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Singh v. RJR & Sons Corp.

A-4424-99T3 (N.J. Super. App. Div. 2001) (Unpublished)

CONTRACTS; REMEDIES; EXCLUSIVITY—Once a contracting party waives its right to seek monetary damages in order to seek specific performance, it will not be able to revive its monetary claim when specific performance is denied.

A buyer purchased a fuel pumping business and then leased a portion of its seller’s property on which to operate its own fuel pumping business. The agreement of sale gave the tenant a first right of refusal to purchase the real property and the companion lease each. The property owner then reached an agreement with a third party to sell the property for cash and seller financing. The owner’s attorney then notified the tenant about the contract, and the tenant’s attorney responded that its client was electing its right of first refusal “under the same terms and conditions of said Contract, subject to my review of same.” The tenant’s attorney also conditioned the acceptance on the contract having been reached by a negotiation “in good faith, at arm’s length, to a bona fide purchaser.” Although the tenant’s attorney requested copies of the contract together with material terms of the proposed purchase money mortgage, none was ever supplied. Instead, the land owner’s attorney replied that the contract had been prepared by a real estate broker and “presumably it was in good faith,” and requested the tenant to demonstrate its “ability to come up with the same cash infusion” and to supply a copy of its credit report. In later correspondence, the owner’s attorney alleged that the owner had first gone to its tenant about the transaction and claimed that the tenant declined to purchase the property because it did not have sufficient funds to do so. The tenant sought a temporary restraining order preventing the sale of the property, but the application was denied by the lower court because “there was insufficient proof of irreparable harm sufficient to justify the grant of a temporary restraining order.” An emergent application to the Appellate Division was denied. The closing took place. A suit was then filed seeking, inter alia, specific performance. At trial, a discussion took place in chambers after which the complaint was dismissed without prejudice for refiling with the Chancery Division with the provision that the tenant would not seek damages. When the suit was refiled, the Chancery Division held that the owner had never actually provided its tenant with an offer to purchase the property pursuant to the right of first refusal that nevertheless denied specific performance. One of the Chancery Division’s findings was that the original letter from the owner’s attorney did not constitute an “actual extension of an offer of the right of first refusal ... in clear, definite terms.” In addition, the lower court rejected, as incredible, testimony that the owner actually preferred to sell the property to its tenant in order to save the broker’s commission. The lower court also rejected as not credible the owner’s testimony that its tenant could not afford to exercise the right of first refusal. Lastly, the lower court concluded that the ultimate buyers were not bona fide purchasers because prior to closing they were aware of the tenant’s claim. “Notwithstanding those conclusions, the judge elected not to award specific performance because it was ‘impossible to put the parties back to where they were before this deal.’ The lower court believed that any remedies available to the tenant lay in a damage claim and therefore dismissed the tenant’s complaint. The tenant’s attorney then orally moved to amend the complaint, apparently to seek damages. The lower court ruled against the tenant, holding that it would be “inherently unfair” to permit the tenant to have abandoned its claim for damages, then refile in the Chancery Division seeking equitable relief, and, “when unsuccessful, to attempt to return to the Law Division to reassert the claims previously abandoned.” On appeal, the Appellate Division reviewed the record and affirmed the lower court’s holding. In doing so, it commented that it was troubled that there was no record of the tenant’s initial decision to abandon the claim for damages. On the other hand, it had “no reason to doubt [the owner’s] attorney’s assertion” that the monetary claim had been abandoned. Further, the Court recognized that “[t]here is a virtual presumption, because of the uniqueness of land and the consequent inadequacy of monetary damages, that specific performance is the buyer’s appropriate remedy” for breach of a contract to sell real estate. On the other hand, “specific performance is a discretionary remedy resting on equitable principles requiring the court to appraise the respective conduct and situation of the parties.” According substantial deference to the exercise of the lower court’s discretion and the lower court’s ability to see and hear the witnesses, the Appellate Division was satisfied that the lower court carefully weighed the equities of the respective parties when denying specific performance. Similarly, the Appellate Division pointed out that although motions to amend a pleading “should be indulgently treated, they are, nevertheless, best left to the sound discretion of the trial court… .” With that in mind, the Court upheld the lower court’s decision to deny the tenant an opportunity to make a claim for monetary damages.

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