Conley v. Guerrero

• Decision Date: 03 April 2017
• Docket Number: Nos. A-65 September Term 2015, 076928.,s. A-65 September Term 2015, 076928.
• Citation: 157 A.3d 416,228 N.J. 339
• Parties: Michael CONLEY, Jr. and Katie M. Maurer, Plaintiffs–Appellants, v. Mona GUERRERO, Brian Kraminitz, and Michele Tanzi, Defendants–Respondents.
• Court: New Jersey Supreme Court

228 N.J. 339

157 A.3d 416

Michael CONLEY, Jr. and Katie M. Maurer, Plaintiffs–Appellants,

v.Mona GUERRERO, Brian Kraminitz, and Michele Tanzi, Defendants–Respondents.

Nos. A-65 September Term 2015, 076928.

Supreme Court of New Jersey.

Argued January 17, 2017

Decided April 3, 2017

Corrected April 6, 2017

William J. Kearns argued the cause for appellants (Kearns & Duffy, attorneys).

Martin Liberman argued the cause for respondent Mona Guerrero.

Robert J. Machi argued the cause for respondents Brian Kraminitzand Michele Tanzi(Morgan Melhuish Abrutyn, attorneys; Mr. Machiand Joshua A. Heines, on the brief).

Barry S. Goodman argued the cause for amicus curiae New Jersey Realtors®> (Greenbaum, Rowe, Smith & Davis, attorneys; Mr. Goodmanand Steven B. Gladis, on the brief).

F. Bradford Batcha argued the cause for amicus curiae New Jersey State Bar Association (Thomas H. Prol, President, attorney; Mr. Prol, of counsel; Mr. Batcha, Stuart J. Lieberman, Michael G. Sinkevich, Jr., and Heather G. Suarez, on the brief).

JUSTICE SOLOMON delivered the opinion of the Court.

In 1983, this Court affirmed a final consent judgment for a settlement agreement between the New Jersey State Bar Association and the New Jersey Association of Realtor Boards. New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Boards (Bar Ass'n) , 93 N.J. 470, 476–77, 461 A .2d 1112, modified , 94 N.J. 449, 467 A .2d 577 (1983). The terms of the settlement provide that real estate brokers and salespersons may prepare contracts to sell or lease real property, so long as a standard form is used that includes a three-day period for attorney review. If, during this review period, an attorney disapproves the contract, he or she must notify the other party and the other party's real estate agent or broker. If no notice of disapproval is sent within the three days, however, the contract becomes enforceable. The standard attorney-review provision specifies that notice of disapproval must be transmitted to the real estate agent or broker by certified mail, telegram, or personal service.

Plaintiffs Michael Conley, Jr., and Katie M. Maurer (Buyers) made an offer to purchase a condominium from defendant Mona Guerrero (Seller), and, a few days later, Seller signed and executed the contract. Before the three-day attorney-review period expired, Seller's attorney sent Buyers' attorney and their realtor notice of disapproval by e-mail and fax, rather than by the methods approved under our 1983 holding and prescribed in the parties' contract—certified mail, telegram, or personal service. Buyers sued for specific performance, claiming the contract was enforceable because Seller's notification of disapproval was sent improperly.

We are called upon to determine whether the attorney-review provision of a standard form real estate contract must be strictly enforced, thereby nullifying Seller's notice of disapproval and requiring enforcement of the real estate contract. We conclude that, because Buyers received actual notice of disapproval within the three-day attorney-review period by a method of communication commonly used in the industry, the notice of disapproval was valid. We also exercise our constitutional authority over the practice of law and find that an attorney's notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Notice by overnight mail will be effective upon mailing. The attorney-review period within which this notice must be sent remains three business days.

I.

The pertinent undisputed facts of record are as follows. On January 12, 2014, Buyers signed a contract to purchase a condominium from Seller. Weichert Realtors was the Listing and Selling Broker on this transaction, and a real estate agent from Weichert acted as a dual agent for the parties. The agent prepared, and the parties used, a standard form real estate contract. Seller signed the contract on January 14, 2014, and the executed agreement was delivered the next day. Both the offer and acceptance were transmitted via e-mail and/or fax.

The agreement included an attorney-review clause, mandated by this Court in Bar Ass'n and N.J.A.C. 11:5–6.2(g)(2), which gave the parties' respective attorneys three business days to review the contract before it became legally binding. If Buyers' or Seller's attorney disapproved the contract, the clause required that he or she notify the "REALTOR(S) and the other party ... within the three-day period."¹ Any notice of disapproval was required to be sent to the "REALTOR(S) by certified mail, by telegram, or by delivering it personally."

A bidding war began on the same day that the attorney-review period commenced, and Buyers were informed that higher offers were submitted for the property. In response, Buyers increased their offer amount and implored Seller to agree to the sale. The next day, however, Seller accepted a higher bid from defendants Michele Tanzi and Brian Kraminitz (Tanzi).

One day before the attorney-review period expired, Seller's attorney e-mailed and faxed a letter to Buyers' attorney disapproving the contract. The dual real estate agent was copied on the e-mail. Nevertheless, after the deadline passed, Buyers' attorney e-mailed a letter to the agent, and faxed Seller's attorney a copy, stating that "the 3 days within which an attorney may terminate this contract ha[ve] expired. The contract is now in full force and effect."

Buyers then filed a breach-of-contract complaint in the Superior Court, Law Division, against Seller and Tanzi (collectively, defendants), demanding specific performance and requesting a temporary restraining order to enjoin the sale of the condominium to anyone other than Buyers. Buyers argued that "no attorney notified any realtor involved in the transaction by certified mail, by telegram or by personal delivery as is required if the contract was disapproved." Consequently, Buyers claimed that because the three-day period within which notification must have been communicated had passed, and neither Buyers, their attorney, nor their agent received proper notification of disapproval, "the contract became effective."

The trial court denied the application for a temporary restraining order, finding that Buyers failed to establish a reasonable probability of success on the merits and that the equities favored Tanzi as an "innocent buyer [ ] ... that entered into a contract to purchase the property, and now ha[s] been forced to enter into litigation."

Both parties filed cross motions for summary judgment because the facts were "largely uncontroverted." The court granted defendants' motion for summary judgment and dismissed Buyers' complaint. Buyers appealed, and the Appellate Division affirmed the trial court's decision. Conley v. Guerrero , 443 N.J.Super. 62, 68, 127 A .3d 705 (App. Div. 2015). The panel found that the agreement detailed the method of delivering a notice of disapproval to the real estate agent only; any form of actual notice to Buyers was sufficient; and Buyers' right to notice of disapproval was satisfied here. Id. at 68–69, 127 A .3d 705.

The panel questioned whether Buyers could be able to enforce their agent's right to notice by the prescribed methods. Id. at 69, 127 A .3d 705. Assuming Buyers' ability to do so, the appellate panel found that the specific methods of delivering notification delineated in the contract were not material, and to force Seller to forfeit her right to disapprove the contract would be inappropriate. Id. at 69–70, 127 A .3d 705. The Appellate Division reasoned that the notice requirements were imposed on the parties by the courts, not through the bargaining process, and therefore, could be relaxed in the interests of justice. Id. at 70, 127 A .3d 705. The panel also found that Seller's attorney "substantially compl[ied] with the notice requirement" because the "undisputed notice to the buyers and their real estate agent ... achieve[d] the goal of the provision: to accomplish actual notice." Id. at 70–71, 127 A .3d 705.

We granted Buyers' petition for certification. 244 N.J. 526 (2016). We also granted amicus curiae status to the New Jersey State Bar Association (NJSBA) and New Jersey REALTORS² (REALTORS).

II.

Buyers argue that the trial court and appellate panel modified the Court's decision in Bar Ass'n when they ruled that Seller's attorney could disapprove the contract by fax and e-mail, rather than the three methods specified in Bar Ass'n : telegram, certified mail, and in-person delivery. By allowing alternative methods, Buyers assert that the lower courts usurped this Court's exclusive authority to regulate the rules governing the practice of law. In addition, Buyers contend that the contract should be strictly enforced because it is unfair for the courts to hold realtors—but not attorneys—to the letter of Bar Ass'n .

Defendants ask this Court to affirm the decision of the Appellate Division. They argue that the Court should find substantial compliance with the notice provision because the e-mail and fax sent by Seller's attorney provided actual notice to Buyers and the agent. Defendants assert that if the Court were to insist on strict enforcement of the notice provision, it would result in a "disproportionate forfeiture" for Tanzi, who bought the house in good faith and has been living there for approximately two years. In addition, according to defendants, strict enforcement would "result in a forfeiture of [Seller's] right to disapprove the contract."

According to defendants, common practice in real estate law has changed dramatically since the Court's decision in Bar Ass'n thirty-three years ago. As such, defendants argue that this Court should not adopt a formalistic rule that ignores the reality of real estate transactions, in which e-mail and fax are routinely used to communicate and exchange contracts. To support this point, Seller submits that it defies logic to allow the signed contract to be delivered...