November 19, 2013
XU'S NORTH 11th STREET PROPERTY, INC., Plaintiff-Appellant,
20 AMITY PROPERTY, L.L.C., QING XIANG WANG and XIU YUN CHEN, Defendants-Respondents
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 29, 2013
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-0462-10.
Kevin Kerveng Tung, P.C., attorneys for appellant (Kevin K. Tung, on the brief).
Raymond A. Grimes, attorney for respondents.
Before Reisner, Alvarez and Carroll.
Plaintiff, Xu's North 11th Street Property (plaintiff), appeals from a May 30, 2012 order of judgment in favor of defendants, 20 Amity Property LLC (Amity), Qing Xiang Wang, and Xiu Yun Chen. The order, which was issued after a bench trial, granted specific performance of a real estate contract between plaintiff and Amity, by ordering Amity to pay plaintiff $194, 330.56, giving Amity clear title to the property, and ordering the discharge of plaintiff's lis pendens. Having thoroughly reviewed the record, we conclude that the decision of Judge Christine Farrington was supported by sufficient credible evidence and was consistent with applicable law. R. 2:11-3(e)(1)(A). We affirm substantially for the reasons stated in her written opinion dated May 16, 2012.
The evidence is set forth at length in Judge Farrington's opinion and need not be repeated here in the same level of detail. We summarize the most pertinent facts. Lin Xu (Xu) was in the wholesale food supply business. He was also a one-third owner of plaintiff, which was a real estate company. Amity, which supplied food products to restaurants, was one of Xu's customers. Amity's owners, Chen and her husband Wang, were also friends of Xu.
Amity needed additional refrigerated warehouse space, and agreed to buy plaintiff's warehouse (warehouse or property) in Jersey City. The parties entered into a contract of sale on November 11, 2005, at a price of $980, 000, including an $80, 000 deposit. Although Xu was aware at the time that the property was in foreclosure due to a $400, 000 tax lien, he did not disclose that fact to the buyers. He also failed to disclose that the warehouse did not have a certificate of occupancy for use as a refrigerated warehouse. Xu was further aware that the buyers had a pressing need to begin remodeling the warehouse space so they could start using it as soon as possible. In fact, one of the reasons they needed more space was that they planned to buy a large supply of monosodium glutamate (MSG) from Xu.
On November 18, 2005, the parties signed a revised sale contract, which contained a $500, 000 liquidated damages clause in the event the seller breached the contract. Chen, whom the judge found entirely credible, testified that she insisted on the clause because the parties had also agreed that Amity could start fixing up the warehouse before the closing took place, and she wanted to protect her anticipated investment in making those repairs and in purchasing hundreds of thousands of dollars worth of inventory and equipment in reliance on a timely closing.
Not only was plaintiff unable to close on the contract by the anticipated December 2005 date, but in May 2006, Xu finally revealed the tax lien to defendants and made a desperate plea for funds to help pay off the lien in order to avoid an imminent foreclosure sale. Fearing the loss of all the money they had already spent to fix up the property, defendants agreed that plaintiff could use their $80, 000 contract deposit to help pay off the lien. They also advanced plaintiff an additional $170, 000 to help satisfy the lien. In return, however, they insisted on an escrow agreement with the following essential provisions: plaintiff was required to escrow the deed with defendants' attorney and, if plaintiff was unable to close by July 31, 2006, defendants' attorney could release the deed to them and they could record it. Plaintiff was unable to close on the property by July 31, and defendants duly obtained the deed out of escrow and recorded it.
Meanwhile, as defendants continued to fix up the property, they discovered multiple additional problems that Xu had concealed from them. Those included the lack of a certificate of occupancy to operate the premises as a refrigerated warehouse, contrary to Xu's representation to them that the property could lawfully be used for that purpose. That deficiency cost them thousands of dollars to correct. Additionally, the property was the subject of multiple preexisting citations for building code violations, which defendants paid thousands of dollars to resolve in order to use the premises. They experienced extensive business delays due to all of these problems, and suffered what Chen testified were "incalculable" losses as a result.
Defendants repeatedly offered to close on the property and were ready, willing and able to do so. The escrow agreement gave defendants the option of giving plaintiff a mortgage or paying the full contract price at closing. They offered to pay in full at the closing. However, plaintiff refused to close unless defendants paid hundreds of thousands of dollars in "use and occupancy" charges. Judge Farrington found that defendants had never agreed to pay such charges, and plaintiff had no legal basis to demand them. She found that Xu, having extracted $250, 000 from defendants to pay off plaintiff's debts, was simply trying to wear defendants down and force them to abandon the property and declare bankruptcy.
Judge Farrington found that plaintiff breached the contract and acted in bad faith in refusing to close. She therefore concluded that plaintiff was liable for $500, 000 in liquidated damages. She further found that defendants were entitled to a $250, 000 credit for the amounts they paid to satisfy the tax liens, plus additional credits for amounts they paid to satisfy other liens and charges that were plaintiff's legal responsibility. Offsetting those credits against the $980, 000 purchase price, the judge ordered defendants to pay plaintiff $194, 330.56 in full satisfaction of the purchase price, and ordered that upon payment defendants would have title "free and clear" of any claim by plaintiff.
On an appeal following a bench trial, "[t]he general rule is that [factual] findings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citing Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974)). We will not disturb the trial judge's findings unless "'they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.'" Id . at 412 (quoting Rova Farms, supra, 65 N.J. at 484); see also Beck v. Beck, 86 N.J. 480, 496 (1981). However, "[w]hether the facts found by the trial court are sufficient to satisfy the applicable legal standard is a question of law subject to plenary review on appeal." State v. Cleveland, 371 N.J.Super. 286, 295, (App. Div.), certif. denied, 182 N.J. 148 (2004). Hence, we review the trial judge's legal conclusions de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
As previously stated, based on our review of the trial transcript and exhibits, Judge Farrington's findings of fact are amply supported by the record. Likewise, we find no basis to second-guess her evaluation of Chen as a believable witness and of Xu as evasive and not credible. In light of the judge's factual findings, her legal conclusions are entirely correct.
On this appeal, plaintiff raises a series of arguments in the following points:
I. WHETHER COURT BELOW ERRED IN FAILING TO RULE THAT BUYERS BREACHED ESCROW AGREEMENT WHERE BUYERS RECORDED DEED WITHOUT SENDING SELLER A 15-DAY NOTICE TO CURE DEFAULT AND OBTAINED TITLE TO PROPERTY WITHOUT PAYING FULL CONTRACT PRICE.
II. WHETHER COURT BELOW ERRED BY FAILING TO AWARD REASONABLE USE AND OCCUPANCY FEE TO SELLER WHERE BUYERS CHANGED LOCKS AND CONTINUOUSLY USED PROPERTY WITHOUT PAYING USE AND OCCUPANCY FEE.
III. WHETHER COURT BELOW ERRED IN RULING THAT SELLER WAS NOT ENTITLED TO MORTGAGE PAYMENTS FROM THE DATE THE DEED WAS RECORDED WHERE DE FACTO CLOSING TOOK PLACE WHEN BUYERS RECORDED DEED.
IV. WHETHER COURT BELOW ERRED BY HOLDING THAT PROVISION FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $500, 000.00 WAS VALID AND ENFORCEABLE WHERE THERE WAS NO BREACH OF CONTRACT BY SELLER AND PROVISION WAS UNILATERALLY ADDED TO CONTRACT WITHOUT KNOWLEDGE AND CONSENT OF SELLER, AND WHERE BUYERS DID NOT PRESENT ORIGINAL CONTRACT IN VIOLATION OF BEST EVIDENCE RULE.
We conclude that these arguments are entirely without merit and do not warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add the following brief comments.
Like Judge Farrington, we reject plaintiff's argument that the buyers were required to give the seller fifteen days' written notice before obtaining and recording the deed pursuant to the escrow agreement. Judge Farrington found that the notice provision, which plaintiff's counsel drafted, was ambiguous and therefore was to be construed in defendants' favor. See Schor v. FMS Fin. Corp., 357 N.J.Super. 185, 193 (App. Div. 2002). By its literal terms, paragraph three of the escrow agreement allowed defendants to record the deed if plaintiff was unable to close, but paragraph four required fifteen days' notice if plaintiff "refused" to close.
The judge found that plaintiff was unable to close, due to an outstanding $80, 000 judgment lien, resulting from Xu's failure to return the deposit of a prior contract purchaser of the warehouse. She also found that, even if defendants had given fifteen days' notice, plaintiff would not have closed on the property. We find no error in the judge's conclusions, which are consistent with her well-supported factual findings. Plaintiff's further arguments on this point are based on Xu's testimony, which the judge did not find credible.
Plaintiff's claims for use and occupancy fees, and for mortgage payments, are equally insubstantial. As the judge found, plaintiff permitted defendants to occupy the premises for the purpose of starting renovations, with no agreement for payment of use and occupancy fees. Nor did the escrow agreement contain any provision for the payment of such fees upon the recording of the deed. Defendants spent thousands of dollars to improve the property and obtain a certificate of occupancy, which was not issued until July 13, 2007. A closing did not occur solely due to Xu's wrongful conduct. The record does not support plaintiff's claim for use and occupancy fees.
Nor were defendants legally obligated to give plaintiff a mortgage. The escrow agreement, which by its terms superseded any inconsistent terms in the original sale contract, gave the buyer the right to tender the balance of the purchase price at closing. Defendants were ready, willing and able to close without a mortgage on July 31, 2006. Xu was unable to provide clear title at that time, and he thereafter repeatedly refused to close unless defendants paid hundreds of thousands of dollars in use and occupancy fees to which he was not entitled.
Finally, there is sufficient credible evidence to support the judge's finding that Xu agreed to, and signed, the November 18, 2005 version of the contract, which contained the $500, 000 liquidated damages clause. See Rova Farms, supra, 65 N.J. at 484. Further, the record supports her finding that the clause was reasonable, in light of the amounts defendants were planning to invest in reliance on the sale going through, and the difficulty of assessing their business losses in the event of a breach. See Metlife Capital Fin. Corp. v. Washington Ave. Assocs., 159 N.J. 484, 495 (1999). Plaintiff's arguments on this point rely heavily on a version of the facts the judge found incredible, and warrant no further discussion. R. 2:11-3(E)(1)(e).