June 26, 2008
UNITED STATES LAND RESOURCES, L.P., PLAINTIFF-APPELLANT,
TRANSISTOR DEVICES, INC., DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, C-111-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued June 10, 2008
Before Judges Stern, Coburn and Waugh.
Plaintiff, United States Land Resources, L.P. ("USLR"), as assignee, sued defendant, Transistor Devices, Inc. ("TDI"), for specific performance of a multi-million dollar real estate contract. TDI counterclaimed, asserting a right to retain the $150,000 deposit. On TDI's motion for summary judgment, the Law Division judge determined that USLR was not entitled to specific performance and that TDI was entitled to the deposit. Plaintiff appeals, and we reverse and remand for further proceedings.
TDI owns an industrial building at 274 South Salem Street in Randolph. In April 2003, TDI contracted to sell the property to Salem-Randolph, LLC ("Salem"), for $3.3 million. The agreement provided that any amendments to the contract had to be in writing and signed by both parties. The closing was to occur ninety days after the date on which all contract contingencies were met or waived by the purchaser.
In late February 2004, the parties agreed in writing to amend the contract. Under the amended agreement, the purchase price was reduced to $3.24 million and all contingencies were deemed satisfied, with one exception: TDI agreed to enter into a remediation agreement with the New Jersey Department of Environmental Protection concerning the replacement of contaminated soil on the property. TDI duly complied with the contingency and sent a copy of the remediation agreement to the buyer on July 21, 2004. The closing was not contingent on TDI's completion of the remediation, but TDI remained responsible to perform the remediation in a satisfactory manner.
On November 11, 2004, and December 2, 2004, TDI wrote letters to Salem's attorney demanding a closing, but not asserting that time was of the essence. The December letter indicated that Salem had agreed to close on January 7, 2005, and asked for confirmation of the date. On December 17, 2004, TDI wrote again, asking for confirmation of the January 7, 2005, closing date "as soon as possible." On December 29, 2004, Salem's attorney wrote back, saying that although the January 7th date was not agreeable, Salem would be prepared to close "shortly thereafter."
On December 30, 2004, TDI wrote back to Salem's attorney, indicating that on the day before it had received from the broker a fax of a "proposed second amendment to the Contract of Sale, in effect changing the purchaser and delaying the closing until March 31, 2005." The letter also stated that TDI was "not interested in amending the Contract again." And the letter concluded with this statement:
Your client's refusal to close as agreed is a breach under the Contract of Sale. Please consider this letter as notice to your client to cure the breach within fifteen (15) days. If the breach is not remedied within the cure period, your client will then be in default, and [TDI] will terminate the Contract and receive the deposit, plus any interest earned thereon, as damages.
On January 3, 2005, TDI wrote to the purchaser's attorney stating that it required a closing on or before January 31, 2005. By letter dated January 5, 2005, Salem's attorney advised TDI that it had assigned its rights under the contract to USLR. The assignment was also dated January 5, 2005.
Representatives of USLR and TDI thereafter agreed to meet on Friday, January 14, 2005. According to USLR, after much discussion the parties orally agreed on a closing date of March 31, 2005, with an outside closing date of July 15, 2005, and then, to quote its brief, "moved on to other topics."
On January 17, 2005, USLR's attorney wrote to TDI, saying: "I enclose a draft of the proposed Second Amendment which incorporates our agreement from Friday's [January 14, 2005] meeting. Please review same and let me know if it is acceptable." This proposed agreement included, among other things, the following terms about which a dispute arose: under paragraph 1, the $150,000 deposit was returnable if TDI failed to perform; under paragraph 3, the outside date set for closing was July 15, 2005; under paragraph 4, municipal property taxes would be "adjusted as of January 31, 2005, rather than the date of Closing;" and under paragraph 5, TDI was required to perform the remediation before closing.
On January 25, 2005, TDI wrote to USLR's attorney rejecting paragraphs 1, 3, 4 and 5. In short, TDI insisted on an outside closing date of March 31, 2005; the right to retain the $150,000 deposit without conditions other than giving it as a credit against the purchase price; payment by USLR of real property taxes and utility expenses as they came due; confirmation that all contingencies had been met; and access to complete the remediation after closing. The letter closed with a request for an amended agreement reflecting those points.
On February 4, 2005, USLR's attorney wrote to TDI enclosing a revised draft of the Second Amendment, and asking that it be finalized and signed. This draft, like the first draft, provided that the additional deposit of $100,000 would be due within three business days "after being provided with a fully executed counterpart of this Second Amendment . . . ."
On February 9, 2005, TDI wrote to USLR's attorney, objecting to the new draft for the following reasons: TDI had still not received a copy of the assignment; TDI objected to the proposed closing date of July 15, 2005, which put the closing off for four months, and insisted that title close on March 31, 2005, or shortly thereafter; TDI insisted on retaining the initial deposit of $150,000 without any contingency for its return because "[i]t has already been earned;" and although TDI would try to complete the remediation before closing, it would not agree to changing the original contract to require that the work be performed before closing.
On February 18, 2005, TDI's attorney wrote to USLR's attorney advising, among other things, that, "[w]e, therefore, make time of the essence for the closing [at your office]" with a closing time and date of 10:00 a.m., March 8, 2005.
Ten days later, on February 28, 2005, USLR's attorney wrote to TDI's attorney, stating, among other things, that the "attempt to declare March 8, 2005 as a time of the essence date for closing is rejected." He asserted that setting the closing for seventeen days away "was patently unreasonable and arbitrary." He further asserted that as a result of the January 14 meeting, his client had "made certain decisions and changed its position with regard to available funds and financing with respect to the transaction and thereby effecting its ability to close on short notice." He added that TDI "is clearly estopped from now refusing to honor its agreement as to the July 15, 2005 outside date for closing."
On March 4, 2005, TDI's attorney replied, moving the time of the essence closing to March 31, 2005. USLR's attorney replied on March 24, 2005, rejecting the March 31, 2005, date without explanation other than to assert reliance on the alleged oral agreement reached on January 14, 2005, to close by July 15, 2005. In other words, he did not suggest the time was insufficient for his client to get ready for the new closing date demanded. TDI's attorney came to USLR's attorney's office prepared to close on March 31, 2005, and was advised that there would be no closing on that date.
On March 31, 2005, after the closing failed to occur, TDI's attorney wrote by fax to USLR's attorney describing what had occurred at the non-closing and asserting that TDI was declaring USLR to be in breach of the contract. The fax also stated that in accordance with Article 5 of the contract TDI was giving USLR notice that it had fifteen (15) days to cure the breach, or [USLR] will be in default. Please contact us if your client decides to close within this fifteen-day period. The fifteen days ends on April 18, 2005. If your client has not closed title by the close of business on April 18, 2005, [TDI] will be entitled to its remedies for default as per the contract.
Obviously, we must be given reasonable notice of your intent to close and an opportunity to arrange our schedule so we can be present to represent our client's interests at the closing. However, this notice need only be "reasonable" and not extensive. We will do everything within our power to arrange our schedule to be present as per your client's convenience.
USLR neither pursued financing after receiving the time of the essence notices, presented evidence demonstrating that it could not have obtained the requisite financing had it tried to do so with reasonable diligence after getting the notices, nor did it attempt to arrange for a closing.
On April 20, 2005, TDI's attorney wrote again to USLR's attorney declaring that USLR was in default. Apparently, TDI had not yet been served with the complaint for specific performance, which was filed on April 13, 2005.
The trial judge determined that USLR and TDI did not come to an agreement at the January 14, 2005, meeting. We agree substantially for the reasons the judge expressed in her oral opinion of July 6, 2007. The arguments offered by USLR suggesting that this determination was legally incorrect are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). Nevertheless, we add the following comments on that determination.
USLR's argument is unsound for a number of reasons. First, the original agreement between TDI and Salem required that all modifications were to be in writing signed by both parties and the parties never so resolved their differences. Second, although USLR's asserts that there was an agreement to a July 15, 2005, closing date, it does not assert that TDI ever agreed to the other changes contained in the draft amendments it submitted to TDI. Those changes were substantial, including in particular the requirement that TDI complete the remediation before closing, and give up its claim to keep without contingencies the $150,000 deposit. USLR's provides no authority for its right to insist on the outside closing date supposedly agreed on when the other issues were unresolved and material. Moreover, USLR obviously recognized that a writing was required when in both proposed amended agreements it stated that the additional deposit would not be due until after it had received "a fully executed counterpart of this Second Amendment."
The judge properly found that since USLR never entered into an amendment of the contract with TDI, as assignee it was bound by the terms of the original agreement between TDI and Salem. The judge also concluded that as of "January 14th . . . the deal between TDI and Salem had been breached and a default declared." Then the judge ruled that she would grant summary judgment because TDI "had the right to enforce the closing at least as to Salem at that point in time." The judge reached that conclusion without resolving whether TDI had ever effectively made time of the essence as to either Salem or USLR.
Before USLR became involved, TDI had demanded a closing with Salem on a number of occasions, with the last request being for January 7, 2005. But TDI never sent Salem a time of the essence letter, thereby indicating a willingness to delay the closing beyond January 7. And TDI does not argue that the closing date in the original contract was anything but a formal rather than essential requirement. Thus, we see no basis for the ruling that Salem breached the contract before USLR became involved as assignee. See Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 602-05 (App. Div.) (discussing the principles governing time of the essence decisions), certif. denied, 183 N.J. 591 (2005).
The judge also did not rule on the effectiveness of TDI's second time of the essence letter as to USLR under the principles described in Marioni. These are matters that will have to be addressed by the trial judge on the remand.
In relation to those issues, the judge should also consider the effect of the letter of March 31, 2005, sent by TDI's attorney after USLR refused to close on that date. The judge should resolve whether Article 5 of the contract required TDI to give the additional fifteen days, and whether doing so rendered the prior time of the essence notices legally irrelevant. We raised this issue during argument, and have noted it here. However, our opinion should not be read as implying what the answer should be.
On the question of USLR's right to the remedy of specific performance, the judge should consider Stamato v. Agamie, 24 N.J. 309 (1957). In that action for specific performance, Chief Justice Weintraub observed that "a party may not ignore the provisions of his agreement to suit his own convenience or profit." Id. at 316. Describing the doctrine of specific performance in further detail, he observed:
There is no precise formula for determining when equity will grant specific performance to one who fails to meet the time provisions of his contract. The ultimate objective is a just solution upon all of the circumstances. The equitable doctrine was not designed to permit a party to dally or speculate upon price movements.
Rather the general rule is that he who seeks performance of a contract for the conveyance of land must show himself ready, desirous, prompt, and eager to perform the contract on his part. [Ibid. (quotation and citations omitted) (emphasis added).]
Among other things, the judge should determine whether USLR's February 28, 2005, letter insisting on a closing date of July 15, 2005, which was over five months away, demonstrated a complete lack of its desire to perform the contract promptly and eagerly.
The judge should also consider whether USLR's letter of February 28, 2005, was an anticipatory breach of the contract. That doctrine was described in Ross Systems v. Linden DariDelite, Inc., 35 N.J. 329, 340-41 (1961) (internal citations omitted):
An anticipatory breach is a definite and unconditional declaration by a party to an executory contract -- through word or conduct -- that he will not or cannot render the agreed upon performance. If the breach is material, i.e., goes to the essence of the contract, the non-breaching party may treat the contract as terminated and refuse to render continued performance.
Before USLR became involved in this transaction, Salem had indicated its agreement to close shortly after January 7, 2005. Apart from the reasonableness or lack thereof of the time of the essence letters, the judge should consider whether USLR was justified in demanding a further delay of over four months. Or, to put it another way, whether USLR's insistence on that amount of delay was an anticipatory breach of its contractual obligation to close in a reasonable period of time. As with the issue we raised about the possible effect of the March 31, 2005 letter on the last letter making time of the essence, our opinion should not be read as implying an answer. Stated differently, our remand for further proceedings is not designed to suggest the judge had reached the wrong conclusion. Whatever she concludes must be reached for the right reasons.
Therefore, we reverse and remand for further proceedings not inconsistent with this opinion.
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