professor Pomeroy:
The right to an equitable remedy... is never in this sense absolute, and may, therefore, when compared with the legal right, properly and to a limited extent, be called discretionary. That is, in addition to the facts, events, and relations which give rise to the certain and absolute legal right, there may be other facts, circumstances, and incidents which determine the existence of the equitable right, which modify its application, or, perhaps, entirely prevent its exercise. The phrase"within the discretion of the court," is, therefore, employed to contrast the equitable with the legal remedy; within the domain of equity jurisdiction remedies are not, in any true sense, discretionary, but are governed by the established principles and rules which constitute the body of equity jurisprudence. [Pomeroy, Specific Performance of Contracts (3d ed., 1926), § 37 at 115-16.]
For these reasons, when specific performance is sought, the court is required to do more than merely determine whether the contract is valid and enforceable; the court of equity must also"appraise the respective conduct and situation of the parties," Friendship Manor, supra, 244 N.J. Super. at 113, the clarity of the agreement itself notwithstanding that it may be legally enforceable, Salvatore, supra, 109 N.J. Super. at 90, and the impact of an order compelling performance, that is, whether such an order is harsh or oppressive to the defendant, Stehr, supra, 40 N.J. at 357, or ...