St. Pius X House of Retreats, Salvatorian Fathers v. Diocese of Camden

• Decision Date: 05 April 1982
• Citation: 88 N.J. 571,443 A.2d 1052
• Parties: ST. PIUS X HOUSE OF RETREATS, SALVATORIAN FATHERS, a New Jersey Corporation not for profit, Plaintiff-Respondent and Cross-Appellant, v. The DIOCESE OF CAMDEN, New Jersey, a religious corporation of the State of NewJersey, and Fred A. Gravino, Defendants-Respondents and Cross-Respondents, and Albert DiSalvio and Mary DiSalvio, his wife, Added Defendants-Appellants.
• Court: New Jersey Supreme Court

Page 571

88 N.J. 571

443 A.2d 1052

ST. PIUS X HOUSE OF RETREATS, SALVATORIAN FATHERS, a New Jersey Corporation not for profit Plaintiff-Respondent and Cross-Appellant, v. The DIOCESE OF CAMDEN, New Jersey, a religious corporation of the State of NewJersey, and Fred A. Gravino Defendants-Respondents and Cross-Respondents and Albert DiSalvio and Mary DiSalvio, his wife, Added Defendants-Appellants.

Supreme Court of New Jersey.

Argued Oct. 6, 1981.

Decided April 5, 1982.

James H. Landgraf, Cherry Hill, for added defendants-appellants (Myers, Matteo, Rabil & Norcross, Cherry Hill, attorneys).

Martin F. McKernan, Camden, for defendant-respondent and cross-respondent The Diocese of Camden, N. J., etc. (McKernan & McKernan, Camden, attorneys).

Charles W. Heuisler, Haddonfield, for plaintiff-respondent and cross-appellant (Archer, Greiner & Read, Haddonfield, attorneys; Gary J. Lesneski, Haddonfield, on the brief).

Robert E. Edwards, Cherry Hill, for defendant-respondent and cross-respondent Fred A. Gravino (Montano, Summers, Mullen & Manuel, Cherry Hill, attorneys).

The opinion of the Court was delivered by

SCHREIBER, J.

We granted certification in this case primarily to consider the proper measure of damages to which a vendee of realty is entitled upon the vendor's breach of an executory contract. Also involved are questions of reformation and an attorney's obligations when engaged to represent the seller.

Plaintiff, St. Pius X House of Retreats, Salvatorian Fathers (Salvatorians), contracted to sell an 81/2 acre tract of land (Lot 2H) in the Township of Gloucester to Albert and Mary DiSalvio (DiSalvios) under an installment arrangement with title to pass upon the final payment. Several years later, but during the installment period, plaintiff mistakenly included this parcel with other land in a conveyance to the Diocese of Camden (Diocese). The error remained undetected until the DiSalvios were about to take title. At that time Fred Gravino, the lawyer representing the Salvatorians, discovered the problem.

Plaintiff Salvatorians instituted this action seeking reformation of the deed to the defendant Diocese, and damages against its lawyer, defendant Gravino, for any losses it might suffer. Plaintiff joined the DiSalvios as defendants asserting the DiSalvios had breached their agreement to acquire the property. Gravino asserted a cross-claim against the Diocese for indemnification. The DiSalvios counter-claimed for specific performance or in the alternative for damages, cross-claimed against Gravino for damages based on his negligence, and cross-claimed against the Diocese asserting a prior right to the property.

The trial court granted defendant Gravino's motion, in which the Salvatorians joined, for partial summary judgment against the DiSalvios, denying them the right to damages based upon the benefit of the bargain. It held that, if the DiSalvios prevailed on their claim for breach of contract, then damages would consist of the monies they had paid under the installment contract. After a plenary trial the trial court in a letter opinion found the plaintiff was not entitled to reformation. It held that plaintiff had breached its contract of sale with the DiSalvios and ordered that all monies paid under the installment contract be returned. The court also concluded that Gravino had not been negligent and dismissed the actions against him. The Salvatorians and the DiSalvios appealed. The Appellate Division affirmed on the opinion below. We granted the DiSalvios' petition for certification. 87 N.J. 314, 434 A.2d 68 (1981), and the Salvatorians' cross-petition, 87 N.J. 359, 434 A.2d 1050 (1981).

The facts are virtually undisputed. The plaintiff Salvatorians originally purchased two tracts of land in Gloucester Township in 1962 from John and Mildred Hopkins. One tract contained a structure which the Salvatorians used as a retreat (Retreat House). The other property, which was not contiguous but was located nearby, is the subject matter of this dispute. It is designated on the Gloucester Township tax map as Lot 2H. Defendant Gravino, who represented the Hopkinses in the sale, prepared the deed, which contained a metes and bounds description and did not refer to lot and block numbers.

In August 1966, the DiSalvios entered into an agreement with the Salvatorians to purchase Lot 2H. The DiSalvios were not represented by counsel in this transaction. Defendant Gravino, now representing the Salvatorians, prepared an installment purchase agreement. The purchase price was $12,500. A down payment of $2,000 was to be followed by monthly installments of $100, commencing in September 1966 until the balance was paid. Upon payment of the balance, the seller was to deliver a warranty deed free and clear of all encumbrances. The settlement was to occur at Gravino's office. The same metes and bounds description which appeared for this tract in the Hopkins deed to the Salvatorians was incorporated in the contract. The agreement was not to be recorded by the buyers and recordation would constitute a default entitling the seller to immediate possession. It was explained at the trial that the clause was inserted to protect the seller, so that if the buyers defaulted, the title would not be cluttered with the sales contract. The DiSalvios were entitled to immediate possession and were responsible for taxes, which the seller might, at its option, pay. The DiSalvios took possession, but did nothing other than installing two no trespassing and three no hunting signs and cutting some grass.

When the Salvatorians encountered financial difficulties, it decided to sell all its properties. In November 1968, the Salvatorians' provincial director, Father DeBruin, met with Bishop Guilfoyle of the Camden Diocese to discuss a possible sale of its Gloucester Township land. The Bishop indicated an interest which led to negotiations. Each side retained an appraiser. The appraisers examined the local tax maps to identify the property owned by the Salvatorians. They assumed the maps were accurate and included Lot 2H in designating the properties to be sold. Both appraisers evaluated the land value at the rate of $1,750 per acre for 150 acres or $262,500. It is clear that the Salvatorians did not intend to sell Lot 2H, but believed that only the Retreat House structures and adjacent land were to be included in the sale.

Father Herron was in charge of the matter on behalf of the Diocese. In January 1969, he inspected the area, including the noncontiguous tract of land, Lot 2H. It was his understanding that this land was to be included since the appraisals referred to Lot 2H.

On February 26, 1969, the parties entered into an agreement of sale, which had been prepared by counsel for the Diocese. The property was described as:

(A)ll those certain parcels of land and premises being and situate in the Township of Gloucester, County of Camden and State of New Jersey, designated on the Tax Maps ..., as plate 31, Block 357, Lots 2H, 2J, 3, 4, 5, and 7, consisting of 150 acres, be the same more or less, and including the lake area in Lot 2J.

The purchase price was fixed at $810,000, a price substantially influenced by offers made by third parties to the Salvatorians. The price exceeded both appraisals, but this did not deter the Diocese. It was motivated by the desire to ease the Salvatorians' financial plight and to continue the Salvatorians' religious works at the Retreat House.

After the contract was executed, Father Herron ordered a survey of the property and a title report. The Salvatorians engaged Gravino. They sent him the contract and instructed him to "draw up the necessary papers to expedite this sale and represent us at the closing on March 14." He received a preliminary title report from Lawyers Title Insurance Corporation that referred to the properties in the same manner as the contract. Subsequently, he was sent a metes and bounds description of the two tracts, which he used in preparing the deed. This description, which also appeared in the final title report, described two tracts, the first containing 8.591 acres (Lot 2H) and the second containing 151.12 acres for a total of 159.711 acres. Gravino prepared a deed containing this description as well as the affidavit of title. At his request these documents were executed and returned to him. He never requested, received or examined the survey, although the survey was produced at the closing on April 2, 1969. At the closing Gravino delivered the deed he had prepared.

The DiSalvios continued to make their monthly payments to the Salvatorians. In November 1974, approximately six months before the deed was to be delivered to them, Gravino detected that the land had been included in the deed delivered to the Diocese.

I Reformation

The traditional grounds justifying reformation of an instrument are either mutual mistake or unilateral mistake by one party and fraud or unconscionable conduct by the other. Heake v. Atlantic Cas. Ins. Co., 15 N.J. 475, 481, 105 A.2d 526 (1954); Downs v. Jersey Central Power & Light Co., 117 N.J. Eq. 138, 174 A. 887 (E. & A. 1934). The parties agree on these principles, but differ on their application. Plaintiff urges that both parties intended a conveyance of only the lands owned by the Salvatorians when the contract was made and therefore a mutual mistake existed. Alternatively, the plaintiff argues that if the mistake was not mutual, the conduct of the Diocese was such as to warrant reformation. Resolutions of these questions are essentially factual. The trial court found that the Diocese was not mistaken and its conduct was not unconscionable. The Appellate Division agreed and we are satisfied that there is sufficient record support for these conclusions.

When the contract was entered into, the intention of both parties was the same, that is, that Lot 2H was to be included in the sale. The Salvatorians made a mistake by incorporating Lot...