NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2568-22
BAYVIEW CORPORATE CENTER, LLC,
Plaintiff-Respondent,
v.
BAYVIEW PROPERTIES, LLC,
Defendant-Appellant,
and
MADISON TITLE AGENCY, LLC,
Defendant-Respondent. ______________________________
Submitted November 14, 2024 – Decided February 6, 2025
Before Judges Marczyk and Torregrossa-O'Connor.
On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-2210-22.
Genova Burns LLC, attorneys for appellant (Jennifer Borek, of counsel and on the briefs; Charu Mehta, on the briefs). Hyland Levin Shapiro LLP, attorneys for respondent Bayview Corporate Center, LLC (Megan Knowlton Balne, of counsel and on the brief; Beau C. Wilson, on the brief).
PER CURIAM
This appeal arises from defendant Bayview Properties, LLC's (defendant
or buyer) failure to attend the closing on its pending purchase of a commercial
building from plaintiff, Bayview Corporate Center, LLC (plaintiff or seller).
Plaintiff filed suit against defendant and Madison Title Agency, LLC (Madison
Title),1 to retain defendant's deposit, alleging breach of contract and breach of
the covenant of good faith and fair dealing. Defendant counterclaimed for
breach of contract and fraud. Defendant challenges the trial court's (1) February
17, 2023 order granting plaintiff summary judgment on its breach of contract
claim and dismissing defendant's counterclaims with prejudice and (2) March
17, 2023 order denying reconsideration of those decisions. Upon careful review
of the record and applicable legal principles, we vacate the order of summary
judgment and the dismissal of defendant's counterclaims with prejudice and
remand to permit defendant to amend its counterclaims and for the parties to
conduct additional discovery in accordance with this opinion.
1 Madison Title did not participate in the appeal. A-2568-22 2 I.
A. The Contract and Closing
On June 2, 2022, defendant entered into an agreement (the contract) to
purchase from plaintiff a multi-tenant commercial office complex with existing
tenants, located in Toms River (the property). The contract listed the agreed-
upon purchase price of $21,500,000, calculated based on a capitalization rate of
7% and a net operating income (NOI) generated from the property in the amount
of $1,505,000. Several provisions of the contract hold particular relevance to
the parties' dispute.
Significantly, the contract provided a capped adjustment in purchase price
should the NOI fall short of the 7% capitalization rate at closing:
If at the time of Closing, the NOI does not satisfy the seven percent . . . capitalization rate, then the Seller shall deliver a credit to Buyer (or a reduction in Purchase Price) at Closing in the amount necessary to achieve the seven percent . . . capitalization rate, which credit or reduction shall in no event exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00). Notwithstanding anything to the contrary, in no event shall the Purchase Price be below Twenty-One Million and 00/100 Dollars ($21,000,000.00).
The contract contained a "time of the essence" clause stating, "[t]ime shall be
deemed of the essence with respect to all matters set forth in" the contract.
A-2568-22 3 The contract provided defendant access to documents in plaintiff's
possession pertinent to the property's current and prior rental revenue "within
three . . . business days of the Effective Date (unless previously provided to
Buyer)." As defined in Section 5 of the contract, this information included the
following:
a. a copy of the tax bill for the preceding year for the Property;
b. a copy of the title report for the Property and survey(s) relating to the Property to the extent in the possession of Seller;
c. copies of all Leases, any leasing commission agreements, existing Property reports, equipment specifications, drawings, or plans in the possession of Seller, and including, without limitation, any environmental, structural, mechanical, and/or utility reports;
d. all Service Contracts (as defined herein) for the Property; and
e. rent roll and operational financial information for the preceding three . . . years for the Property, to the extent such documentation is used or maintained by Seller in the ordinary course of its business.
Plaintiff attached "rent rolls" to the contract. The contract terms did not place
time constraints on any requests by defendant for these documents.
A-2568-22 4 Plaintiff was also to use "commercially reasonable efforts" to deliver to
defendant prior to closing an "[e]stoppel [c]ertificate" from each existing tenant
in the building. Section 3(e) further stated "[i]f Seller is unable to obtain the
[e]stoppel [c]ertificates as required herein, Buyer agrees to accept an estoppel
from Seller in the alternative . . . [and] Seller's failure to obtain Estoppel
Certificates, following use of commercially reasonable efforts, shall not be a
default under this Agreement."
A disclaimer to Section 5 followed with language confirming defendant's
understanding that some documents might not have been prepared by plaintiff
and, as such, plaintiff "ma[de] no representation or warranty whatsoever,
express or implied, as to the completeness, content or accuracy of the delivered
materials that were not prepared by Seller."
Section 6 of the contract addressed "Representations and Warranties"
made by plaintiff "[i]n order to induce Buyer to enter into" the contract. This
included an affirmative statement that "[t]o Seller's actual knowledge, as of the
Effective Date, the Rent Roll is true and correct in all material aspects."
The contract specifically addressed defendant's right to physical
inspection of the property and allowed for an "Inspection Period" after which
A-2568-22 5 defendant waived the right to terminate the contract. That provision stated in
pertinent part:
[C]ommencing on the Effective Date and expiring thirty . . . days thereafter (such date is herein referred to as the "Inspection Period Expiration Date"), Buyer, at Buyer's expense, shall have the right to have performed all non-invasive inspections, measurements, surveys, engineering and environmental studies, utilities investigations, zoning and architectural studies, title investigations and such other reports, tests and investigations that Buyer deems appropriate. . . . In the event Buyer fails to terminate this Agreement on or before the Inspection Period Expiration Date as aforesaid, Buyer shall have waived such right of termination, the Deposit shall be deemed non-refundable, and Buyer shall proceed to Closing.
On June 8, 2022, defendant objected to title, and as a result, the parties
entered into the "[f]irst [a]mendment" to the contract on July 1, 2022, extending
the inspection period until July 11. The amendment provided defendant "the
right, at its option, for any reason or no reason, to terminate [the contract], on
or before July 11, 2022," and that "upon such termination, the Deposit shall be
immediately refunded to the Buyer." On July 11, 2022, defendant sent notice to
plaintiff terminating the contract.
On July 29, 2022, the parties entered into a second amendment, entitled
"Reinstatement and Amendment to Agreement of Sale." The parties agreed to
reinstate the contract with certain modified terms and conditions, and defendant
A-2568-22 6 rescinded the termination notice sent on July 11, 2022. Defendant deposited
$500,000 into an escrow account, to be held by Madison Title. Defendant
acknowledged that because the inspection period had expired, the $500,000
deposit was non-refundable and subject only to Section 20(a) of the original
contract.
Specifically, the amended contract retained the original provision in
Section 20(a) regarding "defaults" and "remedies," stating:
In the event Seller fails to perform any of the covenants and/or agreements contained in this Agreement which are to be performed by . . . Seller, on or before the date set forth in this Agreement for the performance thereof, Buyer may either: (i) terminate this Agreement, in whole and not part, by giving written notice of such termination to Seller and Seller shall immediately thereafter return the Deposit; or (ii) Buyer may pursue the equitable remedy of specific performance.
[(Emphasis added).]
That section further provided:
In the event Buyer fails to perform any of the covenants and/or agreements contained in this Agreement, which are to be performed by Buyer, on or before the dates set forth in this Agreement for the performance thereof, Seller shall be entitled to recover the Deposit as liquidated damages as its sole remedy, and thereupon the parties shall have no further liability to each other hereunder, except for those obligations which specifically survive the termination of this Agreement.
A-2568-22 7 The prevailing party in any litigation shall be entitled to recover reasonable attorneys' fees and costs.
The contract designated the liquidated damages were the sole remedy
should the property not close for reasons other than plaintiff's default stating,
"Seller and Buyer agree that if the purchase and sale contemplated in this
Agreement is not consummated for any reason other than Seller's default under
this Agreement, Seller shall be entitled to retain the Deposit as liquidated
damages." (Emphasis added).
The contract memorialized defendant's acknowledgment that it was
"relying solely on its own expertise and that of buyer's consultants in purchasing
the property," subject only to the "specific[] exclu[sion of] any material and/or
intentional misrepresentations of [s]eller." (Emphasis added). By later
language, the contract preserved "all [defendant's] rights to pursue any and all
available remedies at law and/or equity," for "any material and/or intentional
misrepresentations" by plaintiff, as long as defendant instituted suit within six
months of closing. That clause further stated that "the maximum amount of any
liability shall not exceed more than three . . . percent of the purchase price."
The closing was required to occur either on or before sixty days after the
effective date of the reinstatement, making the closing date September 27, 2022.
A-2568-22 8 At some point after the reinstatement and apparently close in time to
closing, it appears defendant requested an extension of the closing date and
raised with plaintiff its concern that the facts and information plaintiff
represented as to the property's rent roll, occupancy rate, and NOI were
materially inaccurate. As reflected in subsequent correspondence to plaintiff's
counsel from counsel for one of defendant's investors several days before the
closing, "[s]eller made a proposal as to what they would require for the granting
of such extension," to which neither defendant nor its investor would agree. The
letter summarized the impasse and again requested an extension of the closing
date:
The purchase of the Corporate Center was based on an 80% occupied building at a 7% capitalization rate. After execution of the reinstatement agreement, [defendant] worked in good faith with more than one lender to obtain financing for the purchase. Upon visiting the center with the prospective lenders, the building . . . looked like only about 30% of the units were occupied and the occupied units themselves were barely operational. Needless to say, this scared off our lenders.
The email further indicated that defendant was "working with a new
lender" and wished to continue to "work with seller in good faith," but asked for
plaintiff's reciprocal good faith effort to resolve the issues. Specifically, the
email requested an extension of ninety days or alternatively at least "a short two-
A-2568-22 9 week extension . . . to re[]calibrate." Plaintiff responded the same day, denying
the request and taking the position that it had "no obligation to renegotiate this
deal again," as "[t]here [wa]s no occupancy or financing contingency in the
agreement."
Defendant accordingly failed to appear at closing on September 27, 2022,
and plaintiff issued both defendant and Madison Title a notice of default. Two
days after the scheduled closing, counsel on behalf of defendant sent
correspondence rejecting plaintiff's notice of defendant's default, asserting
plaintiff's "rent roll" and "leases" provided to defendant raised "reason to believe
that a material misrepresentation may have been made" necessitating further
investigation. Defendant advised, however, that it "remain[ed] committed to
completing th[e] transaction."
Plaintiff then filed suit to collect the $500,000 deposit. Plaintiff also
relisted the property roughly three weeks after the failed closing at a purchase
price that was $500,000 less than the price previously negotiated with defendant,
and the listing represented the NOI to be considerably less than that represented
in the contract with defendant.
A-2568-22 10 B. The Complaint, Counterclaims, and Motion
Plaintiff filed its initial complaint in October 2022, alleging defendant
breached the contract by failing to close on the property as scheduled. Plaintiff
sought the release of the $500,000 deposit held in escrow by Madison Title as
liquidated damages. Counts one and two alleged breach of contract and breach
of the covenant of good faith and fair dealing, respectively, against defendant
only, and count three sought declaratory judgment requiring Madison Title to
release the $500,000 deposit to plaintiff.
In November 2022, defendant filed its answer with counterclaims
asserting breach of contract and fraud as both affirmative defenses and
counterclaims. Defendant alleged breach of the contract and fraud as a result of
plaintiff's alleged misrepresentations regarding rental occupancy and income for
the property and plaintiff's refusal to adjust the purchase price accordingly prior
to closing.
According to defendant's pleading, plaintiff "[a]nnexed to the
[c]ontract . . . a rent roll, which if accurate, would have resulted in the Property
meeting the NOI [r]equirement." Defendant cited the apparent occupancy
discrepancy as well as the new real estate listing for the property, which reduced
the purchase price and listed the NOI as $1,187,017, appreciably lower than that
A-2568-22 11 previously represented by plaintiff to defendant. Defendant alleged plaintiff
breached by falsely representing the rental income and refusing to adjust the
purchase price after such misrepresentation, and sought specific performance as
a remedy, in accordance with the contract, or alternatively damages for the
breach. Similarly, it sought damages for fraud, alleging it relied to its detriment
on plaintiff falsely representing the NOI and occupancy of the property,
knowing that information was false.
Plaintiff subsequently filed a motion to dismiss defendant's counterclaims
for failure to state a claim and for summary judgment on its own affirmative
claims. After serving discovery demands on plaintiff without response,
defendant cross-moved for summary judgment.
Less than two weeks later, before any discovery was exchanged, the court
heard oral argument. Plaintiff asserted that because defendant had a right to
physically inspect the property, it could not now argue detrimental reliance on
plaintiff's initial representations. It argued that defendant had a deadline for
cancelling or adjusting the purchase price under the contract based on its
inspection, and, as a result, was compelled to appear at closing, and when it
failed to do so, defendant breached the clear terms of the contract and triggered
its exclusive remedy of forfeiting the $500,000 deposit.
A-2568-22 12 Defendant opposed the motion, arguing that the law allows for its reliance
on plaintiff's representations as to the property's rental income despite its own
right to inspect, and alleged plaintiff misrepresented occupancy and rent rolls
for the property, failed to exercise reasonable efforts to provide defendant with
estoppel certificates from each tenant, and refused to adjust the purchase price
as required by the contract.
Following arguments, the court rendered its oral decision granting
plaintiff's motion to dismiss defendant's counterclaims with prejudice and
granting plaintiff's motion for summary judgment on its own affirmative claims.
The court also denied defendant's cross-motion for summary judgment, finding
"plaintiff had done [nothing] that was a material breach of contract."
The court dismissed defendant's claim for fraud, with prejudice, and
granted summary judgment to plaintiff on its breach of contract claim, finding
that defendant, as a matter of law, could not have reasonably relied on plaintiff's
representations regarding the rent roll, because defendant had the opportunity to
do its own investigation and failed to do so. The court reasoned that the contract
"gave [defendant] an adequate period of due diligence where [defendant] could
have pursued an investigation as to the true rents and, for whatever
reason, . . . didn't use whatever tools [were] available to [it] to do that. . . . [I]t
A-2568-22 13 appeared that [defendant] didn't do anything." Accordingly, the court
determined defendant "can't[] later on[] say, well, we got a question about the
rents and, therefore, we're not showing up at closing. It's as simple as that."
The court also found that the parties "agreed to a remedy that, if, for some
reason, these rents substantially deviated from the amount that [the parties] said
they [we]re, that, at most, [defendant] would get a [$500,000] credit." As such,
the court determined defendant's sole remedy was to "at most . . . get a
[$500,000] credit."
Defendant filed a timely motion for reconsideration, which the court
denied by oral decision after arguments. Defendant argued that the court: (1)
incorrectly found the expiration of the physical "inspection period" limited
defendant's right to seek adjustment of the purchase price or challenge plaintiff's
alleged misrepresentation of the rent rolls and NOI, which was not subject to
any time constraint; (2) overlooked that the contract specifically provided that
plaintiff's material misrepresentation could be actionable as a breach of
plaintiff's obligations under the contract; (3) erroneously interpreted the law
regarding fraudulent misrepresentations in sales contracts, which allows a buyer
to rely entirely upon a seller's representation despite its own right of inspection;
(4) failed to consider that plaintiff did not show it expended "reasonable
A-2568-22 14 commercial efforts" to obtain estoppel certificates that would have revealed the
inaccuracy of the rent rolls as represented by plaintiff "because [it]
misrepresented the rent" rolls; and (5) incorrectly found that defendant's only
remedy for material misrepresentation was the adjustment in purchase price.
The court denied reconsideration, again finding that defendant did not
exercise "due diligence" to test plaintiff's rental income representations and its
only "remedy was to go [to the closing] and demand a [$500,000] credit."
This appeal followed.
II.
Defendant argues the trial court erred in granting summary judgment in
favor of plaintiff and dismissing its counterclaims with prejudice. Regarding its
defenses and counterclaims, defendant asserts plaintiff breached the contract by
making false representations and refusing to renegotiate or adjust the purchase
price when confronted with these inaccuracies.
As to its claims of fraud, defendant asserts that it reasonably relied to its
detriment on plaintiff's material misrepresentations regarding the rent roll and
building occupancy and contends it was improperly deprived of the chance to
amend its claim to address any deficiency.
A-2568-22 15 Although acknowledging that the contract permitted physical inspection
of the property, defendant contends the contract's inspection clause
contemplated only physical inspection of the property, and this provision did
not apply to or limit its right to challenge misrepresentations by plaintiff
regarding rental occupancy and income or seek adjustment of the purchase price
on that basis. It further argues that it relied on plaintiff's representations about
the NOI generated from the commercial property in entering and renegotiating
the contract. Defendant contends the court erroneously interpreted the
applicable law to relegate defendant to conducting its own inspection or risk
waiving any claim of fraud. Because defendant asserts it can sustain a viable
claim of fraud, it contends it should have been granted an opportunity to amend. 2
Defendant challenges the grant of summary judgment to plaintiff, arguing
that material factual issues existed regarding whether plaintiff breached the
contract first by its materially misrepresenting the NOI, thereby inflating the
purchase price, failing to conduct reasonable efforts to produce estoppel
2 For the first time on appeal, defendant argues that plaintiff committed a consumer fraud violation under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -227; however, defendant did not raise this issue in its answer or counterclaim or argue this issue before the trial court. Consequently, we do not consider this argument. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973) (citing Reynolds Offset Co. v. Summer, 58 N.J. Super. 542, 548 (App. Div. 1959)).
A-2568-22 16 certificates in order to conceal the misrepresentation, and thereafter, when
confronted with discrepancies in these values, refusing to postpone the closing
or adjust the purchase price as required by the contract. Defendant further
contends that summary judgment was prematurely granted and should have
awaited exchange of discovery. Defendant argues that because plaintiff did not
sufficiently establish defendant's breach of contract, it similarly failed to satisfy
the burden for summary judgment on the breach of implied covenant of good
faith and fair dealing claim. 3
As to the grant of summary judgment, plaintiff counters that the clear and
unambiguous language of the contract required all parties to close on September
27, 2022, and defendant's failure to attend the closing materially breached the
agreement, thereby entitling plaintiff to the deposit.
Plaintiff, citing to Byrne v. Weichert Realtors, 290 N.J. Super. 126, 137
(App. Div. 1996), and similar caselaw, contends that the fraud claim was
properly dismissed with prejudice, as defendant is unable to show, as a matter
of law, reasonable reliance to establish fraud because "there cannot be fraud in
a contract action when a party has been provided with an opportunity to perform
3 We note that the motion court failed to specifically address summary judgment regarding count two or count three of plaintiff's complaint. A-2568-22 17 an independent inspection pursuant to due diligence." Plaintiff also cites the
plain language of the agreement acknowledging defendant had the opportunity
to perform its own inspection.
III.
A.
We first address the court's dismissal of defendant's counterclaim of fraud
with prejudice. We review de novo a trial court's determination of a motion to
dismiss for failure to state a claim under Rule 4:6-2(e). See Stop & Shop
Supermarket Co. v. Cnty. of Bergen, 450 N.J. Super. 286, 290 (App. Div. 2017).
We review a trial judge's decision on whether to grant or deny a motion for
rehearing or reconsideration under Rule 4:49-2 for an abuse of discretion.
Branch v. Cream-O-Land Dairy, 244 N.J. 567, 582 (2021). "The rule applies
when the court's decision represents a clear abuse of discretion based on plainly
incorrect reasoning or failure to consider evidence or a good reason for the court
to reconsider new information." Pressler & Verniero, Current N.J. Court Rules,
cmt. 2 on R. 4:49-2 (2022).
With respect to a Rule 4:6-2(e) motion, "[a] reviewing court must examine
'the legal sufficiency of the facts alleged on the face of the complaint,' giving
the plaintiff the benefit of 'every reasonable inference of fact.'" Baskin v. P.C.
A-2568-22 18 Richard & Son, 246 N.J. 157, 171 (2021) (quoting Dimitrakopoulos v. Borrus,
Goldin, Foley, Vignuolo, Hyman & Stahl, PC, 237 N.J. 91, 108 (2019)). A
pleading is deemed adequate when "a cause of action is 'suggested' by the facts."
Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)
(quoting Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)).
Even when an initial pleading falls short of stating a claim, Rule 4:6-2(e)
dismissals "are ordinarily without prejudice." Mac Prop. Grp. LLC v. Selective
Fire & Cas. Ins. Co., 473 N.J. Super. 1, 17 (App. Div. 2022) (citing Printing
Mart-Morristown, 116 N.J. at 772; Pressler & Verniero, Current N.J. Court
Rules, cmt. 4.1.1 on R. 4:6-2(e) (2020)). However, "a dismissal with prejudice
is 'mandated where the factual allegations are palpably insufficient to support a
claim upon which relief can be granted,' or if 'discovery will not give rise to
such a claim.'" Ibid. (first quoting Rieder v. State, 221 N.J. Super. 547, 552
(App. Div. 1987); and then quoting Dimitrakopoulos, 237 N.J. at 107).
Defendant does not contest the insufficiency of his fraud pleading under
Rule 4:5-8(a) (setting forth particularity requirements for pleading fraud), so we
need not address the infirmity. Defendant instead asserts that the court erred in
dismissing the claim with prejudice without affording it the opportunity to
amend its counterclaim, as the court incorrectly applied the law to conclude that
A-2568-22 19 defendant could never, as a matter of law on these facts, establish reasonable
reliance.
We agree that, if properly pled with sufficient particularity, the law
permits a claim of reasonable reliance on a seller's representations even when a
buyer is given an opportunity to inspect. Consequently, we determine defendant
should have been permitted time to amend. See Rebish v. Great Gorge, 224 N.J.
Super. 619, 627 (App. Div. 1988) (recognizing preference to allow amendment
when the complaint contains the essential elements of a claim but fails to
particularize as required by Rule 4:5-8).
"The five elements of common-law fraud are: (1) a material
misrepresentation of a presently existing or past fact; (2) knowledge or belief by
the defendant of its falsity; (3) an intention that the other person rely on it; (4)
reasonable reliance thereon by the other person; and (5) resulting damages."
Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (citing Jewish Ctr.
of Sussex Cnty. v. Whale, 86 N.J. 619, 624-25 (1981)).
The law regarding the reasonable reliance element of a fraud claim is
clear—"the buyer of a business is entitled to rely on the seller's statement
concerning [the business's] . . . income." Walid v. Yolanda for Irene Couture,
Inc., 425 N.J. Super. 171, 180 (App. Div. 2012) (alteration in original) (quoting
A-2568-22 20 Trautwein v. Bozzo, 35 N.J. Super. 270, 278 (Ch. Div. 1955), aff'd o.b., 39 N.J.
Super. 267 (App. Div. 1956)). However, "where the buyer undertakes an
independent investigation and relies upon that, rather than the seller 's
statements, there is no reliance as a matter of law." Ibid. Therefore, "if the
buyer knows before executing the agreement of purchase and sale[] that the
seller has misrepresented to him the income of the subject matter of the sale, the
buyer is not deceived and may not . . . recover for fraud." Ibid. (quoting
Trautwein, 35 N.J. Super. at 278).
This well-settled caselaw does not impose on buyers a duty to inspect, but
instead allows for reliance on a seller's representations. It is only when a buyer
undertakes inspection, learns of potential misrepresentation by the seller, and
nevertheless proceeds in reliance on the seller's false information, that the buyer
waives a future claim of reasonable reliance.
Here, neither party alleges that defendant knew or had reason to suspect
that the rent roll provided by plaintiff was incorrect at the time of the contract's
inception or prior to its renegotiation. To the contrary, defendant represents it
detected and promptly raised the issue on the eve of closing; and neither party
claims that defendant conducted its own inspection prior to that time, uncovered
the inflated rent roll, and nevertheless relied on plaintiff's misrepresented NOI.
A-2568-22 21 Indeed, the trial court found defendant failed to so inspect, deeming that a waiver
of any claim of fraud for lack of "due diligence." Defendant contends it raised
the misrepresentation upon discovery and requested an extension of the closing
date to further investigate or seek an adjustment of the purchase price under the
contract, and plaintiff denied both requests.
Thus, the court's conclusion that defendant was precluded from ever
raising a fraud claim as a matter of law because defendant could never show it
reasonably relied on plaintiff's representations unduly restricts the bounds of
reasonable reliance. The buyer's mere failure to inspect does not in all instances
thwart a fraud claim or immunize a seller's false representations. Additionally,
whether the lapse of the "inspection period" truly pertained to defendant's ability
to challenge the misrepresentation of rent rolls and NOI remains an open
question, as the court failed to address defendant's claims that challenges to the
rent rolls had no such time constraint, and plaintiff's intentional or material
misrepresentations remained actionable as they were deliberately excluded from
any such temporal limitation.
Our courts consistently recognize the customary practice—even when a
trial court determines a plaintiff has failed to plead fraud with sufficient
specificity—to permit the plaintiff "the opportunity to comply with the dictates
A-2568-22 22 of the rule," rather than deny amendment of the complaint. Rebish, 224 N.J.
Super. at 627; see also Smith v. SBC Commc'ns., Inc., 178 N.J. 265, 282 (2004)
(noting that "ordinarily" a dismissal granted for failure to state a claim should
be "without prejudice"). Hence, the appropriate presumptive remedy, which we
direct here, would be to allow defendant to amend its counterclaim within a
reasonable period of time.
B.
Similarly, we find the court erred in granting summary judgment before
allowing even limited discovery as to genuinely disputed and material factual
issues.
"We review a grant of summary judgment de novo, applying the same
standard as the trial court." Branch v. Cream-O-Land Dairy, 459 N.J. Super.
529, 540-41 (App. Div. 2019) (citing Henry v. N.J. Dep't of Hum. Servs., 204
N.J. 320, 330 (2010)), aff'd as modified, 244 N.J. 567 (2021). We must
"consider[] whether 'the competent evidential materials presented, when viewed
in the light most favorable to the non-moving party, are sufficient to permit a
rational factfinder to resolve the alleged disputed issue in favor of the non-
moving party.'" Id. at 541 (quoting Brill v. Guardian Life Ins. Co. of Am., 142
N.J. 520, 540 (1995)) (citing R. 4:46-2(c)).
A-2568-22 23 It is well-settled that "[t]o establish a claim for breach of contract, a
plaintiff must provide proof of 'a valid contract between the parties, the opposing
party's failure to perform a defined obligation under the contract, and a breach
causing the claimant to sustain[] damages.'" Nelson v. Elizabeth Bd. of Educ.,
466 N.J. Super. 325, 342 (App. Div. 2021) (omission in original) (quoting
EnviroFinance Grp., LLC v. Env't Barrier Co., 440 N.J. Super. 325, 345 (App.
Div. 2015)). "[A] breaching party 'is liable for all of the natural and probable
consequences of the breach of that contract.'" Id. at 342-43 (quoting Totaro,
Duffy, Cannova & Co. v. Lane, Middleton & Co., 191 N.J. 1, 13 (2007)).
Further, "[w]here a party fails to declare a breach of contract[] and continues to
perform under the contract after learning of the breach, it may be deemed to
have acquiesced in an alteration of the terms of the contract, thereby barring its
enforcement." Garden State Bldgs., L.P. v. First Fidelity Bank, N.A., 305 N.J.
Super. 510, 524 (App. Div. 1997); see also Ajamian v. Schlanger, 20 N.J. Super.
246, 249 (App. Div. 1952) (holding that a party entitled to rescind a contract
due to fraud must act diligently and promptly, as any material act that assumes
the contract is valid may be deemed a ratification of that contract).
Exclusive "interpretation of contract language is a question of law."
Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J.
A-2568-22 24 597, 605 (2012) (citing Kieffer v. Best Buy, 205 N.J. 213, 222-23 (2011)). Such
"[p]urely legal questions . . . are . . . particularly suited for summary judgment."
Badiali v. N.J. Mfrs. Ins. Grp., 220 N.J. 544, 555 (2015) (citing Selective Ins.
Co. of Am., 210 N.J. at 605). Mixed questions of law and fact, however, are not
ripe for summary judgment when bona fide issues of fact exist. See Saez v. S
& S Corrugated Paper Mach. Co., 302 N.J. Super. 545, 551 (App. Div. 1997).
Indeed, only when "there exists a single, unavoidable resolution of the alleged
disputed issue of fact[ should] that issue . . . be considered insufficient to
constitute a 'genuine' issue of material fact for the purposes of Rule 4:46-2."
Brill, 142 N.J. at 540. Summary judgment, particularly in the absence of any
discovery, should be reserved for those discreet cases "when the evidence 'is so
one-sided that one party must prevail as a matter of law.'" Ibid. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)); see also Mohamed
v. Iglesia Evangelica Oasis De Salvacion, 424 N.J. Super. 489, 498 (App. Div.
2012). At this early pre-discovery juncture, this was not such a case.
Plaintiff argues, as the trial court found, that the contract required all
parties to close on September 27, 2022, and when defendant failed to attend the
closing, it materially breached the agreement, thereby entitling plaintiff to the
return of the deposit. Defendant argues, quoting directly from Marioni v. 94
A-2568-22 25 Broadway, Inc., 374 N.J. Super. 588, 606 (App. Div. 2005), that plaintiff could
not assert a breach based on defendant's refusal to close, because plaintiff "failed
to show that it was willing to perform the contract on the time of the essence
closing date." Defendant further contends plaintiff breached the contract first,
when it (1) misrepresented the rent rolls and occupancy to induce defendant to
enter the contract, (2) failed to exercise the required reasonable commercial
efforts to provide defendant with estoppel certificates that would have unmasked
the erroneous rental values, and (3) refused to further negotiate or reduce the
purchase price when it became apparent that the NOI was lower than that
represented by plaintiff in the agreement. Defendant contends that genuine
issues of material fact exist as to which party breached the contract and what
obligations remained as a result.
Plaintiff correctly asserts, and the trial court properly found, that the
contract provided that time was of the essence and afforded a remedy to plaintiff
for defendant's breach, allowing plaintiff to retain the $500,000 deposit. Yet,
the court failed to recognize material provisions of the contract limiting those
damages to instances "other than [those attributable to plaintiff]'s default."
More significantly, the contract expressly provided without temporal limitation
that should plaintiff "fail[] to perform any of the covenants and/or
A-2568-22 26 agreements . . . [defendant] may either: (i) terminate this Agreement, in whole
and not part, by giving written notice of such termination to Seller and Seller
shall immediately thereafter return the Deposit; or (ii) Buyer may pursue the
equitable remedy of specific performance."
Defendant raised material issues of fact regarding whether plaintiff's
representations were intentionally and materially false as to the property's rental
occupancy and income which set the purchase price, whether plaintiff used
reasonable commercial efforts to provide the estoppel certificates that would
have exposed any false valuation, and whether plaintiff's refusal to negotiate or
adjust the purchase price as required under the contract constituted a prior
material breach of the contract. The court found that the contract provided an
exclusive remedy to defendant that stipulated a credit of no more than $500,000
to the buyer if the NOI did not satisfy the stated capitalization rate "at the time
of closing." Even setting aside the contract language exempting from that
remedy valuation issues arising from plaintiff's "intentional and/or material"
misrepresentations, the court appeared to overlook that the liquidated damages
provision required plaintiff to, at a minimum, negotiate and reduce that purchase
price, which defendant alleges plaintiff refused to do prior to the closing. As
such, defendant asserted facts alleging plaintiff breached prior to the closing
A-2568-22 27 date, creating material issues of fact and undermining the pre-discovery grant of
summary judgment in plaintiff's favor.
Although it is generally inappropriate to grant summary judgment prior to
the conclusion of discovery, see Wellington v. Est. of Wellington, 359 N.J.
Super. 484, 496 (App. Div. 2003), "[a] party opposing a motion for summary
judgment on the grounds that discovery is incomplete . . . must 'demonstrate
with some degree of particularity the likelihood that further discovery will
supply the missing elements of the cause of action.'" Branch, 459 N.J. Super. at
541 (quoting Badiali, 220 N.J. at 555).
Here, defendant presented to the trial court correspondence in the days
before and after the closing reflecting defendant's raising concerns regarding
plaintiff's representations of the property's occupancy and income generated by
the rentals. It further reflected defendant's desire to pursue a resolution and
ultimately purchase the property and plaintiff's refusal to extend the closing date
or negotiate the price. Defendant alleged it suspected significant vacancies in
the building and referenced the property listing, in the aftermath of the missed
closing date, that reflected a reduced purchase price and a significantly lower
NOI than represented by plaintiff to defendant to induce defendant to enter into
A-2568-22 28 the original contract. At a minimum, defendant should have been afforded an
opportunity to conduct discovery.
Because the same concerns apply to the trial court's denial of summary
judgment on defendant's breach of contract counterclaim, and to its ultimate
dismissal of that claim, we reinstate that claim for further discovery. Defendant
was entitled to explore through discovery its own affirmative defense and
substantive claim that plaintiff breached the contract first by its own conduct.
The order granting summary judgment is reversed. The order dismissing
defendant's counterclaims with prejudice is reversed. On remand, defendant
may amend its counterclaim within thirty days of the date of this order.
Reversed and remanded.
A-2568-22 29