NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5148-16T3
126 SOUTH STREET OWNER, LLC,
Plaintiff-Respondent/ Cross-Appellant,
v.
SUZI'S SKIN AND NAIL CARE STUDIO, INC., d/b/a SUZI'S SALON AND SPA,
Defendant-Appellant/ Cross-Respondent. ________________________________
Argued October 18, 2018 – Decided January 18, 2019
Before Judges Simonelli and DeAlmeida.
On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. LT-000455-17.
James T. Bryce argued the cause for appellant/cross- respondent (Murphy McKeon, PC, attorneys; James T. Bryce, on the briefs). Daniel L. Schmutter argued the cause for respondent/cross-appellant (Hartman & Winnicki, PC, and Law Offices of Thomas A. Buonocore, PC, attorneys; Daniel L. Schmutter and Rosemary G. Vinitsky, on the briefs).
PER CURIAM
In this summary dispossess matter, defendant Suzi's Skin and Nail Care
Studio, Inc., d/b/a Suzi's Salon and Spa, appeals from the July 28, 2017 Law
Division order holding that defendant was not entitled to assert a Marini1
defense, ordering it to pay $63,239.98 in back rent, and awarding $39,204 to
plaintiff 126 South Street Owner, LLC for counsel fees and costs. Plaintiff
cross-appeals from that part of the order holding that N.J.S.A. 2A:18-53(c)(4)
did not apply to grant plaintiff a judgment for possession. Both parties also
challenge the amount of the counsel fee award. We affirm in part, reverse in
part, and remand for entry of a judgment for possession.
I.
Pereaux Deux, LLC (Pereaux) was the prior owner of commercial
property located at 126 South Street in Morristown. In November 2011,
defendant began negotiating with Pereaux to lease a portion of the property.
1 Marini v. Ireland, 56 N.J. 130 (1970).
A-5148-16T3 2 Defendant prepared a rental agreement that proposed a five-year lease with a
five-year option to renew (defendant's proposed rental agreement). Defendant's
proposed rental agreement also proposed the following rent during the initial
and renewal terms:
Rent Breakdown: Years 1-5 Year 1: Months 1-4 $2,500 Months 5-6 $6,000 Months 7-12 $7,500 Total Year 1 $67,000 Year 2: Months 1-12 $8,000 Total Year 2 $96,000 Year 3: Months 1-12 $8,800 Total Year 3 $105,600 Year 4: Months 1-12 $9,700 Total Year 4 $116,400 Year 5: Months 1-12 $10,700 Total Year 5 $128,400 Total Rent for Initial 5 Yr. Term $513,400
Rent Breakdown: Years 6-10 Year 6: Months 1-12 $11,000 Total Year 6 $132,000 Year 7: Months 1-12 $11,500 Total Year 7 $138,000 Year 8: Months 1-12 $12,000 Total Year 8 $144,000 Year 9: Months 1-12 $12,500 Total Year 9 $150,000 Year 10: Months 1-12 $13,000 Total Year 10 $156,000 Total Rent for Optional 5 Yr. Term $720,000
A-5148-16T3 3 Defendant's proposed rental agreement also had an option to purchase, which
provided, in pertinent part: "Tenant will have the sole option to purchase the
entire property for the sum of $1,600,000, beginning at the signing of this
agreement, until the last day of the [second] year of the actual lease term."
On November 12, 2011, defendant and Pereaux executed a Letter of
Understanding (LOU), agreeing to a five-year lease with a five-year option to
renew and rent as follows:
Year 1 Months 1-4 $2,500 Months 5-6 $6,000 Months 7-12 $7,500 Year 2 Months 1-12 $8,000 Year 3 Months 1-12 $8,800 Year 4 Months 1-12 $9,700 Year 5 Months 1-12 $10,700 Year 6 Months 1-12 $11,700 Years 7-10 at a base of $11,700 plus the increase in [Consumer Price Index] for the N.Y./N.J. Area for the previous year or the amount of increase in the property's real estate taxes for the prior year, whichever is greater.
The LOU also contained an option to purchase, which provided, in pertinent
part: "Lessee will have the sole option to purchase the entire property for the
sum of $1,600,000, for a period beginning at the signing of the formal lease and
ending on the last day of the [second] year of the actual lease term."
A-5148-16T3 4 Pereaux's attorney prepared the final lease, which the parties executed on
December 16, 2011. Paragraph One of the lease provided as follows, in
pertinent part:
Payment of Rent. The Tenant covenants and agrees to pay to the Landlord, as rent for and during the term hereof, as set forth in Schedule A which is attached hereto and made a part hereof.
Rent is due on the first day of each month in advance.[2]
[(Emphasis added).]
Schedule A, entitled "Rental Payments," provided as follows:
Date Annual Monthly Base Rent Due
Months 1-4 $2,250.00 Months 5-6 $6,000.00 Months 7-12 $7,500.00 Second Year $96,000.00 $8,000.00 Third Year $105,600.00 $8,800.00 Fourth Year $116,400.00 $9,700.00 Fifth Year $128,400.00 $10,700.00
Paragraph 43A of the lease provided as follows, in pertinent part:
Option to Renew. Landlord and Tenant agree that if the Tenant is not in default under the terms and conditions of this lease and Tenant is still in occupancy of the demised premises, Tenant shall have the right and
2 Because the tenancy commenced in the middle of the month, Pereaux agreed that defendant could pay rent on the fifteenth day of the month. A-5148-16T3 5 option to extend the term of this lease for an additional period of five (5) years.
....
The renewal term shall be on the same terms and conditions applicable to the initial term hereof except that the basic rent payable shall be adjusted as follows:
A. The base annual rental for the first year of the renewal period shall be $11,700.00. Each subsequent year of the renewal period shall have an annual rental of $11,700.00 plus $11,700.00 multiplied by the increase in the Consumer Price Index . . . between the sixtieth (60th) month of the Lease agreement and the date of commencement of each subsequent year of the renewal term. In no event shall the basic rental of each year of the said renewal period be less than $11,700.00 or the prior years' rent, whichever is greater.
Paragraph 47 of the lease provided:
Option to Purchase: Provided and subject to the express condition that as of the date of the exercise of such option the Tenant shall have fully performed and complied with all obligations which are imposed upon it under the provisions of this Lease Agreement and shall not be in default with respect thereto, the Tenant shall have the sole right and option during the first two years of the lease term to purchase the property for $1,600,000. In the event Tenant does not notify Landlord in writing of its intent to purchase the property within . . . the time provided, Tenant's option to purchase shall terminate. Time is of the essence.
A-5148-16T3 6 The lease granted Pereaux the right to re-enter and take possession of the
premises if defendant defaulted in the performance of any lease term or
condition.
Defendant did not exercise its option to purchase the property. In June
2015, Pereaux notified defendant that it intended to sell the property to plaintiff.
Pereaux sent defendant a tenant estoppel certificate, which stated that defendant
had the option to renew the lease for an additional five years at rent of $11,700
per month for the first year of the renewal term. Defendant refused to execute
the document, asserting the rent amount during the renewal period was $11,700
per year, as stated in Paragraph 43A of the lease, and the premises required
repairs.
Following negotiations, in October 2015, Pereaux sent defendant an
amended tenant estoppel certificate, which included post-closing repairs
plaintiff would make to the premises. Pereaux also sent defendant an addendum
to the lease agreement, which provided as follows, in pertinent part:
1. [Paragraph 43A] of the Lease . . . is hereby deleted and replaced with the following: "A. The base annual rental for the first year of the renewal period shall be $140,400.00, payable in monthly installments of $11,700.00. The base annual rental shall be increased by [one percent] for each subsequent year of the renewal period."
A-5148-16T3 7 Defendant refused to execute the amended tenant estoppel certificate or the
addendum to the lease.
Plaintiff acquired title to the property on January 29, 2016, and an
assignment of the lease. In May 2016, defendant exercised its option to renew
the lease for five years, from January 1, 2017 to December 31, 2022. In
December 2016, defendant remitted a monthly rent payment in the amount of
$975 for January 2017, the first month of the renewal term. Defendant made
this rent payment in accordance with Paragraph 43A of the lease, not because of
any defective conditions on the property or need for repairs. Plaintiff returned
the rent payment to defendant and served a notice of default and demand for full
payment of rent plus late charges. Defendant did not cure the default.
In January 2017, defendant remitted a rent payment of $975 for February
2017. Plaintiff returned the rent payment and sent defendant a notice of default
and demand for payment. Plaintiff's attorney advised defendant that Paragraph
43A of the lease
incorrectly provides that the base annual rental for the first year of the renewal period would be $11,700 when it was obviously intended that the monthly base rent would be $11,700 with an annual base rent of $140,400 during the first renewal year. Clearly, the reference that the annual base rent would be $11,700 is a typographical error and that figure was intended to reference the monthly base rent amount. Under no
A-5148-16T3 8 circumstances would a reasonable interpretation of the lease language indicate that the annual renewal rent would be less than the monthly rent paid by the Tenant in the preceding month during the original term of the lease (i.e., $11,700 total annual rent and $10,700 monthly rent).
Defendant did not cure the default. In February 2017, the same situation
occurred regarding the March 2017 rent payment.
On February 15, 2017, plaintiff served a notice of termination on
defendant terminating the lease as of February 21, 2017, demanding possession
of the property, and notifying defendant the lease was terminated because
defendant "breached and violated the covenants and agreements of the Lease
Agreement by failing to pay rent when due in violation of N.J.S.A. 2A:18 -
53(c)(4)" (the NOT). Defendant did not cure the default or surrender possession
of the premises. As a result, plaintiff filed a complaint for possession in the
Special Civil Part. Plaintiff alleged breach of the lease as the cause of action
for summary dispossession and attached the NOT, which indicated plaintiff was
proceeding under N.J.S.A. 2A:18-53(c)(4). Plaintiff alleged that defendant had
not surrendered possession of the premises and held over and continued in
possession without plaintiff's consent. Plaintiff also filed a complaint in the Law
Division for unpaid rent and other relief.
A-5148-16T3 9 Defendant filed a motion in the Special Civil Part to transfer the summary
dispossess action to the Law Division and consolidate it with the Law Division
action. Defendant argued the matter must be transferred because this was a
complex commercial tenancy that demanded discovery and required uniformity
with the Law Division action and joinder of claims.
In a March 23, 2017 oral opinion, the trial court denied the motion. The
court first determined it had jurisdiction because the matter involved an
interpretation of the lease, and plaintiff was not seeking reformation of the lease.
The court found the issue was the rent amount and whether the parties intended
to reduce the rent by ninety-one percent. The court considered the factors
warranting transfer in Twp. of Bloomfield v. Rosanna's Figure Salon, Inc., 253
N.J. Super. 551, 563 (App. Div. 1992), and concluded the issue was not overly
complex as to require discovery and defendant's assertion of a Marini defense
did not require a transfer. The court noted that landlords frequently file separate
Law Division actions for unpaid rent simultaneously with summary dispossess
actions, and found the pending Law Division action did not require a transfer.
The court also found that the significant delay the transfer would cause "would
outweigh any prejudicial effects." The court concluded none of the factors for
A-5148-16T3 10 transfer had been met and the matter was "a simple case" that could be resolved
in the summary dispossess action.
The court memorialized its decision in a March 23, 2017 order. Defendant
then filed an answer in the Law Division matter and a counterclaim for
declaratory judgment, damages, and other relief.
Following trial in the summary dispossess matter, the court entered an
interim order on May 30, 2017, holding that defendant owed $63,239.98 in back
rent as of May 2017, and ordering defendant to deposit that sum into court. The
court interpreted the language in Paragraph 43A of the lease to require rent of
$10,700 per month during the renewal period, as plaintiff had claimed. The
court also ordered the parties to submit briefs addressing plaintiff's request for
counsel fees, defendant's request to assert a Marini defense, and whether
N.J.S.A. 2A:18-53(c)(4) applied to grant plaintiff a judgment for possession.
Subsequently, in a June 29, 2017 statement of reasons, the court found,
based on the testimony of defendant's representative, Bennett Fleisher, 3 that
defendant was not entitled to assert a Marini defense because "[d]efendant
3 Fleisher is the husband of Susan Mack, the sole shareholder of defendant and guarantor of the lease. Fleisher was responsible for defendant's business operations and was the primary person involved in the lease negotiations and dealings with Pereaux and Pereaux's attorneys. A-5148-16T3 11 unambiguously claim[ed] that $975 [was] full rent and [d]efendant ha[d] not
withheld rent on the basis of any Marini claim." The court also stated that under
Berzito v. Gambino, 63 N.J. 460, 469 (1973), defendant was not without
recourse and could recover any claimed overpayment of rent via its counterclaim
in the Law Division matter.
The court also held that because plaintiff proceeded under a nonpayment
of rent theory, plaintiff was not entitled to a judgment for possession under
N.J.S.A. 2A:18-53(c)(4). The court reasoned that N.J.S.A. 2A:18-53(b)
provides for a cause of action for nonpayment of rent and N.J.S.A. 2A: 18-55
permits the tenant to cure. The court ordered the $63,239.98 defendant
deposited into court be paid to plaintiff, reserved on the counsel fee issue, and
ordered plaintiff's counsel to submit an updated affidavit of services complying
with Rule 4:42-9 and R.P.C. 1.5(a).
The court memorialized its decision in a July 28, 2017 order and also
awarded plaintiff $39,204 for counsel fees and costs. In its statement of reasons,
the court determined the reasonableness of the rates charged and time spent by
plaintiff's counsel and omitted redundant and excessive services. This appeal
followed.
A-5148-16T3 12 II.
On appeal, defendant contends the court erred in not enforcing the clear
and unambiguous terms of Paragraph 43A, which provided that rent was $11,700
per year during the renewal period. Defendant argues the court impermissibly
found an ambiguity in Paragraph 43A and used extrinsic evidence to determine
the parties' intent in violation of the parol evidence rule. Defendant also argues
that reformation was the correct remedy and was outside the court's jurisdiction.
We review the facts that relate to defendant's arguments. Without
objection, Pereaux's representative, Rob Oberdick, testified on direct
examination about defendant's proposed rental agreement and the LOU, and
defendant's attorney cross-examined Oberdick on these documents. In addition
to this evidence, plaintiff's witnesses testified, without objection, that the use of
the words "annual" and "year" in Paragraph 43A of the lease were a mistake, the
parties never intended to reduce and never discussed a reduction of the rent
during the renewal period, and defendant never requested a rent reduction.
It was not until plaintiff sought to introduce the LOU and defendant's
proposed rental agreement into evidence that defendant objected, arguing the
lease was an integrated agreement and the parol evidence rule does not permit
admission of extrinsic evidence to interpret an integrated agreement. The court
A-5148-16T3 13 overruled the objection, finding admission of the documents did not violate the
parol evidence rule because the documents were relevant and admissible to
determine the intent of the parties regarding rent during the renewal period. The
court concluded: "And . . . clearly there's inconsistent statements in Paragraph
43[A]. That’s why we're here . . . and I think it's permitted, relevant . . .
evidence, as to the parties' intent. . . ."
The court issued an oral opinion at the conclusion of the trial on May 30,
2017. Addressing credibility, the court noted that Fleisher admitted he did not
request a rent reduction during the renewal period and there were no discussions
about a rent reduction. The court found Fleisher's testimony that he intended
the rent be $975 per month during the renewal period "extremely incredible."
The court also found that Fleisher "lacked candor and credibility," his
"testimony was contradicted by documents and did not seem reasonable and
logical[,]" his responses to certain questions were "argumentative[,]"
"incomplete[,]" and "arrogant[,]" and his testimony was "disingenuous."
The court noted that when confronted by defendant's proposed rental
agreement, Fleisher admitted he drafted it, but had no credible response as to
how he could interpret the document to mean rent would be $975 per month
during the renewal period. The court also noted the LOU and defendant's
A-5148-16T3 14 proposed rental agreement contradicted Fleisher's testimony that the rent was
reduced because the option to purchase the property was reduced from five years
to two years, as these documents gave defendant a two-year option to purchase
and nevertheless provided for monthly rental amounts of $11,700 and $11,000,
respectively. The court emphasized that Fleisher's "testimony that the two-year
option [to purchase] was negotiated down in exchange for this incredible
[ninety-one] percent reduction of rent is, to put it kindly, disingenuous at best,
and is directly contradicted by the documents submitted into evidence."
The court found Fleisher admitted that Paragraph 43A was very close to
the LOU as to year six, but Fleisher essentially did nothing to correct the mistake
in Paragraph 43A because it benefitted defendant. The court concluded that
"what in essence [Fleisher] said was he was aware of [the mistake in Paragraph
43A] but it was more advantageous to [defendant] so he kept his mouth . . .
shut."
The court also found that plaintiff did not seek reformation of Paragraph
43A to provide for rent of $11,700 per month, but rather, sought an interpretation
that the rent was $10,700 in year six. We reiterate that Paragraph 43A provides:
The base annual rental for the first year of the renewal period shall be $11,700.00. Each subsequent year of the renewal period shall have an annual rental of $11,700.00 plus $11,700.00 multiplied by the increase
A-5148-16T3 15 in the Consumer Price Index . . . between the sixtieth (60th) month of the Lease agreement and the date of commencement of each subsequent year of the renewal term. In no event shall the basic rental of each year of the said renewal period be less than $11,700.00 or the prior years' rent, whichever is greater.
The court found "the evidence [was] overwhelming that there was no
intent by the parties to reduce the rent whatsoever commencing in year six, and
that a fair, reasonable and sensible interpretation of Paragraph 43[A] . . . is that
the rent should be . . . $10,700 per month in year six[.]" The court determined
its decision was "consistent with the language of [the third sentence in]
Paragraph 43[A], which limits and modifies [the language in the first and second
sentences], so that the rent will not be reduced in any year of the lease and any
year of the renewal." The court explained:
And I understand that there's conflicting language, and there's ambiguous language in [Paragraph 43A] and certain interpretations could be made, but that's based on the evidence . . . and based on my interpretation of [Paragraph 43A] and the case law cited, I think clearly the evidence supports an interpretation that the rent was not to be decreased from the previous year's rent.
This is, again, consistent with the parties' negotiation of the [lease], in [t]he [c]ourt's judgment, and consistent with the case law cited, and with the interpretation in accordance with justice and common sense.
A-5148-16T3 16 The interpretation of a contract is subject to our de novo review. Kieffer
v. Best Buy, 205 N.J. 213, 222 (2011). "Accordingly, we pay no special
deference to the trial court's interpretation and look at the contract with fresh
eyes." Id. at 223. Although we owe the court here no special deference, we
agree with the court's conclusions and credibility determinations.
"Under New Jersey law a lease is like any other written contract."
Ringwood Assocs., Ltd. v. Jack's of Route 23, Inc., 153 N.J. Super. 294, 309
(Law Div. 1977), aff'd, 166 N.J. Super. 36 (App. Div. 1979). Courts should read
contracts "as a whole in a fair and common sense manner," and enforce them
"based on the intent of the parties, the express terms of the contract, surrounding
circumstances and the underlying purpose of the contract." Manahawkin
Convalescent v. O'Neill, 217 N.J. 99, 118 (2014) (quoting Hardy ex rel. Dowdell
v. Abdul-Matin, 198 N.J. 95, 103 (2009); Caruso v. Ravenswood Developers,
Inc., 337 N.J. Super. 499, 506 (App. Div. 2001)).
The language of the contract, by itself, must determine the agreement's
force and effect if it is plain and capable of legal construction. Ibid. (quoting
Twp. of White v. Castle Ridge Dev. Corp., 419 N.J. Super. 68, 74-75 (App. Div.
2011)). However, "[e]ven in the interpretation of an unambiguous contract, [the
court] may consider 'all of the relevant evidence that will assist in determining
A-5148-16T3 17 [its] intent and meaning.'" Ibid. (third alteration in original) (quoting Conway
v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 269 (2006)); see also Driscoll
Constr. Co. v. State, Dep't of Transp., 371 N.J. Super. 304, 316 (App. Div. 2004)
(noting that even when an integrated contract is free from ambiguity, "evidence
of the situation of the parties and the surrounding circumstances and conditions
is admissible in aid of interpretation") (quoting Great Atl. & Pac. Tea Co. v.
Checchio, 335 N.J. Super. 495, 501 (App. Div. 2000)).
The construction of a written contract is usually a legal question for the
court, suitable for disposition on summary judgment unless there is ambiguity
or the need for parol evidence to aid in interpretation. Driscoll Constr. Co., 371
N.J. Super. at 313-14. The court's goal is to ascertain the intentions of the parties
"as revealed by the language used, taken as an entirety", the relations of the
parties, "the attendant circumstances, and the objects [the parties] were thereby
striving to attain." Id. at 313 (quoting Onderdonk v. Presbyterian Homes of N.J.,
85 N.J. 171, 184 (1981)). In light of this goal our Supreme Court has adopted
an expansive view of the parol evidence rule that permits consideration of "all
of the relevant evidence that will assist in determining the intent and meaning
of the contract." Conway, 187 N.J. at 268. Thus, when the terminology used in
a contract is not free from doubt as to its meaning, a party should be given an
A-5148-16T3 18 opportunity to present evidence of extrinsic circumstances that bear on the
proper interpretation of the document's language. Schor v. FMS Fin. Corp., 357
N.J. Super. 185, 192 (App. Div. 2002).
"In general, the parol evidence rule prohibits the introduction of evidence
that tends to alter an integrated written document." Conway, 187 N.J. at 268.
However, as we have made clear:
the parol evidence rule applies only to prevent the substantive alteration of contractual terms agreed upon by parties and expressed in an integration of their bargain, by resort to other prior or contemporaneous agreements or understandings. But the parol evidence rule does not even come into play until it is first determined what the true agreement of the parties is ̶ i.e., what they meant by what they wrote down. Only when that is determined is one in an appropriate position to raise the bar of the parol evidence rule to prevent alteration or impugnment of the agreement by the asserted contradictory prior or contemporaneous agreement. In other words, interpretation and construction must necessarily precede protection against forbidden contradiction or modification. And in the process of interpretation and construction of the integrated agreement all relevant evidence pointing to meaning is admissible because experience teaches that language is so poor an instrument for communication or expression of intent that ordinarily all surrounding circumstances and conditions must be examined before there is any trustworthy assurance of derivation of contractual intent, even by reasonable judges of ordinary intelligence, from any given set of words which the parties have committed to paper as their contract. Construing a contract of debatable meaning
A-5148-16T3 19 by resort to surrounding and antecedent circumstances and negotiations for light as to the meaning of the words used is never a violation of the parol evidence rule. And debatability of meaning is not always discernible at the first reading of a contract by a new mind. More often it becomes manifest upon exposure of the specific disputed interpretations in the light of the attendant circumstances.
[Garden State Plaza Corp. v. S.S. Kresge Co., 78 N.J. Super. 485, 496 (App. Div. 1963).]
Although there is no ambiguity in the first and second sentences of
Paragraph 43A, the court found an ambiguity in the last sentence, which
provides that "[i]n no event shall the basic rental of each year of the said renewal
period be less than $11,700.00 or the prior years' rent, whichever is greater." At
trial, and on appeal, the parties disagreed as to whether the term "the prior years'
rent" included year five of the original term, as alleged by plaintiff, or applies
only after the first year of the renewal period (year six) expires, as alleged by
defendant.
If the last sentence of Paragraph 43A applies to the first year of the
renewal period, then the base rent for year six could not be less than the rent for
year five, which was set by the lease at $128,400 per year or $10,700 per month.
However, if it did not apply until the end of year six, as defendant alleges, the
base rent amounts for the initial term are irrelevant. This distinction, and the
A-5148-16T3 20 parties' disagreement as to the application of the last sentence of Paragraph 43A,
creates an ambiguity in the terms of the lease.
To resolve this ambiguity, the court viewed the documentary evidence and
circumstances leading up to the formation of the lease, see Conway, 187 N.J. at
269, and found that Paragraph 43A and the circumstances surrounding the
negotiation of the lease, "support[] an interpretation that the rent was not to be
decreased from the previous years' rent." The court also considered the rent
obligations during the initial lease term, set forth in Schedule A:
Months 1-4 $2,250.00 Months 5-6 $6,000.00 Months 7-12 $7,500.00 Second Year $96,000.00 $8,000.00 Third Year $105,600.00 $8,800.00 Fourth Year $116,400.00 $9,700.00 Fifth Year $128,400.00 $10,700.00
The language of the lease and the circumstances surrounding its execution
demonstrated the parties' intent to increase the rental amount annually.
However, rather than changing the words "annual" and "year" in Paragraph 43A
to reflect a monthly obligation, the court merely interpreted the last sentence of
Paragraph 43A and found that the parties intended to prevent the rent obligation
from being reduced "in any year of the lease and any year of the renewal."
Accordingly, the court found the base rent amount for year six could not be less
A-5148-16T3 21 than the rent for year five, which was set at $10,700 per month, or $128,400 per
year, and by failing to pay $10,700 per month, defendant defaulted on its
obligation to pay rent under the lease.
The court's interpretation of the parties' intent in drafting the lease
adequately resolved the ambiguity contained in the last sentence of Paragraph
43A. In light of its interpretation of that language, the court determined that
Paragraph 43A set a minimum base rent of $10,700 to the renewal period. Thus,
although plaintiff may have introduced the extrinsic evidence to vary the terms
of the lease, the court did not use the evidence impermissibly. Rather, the court
interpreted the parties' intention in drafting the lease "to aid in determining the
meaning" of the last sentence of Paragraph 43A, and properly found that
defendant failed to pay rent in full. See ibid. The extrinsic evidence was not
used for the impermissible purpose of varying the terms of the lease and
therefore, its use did not lead to an unjust result. See State v. J.R., 227 N.J. 393,
417 (2017) (quoting R. 2:10-2).
Defendant also argues the appropriate remedy would have been
reformation because the trial testimony revealed the use of the words "annual"
and "year" in Paragraph 43A constituted an error or mistake. Defendant posits
A-5148-16T3 22 that unless and until the lease is reformed, it should only pay rent as clearly
expressed in the lease, i.e., $11,700 per year.
At the conclusion of the trial, the court found that "the dispute, in [its]
judgment, was an interpretation of a contract issue . . . rather than a reformation
of the contract." Although the court acknowledged that if plaintiff were seeking
reformation of the contract, "that would be arguably beyond the power of the
summary dispossess action," the court noted plaintiff was seeking a
determination that "the rent should be $10,700 monthly, pursuant to the
language of the lease, and does not include a decision as to whether or not there
should be a reformation of that clause to modify it to $11,700." Defendant
nevertheless argues that the proper remedy would have been reformation, which
was outside the scope of the trial court's jurisdiction in a summary dispossess
matter. We disagree.
"[A] court hearing a summary dispossess action lacks general equitable
jurisdiction" and "[a]lthough the court may consider equitable defenses, it is
beyond the power of the court to grant permanent injunctive or other e quitable
relief to the parties." Benjoray, Inc. v. Acad. House Child Dev. Ctr., 437 N.J.
Super. 481, 488 (App. Div. 2014) (quoting WG Assocs. v. Estate of Roman, 332
N.J. Super. 555, 563 (App. Div. 2000)).
A-5148-16T3 23 Reformation of a contract has been used as an equitable remedy where a
contract cannot be rescinded. Dugan Constr. Co. v. N.J. Tpk. Auth., 398 N.J.
Super. 229, 242 (App. Div. 2008); see also Bonnco Petrol, Inc. v. Epstein, 115
N.J. 599, 612-13 (1989). Reformation is granted to rectify "either mutual
mistake or unilateral mistake by one party and fraud or unconscionable conduct
by the other." Dugan Constr. Co., 398 N.J. Super. at 242-43 (quoting St. Pius X
House of Retreats, Salvatorian Fathers v. Diocese of Camden, 88 N.J. 571, 577
(1982)). "The problem normally arises when the agreement fails to specify
correctly the terms that the parties agreed upon[.]" Id. at 243 (quoting Edward
D. Lord, Inc. v. Mun. Util. Auth., 133 N.J. Super. 503, 507-08 (App. Div. 1975)).
"Reformation presupposes that a valid contract between the parties was created
but, for some reason, was not properly reflected in the instrument that
memorializes the agreement." Lederman v. Prudential Life Ins. Co. of Am.,
Inc., 385 N.J. Super. 324, 345 (App. Div. 2006) (quoting H. Prang Trucking Co.
v. Local Union No. 469, 613 F.2d 1235, 1239 (3d Cir. 1980)). A court will grant
reformation only if there is "'clear and convincing proof' that the contract in its
reformed, and not original, form is the one that the contracting parties
understood and meant it to be." Cent. State Bank v. Hudik-Ross Co., 164 N.J.
Super. 317, 323 (App. Div. 1978).
A-5148-16T3 24 Here, the court did not reform the contract and, despite the extensive
testimony that the words "year" and "annual" were a mistake in the lease,
plaintiff did not seek the remedy of reformation. Instead, plaintiff relied on the
fact that "notwithstanding [the] typo . . . the rest of Paragraph 43A simply did
not permit a conclusion that year [six] rent could be any less than the prior year's
rent of $10,700 per month." Thus, although reformation would be an appropriate
remedy arising out of an error or mistake in the drafting of a contract, that
remedy was not at issue in this matter. We are satisfied the court committed no
error in using extrinsic evidence to interpret Paragraph 43A to require rent of
$10,700 per month during the renewal period.
III.
Defendant contends the court erred in denying its motion to transfer the
summary dispossess action to the Law Division and consolidate it with the Law
Division action. Defendant reiterates this was a complex commercial tenancy
that demanded discovery and required uniformity with the Law Division action
and joinder of claims.
"The summary dispossess statute, N.J.S.A. 2A:18-51 to -61, was designed
to provide landlords with a swift and simple method of obtaining possession."
Benjoray, Inc., 437 N.J. Super at 486. Nevertheless, either party to a summary
A-5148-16T3 25 dispossession proceeding may move to have the matter transferred to the Law
Division, and the court may grant the motion if it deems the issues before it "of
sufficient importance." N.J.S.A. 2A:18-60.
We review the trial court's ruling on a motion to transfer for abuse of
discretion. See Master Auto Parts, Inc. v. M. & M. Shoes, Inc., 105 N.J. Super.
49, 53 (App. Div. 1969). "[A]buse of discretion only arises on demonstration
of 'manifest error or injustice[,]'" Hisenaj v. Kuehner, 194 N.J. 6, 20 (2008)
(quoting State v. Torres, 183 N.J. 554, 572 (2005)), and occurs when the trial
judge's "decision is 'made without a rational explanation, inexplicably departed
from established policies, or rested on an impermissible basis.'" Milne v.
Goldenberg, 428 N.J. Super. 184, 197 (App. Div. 2012) (quoting Flagg v. Essex
Cty. Prosecutor, 171 N.J. 561, 571 (2002)).
In general, a motion to transfer a summary dispossess action to the Law
Division is granted when "the procedural limitations of a summary action . . .
would significantly prejudice substantial interests either of the litigants or of the
judicial system itself, and . . . those prejudicial effects would outweigh the
prejudice that would result from any delay caused by the transfer." Twp. of
Bloomfield, 253 N.J. Super. at 563. The court should consider the following
factors in deciding a motion to transfer:
A-5148-16T3 26 [(1)] The complexity of the issues presented, where discovery or other pretrial procedures are necessary or appropriate;
[(2)] The presence of multiple actions for possession arising out of the same transaction or series of transactions, such as where the dispossesses are based upon a concerted action by the tenants involved;
[(3)] The appropriateness of class relief;[4]
[(4)] The need for uniformity of result, such as where separate proceedings are simultaneously pending in both the Superior Court and the County District Court arising from the same transaction or set of facts, and
[(5)] The necessity of joining additional parties or claims in order to reach a final result.
[Id. at 562-63 (quoting Morrocco v. Felton, 112 N.J. Super. 226, 235-36 (Law Div. 1970)).]
We discern no abuse of discretion in the court's denial of defendant's
motion to transfer. The issues in this matter are not complex, do not require
discovery, and there are no issues of significant importance that would warrant
transfer to the Law Division. The fact that this matter involves a commercial
tenancy does not change this result, as defendant suggests. This is a simple
summary dispossess action based on the tenant's alleged breach of a lease
4 Because this matter did not involve class relief, factor three does not apply. A-5148-16T3 27 provision and holding over in possession following a notice to terminate the
lease.
Further, the mere fact that a landlord seeks to recover money damages in
a Law Division action is not sufficient to warrant a transfer to the Law Division.
The tenant may assert a counterclaim against the landlord in the Law Division
action, as defendant has done here, join whatever parties it deems necessary to
adjudicate its claims, and engage in discovery. Because none of the five factors
existed here, the court properly denied defendant's motion to transfer.
IV.
Before addressing defendant's remaining arguments, we address
plaintiff's argument on cross-appeal that it was entitled to a judgment of
possession under N.J.S.A. 2A:18-53(c)(4).
Plaintiff argued that it pleaded a cause of action for breach of the lease
under N.J.S.A. 2A:18-53(c)(4) and defendant was not permitted to cure in
accordance with N.J.S.A. 2A:18-555 by paying the rent arrears. The court
determined that N.J.S.A. 2A:18-53(c)(4) did not apply. This was error.
5 N.J.S.A. 2A:18-55 provides as follows, in pertinent part:
If, in actions instituted under [N.J.S.A. 2A:18-53(b)], the tenant or person in possession of the demised
A-5148-16T3 28 "In construing a statute, our 'overriding goal is to determine as best we
can the intent of the Legislature, and to give effect to that intent.'" Bermudez v.
Kessler Inst. for Rehab., 439 N.J. Super. 45, 50 (App. Div. 2015) (quoting State
v. Hudson, 209 N.J. 513, 529 (2012)). "If the Legislature's intent is clear on the
face of the statute, then we must apply the law as written." In re N.J. Firemen's
Ass'n Obligation, 230 N.J. 258, 274 (2017) (quoting Murray v. Plainfield Rescue
Squad, 210 N.J. 581, 592 (2012)). Furthermore, "[a]bsent a clear indication
from the Legislature that it intended statutory language to have a special limiting
definition, we must presume that the language used carries its ordinary and well-
understood meaning." Ibid. (quoting State v. Lenihan, 219 N.J. 251, 262-63
(2014)).
N.J.S.A. 2A:18-53(c)(4) applies to the removal of a commercial tenant:
[w]here such person . . . shall commit any breach or violation of any of the covenants or agreements in the nature thereof contained in the lease for the premises where a right of re-entry is reserved in the lease for a violation of such covenants or agreements, and shall hold over and continue in possession of the demised premises or any part thereof. . . .
premises shall at any time on or before entry of final judgment, pay to the clerk of the court the rent claimed to be in default, together with the accrued costs of the proceedings, all proceedings shall be stopped. A-5148-16T3 29 The language of the statute does not specifically limit its application to no n-
monetary breaches; rather, it provides that removal is appropriate where the
tenant commits "any breach or violation of any of the covenants or agreements
. . . where a right of re-entry is reserved in the lease for a violation of such
covenants or agreements[.]" Ibid. (emphasis added). The plain language of the
statute indicates the Legislature intended section (c) to apply broadly to the
breach of any covenant in a lease where a right of re-entry is reserved.
The Legislature also drew a distinction between N.J.S.A. 2A:18-53(c)(4)
and N.J.S.A. 2A:18-53(b), which permits removal of a commercial tenant "after
a default in the payment of rent," by limiting the application of N.J.S.A. 2A:18-
53(c)(4) to covenants "where a right of re-entry is reserved in the lease for a
violation of such covenants or agreements." Thus, N.J.S.A. 2A:18-53(c)(4)
applies to the non-payment of rent where the lease contains a covenant to pay
rent and the landlord reserves a right of re-entry for the violation of that
covenant.
This matter was properly brought under N.J.S.A. 2A:18-53(c)(4) because
the lease contains a covenant to pay rent, as well as a provision granting plaintiff
the right of re-entry and possession in the event of defendant's default in the
performance of any lease provision, including non-payment of rent.
A-5148-16T3 30 Accordingly, the court erred in finding that N.J.S.A. 2A:18-53(c)(4) was
inapplicable to grant plaintiff a judgment for possession. Plaintiff was entitled
to possession under the statute due to defendant's failure to pay rent and
surrender possession of the property.
We next address defendant's meritless argument that the court lacked
jurisdiction because plaintiff did not properly serve the NOT in accordance with
the lease notice provision.
N.J.S.A. 2A:18-53(c)(4) provides, in pertinent part, that a commercial
tenant may be removed from the premises:
after the landlord or his agent for that purpose has caused a written notice of the termination of said tenancy to be served upon said tenant, and a demand that said tenant remove from said premises within three days from the service of such notice. The notice shall specify the cause of the termination of the tenancy, and shall be served either personally upon the tenant or such person in possession by giving him a copy thereof, or by leaving a copy thereof at his usual place of abode with some member of his family above the age of [fourteen] years.
The purpose in N.J.S.A. 2A:18-53(c) of providing notice to a commercial
tenant is to "permit the tenant to adequately prepare a defense, since the tenant
may contest an alleged breach of a covenant or may raise equitable defenses."
A-5148-16T3 31 Ivy Hill Park Apartments. v. GNB Parking Corp., 236 N.J. Super. 565, 570 (Law
Div. 1989), aff'd, 237 N.J. Super. 1 (App. Div. 1989). "Because an action to
evict the tenant is normally a summary proceeding devoid of discovery,
specification of the cause of termination is a means of adequately advising the
tenant of the allegations against which it must defend." Ibid. As our Supreme
Court stated when construing N.J.S.A. 2A:18-53(c):
The notice is required to "specify the cause of the termination of the tenancy," and proof that such notice has been served is prerequisite to judgment. The cause of the termination is jurisdictional, and if at trial evidence is adduced from which a finding could reasonably be made that a proper notice was served and that the specified statutory cause existed, a judgment for possession is conclusive.
[Carteret Props. v. Variety Donuts, Inc., 49 N.J. 116, 123, (1967) (citations omitted) (quoting N.J.S.A. 2A:18-56).]
A lease may provide for a different manner and time-period for service
than contemplated by N.J.S.A. 2A:18-53(c). Pa. R.R. Co. v. L. Albert & Son,
Inc., 26 N.J. Super. 508, 512-13 (1953). New Jersey courts have held that a
lease termination provision that provides for notice by registered mail may be
exercised by certified mail because "the essence of the matter is whether the
notice required by the lease was received in time." 243 So. Harrison St. Corp. v.
Ogust, 113 N.J. Super. 74, 77 (Cty. Ct. 1971). The purpose of a lease
A-5148-16T3 32 termination provision requiring service by certified or registered mail is to
ensure the defaulting party receives proper notice. See id. at 78 (holding that
the intent of the parties, evidenced by the certified and registered mail provision
of the lease, sought "to insure the delivery of the notice, and to settle any dispute
that might arise between the parties as to whether or not the notice was duly
received").
Here, the lease granted plaintiff the right of re-entry upon defendant's
default. The termination provision provides that upon defendant's default:
the Landlord may . . . at any time thereafter, terminate this lease and the terms hereof, upon giving to the Tenant or to any trustee, receiver, assignee or other person in charge of or acting as custodian of the assets or property of the Tenant, five (5) days notice in writing, of the Landlord's intention so to do. Upon the giving of such notice, this lease and the term hereof shall end on the date fixed in such notice as if the said date was the date originally fixed in this lease for the expiration hereof; and the Landlord shall have the right to remove all persons, goods, fixtures and chattels therefrom, by force or otherwise, without liability for damages.
Regarding notices, the lease provided as follows:
All notices required under the terms of this lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested, to the address of the parties as shown at the head of this lease or to such other address as may be designated in
A-5148-16T3 33 writing, which notice of change of address shall be given in the same manner.
Plaintiff did not serve the NOT on defendant by certified or regular mail.
Instead, on February 15, 2017, plaintiff personally served defendant with the
NOT, and defendant does not dispute it received the notice. Accordingly, we
hold that although service was not in strict compliance with the lease notice
provision, use of the alternative, and better, method of personal service
performed the same function and served the same purpose as the authorized
method of service. In accordance with N.J.S.A. 2A:18-53(c), the NOT specified
the date and cause of the termination, demanded possession, and provided
defendant an opportunity to prepare a defense. Defendant received proper notice
of the cause of the termination and had an opportunity to defend. Due process
was satisfied.
VI.
Defendant contends the court erred by not permitting it to assert a Marini
defense. We disagree.
Marini recognizes rent abatement as an equitable defense available to a
tenant in a summary dispossess action. In Marini, the Court held as follows:
If, therefore, a landlord fails to make the repairs and replacements of vital facilities necessary to maintain the premises in a livable condition for a period of time
A-5148-16T3 34 adequate to accomplish such repair and replacements, the tenant may cause the same to be done and deduct the cost thereof from future rents. The tenant's recourse to such self-help must be preceded by timely and adequate notice to the landlord of the faulty condition in order to accord him the opportunity to make the necessary replacement or repair. If the tenant is unable to give such notice after a reasonable attempt, he may nonetheless proceed to repair or replace. This does not mean that the tenant is relieved from the payment of rent so long as the landlord fails to repair. The tenant has only the alternative remedies of making the repairs or removing from the premises upon such a constructive eviction.
[56 N.J. at 146-47.]
A Marini defense can only be used by a tenant "where defects have been
asserted as a defense to nonpayment of rent or as a basis for withholding of
rental payments." Szeles v. Vena, 321 N.J. Super. 601, 607 (App. Div. 1999)
(emphasis added). Where the landlord fails to make the repairs, the tenant may
declare a constructive eviction and vacate the premises, see Reste Realty Corp.
v. Cooper, 53 N.J. 444, 456-57 (1969); make the repairs and deduct the cost
from the rent, see Marini, 56 N.J. at 146; withhold rent and seek an abatement
in a non-payment dispossess action or file a separate action to recover rents
paid, see Berzito, 63 N.J. at 469-70; or seek the appointment of an
administrator to collect rents and make repairs, see Drew v. Pullen, 172 N.J.
Super. 570, 575 (App. Div. 1980).
A-5148-16T3 35 Defendant did not assert defects in the premises as a defense to
nonpayment of rent and did not withhold rent payment on that basis.
Defendant also did not assert a Marini defense at any time seeking to either
withhold rent, assert its right to a rent abatement, or avail itself of any of the
remedies available to it. Rather, defendant maintained throughout this matter
that it had paid the rent in full in accordance with Paragraph 43A and was not
required to pay more than $975 per month. Accordingly, the court correctly
barred defendant from asserting a Marini defense.
VII.
Both plaintiff and defendant challenge the award of counsel fees.
Defendant argues the award was excessive because it was disproportional to a
summary dispossess action and plaintiff failed to establish the reasonableness
of the fees requested. Plaintiff counters that the award was not excessive, and
argues on cross-appeal that the court erred in severely reducing the amount
awarded.
We review an award of attorneys' fees and costs under an abuse-of-
discretion standard. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444
(2001); Rendine v. Pantzer, 141 N.J. 292, 317 (1995). "Fee determinations by
trial courts will be disturbed only on the rarest of occasions, and then only
A-5148-16T3 36 because of a clear abuse of discretion." Packard-Bamberger, 167 N.J. at 444
(quoting Rendine, 141 N.J. at 317).
In its application for attorneys' fees, plaintiff requested $67,945.59. The
court reduced the amount to $38,904.00 plus reasonable costs of $350. In its
July 28, 2017 statement of reasons, the court noted a number of reasons for
reducing the amount sought. The court noted that at least five attorneys
performed services at various hourly rates, and assigned a blended rate of $355
per hour. The court also noted that one of plaintiff's attorneys whose charges
were included attended every court appearance, but did not actively participate
in the matter. The court found it was unreasonable to expect reimbursement for
an attorney to sit as second chair on a landlord-tenant dispossess action.
Furthermore, the court noted that the affidavit of services contained redundant
services; the billing for the trial brief seemed excessive and redundant; and
counsel billed for excessive fees, including transcript fees, witness fees, and
excessive copying fees, as well as the fees incurred for a private investigator.
The court found that "[i]n reviewing all of the above circumstances . . . the
reasonable amount of time spent in this matter is 109.6 hours at the rate of
$355.00 per hour for a total legal fee of $38,904.00 plus reasonable costs of
$350.00."
A-5148-16T3 37 In determining the reasonableness of an award, "the threshold issue 'is
whether the party seeking the fee prevailed in the litigation.'" Ibid. (quoting N.
Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 570 (1999)). The
court should also consider the lodestar calculation, which "is defined as the
number of hours reasonably expended by the attorney, multiplied by a
reasonable hourly rate." Id. at 445.
In light of these considerations, we find no abuse of discretion in the
counsel fees award. The court reviewed counsel's affidavit of services and
reduced the lodestar fee based on the nature of the action, the use of multiple
attorneys, and the excessive time spent on the trial brief. The court also noted
that counsel included redundant services and excessive costs. These
determinations were appropriate based on the principle that "no compensation
is due for nonproductive time" Rendine, 141 N.J. at 335 (quoting Copeland v.
Marshall, 641 F.2d 880, 891 (D.C. Cir. 1980)). The court considered all the
relevant factors in reducing the plaintiff's counsel fees application. It "carefully
considered the fee requested by plaintiff[], scrutinized the value of the services
. . . provided, and evaluated the disparity between the relief initially requested
by plaintiff[] and that which was ultimately awarded." Packard-Bamberger &
Co., 167 N.J. at 446-47.
A-5148-16T3 38 Affirmed in part, reversed in part, and remanded to the trial court to enter
a judgment for possession.
A-5148-16T3 39