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Ientile v. Favorito

A-5349-97T3 (N.J. Super. App. Div. 1999) (Unpublished)

USE AND OCCUPANCY—Where a use and occupancy agreement is not clear in establishing a daily charge, the stated per diem amount will not be awarded if doing so would result in a windfall to the property owner.

This litigation arose out of a contract for a sale of a residence. When the closing did not take place because of the discovery of an unexpected judgment against the seller, the parties entered into a “Use and Occupancy Agreement.” The agreement provided that in the event the closing did not occur on or before a specified date or if the buyer refused to close, there would be a $200 daily charge for each and every day during which the buyer remained in the house. When the seller learned that its judgment creditor would settle the claim, it informed the buyer that the issue had been resolved and set a closing date. In its letter, the seller was requesting the $200 a day charge from and after the day upon which it sent its notice. The closing did not take place when scheduled, and another notice was sent by the seller setting a later date. That notice demanded payment, at $200 per day, for the period beginning on the day the seller had learned that its judgment creditor would release the lien, even though the lien was not actually released until nearly three weeks later. Whatever else happened, no closing took place because the buyer was unable or unwilling to refresh its mortgage commitment. Consequently, the seller terminated the contract, alleging the buyer had breached the agreement. At the trial for damages, the lower court refused to award damages at the rate of $200 per day pursuant to the Use and Occupancy Agreement. It determined that such a measure of damages would give the seller a windfall. Instead, it awarded the seller its carrying charges for the property during the buyer’s occupancy. On appeal, the seller contended that the lower court erred by not awarding damages “based upon the clear and unambiguous terms of the Use and Occupancy Agreement.” The Appellate Division, reviewing the language of the Use and Occupancy Agreement, said that “to call it ambiguous is being charitable. In some respects, it is almost incomprehensible. Its lack of clarity is manifest in the seller’s initial request for [charges] from October 1 followed by a request for [charges] from September 15.” Consequently, the Court found that, at best, the agreement required a Use and Occupancy charge for the buyer’s possession of the premises after cancellation of the contract or its refusal to close. Based upon that interpretation of the agreement, the buyer would have been responsible less than the lower court actually awarded and the Appellate Division let the lower court’s ruling stand.


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