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Adams v. Barrera

A-384-02T2 (N.J. Super. App. Div. 2003) (Unpublished)

CONTRACTS; REMEDIES; SPECIFIC PERFORMANCE—A buyer may be denied the remedy of specific performance on equitable grounds if the seller reasonably believed that he or she was represented by the seller’s attorney as well, but if specific performance is granted, the associated monetary damages should not include expenses that the buyer would have incurred anyway.

This case involves an attorney’s dual representation of both buyer and seller in a residential real estate transaction. The question before the court was whether a factual dispute regarding the scope of the attorney’s representation of the seller would prevent the Chancery Court from awarding specific performance to the buyer when the deal went sour. The buyer and seller signed a broker’s form residential contract of sale for the sale of a condominium unit. During the three day attorney review period, the buyer retained the services of an attorney. The attorney rejected the contract on behalf of buyer and sent a letter with proposed modifications to the seller. At that point, the seller realized that the attorney had been its own attorney when it purchased the unit. The seller asked the attorney to represent him as well as the buyer in the transaction, since the attorney had the old file. The attorney claimed to have advised the seller that he was representing the buyer and could only prepare the closing documents on behalf of seller. The seller disputed that statement. The attorney sent the seller a letter indicating that he was representing the buyer and preparing the closing documents on seller’s behalf. Nonetheless, the seller claimed that he believed that the attorney was representing both buyer and seller. When the seller failed to close, the buyer sued for specific performance and damages. The chancery judge awarded specific performance to the buyer and also awarded the buyer, as damages, reimbursement of buyer’s title, mortgage application, and home inspection fees.

The seller appealed, and the Appellate Division reversed, finding that the factual dispute as to the scope of the attorney’s representation may have been significant enough to preclude the award of specific performance. It noted that the attorney’s letter to the seller did not clearly state that he was only representing the buyer nor did it advise the seller of the consequences of not having separate counsel. The Court also noted that the seller requested the attorney’s assistance during the attorney review period, when, had he had counseling and advice from an independent attorney, he could have changed the terms of, or rejected, the contract. The Court found that the chancery court was required to make a factual finding regarding the scope of the attorney’s representation of the buyer and the seller before it awarded specific performance. According to the Appellate Division, the Chancery Court disregarded the significance of the dispute as it pertained to the equitable remedy of specific performance. The Appellate Division noted that if the Chancery Court had determined that the attorney represented both buyer and seller, the attorney’s failure to advise the seller of its options during the attorney review period unfairly prejudiced seller and precluded a grant of specific performance. The Court also reversed the lower court’s award of damages. When it awarded specific performance, the lower court required the seller to sell the property to the buyer. If the seller had sold the property to the buyer, the buyer would have been responsible for the ordinary and common expenses associated with a home purchase. Instead, the lower court wrongly required the seller to sell and to pay for the expenses normally borne by the buyer, such as title fees, home inspection fees, and mortgage application fees.

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