NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-3149-16T3
SDK TROY TOWERS, LLC,
Plaintiff-Appellant,
v.
TROY TOWERS, INC.,
Defendant-Respondent. ____________________________
Argued January 15, 2019 – Decided February 14, 2019
Before Judges Fisher, Suter and Firko.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-0011-16.
Joseph B. Fiorenzo argued the cause for appellant (Sills Cummis & Gross, PC, attorneys; Joseph B. Fiorenzo, on the brief).
Michael J. Canning argued the cause for respondent (Giordano, Halleran & Ciesla, PC, attorneys; Michael J. Canning, of counsel and on the brief; Matthew N. Fiorovanti, on the brief).
PER CURIAM Plaintiff SDK Troy Towers, LLC, commenced this chancery action,
seeking specific performance and alleging its written and oral communications
with defendant Troy Towers, Inc. – for the purchase from defendant of an
apartment complex in Bloomfield for $45,000,000 1 – evolved into an
enforceable contract. Defendant secured dismissal through a series of summary
judgment motions, elucidating that the communications of these sophisticated
parties2 demonstrated without doubt that they both well understood neither
would be bound absent a fully-executed and delivered written contract – an
event that never occurred. Because the motion judges correctly determined that
the evidence, when viewed in plaintiff's favor, was "so one-sided" that plaintiff
could not prevail at trial, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,
536 (1995), we affirm.
I
This suit was commenced in the Chancery Division in March 2012. The
original complaint alleged breach of contract, promissory estoppel, breach of
1 The property consists of 356 units contained within two sixteen-story towers. 2 Plaintiff is an entity in the business of owning and managing apartment buildings; its principals are Dinesh Khosla, a law professor, and his wife, Savita Khosla, a physician. Defendant is owned by a holding company, Ayson Realty Corporation, which is owned by a family trust. A-3149-16T3 2 the implied covenant of good faith and fair dealing, and fraud, and sought
specific performance and damages. After a considerable discovery period,
defendant moved for partial summary judgment. By way of a November 20,
2015 written opinion, Judge Donald A. Kessler granted the motion in part; he
dismissed the breach-of-contract claim, rejected plaintiff's request for specific
performance, and discharged a notice of lis pendens on the property. The judge
denied the motion in part and transferred the action to the Law Division.
Defendant later moved for summary judgment on the remaining claims.
In an April 27, 2016 written opinion, Judge Thomas R. Vena granted defendant's
motion on the fraud and good-faith-and-fair-dealing claims but denied relief on
the promissory-estoppel claim. He also denied defendant's reconsideration
motion on the promissory-estoppel claim, and we denied defendant's motion for
leave to appeal the judge's decision on the promissory-estoppel claim.
After further discovery, defendant again moved for summary judgment on
the promissory-estoppel claim. Judge Vena granted that motion for reasons set
forth in a February 17, 2017 written opinion. A few days prior to that decision,
plaintiff moved for reconsideration of the dismissal of its fraud claim and for
leave to file an amended complaint alleging negligent misrepresentation. That
motion was denied for reasons expressed in a March 3, 2017 written opinion.
A-3149-16T3 3 II
Plaintiff appeals, arguing, among other things, that the motion judges
"usurped the function of the jury" and mistakenly "evaluat[ed] the evidence on
critical fact questions," most notably drawing conclusions about the parties'
intentions.3 We disagree. The evidence so one-sidedly demonstrates that neither
party believed either would be bound absent a formal, fully-executed, and
delivered written contract, that defendant was entitled to summary judgment on
all plaintiff's pleaded and unpleaded 4 causes of action.
In reviewing dispositions by way of summary judgment, we employ the
same Brill standard trial courts are obligated to apply. Petro-Lubricant Testing
Labs., Inc. v. Adelman, 233 N.J. 236, 256-57 (2018). Accordingly, while we
affirm substantially for the well-reasoned opinions of Judges Kessler and Vena,
3 We recognize that plaintiff's arguments are not so simple or limited. Instead, we allowed the parties to file overlength briefs. Their excellent submissions contain numerous other contentions. But, the central theme of plaintiff's arguments is the assertion that the motion judges did not honor the summary - judgment standard when they dismissed plaintiff's various legal and equitable theories. 4 Plaintiff moved at the eleventh hour to file an amended complaint to include a negligent-misrepresentation claim. As explained in Section V of this opinion, the motion judge correctly denied leave to amend because that claim also would have been dismissed by way of summary judgment.
A-3149-16T3 4 we nevertheless discuss at some length the factual allegations and the legal
principles that fully warranted the disposition of plaintiff's claims.
III
In May 2011, defendant retained Cushman and Wakefield to broker a sale
of the Bloomfield property, which defendant acquired in the late 1960s or early
1970s for about $3,500,000. Because the potential tax consequences of the sale
were enormous, defendant desired to engage in a 1031 exchange 5 and so advised
Cushman and Wakefield; that aspect formed a material part of defendant's
agreement with Cushman and Wakefield.6
Brian Whitmer of Cushman and Wakefield handled the marketing for
defendant, and Josh Allen, Ayson's chief operations officer, was his primary
5 26 U.S.C. § 1031 permits an investor to sell a property, reinvest the proceeds in a new property, and defer all capital gain taxes. 6 Defendant's agreement with Cushman and Wakefield stipulated that if they were "unable to identify an exchange of the Premises pursuant to Section 1031" defendant could "elect not to proceed with this Agreement or the transactions contemplated [t]hereunder."
A-3149-16T3 5 contact. Whitmer's primary contacts for plaintiff were Dinesh Khosla and his
nephew, Raman Khosla. 7
In June 2011, Whitmer disseminated an offering memorandum. Plaintiff
reached out for additional information, and, after Raman Khosla executed a
confidentiality agreement, Whitmer provided plaintiff with access to an online
due-diligence database about the property.
Dinesh and Raman Khosla visited the property with Whitmer on July 13,
2011. The next day, plaintiff submitted an offer to purchase for $40,700,000;
plaintiff expressly stated that the offer "[wa]s not contractually binding on the
parties" but "only an expression of the basic terms and conditions to be
incorporated into a formal written agreement." In expressing a common theme
throughout the parties' communications, the written offer declared that "[t]he
parties shall not be contractually bound unless and until they execute a form of
contract which contract shall be in form and content satisfactory to each party
and its counsel in their sole discretion" and that "[n]either party may rely on this
letter as creating any legal obligation of any kind." Raman Khosla testified at
his deposition that it was plaintiff's practice to have written and signed contracts
7 Like Dinesh and Savita Khosla, plaintiff's principals, Raman Khosla also had considerable sophistication and knowledge in this arena. He has a bachelor's degree in computer science and an MBA in finance. A-3149-16T3 6 for the acquisition of properties, and he understood that here – without a written,
signed, and delivered contract – no obligation to close would be imposed.
In its offer, plaintiff also acknowledged defendant's interest in pursuing a
1031 exchange:
We recognize that the seller may be interested in a 1031 exchange. We are open to discussing a time frame to accommodate that need. However, we want to emphasize that our offer is based on current levels of financing and interest rates (we have a soft quote from one of our potential lender [sic]).
The offer letter also recognized that plaintiff was obligated to pay its own "legal
fees, costs of due diligence, fee title insurance, and survey," whether or not a
closing ever occurred.
Plaintiff received no response but nevertheless performed some due
diligence. On August 12, 2011, plaintiff submitted a second offer to purchase
for $40,700,000, which included the same language from the first offer about a
need for a written contract, defendant's interest in a 1031 exchange, and the
buyer's obligation to bear its own costs.
On August 16, 2011, Whitmer emailed plaintiff and other prospective
purchasers. He explained to plaintiff that he had scheduled a call with defendant
to discuss its offer but did not believe its prior offers were high enough and,
A-3149-16T3 7 therefore, had decided to bid the property at market. On September 2, 2011, he
advised plaintiff of a September 12, 2011 bid date.
On September 15, 2011, plaintiff submitted a third offer, this time for
$42,000,000. This offer, like the others, acknowledged defendant's interest in a
1031 exchange. Eight days later, Whitmer invited plaintiff and other
prospective purchasers to submit their best and final offers. On October 4, 2011,
plaintiff submitted an offer to purchase for $44,600,000. This fourth offer again
included the same language in the prior three offers that acknowledged
defendant's interest in a 1031 exchange.
On October 12, 2011, defendant interviewed plaintiff and other
prospective purchasers by telephone. Allen asked each whether they had the
equity to close the deal, and he recalled being satisfied with plaintiff's
straightforward response that it had sufficient funds to consummate the deal.
The next day, Whitmer advised Raman Khosla that defendant received one offer
higher than plaintiff's, for over $45,000,000, but defendant was more interested
in a buyer with the necessary funds to close and who would not retrade the
contract. According to Whitmer, he advised plaintiff that if it would increase
its offer to $45,000,000, the deal would be theirs. According to a certification
filed by Raman Khosla, plaintiff agreed to increase the purchase price if
A-3149-16T3 8 defendant would postpone the closing to early January or would accept
$1,000,000 post-closing in January.
On October 20, 2011, Whitmer emailed Raman Khosla requesting that
they speak the next day and ending his email with: "All good news." The next
day, he told Raman Khosla that defendant accepted plaintiff's $45,000,000 bid.
As his deposition testimony reveals, Raman Khosla understood that
nothing had occurred up to and including this point that would legally bind either
party absent an executed written contract. He also recognized defendant was
desirous of closing by December 31, a circumstance which required plaintiff to
quickly obtain financing and complete its due diligence.
Allen testified at his deposition that he did not recall defendant's position
with respect to a closing date; instead he testified that in his experience
defendant's principals did not operate with any urgency. He knew, however,
that defendant's principals would not sign a contract without a ready 1031
exchange property and understood that defendant's success in securing a 1031
property would control the pace of any closing. He also understood plaintiff
wanted to move quickly on due diligence because plaintiff was "extremely
motivated to get this deal done."
A-3149-16T3 9 After acceptance of its bid, plaintiff sought financing and engaged in due
diligence. Meanwhile, the attorneys negotiated and drafted the terms of the
contract of sale. Their communications during the contract-negotiation period
reveal plaintiff's eagerness to close quickly as well as its increasing frustration
with defendant's failure to sign the contract. These communications also reveal
that defendant's reticence was produced by complications in its search for a 1031
exchange property.
On October 25, 2011, defendant's counsel emailed a first draft of the
contract, which anticipated a closing date in December 2011 with "TIME
BEING OF THE ESSENCE as to [p]urchaser as to such date." In the conveying
email, plaintiff's counsel stated that the draft had
not yet been reviewed by our clients and is subject to any comments or changes our clients [m]ay wish to make. There is no contract until such time as a contract has been executed and delivered between the parties.
The draft contract itself, as well as all subsequent drafts, stipulated that the
agreement was not binding without a fully-executed and delivered contract,
stating:
The presentation of this document for consideration by the parties shall not constitute an offer, reservation or option for the [p]roperty. Neither the negotiation nor the revision of this document shall constitute a contract or evidence of a contract, and there shall be no binding
A-3149-16T3 10 agreement unless and until this document is executed by and delivered to all of the parties hereto.
Raman Khosla testified at his deposition that he understood that, throughout the
course of the contract negotiations, neither party would be bound until the
delivery of a signed contract.8 And, although the draft did not make the
transaction contingent on a 1031 exchange, it did anticipate that defendant
would close the sale as a tax-free 1031 exchange of property.9
8 The draft contract's twelfth paragraph provided that defendant would also not be bound to any representations made by Cushman and Wakefield, declaring that defendant
shall not be liable for or bound to any verbal or written statements, representations, warranties, real estate brokers' "setups" or information pertaining to the Premises furnished by Seller, any real estate broker, agent, employee, or other representatives of Seller, servant, or any other person, unless the same are specifically set forth herein. All oral or written prior statements, representations, warranties or promises, if any, and all prior negotiations and agreements are superseded by this Agreement and merged herein . . . . 9 The thirty-fifth paragraph contained plaintiff's acknowledgement that defendant would "have the option of closing the sale contemplated by this Agreement as a 'tax-free exchange' of property under Section 1031 of the IRC" and that the parties "hereto agree to work together in good faith to execute such further documentation as shall be reasonably required to effectuate that result." This was further conditioned on the parties' agreement "that nothing contained in this paragraph" would "cause or require" plaintiff "to take any action posing any financial risk to" plaintiff. This paragraph also permitted defendant to
A-3149-16T3 11 In forwarding a revised version three days later, defendant's attorney
stated that it had not been reviewed by his client and remained subject to his
client's review and comment. That same day, plaintiff began the process of
applying for a $33,750,000 loan, the bulk of the purchase price. Around this
same time, plaintiff's principals executed a loan commitment for $9,000,000 by
refinancing property owned by SDK Prospect Towers, a process that began in
August or September 2011, before defendant accepted its bid.
On November 16, 2011, plaintiff's counsel sent a revised draft to
defendant's counsel; he too expressed that his client had not reviewed it and the
draft remained subject to plaintiff's review and comment. As to the provision
that defendant could adjourn the closing if warranted by its desire for a 1031
exchange, counsel asserted that he provided in the draft
that an extension to January 15, 2012 is agreeable, and anything beyond that is subject to my client's lender agreeing to keep the commitment in place on the same terms and conditions.
Plaintiff received its $33,750,000 loan commitment two days later. One of the
conditions for the loan was delivery of an executed contract.
"adjourn the Closing Date for up to ninety (90) days in order to accomplish the provisions of this Paragraph." A-3149-16T3 12 Raman Khosla testified at his deposition that plaintiff never accepted the
loan commitment or made any payment toward it because there was never any
signed contract, and, without a signed contract, defendant was not obligated to
close. He explained that plaintiff did not want to place any more money at risk
based upon defendant's promise to sign in the future.
On November 28, 2011, defendant's counsel sent comments on the latest
version of the contract that were "subject to further review with our client." The
next day, plaintiff had oil tanks on the property tested, and the day after that,
plaintiff's principals closed on their $9,000,000 loan.
On December 2, 2011, plaintiff's counsel forwarded a revised contract to
his counterpart, advising it had not been reviewed by his client. Plaintiff's
counsel also mentioned he had dated the proposed contract December 5, 2011,
with plaintiff's intent being to sign on that date.
On December 5, 2011, the parties' respective counsel exchanged emails
regarding the most recent draft of the contract, and plaintiff's counsel sent
defendant's counsel another draft, still with the disclaimer that it was subject to
his client's review and comments, but adding: "I think the Contract is ready to
be executed. Please call to confirm your agreement. Our client will be wiring
the deposit to the escrow agent." That same day, plaintiff provided its counsel
A-3149-16T3 13 with a signed signature page of the contract and deposited $1,000,000 into an
escrow account. In a certification submitted in response to defendant's summary
judgment motion, Raman Khosla claimed that plaintiff so acted at defendant's
request.
The next day, December 6, 2011, plaintiff's counsel advised his
counterpart that he had "a signature page from [plaintiff] and the deposit [was]
delivered to the Escrow Agent." But counsel didn't deliver the executed
signature page to defendant and plaintiff understood, as Raman Khosla testified
at his deposition, that the deposit would not be released from escrow until
plaintiff received a signed contract from defendant.
Two days later, Whitmer exchanged emails with Allen, indicating that
plaintiff was "anxious to get a counter signature." Allen responded to Whitmer
that "[e]verything is fine," that defendant was "working towards signing the
contract [b]ut [defendant had] not finalized [its] 1031 replacement contract."
Allen also advised Whitmer that he could "assure [plaintiff] we are working
towards the same goal." Whitmer forwarded this email exchange to plaintiff.
On Friday, December 9, 2011, Whitmer told Raman Khosla that defendant
would sign the contract that weekend.
A-3149-16T3 14 On Monday, December 12, 2011, plaintiff's counsel emailed a revised
draft to defendant's counsel with the comment that "we must sign today." Later
the same day, plaintiff's counsel emailed that he had spoken to plaintiff; he
advised that:
As you can imagine [plaintiff] is very frustrated with the situation. [Plaintiff] has directed me to advise you that unless the contract is signed by 3pm on Tuesday December 13 th it is breaking off negotiations on this property.
According to Raman Khosla, Whitmer advised on December 13, 2011, that
Allen "was going to sign the contract . . .[,] [h]e just need[s] another day or so,"
and on December 16, 2011, he said that "the contract was with the seller and
would get signed this weekend and [plaintiff] would have it by Monday,
December 19, 2011." Raman Khosla acknowledged – as he testified at his
deposition – that plaintiff's multiple requests about status arose from its
understanding that defendant would not be legally bound until it signed the
contract.
By a December 19, 2011 email, plaintiff's counsel asked defendant's
counsel to "advise when your client has signed the contract today," and to
"forward the Seller's signature pages as soon as possible today," reminding
defendant's counsel that he had previously advised "that the Seller would not
A-3149-16T3 15 sign later than today." Plaintiff's counsel also provided a reminder that he had
signature pages from his client and the escrow agent, and the $1,000,000 deposit
had been in escrow for some time; he said that he was forwarding plaintiff's
signature page and the escrow agent's signature page under separate cover.
That same day, Whitmer emailed Allen, asking if he would be available
for a meeting with the Khoslas, expressing his belief that the Khoslas "want to
meet principal to principal to give them comfort of your sincerity in transacting
as soon as possible on your end." Allen responded to Whitmer that he
understood the Khoslas' concern but he was unavailable that day. Allen also
replied: "Our senior principals will not sign until the 1031 property is secured,"
and "[w]e anticipate securing an asset the first half of January."
Whitmer forwarded this email exchange to plaintiff. He also sent another
email to Allen, asking if he was available to meet the following day, noting that
Dinesh Khosla would be leaving the country, and in his absence nothing could
be signed. Allen responded that he had meetings the following day in New York,
but if plaintiff "will wait until January we will most likely have a deal." Whitmer
forwarded this email exchange to plaintiff as well.
Two days later, on December 21, 2011, plaintiff's counsel sent his
counterpart another revised contract, which allowed for an adjournment of the
A-3149-16T3 16 closing date to effectuate defendant's 1031 exchange but anticipated a closing
date no later than March 15, 2012, "provided [plaintiff]'s lender is willing to
extend its commitment, at no additional cost to [plaintiff], on the existing terms
and conditions, including interest rate to such adjourned date." Plaintiff's
counsel also wrote to confirm his understanding that defendant was "not
prepared to sign the Contract at this time" and explained that "this news was
extremely disappointing and distressing" to plaintiff. Plaintiff's counsel also
noted plaintiff's efforts to complete due diligence and obtain financing, and
stated:
Your client frankly had more than enough time to locate a replacement property. To allow our client to go forward to refinance the properties and incur expenses with regard to due diligence, knowing it did not have a replacement property lined up and wanting to have one prior to signing a contract with our client, is certainly not acting in good faith.
The negotiated form of the contract provides that your client has the ability to extend the closing into March of 2012. We do not understand your client's reluctance to sign the contract. It has the ability to adjourn closing and also has 45 days beyond that date to locate a replacement property. To make your client's lack of a replacement property my client's headache given the history of this transaction, is patently unfair.
My client would be agreeable to discussing a letter of intent, the terms of which would be very simple. A pre- condition of our client would be that we would have
A-3149-16T3 17 some assurance from the two of you that your client is actively pursuing another property to purchase. In the absence of that, my client would have to re-examine its position.
In a January 3, 2012 email, plaintiff's counsel inquired of his counterpart
if there was any news, and by emails dated January 3 and 4, Whitmer
communicated with Allen about plaintiff's concerns over maintaining the terms
of the $33,500,000 loan, and the interest and costs associated with its
refinancing loan, as well as defendant's 1031 concerns. Allen advised Whitmer
that defendant was hoping for good news on its 1031 exchange property, and
"we are on board for a deal."
According to Raman Khosla, Whitmer advised two days later that the
contract would be signed that weekend. In an email sent the next day – Friday,
January 6, 2012 – defendant's counsel expressed it would be a good idea to look
at the latest version of the contract to see what needed updating. Defendant's
letter, which was attached, stated that it was "not in a position to enter into a
contract of sale with you at [present] time, however, we anticipate that situation
will change in the not to[o] distant future." Defendant also stated that "[w]hile
there is no binding agreement between us until a contract of sale . . . is executed
and delivered by" defendant to plaintiff, "we do want you to know that we are
not marketing the Premises to others at this time." When asked about this at his
A-3149-16T3 18 deposition, Raman Khosla acknowledged that an agreement was in place but
required to be memorialized in the form of a written contract. He also
acknowledged no one would be bound without a signed and delivered written
contract. Plaintiff's counsel responded to the January 6, 2012 email, agreeing
the contract dates would need to be adjusted and advising that, from plaintiff's
perspective, the closing date was a function of its lender.
In emails dated January 9, 2012, Whitmer and Raman Khosla addressed
the latter's concerns over the delay in execution of the contract. Whitmer
expressed to Raman Khosla his understanding that defendant was "ready to
sign," but the parties' counsel were still working on finalizing the contract. By
separate email that day, plaintiff's counsel stated he had forwarded to his
counterpart a revised contract with a closing date of February 8, 2012, and an
outside closing date of February 15, although plaintiff would prefer slightly
different dates. Counsel further stated that from conversations between his
client and the broker, he believed the parties were discussing a signing on
January 9 or 10.
On January 11, 2012, plaintiff's counsel emailed a revised contract with a
proposed closing date of February 7, 2012, and that an adjournment would be
A-3149-16T3 19 permitted but no later than March 15, 2012. By separate letter that same day,
plaintiff's counsel enclosed a revised page thirty-two of the contract, and stated:
[Plaintiff] has asked me to advise you and your client that unless the Contract is signed by the close of business today, it is breaking off negotiations in this matter.
Raman acknowledged at his deposition that he told counsel to advise defendant's
counsel of this position.
Finally, by separate emails on that same day, Raman Khosla advised
Whitmer that "we have not heard anything"; Whitmer responded, "[i]f not
already, you should have a pleasant surprise by 5 pm." Raman Khosla took this
to mean defendant had signed the contract and that plaintiff "would be receiving
it." Whitmer similarly testified that, based on communications he had with
Allen, he believed defendant signed the contract on January 11 and was
preparing to deliver it to plaintiff through its attorneys. But Allen misspoke.
Although he believed defendant had signed the contract, in fact it had not, and
on the evening of January 6, 2012, he advised Whitmer that defendant had
requested a twenty-four hour extension due to difficulties experienced with the
1031 property.
A-3149-16T3 20 In fact, and there is no evidence to the contrary, no contract was ever
signed by defendant. Certainly, a signed contract was never delivered to
plaintiff.
On January 12 or 13, 2012, Dinesh and Raman Khosla spoke with Bruce
McKaba, defendant's president and one of the two individuals authorized to
execute the contract for defendant. During their conversation, the Khoslas
pressed McKaba for a firm timeline, but McKaba would not commit and stated
defendant would execute the contract once the 1031 property was secured.
Unsatisfied with this response and unwilling to wait longer, plaintiff considered
this the end of negotiations. Thereafter, counsel for the parties exchanged
recriminatory letters in anticipation of litigation.
IV
Because plaintiff's claims were dismissed by way of summary judgment,
the question for us – when viewing the facts discussed in the prior section in the
light most favorable to plaintiff – is "whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 251-52 (1986) (quoted with approval in Brill, 142 N.J. at 536).
As our Supreme Court further explained in Brill, the motion judge must consider
A-3149-16T3 21 "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." Brill, 142 N.J. at 540.
In applying this standard, we agree with the motion judges' disposition of
defendant's summary judgment motions and that plaintiff's claims for (a) breach
of contract, (b) promissory estoppel, and (c) fraud, were correctly rejected.
A
BREACH OF CONTRACT
We agree with Judge Kessler, who dismissed the breach-of-contract
claim, that "the undisputed facts demonstrate that the parties did not enter into
a binding written or oral agreement" because "[t]he undisputed written
communication between the parties" – what he characterized as an "avalanche
of correspondence" – demonstrated the parties' understanding "that there would
be a written, not an oral agreement[,] and that the written agreement would be
executed by and delivered to the parties" before either party would be bound.
And it was undisputed that defendant never delivered a signed contract to
plaintiff or its representatives. Although plaintiff may assert that Whitmer
represented on January 11, 2012, that defendant had executed the contract – and
A-3149-16T3 22 plaintiff may be entitled to an assumption of the truth of this allegation 10 –
plaintiff cannot dispute that, even if signed, the contract certainly was never
delivered. So, any dispute about whether defendant signed the contract cannot
stand in the way of a judgment in defendant's favor on the breach-of-contract
claim.
The judge's accurate assessment of the factual record dovetails with the
his conclusion there was no evidence of an enforceable oral agreement. The
judge correctly recognized that "the course of ongoing communications between
the parties[,] which occurred through counsel and the real estate broker[,]
demonstrates that [defendant] never intended to be bound by an oral agreement
and only intended to be bound when a written contract was executed and
delivered . . . ." This is acutely revealed not only by plaintiff's constant and
many inquiries about whether defendant had signed the written contract, but, as
well, by plaintiff's multiple threats to break off "negotiations" if defendant did
not execute the contract.
10 We might also assume the truth of plaintiff's assertion that Whitmer was defendant's authorized agent even though the evidence is rather one -sided that Whitmer acted only as a real estate broker with no authority to bind defendant to a contract of sale. Even if Whitmer were an authorized agent of defendant, his conduct would not establish the existence of a binding agreement because, again, the contract – whether signed or not – was not delivered. A-3149-16T3 23 Judge Kessler also properly rejected plaintiff's claim of part performance
as a basis for the enforcement of an oral agreement. He correctly recognized
that plaintiff's conducting of due diligence, its arranging of financing, its signing
of the contract, and its depositing of money into escrow, were merely
preparatory and with the clear understanding there would be no binding
agreement until the contract had been fully executed and delivered; the judge
wrote:
It is apparent that both parties intended to negotiate towards the signing of a contract for sale. This is not the same as intending to be bound by an unsigned contract. The "performance" undertaken by [plaintiff] was that which was required to be in place before a contract would be executed. It was not taken in reliance on the fulfillment of a contract that was not yet signed and delivered. [Plaintiff] has not presented sufficient evidence to present a material issue of fact which can be proved by clear and convincing evidence that it partly performed the contract in reliance on [defendant's] conduct.
The judge's analysis of the factual record is consistent with governing
legal principles. For example, it is true that in certain circumstances the Statute
of Frauds permits enforcement of an oral agreement for the sale of real property
by precluding those instances in which enforcement is not permitted; that is, the
Legislature, when amending the Statute of Frauds in 1995, declared that, in the
absence of "a writing signed by or on behalf of the party against whom
A-3149-16T3 24 enforcement is sought," N.J.S.A. 25:1-13(a), an oral agreement to transfer an
interest in real estate "shall not be enforceable unless":
a description of the real estate sufficient to identify it, the nature of the interest to be transferred, the existence of the agreement and the identity of the transferor and the transferee are proved by clear and convincing evidence.
[N.J.S.A. 25:1-13(b).]
In short, in enacting N.J.S.A. 25:1-13(b), our Legislature opened the door to the
enforcement of oral contracts to transfer an interest in real property so long as
the necessary elements could be established by clear and convincing evidence.
Before long, we were asked to consider the enforceability of an oral
contract for the sale of real property under subsection (b). Prant v. Sterling, 332
N.J. Super. 369 (Ch. Div. 1999), aff'd o.b., 332 N.J. Super. 292 (App. Div.
2000). There, in adopting the reasoning of the chancery judge's published
opinion, we were influenced by the 1991 report and recommendations of the
New Jersey Law Revision Commission, which stated:
The circumstances surrounding a transaction, the nature of the transaction, the relationship between the parties, their contemporaneous statements and prior dealings, if any, are all relevant to a determination of whether the parties made an agreement by which they intended to be bound. Thus, if the parties in question have been negotiating the sale of a multi-million dollar office building over many months through the exchange of a
A-3149-16T3 25 series of redrafted written contracts, it is unlikely that the parties intended to be bound other than in writing. Conversely, if the parties in question have engaged in a series of "handshake" agreements, for the purchase and sale of individual building lots in the past and have honored them in the absence of any writing, their prior conduct could tend to show that they intended to enter into a binding oral agreement.
[Id. at 378.11]
This same Law Revision Commission language was cited favorably by the
Supreme Court. In Morton v. 4 Orchard Land Trust, 180 N.J. 118, 126 (2004),
the Court found no enforceable oral agreement for the sale of real estate in
strikingly similar circumstances; because there is no principled distinction to be
drawn between the matter at hand and Morton, we quote the Court's holding at
some length:
In this case, we cannot find the existence of a contract even in the deferential light in which we must view the facts as presented by plaintiff. From the inception of the dealings between the parties, beginning with the broker-prepared contract, to the final flurry of letters between the attorneys, it is clear to us that plaintiff and defendant intended to be bound only by a written contract. Under the terms of the written contract prepared by plaintiff's realtor, the contract was binding only on "parties who sign it," and the "signed contract" had to be delivered to the parties. (Emphasis added.)
11 The quoted language can be found in the New Jersey Law Revision Commission, Report and Recommendations Relating to the Statute of Frauds 11 (1991), available at http://www.lawrev.state.nj.us/rpts/fraud.pdf. A-3149-16T3 26 The realtor and plaintiff signed the contract, but defendant did not. The realtor contemplated that defendant would forward to her a signed copy to consummate the deal.
....
. . . In this case, a binding, oral agreement is not suggested by the circumstances surrounding the negotiations, or by the relationship of the parties, or by the parties' contemporaneous statements and past dealings. This case is similar to Prant, in which the initial offer was in writing as were all meaningful communications between the parties, leading to one inescapable conclusion – the parties did not intend to be bound by an oral agreement. See Prant, 332 N.J. Super. at 371-74. The sale of the Orchard Court property was not expected to end on the basis of a handshake or a verbal utterance by the Trustees to the realtor.
[Id. at 128, 130.12]
Like Morton, the parties here are sophisticated business people. They had
no prior relationship, and they engaged in an arms-length transaction for a large
apartment complex priced by them at $45,000,000. Plaintiff's written offers for
the purchase of the property all set forth that the parties would not be bound
12 The Court also distinguished McBarron v. Kipling Woods, LLC, 365 N.J. Super. 114, 118 (App. Div. 2004), where, as the Morton Court observed, "the negotiations were entirely oral, with the deal consummated over the telephone followed by repeated verbal confirmations by the seller that the deal was done and would be honored." Morton, 180 N.J. at 130. A-3149-16T3 27 absent a written contract. And, once plaintiff's final offer was accepted, the
parties negotiated a written contract between counsel, over a period of several
months. All versions of their draft contract contained a clause stating that the
parties would not be bound absent an executed agreement that had been
delivered to the parties. See Morton, 180 N.J. at 128-29; Prant, 332 N.J. Super.
at 379-80.
All other communications also revealed the parties' understanding that
they would not be bound absent an executed written and delivered contract.
Indeed, Raman Khosla testified to plaintiff's understanding that the parties
would be bound only by a written agreement, and there is no other reasonable
explanation for plaintiff's repeated demands that defendant sign the contract, or
its repeated threat that if defendant did not sign the contract plaintiff would
break off negotiations.
Plaintiff's argument that it partially performed does not alter our
conclusion. The facts, when viewed in the light most favorable to plaintiff,
demonstrate that its actions were merely preparatory, to ensure its ability to
close on the deal once the contract was executed and delivered. See Kopp, Inc.
v. United Techs., Inc., 223 N.J. Super. 548, 556-57 (App. Div. 1988); Kufta v.
Hughson, 46 N.J. Super. 222, 229 (Ch. Div. 1957). Moreover, the evidentiary
A-3149-16T3 28 record, including plaintiff's written offers to purchase the property, and its
communications threatening to end negotiations and noting the costs it incurred,
clearly shows plaintiff's understanding that it incurred these expenses at its own
risk.
B
PROMISSORY ESTOPPEL
Defendant was once denied summary judgment on plaintiff's promissory
estoppel claim.13 But a later summary judgment motion, filed after further
discovery, including Raman Khosla's deposition, was granted.
In his February 17, 2017 opinion, Judge Vena determined there was no
sufficient evidence from which a rational factfinder could conclude that
defendant made a clear and definite promise that would reasonably induce
plaintiff to act or forbear. The judge cited Raman Khosla's deposition testimony
that plaintiff "was aware, from the outset of the contract negotiations in July
2011 to the termination of said negotiations in January 2012, that [d]efendant's
offer to sell . . . was contingent on there being a signed, written, and delivered
contract." Because the parties understood "neither . . . would be legally bound
13 The judge also denied a reconsideration motion and we denied a motion for leave to appeal that addressed this issue. A-3149-16T3 29 to the other . . . until there was a signed, written contract which was acceptable
to both parties" and both could "'walk away' from the deal at any time" until a
fully-executed contract was delivered, the judge concluded there was no promise
– clear and definite or not – that could form the basis for a viable promissory-
estoppel claim.
The judge properly recognized that there was no genuine dispute on the
question whether defendant could reasonably have expected to induce reliance
on plaintiff's part because both sides acted on the understanding that no one
would be bound or rely absent a fully-executed and delivered contract. And he
also correctly concluded that the plaintiff could not have reasonably relied on
any of defendant's representations for the same reason. 14
Judge Vena's conclusions were in accord with applicable legal principles.
"Promissory estoppel is made up of four elements: (1) a clear and definite
promise; (2) made with the expectation that the promisee will rely on it; (3)
reasonable reliance; and (4) definite and substantial detriment." Toll Bros., Inc.
v. Bd. of Chosen Freeholders of Cty. of Burlington, 194 N.J. 223, 253 (2008).
14 The judge sagaciously recognized that plaintiff's allegations were also inconsistent about the reasonable-reliance element. For instance, plaintiff did not pay the $1,000,000 deposit to defendant but instead placed it in escrow "because . . . there was a chance that negotiations would terminate and that if it paid the money to [d]efendant, it would be non-refundable." A-3149-16T3 30 In contending that it met all these elements, plaintiff relies heavily on our
decision in Pop's Cones, Inc. v. Resorts International Hotel, Inc., 307 N.J. Super.
461 (App. Div. 1998).
In Pop's Cones, the plaintiff negotiated with the defendant about the
possible relocation of the plaintiff's frozen yogurt business on the Atlantic City
boardwalk to space owned by the defendant, with the defendant offering
inducements to encourage the plaintiff's interest in a particular site. After the
plaintiff made a written offer, it advised the defendant of its need for a timely
decision, given the timing of its lease renewal if it did not change location. Id.
at 464-65. In response, the defendant assured the plaintiff that it would have
little difficulty in concluding the agreement, and the defendant explicitly
advised the plaintiff to give notice it would not be extending its present lease,
to pack up its store, and to plan on moving. Id. at 465. In reliance on these
assurances, the plaintiff gave notice on its lease, moved its equipment into
temporary storage, sent designs for its new store to its franchisor, and retained
an attorney to represent it in finalizing a lease with the defendant. Ibid. The
parties' counsel then negotiated a proposed lease. Id. at 465-66. Ultimately, the
defendant withdrew its offer to lease space to the plaintiff, and the plaintiff filed
A-3149-16T3 31 suit. Id. at 466-67. The trial court granted summary judgment in the defendant's
favor. Id. at 468.
In reversing, we relaxed the requirement of a clear and definite promise
in Restatement (Second) of Contracts § 90 (1979), and held that promissory
estoppel requires only "[a] promise which the promisor should reasonably
expect to induce action or forbearance on the part of the promisee." Id. at 463,
471-72. Applying this less rigid standard, we concluded the facts supported a
valid promissory estoppel claim. Id. at 472-73.
This case is markedly and materially different from Pop's Cones.
Defendant made no promise to convey the property absent additional conditions
– again, at the risk of becoming tiresome – that there be a written, executed and
delivered contract – so reliance on what preceded that event, which never
occurred, could not be found by a rational factfinder to be reasonable. See
Reprosystem, B.V. v. SCM Corp., 727 F.2d 257, 264-65 (2d Cir. 1984) (holding
that a promissory estoppel claim could not be established where defendant made
no clear promise to consummate a deal because the parties' negotiations "as
reflected in the draft agreements made it clear that the obligations" of both
parties "were contingent upon execution and delivery of the formal contract
documents").
A-3149-16T3 32 C
FRAUD
In granting summary judgment dismissing plaintiff's fraud claim, Judge
Vena recognized that – even when given a favorable view of the evidence –
plaintiff had offered only "bare assertion[s]" and he concluded there was no
"evidence beyond mere suspicion to permit a rational jury to find in favor of
[plaintiff] at trial on the issue of whether [defendant] made knowing and
intentional misrepresentations regarding [its] intentions with respect to a 1031
exchange[.]"
The judge also denied plaintiff's motion for reconsideration on this point.
He found Allen's deposition testimony was not new evidence, because the record
was already replete with evidence that plaintiff knew as early as its July 2011
offer that defendant intended to pursue a 1031 exchange, and in December 2011
defendant made it clear that it would not sign the contract in the absence of a
1031 exchange property. The judge soundly observed that defendant:
merely acted in accordance with the option it included in the drafts. Options by their very nature provide flexibility for parties who hold them. Defendant exercised its option – which [p]laintiff knew [d]efendant had – not to proceed without a 1031 replacement property. This is not fraudulent. If anything, the drafts put [p]laintiff on notice that such a decision [by] [d]efendant was entirely within the realm
A-3149-16T3 33 of possibility. That the existence of a 1031 replacement property factored into [d]efendant's decision to approve or [dis]approve or to finalize or not finalize the contract does not necessarily equate to the contract's ultimate completion being expressly contingent on the existence of a 1031 replacement property.
And the judge recognized that the reason for defendant's refusal to sign the
contract was largely irrelevant given the parties' understanding – we say once
again – that the anticipated transaction was not binding absent a written, fully-
executed and delivered contract.
Fraud requires clear and convincing evidence, Stochastic Decisions, Inc.
v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div. 1989); Albright v. Burns,
206 N.J. Super. 625, 636 (App. Div. 1986), of "a material representation of a
presently existing or past fact, made with knowledge of its falsity and with the
intention that the other party rely thereon, resulting in reliance by that party to
his detriment," Jewish Ctr. of Sussex Cty. v. Whale, 86 N.J. 619, 624 (1981).
Accord Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997); Suarez v.
E. Int'l Coll., 428 N.J. Super. 10, 28 (App. Div. 2012). To be actionable, "the
alleged fraudulent representation must relate to some past or presently existing
fact and cannot ordinarily be predicated upon matters in future." Ocean Cape
Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369, 380 (App. Div. 1960). "An
exception to this rule exists in the case of a false representation of an existing
A-3149-16T3 34 intention, i.e., a 'false state of mind.'" Ibid. So, "[i]ncluded within the first
element [of a fraud claim,] are promises made without the intent to perform since
they are 'material misrepresentations of the promisor's state of mind at the time
of the promise.'" Bell Atl. Network Servs., Inc. v. P.M. Video Corp., 322 N.J.
Super. 74, 95-96 (App. Div. 1999) (quoting Dover Shopping Ctr., Inc. v.
Cushman's Sons, Inc., 63 N.J. Super. 384, 391 (App. Div. 1960)).
Plaintiff argues in its appeal brief that there was a material issue of fact as
to whether defendant "misrepresented . . . its intention to close on the sale
without having a 1031 exchange." The record, however, contains no evidence
of this alleged misrepresentation.
Defendant did not affirmatively misrepresent, nor did it conceal, its
intention to pursue a 1031 exchange with respect to sale of the property. As we
have already established, defendant informed its broker of this fact, and plaintiff
was aware of this fact when it submitted its first offer in July 2011. The parties
also addressed this issue in the draft contracts exchanged. There is no evidence
that defendant ever promised to execute the contract before it secured a 1031
There is also a dearth of evidence that defendant intended for plaintiff to
rely on the deal proceeding in the absence of a 1031 exchange. To reiterate –
A-3149-16T3 35 for the last time – both sides knew neither was bound absent a written, executed,
and delivered contract.
The fraud claim was properly dismissed.
V
Lastly, we consider plaintiff's argument that its motion for leave to amend
the complaint to assert a claim of negligent misrepresentation was erroneously
denied. Filed at the eleventh hour, the motion was denied because the judge
found the application untimely and the proposed amendment without merit. We
find no abuse of discretion.
In exercising discretion in deciding a motion for leave to amend a
complaint, a judge must consider the prejudice resulting from the late
amendment and whether permitting the amendment would constitute a "futile"
act because the new claim would not be sustainable. Notte v. Merch. Mut. Ins.
Co., 185 N.J. 490, 501 (2006).
Considering the case's age – it was commenced in March 2012, and the
motion to amend was filed nearly five years later in February 2017, when
defendant's last summary judgment motion was pending and with a scheduled
trial date a month away – the prejudice was obvious. See Cavuoti v. N.J. Transit
Corp., 161 N.J. 107, 134-35 (1999). The futility element was also fully
A-3149-16T3 36 implicated. If permitted, the new claim would ultimately fall once defendant
moved for summary judgment, because the same factual circumstances that
barred the fraud claim would bar the negligent-misrepresentation claim, which
requires proof that defendant negligently made an incorrect statement that
plaintiff justifiably relied upon, causing damage. H. Rosenblum, Inc. v. Adler,
93 N.J. 324, 334 (1983); Masone v. Levine, 382 N.J. Super. 181, 187 (App. Div.
2005).
***
To the extent we have not discussed any other issue presented by plaintiff,
it is because we find any such argument lacks sufficient merit to warrant further
discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
A-3149-16T3 37