April 1, 2008
ESTELA PIMENTEL, PLAINTIFF-APPELLANT,
LA BORINQUENA BAKERY, INC., A NEW JERSEY CORPORATION, HIGINIO MONES, INDIVIDUALLY AND AS PRESIDENT OF LA BORINQUENA BAKERY, INC., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Passaic County, C-61-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 28, 2008
Before Judges Graves and Alvarez.
Plaintiff Estela Pimentel, seeks relief from two Chancery Division orders which terminated a long-term commercial lease with option to purchase real estate. On April 16, 2007, the judge denied plaintiff's motion to enforce litigant's rights to compel defendants to sell pursuant to an option to purchase contained in the lease agreement. By the same order, the judge denied defendants' application for leave to amend their answer to assert a counter-claim for declaratory judgment. On May 2, 2007, the judge entered the second order terminating the parties' lease, including the option to purchase, and denying damages to either party. We affirm.
Plaintiff, and defendants, La Borinquena Bakery, Inc. and Higinio Mones, its president, entered into a lease purchase agreement on December 17, 1999, for a term of seven years, ending December 31, 2006. The agreement states that the "[t]enant is hereby given an option to buy the buildings[,] . . . for the sum of $285,000, throughout the life of this lease. If at that time [t]enant is unable to exercise said option and landlord puts the building on the market tenant shall have the right of first refusal to buy the building."
Defendants did not respond initially to plaintiff's attempts to exercise the option, which commenced on January 9, 2006. In fact, plaintiff alleges defendants filed eviction proceedings against her when she first attempted to exercise the option. She, in turn, filed a verified complaint in the Chancery Division seeking specific performance of the terms of the option to purchase.
On October 16, 2006, the judge entered an order requiring defendants to submit an agreement to plaintiff in order to effectuate the sale. The order also provided that the parties complete the sale within forty-five days of the agreement being signed. In compliance with that order, on November 7, 2006, defendants' former attorney forwarded a letter to plaintiff's counsel enclosing a contract which provided that closing would occur December 27, 2006. Closing was later rescheduled for January 19, 2007. When plaintiff's counsel arrived for that anticipated closing, he learned defendants had retained new counsel and that the sale would not go forward that day.
Once defendants retained new counsel, it appeared that the sale would actually come to pass. By fax dated January 26, 2007, a paralegal from defendants' counsel's office made inquiry as to details related to the anticipated closing. A few days later, additional inquiries were exchanged, including a fax from plaintiff's counsel asserting that plaintiff had made a $28,000 overpayment to defendants. On January 31, 2006, defendants' counsel even forwarded a stipulation of dismissal with prejudice of the chancery action, a proposed release, and letter withdrawing the pending motion to enforce litigant's rights. No mention was made by defendants of the $28,000 claimed overpayment. In fact, in a fax dated the same day, defendants complained that plaintiff owed them two months' rent or $4200, for the months of December 2006 and January 2007. Just two days later, on February 2, 2007, defendants' counsel forwarded a proposed deed, affidavits of title, and 1099 forms to plaintiff's counsel for review. Again, the $28,000 was not mentioned.
The record presented to us discloses that plaintiff's counsel did not respond to any communication received after January 30, 2007, until February 21, 2007. On February 6, 2007, defendants' paralegal faxed a notice to plaintiff's counsel to the effect that defendants were "anxious" to close the matter before February 9, 2007. Plaintiff's counsel did not reply. As a result, by letter faxed on February 7, 2007, defendants' counsel made time of the essence:
PLEASE TAKE NOTICE that the [s]ellers will be ready, willing and able to deliver title and possession in accordance with the [c]ontract at 2:00 p.m. on Wednesday, February 21, 2007 at [plaintiff's counsel's] office . . . which TIME and DATE hereby is made OF THE ESSENCE of the [c]ontract.
If you fail to appear to deliver the balance of the [p]urchase [p]rice and otherwise to comply with the requirements and provisions of the [c]ontract at the aforementioned time, date and place in accordance with the terms of the [c]ontract, you will be deemed to be in breach of the [c]ontract, you will lose your rights under the [c]ontract, and you will forfeit the entire [d]eposit.
Thereafter, on February 16, 2007 and February 20, 2007, reminder notices were forwarded by defendants' counsel requesting closing documents and reminding plaintiff's counsel that the time is of the essence closing was scheduled for February 21, 2007, at 2 p.m. at plaintiff's attorney's office.
Plaintiff's counsel never acknowledged the February 7, 2007 fax making time of the essence. At approximately 1 p.m. on February 21, 2007, defendants' counsel faxed the following to plaintiff's counsel:
Kindly recall that closing is scheduled for 2:00 p.m. today, at your office. It now is 1:00 p.m.
As my office has not heard from yours in the last few days (including any time today), I just called for you and was told by your office that:
1. the [buyer's] lender has informed your office that it will not be ready to close before 3:00 p.m. today;
2. your office would call the [l]ender to obtain a more precise closing time; and
3. after speaking to the [l]ender, your office would contact mine to give us a realistic time to come to your office for closing.
We look forward to hearing from you with regard to when after 3 p.m. closing will be scheduled.
At 2:19 p.m. on February 21, 2007, plaintiffs' counsel left a voice mail as follows:
I am calling regarding that Pimentel closing. I am still in court. It's 2:15. I am not going to get back until 3:40 or 3:45. You know how things are. I am on my feet actually but I will be done today. I understand that you are not going to be at the closing; you are going to send [another attorney]. I tried to reach Kim but she is not in. Here is the situation - I am not going to be able to do this today. I still got to call my bank to confirm the wire and I know that the bank's attorney called me up too. I am going to have to put this off for tomorrow. If any problems, just give me a call on my cell phone . . ., but pretty much everything is done on our end. We can do this thing for tomorrow and I will tell the [j]udge to excuse me for like an hour. Thank you.
At 2:39 p.m. that same day, plaintiff's attorney's office notified defendants' counsel that plaintiff's lender had not wired the necessary funds into his attorney's account for closing, and that in any event, the attorney was still in court on three unrelated matters. Plaintiff's attorney requested that closing be rescheduled for the following day. Defendants' counsel responded with:
I confirm that you telephoned my office at 3:50 p.m. today to say you still were in court and wished to close this transaction tomorrow. When I mentioned that this closing was "time of the essence" for today, you responded that I was "playing games" and that you would close at your office beginning at 5:00 p.m. today.
You previously informed my office both in the voice mail message you left at 2:15 p.m. for [defendants' counsel] (who had planned to attend closing) and in a fax we received at 2:40 p.m. that your client's lender would not be ready to fund your client's loan (which it would do by wire transfer) until tomorrow.
In light of your previous oral and written notifications that your client's lender would not wire you funds today, I question the bona fide of your sudden about-face. I also question whether you will have the funds in your client's trust sub-account necessary to support the attorney trust account checks you presumably would be issuing at a closing. Accordingly, please support your assertion that your client will be ready, willing and able to close this afternoon by providing me with written substantiation that your client's lender has wired the loan proceeds into you[r] attorney trust account.
Plaintiff's counsel then replied:
In response to your last fax, my paralegal advised that I could not confirm my wire. As you are aware, I was in court. My client has submitted her closing costs to my trust account. I am now confirming that the lender's attorney confirmed that funds are available.
Lastly, your Time of Essence letter is void against the essence of Judge McVeigh's court order. If you are now refusing to close, you are "playing games" with a case that was extensively litigated in court. Please be reminded that as a courtesy, I withdrew a motion last Friday to compel your client to perform.
My client and I are waiting for you to appear at my office. Please confirm that your clients are on their way or that someone from your office will appear. Should you not appear by 6:00 p.m., I expect you in my office tomorrow to conclude this matter.
That evening, at 6:35 p.m., plaintiff's counsel advised defendants' counsel that because it was obvious defendants had "elected not to appear," that the closing would resume the following day, that plaintiff was available, the requisite funds were available and that if defendants did not appear, the prior motion seeking relief would be reinstated. Both copies of plaintiff's faxes were also sent to the judge.
On February 22, defendants' attorney demanded "substantiation" that loan proceeds had been wired to plaintiff's attorney's trust account. He threatened to file a cross-claim seeking damages for breach of contract. On February 23, plaintiff's attorney copied to defendants' counsel and the judge a letter from plaintiff's out-of-state lender's out-of-state counsel to the effect that the closing funds had been transferred into plaintiff's attorney's trust account the morning of February 22, not February 21.
As a result of this stand-off, no sale occurred, and defendants cross-moved to amend their answer to include a counter-claim seeking declaratory judgment that the lease expired December 31, 2006 and that the purchase option was no longer viable. Plaintiff sought enforcement of the court's prior order directing a sale of the real estate pursuant to the terms of the lease-purchase agreement.
Implicit in the judge's April 16 written opinion is that the time is of the essence notice provided by defendants was reasonable. Plaintiff now asserts on appeal, as she did in the February 21, 2007 fax, that the notice was void because a court order was already in effect requiring defendants to complete the sale. In the alternative, plaintiff contends that the defendants waived time being of the essence by language in the 1 p.m. February 21, 2007 fax inquiring "with regard to when after 3 p.m. closing will be scheduled."
Where a real estate agreement does not make time of the essence, either party has the right to do so as long as "reasonable notice of the date for closing" is given. Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 603 (App. Div.) (citing Paradiso v. Mazejy, 3 N.J. 110, 115 (1949); Finn v. Glick, 42 N.J. Super. 514, 518-19 (App. Div. 1956); Orange Soc'y of the New Jerusalem v. Konski, 94 N.J. Eq. 632, 636 (Ch.), aff'd, 95 N.J. Eq. 254 (E. & A. 1923)), certif. denied, 183 N.J. 591 (2005). The specified date "must 'bear a reasonable relation to the time already elapsed.'" Ibid. (quoting Paradiso, supra, 3 N.J. at 115). The notice must specify not only the date, but also a time and place. Ibid.
The notice in this case specified the date, February 21, 2007, the time, 2 p.m., and the place - the buyer's attorney's office. The letter gave plaintiff two weeks' notice and provided a reasonable hour and a convenient place for closing. Certainly, it fit all the requirements for reasonable notice. The judge's reliance upon it in making her decision was equally reasonable.
The validity of the notice is not defeated by the existence of a court order requiring defendants to sell. The order previously directed the parties to close within a reasonable time frame - forty-five days from the execution of an agreement of sale. The existence of the order which plaintiff obtained, but with which she was not compliant, was no different than the existence of the underlying contract obliging the parties to sell. In both instances, the parties would be expected to fulfill their commitments within a reasonable time and in a reasonable manner. Plaintiff's order compelling specific performance did not give her an option to purchase of indefinite duration, which would hinder defendants' ability to dispose of the property until it was convenient for plaintiff to buy.
When the hour is specified in a valid time is of the essence notification, "performance at that precise time will be required and even a minor delay will cause a forfeiture of a party's right to obtain its benefit of the bargain." Id. at 604. In this case the time is of the essence notice was completely ignored by plaintiff, who never even acknowledged receipt. In fact, plaintiff's attorney was in court on other matters and not even available that afternoon. He did not communicate his unavailability until the voice mail left at 2:19 p.m.
Whether due to problems with plaintiff's financing or for some other reason, plaintiff lost the benefit of her bargain after 2 p.m. came and went. The defendants' inquiry at 1 p.m. was not a waiver of their right to enforcement of their time is of the essence notification, including the provision that closing had to occur at precisely 2 p.m.
"Where time of performance is of the essence of the contract, a party who does any act inconsistent with the supposition that he continues to hold the other party to his part of the agreement will be taken to have waived it altogether. When a specific time is fixed for the performance of a contract and is of the essence of the contract and it is not performed by that time, but the parties proceed with the performance of it after that time, the right to suddenly insist upon a forfeiture for failure to perform within the specified time will be deemed to have been waived and the time for performance will be deemed to have been extended for a reasonable time." [Marioni, supra, 374 N.J. Super. at 608 (quoting 15 Williston on Contracts § 46:14 (Lord ed. 2002)).]
Here, defendant's inquiry was not conduct inconsistent with the expectation that plaintiff would be held to the time is of the essence clause. Moreover, "[w]aiver involves the intentional relinquishment of a known right and must be evidenced by a clear, unequivocal and decisive act from which an intention to relinquish the right can be based." Scibek v. Longette, 339 N.J. Super. 72, 82 (App. Div. 2001), (citing Country Chevrolet, Inc. v. Twp. of N. Brunswick Plan. Bd., 190 N.J. Super. 376, 380 (App. Div. 1983)). There was no intentional relinquishment here.
Plaintiff also maintains on appeal that defendants' "unclean hands" should not relieve him of his obligations to plaintiff in equity. There is no doubt that defendants were unwilling sellers in 2006. Plaintiff does not specify any act on defendants' part which triggers the doctrine of unclean hands once there was a change in representation in January 2007. If the documents are to be believed, in January and February 2007, defendants were ready and willing sellers.
In a similar vein, plaintiff contends that equitable estoppel should bar defendants from relief. The doctrine requires more than just the bare assertion that to award one party relief would inflict a hardship upon the other. See Miller v. Miller, 97 N.J. 154, 163 (1984) (stating the requirements of a party asserting a claim of equitable estoppel). "'[T]he maxim has long been recognized that equity aids the vigilant, not those who sleep on their rights.'" Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 228 (2005) (quoting Brick Plaza, Inc. v. Humble Oil & Ref. Co., 218 N.J. Super. 101, 104 (App. Div. 1987)). The judge's reasoning which assumed a valid time is of the essence notice, and an unexplained failure on the part of plaintiff to abide by its terms, was not error.
The judge concluded that both parties had breached "the covenant of good and fair dealing," that therefore specific performance should be denied, the lease terminated, and neither party entitled to damages. "Every party to a contract, including one with an option provision, is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract." Brunswick Hills, supra, 182 N.J. at 224. As the judge said, plaintiff breached the covenant by "trying to push back the closing whenever a date was scheduled, by 'pretending that [p]laintiff was ready to close' and by not properly communicating with [defendants'] counsel about the closing." We concur.
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