On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-1234-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Graves and Messano.
Following a non-jury trial, final judgment was entered in favor of plaintiffs, Corner Property Investments, LLC (CPI) and Anthony Nardone, against defendants Susan Winderman and Zalika Mitchell, in the total amount of $30,939.18 -- $30,617.28 in compensatory damages and $321.90 in costs. Defendants now appeal, essentially contending that the contract between the parties contained an unambiguous liquidated damages provision limiting plaintiffs' recovery to $5000. We have considered the arguments raised on appeal in light of the record and applicable legal standards. We reverse.
Nardone, CPI's sole member, was the only witness produced at trial by either side. Nardone "was in the business of buying and turning over houses" and had been involved in "[w]ell over a hundred" closings. On April 5, 2008, on behalf of CPI, Nardone entered into a real estate purchase agreement with Shirley Ridley for the sale of her home in Roselle (the sales contract). The purchase price was $131,000.
Pursuant to the terms of the sales contract, CPI tendered no deposit and had thirty days to obtain a mortgage for the full purchase price. The estimated date of closing was July 19. Ridley was not represented by counsel, and CPI "agree[d] to pay [her] attorney['s] fee[s] up to $250."
On May 13, CPI entered into an "Assignment of Contract of Sale," drafted by its attorney, in which it "assign[ed] its rights and interest in the [sales contract]" to defendants (the Assignment).*fn1 Defendants were not represented by an attorney.
The Assignment required defendants to pay $34,000 to CPI "at closing of [the] transaction between [defendants] and [Ridley]" "on July 19, 2008 but not before." Defendants were required to deposit $5000 with CPI's attorney by 5:00 p.m. of the day after execution of the Assignment. Defendants' "total purchase price" was $165,000. The Assignment provided that defendants could not further assign "[t]he [A]ssignment and/or [the sales contract] . . . without the consent of [CPI]."
The Assignment utilized the term "liquidated damages" twice. The following appeared in bold letters on page one:
Both parties mutually agree that this Assignment . . . is fully contingent upon [defendants] providing [CPI] with proof that [they] ha[ve] the cash readily available to perform this contract and/or should financing be required, proof of a FULLY approved loan (loan commitment). Such proof shall be provided no later than 5:00 p.m. on the NEXT business day after signing this agreement and the proof shall be written documentation indicating that the funds are or will be available at least 48 hours prior to the closing date stated herein. If [defendants] do not provide the required proof to [CPI] by such time or if the proof provided is not acceptable to [CPI], then this Assignment . . . shall be NULL and VOID and [CPI] is entitled to keep the full amount of the non-refundable assignment fee as liquidated damages.
The "non-refundable assignment fee" was never defined. Paragraph 11 of the Assignment provided:
In the event that [defendants] fail to close this transaction or [are] in default of the agreement, [CPI] shall have the right to terminate this assignment of contract and declare [defendants] in default, wherein, [CPI] shall [(a)] retain the sum of $5000.00 as liquidated damages and (b) all right, title, and interest pursuant to [the sales contract] shall automatically revert to [CPI] without notice.
CPI also retain[ed] the right to renegotiate the price on [the sales contract] with [Ridley] at any time up to the closing date. At closing, the newly reduced price w[ould] be reflected on [the] settlement statement. [CPI's] assignment fee [would] be increased by the amount of the price reduction. [Defendants'] total purchase price would remain the same.
Defendants apparently immediately assigned their rights to a third party, Cherie McPherson, who in turn assigned her rights to Donald Cila.*fn2 On May 15, Cila tendered a check for $5000 to CPI. Cila also showed Nardone a "HUD statement" involving another transaction as proof that he would have the requisite funds by closing.
On July 29, CPI's attorney wrote Cila's attorney noting that the original closing date -- July 19 -- was extended to July 24 at the request of Cila and "other principals involved." Further noting that the closing had not been rescheduled, CPI's counsel "advised that if this matter d[id] not close within the next two days, CPI intend[ed] to take the steps it deem[ed] appropriate to protect its interests, which may include the issuance of a time of the essence notice to [defendants]."
When the closing did not occur, on July 31, 2008, CPI's counsel served defendants with a "time of the essence" letter setting a closing date of August 11, 2008, at 2:00 p.m. The letter further advised that failure to close would be a breach of the Assignment and CPI would "hold [defendants] liable for any and all damages sustained as a result of [their] failure to perform." Cila's counsel was copied.
The closing did not occur. Ridley never served CPI with any time of the essence notice, nor did she ever notify CPI that it was in breach of the sales contract. Nardone testified Ridley asked him constantly when the closing would occur and, when the sale to Cila foundered, Ridley told Nardone that she would "hold [him] responsible for damages." On September 4, 2008, CPI closed on the property with Ridley and marketed the property "immediately on closing."
On September 25, 2008, CPI entered into another contract to sell the property to Francisco Valdez for $168,000. That transaction closed on November 11. Nardone testified that CPI incurred costs of approximately $15,409.02 to purchase and maintain the property from September to the Valdez closing. Combined with "fees and brokers" commissions paid at closing, CPI netted a profit of $3,382.72.*fn3 CPI claimed it was entitled to compensatory damages ...