A week later, plaintiff’s attorney reiterated his client’s position that Roxy was obligated to turnover the property at closing with all debris removed.
On Nov. 17, 2000, Roxy’s attorney returned plaintiff’s $12,000 deposit, advising that he was so instructed because Roxy believed that plaintiff “breached the contract by failing to close title pursuant to a notice to do so.” In reply, on Nov. 21, 2000, plaintiff’s attorney sent back the $12,000 check, again explaining plaintiff’s position that the contract required that the property be turned over in broom-clean condition; at the same time, plaintiff offered to avoid any resulting litigation by agreeing to a $12,500 escrow for the cleanup of the property.
Later correspondence between these attorneys memorialized the parties’ agreement to resolve the dilemma posed by Roxy’s unwillingness to abide by the terms of the contract. The parties agreed that the closing would occur on Jan. 3, 2001, and that Roxy would provide a credit of $12,500 for the cleanup of the property. This agreement was confirmed by plaintiff’s counsel on Dec. 1, 2000, and, also, by Roxy’s attorney on Dec. 13, 2000. On Dec. 13, 2000, plaintiff recorded a notice of settlement with the county clerk.
What was then unknown to plaintiff was that Roxy, through a different attorney, was negotiating to sell the property to defendant John Lindner. On Nov. 21, 2000, defendant Joel Heier, a Roxy officer, met with Lindner. Heier provided Lindner with a copy of plaintiff’s contract with Roxy, as well as a copy of his attorney’s Nov. 17, 2000, letter to plaintiff returning the deposit. Heier and Lindner reached an agreement and, on Dec. 8, 2000 � one week after plaintiff and Roxy had agreed to an escrow for the removal of the debris and a new closing date � Roxy executed a contract to sell the property to defendant 94 Broadway Inc., a corporation controlled by Lindner. Lindner recorded a notice of settlement on Dec. 11, 2000, two days prior to the recording of a similar document by plaintiff.
Also then unknown to plaintiff, a closing between Roxy and 94 Broadway took place on Dec. 18, 2000, and a deed of conveyance was recorded the next day. Plaintiff learned this when he appeared for the Jan. 3, 2001, closing that his attorney and Roxy’s attorney had agreed on.
On Jan. 11, 2001, plaintiff filed a verified complaint in the Chancery Division against Roxy, two of Roxy’s officers (Heier and Bert Miller), 94 Broadway, Linder, and Roxy’s attorneys. Plaintiff sought, among other things, specific performance of his agreement with Roxy. The Chancery Division judge ruled that plaintiff was not entitled to specific performance, dismissed that part of the complaint that sought equitable relief, dissolved the temporary restraints, and transferred the remaining claims to the Law Division. Plaintiff’s motion for leave to appeal was denied.
II. In general, to establish a right to the remedy of specific performance, a plaintiff must demonstrate that the contract in question is valid and enforceable at law, 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, and that an order compelling performance of the contract will not be harsh or oppressive.
III. Held: Plaintiff had demonstrated, beyond question, that Roxy had wrongfully attempted to terminate its contract with plaintiff and that the contract remained valid and enforceable when Roxy wrongfully contracted with, and conveyed the property to, Lindner.
Plaintiff remained patient while it took Roxy approximately two years to remove a tenant from the premises. Indeed, plaintiff demonstrated his desire to obtain the benefit of his bargain by twice testifying in the tenancy proceedings brought by Roxy against the tenant. When Roxy finally succeeded in obtaining a judgment of possession in June 2000, and soon thereafter secured the tenant’s removal from the property, the parties then discussed a closing date. Plaintiff inspected the premises on Oct. 10, 2000, observed a significant accumulation of debris, and, as indicated earlier, reminded Roxy of its obligation to convey the property in “broom clean” condition. Roxy wrongfully asserted that it had no obligation to remove the debris and demanded that plaintiff take the property “as is.” Roxy then tried to bully plaintiff into acceding to its inaccurate understanding of the contract by attempting to set “time of the essence” for Nov. 7, 2000. When plaintiff did not then appear, but instead persisted in his correct interpretation of the contract’s terms, Roxy asserted that the contract had been breached and returned the deposit. Notwithstanding, further discussions between their attorneys resulted in an escrow agreement concerning the debris on the property and the scheduling of Jan. 3, 2001, as the new closing date. This time plaintiff appeared for closing, but Roxy did not. Plaintiff then learned that the property had been conveyed to Lindner.
In analyzing these events, (a) there were questions of fact surrounding the legitimacy of Roxy’s time-of-the-essence closing date, (b) Roxy could not declare a time-of-the-essence closing while simultaneously stating its refusal to fully perform all its contractual obligations, and (c) Roxy waived any rights it claims to have obtained when plaintiff failed to appear to close on Nov. 7, 2000, by subsequently agreeing to a new closing date.
A. There is no dispute that plaintiff’s contract with Roxy did not contain a time-of-the-essence closing date. In that circumstance, either party could later make time of the essence. But, in attempting to do so, the contracting party must give reasonable notice of the date for closing, and the date chosen must “bear a reasonable relation to the time already elapsed.” Paradiso v. Mazejy, 3 N.J. 110, 115 (1949).
It is assumed, without deciding, that Roxy gave reasonable notice of the Nov. 7, 2000, closing date. The reasonableness of its notice is arguably doubtful since the letter of Roxy’s counsel, contrary to normal practice, did not state a time or place for closing. As to the second aspect � the “reasonable relation” rule described in Paradiso � there were genuine disputes of material facts as to whether the particular date chosen by Roxy was reasonable under the circumstances, and these factual uncertainties precluded the grant of defendants’ motions for summary judgment. The reasonableness of a contracting party’s attempt to set a time-of-the-essence closing date must be weighed against the time that had elapsed since the formation of the contract and any deleterious effect that may befall the noticing party as a result of future events beyond the chosen closing date. In other words, the court must assess the delay that preceded the time-of-essence notice as well as the prejudice to the noticing party by any further delay beyond the date for closing contained in the notice.
Here, in seeking summary judgment, Roxy gave no indication that it would be prejudiced by a reasonable delay beyond the Nov. 7, 2000, closing date it unilaterally chose; indeed, its later willingness to postpone the closing date to Jan. 3, 2001, strongly suggests that a later date would have been equally reasonable. More important, the record reflects that approximately two years had elapsed from the execution of the contract until the point in time when Roxy had secured the removal of its holdover tenant and was finally prepared to perform. Considering that extraordinary delay, which occurred through no fault of plaintiff, it is highly questionable whether it was reasonable for Roxy to compel a closing date of Nov. 7, 2000, at the expense of plaintiff’s forfeiture of its contract rights for failing to comply.
Although it is doubtful whether it was reasonable for Roxy to set Nov. 7, 2000, as a time-of-the-essence closing date without plaintiff’s consent, the issue need not be decided since there is no dispute that Roxy was unwilling, at that time, to perform as it had promised in the contract and that, even if the Nov. 7 closing was reasonably noticed and reasonably fixed, Roxy later waived plaintiff’s failure to perform at that time by negotiating a resolution of a dispute about Roxy’s performance and by consenting to a new closing date, as the court hereafter explains.
B. Roxy could not obtain the forfeiture of plaintiff’s rights to the contract because it failed to show that it was willing to perform the contract on the time-of-the-essence closing date.
After the removal of the holdover tenant, it was observed by plaintiff that the property contained a considerable amount of debris. Roxy did not dispute plaintiff’s contention about the collection of garbage both in the structure and outside on the lot; instead, Roxy simply refused to remove it prior to closing, insisting, through its attorney’s Oct. 24, 2000, letter quoted earlier, that the contract did not impose that obligation and that it had already spent thousands of dollars in obtaining possession of the property.
Roxy’s contention, however, was based on a misunderstanding of its obligations, since paragraph 30 of the contract unequivocally states that the premises would be “left in a broom clean condition.” Roxy’s argument that this “broom clean” provision is overridden by another provision that states the property was being sold “as is” is mistaken. The common usage of these terms would indicate that the “as is” limitation related only to the structural condition of the building itself � i.e., its floors, walls, roof, etc., and meant, for example, that Roxy was under no obligation to make repairs to the building. This general understanding of the term also comports with the fact that Roxy’s representation that the “property is being sold ‘As Is’” is contained in a paragraph bearing the heading “Physical Condition of the Property,” that further references the condition of the “grounds, buildings and improvements.” On the other hand, the use of the term “broom clean,” commonly found in contracts for the sale or leasing of property, connotes precisely what plaintiff argues � that there will be no dirt or debris inside the structure being sold.
There is nothing inconsistent about a contract that purports to convey property “as is” and in “broom clean” condition. As a general matter, the former relates to the sufficiency of the structure, the fixtures and the grounds, while the latter requires the removal of dirt and debris prior to conveying. Moreover, nothing in the record, other than Roxy’s self-serving assertions, suggests any ambiguity or dispute about the meaning of these provisions.
In the absence of a genuine dispute about their meaning, plaintiff was correct in arguing that it was entitled to a turnover of the property, at the time of closing, free of the debris he complained of. Accordingly, even if it were assumed that the time-of-the-essence notice was in conformity with the common-law requirements, Roxy could not obtain the benefit of its notice because it did not demonstrate its willingness to fully perform the obligations contained in the contract.
C. The record also negates Roxy’s claim that plaintiff had breached the contract by failing to appear for the alleged time-of-the-essence notice because both parties continued to act, after that date, as if the contract remained viable. When it has been demonstrated that a party has acted inconsistently with the attempt to make the time of performance of the essence, whether the conduct precedes or follows the closing date, a waiver will be found and the parties will be deemed to have extended the time for performance for a reasonable period of time.
After the alleged time-of-the-essence closing date of Nov. 7, 2000, both plaintiff and Roxy, through their attorneys, continued to discuss their future performance and what was to be done about the debris on the property. They agreed that $12,500 would be placed in escrow pending cleanup of the property and that closing would take place on Jan. 3, 2001.
On Dec. 13, 2000, Roxy’s attorney responded and unequivocally agreed with plaintiff’s attorney assessment of their discussion. Roxy’s attorney’s letter indicates that a copy was sent to Heier.
The only conclusion that can be reached from these undisputed facts is that Roxy waived any right it may have had to insist on the consequences of plaintiff’s failure to appear for a time-of-the-essence closing. Since defendants had moved for dismissal or, in the alternative, summary judgment, the Chancery Division judge was obligated to assume that the parties had agreed to the escrow and the postponing of the closing date. Indeed, as indicated, these facts were undisputed. Instead of supporting defendants’ view that specific performance was precluded, the facts demonstrate the opposite.
Lastly, in attempting to counteract the impact of this waiver, Roxy asserted that the attorney who discussed the matter with plaintiff’s attorney in November and December 2001, who received plaintiff’s attorney’s letter of Dec. 1, 2001, and who sent the letter of Dec. 13, 2001, to plaintiff’s attorney, was not authorized to speak for Roxy. These assertions could, at most, create only an issue of fact that the Chancery Division judge could not resolve solely by resort to the papers. But Roxy’s self-serving claim that the attorney lacked actual authority was insufficient to create a question of fact.
In short, for summary judgment purposes, the Chancery Division judge should have proceeded on the assumption that plaintiff’s contract with Roxy was binding and enforceable after Nov. 7, 2000, and up to, and through, both the date Roxy contracted with Lindner and the date Roxy conveyed legal title to Lindner.
IV. Lindner possessed actual knowledge, and was given constructive notice, of plaintiff’s contract with Roxy � facts that preclude Lindner’s claim to the status of bona fide purchaser and which relegate Lindner’s rights to a position inferior to plaintiff’s rights. As a result, neither Lindner’s contract with Roxy nor the actual conveyance of a deed to Lindner could defeat plaintiff’s right to specific performance.
Relying on his belief that the rundown performed by Lindner’s title searcher on Dec. 18, 2000, “would not and did not reveal the notice of settlement filed by plaintiff on December 13th, 2000, because the rundown stopped at the notice of settlement filed by [Lindner] on December 11th, 2000,” the Chancery Division judge concluded that Lindner was a bona fide purchaser and compelled the entry of summary judgment dismissing plaintiff’s claim for specific performance. This determination was based on an overstatement of the legal significance of the fact that Lindner’s notice of settlement was recorded two days prior to plaintiff’s, and gave no weight to Lindner’s actual or constructive knowledge of plaintiff’s contract with Roxy.
A court of equity has the power to undo a completed conveyance to a party who does not qualify as a bona fide purchaser. See Hallock v. Bushauer, 113 N.J. Eq. 102 (E.&A. 1933). Such a determination surely requires a balancing of the rights and equities, but, in the final analysis, a party who first contracted to purchase property later sold to another possesses, in the eyes of a court of equity, a greater right to the property than the other, so long as the other is not a bona fide purchaser.
On the recording of Lindner’s notice of settlement, plaintiff and the rest of the world were given constructive notice of Lindner’s contract with Roxy. That filing, however, signified only that all others who later obtained an interest in the property acquired their interest “with knowledge of the anticipated settlement and shall be subject to the terms, conditions and provisions of the deed or mortgage between the parties filed,” N.J.S.A. 46:16A-4, within the 45-day period set forth in 46:16A-5. The interest that plaintiff seeks to enforce, in the first instance, is his right of equitable ownership that came into being when he contracted with Roxy on Aug. 21, 1998. As a result, the parties to a contract such as that under consideration here possess equitable rights that are broader, and in some ways, superior to their legal rights. The contract purchaser’s legal claim
produces no effect upon the respective estates and titles of the parties. … No change is made until, by the execution and delivery of the deed of conveyance, the estate in the land passes to the vendee. Pomeroy, Specific Performance of Contracts (3d ed., 1926), �� 314 at 691.
A very different approach is taken when the equitable obligations of the parties are considered:
Equity views all these relations from a very different standpoint. [S]o far as the interest or estate in the land of the two parties is concerned, it is regarded as executed, and as operating to transfer the estate from the vendor and to vest it in the vendee. … The vendee is looked upon and treated as owner of the land; an equitable estate has vested in him commensurate with that provided for by the contract … ; although the vendor remains owner of the legal estate, he holds it as a trustee for the vendee, to whom all the beneficial interest has passed. Id. at 691-93.
