February 3, 2009
MICHAEL J. PAZZANI AND CHRISTINE PAZZANI, HUSBAND AND WIFE, PLAINTIFFS-RESPONDENTS/ CROSS-APPELLANTS,
SPRING STREET DEVELOPMENT URBAN RENEWAL, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY AND MADIHA BORAIE T/A BORAIE REALTY, DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-7662-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 19, 2008
Before Judges Lihotz and Messano.
Defendants Spring Street Development Urban Renewal, LLC, (Spring Street) and Madiha Boraie*fn1 appeal from summary judgment granted to plaintiffs Michael and Christine Pazzani and dismissal of defendants' counterclaim for breach of contract and the implied covenant of good faith and fair dealing in connection with a contract to purchase residential real estate. Following our review of the record, the arguments advanced by the parties and the applicable law, we reverse, as there are material facts in dispute such that entry of summary judgment was inapposite.
Because the case comes to us by virtue of a summary judgment, we recite the facts applying the Brill*fn2 standard, in the light most favorable to plaintiff. On September 26, 2005, the parties executed a Subscription and Purchase Agreement ("the Agreement") for plaintiffs' purchase of a condominium (the Unit) located at 1 Spring Street, Unit 2502, New Brunswick, New Jersey. The Unit was part of a proposed twenty-five story, multi-use building, which included 121 residential units, non- residential office and retail space, a parking garage, and common elements including a swimming pool, fitness room, and a sun deck. The Unit's purchase price was $1,260,000, and plaintiffs deposited $126,000 with defendants.
The stated "Estimated Completion Date" (ECD) for construction was March 1, 2006. Paragraph 8 of the Agreement discussed the time and place for the closing of title as follows:
Seller estimates that the construction of the . . . Unit will be completed by the [ECD] . . . . TITLE MAY CLOSE LATER THAN THE ESTIMATED COMPLETION DATE.
Seller shall complete the . . . Unit and settlement shall occur, within twenty-four (24) months after the date Buyer signs this Agreement.
Additionally, Paragraph 10, entitled "SELLER'S DELAY" added this provision for a postponement period:
If the Seller is not able to fulfill its obligations under this Agreement for reasons beyond its control, the Seller may postpone the closing for up to one hundred eighty (180) calendar days from the Estimated Completion Date by notifying the Buyer in writing that the closing has been postponed. If, after this period has expired, the Seller is still unable to perform its obligations for reasons beyond its control, the Buyer may terminate this Agreement by so notifying the Seller in writing. If this Agreement is so terminated by the Buyer, the Seller will return to the Buyer all deposit monies paid under this Agreement, without interest, within ten (10) business days.
On November 10, 2005, following commencement of construction on the Unit, plaintiffs executed an "Amendment to the Contract" adding various upgrades to their proposed Unit. In a May 2006 letter, defendants advised plaintiffs closing for the Unit would be between June 15 and July 15, 2006. In June 2006, plaintiffs requested modifications to the floor plan, including elimination of a bedroom wall to expand the size of the living room; extension of the kitchen's granite countertop; installation of pendant lighting over the extended countertop, a Jacuzzi-style bathtub, a pocket door, and recessed lighting in the living room. Defendants advised plaintiffs these modifications would not be performed until a Temporary Certificate of Occupancy (TCO) inspection of the Unit was issued by the City of New Brunswick (City).
In late July, plaintiffs received a second letter, rescheduling closing for August 25, 2006. An August 7, 2006 letter provided an amended "Unit Modification Rider" (Rider), specifying the floor plan changes and correcting the proposed cost. Plaintiffs executed the Rider. Defendants thereafter sent a second Rider dated August 9, 2006, amending the ECD to September 1, 2006. Plaintiffs did not sign this Rider. On August 16, 2006, on behalf of Spring Street, a sale's associate, Rachel Weisfelner, telephoned plaintiff Michael Pazzani to discuss rescheduling closing because too many units had been scheduled to close on August 25, 2006. He was ambivalent about the adjustment and did not object to her suggestion to set closing for September 1, 2006. In her August 17, 2006 confirming correspondence to plaintiffs, Weisfelner reiterated the September 1 closing date, as agreed upon in the prior telephone conversation. The letter stated: "I understand that this date and time is [sic] acceptable to you and, going forward, this will be the date of closing under the Subscription and Purchase Agreement that you and the seller signed. If you have any questions please feel free to contact me . . . ." Plaintiffs neither called nor responded to the letter.
Final TCO inspections were completed by the City on August 22, 2006, and the Unit was approved. Defendants requested the TCO certificate on August 30, 2006 in preparation for the September 1, 2006 closing. Plaintiffs completed walk-throughs of the Unit on August 24, 26, and 28. Spring Street was in the process of completing plaintiffs' post-TCO requested design modifications, which were completed on August 30, 2006.
On August 29, plaintiffs' counsel issued notice to terminate the Agreement, invoking the provision of Paragraph 10, and demanded return of their deposit within ten days. Plaintiffs did not appear for closing on September 1.
Defendants' counsel sent a Notice of Default letter, rescheduling closing for September 15 and declaring "time is hereby made of the essence." Plaintiffs did not close.
On September 22, 2006, plaintiffs filed their Law Division complaint seeking return of their deposit for purchase. Defendants filed a counterclaim, alleging breach of contract and the implied covenant of good faith and fair dealing. Plaintiffs submitted a motion for summary judgment. The motion judge granted the application and entered a $133,179.80 judgment against defendants and dismissed defendants' counterclaim. Defendants argue the judge erred in this determination.*fn3
Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to judgment or order as a matter of law." R. 4:46-2(c). In deciding a summary judgment motion, the trial court's "'function is not . . . to weigh the evidence and determine the truth . . . but to determine whether there is a genuine issue [of fact] for trial.'" Brill, supra, 142 N.J. at 540 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed. 2d. 202, 212 (1986)). A "genuine" issue of fact means only if, "'considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom, could sustain a judgment in favor of the non-moving party.'" Id. at 538.
In our de novo review, we apply the same standard used by the trial court in deciding whether a grant or denial of summary judgment was proper. Liberty Surplus Ins. Corp. v. Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Turner v. Wong, 363 N.J. Super. 186, 198-99 (App. Div. 2003); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.) (citing Antheunisse v. Tiffany & Co., Inc., 229 N.J. Super. 399, 402 (App. Div. 1988)), certif. denied, 154 N.J. 608 (1998). We consider the correctness of the motion judge's decision based on the evidential material submitted with the motion. Bilotti v. Accurate Forming Corp., 39 N.J. 184, 188 (1963). Thus, a movant must show there is no "genuine issue" of material fact "and not simply one 'of an insubstantial nature'; a non-movant will be unsuccessful 'merely by pointing to any fact in dispute.'" Boylan, supra, 307 N.J. Super. at 167 (quoting Brill, supra, 142 N.J. at 529-30). If there is no genuine issue of fact, we must then decide whether the lower court's ruling on the law was correct.
"A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). Therefore, we review the trial court's legal conclusions "de novo." Ibid.
In this matter, the trial judge concluded the question presented was "whether or not as a matter of law the [plaintiffs] effectively and appropriately exercised their right of termination." Because the Agreement required all changes to be in writing, signed by both parties, defendants' failure to obtain a written amendment setting the closing date for September 1, 2008 required closing by August 28, 2006. Finding title was not delivered by that date, the court concluded defendants breached the Agreement. We reject such rigid reasoning.
As a matter of basic contract law, if "'during the course of performance one party fails to perform essential obligations under the contract, he may be considered to have committed a material breach and the other party may elect to terminate it.'" Ingrassia Const. Co. v. Vernon Twp. Bd. of Educ., 345 N.J. Super. 130, 136-137 (App. Div. 2001) (quoting Medivox Prod., Inc. v. Hoffmann-LaRoche, Inc., 107 N.J. Super. 47, 58-59 (Law Div. 1969)). However, whether conduct constitutes a breach of contract and, if it does, whether the breach is material remain questions for the ultimate factfinder. Magnet Res., Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 286 (App. Div. 1998). "Materiality" speaks to the essence of a contract. General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 315 (3d Cir. 2001). A breach is material only "if it 'will deprive the injured party of the benefit that is justifiably expected' under the contract." Ibid. (quoting Allan Farnsworth, Farnsworth on Contracts § 8.16, at 497 (2d ed. 1998)). "The standard of materiality applies to contracts of all types and without regard to whether the whole performance of either party is to be rendered at one time or part performances are to be rendered at different times." Restatement (Second) of Contracts § 241, comment a (1981).
The Restatement provides the following criteria to examine when considering whether a material breach has occurred:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
The factual determination of the materiality of an alleged breach cannot be ignored. Here, whether Spring Street was "unable to perform its obligations," which was a precondition to plaintiffs' exercise of the right to terminate under paragraph 10, speaks to the issue of the materiality of the asserted breach. There is no evidence plaintiffs expressed objection to waiting four additional days to close. They viewed the premises on August 24, 26, and 28, without a hint of an objection to closing thereafter. Moreover, plaintiffs presented no evidence of any harm suffered. Some delay resulted from plaintiffs' requested material modifications, necessitating completion prior to effectuating the transfer of title.
Plaintiffs' reliance on Coastal Group v. Planned Real Estate Dev. Section, 267 N.J. Super. 49 (App. Div. 1993), is misplaced. In Coastal Group, at the expiration of the 120-day grace period, "the seller was not ready to close and no certificates of occupancy had issued." Id. at 60. These facts are not presented in this matter. The Unit received TCO approval on August 22, prior to the termination of the grace period, suggesting closing could have been scheduled by August 28, 2006, had plaintiffs insisted.
Another material factual dispute arises over whether plaintiffs, by their silence, waived the formality of a written modification or acquiesced to schedule closing on September 1. Marsden v. Encompass Ins. Co., 374 N.J. Super. 241, 249 (App. Div.), certif. denied, 183 N.J. 259 (2005); Fairken Ass'n v. Curtis Hutchin, 223 N.J. Super. 274, 280 (Law Div. 1987). The equitable doctrine of estoppel "is designed to prevent injustice by not permitting a party to repudiate a course of action on which another party has relied to his detriment." Marsden, supra, 374 N.J. Super. at 249 (citing Mattia v. Northern Ins. Co. of N.Y., 35 N.J. Super. 503, 510 (App. Div. 1955)).
Plaintiffs' conduct induced reliance and caused defendants to act to their detriment. Plaintiffs neither voiced any opposition to a September 1 closing during their phone conversation with defendants' sale's associate, nor did they express discontent during their August 24, 26, and 28 walk-throughs.
Based upon our determination, we decline to review defendants' remaining arguments suggesting plaintiffs never made time of the essence. See Coastal Group, supra, 267 N.J. Super. at 60 (buyer's right to terminate purchase agreement after the end of the extension periods does not require prior time of the essence notice). Accordingly, we reverse the trial court's grant of summary judgment and dismissal of defendants' counterclaim. Trial on the issues presented in plaintiffs' complaint and defendants' counterclaim shall be scheduled.