Welsh v. Griffith-Prideaux, Inc.

• Decision Date: 08 March 1960
• Docket Number: INC,GRIFFITY-PRIDEAU,No. A--744,A--744
• Citation: 60 N.J.Super. 199,158 A.2d 529
• Parties: Ronald A. WELSH and James T. Welsh, Jr., Plaintiffs-Appellants, v., et al., Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 199

60 N.J.Super. 199

158 A.2d 529

Ronald A. WELSH and James T. Welsh, Jr., Plaintiffs-Appellants, v. GRIFFITY-PRIDEAUX, INC., et al., Defendants-Respondents.

No. A--744.

Superior Court of New Jersey Appellate Division.

Argued Dec. 14, 1959.

Decided March 8, 1960.

Walter J. Hunziker, Jr., Paterson, argued the cause for plaintiffs-appellants (Hunziker & Hunziker, Paterson, attorneys).

Clifford W. Starrett, Morristown, argued the cause for defendant-respondent Griffity-Prideaux, Inc. (Schenck, Smith & King, Morristown, attorneys).

John J. Gibbons, Newark, argued the cause for defendants-respondents Alex Richard Lanyi and wife (Crummy, Gibbons & O'Neill, Newark, attorneys).

Before Judges GOLDMANN, CONFORD and HANEMAN.

The opinion of the court was delivered by CONFORD, J.A.D.

The basic question projected before the trial court in this case was whether a certain written agreement between plaintiffs (hereinafter referred to as the 'Welshes') and the defendant corporation (hereinafter referred to as 'Griffith') dated December 15, 1955, as recast by an agreement between the same parties dated July 10, 1957, constitutes an equitable mortgage, with the consequent right of redemption by the Welshes, upon default, from the obligations due thereunder to Griffith; or either (a) a non-security transaction classifiable as an option from Griffith to the Welshes to buy any of 11 certain lots, as held by the trial court and contended by defendants Griffith and Lanyi, or (b), as alternatively argued by them, a sales contract on condition, upon which the Welshes have defaulted.

The appeal raises the additional issue as to whether the determination of the question posed should not have been reserved for decision after trial, as dependent upon resolution of disputed issues of fact, rather than upon defendants' motion for summary judgment, as was here done by the Chancery Division.

Much of the factual background in this case is undisputed. One of the plaintiffs, James T. Welsh, Jr., was employed by Griffith as a real estate salesman from 1953 to 1958. During that period he also engaged independently in several real estate ventures with his brother, the other plaintiff, Ronald H. Welsh. In one of these ventures the plaintiffs (through James obtained an option from one Cameron in January 1955 to purchase a six-acre tract of land with a small frontage on Woodruff Road in Morris Township, suitable for high-class residential construction, for $11,000, conditioned, however, upon their undertaking to apply for and obtain, no later than April 8, 1955 (or within 30 days thereafter), approval by the local planning board 'of building plans.' The Welshes obtained approval from the planning board April 1, 1955 of a plan for subdivision of the property into 11 building plots on a road to be constructed therein, conditional upon their posting a road-completion surety bond with the township authorities in the sum of $18,505. As the date for closing title with Cameron approached the Welshes were apparently unable to obtain financing elsewhere and consequently entered into the arrangement with Griffith which underlies this litigation. An oral agreement was arrived at concurrently with the closing of title with Cameron in May 1955. A written agreement, signed December 15, 1955, formalized this understanding. The parties agree the writing accords exactly with the oral understanding.

Basically, Griffith was to put up the purchase price and take title in its own name; plaintiffs would build the road and other necessary developmental improvements required, as well as the homes on the lots; Griffith would have the exclusive right of sale of the dwellings thus erected; Griffith would be 'reimbursed' by the Welshes for the purchase price of the property, together with interest at the rate of 5% From May 11, 1955 (closing date), payable semi-annually, and for any real estate taxes and insurance and maintenance expenses paid by Griffith; the Welshes were to pay taxes and insurance premiums in the first instance and also a $500 fee to Griffith 'by way of commission for negotiating the purchase' of the property and for 'assisting' plaintiffs 'in consummating the said transaction.' Paragraph 2 of the agreement explains that Griffith took title 'due to the fact that the Party of the Second Part (Welshes) was unable to raise sufficient money to consummate the said deal, and consequently, requested th Party of the First Part (Griffith) to negotiate the deal for them, subject to the conditions which hereinafter follow.' Griffith agreed to 'hold the property for the benefit of' the Welshes 'for a period of two years,' subject to the contract terms. A plan for 'release' of lots by Griffith by conveyance to the Welshes was specified. In each case the latter would obtain a construction loan and get their deed for the lot upon payment to Griffith of $1,000 and execution of 'a second mortgage' for $1,000. This arrangement would continue until Griffith was paid its balance due in full. Plaintiffs could at any time pay Griffith in full and have a deed for the entire property, but Griffith would retain the exclusive right of marketing the dwellings for six months thereafter. Paragraph 4 of the agreement reads as follows:

'4. The parties of this Agreement hereby stipulate and agree that if the Party of the Second Part should fail to improve the said property and construct the eleven dwellings as hereinbefore mentioned, within the period of two years as aforesaid, then the Party of the First Part reverses the right to retain the aforesaid property as its own, to all uses, intents and purposes, and to develop or sell the said lots, and the Party of the Second Part agrees that the Party of the First Part shall not be liable, either at law or in equity, under any clause of this Agreement.'

After the taking of title from Cameron, the Welshes found themselves unable on their own credit to obtain the necessary performance bond for the road construction, and it became necessary for Griffith to enter into the bond along with the Welshes as co-principals, undertaking to complete the road satisfactorily by June 6, 1957.

Plaintiffs made unsatisfactory progress with the road, but were able to obtain from the township an extension of time for its completion until June 6, 1958. Thereupon the Welshes and Griffith entered into a new agreement of July 10, 1957 which provides in its first-numbered paragraph that '(the) agreement dated December 15, 1955 by and between the parties is terminated.' At that time only one lot had been conveyed by Griffith under the agreement. A number of 'whereases' are recited in the preamble of the 1957 agreement, of which the first two read:

'Whereas, on May 9, 1955, Griffith-Prideaux and Welsh entered into a contract whereby Griffith-Prideaux paid the consideration in the amount of Eleven Thousand ($11,000.00) Dollars for a certain six-acre tract of land, which said Welsh had under contract of purchase, and for which payment the said Welsh was unable to raise sufficient money; and

'Whereas, said agreement set forth that Griffith-Prideaux agreed to hold the property for the benefit of Welsh for a period of two years under certain terms and conditions as therein set forth.'

Epitomized, the new agreement provided, additionally, the following: plaintiffs agreed they 'owe(d)' Griffith $9,000 'for money advanced for a portion of this property * * *' and undertook to pay 6% Interest thereon, as well as the same carrying charges mentioned in the original agreement; they were to rough grade, cut and fill the entire road by August 15, 1957, and install utility pipes and curbs by November 16, 1957, subject to extension of time for certain contingencies, failing which their rights under the contract 'would cease and terminate' and the property 'remain in the name' of Griffith, free of any claim by or through the Welshes, time being fixed as of the essence; provisions for release of lots and for permission to prepay the moneys due Griffith, comparable to those of the first agreement, were specified; Griffith continued to have exclusive sale rights for a period extending to six months after termination of the agreement, on a 5% Commission basis, for payment of which the Welshes were responsible, and the latter were also to pay Griffith $300 or 1% Of the sale price on each dwelling sold 'as an additional service charge for the financial service rendered' to the Welshes by Griffith. If, by June 8, 1958, the road was not satisfactorily completed but there was sufficient money in an escrow account, made up from stipulated payments to be made by the Welshes on releases of lots, to cover the cost thereof, the contract might be extended six months for such completion and release of Griffith on the performance bond; otherwise the contract would terminate June 7, 1958 and Griffith have the right to retain the remaining property as theretofore provided.

The Welshes failed to make the installation of utility pipes as agreed upon by the date required, and Griffith notified them by letter of February 5, 1958 that they had failed to perform the conditions of the July 10, 1957 agreement and that Griffith was therefore holding the property free and clear of any claim by the Welshes. In the meantime, five or six of the lots had been conveyed by Griffith to the Welshes pursuant to the two agreements and sold to purchasers of dwellings. In several of these transactions the Welshes executed $1,000 second mortgages to Griffith reciting they were given 'to secure a part of the purchase price therefor.'

The township found the road construction work done by plaintiffs not in accordance with specifications and called upon Griffith to make good on the bond. The latter contracted with another construction firm to do the necessary work for an estimated expense of $17,338. An affidavit submitted on its behalf on the motion for summary judgment indicates it had or would...