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Wright v. Sunwoo

A-6242-01T1 (N.J. Super. App. Div. 2003) (Unpublished)

CONTRACTS; TIME OF THE ESSENCE—Failure of a party to a sales contract to promptly respond to inquiries about the status of a title defect constitutes acting unreasonably, and the unresponsive party will not be excused from appearing at an otherwise properly made time of the essence closing.

After signing a realtor’s form contract, the buyer and seller agreed to extend the period for attorney review and negotiation. They then modified the terms in a letter agreement and called for a closing date of October 17, 2000. The deposit was paid to the seller’s attorney in escrow and the buyer “engaged searches, inspections, and the like, proceeding, as well, to arrange mortgage financing.” Even though the initial title search “was unremarkable,” the title rundown search revealed a lien against the property pursuant to the Uniform Enforcement of Foreign Judgments Act. The buyer’s attorney immediately advised the seller’s attorney of the lien and the seller’s attorney stated “he could not assure the matter could be cleared up that day.” The lower court “evaluated the conduct of all parties as of [the date originally scheduled for closing] as ‘entirely appropriate and expected.’” Both parties proceeded in a cooperative spirit.

Two weeks later, the buyer’s attorney asked the seller’s attorney to explain how the problem was going to be resolved. The seller negotiated for a discharge of the lien upon the payment of a relatively small amount, but the buyer didn’t know that such an arrangement had been made. Instead, the record appeared to show that the parties failed to communicate with each other. In fact, the buyer believing it had received no response, sent a letter on November 1 demanding that closing take place on November 3, otherwise the contract would be “canceled and of no force and effect due to your clients’ inability and failure to convey marketable title.” On November 7, the seller’s attorney wrote to the buyer’s attorney advising that an agreement had been reached to release the lien and telling the buyer’s attorney that as soon as the matter was concluded, he would advise the buyer’s attorney as to the closing date. The letter offered to rent the home to the buyer. In response, the buyer’s attorney declared that his client had “terminate[d] the Contract” by reason of “sellers’ inability to convey ‘marketable title, free and clear of all liens and encumbrances… .” Additional letters demanded return of the deposit and costs. On November 8, the seller’s attorney responded to the buyer’s attorney that the seller had “finally received a letter of discharge” and could now close. A week later, the buyer’s attorney responded by again asking for return of the deposit monies and reimbursement of search and survey costs. This went back and forth, now with the seller’s attorney demanding that the buyer attend the closing. No closing occurred on the date specified by the seller’s attorney. Instead, six days before that date, the buyer sued the seller for return of the deposit and reimbursement of costs. The property was returned to the market and a sale ensued for $90,000 less than the original contract.

The lower court, “in an extensive and scholarly analysis, discussed the principles implicated in the case, especially concepts associated with the setting of closing dates.” The lower court’s opinion discussed the situation where no time-of-the-essence declaration had been made and, the Appellate Division agreed “that, with no time-of-the-essence requirement, the result on the liability issue turns upon a reasonableness evaluation regarding the respective parties’ conduct and the positions they took.” In that regard, the Appellate Division believed that the buyers acted more reasonably than the sellers did in the circumstances. The sellers were responsible for the title defect, “and having failed to disclose it at the outset, failed also to discharge their obligations to act forthrightly and promptly to provide reasonable and timely assurances that they were proceeding with dispatch to remedy the title defect.” On the closing date, the sellers only acknowledged the problem, but provided no explanation of how and when they intended to address the matter successfully. As a result, the seller gave the buyer “no reason to believe that the matter would be dealt with on an expedited basis.” All it stated was that “additional time would be needed and that rescheduling of the closing would be necessary.” In essence, the response did not inspire confidence. Nevertheless, the buyer’s attorney, “in a spirit of accommodation, indicated that his clients ‘will attempt to close ... as soon as’” the seller resolved the matter. When no communication whatever came from the seller, the buyer pursued the seller. The seller did not respond on a timely basis. Further, when the seller offered to rent the home to the buyer, the buyer reasonably could believe that this only meant that there would be further delay with no end in sight.

In sum, the Court believed that “by failing to communicate with purchasers to provide assurances that the title defect was being seriously addressed with an attitude of expedition, following their failure to disclose in the first place, sellers acted unreasonably, with inadequate regard for the likelihood that purchasers would be alienated from the contract. In so conducting themselves, sellers assumed the risk of losing the benefit of their bargain.”


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