SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interest of brevity, portions of any opinion may not have been summarized.)
Michael Conley, Jr. v. Mona Guerrero (A-65-15) (076928)
Argued January 17, 2017 -- Decided April 3, 2017 -- Corrected April 6, 2017
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 N.J. 470, 476-77, modified, 94 N.J. 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 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 N.J. 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. In Levison v. 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.
2 SUPREME COURT OF NEW JERSEY A-65 September Term 2015 076928
MICHAEL CONLEY, JR. and KATIE M. MAURER,
Plaintiffs-Appellants,
v.
MONA GUERRERO, BRIAN KRAMINITZ, and MICHELE TANZI,
Defendants-Respondents.
Argued January 17, 2017 – Decided April 3, 2017 – Corrected April 6, 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).
1 JUSTICE SOLOMON delivered the opinion of the Court.
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
2 than by the methods approved under our 1983 holding and
prescribed in the parties’ contract -- certified mail, telegram,
or personal service. Buyers sued for specific performance,
claiming the contract was enforceable because Seller’s
notification of disapproval was sent improperly.
We are called upon to determine whether the attorney-review
provision of a standard form real estate contract must be
strictly enforced, thereby nullifying Seller’s notice of
disapproval and requiring enforcement of the real estate
contract. We conclude that, 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. We also exercise
our constitutional authority over the practice of law and find
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.
I.
The pertinent undisputed facts of record are as follows.
On January 12, 2014, Buyers signed a contract to purchase a
condominium from Seller. Weichert Realtors was the Listing and
3 Selling Broker on this transaction, and a real estate agent from
Weichert acted as a dual agent for the parties. The 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 this Court in Bar Ass’n 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.”1 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 Buyers were informed that higher
1 In a subsequent modification to New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards (Bar Ass’n), 93 N.J. 470 (1983), we held “that the term ‘Realtor’ may be used in the ATTORNEY REVIEW clause instead of ‘Broker’ by any person who is duly authorized by the National Association of Realtors to use that term.” N.J. State Bar Ass’n v. N.J. Ass’n of Realtor Bds., 94 N.J. 449, 449 (1983). As such, while Bar Ass’n, supra, 93 N.J. at 476-77, and N.J.A.C. 11:5-6.2(g)(2)(3) use only the term “Broker(s),” the contract at issue here used appropriate language to apply the method-of-notification provision to the dual real estate agent. 4 offers were submitted for the property. In response, Buyers
increased their offer amount and implored Seller to agree to the
sale. The next day, however, Seller accepted a higher bid from
defendants Michele Tanzi and Brian Kraminitz (Tanzi).
One day before the attorney-review period expired, Seller’s
attorney e-mailed and faxed a letter to Buyers’ attorney
disapproving the contract. The dual real estate agent was
copied on the e-mail. Nevertheless, 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, against Seller and Tanzi
(collectively, defendants), demanding specific performance and
requesting a temporary restraining order to enjoin the sale of
the condominium to anyone other than Buyers. Buyers argued that
“no attorney notified any realtor involved in the transaction by
certified mail, by telegram or by personal delivery as is
required if the contract was disapproved.” Consequently, 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.”
5 The trial court denied the application for a temporary
restraining order, finding that Buyers failed to establish a
reasonable probability of success on the merits and that the
equities favored Tanzi as an “innocent buyer[] . . . that
entered into a contract to purchase the property, and now ha[s]
been forced to enter into litigation.”
Both parties filed cross motions for summary judgment
because the facts were “largely uncontroverted.” The court
granted defendants’ motion for summary judgment and dismissed
Buyers’ complaint. Buyers appealed, and the Appellate Division
affirmed the trial court’s decision. Conley v. Guerrero, 443
N.J. Super. 62, 68 (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 panel questioned whether Buyers could be able to
enforce their agent’s right to notice by the prescribed methods.
Id. at 69. Assuming Buyers’ ability to do so, the appellate
panel found that the specific methods of delivering notification
delineated in the contract were not material, and to force
Seller to forfeit her right to disapprove the contract would be
inappropriate. Id. at 69-70. The Appellate Division reasoned
that the notice requirements were imposed on the parties by the
6 courts, not through the bargaining process, and therefore, could
be relaxed in the interests of justice. Id. at 70. The panel
also found that Seller’s attorney “substantially compl[ied] with
the notice requirement” because the “undisputed notice to the
buyers and their real estate agent . . . achieve[d] the goal of
the provision: to accomplish actual notice.” Id. at 70-71.
We granted Buyers’ petition for certification. 244 N.J.
526 (2016). We also granted amicus curiae status to the New
Jersey State Bar Association (NJSBA) and New Jersey REALTORS2
(REALTORS).
II.
Buyers argue that the trial court and appellate panel
modified the Court’s decision in Bar Ass’n when they ruled that
Seller’s attorney could disapprove the contract by fax and e-
mail, rather than the three methods specified in Bar Ass’n:
telegram, certified mail, and in-person delivery. By allowing
alternative methods, Buyers assert that the lower courts usurped
this Court’s exclusive authority to regulate the rules governing
the practice of law. In addition, Buyers contend that the
contract should be strictly enforced because it is unfair for
2 New Jersey REALTORS was formerly known as the New Jersey Association of REALTOR Boards. This organization represented real estate professionals in Bar Ass’n, which created the attorney-review requirement at issue in this case. 7 the courts to hold realtors -- but not attorneys -- to the
letter of Bar Ass’n.
Defendants ask this Court to affirm the decision of the
Appellate Division. They argue that the Court should find
substantial compliance with the notice provision because the e-
mail and fax sent by Seller’s attorney provided actual notice to
Buyers and the agent. Defendants assert that if the Court were
to insist on strict enforcement of the notice provision, it
would result in a “disproportionate forfeiture” for Tanzi, who
bought the house in good faith and has been living there for
approximately two years. In addition, according to defendants,
strict enforcement would “result in a forfeiture of [Seller’s]
right to disapprove the contract.”
According to defendants, common practice in real estate law
has changed dramatically since the Court’s decision in Bar Ass’n
thirty-three years ago. As such, defendants argue that this
Court should not adopt a formalistic rule that ignores the
reality of real estate transactions, in which e-mail and fax are
routinely used to communicate and exchange contracts. To
support this point, Seller submits that it defies logic to allow
the signed contract to be delivered by e-mail and fax -- which
happened here -- yet not allow disapproval of the same contract
in the same manner.
8 Amicus NJSBA supports defendants’ contentions. It asks the
Court to affirm the Appellate Division and to “take steps to
reassess the transmission requirements established in the [Bar
Ass’n] case over 30 years ago.”
Amicus REALTORS also argues in support of defendants. It
asserts that the contract language from Bar Ass’n is
anachronistic and that future contracts should allow
communication “by fax, by email, or by a reputable overnight
courier.” REALTORS argues that “the decision below was correct
as a matter of logic,” but concedes that relying on the
substantial compliance doctrine could endanger the Bar Ass’n
settlement. Instead, REALTORS urges that the Court modify the
allowable method of delivery for notices of disapproval in real
estate contracts and apply it retroactively to this case.
III.
Our review of a summary judgment ruling is de novo. Templo
Fuente De Vida Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh,
224 N.J. 189, 199 (2016). We apply the same standard as the
trial court. Ibid. That is, summary judgment will be granted
if there is no genuine issue of material fact and “the moving
party is entitled to a judgment or order as a matter of law.”
Ibid. (quoting R. 4:46-2(c)).
A.
9 Our decision as to whether defendants are entitled to
judgment as a matter of law is guided by Bar Ass’n. That case
was precipitated by State v. Bander, 56 N.J. 196 (1970), which
was decided more than ten years earlier. In Bander, the
defendant was a licensed real estate broker who used a blank
legal form as his skeleton for a contract to sell a certain
property. Id. at 198. The defendant added provisions he
created himself and, eventually, the document was signed by both
the sellers and purchasers. Id. at 198-99. The defendant was
then charged with the unauthorized practice of law, under the
now repealed N.J.S.A. 2A:170-78(a). Id. at 199 (“Any person not
licensed as an attorney or counselor at law . . . [who]
[e]ngages in this state in the practice of law . . . [i]s a
disorderly person.” (quoting N.J.S.A. 2A:170-78(a) (repealed))).
N.J.S.A. 2A:170-81(d), however, exempted licensed real
estate brokers who drafted real estate contracts from criminal
liability under N.J.S.A. 2A:170-78. Ibid. The municipal and
superior court determined that this exemption was
unconstitutional and, thus, found the defendant guilty. Ibid.
According to those tribunals, the N.J.S.A. 2A:170-81(d)
exemption was a legislative attempt to authorize certain
practices of law -- conduct which goes directly against this
Court’s “exclusive jurisdiction over admission of the practice
of law and discipline of those admitted,” pursuant to Article
10 IV, Section 2, Paragraph 3 of the New Jersey Constitution. Id.
at 200.
This Court reversed the defendant’s conviction, finding
that the Legislature enacted N.J.S.A. 2A:170-78 “to aid the
judiciary in its regulation of the practice of law by providing
a mode of punishment for those found to have engaged in some
unlawful practice.” Id. at 201. The Court concluded that the
exemption provision was not an attempt by the Legislature to
permit real estate brokers to practice law, but rather to shield
their practices from criminality under N.J.S.A. 2A:170-78.
Ibid. The Court declined to decide whether the defendant’s
conduct actually constituted the unauthorized practice of law
because such a determination was not needed under its holding
and because the record was insufficiently developed to make that
assessment. Id. at 202. The Court suggested, however, that “an
answer might be obtained in a separate suit for an injunction”
against this type of act “or for a declaratory judgment,” in
which a fully developed record would allow “a valued and
intelligent reply to such an inquiry.” Id. at 202-03.
About a decade later, in New Jersey State Bar Ass’n v. New
Jersey Ass’n of Realtor Boards, 186 N.J. Super. 391, 393 (Ch.
Div. 1982), the NJSBA acted on the Bander Court’s suggestion and
filed a suit against REALTORS seeking a declaratory judgment and
injunctive relief. NJSBA sought a ruling that licensed real
11 estate brokers or salespersons engage in the unauthorized
practice of law when they prepare contracts for the sale or
lease of property. Ibid.
After several settlement attempts and two public hearings,
the parties reached a final agreement. Id. at 393-96. Under
the proposed final settlement, real estate brokers were allowed
to prepare real estate contracts, provided they include an
attorney-review clause that (1) gives the parties’ respective
attorneys three days to review the contract and (2) requires an
attorney to notify the broker of disapproval within the three-
day review period. Id. at 395.
The trial court found that
[t]he proposed settlement [accommodates] the interests of realtors and attorneys by allowing the realtor to consummate the contract phase of the transaction, with attorneys handling the actual transfer of title. Most importantly, however, it serves to protect the public interest by making the contract subject to prompt attorney review if either buyer or seller so desires.
[Id. at 396.]
The court entered a final consent judgment that incorporated the
proposed terms with minor modifications, including the
requirement that a disapproving attorney must notify the other
party, in addition to the broker. Id. at 397-98.
This Court reviewed the final consent judgment upon joint
application of the parties, NJSBA and REALTORS, “under our
12 constitutional powers governing the practice of law.” Bar
Ass’n, supra, 93 N.J. at 472 (citing N.J. Const. of 1947 art.
VI, § II, ¶ 3; R. 1:21 (regulation of practice of law)). The
Court found that “[t]o the extent that there is an inevitable or
unavoidable overlap between the realty and legal professions,
the public’s interest is safeguarded through the settlement’s
attorney[-]review provisions and the Court’s continuing
supervisory control.” Id. at 474. Importantly, we approved the
final consent judgment, with modifications, and specifically
noted that we may modify the agreement in the future. Ibid.
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. N.J.A.C. 11:5-
6.2(g) has not been amended since.
B.
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:
3. Notice of Disapproval
If an attorney for the Buyer or the Seller reviews and disapproves of this contract, the attorney must notify the Broker(s) and the other party named in this contract within the three-day period. Otherwise this contract
13 will be legally binding as written. The attorney must send the notice of disapproval to the Broker(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 Broker's office. The attorney may but need not also inform the Broker(s) of any suggested revisions in the contract that would make it satisfactory.
[N.J.A.C. 11:5-6.2(g)(2) (emphasis added).]
The regulation also requires that the contract include “the
names and full addresses of all persons to whom a Notice of
Disapproval must be sent in order to be effective.” N.J.A.C.
11:5-6.2(g)(3).
Our courts have been called on several times to interpret
the attorney-review provisions in real estate contracts. See,
e.g., Romano v. Chapman, 358 N.J. Super. 48, 56-57 (App. Div.)
(holding that once attorney approves contract, contract is
binding, even if attorney attempts to disapprove it before
review deadline), certif. denied, 176 N.J. 431 (2003); Peterson
v. Estate of Pursell, 339 N.J. Super. 268, 273-74 (App. Div.
2001) (holding that attorney-review period begins to run “when a
conforming contract is delivered to a party”); Levison v.
Weintraub, 215 N.J. Super. 273, 274-75, 278 (App. Div.) (holding
that when one attorney, acting as attorney-in-fact, signs
contract on party’s behalf, second attorney for that party may
still disapprove contract), certif. denied, 107 N.J. 650 (1987).
14 However, this Court has not been called on to decide whether an
attorney’s disapproval letter must follow the precise
notification procedures detailed in the attorney-review clause.
This Court did evoke the prescribed means of notification
in Kutzin v. Pirnie, in which we held that the contract was
enforceable because it was not explicitly disapproved within the
three-day attorney-review period. 124 N.J. 500, 507 (1991). In
that case, during the attorney-review period, the sellers’
attorney sent a letter to the buyers’ attorney, asking that the
deposit be transferred to an escrow account pending closing.
Id. at 503-04. The buyers responded to the sellers’ attorney by
letter, also within the three-day period, agreeing to transfer
the funds and attaching a rider with proposed amendments to the
contract. Id. at 504. Several weeks later, however, the buyers
backed out of the deal. Id. at 505. Although we found
dispositive the fact that the contract was not clearly
disapproved within the three-day attorney-review period, in
dicta we commented on the failure of both parties to comply with
the method-of-delivery provision. Id. at 508. We noted that
the sellers’ attorney failed to send the letter directly to the
buyers also and that the buyers’ attorney failed to send the
letter by certified mail. Ibid.
Later, the Appellate Division decided Gaglia v. Kirchner,
which is more germane to the issue now before us. 317 N.J.
15 Super. 292 (App. Div.), certif. denied, 160 N.J. 91 (1999). In
Gaglia, supra, the buyer’s attorney sent a letter -- only to the
sellers’ attorney -- by fax and ordinary mail, and not
personally or by telegram or certified mail. Id. at 296. The
letter -- sent within the three-day attorney-review period --
explicitly disapproved the contract in its current condition and
requested certain modifications that would render the contract
acceptable. Id. at 296-97. Several business days later, the
sellers’ attorney faxed a letter to the buyer’s attorney,
stating, “I have received your disapproval of the contract . . .
. My clients do not wish to pursue this matter any more with
your clients. The contract shall be considered void.” Id. at
298. The buyer then brought an action to enforce the contract,
arguing that his attorney’s disapproval letter did not terminate
the contract because it failed to abide by the requisite
notification procedures. Ibid. The trial court and Appellate
Division agreed that “the party who invoked the attorney[-
]review provision to annul the contract could not avoid the
consequences of his doing so by relying on his own deviations
from the procedure prescribed by N.J.A.C. 11:5-6.2.” Ibid.
Although it limited a party’s ability to benefit from his
or her own mistakes, Gaglia left open the question central to
this appeal: whether an individual can rely on the other
16 party’s failure to abide by the method-of-notice provision to
enforce the contract.
Indeed, even though the cases cited above are instructive,
none dictate the outcome in this case. Buyers rely on Peterson,
supra, to support their argument that courts must strictly
enforce the precise terms of the attorney-review clause. 339
N.J. Super. at 276 (“We thus insist on strict adherence to the
contractual and regulatory language.”). Peterson is
distinguishable, however, because, while the contract language
was “crystal clear,” id. at 275, it dealt with a different
mandate -- the point at which the attorney-review period begins,
id. at 271. The panel found no good reason to deviate from the
contract’s language. Id. at 275.
In Kutzin, supra, we suggested that failure to abide by the
method-of-delivery provision would render a disapproval
ineffective, but those statements were dicta. 124 N.J. at 508.
Likewise, the Appellate Division’s holding in Gaglia, supra,
does not control here. There, the panel upheld the buyer’s
disapproval notice even though he did not abide by the
contractually specified methods of delivery. 317 N.J. Super. at
298-99. However, the disapproval notice was upheld because the
buyer later sought to enforce that very contract, arguing that
it was still valid because his own disapproval letter deviated
from the requirements of N.J.A.C. 11:5-6.2. Id. at 298. Here,
17 by contrast, Buyers rely on Seller’s noncompliance with contract
terms.
IV.
There is no directly controlling precedent before us. We
are influenced, however, by our decision in Bar Ass’n and
subsequent Appellate Division cases that have placed great
weight on the underlying purpose when interpreting and enforcing
the attorney-review provision.
To begin with, the Bar Ass’n Court was concerned first and
foremost with protecting consumers’ rights. The Court approved
of the settlement agreement because it resolved the question of
brokers’ unauthorized practice of law, and, “[m]ost importantly,
. . . it serve[d] to protect the public interest by making the
contract subject to prompt attorney review if either buyer or
seller so desires.” Bar Ass’n, supra, 93 N.J. at 474 (quoting
trial court opinion); see also Calvert v. K. Hovnanian at
Galloway, VI, Inc., 128 N.J. 37, 45 (1992) (holding that,
“[m]ost importantly, what [Bar Ass’n] sought to protect was not
the private interest of lawyers but rather the public’s right to
be protected from inadequate information” by allowing parties to
real estate transactions opportunity to consult with counsel);
Sears Mortgage Corp. v. Rose, 134 N.J. 326, 356 (1993)
18 (explaining that Bar Ass’n settlement aimed to “protect the
interests of buyers and sellers”).
Notably, 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. In accepting
these methods, we do not perceive an intent on this Court’s part
to convert them into the focus of the Bar Ass’n opinion itself.
Similarly, we do not glean from the Bar Ass’n opinion an intent
that strict adherence is necessary, so long as the interests of
the consumer are protected. In fact, we believe that the Bar
Ass’n Court contemplated that a court would have the flexibility
to grant relief to the parties before it 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.
Turning to cases following Bar Ass’n, it appears that the
Appellate Division has honored effectuating the purpose of the
attorney-review clause above all else.
19 For example, in Peterson, supra, the buyer delivered the
executed agreement to the real estate broker, who then faxed the
contract to the seller’s attorney the next day. 339 N.J. Super.
at 272. The issue before the panel was when the three-day
attorney-review period began, given that the parties involved
received the contract on different days. Id. at 271. The
Appellate Division found the attorney-review clause to be
“crystal clear” and to require that the three-day review period
begin on the date the signed contract is delivered to a party,
not its agents. Id. at 275. The Peterson panel found this rule
supported the purpose of the attorney-review clause -- to
protect the parties’ interests from the real estate broker,
whose interests may be more focused on quickly closing a deal.
Id. at 276.
In Levison, supra, the sellers’ attorney signed a real
estate contract on the sellers’ behalf, acting under a power of
attorney, arguably evidencing approval of the contract. 215
N.J. Super. at 274. The sellers then forwarded the contract to
a second attorney for review, who disapproved the contract
within the three-day period. Id. at 274-75. The panel found
the contract to be void, stating that when “attorney disapproval
is registered within three days there can be no contract,
regardless of prior approvals.” Id. at 277. The Appellate
Division found that this holding supported the attorney-review
20 clause’s purpose, which “is to protect parties against being
bound by broker-prepared contracts without the opportunity to
obtain adequate protection of their separate interests.” Ibid.
Levison was clarified by Romano, supra, where, on the
second day of the review period, each party’s attorney wrote to
her counterpart approving the contract and stating that the
attorney review was complete. 358 N.J. Super. at 50-51. On the
third day, however, the sellers accepted a higher offer, and a
disapproval letter was hand-delivered to the buyers’ counsel.
Id. at 51. The buyers sued, arguing that the attorney-review
clause was not meant “to prevent the creation of a binding
contract” before the three-day review period expired, “so long
as the parties’ attorneys have approved its contents.” Ibid.
In addition, the buyers argued that Levison was distinguishable
because the first attorney in that case was an agent acting as a
seller and not as legal counsel approving the contract terms.
Id. at 51-52.
The Appellate Division agreed with that distinction and
found that, although an attorney executed the agreement for the
sellers in Levison, the sellers in that situation were still
entitled to full attorney review as provided for in the
contract’s provisions. Id. at 56. The appellate panel
reiterated that the purpose of the attorney-review provision is
to “give the parties an opportunity for attorney review and
21 consultation” before a real estate contract becomes enforceable.
Id. at 54. With that purpose in mind, the panel found that
“once the attorney has the opportunity to review the agreement
and consult with the client, and the agreement is approved, with
or without changes, the client cannot back out of the agreement,
even within the three-day period.” Id. at 57. The panel based
its decision on the need to effectuate the broad purpose of the
attorney-review clause, “to give the parties an opportunity for
their respective attorneys to review the form agreement,” and
not on a strict interpretation of its language. Id. at 52.
Furthermore, we find the purpose-focused reasoning applied
in these decisions to comport with well-settled principles of
contract law. This Court will generally not rewrite a valid
contract to replace it with a better one, Quinn v. Quinn, 225
N.J. 34, 45 (2016), but, when strict enforcement of a contract
provision would frustrate the contract’s overarching purpose,
the courts will intervene, Cooper v. Government Employees
Insurance Co., 51 N.J. 86, 93-94 (1968).
As the appellate panel observed, strict enforcement of the
notification provision here would result in the significant
forfeiture of Seller’s right to review the contract with counsel
and disapprove it within the attorney-review period. Conley,
supra, 443 N.J. Super. at 69-70. Such a consequence would
undermine the purpose of the attorney-review clause. Thus, this
22 case presents precisely the type of circumstance where strict
enforcement is not called for in order to fulfill the consumer-
oriented purpose of the notice-of-disapproval obligation. In
addition, actual notice of disapproval of the contract was
conveyed to the attorney for the client. That is not disputed.
Moreover, because the broker was operating in a dual capacity
for Buyers and Seller in the original transaction, there can be
no practical argument that the broker did not know of the
disapproval. In any event, the broker here is not the
complaining party.
In short, 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 in Bar Ass’n
and included in Section 11:5-6.2(g) of the New Jersey
Administrative Code. We decline to reach such a result.
Finally, we specifically reserved our right to modify the
settlement agreement reached in Bar Ass’n, supra, 93 N.J. at
474, and we do so today. Currently, the regulation provides
that real estate agents and brokers must receive notice by
certified mail, telegram, or personal delivery. N.J.A.C. 11:5-
6.2(g)(2)(3); Bar Ass’n, supra, 93 N.J. at 476-77; see N.J.
23 State Bar Ass’n v. N.J. Ass’n of Realtor Bds., 94 N.J. 449, 449
(1983) (allowing term “realtor” to replace “broker” in attorney-
review provision when warranted).
However, notice by telegram is obsolete. As amici point
out, fax and e-mail are “faster and more reliable” than
telegrams were. Shelly Freierman, Telegram Falls Silent Stop
Era Ends Stop, N.Y. Times (Feb. 6, 2006),
http://www.nytimes.com/2006/02/06/technology/telegram-falls-
silent-stop-era-ends-stop.html. In fact, it appears that fax
and e-mail have become the predominant, customary methods by
which professionals in the industry communicate. Thus, amending
the Bar Ass’n settlement is necessary to acknowledge customary
procedure in the profession and to recognize advances in
technology.
Therefore, 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
days. We also commend this matter to the Real Estate Commission
for consideration of amendments to N.J.A.C. 11:5-6.2(g)
consistent with our holding. Finally, we recognize that the
Court may need to modify the attorney-review clause again in the
future. Bar Ass’n, supra, 93 N.J. at 474.
24 VI.
For the reasons set forth above, 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.