We granted certification, 102
N.J.
397 (1986), primarily to consider whether, in the absence of an express contractual provision, the interest earned on a real estate deposit should be considered the property of the seller or buyer. The issue arises in the context of an agreement which specifically requires that
As Justice Schreiber stated in Kearny PBA Local No. 21 v. Town of Kearny, 81 N.J. 208, 221 (1979),
[t]he polestar of construction of a contract is to discover the intention of the parties. * * * * Any number of interpretative devices have been used to discover the parties’ intent. These include consideration of the particular contractual provision, an overview of all the terms, the circumstances leading up to the formation of the contract, custom, usage, and the interpretatiоn placed on the disputed provision by the parties’ conduct. Several of these tools may be available in any given situation — some leading to conflicting results. But the weighing and consideration in the last analysis should lead to what is considered to be the parties’ understanding. Individual interpretativе rules should be subordinated to that goal. See Ace Stone, Inc. v. Tp. of Wayne, 47 N.J. 431, 439 (1966), and cases cited, [citations omitted].
Applying those guiding principles here, we conclude that the trial court correctly held, after weighing and considering all the factors relevant to the parties’ intent, in light of the parties’ understanding of the contract, that the interest on the depоsit be credited to the purchaser. In so holding, we do not reach the question of which party ordinarily is to receive credit for the interest earned on a realty deposit, held in trust, in the absence of an express contractual provision.
The facts and circumstances that sustain the rеsult here are as follows. The defendant, Great Pacific Century Corp. (Great Pacific), is the developer and vendor of Century Tower, a 235-unit luxury, cooperative apartment complex in Fort Lee, New Jersey. Plaintiff, Samuel Jacobs, individually and on behalf of class members, is the purchaser of cooperative shares with accompanying proprietary lease.
On October 16,1980, Jacobs signed a “Stock Purchase Agreement” pursuant to the “Offering Statement and Plan of Cooperative Organization” for the property and placed a deposit on a unit in Century Towеr. At closing, he requested that the interest earned on the deposit from date of deposit to date of closing be credited toward the purchase price. Great Pacific refused. Jacobs proceeded with the closing “under protest.”
The provisions in the “Stock Purchase Agreement” and “Offering Statement” do not expressly state which party receives credit for interest earned when a sale is completed. Rather, the contract focuses on which party receives interest earned when there is a default or breach by either party. The purchaser obtains the deposit and interest earned if the seller defaults and the seller retains deposit and interest earned if the purchaser defaults. The only “non-default” provision in the “Stock Purchase Agreement” concerning deposit and interest earned thereon provides:
All monies received by the Seller on account of the Purchase Price shall be deposited in trust in an interest bеaring account at Citibank, N.A., under the name “One Century City Special Account”, until actually transferred to the Seller in connection with the closing under this Purchase Agreement. Such account will bear interest at the rate paid by Citibank, N.A. from time to time on ordinary deposits, which on the date of this Purchasе Agreement is 5‘4% per annum. Until such deposit has been made, the Seller shall hold all monies received by its employees or agents in trust.
While these provisions are inconclusive if viewed in isolation, when construed in conjunction with the other contract terms and surrounding circumstances, the understanding of the parties becomes apparent.
Because these real estate cooperative units would be offered for sale in New York, the contract had to contain recitals satisfactory to the New York regulatory authorities. It was, therefore, required that the contraсt specifically contain reference to a provision of New York law,
N.Y. Gen. Bus. Law
§ 352-h,
1
to the effect that the deposit would remain the
We focus on the New York provisions dealing with cooperative sales, even if not operative as argued by defendant, and despite the fact that the contract was to be governed in other respects by the laws of New Jersey,
2
because the provisions
While not emphasized by the parties, there is a difference between the “Offering Statement” and “Purchase Agreement” as to the use of the deposits by the seller. In the “Offering Statement,” the relevant provision, and the one inserted pursuant to the New York statute, states that
[n]o mоnies paid by purchasers will be employed in connection with the consummation of this Plan prior to the Closing [between the sponsor and Apartment Corporation] * * *.
The “Purchase Agreement,” however, states that
[a]ll monies received by the Seller * * * shall be deposited in trust in an interest bearing account * * * until actually transferred to the Sellеr in connection withthe closing under this Purchase Agreement [when the purchaser enters into the leasehold relationship with the Apartment Corporation],
This difference as to when monies could be released to the seller may be important to the understanding of the agreements by differing clаss members. Some class members entered agreements pursuant to the “Offering Statement” only, at a time prior to the sponsor’s election to effectuate the cooperative plan; others may have entered agreements after the sponsor declared the plan effective on October 12, 1979, see “First Amendment to Offering Statement,” but before the actual closing of the plan on October 29, 1979, see “Second Amendment to Offering Statement;” still other members, like Jacobs, entered agreements after the cooperative plan was effective and closed. Consequеntly, and especially for those purchasers who tendered deposits between October 12 and 29, it may have been confusing and ambiguous as to when their deposits could be used by the seller: Was it after the cooperative plan closing between the Sponsor and Apartment Corpоration, or was it after the retail closing under the “Purchase Agreement”? Hence, even if the plan had already closed, so as to make the “Offering Statement” provision on the use of deposits inoperative, this distinction would be ambiguous to residential purchasers. The disposition below made no distinction between the classes of purchasers and we do not undertake here to make one.
As always, in the quest for the intention of the parties to the contract, the “attending circumstances, including practices and custom, may serve to clarify the common intention of thе parties.”
Medivox Prods., Inc. v. Hoffmann-LaRoche, Inc.,
107
N.J.Super.
47, 61 (Law Div.1969) (Handler, J.), citing
Ace Stone, Inc. v. Township of Wayne, supra,
47
N.J.
431. But the judicial interpretative function is to consider what was written, in the entire context of the circumstances under which it was written, and to accord the language a rational meaning in keeping with the expressed general purpose.
Casriel v. King,
In its decision, reported at 197 N.J.Super. 378 (1984), the trial court, in the exercise of the judicial interpretative function, essentially concluded that the meaning of the critical phrase, in the context of this contract, was that the purchaser was to receive credit at the closing for the deposit and interest earned on the deposit. In reaching its decision, the trial сourt declined to accept as controlling the unrebutted testimony of defendant’s real estate expert that the prevailing custom and usage in New Jersey real estate transactions is to the contrary. The expert witness had testified that if there is interest to be paid on the deposit and the contract is silent, it would follow the deposit. His conclusion was based upon consideration of the principles of equitable conversion and the recognition that the seller had “kept the property off the market.”
On this record, given the attendant circumstances, the exрressed reference to the statute that the deposit remains the property of the purchaser, the unusual nature of the transaction partaking both of the sale of securities and of the sale of real estate, the express provision that the deposit be placed in an interest-bearing account with a specific institution at a specific rate, and the adverse implication arising from Great Pacific’s failure to have stated who was to receive the interest earned, we conclude that the factual finding by the trial court should be sustained. 3
We suggest that in almost all circumstances prudent counsel should provide for this contingency in the preparation and execution of real estate contracts.
We further leаve undisturbed, for the reasons stated by the courts below, their dispositions of the appropriateness of class certification as well as plaintiffs’ application for treble damages and counsel fees.
The judgment of the Appellate Division is affirmed.
For affirmance — Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O’HERN, GARIBALDI and STEIN — 7.
Opposed — None.
Notes
Specifically, N.Y.Gen.Bus.Law § 352-h provides that: “Whenever ** * * any * * * corporation * * * offers or sells securities described in subdivision one of section three hundred fifty-two-e of this article to the public in or from the state of New York, then all monies received in connection therewith, including deposits or advances therefor, shall continue to be the money of the person
We are also unpersuaded, as was the Appellate Division, 204
N.J.Super. 605
(1985), by the plaintiffs' argument for аpplication of New Jersey’s securities syndication law,
N.J.S.A.
49:3-27 to -44,
repealed by L.
1985, c. 405, § 22, because it is doubtful that the sale of these individual owner-occupied coopera
In a reported decision, 204 N.J.Super. 605 (1985), the Appellate Division affirmed the judgment of the trial court, but disagreed with the trial court’s conclusion that the New York law “deems the purchaser the owner of the dеposit for all purposes.” Id. at 608. Considering the six specific provisions for disposition of the interest, and the other relevant provisions, the Appellate Division viewed the deposit as a pledge to secure performance by the purchaser. Id. at 609. Under that analysis, ”[i]f the purchaser closes, * * * the seller must return the deposit and its interest to the purchaser in the form of a credit against the purchase price.” Id. at 610.