NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3796-13T2
MICHAEL CONLEY, JR. and KATIE M. MAURER, APPROVED FOR PUBLICATION Plaintiffs-Appellants, November 5, 2015
v. APPELLATE DIVISION
MONA GUERRERO, BRIAN KRAMINITZ, and MICHELE TANZI,
Defendants-Respondents. ______________________________
Argued May 19, 2015 – Decided November 5, 2015
Before Judges Messano, Ostrer and Tassini.
On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County, Docket No. C-12005-14.
William J. Kearns argued the cause for appellants (Kearns & Duffy, P.C., attorneys; Mr. Kearns, on the briefs).
Martin Liberman argued the cause for respondent Mona Guerrero (Law Offices of Martin Liberman, attorneys; Mr. Liberman, on the brief).
Robert J. Machi argued the cause for respondents Brian Kraminitz and Michele Tanzi (Morgan Melhuish Abrutyn, attorneys; Mr. Machi, of counsel and on the brief; Joshua Heines, on the brief).
F. Bradford Batcha argued the cause for amicus curiae New Jersey State Bar Association (Sharon A. Balsamo, General Counsel, attorney; Miles S. Winder, III, President, of counsel; Mr. Batcha, Stuart J. Lieberman, and Heather G. Suarez, on the brief).
The opinion of the court was delivered by
OSTRER, J.A.D.
The issue in this appeal is whether defendant-seller of a
residence effectively terminated her sale agreement with
plaintiffs-buyers during the "three day review" authorized by
the agreement, in accordance with New Jersey State Bar
Association v. New Jersey Association of Realtor Boards, 93 N.J.
470 (1983), mod., 94 N.J. 449 (1983), and N.J.A.C. 11:5-
6.2(g)(2). Plaintiffs challenged the seller's termination, and
appeal from the summary judgment order of the General Equity
Part dismissing their complaint to enforce the sale agreement.
We affirm.
I.
The facts are undisputed. On January 12, 2014, plaintiffs
Michael Conley, Jr. and Katie M. Maurer signed a form contract
to purchase a condominium unit in Bernards Township that
defendant Mona Guerrero had offered for sale. The contract
price was $292,000, and plaintiffs paid a $1000 deposit.
Guerrero signed the contract two days later, and the executed
contract was delivered on Wednesday, January 15, 2014.
2 A-3796-13T2 The Guerrero-to-Conley1 contract included the standard
attorney review provision, which provides that notice of
disapproval must be sent to the realtor by "certified mail, by
telegram or by delivering it personally." It states:
The Buyer or the Seller may choose to have an attorney study this Contract. If any attorney is consulted, the attorney must complete his or her review of the Contract within the three-day period. This Contract will be legally binding at the end of this three-day period unless an attorney for the Buyer or the Seller reviews and disapproves of the Contract.
. . . .
If an attorney for the Buyer or the Seller reviews and disapproves of the Contract, the attorney must notify the REALTOR(S) and the other party named in this Contract within the three-day period. Otherwise this Contract will be legally binding as written. The attorney must send the notice of disapproval to the REALTOR(S) by certified mail, by telegram or by delivering it personally. The telegram or certified letter will be effective upon sending. The personal delivery will be effective upon delivery to the REALTOR's office. The attorney may also, but need not, inform the REALTOR(S) of any suggested revision(s) in the Contract that would make it satisfactory.
As a result of a three-day weekend, the attorney review period
extended to Tuesday, January 21, 2014. Weichert Realtors,
1 For convenience, we use only one buyer's name in referring to the contract.
3 A-3796-13T2 through its "authorized representative[]," served as a disclosed
dual agent on the contract.
After the agreement was executed, Guerrero's agent received
competing offers to purchase the property. Plaintiffs were
aware of this. They sent a handwritten note to Guerrero,
describing their personal circumstances, and their desire for
the house. The note stated, "I hope that we are able to come to
an agreement that works for both sides." On or about January
15, plaintiffs increased their offer to $298,000.
Meanwhile, defendants Brian Kraminitz and Michele Tanzi
offered to pay $307,500, as reflected in an agreement they and
Guerrero signed on January 16, 2014. The attorneys for
Guerrero, and Kraminitz and Tanzi, negotiated various
modifications to the contract, which the attorneys deemed
binding on January 20, 2014.
On January 16, 2014, the Weichert agent asked Guerrero's
attorney, Martin D. Eagan, to transmit a disapproval of the
Guerrero-to-Conley contract.2 On January 20, 2014, an attorney
2 Defendant asserted that a second Weichert agent stepped in to represent only Guerrero, because the original Weichert agent was a dual agent. However, the Guerrero-to-Conley contract identified Weichert as the dual agent and the named agent as Weichert's representative. Moreover, the first Weichert agent, not the second, asked Guerrero's attorney to "void" the Guerrero-to-Conley contract, noting she was representing both buyer and seller.
4 A-3796-13T2 in Eagan's office by letter advised plaintiffs' attorney,
William Kearns, that the Guerrero-to-Conley agreement was
terminated, stating, "This will confirm that the above-
referenced contract has been terminated by the seller and the
realtors are hereby authorized to release the initial deposit
monies to the buyers." The letter was sent by email and
facsimile to Kearns; the agent at Weichert was "cc'd" on the
email. It was undisputed that Kearns and the agent received the
letter on January 20, 2014. Plaintiffs do not deny that they
also received notice of the letter.
On January 23, 2014, Kearns faxed a letter to Eagan
asserting that the Guerrero-to-Conley contract was in "full
force and effect" because "the 3 days within which an attorney
may terminate this contract has expired." Eagan and Kearns then
exchanged emails disputing the effectiveness of the January 20,
2014 notice. Plaintiffs filed a verified complaint and proposed
order to show cause, seeking specific performance of the
Guerrero-to-Conley contract and other relief. Plaintiffs
included Kraminitz and Tanzi as defendants.
Plaintiffs argued that the January 20 termination was
ineffective because it was not sent in accord with the
contract's attorney review provision. Kearns, plaintiffs'
counsel, admitted: "My clients . . . were informed that their
5 A-3796-13T2 contract would be cancelled as other offers were being received
after their initial offer was made and accepted, and a valid and
binding contract executed, subject to attorney review."
However, he asserted that plaintiffs, in making an increased
offer, did not "rescind or abandon their contract, but were
merely offering to create a new contract when and if their
contract was cancelled or disapproved." Eagan, Guerrero's
counsel, asserted "it has become the standard and customary
practice in residential real estate transactions to use email
and facsimile notification at the time of contract disapproval
in lieu of a certified mailing."
Judge Edward M. Coleman denied temporary injunctive relief.
As the facts were undisputed, Guerrero and plaintiffs filed
competing motions for summary judgment. In a cogent written
opinion, Judge Coleman granted defendants' motion, dismissing
plaintiffs' complaint. Judge Coleman noted that the attorney
review provision requires notice of disapproval to the broker
and the other party, but specifies the method of delivery only
as it relates to the notice to the broker. He discussed the
history and purpose of the provision, citing N.J. State Bar
Ass'n v. N.J. Ass'n of Realtor Bds., 93 N.J. 470 (1983). Judge
Coleman then analyzed three cases that construed the provision —
Kutzin v. Pirnie, 124 N.J. 500 (1991); Romano v. Chapman, 358
6 A-3796-13T2 N.J. Super. 48 (App. Div.), certif. denied, 176 N.J. 431 (2003);
and Gaglia v. Kirchner, 317 N.J. Super. 292 (App. Div. 1999) —
and found that none controlled the parties' dispute.
Judge Coleman noted that Kutzin held a contract was not
effectively rescinded where the attorneys for buyer and seller
discussed modifications to the contract, but "there was no
evidence of any form of specific disapproval within the review
period." See 124 N.J. at 507-08. Unlike in the instant case,
that notice came only after the review period had expired. Id.
at 505. Judge Coleman also discussed Romano, where we held that
once the attorneys approved an agreement during the attorney
review period — which did not occur here — a party may not
terminate, even if the period was unexpired. 358 N.J. Super. at
56-57.
Finally, Judge Coleman discussed Gaglia, which addressed an
attempt by the buyer to enforce a contract by alleging that his
own notice of disapproval was ineffective because it was sent by
fax and ordinary mail, and only to sellers' counsel. See 317
N.J. Super. at 298. Judge Coleman noted that Gaglia was denied
relief because he was not permitted to rely on his own counsel's
deviations from the mandated procedure.
Judge Coleman recognized that generally, clear and
unambiguous contract provisions must be enforced as written,
7 A-3796-13T2 citing Levison v. Weintraub, 215 N.J. Super. 273, 276 (App. Div.
1987). However, the judge wrote, "[T]his is a [c]ourt of equity
in which we are permitted to apply substance over form," citing
Applestein v. United Bd. & Carton Corp., 60 N.J. Super. 333, 348
(Ch. Div. 1960). The judge continued:
The purpose of the attorney review clause approved within the settlement in Bar Ass'n II, was to "protect parties against being bound by broker-prepared contracts without the opportunity to obtain adequate protection of their separate interests." Levi[]son, supra, 215 N.J. Super. at 277. It is undisputed that all parties to this transaction were represented by counsel and counsel were actually consulted, thus the underlying justification for the attorney review clause itself was satisfied. Further, Guerrero's breach was minor as it is further undisputed that Plaintiffs' were on actual notice of Guerrero's termination within the three-day period for attorney review. The essential purpose of the notice provision is to ensure actual notice and that was accomplished here.
This appeal followed. Plaintiffs argue that Guerrero was
required to strictly adhere to the contractual provision
specifying the methods of delivery. Defendants and amicus
curiae, the New Jersey State Bar Association, generally respond
that the termination notice in this case substantially complied
with the contract and that actual notice was accomplished,
thereby satisfying the underlying purpose of the notice
provision.
8 A-3796-13T2 II.
We review the trial court's grant of summary judgment de
novo. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330
(2010). We conclude, as did Judge Coleman, that defendant's
counsel's disapproval of the contract was effective.
Notice of disapproval must be sent to both the other
contracting party and that party's real estate agent. See N.J.
State Bar Ass'n, supra, 93 N.J. at 476. In the original
settlement between the State Bar and the New Jersey Association
of Realtor Boards, notice was to be provided only to the real
estate professional; however, the Court modified the agreement
to require notice to the contracting parties. Compare N.J.
State Bar Ass'n v. N.J. Ass'n of Realtor Bds., 186 N.J. Super.
391, 395 (Ch. Div. 1982) (describing notice only to broker),
with N.J. State Bar Ass'n, supra, 93 N.J. at 477 (language as
modified by the Court).
The contract prescribes the method of delivery only for
notice to the agent. Any form of actual notice suffices as
pertains to the buyer. Based on the history of the provision,
the method-of-delivery provision was apparently designed to
protect the interests of the real estate professionals, not the
contracting parties. See Peterson v. Pursell, 339 N.J. Super.
268, 276 (App. Div. 2001) (noting that the interests of the
9 A-3796-13T2 broker and the party "may not be congruent"); Denesevich v.
Moran, 211 N.J. Super. 554, 557 (App. Div. 1986) (declining to
treat the broker as a "fiduciary so as to impute notice to the
party" in part because "a broker's role is to bring the parties
together and act as a conduit for negotiations"). By contrast,
the three-day-review itself was designed to protect parties from
being bound by realtor-prepared contracts, without the benefit
of legal counsel. Levison, supra, 215 N.J. Super. at 276. This
obviously served the interests of the legal profession as well.
The method-of-delivery provision, as well as the entire
attorney review provision, arose out of a dispute between the
bar and the real estate professionals. The provisions are
mandated, even if contracting parties would prefer to waive
them. See N.J. State Bar Ass'n, supra, 93 N.J. at 481
(enjoining real estate brokers from preparing contracts that
would "waive, disclaim, relinquish or abridge the right of the
parties" to attorney review).
In this case, plaintiffs' right to notice of disapproval —
which is not subject to the method-of-delivery requirements —
was satisfied. Instead, plaintiffs seek to enforce the rights
of the agent to notice that complies with the method-of-delivery
requirements. However, the agent does not complain about the
deviation from the prescribed method of delivery.
10 A-3796-13T2 Even assuming the buyers may enforce the agent's right to
notice by the prescribed method of delivery, there was
substantial compliance. Enforcement of the method-of-delivery
provision here would result in a forfeiture of Guerrero's right
to disapprove the contract. Given Guerrero's substantial
compliance, that forfeiture should be avoided.
"'To the extent that the non-occurrence of a condition
would cause disproportionate forfeiture, a court may excuse the
non-occurrence of that condition unless its occurrence was a
material part of the agreed exchange.'" Gazis v. Miller, 378
N.J. Super. 59, 65 (App. Div. 2005) (quoting Restatement
(Second) of Contracts, § 229 (1981)), aff'd, 186 N.J. 224
(2006). Disproportionality is a flexible concept; its
application rests within the court's sound discretion.
Restatement (Second) of Contracts, § 229 comment b (1981). In
determining whether a forfeiture is disproportionate, we weigh
the extent of forfeiture against "the importance to [plaintiffs]
of the risk from which [they] sought to be protected and the
degree to which that protection will be lost if the non-
occurrence of the condition is excused . . . ." Ibid.
Here, defendant's right of disapproval was conditioned on
notice that complies with the specified methods of delivery.
However, compliance with the condition was not a material part
11 A-3796-13T2 of the parties' agreement; it was imposed upon them by the
consent judgment in N.J. State Bar Ass'n. Enforcement of the
condition would cause a forfeiture — the loss of Guerrero's
right to disapprove the contract and enter into an agreement
with others. Applying that balance, the weight of Guerrero's
forfeiture predominates, inasmuch as plaintiffs avoided the
result the condition was designed to avoid — lack of actual
notice. See Del. Steel Co. v. Calmar S.S. Corp., 378 F.2d 386,
387-89 (3d Cir. 1967) (stating that "no legitimate interest" of
the defendant-carrier would be served and it would "plainly be
inequitable" to bar an action of the plaintiff-shipper who
failed to timely file a written notice of claim of damage, as
required by a bill of lading, where the carrier received written
notice that the shipped goods were damaged, the carrier was
aware of the damage, and the shipper orally advised the carrier
that a damage claim would be made).
Substantial compliance may be more liberally applied in
this case because the attorney review provision, in particular
the notice requirement, is not the product of an arm's length
agreement of the two contracting parties. Rather, the
provisions are imposed upon buyers and sellers by the consent
judgment approved by the Court in N.J. State Bar Ass'n, supra.
Cf. Corcoran v. St. Peter's Med. Ctr., 339 N.J. Super. 337, 343-
12 A-3796-13T2 44 (App. Div. 2001) (applying substantial compliance doctrine to
service of a demand for a trial de novo pursuant to R. 4:21A-
6(b)(1)); 13 Williston on Contracts § 38:12 (Lord ed. 2013)
(distinguishing between contractual provisions expressing "the
will of the parties" and conditions "the law itself had imposed
. . . in absence of or irrespective of the manifested intention
of the parties," which the court may relax "so as to do justice
and avoid hardship.").
Our holding that the attorney here effectively terminated
the contract by substantially complying with the notice
requirement is not inconsistent with previous decisions
construing the attorney review provision. Plaintiffs contend
that Peterson, supra, compels a result in their favor. We
disagree. In Peterson, the buyers alleged that the seller's
termination of the sale agreement was untimely. 339 N.J. Super.
at 271. We rejected the buyers' argument that the attorney
review period commenced when the buyers delivered a fully
executed purchase agreement to the seller's broker, and not to
the seller. Id. at 273-75. We held that even if later delivery
to the seller's attorney constituted delivery to the seller —
since the seller had directed that the signed contract be
delivered to her attorney — the termination was timely made
within three days thereafter. Id. at 276-77.
13 A-3796-13T2 We held that the buyers were required to strictly adhere to
the contractual and regulatory language. Id. at 276. However,
we did so because delivery of a signed agreement to the seller's
real estate broker did not achieve the purpose underlying the
requirement of delivery to the seller.
Not only does plaintiff's argument violate the plain language of the attorney review provision, but it ignores the reality of the real estate transaction and, indeed, common sense. A broker's interest lay solely in negotiating a signed contract and obtaining a commission. [A] broker's role is to bring the parties together and [to] act as a conduit for negotiations. Its goal is simply to put the deal together. In approving the settlement agreement, the Supreme Court provided for the intervention of an attorney because the interests of the broker and those of a party may not be congruent. To clothe the broker with the attributes of a fiduciary in this context so as to impute delivery to a party by reason of delivery to the broker is unrealistic.
[Ibid. (internal quotation marks and citations omitted).]
By contrast, undisputed notice to the buyers and their real
estate agent in this case achieves the goal of the provision: to
accomplish actual notice. We are keenly aware that the actual
notice did not avoid a dispute or litigation. But the
litigation pertained not to the fact of notice, but to its legal
implications.
14 A-3796-13T2 Furthermore, we are not convinced that Kutzin, supra,
compels a different result than we reach here. While the Court
referenced the disapproving attorney's failure to comply with
the method-of-delivery requirement, its focus was on the failure
to disapprove at all. The Court stated:
To rescind the contract, either party's attorney would have had to send notice of disapproval during the three-day period to both Weichert and Russo "by certified mail, by telegram, or by delivering it personally." The record reveals that the only correspondence between the attorneys and the realtors during the three-day period in question was Kozinn's September 3rd letter to Russo. That letter did not disapprove of the contract; rather, it stated that "the * * * contract is satisfactory to me as Attorney for the Seller with the exception that my clients have requested that I hold the deposit pending closing," an exception that was accepted by both Russo and Maccarone. Moreover, Kozinn did not send the letter by certified mail, nor did he send a copy to Weichert.
[124 N.J. at 507.]
The Court's holding rested not on the method of delivery, but on
the fact that Kozinn's letters did not disapprove of the
agreement. Moreover, the Court did not consider the doctrine of
substantial compliance, as it did not need to reach the issue
whether delivery was effective.
Finally, we decline the Bar Association's invitation to
endorse a revision of the current standard language to recognize
15 A-3796-13T2 the advent of modern communication methods such as email and the
asserted obsolescence of telegram. (The record includes no
competent evidence on the availability or unavailability of
telegram carriers.) We acknowledge that the Court in N.J. State
Bar Ass'n, supra, did not explain the purpose served by
prescribing methods of delivery of a termination notice.
However, one purpose of the selected delivery methods is
evident: to avoid or limit disputes and litigation over whether
actual delivery was accomplished.
A party may prove that he or she has sent notice by
certified mail or telegram by resorting to evidence from a
third-party — the U.S. Postal Service or a telegram service.
Unless the attorney giving notice personally delivers the notice
himself or herself, a third person would be involved in personal
delivery as well. Also, the drafters of the settlement in N.J.
State Bar Ass'n, supra, apparently deemed the three required
methods as generally reliable means of accomplishing delivery.
Whether email or facsimile can satisfy that apparent purpose,
and under what conditions, we leave to others to address.
We observe that in this case, it was not disputed that
actual notice of termination was received by the buyers, their
attorney and real estate agent. We do not intend to establish a
general rule that delivery to the realtor by email satisfies the
16 A-3796-13T2 prescribed method of delivery. Rather, based on the facts and
circumstances presented, considered in light of the legal
principles we have described, we affirm the trial court's
determination that the notice of disapproval effectively
terminated the Guerrero-to-Conley agreement.
Affirmed.
17 A-3796-13T2