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N.J. Bergen Development Co., LLC v. Fleisher

A-5945-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

CONTRACTS; CONTINGENCIES — Where a contract of sale gives the buyer specific remedies upon its seller’s default, and those remedies do not include tolling of approval or contingency periods, the buyer is not permitted to delay its performance under the contract based on the seller’s defaults or even by reason of the seller’s bad faith efforts to avoid fulfilling its contractual obligations.

A developer entered into a contract for the sale of undeveloped real property. The sellers were husband and wife. When the contract was executed, the wife had a pending bankruptcy petition. Pursuant to the contract, the developer had a 60 day feasibility study period to commence on the date the bankruptcy court approved the terms of the sale. The contract provided for a one-year approval period to get development approvals. It was to commence on the expiration of the feasibility period. The contract also provided for a 60 day extension of the approval period if the developer paid an additional fee to the sellers. In addition, the approval period was to be tolled if there were a decision pending or if the developer was appealing a decision by the planning board.

The developer and sellers disputed the date the approval period was to begin. The bankruptcy court order approving the terms of sale was entered on April 18, 2006, but the sellers did not send a copy of the order to the developer until June 9, 2006. The sellers claimed that the 60 day feasibility period started on the date the bankruptcy court order was issued and that the approval period ended one year after the feasibility period ended, on June 28, 2007. The developer argued that the feasibility period did not start until the date it received a copy of the bankruptcy court order. Under that theory, the feasibility would have started on June 9, 2006, the approval period would have started on August 9, 2006, and the approval period would end on August 9, 2007.

On June 22, 2007, the sellers’ attorney notified the developer that the approval period would expire on June 28, 2007 and the developer responded by disputing the deadline. The developer filed an application for approvals with the planning board on June 27, 2007. On July 3, 2007, the sellers served the developer with a notice of default. On August 1, 2007, the developer placed the extension fee in escrow pending the outcome of a suit it intended to file against the sellers. On August 22, 2007 the developer’s application for approvals was deemed incomplete by the planning board.

The developer filed suit against the seller. It claimed that the approval period did not end until August 9, 2007, and further that the approval period was tolled once the developer filed an application with the planning board. The lower court rejected the developer’s claim that the approval period had been tolled. It found that the contract language regarding tolling could not reasonably be interpreted to toll the deadline after the filing of an incomplete application. However, the lower court found that the approval period did not expire until April 9, 2007 and, since the developer requested a six month extension before it expired, the sellers had no grounds to withhold their consent once the extension fee was posted.

The developer appealed, and the Appellate Division rejected the appeal. The Court rejected the developer’s argument that the contract terms or the implied covenants of good faith and fair dealing allowed the developer to delay its performance of the contract based on the sellers’ bad faith efforts to avoid fulfilling their contractual obligations. The Court found that the contract provided alternative remedies to the developer where it had met its obligations but the sellers defaulted on their obligation, but those remedies did not include tolling the approval period after it filed an incomplete application for development approvals.

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