SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1317-01T2
JAMES LOBIONDO,
Plaintiff-Respondent,
v.
LIAM O'CALLAGHAN,
Defendant-Appellant,
and
JOHN MULHEREN,
Defendant.
________________________________
Argued December 4, 2002 - Decided February 19, 2003
Before Judges Wefing, Wecker and Fuentes.
On appeal from Superior Court of New
Jersey, Chancery Division, Monmouth
County, MON-C-251-00.
Paul H. Schneider argued the cause for
appellant (Giordano, Halleran & Ciesla,
attorneys; Mr. Schneider, on the brief).
Thomas J. Hirsch argued the cause for
respondent.
The opinion of the court was delivered by
WEFING, J.A.D.
Defendant, Liam O'Callaghan, appeals from a judgment
granting specific performance to plaintiff, James LoBiondo. We
reverse and remand for entry of judgment in favor of defendant.
I.
O'Callaghan and his wife, Robin, together own a house
located at 850 Ocean Avenue in Sea Bright. The property is
across the street from the ocean and the rear abuts the
Shrewsbury River. The O'Callaghans also own a house in
Princeton, where Mrs. O'Callaghan works for Educational Testing
Service. Their two sons attended Christian Brothers Academy
(CBA) in Lincroft and Mr. O'Callaghan lived at the Sea Bright
house during the week with the boys because it was closer to
their school as well as closer to his work. Mrs. O'Callaghan
stayed in Princeton because it was closer to her work. The
family would reunite on weekends, sometimes in Sea Bright, more
often in Princeton. The family resided together in Sea Bright
during the summer.
Various neighbors had, over the years, indicated to
O'Callaghan an interest in buying the house if he ever decided to
sell. During these discussions, O'Callaghan consistently replied
that he would not sell the house until his youngest son had
graduated from CBA, an event scheduled to occur in 2001.
Neighbors who had expressed an interest in the property included
Mr. O'Shea, who owned the property next door to O'Callaghan, Mr.
DeSio, who lived a few houses down the street, and Mr. Chimento,
who owned a beach club further up Ocean Avenue.
Plaintiff LoBiondo owns the Surfrider Beach Club that is
diagonally across Ocean Avenue from the O'Callaghan home. He was
particularly interested in buying the property, both to provide a
residence for his son, James, who managed the beach club, and to
provide additional parking for the business. LoBiondo maintained
that as a result of his discussions with Mr. O'Callaghan, he at
first had an oral contract for the purchase of the house that was
later transformed into an oral right of first refusal. Defendant
O'Callaghan denied any such agreement.
Discussions between O'Callaghan and LoBiondo commenced in
1996 and spanned several years. Nothing was ever reduced to
writing between the two. Mrs. O'Callaghan, despite being a joint
owner, took no part in these discussions. The trial court, after
a four-day bench trial, found for plaintiff.
According to LoBiondo, the two men met in the winter of
1998-1999 to discuss a possible sale. During the meeting, they
discussed the condition of the property and the fact that the
bulkhead was in need of extensive repair. LoBiondo said they
agreed at this meeting that the property was worth approximately
$280,000. LoBiondo also testified that during this meeting,
O'Callaghan said he could not agree then to sell the property to
LoBiondo because he had already promised Chimento the first
opportunity to buy.
LoBiondo said the two next met in late 1999 or early 2000;
by that time O'Callaghan knew that Chimento was no longer
interested in buying the O'Callaghan home. LoBiondo said he told
O'Callaghan in April 2000 that for business reasons he would like
to buy the property in 2000 but that he would permit O'Callaghan
to remain in the house until his son finished high school.
LoBiondo maintained that O'Callaghan was willing to sell on those
terms. He said the two had further discussions on price and
agreed $300,000 was a fair price.
LoBiondo said he told O'Callaghan that another nearby
neighbor, Guch, was planning to sell his house and that he,
LoBiondo, would buy that house if O'Callaghan did not want to
sell in 2000. O'Callaghan responded by producing a survey of his
property to demonstrate to LoBiondo why his property would be
superior, for LoBiondo's purposes, to Guch's.
LoBiondo said he wanted to commence repairs on the bulkhead
and demolish a wall on the property which would permit him both
greater access to the bulkhead and facilitate the parking of
cars. LoBiondo testified O'Callaghan was agreeable to both
proposals and LoBiondo secured a number of estimates on having
the bulkhead repaired. When LoBiondo settled on the contractor,
he wanted a deposit before proceeding to request the necessary
permits. LoBiondo said he called O'Callaghan to make sure they
still had a deal and O'Callaghan said they did.
LoBiondo planned to begin demolishing the wall on Monday,
June 19, 2000. Mrs O'Callaghan learned of this on June 18 and
immediately objected. She also insisted that the couple list the
property with a real estate broker to see if they would realize
more on the sale.
O'Callaghan went across the street to inform LoBiondo of his
wife's position. LoBiondo said he was chagrined but did not
insist that the two had a contract for $300,000. He said he did
not want O'Callaghan in the future to feel he had sold at too low
a price. LoBiondo said that O'Callaghan promised he would give
LoBiondo the opportunity to match any offer that was received and
that he would put into the listing contract a provision that
LoBiondo could purchase the property without a commission.
O'Callaghan later returned to LoBiondo and told him that he
and his wife had listed the property with a local broker for
$425,000. Both O'Callaghan and LoBiondo felt that price was
unrealistic. O'Callaghan further told LoBiondo that while the
realtor had refused to include within the listing agreement a
provision relieving LoBiondo from the scope of her commission,
she had said that if LoBiondo bought the property within a week
she would not charge a commission.
The O'Callaghans signed the listing agreement on July 26,
2000. On August 6, the realtor called to tell them she had
received an offer to pay the full asking price, with no
contingencies. They agreed to meet the following day to sign the
contract.
Mr. and Mrs. O'Callaghan were in Princeton and had to drive
from there to the broker's office. On August 7, they did not
proceed directly to the broker's office, however, for Mr.
O'Callaghan wanted to stop in Sea Bright to talk to the various
neighbors who had expressed an interest in the property over the
years.
He first tried to reach Mr. O'Shea, his next door neighbor,
but he was unsuccessful in contacting O'Shea. He did talk to
Mr. DeSio and told him of the $425,000 offer. DeSio was a
builder who had intended on knocking down the existing house and
building a new one; he did not think the property was worth that
much and simply congratulated O'Callaghan on receiving such a
large offer.
O'Callaghan then walked across the street to LoBiondo's
beach club. He met LoBiondo and told him of the $425,000 offer.
LoBiondo was surprised at the size of the offer and, according to
his testimony, asked for time to consult with his wife whether to
match the offer but O'Callaghan refused, saying they were on
their way to the real estate agent's. O'Callaghan, on the other
hand, testified that LoBiondo did not ask for time to talk to his
wife but only asked for the return of the deposit he had given to
the bulkhead contractor. The trial court found LoBiondo's
version credible and rejected O'Callaghan's testimony in this
regard.
LoBiondo called O'Callaghan the following day and said he
was prepared to match the offer and would offer an additional
$25,000. O'Callaghan, despite the three-day attorney review
provision in the contract, said it was too late because he had
already signed the contract.
LoBiondo then began this action, naming as defendants
O'Callaghan and the offeror, John Mulheren, who happened to own
the property directly across the river from O'Callaghan. The
trial court restrained the sale of the property pending trial.
Plaintiff did not join as a defendant Mrs. O'Callaghan, who was a
joint owner of 850 Ocean Avenue.
At the conclusion of the trial, the court issued a twenty-
three page written decision in which it found that O'Callaghan
had granted LoBiondo a right of first refusal, that the right was
enforceable, and that Mrs. O'Callaghan had authorized Mr.
O'Callaghan to act on her behalf in connection with the property.
Within its opinion, the trial court specifically refused to rest
its decision on the doctrine of promissory estoppel, the
alternate basis to plaintiff's claim for relief. Pop's Cones v.
Resorts Intern. Hotel,
307 N.J. Super. 461 (App. Div. 1998);
Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat.
Bank,
163 N.J. Super. 463 (App. Div. 1978), certif. denied,
79 N.J. 488 (1979).
O'Callaghan raises, essentially, three points on appeal:
that the evidence was insufficient to permit the trial court to
find an enforceable right of first refusal, that even if LoBiondo
had such a right of first refusal, he lost it by not exercising
it when first told of the Mulheren offer, and the trial court
erred by entering an order compelling him to sell to LoBiondo.
We agree with O'Callaghan's first argument and, accordingly,
reverse.
There is no essential dispute on the standard of review
which we are called upon to utilize in considering this matter.
We will not interfere with the trial court's findings of fact to
the extent they find support within the record. State v.
Locurto,
157 N.J. 463, 470 (1999); Abtrax Pharmaceuticals, Inc.
v. Elkins-Sinn, Inc.,
139 N.J. 499 (1995). The trial court's
conclusions of law, however, are not entitled to such deference;
they are subject to plenary review. Manalapan Realty v. Township
Committee,
140 N.J. 366 (1995).
II.
Until recently, New Jersey followed the historical common
law rule that oral agreements to transfer an interest in real
property were unenforceable under the Statute of Frauds. In
1996, however, the Legislature substantially amended the statute
and provided that such oral agreements could be enforceable if
proven by clear and convincing evidence. N.J.S.A. 25:1-13(b).
Prant v. Sterling,
332 N.J. Super. 369, 378 (Ch. Div. 1999),
aff'd,
332 N.J. Super. 292 (App. Div. 2000).
The parties at trial did not factually dispute much of what
occurred between LoBiondo and O'Callaghan. The one clear area of
dispute related to LoBiondo's initial reaction upon hearing of
the $425,000 offer. As we noted earlier, the trial court
accepted LoBiondo's testimony in that regard and that credibility
assessment is binding upon us.
The parties did, however, dispute the legal significance of
what transpired between the two men. Having reviewed the record
in detail, we consider the critical issue on appeal to be the
relationship of Mrs. O'Callaghan to this transaction. The trial
court concluded that Mrs. O'Callaghan acted as to vest her
husband with apparent authority in his dealings with LoBiondo; it
is in this conclusion that we are satisfied the trial court erred
in two respects.
A.
Within its letter opinion, the trial court carefully noted
that plaintiff was required to prove the existence of a right of
first refusal by clear and convincing evidence but was only
required to prove the remaining aspects of his case by a
preponderance of the evidence. To the extent that the trial
court concluded that plaintiff did not have to prove by clear and
convincing evidence that Mr. O'Callaghan had apparent authority,
the trial court erred.
In O'Reilly v. Keim,
54 N.J. Eq. 418 ( E. & A. 1896), the
Court of Errors and Appeal held that while parol evidence could
prove an agent's authority to bind his principal for the sale of
real estate, the evidence had to be "clear and decisive" on the
point. There has been no retreat from that principle since.
Nothing within the 1996 amendments to the Statute of Frauds
indicates that the Legislature intended to lessen the burden of
proving the existence or scope of an agent's authority by parol
evidence. Rather, it would only be logical, if clear and
convincing evidence is required to prove the existence of an oral
agreement relating to the sale of real estate, to continue the
requirement that the agent's authority be proven by "clear and
decisive" proof. It would be counter to the thrust of the
amended statute of frauds, in our judgment, if preponderance of
the evidence was a sufficient evidential basis to find apparent
authority.
That is particularly so in the context of this case, in
which Mrs. O'Callaghan was an equal owner of the property. To
permit a finding of apparent authority based upon a preponderance
of the evidence would have the result of finding an enforceable
oral contract with her on the preponderance of the evidence,
rather than the statutorily mandated clear and convincing
evidence.
B.
We have reviewed the record in this matter in great detail
to determine whether plaintiff could be considered to have
demonstrated by clear and convincing evidence that Mr.
O'Callaghan had apparent authority from Mrs. O'Callaghan to enter
into an enforceable agreement for this property. If the evidence
presented during trial was clear and convincing, the trial
court's reference to a preponderance of the evidence would be
deemed harmless error. We are satisfied, however, that
plaintiff's evidence cannot meet the clear and convincing
threshold and that the reasons given by the trial court to
support its conclusion that Mrs. O'Callaghan had vested her
husband with apparent authority are legally insufficient.
"Apparent authority arises when a principal 'acts in such a
manner as to convey the impression to a third party that the
agent has certain power which he may or not possess.'" Rodriguez
v. Hudson County Collision Co.,
296 N.J. Super. 213, 220 (App.
Div. 1997). "Liability will be imposed upon the principal in
cases involving apparent authority where the actions of a
principal have misled a third party into believing that a
relationship of authority existed." Id. at 221.
Under the doctrine of apparent authority,
[t]he principal is bound by the acts of his agent within the
apparent authority which he knowingly permits the agent to
assume, or which he holds the agent out to the public as
possessing. The question in every case depending upon the
apparent authority of the agent is whether the principal
has by his voluntary act placed the agent in such a
situation that a person of ordinary prudence, conversant
with business usages and the nature of the particular
business, is justified in presuming that such agent has
authority to perform the particular act in question....
[Legge, Ind. v. Kushner Hebrew Acad.,
333 N.J. Super. 537,
560 (App. Div. 2000) (quoting American Well Works v.
Royal Indemnity Co.,
109 N.J.L. 104, 108 (E. & A. 1932)).]
Thus, a conclusion that a party has acted with apparent authority
must rest upon the actions of the principal, not the alleged
agent. Wilzig v. Sisselman,
209 N.J. Super. 25, 35 (App. Div.
1986).
The trial court cited six reasons for its conclusion that
Mr. O'Callaghan had apparent authority to negotiate an
enforceable agreement with LoBiondo: (1) he spent more time at
the property than did his wife; (2) he had held numerous
discussions with LoBiondo over the years about the property; (3)
there was no evidence Mr. O'Callaghan ever told LoBiondo that he
did not speak for his wife or that would have given LoBiondo
reason to doubt O'Callaghan's authority; (4) the only time Mr.
O'Callaghan mentioned his wife to LoBiondo was when he said she
insisted on listing the property with a broker; (5) Mrs.
O'Callaghan testified that when her husband went to LoBiondo on
August 7 to inform him of the offer, he was authorized to speak
for her; and (6) Mrs. O'Callaghan never told anyone her husband
acted without her authority.
The first three factors are immaterial to the question of
Mr. O'Callaghan's apparent authority for they are actions of Mr.
O'Callaghan, the alleged agent, not Mrs. O'Callaghan, the alleged
principal. Wilzig v. Sisselman, supra.
The same analysis applies to the fourth factor. This
factor, moreover, evidences Mrs. O'Callaghan's unwillingness to
let her husband handle the sale of this property. The only
reasonable conclusion LoBiondo could have drawn from being told
that Mrs. O'Callaghan wanted the property listed with a real
estate broker and refused to have the wall taken down would be
that Mr. O'Callaghan did not speak for his wife in these matters.
The fifth factor, Mrs. O'Callaghan's testimony that her
husband was authorized to speak for her on August 7 when he went
to LoBiondo, is also legally insufficient to support a finding of
apparent authority because the trial court found that the oral
contract for a right of first refusal was entered into, not on
August 7, but some time earlier, when O'Callaghan told LoBiondo
his wife insisted on listing the property with a broker.
Nor can Mrs. O'Callaghan's testimony to this effect be
considered a ratification on her part for there is no testimony
that Mrs. O'Callaghan ever knew that her husband had purported to
convey a right of first refusal to LoBiondo and Mrs. O'Callaghan
specifically denied such knowledge. Passaic-Bergen Lumber Co. v.
U.S. Trust Co.,
110 N.J.L. 315, 318 (E. & A. 1932) ("In order
that ratification may be shown, it is incumbent on defendant to
prove that the plaintiff had full knowledge of all the material
facts."); McLeod v. Ajax Distributing Co.,
22 N.J. Super. 121,
127 (App. Div. 1952) ("To ratify means to approve and sanction.
It presupposes knowledge or at least some alerting circumstantial
information of the unauthorized action.").
The sixth factor, that Mrs. O'Callaghan never testified her
husband acted without her authority, is also insufficient for it
has the effect of placing the burden of proof on defendant to
disprove authority, rather than upon plaintiff, who is asserting
its existence. Mrs. O'Callaghan did testify, moreover, that she
expected to be consulted before there would ever be a final deal
for the sale of the house she jointly owned.
III.
Plaintiff argues that the judgment of the trial court should
be affirmed under the principles of promissory estoppel. We
disagree.
There are four elements to the doctrine of promissory
estoppel: 1) a clear and definite promise, 2) made with the
expectation that the promisee will rely upon it, 3) reasonable
reliance upon the promise, 4) which results in definite and
substantial detriment. Malaker Corp. Stockholders Protective
Committee v. First Jersey Nat'l Bank,
163 N.J. Super. 463, 479
(App. Div. 1978) (holding, inter alia, that an alleged oral
promise by a bank to provide additional loans to a creditor was
unenforceable under principles of promissory estoppel).
This court has recently indicated that in certain contexts
the party invoking the doctrine of promissory estoppel need not
provide "clear and definite" proof of such an express promise.
Pop's Cones v. Resorts Intern. Hotel, supra, 307 N.J. Super. at
469 (plaintiff, who held a franchise to sell yogurt products,
established a prima facie case for damages when defendant
withdrew its oral promise to lease space to plaintiff and
plaintiff had surrendered its lease at its original location in
reliance on that promise). We carefully pointed out, however,
that plaintiff in that case was seeking damages relating to the
surrender of its location, not damages based upon losing a
location on the Boardwalk. We said, "This [permitting a party to
proceed without 'clear and definite' proof] is particularly true
where, as here, a plaintiff does not seek to enforce a contract
not fully negotiated, but instead seeks damages resulting from
its detrimental reliance upon promises made during contract
negotiations despite the ultimate failure of those negotiations."
Id. at 469-70. Here, however, plaintiff is attempting to utilize
the theory of promissory estoppel to obtain specific performance
of the alleged contract at issue.
Plaintiff having failed to prove his claim by clear and
convincing evidence was not entitled to a judgment for specific
performance and we reverse the order for judgment and remand this
matter for entry of a judgment in favor of defendant.