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Perla v. Jung

A-4344-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; INTERPRETATION — Where contrary interpretations of an agreement’s provisions is possible, summary judgment is not appropriate to decide whether a provision in the agreement is ambiguous or not.

A developer entered into a contract to buy property with the intention of constructing an eighty apartment residential building. Rezoning was essential to the plan to develop the property. Pursuant to the contract, a $300,000 deposit was in escrow. The contract contained the following provision:

Article 13 titled “PRECONDITIONS TO CLOSING” read as follows: “13.01 Notwithstanding anything to the contrary contained in this Agreement, this Agreement shall have no force and effect and not be binding on Purchaser unless and until the following conditions (collectively, ‘Preconditions to Closing’) are satisfied.

(i) Seller will introduce Buyer to the [municipality’s] Land Use Authority to confirm and verify Buyer obtaining from the Authority the necessary permissions to build the aforementioned 80 apartment units… .

If any of the Preconditions to Closing do not occur, then Purchaser, upon written notice to Seller, may terminate this Agreement and receive the return of the Deposit and the parties shall have no further obligations to each other hereunder.”

At some point after the developer initiated contacts with the authority, he learned that the municipality would not rezone the property. Subsequently, the seller demanded performance of the contract, while the developer declared the contract terminated and sought return of its deposit. The developer filed suit for return of the $300,000 and the seller counterclaimed, claiming the deposit as liquidated damages for the developer’s refusal to close title.

The lower court granted summary judgment to the developer, holding that the governing contract was unambiguous as to the approval of re-zoning as a precondition to enforcement of the contract, thereby entitling the developer to the return of the initial deposit. The seller appealed.

The Appellate Division reversed and remanded, for trial, the issue of the intent and understanding of the parties prior to the final executed contract. The Court did not agree that the contract was unambiguous, but held that a contrary interpretation as to the re-zoning was possible. Specifically, the Court said that it could be construed that securing a municipal approval was not a condition of the executed contract and that the seller was obligated only to “assist” and introduce the developer to the municipal officials making the decision on the rezoning.

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