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Paparone Housing Company, Inc. v. Wynford Group

January 11, 2008

PAPARONE HOUSING COMPANY, INC., A NEW JERSEY CORPORATION, PLAINTIFF-RESPONDENT,
v.
THE WYNFORD GROUP, BLUE FOOT STABLES, MAIN LINE REALTY GROUP, MAIN LINE REALTY, INC., PINEDGE ASSOCIATES, KEN DILULLO, JOSEPH SAMOST, IVA SAMOST, LINDA SAMOST, ELLEN SAMOST, EIL INVESTMENTS, EIL INVESTMENTS, L.P., WYNFORD INC., KENNETH STELIGA, THE STELIGA CORP., MAIN LINE REALTY GROUP, L.L.C., LINELIV, L.L.C., COOPER RIDGE, DEFENDANTS, AND COOPER RIDGE, L.P., DEFENDANT-APPELLANT, AND STEPHEN D. SAMOST, DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Chancery Division, Camden County, C-5-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted December 12, 2007

Before Judges Axelrad, Payne and Messano.

Defendant, Cooper Ridge, L.P., appeals from an order for specific performance, certified as final, that requires it to transfer property known as Phase II of Highpoint II to plaintiff, Paparone Housing Company, Inc., in accordance with a written contract, executed on March 31, 1998, between plaintiff and The Wynford Group, a development company controlled, along with other real estate and development entities, by defendant Joseph Samost, a prominent South Jersey real estate entrepreneur. On appeal, Cooper Ridge, the sole appellant,*fn1 argues that (1) plaintiff failed to demonstrate the existence of a valid, enforceable and reasonably definite contract between it and Cooper Ridge; (2) neither the doctrine of equitable estoppel nor that of partial performance applies to the transaction; (3) the transfer of the land at issue constitutes an unduly harsh remedy; and (4) the named defendants did not violate any implied covenant of good faith and fair dealing justifying the relief that was granted. We affirm.

As in much real estate sale and development litigation, the facts of this matter are complex, involving a multitude of business entities essentially controlled by one person, Joseph Samost, and a contractual sale agreement whose structure and content was impelled at the time of its inception by tax considerations and expressions of good faith, rather than the niceties of contract law. Although Phase I of the sale was timely consummated, litigation resulting from the refusal by Joseph's son and business associate, Stephen, to relinquish an easement that violated an existing settlement delayed development and, hence, closing on Phase II of the property sale. Then, when business and personal relationships soured between Joseph and Stephen, and Stephen asserted temporary control over the property at issue, Stephen repudiated interim agreements extending the date for closing on that phase of the sale and, while expressing a willingness to negotiate terms more favorable to him, Stephen declared the 1998 sale agreement pertaining to the land to be at an end.

As a consequence, on January 3, 2001, plaintiff filed suit in the Chancery Division against Stephen and various entities with a relationship to the sale transaction: The Wynford Group, Blue Foot Stables, Main Line Realty Group, Main Line Realty, Inc., Pinedge Associates, and Cooper Ridge, L.P. A second suit, naming as defendants EIL Investments and EIL Investments, L.P. was consolidated with the main action in June 2004.

While suit was in progress, Joseph reasserted control of the property and, for a substantial period, acquiesced or cooperated in plaintiff's efforts to obtain sewer approvals and otherwise develop the property. However, recognizing that the property had increased in value over time and as the result of plaintiff's development efforts, eventually Joseph, as well, sought to avoid the Phase II sale. As the result, on July 13, 2004, plaintiff added Joseph to the litigation as a defendant, along with Wynford, Inc., Main Line Realty Group, L.L.C., Lineliv, L.L.C., Cooper Ridge, and various other individuals and entities that were either fictitious or later dismissed from the litigation.*fn2 Plaintiff's suit asserted, among others, claims of breach of contract, breach of the covenant of good faith and fair dealing, interference with contract by Stephen, violations of the Consumer Fraud Act, fraud, quantum meruit, and unjust enrichment in connection with the uncompleted real estate transaction, and it sought specific performance and both compensatory and punitive damages.

In 2004, the chancery judge granted plaintiff's motion to restrain the transfer of the Phase II property, as well as other properties at issue, by defendants,*fn3 and it additionally granted a motion by Stephen to dismiss plaintiff's specific performance claims against him. On February 14, 2005, a consent judgment was signed, whereby defendant Main Line Realty Group, L.L.C., acknowledged that it was the successor in interest to defendant Main Line Realty Group, which in turn was the successor in interest to defendant Main Line Realty, Inc., as well as the assignee of defendant The Wynford Group, the party that executed the 1998 sale agreement with plaintiff. Main Line Realty Group L.L.C. further acknowledged that it was legally obligated to sell and convey title to the property at issue to plaintiff once it had acquired title from the nominal property owner, Cooper Ridge, L.P., the ultimate successor to defendant Blue Foot Stable, which owner the property at the time of the 1998 sale agreement with plaintiff. However, that additional conveyance was resisted.

When the equitable issues remaining after the execution of the consent judgment were tried in the Chancery Division, a partial judgment was entered in plaintiff's favor. In a lengthy oral opinion, placed on the record on July 11, 2006, the trial judge found essential control by Joseph over all the real estate and development entities involved in the transaction. Additionally, he found bad faith on the part of Joseph Samost, as well as his son Stephen, in refusing to consummate the sale.

Finding equitable grounds to do so, the judge granted specific performance of the 1998 sale agreement, concluding that the covenant of good faith and fair dealing had been violated, and that defendants were estopped from disavowing that agreement. The chancery judge certified the judgment as final pursuant to R. 4:42-2, reserving plaintiff's damages claim for later trial. A subsequent motion for reconsideration was denied, but a stay of the partial judgment was granted.

I.

The record supports the following abbreviated summary of the evidence in this matter. In early 1998, plaintiff's principal, Thomas Paparone, a builder, entered into negotiations with Joseph and Stephen Samost, a trained attorney who worked in that capacity, as well as others, for the Samost businesses, to purchase land in Voorhees Township, known as Highpoint II, consisting of seventy-three residential building lots, drainage basins, and open space. At the time of the negotiations, final subdivision and sewer approvals had been granted only with respect to twenty-four of the lots. As a consequence, the deal was structured in two phases that required plaintiff to immediately purchase the twenty-four lots for $1,800,000 and to purchase the remaining forty-nine lots by January 2, 2000*fn4 for an additional $4,045,000, paid in two installments, once the necessary development approvals had been obtained by the seller. Title to Highpoint II was held by defendant Blue Foot Stables, an unincorporated entity at the time owned by Joseph, Stephen, and their wives, but effectively controlled by Joseph, as were all of the other defendant entities in which Joseph held an interest.

As the result of Joseph's desire to avoid capital gains taxes on the transaction, the property was first to be transferred from Blue Foot to The Wynford Group,*fn5 a development company administered at Joseph's direction by Henry DiLullo, a "second son" to Joseph, and controlled by Joseph. Wynford would then transfer the property to plaintiff.

On March 31, 1998, plaintiff and Wynford entered into a formal contract for both phases of the sale of Highpoint II. Pursuant to that contract, Wynford was required, at its expense, by January 2, 2000, to obtain Phase II final, non-appealable subdivision approval from Voorhees Township, as well as to obtain necessary sewer system construction approvals from local and state authorities.*fn6 The agreement also contained an undertaking to provide easements for access, utility lines and facilities, storm water and drainage, and other facilities "from any adjacent property owned by Seller or an affiliate in favor of any portion of the Property purchased by Buyer." An additional easement over the Phase II property was granted to the seller to permit "access to a residential, single family community to be located in Evesham Township, Burlington County, New Jersey, which is not precluded by [a prior] Order and Stipulation of Settlement" with Voorhees Township and Township residents.

Blue Foot, the owner of Highpoint II, was not a signatory to the agreement. However, plaintiff was assured by Stephen Samost, the seller's attorney and, at the time, a part owner of Blue Foot, that the formality was immaterial, because Joseph controlled all of the entities. As the result of prior successful business dealings between Thomas Paparone and Joseph Samost, in connection with the purchase of properties known as Sanctuary and Highbridge, which deals were similarly structured, the assurances were accepted.

Phase I closed on April 5, 1998, after Blue Foot deeded it to Wynford in an informal sale transaction for consideration of $1,700,000.*fn7 However, matters did not proceed as smoothly with respect to Phase II.

First, in a letter of June 11, 1998, Voorhees Township advised plaintiff and Stephen that the easement granted across Phase II property to provide access to a residential development in Evesham violated the settlement that Stephen had previously reached in litigation with Voorhees and certain of its residents. A stop order was issued precluding work on Phase I and the issuance of any approvals on Phase II. Despite a prior oral agreement by Stephen with plaintiff to remove the reservation, should Voorhees object, Stephen refused Voorhees's demand. Ensuing litigation by Voorhees was not resolved until August 22, 2000 when the reservation was declared invalid. Although the stop work order was lifted with respect to Phase I during litigation, the stop order with respect to Phase II was not, delaying issuance of necessary approvals.

Second, in July 1998, a dispute arose between Joseph and Stephen Samost regarding the ownership of the Samost family properties, including Highpoint II, Phase II. Litigation was commenced, first in federal, and then also in state court. Stephen claimed that, between July 1998 and June 2000, he was not consulted by Joseph regarding the status of High Point's Phase II. According to testimony at trial, Stephen, as an attorney, previously had been ...


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