Urban Farms, Inc. v. Seel

• Decision Date: 16 March 1965
• Docket Number: No. C,C
• Citation: 87 N.J.Super. 177,208 A.2d 434
• Parties: URBAN FARMS, INC., a Corporation of the State of New Jersey, Plaintiff, v. Arthur J. SEEL and Charlotte Seel, his wife, Defendants. 1405.
• Court: New Jersey Superior Court

Page 177

87 N.J.Super. 177

208 A.2d 434

URBAN FARMS, INC., a Corporation of the State of New Jersey, Plaintiff, v. Arthur J. SEEL and Charlotte Seel, his wife, Defendants.

No. C 1405.

Superior Court of New Jersey, Chancery Division.

March 16, 1965.

Gassert & Murphy, Newark, for plaintiff (Thomas S. Murphy, appearing).

Sebastian Gaeta, Wycoff, for defendants.

PASHMAN, J.S.C.

This is an action in which plaintiff corporation seeks to enjoin defendants husband and wife from violating two restrictive covenants. One covenant is found only in a written contract of sale between the parties, and the other in both the contract and the deed conveying certain property from plaintiff to defendants.

Urban Farms is a model community for our affluent society. The area, owned and operated by plaintiff corporation, consists of approximately 240 one-family homes, all of which have a very substantial value. With permission of counsel, I inspected the premises in question. Urban Farms is located in the Borough of Franklin Lakes and extends over approximately 3000 acres, with 500 acres presently being developed. Plaintiff contends that it is doing everything within its power to keep the community beautiful to the sight and wholesome in environment. To achieve this end, plaintiff claims it has been necessary to impose restrictive covenants binding on the residents of Urban Farms. Defendants, who own property in the community, counter that many of these covenants have only one purpose--to enlarge plaintiff's corporate pocketbook through an interlocking realty company.

On August 1, 1961 defendants entered into a written contract to buy a certain lot for $12,500 from plaintiff corporation. The sales contract contained a typewritten provision, inserted between the 'In witness whereof' clause and the signatures on the printed contract, stating:

'Supplementing Clause No. 2 in Schedule 'A' of this contract, it is understood and agreed that any residence erected on the within described premises will be built by a Contractor approved by Urban Farms, Inc. Any top soil stored on this lot is the property of the Seller and must not be moved.'

Pursuant to the terms of the contract, title was closed on September 30, 1961 and a deed containing all of the printed terms in the contract, except the additional typewritten 'No dwelling or other structure, nor any exterior alterations or improvements thereof shall be built, constructed, maintained, used or occupied unless and until the plans and specifications thereof, together with a plot plan showing the proposed location thereof, (and a grading plan of said plot if requested) shall have been approved by written endorsement of the grantor herein, its successors or assigns, upon said plans prior to the commencement of the construction thereof.'

clause set forth above, was executed and delivered to defendants. Both the contract and the deed contained a schedule designated as 'Schedule A,' which included, among other covenants, conditions and restrictions, the following:

The evidence submitted at trial indicates that in June 1963 defendants decided to build a dwelling on the premises in question. After numerous conferences under the supervision of Carmine A. Latrecchia, president of a construction firm of the same name, plans and specifications for a two-story home were prepared by Rudolph G. Bolling, an architect, at Latrecchia's request. Latrecchia acted as agent for defendants. Bolling received $300 from Latrecchia. This rather conservative charge was fixed by arrangement with plaintiff. Defendants ultimately paid Latrecchia $370 for this service.

These plans and specifications were submitted to plaintiff and were returned to Latrecchia containing its written endorsement as follows:

'APPROVED FOR URBAN

FARMS, INC.

JOB NO. 1--145

BLOCK NO. 1110--A

LOT NO. 14

BY M. G. B.

DATE 12--10--63'

The original plans and plot plans were then submitted to the Franklin Lakes building inspector, and after inspection and review an official building permit was duly issued to defendants on January 6, 1964. However, on December 23, 1963, plaintiff's approval of the plans and specifications was withdrawn by the following notation thereon:

'NOT APPROVED

APPROVAL WITHDRAWN

DEC. 20, 1963--CONTRACT WITH LATRECCHIA CANCELLED BY OWNER IN DEFAULT WITH OTHER AGREEMENTS TO BUILDER AND URBAN FARMS, INC. / / M G B 12/23/63'

Evidence submitted at trial indicates that the sole reason for the withdrawal of approval proval of the plans and specifications was defendants' failure to employ a contractor approved by plaintiff.

Defendants originally chose Latrecchia, Inc. as their 'approved' builder, and it was this firm which submitted the plans and specifications to plaintiff. Upon the return of the approved plans, plaintiff requested an estimate from Latrecchia as to the cost of construction the proposed home. The written estimate of $54,730 which defendants received included a 6% Sales commission to be paid to plaintiff. This is the root of the problem presently before the court.

Defendants refused to pay $54,730 to Latrecchia if 6% ($3,283.80) of this amount would be paid over the plaintiff as a 'sales commission.' Since these were the only terms under which Latrecchia would agree to perform the work, a stalemate developed. Defendants then engaged Jurgensen Builders, Inc. (whose principals are related to defendant Mrs. Seel) to construct their home according to the plans and specifications previously submitted to plaintiff.

It appears that the president of plaintiff corporation orally informed defendants in January 1964 that an investigation of Jurgensen indicated that the firm was properly qualified and that it could become an approved builder if it (Jurgensen) first purchased a vacant lot from plaintiff, which is a prerequisite to approval. Jurgensen refused to accede to this request, but nevertheless began construction by clearing the land to start excavation.

This led to the institution of the instant proceeding and the granting of Ex parte restraints on January 20, 1964, enjoining defendants from 'digging and clearing premises * * * erecting any building, residence or other improvement * * *' on the property in question. By subsequent order of this court, these restraints have been continued pending the final determination of this action.

As previously indicated, plaintiff contends that defendants have failed to comply with two separate restrictive covenants. The court will first consider the validity of the covenant contained in the contract that 'any residence erected * * * will be built by a contractor approved by Urban Farms, Inc.', which covenant was not included in the deed executed by the parties. The governing rule of law as to whether such a covenant merges in the deed was set forth by Justice Haneman in Caparrelli v. Rolling Greens, Inc., 39 N.J. 585, 190 A.2d 369 (1963):

'It is generally recognized that the acceptance of a deed for lands is to be deemed Prima facie full execution of an executory contract to convey, unless the contract contains a covenant collateral to the deed. Dieckman v. Walser, 114 N.J.Eq. 382, 385--386, 168 A. 582 (E. & A. 1933) (and citing other authority). This rule of merger satisfies and extinguishes all previous covenants which relate to or are connected with the title, possession, quantity or emblements of the land. Contemporaneously, those covenants in the antecedent contract which are not intended by the parties to be incorporated in the deed, or which are not necessarily satisfied by the execution and delivery of the deed, are collateral agreements and are preserved from merger. Dicekman v. Walser, supra; Deerhurst Estates v. Meadow Homes, Inc., 64 N.J.Super. 134, 165 A.2d 543 (App.Div.1960). The test herein in whether the alleged collateral agreement is connected with the title, possession, quantity, or emblements of the land which is the subject of the contract.' (at p. 590, 190 A.2d at p. 372)

The aforesaid provision requiring approval by plaintiff of any contractor selected to erect a residence has no relationship to 'the title, possession, quantity or emblements of the land.' It therefore survives the delivery of the deed as a collateral undertaking.

However, the mere survival of the covenant after the execution of the deed does not mean that it is binding on defendants. As our Supreme Court stated in Weinstein v. Swartz, 3 N.J. 80, 68 A.2d 865 (1949):

'A restrictive covenant is a contract. Rankin v. Brown, 142 N.J.Eq. 180, 59 A.2d 645 (Ch.1948). Any neighborhood scheme that flows from the terms thereof must to be effective and enforceable apply to all lots of a like character Brought within the scheme. The consideration to each lot owner for the imposition of the restriction is that the same restrictions are placed upon the lots of others similarly located. Its universal character therefore is dependent upon reciprocal or mutual burdens and benefits shared by each lot owner brought within the...