March 19, 2010
N.J. BERGEN DEVELOPMENT CO., LLC, PLAINTIFF-APPELLANT,
MARTIN FLEISHER & FELICIA FLEISHER, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Chancery Division, Morris County, Docket No. C-140-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 23, 2010
Before Judges Wefing and Grall.
Plaintiff N.J. Bergen Development Co., LLC (NJBD) and defendants Martin and Felicia Fleisher contracted for the purchase and sale of undeveloped real estate in Morristown known as 68-74 Ridgedale Avenue.*fn1 NJBD appeals from a final judgment entered after a bench trial on its complaint seeking a judgment declaring its time for performance under the agreement and an extension of the period. Although the trial court found that NJBD had a right to a six-month extension under the terms of the contract upon payment of a $20,000 fee, the court denied NJBD's request to delay the commencement of the six-month period. We affirm, substantially for the reasons stated by the trial court in its oral decision of June 5, 2009.*fn2
These are the pertinent facts. The contract was executed on January 30, 2006. It provides for a sale of the property for a purchase price of $1,300,000, which is subject to a $30,000 bonus to seller "for each residential unit in excess of twenty-one (21) units for which [NJBD] has obtained Development Approvals." The term "Development Approvals" is defined to mean: "an Approved Site Plan, submission of an application for a foundation and footing permit and issuance of a foundation and footing permit by the appropriate municipal authority." The definition further specifies that "the application for the foundation and footing permit must be submitted within thirty (30) days of receipt of Approved Site Plan." The contract defines the term "Approved Site Plan" to mean approval for not less than twenty-one, three-story residential units, and it provides for closing to take place forty-five days after the Development Approvals are obtained.
The contract period for obtaining the requisite Development Approvals is not unlimited. When the contract was signed, Mrs. Fleisher had a petition pending before the bankruptcy court. Pursuant to paragraph 4.1 of the contract, a sixty-day "Feasibility Study Period" was to commence "from issuance" of an order of the bankruptcy court approving the terms of this sale. The contract provides for a twelve-month "Approval Period," commencing upon expiration of the Feasibility Study Period. The contract also permits a six-month extension of that Approval Period upon request of NJBD, with consent of defendants, not to be unreasonably withheld, and upon payment of $20,000 in addition to the purchase price.
The contract provides for tolling of the Approval Period. Paragraph 4.2 explains: "If decision with respect to a Final Approval [equated with "Development Approvals"] is pending or any appeal from a Final Approval is taken, the time periods set forth in this Agreement shall be tolled until the decision is made or the appeal is decided, and no further appeal from the Final [A]pproval is taken."
A dispute arose about the date on which NJBD's time to obtain approvals commenced. The relevant order of the bankruptcy court was issued on April 18, 2006, but it was not delivered to NJBD until June 9, 2006. In subsequent correspondence, the attorneys for NJBD and defendants took different positions on the start date of the Feasibility Study Period. Defendants' attorney was of the view that the sixty-day Feasibility Study Period ran from the issuance of the order and that the subsequent one-year Approval Period would expire on June 28, 2007. NJBD's position was that the Feasibility Study Period commenced on June 9, 2006 and the Approval Period started sixty days later, on August 9, 2006, and ended one year after that, on August 9, 2007.
On June 22, 2007, defendants' attorney gave NJBD notice that the Approval Period would end on June 28, 2007, and plaintiff's attorney responded by restating his view of the end date. Plaintiff took action to obtain the approvals by submitting an application for development to the Morristown Planning Board on June 27, 2007. On July 3, 2007, defendants served NJBD with notice of default. On August 1, 2007, NJBD offered to place $20,000 in escrow pending resolution of a declaratory judgment action it intended to file. On September 10, 2007, defendants directed NJBD not to proceed with its application for development. NJBD's application for development was deemed incomplete on August 22, 2007.
On October 4, 2007, NJBD commenced this litigation asserting that defendants' notice of default was improper and that the filing of NJBD's application for development tolled the Approval Period. In their answer and counterclaim, defendants alleged that NJBD was in default.
On December 8, 2008, Mr. Fleisher filed a petition for bankruptcy. According to NJBD, Mr. Fleisher asked the bankruptcy court to reject the contract. Due to the bankruptcy filing, this case was delayed until the automatic stay was lifted. Thus, trial was not held until May 2009.
The trial court, agreeing with NJBD's interpretation of the contract, concluded that NJBD's time to obtain the Development Approvals did not expire until August 9, 2007. The court rejected NJBD's interpretation of the tolling provision, however. In the court's view, the contract language providing for tolling while a decision is pending could not reasonably be understood to cover the time after the filing of an incomplete application. The court further found that both parties had contributed to the delay - defendants by failing to promptly serve the initial order of the bankruptcy court, and NJBD by not taking prompt action to file an application for development with the planning board. Focusing on the present circumstances of the parties, the terms of the contract, the potential for NJBD to forfeit what it had invested to date and defendants' need to bring the transaction to a close, the court concluded that NJBD had properly requested an extension in accordance with the contract and that defendants had no ground to withhold consent upon payment of $20,000 required by the contract. Although NJBD asked the court to delay the start of the extension period until the bankruptcy court ruled on Mr. Fleisher's petition, the trial court concluded that there was no basis or reason for permitting further delay.
On appeal NJBD argues:
I. THE TRIAL COURT ERRED AS A MATTER OF LAW IN PROVIDING IN THE FINAL JUDGMENT THAT THE TIME TO OBTAIN DEVELOPMENT APPROVALS WOULD RUN FROM THE DATE OF FINAL JUDGMENT RATHER THAN FROM THE DATE THAT A FINAL, NON-APPEALABLE ORDER OF DISMISSAL WAS ENTERED IN THE BANKRUPTCY CASE FILED BY MARTIN FLEISHER ON NOVEMBER 25, 2008 AS THE PENDENCY OF THAT BANKRUPTCY ACTION WAS IN DIRECT CONTRAVENTION OF THE DEFENDANTS EXPRESS CONTRACTUAL OBLIGATIONS, CONSTITUTED A VIOLATION OF GOOD FAITH AND FAIR DEALING, AND CREATED A CLOUD ON PLAINTIFF'S CONTRACTUAL RIGHTS WHICH NEEDED TO BE RESOLVED BEFORE THE PLAINTIFF SHOULD EXPEND FURTHER TIME, MONEY AND EFFORT TO OBTAIN THE DEVELOPMENT APPROVALS.
II. THE TRIAL COURT ERRED AS A MATTER OF LAW IN DECIDING THAT THE FILING OF THE LAND USE APPLICATION BY THE PLAINTIFF DID NOT TOLL THE APPROVAL PERIOD PER THE CONTRACT AS IT WAS THE INTENT OF THE PARTIES TO TOLL THE APPROVAL PERIOD ONCE THE LAND USE APPLICATION WAS FILED.
III. THE TRIAL COURT ERRED IN REFUSING TO ALLOW THE PLAINTIFF TO APPLY TO THE TRIAL COURT FOR AN EXTENSION OF THE SIX MONTH PERIOD ON SUCH TERMS AS ARE EQUITABLE AND JUST IF THE APPLICATION OF THE PLAINTIFF HAS BEEN DEEMED COMPLETE, IF THE PLAINTIFF HAS PROVIDED STATUTORY NOTICE TO PROPERTY OWNERS, AND IF THE APPROPRIATE BOARD HAS SCHEDULED A HEARING ON THE COMPLETED APPLICATION BUT THE BOARD HAS EITHER NOT HELD THE HEARING OR HAS NOT COMPLETED SAID HEARING WITHIN THE SIX MONTH PERIOD DUE TO NO FAULT OF THE PLAINTIFF.
After review of the record in light of the arguments presented, we are convinced that no discussion beyond the brief comments that follow is warranted. R. 2:11-3(e)(1)(E). The trial court's factual findings are adequately supported by the evidence. R. 2:11-3(e)(1)(A). Moreover, in construing the contract, the trial court has given its provisions a rational meaning in keeping with the purpose of the parties and their respective obligations to deal with one another fairly and in good faith. Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005) (discussing the implied covenant of good faith and fair dealing); Cruz-Mendez v. ISU/Insurance Servs., 156 N.J. 556, 570-71 (1999) (discussing principles governing interpretation of contracts).
We find no support for NJBD's claim that the terms of the contract or the implied covenant of good faith and fair dealing give it a right to delay its performance based upon what NJBD perceives to be a bad faith effort on defendants' part to avoid the contract. The contract provides alternate remedies for NJBD if it "fulfills its obligations" under the contract, "but Seller defaults." Those remedies do not include the relief NJBD seeks.