December 20, 2007
MICHAEL AND JUDITH HEPPS, PLAINTIFFS-APPELLANTS,
CHRISTOPHER AND JODI SGOUROS, AND THOMAS J. SHUSTED, JR., DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-03041-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 13, 2007
Before Judges Graves and Sabatino.
This case involves a residential real estate transaction. Plaintiff Judith Hepps entered into a written contract to sell her residence located at 120 St. Vincent Court, Cherry Hill (property), to defendants Christopher and Jodi Sgouros (buyers), for the sum of $775,000. Defendant Thomas J. Shusted, Jr. (Shusted), an attorney, represented the buyers in the real estate transaction. Plaintiffs, Judith Hepps and her husband, Michael Hepps, appeal from two summary judgment orders entered on January 12, 2007, in favor of the buyers and their attorney. We affirm the summary judgment order in favor of defendant Shusted, but we reverse the order granting summary judgment to the buyers.
The contract of sale, which is dated January 18, 2006, was signed by the buyers on February 22, 2006, and by Judith Hepps on February 23, 2006. The contract stated that buyers needed the proceeds from the sale of their residence located at 102 Sandringham Road, Cherry Hill, as well as a mortgage loan in the amount of $520,750, to complete the transaction. Paragraph forty of the contract also contained the following language: "This Contract may be changed only in writing signed by both Buyer and Seller. ANY REPRESENTATIONS OR AGREEMENTS NOT CONTAINED IN THIS CONTRACT ARE OF NO EFFECT."
Paragraph nine of the contract, the mortgage contingency clause, and paragraph forty-two, which made the sale of the property contingent upon the sale of buyers' residence, read as follows:
9. MORTGAGE CONTINGENCY, PLACEMENT FEE (POINTS), COMMITMENT DATE:
If payment of the purchase price requires a mortgage loan other than by the Seller or other than assumption of Seller's mortgage, the Buyer shall apply for the loan in writing on lender's standard form within seven (7) days after the expiration of the Attorney Review period (Paragraph 1) and use their best efforts to obtain it. The Buyer shall supply all necessary information and fees required by the proposed lender and shall authorize the lender to communicate with the real estate broker(s) and involved attorney(s). The Buyer shall obtain a written commitment from an established mortgage lender to make a loan on the property under the following terms.
Principle Amount: $520,750.00 Type of Mortgage: () VA () FHA (XX) Conventional () Other.
Term of Mortgage: 30 years, with monthly payments based on a 30 year payment schedule.
The written mortgage commitment must be delivered to the Seller's agent who is the Listing Broker identified in Paragraph 33 no later than the 7th day of March, 2006. Should Buyer require additional time to obtain the written mortgage commitment, the commitment date shall automatically be extended for a period not to exceed 7 days. If such extension shall cause the commitment date to extend beyond the settlement date specified in [P]aragraph 14 then the settlement date shall be extended for ___ days after the revised commitment date. In the event the mortgage commitment is not delivered by the specified date, or any extended date permitted by the Seller, this Contract shall be deemed null and void. In that event, the deposit monies paid by the Buyer, shall be returned to the Buyer unless failure to obtain the mortgage commitment is the result of the Buyer's negligence or intentional conduct or failure to diligently pursue the mortgage application.
42. ADDITIONAL CONTRACT PROVISIONS.
Seller agrees to remove the house off the market at the time of the signing of this Agreement. If Buyers do not have an Agreement of Sale on their house at 102 Sandringham Road, Cherry Hill by April 20, 2006[,] the Seller will be permitted at Seller's sole option, to cancel and terminate this Agreement.
If Seller terminates this Agreement, the Deposit shall be refunded to Buyer, and neither Seller [nor] Buyer shall have any further obligation to each other, under this Agreement.
On March 17, 2006, Shusted sent a letter to Judith Hepps with a notice of credit denial issued by Alta Financial indicating that buyers' "recent application" had not been approved because of "INSUFFICIENT INCOME" and "EXCESSIVE OBLIGATIONS." Shusted's letter stated: "Enclosed please find a copy of the denial of the mortgage commitment for the Sgouros'. In addition, they have had 102 Sandringham Road listed since Thanksgiving, 2004. There has not been one offer. Please accept this letter that Buyers declare this contract null and void."
In their complaint filed on April 6, 2006, plaintiffs alleged that buyers breached the contract and that statements made by the buyers and their attorney regarding buyers' financial status and their ability to satisfy the mortgage contingency, were either "false or greatly exaggerated." The trial court's reasons for granting summary judgment in favor of the buyers included the following:
But it's clear from a review of the entirety of the agreement, when you read all the paragraphs together, that if the house is not sold, that house being the buyer[s'] home at 102 Sandringham Road no settlement can take place; therefore, the agreement would be void or voidable.
I would note, however, that there is nothing in the entirety of the agreement that requires the buyers to list the property for sale or sell it. The agreement is completely silent, so that although it recognizes that the buyer[s are] going to need proceeds from the sale and that settlement cannot take place until their home, the buyer[s'] home is sold, there's nothing in the agreement that requires the buyer[s] to in fact list the property for sale at any time.
So the agreement, when we read it light of that and we, again, look at what the parties' intent is, as set forth not only in the agreement, but also as admitted to even by Mr. Hepps, that the agreement is all contingent upon the sale of the property, the buyer[s] never had an obligation to list the property for sale; therefore, it was an illusory contract, so there was a need for consideration on the part of the buyer[s] to be bound to the agreement.
Having said all that, the consideration having not been paid; that is, the 54,250-dollar down payment having not been paid, there is no valid contract upon which . . . Mr. Hepps or Mrs. Hepps can seek enforcement or damages, and as a result of there be[ing] no valid contract, I'm going to have to grant the motion in favor of the Sgouroses and against [Mrs.] Judith Hepps, as well as Mr. Michael Hepps.
We do not agree that the contract was "illusory." In support of their motion for summary judgment, the buyers claimed they had "listed their home for sale with Weichert Realtors on January 25, 2006," and they provided the trial court with a copy of the listing agreement. Thus, it is clear the buyers' residence was already listed for sale when they agreed to purchase the property owned by Judith Hepps. Additionally, in their opposition papers, plaintiffs claimed the buyers "never applied for a mortgage as the contract required," and they "refused to produce their financial statements, even when faced with two court orders, so that their good faith can be ascertained." Thus, in our view, there was a genuine factual dispute regarding whether buyers complied with the mortgage contingency clause.
In granting Shusted's motion for summary judgment, the trial court relied on paragraph forty of the contract, which specifically provided that any representations not contained in the contract were of no effect. Moreover, the contract was contingent upon buyers selling their home and obtaining a mortgage loan in the amount of $520,750. Thus, the motion judge correctly determined that Shusted could not be liable for any oral statements or misstatements because his statements did not invite reliance, and it would have been unreasonable for plaintiffs to disregard the clear and unambiguous terms of the contract. See Banco Popular N. Am. v. Gandi, 184 N.J. 161, 181 (2005) ("[T]he invitation to rely and reliance are the linchpins of attorney liability to third parties."). When a contract is unambiguous, resolution by summary judgment is appropriate. Cedar Ridge Trailer Sales, Inc. v. Nat'l Cmty. Bank of N.J., 312 N.J. Super. 51, 62-63 (App. Div. 1998) (citing Booth v. Hartford Accident & Indem. Co., 125 N.J.L. 601, 603 (Sup. Ct. 1941) ("The settled rule is that where there is no ambiguity in the terms of a written instrument its construction and effect is a matter of law to be determined by the court and not by the jury.")). Summary judgment in favor of defendant Shusted is affirmed, but summary judgment in favor of buyers is reversed and remanded for further proceedings consistent with this opinion.
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