A Christmas present for Paradise Park: Part 3, the smoking gun
[Continued from yesterday's Part 2 and Part 1.]
You think that’ll impress me?
To reach the ruling (available here in .pdf) whether the Paradise Park residents were entitled to the New Jersey Mobile Home Protection Act to Paradise Park, the New Jersey Appellate Court first wrote an operational definition of ‘in contemplation’ and then looked at the record, starting (yesterday) with the active lobbying to change the property’s zoning to be something other than a mobile home park.
The reasonableness of a seller’s belief that the sale is exempt under N.J.S.A. 46:8C-13(a) must necessarily be dependent upon all [Our emphasis – Ed.] of the attendant circumstances surrounding the parties’ negotiations leading to the execution of the final contract, up to and including the date of closing of title, when presumably the seller delivers to the buyer a duly executed affidavit of compliance as required under N.J.S.A.46:8C-14.
Given that the seller and buyer were actively lobbying to change the property’s permissible use at the same time they were negotiating a contract under circumstances highly coercive to the seller and advantageous to the buyer, that’s powerful evidence that Something Was Up.
Then comes:
2. The consideration paid
In his filings, Mr. Bollerman argued, curiously, that of course the property’s buyer and seller had no contemplation of changing the use, because if that had occurred he would have had to pay more. The way Mr. Somers put it:
In fact, [Somers] had received and rejected other “significantly higher” offers from other buyers because they included development approval contingencies. He was willing to make less profit from the sale in order to avoid any entanglement in a protracted process of obtaining governmental approvals. As he explained: “Selling it as a mobile home park, I knew, meant selling it for less money. That is what I agreed to. That is what I contemplated.” Somers thus candidly admitted that he did not notify any of the Park’s residents because he viewed this transaction as exempt under the Act.
We’ve already seen that Mr. Somers knew about the Act, and as we’ll see in a minute, he took it very seriously indeed. In any case, the park sold for a depressed price – a price everyone tacitly concedes was well below full market value – to the one person who could compel a depressed price because he was holding a successful summary judgment against the seller that he knew the seller could not fulfill without “staggering expense” (buyer’s words):
Bollerman instructed his attorney, immediately after he prevailed on the liability part of his encroachment action, to negotiate a contract with Somers using this legal victory as leverage. This resulted in a settlement of the damages part of the case, which was ultimately incorporated into and made an express part of the contract for sale.
The buyer traded his probably-uncollectible but certainly enforceable judgment into a bargain price:
How big a discount was it? Expert testimony required
As argued by plaintiffs, this undermines one of defendants’ principal arguments; namely, that the consideration reflected in the contract is consistent with the continuing operation of the Park as a mobile home community. Expert testimony may provide a basis to quantify the value the settlement added to Somers’s contract, as well as the amount of damages to which Bollerman would have been entitled to if Somers was physically unable to remove the encroachment. These factors could affect the actual consideration Bollerman paid for the property.
That paragraph is another Christmas present to the plaintiff homeowners: it’s providing a roadmap for their trial strategy.
From here to the courthouse
What would the property be worth if it could be redeveloped? What is the cost of curing the judgment (the “staggering expense” Mr. Bollerman mentioned)? Prove those and you not only demolish the price paid, you also start to quantify the amount of value to be gained by the buyer if the tenants were deprived of their rights – and, by extension, the damages that could potentially be owed to the residents.
3. Correspondence of counsel
The unmistakable evidence that the seller and buyer knew what was afoot – what the plaintiffs’ brief describes as the ’smoking gun’ is the tussle between seller and buyer over who, if anybody, has to certify as to the exemption:
Bollerman certified that he first became aware of the existence of the Act in early January 2005, through conversation with a third-party. He then immediately directed his attorney to research the issue.
We know that Mr. Somers knew of the statute six months earlier, and we know the court has found this is the seller’s obligation – but Mr. Bollerman might well not have known about it.
In response, Edelson wrote a letter to Somers’s counsel advising him that the seller’s title insurance company required proof of Somers’s compliance with N.J.S.A. 46:8C-12.
Mr. Edelson, the court noted, has since been disbarred, which calls into question the credibility of any conclusions he might have reached during this phase, or the advice he might have given Mr. Bollerman.
Hidden surveillance cameras of Mr. Bollerman and the reporting oblgiation
In any case, he sought to put the certification monkey onto Mr. Somers’ back
Specifically, Somers had to provide the affidavit of compliance required under N.J.S.A. 46:8C-14 in order to record the deed. Edelson asked that Martin Barger (Somers’s attorney) notify him immediately if this was going to be an issue, because the due diligence period would expire on January 31, 2005.
Mr. Somers emphatically flung the monkey off:
Not my responsibility!
Somers made the following comments with respect to Bollerman’s plans for the development of the property:
Lastly, at all times in the correspondence and conversations with
Aside from its being a smoking gun – I agree with the plaintiffs – something about this phrase makes me like Mr. Somers more. He’s calling what he sees and you’re in no doubt about his views.
The “development of the property” is absolutely none of my concern. The “requirements of their lenders” is irrelevant in a cash deal. They represented in the Agreement that they had the cash to close. These issues were discussed, made crystal clear and agreed to in my negotiations with Mr[.] Bollerman prior to executing the contract with “
Mr. Somers is also clearly unhappy with the drift of events:
The chaos created by these one year leases is working to the benefit of
As a matter of future litigation, it’s entirely possible Mr. Somers and the seller group may well turn out to be the residents’ allies. The court has placed them squarely in the dock as defendants, and given them the burden of proof of exemption. Mr. Somers’ conduct shows he knew of the statute, respected it, sold his property for less than conversion market value, and categorically refused to certify to something he didn’t know.
After one further postponement, closing of title took place on March 4, 2005. According to Bollerman, throughout the due diligence period, Somers generally responded to any questions about the complexities of the site with the phrase: “It’s not my problem,” and emphasized that he was selling the property as a “trailer park.”
Mr. Somers, who has now sold his property and settled with Mr. Bollerman, has nothing at stake in this litigation, so he will be a perfect interested but disinterested witness, particularly under oath in a court of law.
The court did not add, although it easily could have, a fourth indicator of evidence:
4. The buyers’ efforts to prevent application the statute
The seller and buyer consummated their transaction on March 4, 2005. The very next day, the tenants first learned that the land under their property had been sold:
On March 5, 2005, an employee of the sellers hand delivered a notice signed by Somers advising some of the residents of the Park that the property had been sold to the Bollerman group. At the time there was no homeowners association in place, or even discussion of creating one.
At this point, the fat was really in the fire:
[Continued tomorrow in Part 4.]
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