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Mill Race Village, Ltd v. Main & Glen Associates

April 25, 2012


On appeal from the Superior Court of New Jersey, Chancery Division, Sussex County, Docket No. C-25-05.

Per curiam.


Argued November 15, 2011 -

Before Judges Yannotti, Espinosa and Kennedy.

Plaintiff Mill Race Village, Ltd. (Mill Race) appeals from a final judgment entered against it on April 9, 2010, following a bench trial, dismissing its complaint and awarding $2.7 million in compensatory damages and counsel fees and costs of $652,577.79 to defendant Main & Glen Associates, L.L.C. (Main & Glen) on its counterclaim for breach of contract. Main & Glen cross-appeals from the trial court's denial of prejudgment interest and additional counsel fees.

We affirm on the appeal and the cross-appeal.


This case arises from a real estate contract in which Mill Race agreed to sell to Main & Glen 13.64 acres of land in the Township of Sparta (Township). The property is largely unimproved and Mill Race has owned the property since at least 1987. One of the principals of Mill Race is Bernard Langan (Bernard),*fn1 who is vested with authority to enter into contracts on behalf of Mill Race. In the summer of 2003, Mill Race offered to sell its property for $1.62 million to any developer who would agree to construct fifty-four townhouse units on the property pursuant to an agreement between Mill Race and the Township which would have satisfied the Township's low and middle income housing obligations under laws pertaining to the New Jersey Council On Affordable Housing (COAH). The COAH agreement would expire on March 31, 2004, unless the developer filed an appropriate development application with the Township's planning board on or before that date.

Joseph Langan (Joseph), Bernard's son, was the principal of an entity that had been engaged to manage the property. In October 2003, Joseph and others formed Main & Glen for the purpose of purchasing and developing the property and he reached an oral agreement with Bernard that Mill Race would sell the property to Main & Glen for $1.62 million. Over the next several months, Main & Glen spent over $500,000 and much time and effort seeking the necessary government approvals and preparing the plans for the townhouse development. On March 31, 2004, Main & Glen filed a development application and on June 16, 2004, the Township's planning board granted final subdivision and site plan approval for the proposed development of the property.

At this point, Bernard wanted more money for the property and refused to execute a written contract unless the price was set at $2 million. By September 2004, Mill Race and Main & Glen had negotiated a written agreement whereby Main & Glen would purchase the property for $2 million. Bernard signed the contract on September 2, 2004, and Main & Glen's principal signed on September 10, 2004. The contract contained a number of provisions relevant to this appeal. We briefly summarize these provisions.

Under Article 2.1, Mill Race agreed to sell all the property except for a parcel on which a house and some buildings were located. Article 5.4 provided that Main & Glen would obtain a minor subdivision covering that .294-acre plot, and Mill Race would retain ownership of that plot.

Article 3.3 established a six-month contract period and provided for a six-month extension of that period in exchange for a non-refundable payment of $100,000. Article 7.1 provided that the closing of title "shall occur no later than the sixth (6th) month anniversary of the contract date or any agreed upon extensions. The closing shall occur at the Office of Neil Kilstein", an attorney in Elmwood Park. Article 4.1 provided that unless Main & Glen had exercised its extension rights, this contract shall terminate upon the sixth (6th) month anniversary of the Contract Date. The Initial Deposit shall be retained by the Seller and neither party shall have any further rights or obligations hereunder . . . If Purchaser has exercised its Extension Right, but title has not closed by the twelfth (12th) [month] anniversary of the contract date, this contract shall terminate[.]

Article 5.3(a) addressed "hazardous substances" and provided that if, prior to closing, there was a discharge of hazardous substances on the property not caused by Main & Glen, Mill Race would remediate the condition and "the closing shall be adjourned for a reasonable period to permit [Mill Race] to complete such activities."

Article 5.3(b) stated that Mill Race had obtained a "no further action" (NFA) letter in accordance with New Jersey Department of Environmental Protection (NJDEP) regulations governing the removal of underground gasoline and oil tanks on the property together with the contaminated soil.

Article 5.8 required Mill Race, upon request, to promptly execute any documents required by Main & Glen to obtain governmental approvals and also provided that any delay by Mill Race in that regard would result in a tolling of any time periods established in the contract.

Article 9 of the contract governed default and remedies. Article 9.1 stated that Mill Race could terminate the agreement by notice to Main & Glen at any time prior to the closing date in the event of a material default by Main & Glen which remains uncured for twenty days after notice. In the event the default could not be cured with due diligence within twenty days, Main & Glen was given a longer period "as shall be necessary to cure such default" provided that it started to cure the default within twenty days and completed the cure within ninety days. Article 9.2 accorded the same right to Main & Glen in the event of a material default by Mill Race and established the same time frames.

Article 9.3(b) concerned Main & Glen's remedies in the event of a default by Mill Race. That section provides:

If Purchaser fulfills its obligations hereunder, but Seller defaults under this Agreement beyond any applicable cure period, or materially breaches any representation or warranty contained herein, Purchaser shall be entitled, as its sole and exclusive remedies and at its election, either (i) to specific performance and any costs, including reasonable attorney's fees incurred in pursuing an action for specific performance, or (ii) to terminate this Agreement and recover all Deposit Monies and any interest accrued thereon. The return of the Deposit shall constitute and be liquidated and agreed damages, and upon payment thereof the parties hereto shall be relieved of any further liability to each other, it being expressly understood that such remedy, if elected, shall then be the sole and exclusive right and remedy of Purchaser, and constitutes a fair and reasonable remedy for the damages sustained by Purchaser by reason of Seller's breach of this Agreement.

Finally, Article 10.4 addressed attorneys' fees and provided that:

In the event any action or proceeding is commenced to obtain a declaration of rights hereunder, to enforce any provision hereof, or to seek rescission of the Agreement for default contemplated herein, whether legal or equitable, the prevailing party in such action shall be entitled to recover its reasonable attorneys' fees in addition to all other relief to which it may be entitled therein.

After execution of the contract, Main & Glen proceeded with apparent diligence to obtain ...

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