On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County, Docket No. C-12094-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Cuff and Baxter.
Plaintiffs Walter Szymanski and NBSF Cabinets & Millwork Manufacturing, Inc.*fn1 appeal from the July 31, 2006 order granting summary judgment to defendant Berry Somerset, LLC, thereby dismissing plaintiff's complaint for specific performance of a commercial real estate contract executed between the parties on January 5, 2004. The motion judge was presented with the question of whether defendant was entitled to unilaterally cancel the agreement on the grounds that plaintiff had abandoned any right to purchase the property. We agree with plaintiff's argument that he was entitled to waive a contingency concerning possible environmental contamination of the property and to proceed to closing without a Letter of Non-Applicability (LNA) from the Department of Environmental Protection (DEP).*fn2 We also agree with plaintiff's argument that he did not abandon his right to purchase the property, and therefore reverse.
Plaintiff operated a cabinet and millwork manufacturing facility in Franklin Township at 59 Berry Street on property he leased from defendant. On January 5, 2004, the parties entered into a contract for the purchase of the property by plaintiff at a price of $675,000, with closing to occur no later than May 1, 2004. The contract afforded defendant the right to subject the closing date to a time of the essence condition if he chose to do so.
The contract terms specifically obligated plaintiff to obtain an LNA from DEP pursuant to the Industrial Site Recovery Act (ISRA). N.J.S.A. 13:1K-6 to -14. The contract provided that if plaintiff was unable to obtain an LNA within 120 days from the conclusion of the attorney review period, he would have the option of canceling the contract or waiving that condition and taking title to the property in an "as-is" condition, thereby subjecting himself to any site clean-up requirements DEP might ultimately impose. The contract made it clear that only plaintiff had the right of cancellation if the LNA letter could not be obtained.
On February 9, 2004, shortly after the execution of the contract, plaintiff applied to DEP for the LNA. As the May 1, 2004 closing date approached, it became clear that he would be unable to secure an LNA prior to closing. Accordingly, the parties amended the terms of their original contract by letter dated April 29, 2004, which they both signed. The letter specifically extended his mortgage contingency date to August 4, 2004, with closing to occur on or about August 20, 2004; extended the plaintiff's lease on the property under the same terms and conditions as the original lease; and, most important, extended the LNA contingency date to August 5, 2004. In the letter, defendant assumed responsibility for providing DEP with the information about its prior tenant that DEP needed before it could decide whether to issue an LNA.
As the revised August 20, 2004 closing date approached, plaintiff again realized that neither the mortgage commitment,*fn3 nor the decision of the DEP on the LNA were likely to be obtained by the August 5, 2004 date specified in the amended agreement. Accordingly, on August 19, 2004, plaintiff sent another letter to defendant, informing him that the only reason the closing had not occurred was because defendant had been "unable to obtain an ISRA clearance letter, and that is the reason for the delay in the transfer of title." In his letter of August 19, 2004, plaintiff proposed to apply all future rent payments toward the purchase price of the property.
In a letter dated August 24, 2004, defendant responded to the August 19 letter by declining to apply the rent payments to the purchase price and reiterating that plaintiff could either "consummate this transaction" without the LNA letter, or else vacate the premises. Defendant's August 24 letter to plaintiff, in pertinent part, read as follows:
[A]ny request by you for application of future rent checks against the proposed purchase price is not acceptable. We are attempting to resolve the environmental problem with the use of all due diligence.
If you wish to wait until this matter is resolved, you are free to do so, provided, however, that the rent which is due on a monthly basis is paid . . . I need not explain to you what will happen in the event the rent is not paid.
It should be further understood and agreed that this letter is not to be construed as an agreement to continue your . . . tenancy after such time as you have been advised by us as to the ultimate disposition of the environmental problem. Should the Landlord be unable to resolve the problem, you will be ...