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Conley v. Guerrero

Supreme Court of New Jersey

April 3, 2017

MICHAEL CONLEY, JR. and KATIE M. MAURER, Plaintiffs-Appellants,
v.
MONA GUERRERO, BRIAN KRAMINITZ, and MICHELE TANZI, Defendants-Respondents.

          Argued January 17, 2017

         On certification to the Superior Court, Appellate Division, whose opinion is reported at 443 N.J.Super. 62 (App. Div. 2015).

          William J. Kearns argued the cause for appellants (Kearns & Duffy, attorneys).

          Martin Liberman argued the cause for respondent Mona Guerrero.

          Robert J. Machi argued the cause for respondents Brian Kraminitz and Michele Tanzi (Morgan Melhuish Abrutyn, attorneys; Mr. Machi and Joshua A. Heines, on the brief).

          Barry S. Goodman argued the cause for amicus curiae New Jersey Realtors® (Greenbaum, Rowe, Smith & Davis, attorneys; Mr. Goodman and Steven B. Gladis, on the brief).

          F. Bradford Batcha argued the cause for amicus curiae New Jersey State Bar Association (Thomas H. Prol, President, attorney; Mr. Prol, of counsel; Mr. Batcha, Stuart J. Lieberman, Michael G. Sinkevich, Jr., and Heather G. Suarez, on the brief).

         Solomon, J., writing for a unanimous Court.

         In this appeal, the Court determines whether the attorney-review provision of a standard form real estate contract, which specifies that notice of disapproval must be transmitted to the real estate agent or broker by certified mail, telegram, or personal service, must be strictly enforced.

         On January 12, 2014, plaintiffs Michael Conley, Jr., and Katie M. Maurer (Buyers) signed a contract to purchase a condominium from defendant Mona Guerrero (Seller). The real estate agent prepared, and the parties used, a standard form real estate contract. Seller signed the contract on January 14, 2014, and the executed agreement was delivered the next day. Both the offer and acceptance were transmitted via e-mail and/or fax.

         The agreement included an attorney-review clause, mandated by the Court in New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Boards (Bar Ass'n). 93 KI 470, 476-77, modified. 94 KI 449 (1983), and N.J.A.C. 11:5-6.2(g)(2), which gave the parties' respective attorneys three business days to review the contract before it became legally binding. If Buyers' or Seller's attorney disapproved the contract, the clause required that he or she notify the "REALTOR(S) and the other party . . . within the three-day period." Any notice of disapproval was required to be sent to the "REALTOR(S) by certified mail, by telegram, or by delivering it personally."

         A bidding war began on the same day that the attorney-review period commenced, and Seller accepted a higher bid from defendants Michele Tanzi and Brian Kraminitz.

         One day before the attorney-review period expired, Seller's attorney e-mailed and faxed a letter to Buyers' attorney disapproving the contract. After the deadline passed, Buyers' attorney e-mailed a letter to the agent, and faxed Seller's attorney a copy, stating that "the 3 days within which an attorney may terminate this contract ha[ve] expired. The contract is now in full force and effect."

         Buyers then filed a breach-of-contract complaint in the Superior Court, Law Division, demanding specific performance and requesting a temporary restraining order to enjoin the sale of the condominium to anyone other than Buyers. Buyers claimed that because the three-day period within which notification must have been communicated had passed, and neither Buyers, their attorney, nor their agent received proper notification of disapproval, "the contract became effective."

         The trial court denied the application for a temporary restraining order, and both parties filed cross motions for summary judgment. The court granted defendants' motion and dismissed the complaint. Buyers appealed, and the Appellate Division affirmed the trial court's decision. 443 N.J.Super. 62 (App. Div. 2015). The panel found that the agreement detailed the method of delivering a notice of disapproval to the real estate agent only; any form of actual notice to Buyers was sufficient; and Buyers' right to notice of disapproval was satisfied here. Id. at 68-69.

         The Court granted Buyers' petition for certification. 244 N.J. 526 (2016).

         HELD: In this case, because Buyers received actual notice of disapproval within the three-day attorney-review period by a method of communication commonly used in the industry, the notice of disapproval was valid. The Court also exercises its constitutional authority over the practice of law and finds that an attorney's notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Notice by overnight mail will be effective upon mailing. The attorney-review period within which this notice must be sent remains three business days.

         1. In 1982, the NJSBA filed a suit against REALTORS seeking a ruling that licensed real estate brokers or salespersons engage in the unauthorized practice of law when they prepare contracts for the sale or lease of property. The Court reviewed the final consent judgment upon joint application of the parties under its constitutional powers governing the practice of law. Bar Ass'n, supra, 93 N.J. at 472. The Court approved the final consent judgment, with modifications, and specifically noted that it may modify the agreement in the future. Id. at 474. (pp. 10-13)

         2. In 1987, the Real Estate Commission added Section (g) to N.J.A.C. 11:5-6.2, requiring "licensees" in the State, including real estate agents and brokers, to comply with the terms mandated in Bar Ass'n, supra, 93 N.J. at 475-81. Section 6.2(g) requires every contract for the sale of certain real estate, including the property at issue here, to contain the following language within its attorney-review clause: "The attorney must send the notice of disapproval to the Broker(s) by certified mail, by telegram, or by delivering it personally." (pp. 13-14)

         3. The Court has not decided whether an attorney's disapproval letter must follow the precise notification procedures detailed in the attorney-review clause. In Kutzin v. Pirnie. 124 N.J. 500, 508 (1991), the Court commented in dicta on the failure of both parties to comply with the method-of-delivery provision. Gaglia v. Kirchner. 317 N.J.Super. 292, 298 (App. Div.), certif. denied. 160 KI 91 (1999), left open the question central to this appeal: whether an individual can rely on the other party's failure to abide by the method-of-notice provision to enforce the contract, (pp. 15-17)

         4. The Bar Ass'n Court was concerned first and foremost with protecting consumers' rights. The Court did not draft the language of the settlement. Rather, the parties chose the three methods of communication to notify the broker of dissatisfaction with the contract. Bar Ass'n, supra, 93 N.J. at 476, 480. The Bar Ass'n Court contemplated that a court would have the flexibility to grant relief without strictly adhering to the settlement agreement's terms because the Court explicitly granted courts the power to address, "in the most appropriate manner under the given circumstances, " "questions of the interpretation, application, and general adherence to or enforcement of the settlement. . . that may arise and affect the public interest." Id. at 474. (pp. 18-19)

         5. In cases following Bar Ass'n. the Appellate Division has honored effectuating the purpose of the attorney-review clause. In Peterson v. Estate of Pursell. 339 N.J.Super. 268, 273-75 (App. Div. 2001), the Appellate Division found the attorney-review clause to require that the three-day review period begin on the date the signed contract is delivered to a party, not its agents. The panel found this rule supported the purpose of the attorney-review clause- to protect the parties' interests from the real estate broker. InLevisonv. Weintraub, 215 N.J.Super. 273, 274-75, 277 (App. Div.), certif. denied, 107 N.J. 650 (1987), the panel stated that when "attorney disapproval is registered within three days there can be no contract, regardless of prior approvals, " finding that this holding supported the attorney-review clause's purpose. And in Romano v. Chapman, 358 N.J.Super. 48, 52 (App. Div.), certif. denied, 176 N.J. 431 (2003), the panel based its decision on the need to effectuate the broad purpose of the attorney-review clause and not on a strict interpretation of its language, (pp. 19-22)

         6. As the appellate panel observed, strict enforcement of the notification provision here would result in the forfeiture of Seller's right to review the contract with counsel and disapprove it within the attorney-review period. Holding that the notice here-which was actually and indisputably received by Buyers within the three-day window -was deficient because of the manner in which it was transmitted would elevate form over the protective purpose for which the attorney-review provision was adopted. The Court declines to reach such a result, (pp. 22-23)

         7. The Court reserved its right to modify the settlement reached in Bar Ass'n and does so: notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Notice by overnight mail will be effective upon mailing. The attorney-review period within which this notice must be sent remains three business days. The Court commends this matter to the Real Estate Commission for consideration of amendments to N.J.A.C. 11:5-6.2(g) consistent with the Court's holding. The Court recognizes that it may need to modify the attorney-review clause again in the future, (pp. 23-25)

         The judgment of the Appellate Division is AFFIRMED as modified.

          CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-VINA, and TIMPONE join in JUSTICE SOLOMON'S opinion.

          OPINION

          SOLOMON JUSTICE

         In 1983, this Court affirmed a final consent judgment for a settlement agreement between the New Jersey State Bar Association and the New Jersey Association of Realtor Boards. New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Boards (Bar Ass'n), 93 N.J. 470, 476-77, modified, 94 N.J. 449 (1983). The terms of the settlement provide that real estate brokers and salespersons may prepare contracts to sell or lease real property, so long as a standard form is used that includes a three-day period for attorney review. If, during this review period, an attorney disapproves the contract, he or she must notify the other party and the other party's real estate agent or broker. If no notice of disapproval is sent within the three days, however, the contract becomes enforceable. The standard attorney-review provision specifies that notice of disapproval must be transmitted to the real estate agent or broker by certified mail, telegram, or personal service.

         Plaintiffs Michael Conley, Jr., and Katie M. Maurer (Buyers) made an offer to purchase a condominium from defendant Mona Guerrero (Seller), and, a few days later, Seller signed and executed the contract. Before the three-day attorney-review period expired, Seller's attorney sent Buyers' attorney and their realtor notice of disapproval by e-mail and fax, rather than by the methods approved under our 1983 holding and prescribed in the parties' contract -- certified mail, telegram, or personal service. ...


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