NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-5465-14T3
PILGRIM PLAZA, LLC,
Plaintiff-Respondent/ Cross-Appellant,
v.
XIU FANG LIU,
Defendant-Appellant/ Cross-Respondent. ______________________________
Argued November 30, 2016 – Decided April 11, 2017
Before Judges Alvarez and Accurso.1
On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-293-12.
Benjamin B. Xue argued the cause for appellant/cross-respondent (Xue & Associates, P.C., attorneys; Mr. Xue, on the brief).
1 Hon. Carol E. Higbee participated in the panel before whom this case was argued. The opinion was not approved for filing prior to Judge Higbee's death on January 3, 2017. Pursuant to R. 2:12-2(b), "Appeals shall be decided by panels of 2 judges designated by the presiding judge of the part except when the presiding judge determines that an appeal should be determined by a panel of 3 judges." The presiding judge has determined that this appeal shall be decided by two judges. Richard L. Zucker argued the cause for respondent/cross-appellant (Lasser Hochman, LLC, attorneys; Mr. Zucker, of counsel and on the brief).
PER CURIAM
In this shopping center tenancy dispute tried in the
Chancery Division, defendant tenant, Xiu Fang Liu, appeals from
an amended final judgment reforming the parties' lease,
declaring her in default of the lease as reformed and as failing
to have exercised an option to renew and awarding the landlord
damages, including attorneys' fees. The landlord, plaintiff
Pilgrim Plaza, LLC, cross-appeals claiming the Chancery judge
erred in denying its demand for holdover rent, late charges and
interest in accordance with the reformed lease and in
determining its fee award. Because there is substantial,
credible evidence in the record to support Judge Moore's
findings and fee award, we affirm, substantially for the reasons
expressed in his comprehensive and cogent opinions delivered
from the bench on May 19 and June 26, 2015.
The Pilgrim Plaza Shopping Center straddles the line
between Cedar Grove and Verona. In 2007, defendant took an
assignment of a triple net lease from the owner of a Chinese
restaurant on the Cedar Grove side. In the lease plaintiff
inherited, the tenant's proportional share of real estate taxes
2 A-5465-14T3 was 5.18 percent, which defendant began paying when she assumed
the lease. In 2008, defendant negotiated a new lease with the
landlord, plaintiff's predecessor and the entity which filed the
original complaint in the case.2
The landlord was at that time using a new form lease for
the shopping center. The negotiations were conducted through
counsel, as defendant averred she spoke "very limited English
and can read even less." Although there were discussions over
the amount of the base rent for the space, the parties were in
agreement that the triple net arrangement for defendant's pro
rata share of real estate taxes and common area maintenance
(CAM) charges would remain. The new lease called for defendant
2 In her post-trial submissions, defendant argued for the first time that Pilgrim Plaza, substituted in as plaintiff in a "supplemental" complaint filed in 2013, lacked standing because it acquired its title from an entity different from her prior landlord. Although this issue was not included in the pre-trial order, see R. 4:25(b)(7), and was not raised at trial, Judge Moore addressed it for sake of completeness. Relying on plaintiff's deed in evidence and accepting plaintiff's explanation of the obvious connection between the related entities of defendant's former landlord and plaintiff's predecessor in title, the judge dismissed defendant's belated standing challenge as without merit. See R. 4:26-1; Crescent Park Tenants Ass'n v. Realty Equities Corp. of N.Y., 58 N.J. 98, 101 (1971). As plaintiff, the owner of the shopping center, would appear an obvious proper party to prosecute this tenancy action, see Port Liberte II Condo. Ass'n, Inc. v. New Liberty Residential Urban Renewal Co., LLC, 435 N.J. Super. 51, 64 (App. Div. 2014), we consider the issue without sufficient merit to warrant discussion in this opinion. R. 2:11-3(e)(1)(E).
3 A-5465-14T3 to pay as "additional rent" her proportionate share of the real
estate taxes and CAM charges, calculated "by dividing the total
ground floor demised area of the Premises by the total leasable
ground floor area of all buildings in the Shopping Center[,]
which percentage is currently 1.58%." The lease provided that
"[n]otwithstanding the foregoing," defendant's share of the real
property taxes "which relate solely to the portion of the
Shopping Center located in Cedar Grove . . . shall be equal to
2.23%." The lease further provided defendant's share "shall be
modified from time to time in the event of a change in the
ground floor area of the Premises or the total leasable ground
floor area of all buildings in the Shopping Center."
Apparently unnoticed by either party was that defendant's
pro rata share of the real estate taxes as calculated by the
method set out in the lease was then 5.18 percent, not 2.23
percent. At trial, the landlord's attorney surmised she
miscalculated the percentage by relying on the ratios for space
on the Verona side of the shopping center. She, however, sent
an email to the landlord's representative confirming the
correctness of the 2.23 percent figure before providing
defendant the new lease for execution. The landlord's
representative acknowledged his receipt of the email, but
testified he had not focused on the error, being more interested
4 A-5465-14T3 in the part of the email advising that defendant was bringing
her rent arrears current.
After the lease was executed but before the start of the
new term in August 2009, the landlord advised defendant, along
with all the other tenants of the shopping center, that it had
hired an architect to re-measure the entire shopping center. As
a result, defendant's pro rata share of the shopping center's
real estate taxes to Cedar Grove rose from 5.18 to 5.3 percent.
The landlord billed defendant for her 5.3 percent share, and
defendant paid the increased rate, although the tax
reconciliation statement explaining the change was sent in
February 2010 to defendant's old address in Jackson Heights, New
York.3
In May 2010, nearly ten months into the new lease term,
defendant asked the landlord for a thirty percent reduction in
her base rent because the movie theatre in the shopping center
had closed, and the effect that and the economic downturn were
having on her business. The landlord agreed to a one-year, ten
3 Defendant's counsel had advised the landlord's counsel in May 2008, before execution of the lease, to change defendant's address from Jackson Heights to the restaurant in the shopping center. This was apparently not done and the landlord continued to send tax reconciliation statements to defendant at her Jackson Heights address until January 2013, when it sent the 2012 reconciliation to her at the restaurant.
5 A-5465-14T3 percent reduction. At the end of that period, defendant asked
the landlord to allow her to continue paying the same reduced
base rent through the end of the lease term in 2014. The
landlord refused.
In February 2012, the landlord's attorney wrote to
defendant's counsel enclosing the most recent tax reconciliation
statement for the Cedar Grove portion of the shopping center
and advised that defendant owed $2778.93 in unpaid real estate
taxes and CAM charges. Counsel for defendant responded that his
client would immediately pay any arrears, but expressed
confusion over defendant's pro rata share of 5.3 percent of real
estate taxes as the executed lease listed the percentage as 2.23
percent. He also claimed he could not tell whether the CAM
charge was calculated in accordance with the 1.58 percent rate
included in the lease.
In response, the landlord's counsel attached the CAM
reconciliation demonstrating that defendant was charged a 1.52
percent pro rata CAM charge, slightly less than the 1.58 pro
rata charge included in the lease. As to the real estate tax
charge, the landlord's counsel did not address the discrepancy
in the lease but instead attached the results of the 2009
remeasurement of the shopping center, quoting the provision of
the lease permitting the modification of the tenant's share of
6 A-5465-14T3 the taxes. Based on the architect's conclusion that defendant
occupied 5.3 percent "of the ground floor area of the Cedar
Grove portion of the Shopping Center," counsel asserted
defendant's "[pro rata] share of the Cedar Grove taxes is 5.3%."
Following that exchange and in accordance with defendant's
counsel's representation, defendant brought her rent current,
including the outstanding CAM charges and her share of the Cedar
Grove real estate taxes.
In December 2012, defendant owed the landlord slightly over
$6500, less than one month's rent. The landlord filed a
complaint seeking reformation of the lease to correct its
"scrivener's error" regarding defendant's pro rata share of the
Cedar Grove taxes, possession and damages, including a service
fee of eight percent and default interest of eighteen percent.
The case was very aggressively litigated and closely
overseen, first by Judge Klein and then, following her
retirement, by Judge Moore. Judge Moore noted seventy-two
separate filings in the matter over the case's two-and-a-half-
year existence. Plaintiff filed four motions within the first
three-and-a-half months of the case.
In the middle of this hotly contested matter, the tenant
faced the deadline to exercise her option to extend the lease
for another five-year term. The landlord's representative wrote
7 A-5465-14T3 directly to defendant on July 18, 2013, advising her that
"should [she] wish to exercise [her] option which shall become
effective on August 1, 2014[,] [she] must so notify the landlord
in writing no later than July 31, 2013." He wrote defendant
another letter the very next day, stating that, notwithstanding
his earlier letter, plaintiff could not exercise her option
because she was in default of her lease obligations.
Defendant claimed she wrote back on July 24, 2013,
exercising her option. When she did not receive any response
from the landlord, she made inquiry with her counsel. He wrote
to the landlord's counsel on September 20, 2013, approximately
seven weeks after the option deadline, requesting the letter be
considered "another confirmation/notice to the Landlord" that
defendant was exercising her option to renew the lease.
Plaintiff's counsel emailed his response the following day,
noting the landlord had no record of any renewal notice.
Plaintiff's counsel asserted not only was the option not
exercised timely, but because defendant was in default of her
lease obligations, she had no right to "extend the term of the
tenancy beyond July 31, 2014."
Plaintiff filed a second "supplemental" complaint in
November 2013 seeking a declaratory judgment that defendant
8 A-5465-14T3 failed to timely exercise her option to renew.4 In April 2014,
plaintiff made its second motion for partial summary judgment,
including on the count asserting defendant's failure to timely
renew the lease. Although denying plaintiff relief on the other
counts, Judge Moore granted plaintiff summary judgment on
defendant's failure to timely exercise the option. The judge
subsequently denied defendant's request for reconsideration.
Without advising the court, plaintiff instituted a summary
dispossess action in landlord/tenant court against defendant.
Judge Moore subsequently advised the parties of his intention to
sua sponte reconsider the partial summary judgment on the
option. Following argument, Judge Moore vacated his prior
orders, ordered the dismissal of the summary dispossess action
and required defendant to pay plaintiff the base rent called for
under the lease's extension option rider and real estate taxes
and CAM charges without prejudice to plaintiff's application for
holdover rent.
The case was tried over six non-consecutive days from
December 2014 to February 2015. As Judge Moore noted,
notwithstanding the intensity with which the case was litigated,
4 Plaintiff's first "supplemental" complaint asserted additional grounds for defendant's default relating to her failure to perform certain non-monetary obligations required by the lease, which the landlord had not previously asserted.
9 A-5465-14T3 the trial mainly concerned just two issues, whether plaintiff
was entitled to reformation of the lease and whether defendant
had timely exercised her option to renew. In the event the
court decided the second issue against defendant, it also had to
resolve whether equity should relieve the forfeiture.
Plaintiff argued the parties were in agreement the triple
net feature of the old lease would remain unchanged, and the
words of the lease accurately reflected their agreement. It
contended the inaccurate percentages inserted into the lease was
simply a "scrivener's error" entitling it to reformation.
Plaintiff maintained defendant was always well aware of the
actual percentages and simply latched onto the error in bad
faith when it refused to reduce defendant's base rent in 2012.
As to exercise of the option, plaintiff argued time was of the
essence and defendant never sent the landlord's representative
any letter exercising the option. Plaintiff asserted
defendant's testimony to the contrary was a lie and she
manufactured her letter of July 24, 2013 after the fact.
Defendant maintained calculating her pro rata share of the
Cedar Grove real estate taxes was the exclusive responsibility
of the landlord, who negligently discharged that duty. Relying
on the landlord's counsel's testimony that she did not simply
fail to copy the percentages correctly but miscalculated them by
10 A-5465-14T3 relying on the ratios for the Verona side of the shopping
center, defendant contended the mistake could not fairly be
characterized as a scrivener's error. Defendant also noted the
lawyer testified she sent her calculations to the landlord's
representative for review before finalizing the lease and
sending it to defendant for execution. Defendant asserted those
facts made clear that the error was simply a negligent,
unilateral mistake by the landlord precluding reformation of the
lease.
As for her exercise of the option, defendant maintained her
son typed the one-sentence letter to the landlord, and her
husband addressed the envelope and sent it to the landlord's
representative by regular mail, just as he had sent his two
letters to her. She also contended that even if the landlord
never received her letter, her counsel made clear she was
exercising her option only a few weeks after the deadline. As
the option deadline was a full year before expiration of the
lease, and the landlord had not taken any steps to advertise or
re-let the space in the interim, defendant argued forfeiture was
too harsh a penalty. Defendant testified she had invested
nearly $100,000 in the restaurant, in which her entire family
worked. She emphasized the inequity of allowing the landlord,
with its superior resources, relief from its unilateral mistake
11 A-5465-14T3 while holding her to the letter of the lease, resulting in the
complete loss of the business she had worked hard to build.
After hearing the testimony of the witnesses and reviewing
the parties' extensive post-trial proposed findings of fact and
conclusions of law, Judge Moore entered judgment for plaintiff
reforming the lease and granting it possession and damages. The
judge found the percentages in the lease for defendant's pro
rata share of the Cedar Grove real estate taxes did not
accurately reflect the parties' actual agreement to continue the
triple net arrangement under the prior lease. Although
rejecting plaintiff's theory that defendant raised the issue in
bad faith, the judge did not find any evidence defendant had
relied on the erroneous percentage, so as to preclude relief to
plaintiff. Concluding that reformation was appropriate to cure
what the judge agreed was a scrivener's error, he granted
judgment to plaintiff reforming the lease.
Determining whether defendant had timely exercised her
option to renew was clearly a closer question. After hearing
the parties testify, Judge Moore concluded defendant did not
properly exercise the option. The judge found the landlord's
representative "more credible" than defendant on the issue. In
making that finding, the judge found "the one fact that
12 A-5465-14T3 shift[ed] the weight" to the landlord's representative was the
posture of the litigation.
The landlord's representative copied his lawyer on his
first letter to defendant about the deadline for exercising the
option. The following day, he wrote another letter, again
copying his counsel, basically retracting the first, telling
defendant she cannot exercise the option because she was in
default, referencing the ongoing litigation. Judge Moore
concluded in the context of "a very lawyered case with extensive
motion practice," he was "certain, based upon all the facts"
that the landlord's representative would have shared any letter
he received from defendant with his counsel. The judge further
found "the credible evidence is that [defendant] was in default
both on the rent issue and on the maintenance issue at the end
of July under that paragraph of the extension option rider
making the tenant unable to exercise the option."
Having concluded the option was not timely exercised, the
judge considered whether equity should relieve the forfeiture.
Relying on Dunkin' Donuts of America, Inc. v. Middletown Donut
Corporation, 100 N.J. 166, 183-84 (1985) and Brick Plaza, Inc.
v. Humble Oil & Refining Company, 218 N.J. Super. 101, 104 (App.
Div. 1987), the judge found no "fraud, accident, surprise or
13 A-5465-14T3 improper practice" that would justify "alter[ing] the very clear
language of the lease agreement."
Turning to damages, the judge calculated rent due in
accordance with the lease as reformed, but denied plaintiff's
request for interest, late fees and holdover rent, finding those
charges improper under the circumstances. The judge noted it
was plaintiff's lease error that led the parties into
litigation. Further, he found defendant was in good faith
paying rent during the pendency of the matter and should not be
penalized by the imposition of interest, late fees and holdover
rent in order to fairly litigate legitimate issues.
Accordingly, relying on plaintiff's tenant ledger, the judge
awarded plaintiff damages of $23,633.66 along with $7533.95 in
rent coming due after the court's decision and a $602.72 late
fee for failure to pay that sum when due.
After considering plaintiff's request for attorneys' fees
of $240,710.53 and expenses of $2760, he judge awarded $35,000
in fees and $1461 in expenses. The judge acknowledged both
parties' arguments as to an appropriate fee award and reviewed
the request in light of the eight factors of RPC 1.5(a).
Scrutinizing the certification in support of the application,
the judge's central finding was the case was litigated in a
manner all out of proportion with the amount of money at issue.
14 A-5465-14T3 See Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 387
(2009).
Specifically, the judge found the hours grossly excessive,
noting plaintiff sought over $100,000 for basic litigation
services including preparation for trial, trial exhibits,
document reviews and preparing and responding to proposed
findings of fact and conclusions of law. The judge acknowledged
plaintiff's counsel's experience and reputation but concluded a
great many tasks could have been performed competently by a
lawyer with less experience and a much reduced billing rate.
Final determinations made by the trial court sitting in a
non-jury case are subject to a limited and well-established
scope of review: "'we do not disturb the factual findings and
legal conclusions of the trial judge unless we are convinced
that they are so manifestly unsupported by or inconsistent with
the competent, relevant and reasonably credible evidence as to
offend the interests of justice[.]'" In re Trust Created By
Agreement Dated Dec. 20, 1961, ex rel. Johnson, 194 N.J. 276,
284 (2008) (quoting Rova Farms Resort, Inc. v. Investors Ins.
Co. of Am., 65 N.J. 474, 484 (1974)).
Having reviewed the record as well as the parties'
extensive briefing of the issues, and applying that standard
here, we have no reason to quarrel with any of Judge Moore's
15 A-5465-14T3 findings or conclusions. The issues in this case were limited
and uncomplicated. The law is well-settled and the outcome
turned largely on the judge's assessment of the credibility of
the witnesses, which we are in no position to second-guess. The
judge considered whether equitable relief should be afforded
defendant and determined it was not warranted, notwithstanding
that enforcement of the contract would undoubtedly cause
hardship to her. See Brunswick Hills Racquet Club, Inc. v.
Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 223 (2005).
Judge Moore made detailed factual findings and explained
the reasons for his conclusions. We are satisfied that his
legal conclusions were sound and his damage award reasonable
based on the facts in evidence. Plaintiff applied to a court of
equity for relief in the form of reformation of a contract made
necessary by its own error. The litigation was prolonged by its
own litigation strategy and the inability of the court to
provide the parties consecutive trial days. We find nothing
unremarkable or inequitable in limiting the landlord under such
circumstances to the rent owed without late fees and interest of
eighteen percent. See Graziano v. Grant, 326 N.J. Super. 328,
342 (App. Div. 1999) (noting "a court of equity should not
permit a rigid principle of law to smother the factual realities
to which it is sought to be applied"). To do otherwise would
16 A-5465-14T3 unfairly penalize the tenant for litigating what the court found
were legitimate issues pursued in good faith. See Rehberger v.
Rosenfeld, 100 N.J. Eq. 18, 23 (Ch. 1926) ("Cases could be
multiplied to show that one party to a suit cannot correct his
own mistake with costs as against those in nowise responsible
for the errors complained of.").
Our standard of review of a fee award is even more
restrictive. "[A] reviewing court will disturb a trial court's
award of counsel fees 'only on the rarest of occasions, and then
only because of a clear abuse of discretion.'" Litton Indus.,
Inc., supra, 200 N.J. at 386 (quoting Packard-Bamberger & Co.,
Inc. v. Collier, 167 N.J. 427, 444 (2001)). We find no such
abuse of discretion here.
Plaintiff sought fees of over $240,000 in a landlord/tenant
matter begun when the tenant owed the landlord only slightly
over $6500, less than one month's rent. Over $147,000 of what
plaintiff's counsel sought from defendant it had not even billed
its own client. Judge Moore's careful findings about the amount
of time spent on specific tasks make clear he scrutinized the
billings. We agree that charging defendant over $240,000 in
attorney's fees in a landlord/tenant dispute in which plaintiff
recovered less than $24,000 could not be justified under
applicable law. See id. at 389 ("[T]he relationship between the
17 A-5465-14T3 fee requested and the damages recovered is a factor to be
considered by the trial court because the notion of
proportionality is integral to contract fee-shifting in order to
meet the reasonable expectations of the parties.").
Judge Moore clearly identified the time and fees he found
excessive for the tasks performed. He likewise clearly
explained the expenses he found unjustified. Having reviewed
the billings and counsel's arguments, we cannot find the judge
abused his considerable discretion in this matter,
notwithstanding that the fees awarded exceeded plaintiff's
damages.
Having reviewed the record and considered the parties'
arguments in light of applicable law, we affirm the judgment,
substantially for the reasons expressed by Judge Moore in his
thorough and thoughtful opinions from the bench on May 19 and
June 26, 2015.
Affirmed.
18 A-5465-14T3