Centex Homes Corp. v. Boag

• Decision Date: 28 March 1974
• Citation: Centex Homes Corp. v. Boag, 320 A.2d 194, 128 N.J.Super. 385 (N.J. Super. 1974)
• Parties: CENTEX HOMES CORPORATION, Plaintiff, v. Eugene H. BOAG and Virginia D. Boag, his wife, Defendants.
• Court: New Jersey Superior Court

Page 385

128 N.J.Super. 385

320 A.2d 194

CENTEX HOMES CORPORATION, Plaintiff, v.Eugene H. BOAG and Virginia D. Boag, his wife, Defendants.

Superior Court of New Jersey Chancery Division.

March 28, 1974.

David Carmel, Hackensack, for plaintiff.(Gross, Demetrakis & Donohue, Hackensack, attorneys).

Herbert New, Jersey City, for defendants.(Brenner, New & Brenner, Jersey City, attorneys).

GELMAN, J.S.C., Temporarily Assigned.

PlaintiffCentex Homes Corporation(Centex) is engaged in the development and construction of a luxury high-rise condominium project in the Boroughs of Cliffside Park and Fort Lee.The project when completed will consist of six 31-story buildings containing in excess of 3600 condominium apartment units, together with recreational buildings and facilities, parking garages and other common elements associated with this form of residential development.As sponsor of the project Centex offers the condominium apartment units for sale to the public and has filed an offering plan covering such sales with the appropriate regulatory agencies of the States of New Jersey and New York.

On September 13, 1972defendants Mr. & Mrs. Eugene Boag executed a contract for the purchase of apartment unit No. 2019 in the building under construction and known as 'Winston Towers 200.'The contract purchase price was $73,700, and prior to signing the contract defendants had given Centex a deposit in the amount of $525.At or shortly after signing the contract defendants delivered to Centex a check in the amount of $6,870 which, together with the deposit, represented approximately 10% Of the total purchase of the apartment unit.Shortly thereafter Boag was notified by his employer that he was to be transferred to the Chicago, Illinois, area.Under date of September 27, 1972he advised Centex that he'would be unable to complete the purchase' agreement and stopped payment on the $6,870, check.Centex deposited the check for collection approximately two weeks after receiving notice from defendant, but the check was not honored by defendants' bank.On August 8, 1973 Centex instituted this action in Chancery Division for specific performance of the purchase agreement or, in the alternative, for liquidated damages in the amount of $6,870.The matter is presently before this court on the motion of Centex for summary judgment.

Both parties acknowledge, and our research has confirmed, that no court in this State or in the United States has determined in any reported decision whether the equitable remedy of specific performance will lie for the enforcement of a contract for the sale of a condominium apartment.The closest decision on point is Silverman v. Alcoa Plaza Associates37 A.D.2d 166, 323 N.Y.S.2d 39(App.Div.1971), which involved a default by a contract-purchaser of shares of stock and a proprietary lease in a cooperative apartment building.The seller, who was also the sponsor of the project, retained the deposit and sold the stock and the lease to a third party for the same purchase price.The original purchaser thereafter brought suit to recover his deposit, and on appeal the court held that the sale of shares of stock in a cooperative apartment building, even though associated with a proprietary lease, was a sale of personalty and not of an interest in real estate.Hence, the seller was not entitled to retain the contract deposit as liquidated damages.¹

As distinguished from a cooperative plan of ownership such as involved in Silverman, under a condominium housing scheme each condominium apartment unit constitutes a separate parcel of real property which may be dealt with in the same manner as any real estate.Upon closing of title the apartment unit owner receives a recordable deed which confers upon him the same rights and subjects him to the same obligations as in the case of traditional forms of real estate ownership, the only difference being that the condominium owner receives in addition an undivided interest in the common elements associated with the building and assigned to each unit.See the Condominium Act, N.J.S.A. 46:8B--1 et seq.;15 Am.Jur.2d, Condominiums and Cooperative Apartments, at 977 et seq.;Note, 77 Harv.L.Rev. 777(1964).

Centex urges that since the subject matter of the contract is the transfer of a fee interest in real estate, the remedy of specific performance is available to enforce the agreement under principles of equity which are well-settled in this state.SeeHopper v. Hopper, 16 N.J.Eq. 147(Ch.1863);5A Corbin on Contracts § 1143(1964);11 Williston on Contracts § 1418A(3d ed. 1968);4 Pomeroy Equity Jurisprudence(5th ed. 1941), § 1402, Restatement, Contracts§ 360.

The principle underlying the specific performance remedy is equity's jurisdiction to grant relief where the damage remedy at law is inadequate.The text writers generally agree that at the time this branch of equity jurisdiction was evolving in England, the presumed uniqueness of land as well as its importance to the social order of that ear led to the conclusion that damages at law could never be adequate to compensate for the breach of a contract to transfer an interest in land.Hence specific performance became a fixed remedy in this class of transactions.See11 Williston on Contracts (3d ed. 1968) § 1418A;5A Corbin on Contracts § 1143(1964).The judicial attitude has remained substantially unchanged and is expressed in Pomeroy as follows:

* * * in applying this doctrine the courts of equity have established the further rule that in general the legal remedy of damages is inadequate in all agreements for the sale or letting of land, or of any estate therein; and therefore in such class of contracts the jurisdiction is always exercised, and a specific performance granted, unless prevented by othe and independent equitable considerations which directly affect the remedial right of the complaining party * * * (1 Pomeroy, Equity Jurisprudence(5th ed. 1941), § 221(b))

While the inadequacy of the damage remedy suffices to explain the origin of the vendee's right to obtain specific performance in equity, it does not provide a Rationale for the availability of the remedy at the instance of the vendor of real estate.Except upon a showing of unusual circumstances or a change in the vendor's position, such as where the vendee has entered into possession, the vendor's damages are usually measurable, his remedy at law is adequate and there is no jurisdictional basis for equitable relief.But seeRestatement, Contracts§ 360, comment c. ² The early English precedents suggest that the availability of the remedy in a suit by a vendor was an outgrowth of the equitable concept of mutuality, I.e., that equity would not specifically enforce an agreement unless the remedy was available to both parties.See the discussion in Stoutenburgh v. Tompkins, 9 N.J.Eq. 332, 342--346(Ch.1853);4 Pomeroy, Equity Jurisprudence(5th ed. 1941), § 1405;Annotation, 65 A.L.R. 7, 40(1930);Jones v. Newhall, 115 Mass. 244, 15 Am.Rep. 97, 103(Sup.Jud.Ct.1874);Comment, 10 VillanovaL.Rev. 557, 568--569(1965).

So far as can be determined from our decisional law, the mutuality of remedy concept has been the prop which has supported equitable jurisdiction to grant specific performance in actions by vendors of real estate.³The earliest reported decision in this State granting specific performance in favor of a vendor is Rodman v. Zilley, 1 N.J.Eq. 320(Ch.1831), in which the vendee (who was also the judgment creditor) was the highest bidder at an execution sale.In his opinion Chancellor Vroom did not address himself to the question whether the vendor had an adequate remedy at law.The first reported discussion of the question occurs in Hopper v. Hopper, 16 N.J.Eq. 147(Ch.1863), which was an action by a vendor to compel specific performance of a contract for the sale of land.In answer to the contention that equity lacked jurisdiction because the vendor had an adequate legal remedy, Chancellor Green said (at p. 148);

'It constitutes no objection to the relief prayed for, that the application is made by the vendor to enforce the payment of the purchase money, and not by the vendee to compel a delivery of the title.The vendor has not a complete remedy at law.Pecuniary damages for the breach of the contract is not what the complainant asks, or is entitled to receive at the hands of a court of equity.He asks to receive the price stipulated to be paid in lieu of the land.The doctrine is well established that the remedy is mutual, and that the vendor may maintain his bill in all cases where the purchaser could sue for a specific performance of the agreement.'

No other Rationale has been offered by our decisions subsequent to Hopper, and specific performance has been routinely granted to vendors without further discussion of the underlying jurisdictional issue.⁴E.g., Brown v. Norcross, 59 N.J.Eq. 427, 45 A. 605(Ch.1900);Moore v. Baker, 62 N.J.Eq. 208, 49 A. 836(Ch.1901);Van Riper v. Wickersham, 77 N.J.Eq. 232, 76 A. 1020(Ch.1910);Gerba v. Mitruske, 84 N.J.Eq. 79, 94 A. 34(Ch.1914);Meyer v. Reed, 91 N.J.Eq. 237, 109 A. 733(Ch.1920);Morris v. Eisner, 96 N.J.Eq. 538, 125 A. 573(Ch.1924);Salter v. Beatty, 101 N.J.Eq. 86, 137 A. 848(Ch.1927);Mahaffey v. Sarshik, 101 N.J.Eq. 297, 137 A. 887(E. & A.1927);Harrington v. Heder, 109 N.J.Eq. 528, 158 A. 496(E. & A.1931);Hoffman v. Perkins, 3 N.J.Super. 474, 67 A.2d 210(Ch.Div.1949).

Our present Supreme Court has squarely held, however, that mutuality of remedy is not an appropriate basis for granting or denying specific performance.Fleischer v. James Drug Store, 1 N.J. 138, 62 A.2d 383(1948);see also, Restatement, Contracts§ 372;11 Williston, Contracts (3d ed 1968), § 1433.The test...