Allstate Redevelopment Corp. v. Summit Associates, Inc.

• Decision Date: 25 November 1985
• Citation: 502 A.2d 1137,206 N.J.Super. 318
• Parties: ALLSTATE REDEVELOPMENT CORPORATION, a New Jersey Corporation, Plaintiff-Appellant, v. SUMMIT ASSOCIATES, INC., a New Jersey Corporation, Diego R. Visceglia and Peter H. Cook, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 318

206 N.J.Super. 318

502 A.2d 1137

ALLSTATE REDEVELOPMENT CORPORATION, a New Jersey Corporation, Plaintiff-Appellant, v. SUMMIT ASSOCIATES, INC., a New Jersey Corporation, Diego R Visceglia and Peter H. Cook, Defendants-Respondents.

Superior Court of New Jersey Appellate Division.

Submitted Sept. 25, 1985.

Decided Nov. 25, 1985.

Franzblau, Falkin & Goldman, P.A., for plaintiff-appellant (Frederic C. Ritger, Jr., Newark, on brief)

Crummy, Del Deo, Dolan & Purcell, P.C., for defendants-respondents (Frederick C. Kentz, III, Newark, on brief).

Before Judges O'BRIEN and SCALERA.

The opinion of the court was delivered by

O'BRIEN, J.A.D.

Plaintiff Allstate Redevelopment Corporation (Allstate) appeals from a summary judgment dismissing its complaint against defendant Summit Associates, Inc. (Summit). At issue in this case is the nonperformance by plaintiff-lessee of a condition precedent in a commercial lease agreement allegedly caused by defendant-lessor's bad-faith failure to disclose a material fact. We hold that plaintiff sufficiently raised the issue of defendant's bad faith to preclude summary judgment, and therefore reverse and remand.

On January 14, 1977, Allstate entered into a lease with Summit, under the terms of which Allstate leased approximately 25 acres of vacant land in North Bergen owned by Summit, beginning on January 1, 1977 and ending on June 30, 1982, to be used by Allstate as a "dump site for non-organic materials and wood derived from the demolition of buildings and other structures." The parties agree that it was intended that the premises would be filled in a manner so as to be suitable for the erection of a building or buildings. In connection with that purpose, paragraph 38th of the lease required Allstate to submit to Summit a report prepared by Allstate's engineers indicating in detail the procedures which Allstate planned to follow in filling the demised premises with demolition material. It further authorized Summit, at Allstate's expense, to retain a firm to perform preliminary subsurface investigations. The paragraph further authorized Summit to terminate the lease after receipt of the engineering data if, in Summit's opinion or in the opinion of its engineers, the method of filling and suggested elevation interferes with Summit's proposed development of the demised premises after the filling has been completed, or if the subsurface report reveals that the costs for necessary site preparation for building construction will be increased by Allstate's use.

The clause in the lease upon which the court granted summary judgment reads as follows:

39th. The Tenant shall obtain on or before the expiration of the 4 month period set forth in paragraph 38th hereof any and all necessary permits and approvals required to permit the proposed use from any governmental unit having jurisdiction over the demised premises, said governmental units to include but not be limited to the Township of North Bergen, the Hackensack Meadowlands Development Authority, Hudson County, the State of New Jersey, and the United States of America until all such permits and approvals are obtained. If the necessary permits and approvals have not been obtained by said date, the time to obtain said permits and approvals shall be automatically extended from month-to-month, subject, however, to the right of either Landlord or Tenant to terminate said automatic extensions by thirty (30) days advance written notice to the other. If on the last day for obtaining permits and approvals, all necessary permits and approvals have not been obtained, this lease shall terminate and have no further force or effect and all of the security deposits not needed to satisfy the tenant's obligations hereunder shall be returned to the tenant. During any extension period for obtaining the necessary governmental permits and approvals, rent shall accrue and be payable by the tenant hereunder notwithstanding that said permits and approvals have not yet been obtained.

Pursuant to its obligation, Allstate began applying for the necessary permits. When Allstate's attorney applied to the New Jersey Department of Environmental Protection, he learned of an outstanding riparian claim by the State of New Jersey against the premises, and that no permits could be granted until that claim was resolved.

According to an affidavit filed by general counsel for Summit, the premises in question are located in the Hackensack Meadowlands District and portions thereof have been claimed by the State of New Jersey as riparian since 1970. Summit has been involved in negotiations and litigation over the State's claim since 1971 and had retained special counsel to litigate the matter on its behalf. In his affidavit, general counsel admitted that "as a result of the State's claim indicating that portions of this property are owned by the State, we have been unable to develop or use this property in any manner until those claims have been resolved." A potential settlement with the State was thwarted because of a change in administration and the appointment of a new attorney general.

The principals of Allstate certified that they were not aware of the existence of the riparian claim of the State of New Jersey at the time the lease was executed. Upon learning of the existence of this claim, Allstate was repeatedly assured that the claim was in the process of settlement and that it would not interfere with the project. Suggestions by Allstate that its representatives take part in an effort to clear up the riparian claim were rejected by Summit. In appearances before the Hackensack Meadowlands Development Commission (HMDC), attorneys for Summit testified as to the potential settlement of the claim. According to representatives of Allstate, they were assured by Summit that they would be able to commence their operation in just a few months and that the riparian claim did not represent any significant problem.

By letter of March 17, 1980, Summit exercised its right to terminate the lease under paragraph 39th, contending that, while a report of HMDC purports to permit the proposed demolition landfill:

various comments disclaiming approval of the fill for building purposes, requiring possible additional site preparation in the future and varying the percentages of organics and/or wood in accordance with building areas, parking areas and lawn areas yet at the same time withholding any approval of the denomination of those areas create an impossible situation.

Attached to that letter was a statement of charges allegedly due from Allstate to Summit totaling $194,807.83, but giving credit to Allstate for the $10,000 security deposit made pursuant to paragraph 31st of the lease.

On December 10, 1981, Allstate filed a complaint against Summit, Diego R. Visceglia, one of Summit's corporate officers, and Peter H. Cook, general counsel of Summit. This appeal is from the dismissal of that complaint. In the first count of the complaint, Allstate sought compensatory and punitive damages and to impose a lien upon the premises for the amount found to be due, alleging breach of contract. The second count charged a conspiracy between Visceglia and Cook to cause the contract between Allstate and Summit to be breached. Summit filed an answer and a counterclaim seeking damages for Allstate's alleged breach of the lease agreement, and a third-party complaint against Frank Capuano, who allegedly entered into an agreement in writing to guarantee performance of Allstate's obligations under the lease. The trial judge granted summary judgment in favor of Summit and dismissed both counts of the complaint by order dated November 18, 1983. ¹ Notice of appeal was filed on December 13, 1983. Thereafter the parties agreed to the entry of a consent order on January 4, 1984, dismissing the counterclaim and third-party complaint without prejudice. ²

In his letter opinion of March 16, 1984, the trial judge reasons that Allstate was obligated to obtain the necessary permits and approvals which had not been secured at the time Summit exercised its right to terminate under paragraph 39th. The judge concluded that because a condition precedent had not been satisfied, Allstate had no enforceable contractual rights under the lease agreement. The judge relied upon our opinion in State Farm Mutual Automobile Ins. Co. v. Anderson, 70 N.J.Super. 520, 527, 176 A.2d 23 (App.Div.1961), and also cited Duff v. Trenton Beverage Co., 4 N.J. 595, 604, 73 A.2d 578 (1950), for the proposition that "[g]enerally, no liability can arise on a promise subject to a condition precedent until the condition is met." On this appeal, Summit also relies upon Duff for the proposition that:

The parties may make contractual liability dependent upon the performance of a condition precedent; and where the performance of the condition made vital to the existence of the contract is impossible as in violation of public policy, a contractual obligation does not come into being. [at 604, 75 A.2d 578]

Application of the stated principles depends upon a resolution of the facts. In its brief filed in the trial court in support of its motion for summary judgment, Summit argued that the lease could not possibly have been performed, stating:

In addition to the impossibility of performance of this lease agreement due to the State's riparian claims there was the additional inability to obtain all of the necessary State and governmental permits within the time prescribed by the lease.

This recognition of the impossibility of performance of the lease by Summit creates a factual matter in dispute between the parties sufficient to preclude the grant of summary judgment. Nowhere in the lease agreement is there any reference to the riparian claim of the State. Yet Summit conceded that the premises could not be used until that claim was resolved. In face of this fact, it appears that Summit entered into a lease agreement with Allstate,...