2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-27-2002

O'Leary v. Grace Newark Housing

Precedential or Non-Precedential:

Docket 01-1644

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Recommended Citation

"O'Leary v. Grace Newark Housing" (2002). 2002 Decisions. Paper 218.

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 NOT PRECEDENTIAL 

 

 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 

 No. 01-1644 

 ___________ 

 

 DONALD J. O’LEARY 

 v. 

 GRACE/NEWARK HOUSING LIMITED PARTNERSHIP; 

 MAINLAND DEVELOPMENT COMPANY; MICHAEL A. LIBERTY, 

 

 Defendants/Third-Party P

 v. 

 B.P. SLAVITT ASSOCIATES, INC., a New Jersey Corporation; 

 ADAM J. SLAVITT; SHARON SLAVITT, 

 Third-Party Defendants 

 Grace/Newark Housing Limited Partnership; 

 Mainland Development Company; Michael A. Lib

 Appellants 

 ___________ 

 

 On Appeal from the United States District Court 

 for the District of New Jersey 

 

 District Court Judge: The Honorable Faith S. Hochberg 

 (D.C. Civil Action No. 99-3739 (FSH)) 

 ___________ 

 

 Argued on February 26, 2002 

 Before: ROTH, FUENTES, and GIBSON, Circuit Judges 

 (Opinion Filed: March 26, 2002) 

 ___________ 

 

 Daniel J. McCarthy [ARGUED] 

 Diane U. Dabulas 

 Keli Bowden 

 Rogut McCarthy PC 

 37 Alden Street 

 Cranford, New Jersey 07016 

 Counsel for Appellants 

 Robert J. Fettweis [ARGUED] 

 Wolf, Block, Schorr and Solis-Cohen, LLP 

 744 Broad Street, Suite 1515 

 Newark, New Jersey 07102 

 Counsel for Appellee 
 _______________________ 

 OPINION OF THE COURT 

 _______________________ 

 

FUENTES, Circuit Judge: 

 Defendants appeal from the District Court’s grant of summary judgment in favor 

of Plaintiff Donald J. O’Leary on all claims. Because we find no error in the District 

Court’s decision, we will affirm. 

 O’Leary’s claims arise from two contracts relating to the sale of Grace West 

Manor ("Grace West"), a low income housing project, to Defendant Grace/Newark 

Housing Limited Partnership ("Grace/Newark"). Defendant Mainland Development 

Company ("Mainland") is the sole general partner of Grace/Newark, and Defendant 

Michael A. Liberty is the President of Mainland. 

 In a letter dated October 29, 1996 from Grace/Newark and Liberty to O’Leary as 

the sole general partner of Grace Associates, Grace/Newark agreed to purchase the Grace 

West management rights from O’Leary for $200,000. This provision states: 

 Grace/Newark Housing Limited Partnership will pay the Two Hundred 

 Thousand Dollars ($200,000) to you as the General Partner of Grace 

 Associates on the first anniversary of the New Jersey Housing Mortgage 

 Finance Authority’s (NJHMFA’s) ratification of its proposed regulations 

 allowing an enhanced rate of return on our Developer’s Fee and cash equity 

 of 600 basis points above long-term Treasury Bills. Our obligation to pay 

 vests if and only if NJHMFA ratifies said regulations. Again, the time for 

 payment is one (1) year after the date such ratification occurs. I am 

 personally guaranteeing the payment of these monies to you if when they 

 become due. 

App. at A31. 

 It is undisputed that at the time that the management rights agreement was signed, 

there was only one regulation proposed by the NJHMFA. Based on a review of the 

October 21, 1996 Index of New Jersey Register, which lists active rule proposals 

published within the preceding year, the only pending NJHMFA regulation involved 

changes to N.J.A.C. 5:80-32. This regulation concerned an enhanced rate of return on 

developer’s equity. The proposed regulation did not mention "cash equity of 600 basis 

points above long-term Treasury Bills." The proposed regulation was adopted as 

N.J.A.C. 5:80-32.7, effective March 3, 1997. Defendants have not paid O’Leary the 

$200,000 management rights fee. 

 O’Leary entered into a separate consulting agreement with Mainland in June 1996. 

While this Agreement is not dated, both O’Leary and Liberty signed the document. The 

agreement’s retainer provision states that Mainland agreed to pay O’Leary $36,000 per 

year during the term of the agreement, with the "first such annual retainer fee to be paid 

upon the execution hereof..." App. at A33. Upon execution of this agreement, Mainland 

failed to pay the initial $36,000 retainer fee, and continued to refuse to make payment of 

the initial retainer. 

 O’Leary filed a complaint in the District of New Jersey against Grace/Newark, 

Mainland, and Liberty (collectively "Defendants"). O’Leary claimed breach of the two 

contracts and breach of the guaranty of payment in the management rights agreement by 

Liberty personally. Defendants filed an answer and a third-party complaint. The thirdparty complaint is not part of this appeal. O’Leary moved for summary judgment on all 

claims, and discovery was stayed pending disposition of this motion. 

 On December 19, 2000, the District Court granted O’Leary’s motion for summary 

judgment on all counts. In a bench opinion, the District Court held that the condition 

precedent in the management rights agreement was satisfied by the ratification of 

N.J.A.C. 5:80-32.7, and rejected all other defenses to Defendants’ liability under both 

contracts. The court ordered Defendants to pay O’Leary $200,000 under the management 

rights agreement and $36,000 under the consulting agreement. Defendants moved for 

reconsideration, and that motion was denied on February 8, 2001. 

 The District Court had diversity jurisdiction over this case under 28 U.S.C. 1332, 

and we have jurisdiction over this timely appeal under 28 U.S.C. 1291. Our review 

over the court’s grant of summary judgment is plenary. See Armour v. County of Beaver, 
271 F.3d 417, 420 (3d Cir. 2001). 

 We first consider the management rights agreement claims. Under basic contract 

law, a condition precedent is "an event, not certain to occur, which must occur, unless its 

non-occurrence is excused, before performance under a contract becomes due." 

Restatement (Second) of Contracts 224. Defendants argue that no regulation was ever 

ratified allowing its rate of return to be enhanced to 600 basis points above long-term 

Treasury Bills, and therefore the condition precedent was not satisfied and its payment 

obligation never arose. Yet this argument ignores the importance of the words "proposed 

regulations" in the condition. The only proposed regulation at the time of execution of 

the agreement provides for an enhanced rate of return on a developer’s equity investment. 

Thus, O’Leary asserts that the contract must have been referring to this regulation. 

Because the regulation, N.J.A.C. 5:80-32.7, was ratified on March 3, 1997, O’Leary 

argues that Grace/Newark was obligated to pay O’Leary $200,000 on March 3, 1998, the 

one year anniversary of ratification. 

 We agree. As the only proposed regulation, N.J.A.C. 5:80-32.7 must be that to 

which the parties referred in the agreement. Defendants’ subjective expectation of a 

particular rate of return is irrelevant under the clear terms of the contract, as the contract 

does not guarantee any specific rate, but instead depends upon ratification of the 

"proposed regulation." While defendants stress that a specific Treasury-based enhanced 

rate regulation was never ratified, they do not account for the fact that no such regulation 

was ever proposed. Their contention at oral argument that such a regulation might have 

been informally pondered by the NJHMFA is irrelevant in light of the plain contractual 

language referring to "proposed regulations." If any ambiguity exists because of the 

reference to "600 basis points above long-term Treasury bills," we construe the provision 

against Defendants because they drafted the agreement. 

 We agree with the District Court that the NJHMFA "did in fact adopt the proposed 

regulations referred to in the agreement." App. at A6. Defendants were obligated to pay 

O’Leary $200,000 on March 3, 1998. The District Court did not err in granting O’Leary 

summary judgment on his claims under the management rights agreement. 

 As for the Consulting Agreement, Defendants argue that they are not obligated to 

pay O’Leary the initial $36,000 retainer because O’Leary misrepresented his value as a 

consultant, because O’Leary breached the agreement by failing to provide consulting 

services and harming Defendants’ business interests, and because the contract is 

ambiguous as to the due date of payments. The District Court did not err in rejecting 

these meritless arguments in light of the clear contractual language. 

 Mainland agreed to pay O’Leary a $36,000 retainer fee per year, "[t]he first such 

annual retainer fee to be paid upon the execution hereof..." This language could not be 

clearer. The District Court held that this first payment was "unequivocally due" upon 

execution, that the contractual language was "unambiguous," that "no performance was 

required prior to the payment of this first sum, and "without payment of this sum, Mr. 

O’Leary had no duty to perform." App. at A8. We find no error in these conclusions. 

 For these reasons, the judgment of the District Court is AFFIRMED. 

____________________________ 

TO THE CLERK OF THE COURT: 

Kindly file the foregoing Opinion. 

 /s/ Julio M. Fuentes 

 Circuit Judg