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B & F Properties, L.L.C. v. Two Bits Properties


April 16, 2007


On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-3828-04.

Per curiam.


Argued March 21, 2007

Before Judges Yannotti and Messano.

Plaintiff, B & F Properties, L.L.C. (B & F), appeals from the motion judge's February 6, 2006 order granting summary judgment to defendant, Two Bits Properties, L.L.C. (Two Bits).*fn1

After careful consideration of the record and appropriate legal standards, we affirm.

In a written contract dated April 26, 2002, defendant agreed to sell property located at 186 William Street, East Orange to Joe Fried, a member of plaintiff limited liability corporation, for $275,000. Pursuant to the agreement, Two Bits was to transfer the property "free of all claims and rights of [o]thers," except for, among other things, Recorded agreements which limit the use of the Property, unless the agreements: (1) are presently violated; (2) provide that the property would be forfeited if they were violated; or (3) unreasonably limit the normal use of the property.

The contract further provided that plaintiff's title must be "marketable and insurable . . . by any title insurance company . . . subject only to the above exceptions."

In fact, Two Bits did not own the property. Although Fried claimed he was unaware of this until the date of closing, there is substantial evidence in the record that B & F's real estate counsel, Michael G. Meskin, was aware of this fact much earlier as a result of the title searches prepared for the property. Two Bits intended to purchase the property from its true owners, defendants Mohamed Bargul and Frances Souza, and on the same day, in what is commonly known as a "flip," convey it to plaintiff.

Bargul and Souza became the owners of the property on June 28, 2001, when they purchased it from the City of East Orange (East Orange) for $39,000. The deed from East Orange contained the following provision:

This conveyance may be set aside by [East Orange] if [Bargul and Souza] shall fail to comply with Conditions of Sale, as set forth by provision Number 32 of the "Standard Conditions of Sale," also known as Schedule "B", which conditions shall survive the closing of title and are incorporated herein by reference. This clause shall only be effective if [East Orange] commences an action to set aside the conveyance for failure to comply within six (6) months of the date of the expiration of the Conditions of Sale.

The conditions of sale, which were recorded along with the deed, contained a general right of reversion of title in favor of East Orange in the event Bargul and Souza failed to comply with any condition. Specifically, Condition 29 provided that [Bargul and Souza] may not convey the property for a period of two (2) years from the date of closing of title unless the following applies:

a. A new structure has been constructed on a vacant lot.

b. An investment property has been rehabilitated and a Certificate of Occupancy and/or a Certificate of Continued Occupancy has been issued by [East Orange].

It is undisputed that on July 15, 2002, when Bargul and Souza conveyed the property to Two Bits, and Two Bits conveyed the property to plaintiff, this condition had been violated because 1) the conveyance took place within two years of the closing between East Orange and Bargul and Souza, and 2) no new or rehabilitated structure existed on the property.

While plaintiff contends it was unaware of the breach of this condition when it closed title on July 15, Meskin was admittedly aware of the condition, Bargul and Souza's failure to comply, and East Orange's right of reversion. In a June 3 letter to Meskin, East Coast Title Agency, which had prepared a title binder, advised him of the recorded restrictions and indicated it would need "proof of compliance with [the] standard conditions of sale" to remove the exception from its policy. Meskin testified in his deposition that he made Fried aware of these conditions and the possibility of a reversion of title to East Orange.

The deed from Two Bits to B & F, while not specifically citing the conditions of sale, stated that the property was being conveyed "subject to . . . restrictions of record." Two Bits' affidavit of title exchanged at closing contains representations that it "ha[d] not given anyone any rights concerning the purchase or lease of th[e] property," and "ha[d] not allowed any interests [] to be created which affect its ownership or use of this property." It continued, "No other persons have legal rights in this property."

On June 30, 2003, East Orange filed suit against Bargul, Souza, plaintiff and defendant seeking a reversion of title to the property based upon violations of the recorded conditions of sale. The next day, B & F filed this suit naming as additional defendants East Coast Title, Meskin and Commonwealth Insurance Company who it was alleged also provided plaintiff with title insurance.*fn2 B & F sought a declaration that it had clear title to the property; it also sought damages as a result of its alleged inability to rehabilitate the property because of East Orange's refusal to issue permits and the city's attempt to reacquire title.

On May 3, 2004, the motion judge granted plaintiff partial summary judgment, declared it owned the property in fee simple, and dismissed East Orange's claim to any reversionary interest in the property. On June 28, 2005, both title insurance companies were granted summary judgment and plaintiff does not appeal those orders. Plaintiff subsequently settled its claims against Meskin.

Two Bits then sought summary judgment advancing a number of arguments in support of the motion. On February 6, 2006, Judge Hector E. DeSoto granted Two Bits' motion and dismissed plaintiff's complaint. The judge reasoned that defendant had made "misrepresentations" regarding the status of title in the seller's affidavit of title exchanged at closing. However, he concluded that plaintiff knew about the cloud on title because East Orange's right of reversion was a matter of public record. Thus, "plaintiff . . . entered into the closing and completed the closing at its own risk because it knew or should have known of the cloud on the title." The judge concluded that plaintiff could have "stopped the process right at that time and had a claim for damages against Two Bits." But, because plaintiff "chose to . . . go forward," "the damages created are of its own making."

We review a grant of summary judgment by employing the same standards used by the motion judge. DeWees v. RCN Corp., 380 N.J. Super. 511, 522 (App. Div. 2005). Summary judgment is appropriate if "there is no genuine issue as to any material fact challenged and . . . the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). We must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the [plaintiffs], are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Plaintiff contends that the misrepresentations made by Two

Bits in its affidavit of title and deed tendered at closing presented factual disputes such that summary judgment was improvidently granted. Plaintiff further argues that another factual dispute existed because Fried claims to have not known of East Orange's reversionary interests or the specific conditions of sale that were in the public record. We disagree.

Initially, we note that at one point in his deposition, Fried testified that Meskin actually told him of East Orange's right to reversion, but that he did not understand how that claim would be perfected by the city. Even assuming, however, that a factual issue was raised as to plaintiff's actual knowledge of the reversionary rights and all its particulars, it is clear that Meskin had actual knowledge of the specific conditions of sale that were in the public record and knew of the city's inchoate claim.

In Colegrove v. Behrle, 63 N.J. Super. 356 (App. Div. 1960), we said, "[I]t has been held unequivocally that knowledge on the part of the attorney for a purchaser of land . . . of a defect in title is imputed to the client." Id. at 364. Thus, B & F is charged with the knowledge that Meskin possessed which included 1) defendant was obtaining title from Bargul and Souza and conveying it to plaintiff all within two years of East Orange's initial conveyance, and 2) that neither Bargul and Souza nor defendant had complied with special condition 29. Nevertheless, plaintiff chose to close title.

As a result, for purposes of summary judgment, there was not a legitimate factual dispute as to plaintiff's state of knowledge regarding the reversionary interest. Because its attorney completely understood the conditions, knew they had already been violated, and knew that reversion of title to East Orange was possible, any misrepresentations made in defendant's deed or affidavit of title, to the extent there were any, could not have proximately caused any of plaintiff's claimed damages.*fn3

As Judge DeSoto noted, plaintiff could have declined to close title based upon the contents of the documents and the knowledge it actually possessed regarding the state of the title to the property; it nevertheless decided to close. Having done so, plaintiff cannot now pursue a complaint based upon damages it allegedly suffered after its acceptance of defendant's deed. See Eillen T. Quigley, Inc. v. Miller Family Farms, Inc., 266 N.J. Super. 283, 298 (App. Div. 1993) (holding acceptance of deed is prima facie full execution of contract to convey and extinguishes all covenants related to or connected with title).

Because we conclude that summary judgment was appropriate substantially for the reasons set forth in the motion judge's oral decision, we do not consider the other arguments advanced by defendant.


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