July 25, 2011
FIRST FIDELITY REALTY, LLC AND DURAPORT REALTY IV, LLC, PLAINTIFFS-APPELLANTS,
CITY OF BAYONNE AND BAYONNE LOCAL REDEVELOPMENT AUTHORITY, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-291-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: June 8, 2011
Before Judges Cuff, Sapp-Peterson and Fasciale.
Plaintiff First Fidelity Realty, LLC (First Fidelity) was the successful bidder at an auction in January 2003 for a parcel of land in the Standard Tank Site (the Site) in Bayonne.
Bidders were informed that the land had environmental constraints and Bayonne offered the land "as is." In January 2009, following remediation of the property and discharge of all liens, First Fidelity filed a complaint alleging Bayonne breached the contract to sell the land and sought specific performance of the contract. Following a trial on a stipulated record, including the record submitted in support of an earlier motion to dismiss, Judge Iglesias held that the closing date in the contract was "of the essence," that First Fidelity refused to accept the tendered quitclaim deed and declined to pay the agreed price. The judge, therefore, dismissed the complaint. We affirm.
On December 18, 2002, the City of Bayonne (the City) passed a resolution authorizing sale by auction of various parcels of land, including the property at issue in this case, block 475, lot 2 (the Property). The Property, along with block 475 lots 3 and 4 and block 359 lot 2, was known as the Site. The Site contained riparian land, "vacant land, an unused building and a pier on the upland portions of the property." At the time the City adopted the resolution, the Site was contaminated and in the course of remediation to allow for commercial and industrial development. The Site encompassed approximately 13.67 acres, six acres of which were developable. The Property comprised 1.13 of those 13.67 acres, had an "irregular" shape, and was "constrained by narrow width, limited frontage and environmental contamination."
The resolution provided that the City intended to sell the Property and other parcels "as is" at an auction on January 28, 2003, and bidding for the Property would start at $136,250. The highest bidder was required to make a 10% deposit and execute an offer to purchase, which would be irrevocable for sixty days. The resolution continued:
c. All bids shall be referred to the Municipal Council for review and approval. The City of Bayonne reserves the right to accept the highest offer or reject any and all bids including the highest bid.
d. Conveyance of title shall be by Quitclaim Deed, subject to the provisions of N.J.S.A. 40A:12-13 and purchasers must be prepared to close title within 90 days from the date of the acceptance of a bid. The City reserves the right to extend this 90 days time frame as necessary. Within 30 days of the City's acceptance of a bid, a successful bidder shall be responsible for providing the City of Bayonne with a last owner and lien search on the property to be purchased. Failure to provide said last owner and lien search within 30 days of the acceptance of the bid may result in the rejection of the bid.
Vincenzo Alessi, owner of First Fidelity and plaintiff Duraport Realty IV, LLC (Duraport), certified that he owned land near the Property and was "well aware that the Property was affected by various liens and encumbrances." Nonetheless, he was interested in purchasing the Property and ordered a title search for it from Chicago Title Insurance Company (Chicago Title).
On December 31, 2002, Chicago Title issued its report showing that the Property was subject to the following encumbrances, which also covered neighboring properties in the Site: (A) a $144,000 federal lien under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C.A. §§ 9601 to 9675, which was acquired in July 1996; (B) two $1 million mortgages held by the New Jersey Redevelopment Authority (NJRA) and created in January and December 2001, respectively; and (C) Internal Revenue Service (IRS) lien.
On January 14 and 23, 2003, the City posted public notice of the December 18, 2002 resolution authorizing the auction. On January 28, 2003, the City held the auction. First Fidelity bid $136,250 on the Property and was the only bidder. It executed an acknowledgement of bid and made a 10% deposit.
First Fidelity was also the highest bidder on two other properties, namely, block 475, lot 1 ($40,500) and block 474.02, lot 4 ($20,000). Duraport was the highest bidder on block 475, lot 7.01 ($168,750). Another company owned by Alessi, 522 Associates, LLC, was the highest bidder on block 190, lot 14 ($15,000). The City accepted these four bids and Alessi submitted the requisite deposits and acknowledgments for the bids.
By resolution dated February 5, 2003, the City accepted First Fidelity's bid on the Property and authorized the sale in accordance with the terms of the December 18, 2002 resolution. With respect to the time of closing, the resolution said:
[I]f a bidder should fail to meet his/her/its obligations with respect to the purchase of a particular property and should fail to perfect the purchase of a particular property within 90 days of the date of this resolution, then the bidder shall forfeit the deposit appurtenant to that property and the property shall be placed up for sale again at the discretion of the Mayor. The aforementioned 90 day time frame may be extended in writing by the Law Department for good cause without the necessity of obtaining Municipal Council approval.
On February 20, 2003, John F. Coffey, II, Acting Law Director for the City, sent Robert V. Priscoe of First Fidelity a copy of the February 5, 2003 resolution, and notified First Fidelity that the City had accepted First Fidelity's bid. Coffey requested that First Fidelity obtain and provide the City a copy of a title search as soon as possible so the City could draft a quitclaim deed.
Shortly thereafter, Alessi and other First Fidelity representatives met with City officials to discuss the encumbrances affecting the Property. The record contains no information providing or suggesting that Alessi or anyone on behalf of First Fidelity posed any objection to the terms of the February 5, 2003 resolution. Alessi certified, "[t]he nature of my discussions and correspondence with Bayonne representatives was to explore the various encumbrances, particularly given that some of the encumbrances, such as the NJRA mortgage liens, extended to other parcels in the [Site]. He provided no additional information on the nature of the discussions.
On March 21, 2003, Victor E. Kinon, attorney for First Fidelity, sent
Coffey a copy of Chicago Title's insurance commitment. On March 25,
2003, Coffey notified Alessi that the City would not pay off liens on
the Property because the City was selling the Property "as is," as set
forth in the offering resolution. On April 2, 2003, Kinon sent Coffey
a copy of Chicago Title's title binder and again asked about the
status of some encumbrances. On April 8, 2003, Alessi and the City
recorded with the Hudson County Register of Deeds a notice of
settlement which stated that the Property was under contract of sale.
On April 15, 2003, Kinon forwarded to Coffey correspondence from the
title company. In a May 1, 2003 letter
to Kinon, Coffey referred to a meeting they recently had and
reiterated that "it would be your client's responsibility to satisfy
or negotiate" release of the encumbrances.
On May 5, 2003 (on or about the date when the ninety-day-closing period was to expire), Coffey sent Kinon for review and comment a proposed affidavit of title and quitclaim deed. Coffey certified that no one on behalf of First Fidelity accepted the deed or tendered the remainder of the purchase price. Whether the parties discussed the deed or a date for closing is not clear from the record. In their brief, defendants say that First Fidelity "never responded" to the quitclaim deed and "did not even communicate with the City again regarding the Property for almost a year."
Meanwhile, in April 2003, the City issued a Redevelopment Study that found the Site qualified as an area in need of redevelopment. On May 1, 2003, the City Planning Board recommended that the City designate the Site as an area in need of redevelopment. It also recommended that the City adopt a redevelopment plan for the Site, except block 475, lot 4.
During the summer, the Law Director for the City and an attorney for First Fidelity spoke about the Property. In their application for specific performance, the First Fidelity representative referred specifically, however, to only one conversation in August 2003 in which First Fidelity made another inquiry about the encumbrances. Alessi certified that he became convinced that the City regretted selling the Site in pieces and decided to pursue sale of the Site in its entirety. Alessi certified he was interested in such a transaction. Alessi provides few, if any, details about this change of plan. In spite of Alessi's beliefs, he and the City closed the sale of block 475, lot 1 on September 17, 2003.*fn1 The closing occurred three months after the City adopted an ordinance accepting the recommendation that the Site be designated an area in need of redevelopment. At the same time, the City adopted a redevelopment plan for the Site.
On April 21, 2004, nearly a year after Coffey had sent Kinon the quitclaim deed, John Libretti, on behalf of First Fidelity, notified Coffey that he had heard that the City had conveyed the Property to the Bayonne Local Redevelopment Authority (BLRA). Kinon certified that Coffey responded that the City had not sold the Property to the BLRA.
In May 2006 the City Council passed a resolution returning Alessi's
deposit for block 475, lot 7.01 and block 190, lot 14. Alessi had
requested a return of the deposits because the City could not convey clear
title to the properties, and the City consented
to the return.
On July 12, 2006, the federal government discharged the CERCLA lien on the property. In August 2006, Alessi and City officials discussed "a new transaction" in which First Fidelity or one of its related companies "would have a right to lease and purchase additional parcels adjacent to the subject Property." Alessi certified that he did not learn that the CERCLA lien and IRS liens had been discharged, and the NJRA liens were pending discharge until late in 2008. Alessi and the City drafted a proposed contract for First Fidelity to purchase the Site, but the parties were unable to reach a final agreement.
In June 2008 the City Council recommended that the Property be sold to the BLRA for redevelopment. The following month the City sold the Property to the BLRA for one dollar.
In the latter part of 2008 the City announced that it would accept bids for the redevelopment of the Site. Alessi objected to the City's actions and said that First Fidelity still wanted to close the sale on the Property. He attended a November 21, 2008 meeting with City officials and reiterated First Fidelity's desire to purchase the Property. In a subsequent letter regarding the meeting, Kinon reminded Coffey that plaintiffs had been informed by the City that it had transferred title for other properties to BLRA, "it had maintained title to the subject property in light of its obligations to" First Fidelity.
On December 2, 2008, Coffey sent First Fidelity a check in the amount of the deposit on the Property, explaining that First Fidelity had refused to accept a quitclaim deed for the Property and to purchase it subject to all existing liens. Coffey explained that the City later sold the Property to the BLRA for redevelopment.
On December 5, 2008, a First Fidelity legal representative notified Coffey that First Fidelity was still interested in purchasing the Property, and he insisted that the City had breached the 2003 contract by conveying the Property to the BLRA. Kinon said First Fidelity was ready to close the sale as soon as possible and required the City to "complete the transaction without further delay."
On January 20, 2009, plaintiffs filed a complaint against defendants alleging primarily that the City had breached its contract to sell real estate to First Fidelity. Plaintiffs also alleged that the City had violated the covenant of good faith and fair dealing implied in the contract and that the City was estopped from refusing to sell the property to plaintiffs on the basis of reasonable reliance. Plaintiffs sought specific performance of the contract, compensatory, punitive and consequential damages, and an award of fees and costs. If the court refused to grant specific performance, then they requested a monetary award based in equity.
Plaintiffs contend that the court erred in granting defendants' motion for summary judgment and dismissing their complaint for specific performance on the grounds that the time for closing was of the essence and plaintiffs failed to close the sale on the required date.
The standard to be applied in a summary judgment case is as follows:
[A] determination whether there exists a "genuine issue" of
material fact that precludes summary judgment requires the motion
judge to consider whether the competent evidential materials
presented, when viewed in the light most favorable to the non-moving
party, are sufficient to permit a rational factfinder to resolve the
alleged disputed issue in favor of the non-moving party. The "judge's
function is not himself [or herself] to weigh the evidence and
determine the truth of the matter but to determine whether there is a
genuine issue for trial." [Anderson v.] Liberty Lobby, Inc., 477 U.S.
242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202, 212 (1986).
Credibility determinations will continue to be made by a jury and not
the judge. If there exists a single, unavoidable resolution of the
alleged disputed issue of fact, that issue should be considered
insufficient to constitute a "genuine" issue of material fact for
purposes of Rule 4:46-2. Liberty Lobby, supra, 477 U.S. at 250,
106 S. Ct. at 2511, 91 L. Ed. 2d at 213.
The import of our holding is that when the evidence "is so one-sided that one party must prevail as a matter of law," Liberty Lobby, supra, 477 U.S. at 252, 106 S. Ct. at 2512, 91 L. Ed. 2d at 214, the trial court should not hesitate to grant summary judgment. [Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).]
In reviewing a trial court's summary judgment decision, an appellate court applies the same standard that the trial court applied. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 446 (2007).
To establish a claim for specific performance, a plaintiff must first show that the parties entered a contract, that the contract in question is valid and enforceable at law, Jackson v. Manasquan Sav. Bank, 271 N.J. Super. 136, 144 n.8 (Law Div. 1993); 25 Williston, Contracts (Lord ed., 2002), § 67:2 at 186, that the terms of the contract are "expressed in such fashion that the court can determine, with reasonable certainty, the duties of each party and the conditions under which performance is due," Salvatore v. Trace, 109 N.J. Super. 83, 90 (App. Div. 1969), aff'd o.b., 55 N.J. 362, 262 A.2d 385 (1970); accord Barry M. Dechtman, Inc. v. Sidpaul Corp., 89 N.J. 547, 552, 446 A.2d 518 (1982), and that an order compelling performance of the contract will not be "harsh or oppressive," Stehr v. Sawyer, 40 N.J. 352, 357 (1963); Ridge Chevrolet-Oldsmobile, Inc. v. Scarano, 238 N.J. Super. 149, 155 (App. Div. 1990).
[Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 598-99 (App. Div.) (footnotes omitted), certif. denied, 183 N.J. 591 (2005).]
Thus, even if the parties had an enforceable contract, the remedy of specific performance is not automatic. Id. at 599. The decision to grant specific performance is a discretionary one based on principles of equity. Ibid.
[A]s a consequence of the remedy's equitable underpinnings, the party seeking specific performance "must stand in conscientious relation to his adversary; his conduct in the matter must have been fair, just and equitable, not sharp or aiming at unfair advantage." Stehr, supra, 40 N.J. at 357.
This weighing of equitable considerations must represent, in each case, a conscious attempt on the part of the court of equity to render complete justice to both parties regarding their contractual relationship.
In short, a court of equity will often direct performance of such a contract because, when there is no excuse for the failure to perform, equity regards and treats as done what, in good conscience, ought to be done. Goodell v. Monroe, 87 N.J. Eq. 328, 335 (E. & A. 1917). [Marioni, supra, 374 N.J. Super. at 600-01.]
In this case, the court found that the parties had entered a sales contract for the Property when the City accepted First Fidelity's bid at the auction. That acceptance and First Fidelity's deposit, coupled with the December 18, 2002 resolution publicly announcing an auction and requesting bids, amounted to a contract. Buckley v. Mayor & Aldermen of Jersey City, 105 N.J. Eq. 470, 479 (Ch.), aff'd, 107 N.J. Eq. 137 (E. & A. 1930); see also McCurrie v. Town of Kearny, 344 N.J. Super. 470, 480 (App. Div. 2001) (citing Buckley, supra, 105 N.J. Eq. at 479, with approval), rev'd in part, 174 N.J. 523 (2002). Making the bid and tendering the deposit amounted to acceptance of the City's offer.
Judge Iglesias found that First Fidelity was not entitled to specific performance, however, because the February 5, 2003 resolution established that time for closing was of the essence, and plaintiffs failed to close within ninety days of the resolution. The December 18, 2002 resolution notified potential bidders that the City expected to close the sale within ninety days, and the February 5, 2003 resolution solidified that requirement by providing that if the bidder "fail[ed] to perfect the purchase of a particular property within 90 days of the date of this resolution" the bidder would forfeit the deposit and the property could be placed on the market at the mayor's discretion.
The judge referred to Paradiso v. Mazejy, 3 N.J. 110 (1949). In Paradiso, the Supreme Court held that when "time is not of the essence of the original contract, it can be made so by later notice," so long as the date of closing is reasonable. Id. at 115. In this case, the ninety-day period in the February 5, 2003 resolution was reasonable and consistent with the December 18, 2002 resolution.
Alternatively, Judge Iglesias held that plaintiffs were not entitled to specific performance because the result would be harsh and oppressive. After the City provided First Fidelity with a quitclaim deed for the Property, First Fidelity "took no steps to perfect the sale . . . ." It requested information on the liens that encumbered the Property and failed to provide the purchase price. This showed "an unwillingness to close within the ninety [day] time of the essence period . . . ." Years later, after the property had been remediated and transferred to the BLRA for redevelopment, First Fidelity attempted to revive the sale by filing this suit in 2009. To require the City to transfer the Property to First Fidelity after all that time and after First Fidelity had refused to accept the quitclaim deed in accordance with the contract would be unjust.
On appeal, plaintiffs first argue that the February 5, 2003 resolution was not part of the parties' contract. It argues that the parties had formed the contract when the City accepted First Fidelity's bid at the auction. Thus, they reason the only terms of the contract were those stated in the December 18, 2002 resolution. That resolution merely required bidders to "be prepared" to close within ninety days.
We disagree. The December 18, 2002 resolution announced the City's offer to accept bids at public auction and provided that "[a]ll bids shall be referred to the Municipal Council for review and approval." Here the offering resolution required a formal bid approval to create a contract. It was not until the Council accepted the bid that the parties had an enforceable contract. That acceptance was formalized in the February 5, 2003 resolution. Indeed, it was the final action that created the contract.
Plaintiffs complain that the February 5, 2003 resolution materially changed the terms of the agreement by requiring the purchaser to "perfect" the sale within ninety days or else forfeit the deposit. The ninety-day requirement was not a new term; it was included in the offering resolution. The change of wording to require the bidder to "perfect" the sale was a material change. Although the forfeiture-of-deposit term was a new term, the issue is moot because the City ultimately returned First Fidelity's deposit.
Plaintiffs also contend that the court erred in finding that the February 5, 2003 resolution made time of the essence. Alternatively, they argue that even if defendants made time of the essence, the City later waived that requirement by their actions.
Ultimately, we need not determine whether time was of the essence in this matter. What is clear from the record is that plaintiffs submitted bids with the knowledge that the City was selling the Property "as is." They also knew in January 2003 of several encumbrances and environmental constraints. When the quitclaim deed was tendered, they did not close. Between the time the bid was accepted and tender of the deed, plaintiffs sought a better deal regarding the encumbrances. After years of inactivity, plaintiffs' interest in the Property was renewed at the same time the public learned that the encumbrances had been or were about to be discharged. In other words, when the Property no longer carried multiple burdens, plaintiffs sought to enforce a contract entered years earlier under different circumstances.
Specific performance is an equitable remedy. The party seeking specific performance must deal fairly with the other party. Marioni, supra, 374 N.J. Super. at 600. Its actions to discharge its contractual obligations must reflect a knowledge of the respect for the terms of the agreement. This record does not permit resort to this equitable remedy. In the end, plaintiffs seek to enforce a contract for the sale of land years after entry and after the conditions and the value of the Property have changed materially. Resort to this remedy at this time and under these circumstances is not consonant with equity.
Plaintiffs also contend that the court failed to address its claim that defendants breached the covenant of good faith and fair dealing implied in the contract. Plaintiffs are correct that the court issued no decision on this claim. A remand is not required because the claim is unsupported by evidence and is baseless.
"Every party to a contract . . . is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract." Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). The covenant of good faith and fair dealing calls for parties to a contract to refrain from doing "anything which will have the effect of destroying or injuring the right of the other party to receive" the benefits of the contract. Palisades Props., Inc. v. Brunetti, 44 N.J. 117, 130 (1965) (internal quotations omitted); see also Wade v. Kessler Institute, 172 N.J. 327, 340 (2002) (same).
Proof of "bad motive or intention" is vital to an action for breach of the covenant. Wilson [v. Amerada Hess Corp.], supra, 168 N.J.  at 251 . The party claiming a breach of the covenant of good faith and fair dealing "must provide evidence sufficient to support a conclusion that the party alleged to have acted in bad faith has engaged in some conduct that denied the benefit of the bargain originally intended by the parties." Williston [on Contracts], supra, § 63:22, at 513-14 [(Lord ed. 2002)] (footnotes omitted); see also Wilson, supra, 168 N.J. at 251. [Id. at 224-25.]
The City performed as it was required to perform under the contract. Ninety days after the contract was formed the City delivered a quitclaim deed to First Fidelity. The contract did not require the City to do anything else. Plaintiffs complain that the City failed to disclose its intention to not close on the sale during discussions on a possible global purchase, but by then the contract had lapsed.
Plaintiffs claim that the court ignored their claim for equitable estoppel on the basis of reasonable reliance. Like the prior claim, the court dismissed this claim without providing a rationale. A remand is not necessary because it, too, is unsupported by the evidence and lacks merit.
"Estoppel is an equitable doctrine, founded in the fundamental duty of fair dealing imposed by law." Casamasino v. City of Jersey City, 158 N.J. 333, 354 (1999). The doctrine 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. Mattia v. Northern Ins. Co. of New York, 35 N.J. Super. 503, 510, (App. Div. 1955). The doctrine is invoked in "the interests of justice, morality and common fairness." Palatine I v. Planning Bd., 133 N.J. 546, 560 (1993) (quoting Gruber v. Mayor of Raritan Township, 39 N.J. 1, 13 (1962)). . . . [T]o establish equitable estoppel, plaintiffs must show that defendant engaged in conduct, either intentionally or under circumstances that induced reliance, and that plaintiffs acted or changed their position to their detriment. Miller v. Miller, 97 N.J. 154, 163 (1984). [Knorr v. Smeal, 178 N.J. 169, 178 (2003).] "Equitable estoppel is rarely invoked against a governmental entity, Cipriano v. Department of Civil Service, 151 N.J. Super. 86, 91 (App. Div. 1977), particularly when estoppel would 'interfere with essential governmental functions.'" O'Malley v. Dep't of Energy, 109 N.J. 309, 316 (1987) (quoting Vogt v. Borough of Belmar, 14 N.J. 195, 205 (1954)). "Equitable principles of estoppel may be applied against a municipality 'where the interests of justice, morality and common fairness clearly dictate that course.'" Ranchlands, Inc. v. Twp. of Stafford, 305 N.J. Super. 528, 538 (App. Div. 1997) (quoting Gruber v. Mayor & Twp. Comm. of Raritan Twp., 39 N.J. 1, 13 (1962)), aff'd, 156 N.J. 443 (1998).
Plaintiffs claim that equitable estoppel is appropriate in this case because the City knew that First Fidelity was at all times ready, willing and able to close the deal, but extended the closing date through its conduct, then refused to close and conveyed the Property to the BLRA after the City realized that the Standard Tank Site was more valuable if owned by one entity or person. In anticipation of the sale, plaintiffs say that First Fidelity made improvements to its lots that neighbored the Property.
The record fails to show that any reliance by plaintiffs on the City's selling the Property to First Fidelity was reasonable. The deal ended because First Fidelity did not accept a quitclaim deed. Nothing in the record suggests that the City gave any indication that it would sell the Property to First Fidelity free of all encumbrances. Alessi never certified to that, nor did he say that the City told him that the sale would go forward. Thus, plaintiffs have not shown that their alleged reliance was reasonable or that equity requires the City to sell the Property to First Fidelity.
Plaintiffs claim that even if they are not entitled to specific performance of the contract, they are entitled to some equitable remedy. This argument is without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).