Selective Builders, Inc. v. Hudson City Sav. Bank

• Decision Date: 02 December 1975
• Citation: 137 N.J.Super. 500,349 A.2d 564
• Parties: SELECTIVE BUILDERS, INC., Plaintiff, v. HUDSON CITY SAVINGS BANK, Defendant.
• Court: New Jersey Superior Court

Page 500

137 N.J.Super. 500

349 A.2d 564

SELECTIVE BUILDERS, INC., Plaintiff, v. HUDSON CITY SAVINGS BANK, Defendant.

Superior Court of New Jersey,

Chancery Division.

Dec. 2, 1975.

William J. O'Shaughnessy, Newark, for plaintiff (Clapp & Eisenberg, Newark, attorneys).

Hugo M. Pfaltz, Jr., Summit, for defendant.

KENTZ, J.S.C.

This is a breach of contract action. By way of remedy plaintiff Selective Builders, Inc. (Selective) seeks specific performance and incidental damages or, in the alternative, general compensatory damages. Defendant Hudson City Savings Bank (Hudson) denies that it breached the contract and contends that the contract was broken by Selective.

Selective, a New Jersey corporation, operates a general construction business. It is the owner of premises located in Bensalem Township, Pennsylvania and has undertaken to construct thereon a garden apartment complex commonly known as Park Terrace.

Hudson is a banking institution of the State of New Jersey and as such is engaged in the mortgage lending business. Selective applied to Hudson and obtained a permanent mortgage loan commitment on said property on March 11, 1974 in the base amount of $1,200,000. The commitment agreement was in writing and signed by the parties. It provided, among other things, that it would 'automatically expire' unless the loan was closed by January 1, 1975 and that the proceeds of the loan would be disbursed only upon 'final inspection.'

The mortgage loan did not close prior to January 1, 1975 and Hudson contends that the failure to close by that date was the fault of Selective. Selective maintains that Hudson breached the agreement and that therefore Selective is entitled to the relief sought in this action.

It is not disputed that Selective had not fully completed the construction of the garden apartment project by January 1, 1975. Certain minor work in various apartment units, such as carpeting, tiling and other touchup work was not finished. Most of this work had not been completed in those apartment units that had not been rented. In the nonrented apartments the heat had not yet been turned on due to the fact that each apartment was on a separate electrical heating unit and Selective did not want to incur additional heating costs until an apartment was rented. Without heat it would not have been practicable to complete these items of unfinished work. Admittedly, there was also some general 'mop up' work to be done in or about the premises. A satisfactory explanation was given why this work had not been completed. The approximate dollar amount of all of the unfinished work at the premises was $20,000.

In November 1974 Selective proposed to Hudson that the mortgage loan closing take place with a 'holdback' or an escrow in the amount of $20,000, which sum would be retained by Hudson until there was 100% Completion and thereupon the amount withheld would be paid over to Selective. This type of closing is not uncommon in mortgage loan transactions where new construction is involved. Upon receipt of this request Hudson did take the proposal under consideration and by its conduct did lead Selective to believe that such a closing might be possible. Toward this end Hudson caused the property to be reinspected on two occasions in order to determine if this type of closing would be feasible. Notwithstanding, Hudson, by letter dated December 24, 1974, notified Selective for the first time that the project would have to be fully completed, ready for occupancy, and the loan closed by January 1, 1975 or the commitment would be null and void. Because of the shortness of time allowed by this notice and particularly because of the intervening holidays, it was virtually impossible for Selective to comply with the notice and as a result the closing did not take place.

The first question to be decided is whether Hudson had the right under the commitment agreement to require 100% Completion of the project by January 1, 1975. To answer this question it is necessary to determine the intention of the parties. Intention may be gleaned from the relations of the parties, the surrounding circumstances and the objects of the parties. Applying these guides, it would seem from the language used in the commitment agreement that such completion was not intended by Hudson. There was no such requirement expressly stated in the commitment nor can such condition be implied from the expressed provisions contained therein. See Schultz v. Kneidl, 56 N.J.Super. 575, 584--585, 153 A.2d 779 (Law Div.1959), aff'd 59 N.J.Super. 382, 157 A.2d 861 (App.Div.1960). There was nothing in the nature of the contract or the surrounding circumstances which could be the basis for this condition. See Tessmar v. Grosner, 23 N.J. 193, 201, 128 A.2d 467 (1957); Casriel v. King, 2 N.J. 45, 50--51, 65 A.2d 514 (1949). Certainly, the conduct of the parties did not in any way give rise to such a condition.

Nevertheless, the project was at least 95% Finished at the time in question and thus substantially completed. Substantial completion is compliance with this type of contract in the absence of any expressed agreement to the contrary. ¹ In St. Paul & Chase Corp. v. Manufacturers Life Ins. Co., 262 Md. 192, 278 A.2d 12 (Ct.App.1971), the court was confronted with substantially the same issue in a similar factual setting as presented here, and referring to the mortgage loan commitment commented as follows:

(T)his building was substantially completed, and that was all that was required so far as the contract was concerned; second, that Manufacturers had more than adequate protection by an escrow of funds sufficient to complete the building, at which point the necessary certificates would have been forthcoming.

Assuming Arguendo that Hudson had the right to demand full and complete performance by Selective by January 1, 1975, Selective argued that Hudson is estopped from asserting such right. There is merit to this argument. I am satisfied that the silence of Hudson until December 24, 1974 and its conduct and actions immediately prior thereto estops it from asserting such right. ² Selective also urges that if this right did exist it was waived by Hudson. ³ It is well established that one may waive the delay in the performance of a contract whether time be of the essence or not. This waiver may be expressed or implied by written or oral agreement or by conduct indicating an intention to waive. Salvatore v. Trace, 109 N.J.Super. 83, 262 A.2d 409 (App.Div.1969), aff'd o.b. 55 N.J. 362, 262 A.2d 385 (1970); Goodpasture v. Goodpasture, 115 N.J.Super. 189, 197--198, 278 A.2d 531 (Ch.Div.1971); 17A C.J.S. Contracts § 506, p. 804. If Hudson had the right to demand 100% Completion at time of closing, the conduct of Hudson constituted a waiver of this requirement.

Still assuming that Hudson had such a right to require 100% Completion of the construction by January 1, 1975 and the estoppel theory or waiver doctrine are not applicable, Selective then contends that Hudson should have been given some reasonable extension of time for completion. Hudson disagrees and argues that time was of the essence for the performance of the commitment agreement. The language in the contract did not expressly state that time was of the essence. It provided that the commitment would automatically expire if the loan was not closed by a specific date. In Salvatore v. Trace, supra, the court said:

Ordinarily, equity does not regard time as of the essence of an agreement. When a certain period of time is stipulated in the contract for its completion, or for execution of any of its terms, equity treats the provision as formal rather than essential. Delay, unless willful or unreasonably long or prejudicial to the other party, is not of itself a reason for denying the relief of specific performance. (109 N.J.Super. at 91, 262 A.2d at 413)

There was no evidence that any delay in the completion of the project by Selective was the result of willful or bad faith conduct on its part. Nor was any such delay unreasonably long or prejudicial to Hudson.

Time of the essence may arise by implication from the nature of the subject matter of the contract or from the objects of the contracting parties. Hoffman v. Perkins, 3 N.J.Super. 474, 67 A.2d 210 (Ch.Div.1949); Diamonde v. Berkley Tp., 142 N.J.Eq. 140, 59 A.2d 617 (Ch.1948). This is not the situation here. Time of the essence could not have arisen in this agreement by implication.

Assuming Arguendo that time was of the essence in this commitment agreement, such provision could have been waived by the parties. Salvatore v. Trace, supra; Hoffman v. Perkins, supra; Hudson City Savings Bank v. Brockhurst, 138 N.J.Eq. 582, 49 A.2d 436 (Ch.1946); Norton v. Miller, 138 N.J Eq. 235, 47 A.2d 738 (Ch.1946). I conclude that if time was of the essence of the agreement, the conduct and the actions of Hudson were sufficient to establish a waiver of this provision.

Furthermore, it is a general rule that a contract is to be construed most strongly against the party preparing it. Trautwein v. Bozzo, 35 N.J.Super. 270, 113 A.2d 848 (Ch.Div.1955), aff'd 39 N.J.Super. 267, 120 A.2d 788 (App.Div.1956). See Summer v. Fabregas, 52 N.J.Super. 399, 145 A.2d 659 (App.Div.1958). Similarly, where in case of doubt as to the meaning of a written contract, the contract will be construed against the party who prepared it. Buscaglia v. Owens-Corning Fiberglas, 68 N.J.Super. 508, 172 A.2d 703 (App.Div.1961), aff'd 36 N.J. 532, 178 A.2d 208 (1961). Hudson prepared the mortgage loan commitment agreement. It had considerable experience in the mortgage lending business and was certainly knowledgeable in the preparation of such agreements. If Hudson wanted to require 100% Completion by Selective prior to the disbursement of the mortgage proceeds or to make time of the essence it could have so expressly stated. Failing to do this, the contract with respect thereto should be interpreted...