Opinion
DOCKET NO. A-4333-12T4
07-23-2015
PEARLMONT, L.L.C., JANET L. CAGGIA and ALFRED CAGGIA, Plaintiffs-Respondents, v. THE WATERFALL, INC. d/b/a THE PORTER HOUSE, Defendant-Appellant, and FINTAN SEELEY, BRENDAN MADDAN and EUGENE GILLESPIE, Defendants.
Bruce L. Atkins argued the cause for appellants (Deutsch Atkins, P.C, attorneys; Mr. Atkins, of counsel; Christopher J. Carcich, on the briefs). Andrew P. Bolson argued the cause for respondents (Rubenstein, Meyerson, Fox, Mancinelli, Conte and Bern, P.A., attorneys; Robert J. Mancinelli, of counsel; Michael A. Austin, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Alvarez, Waugh, and Maven. On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9562-08. Bruce L. Atkins argued the cause for appellants (Deutsch Atkins, P.C, attorneys; Mr. Atkins, of counsel; Christopher J. Carcich, on the briefs). Andrew P. Bolson argued the cause for respondents (Rubenstein, Meyerson, Fox, Mancinelli, Conte and Bern, P.A., attorneys; Robert J. Mancinelli, of counsel; Michael A. Austin, on the brief). PER CURIAM
Plaintiffs Pearlmont, LLC, Janet L. Caggia, and Alfred Caggia (Caggia) were awarded $277,600 in unpaid monthly rent plus costs, in addition to $72,327.39 in legal fees, for a total of $349,927.39. We now reverse the trial judge's February 12, 2013 decision, and remand for a new trial, as we conclude that the trial judge's factual findings, including his credibility determinations, are not supported by adequate, substantial, and credible evidence in the record. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).
I.
We summarize the relevant circumstances developed during the course of this five-day bench trial. Defendants The Waterfall, Inc., doing business as The Porter House (Waterfall), and Fintan Seeley, Brendan Maddan, and Eugene Gillespie had leased plaintiffs' vacant lot, located adjacent to their restaurant business, for thirty parking spaces. The parties entered into a written agreement on August 25, 1999. The vacant lot, which Caggia had never previously rented to anyone, wrapped around two sides of defendants' property line to the northwest. Maddan was the only Waterfall principal who signed the ten-year lease. Seeley, who at the time of the trial operated the business alone, does not dispute that Maddan had the legal authority to enter into the agreement on behalf of the business.
On February 14, 2012, plaintiffs voluntarily dismissed Maddan and Gillespie from the proceedings. Seeley was dismissed from the matter by order dated September 14, 2012. None of the owners were actively involved in the business after 1999.
The contract, a form document purchased and completed by Caggia without the benefit of counsel, called for monthly payments of $2750 for the first sixty months; thereafter $3000 per month for the remaining sixty months of the lease term. The lease stated "[t]he [t]enant covenants and agrees to use the demised premises as a parking area for cars associated with the operation of The Porter House Restaurant . . . , to accommodate a minimum of thirty (30) cars." The lease further provided that the tenant "agrees to pay, as additional rent, all attorney's fees and other expenses incurred by the [l]andlord in enforcing any of the obligations under this lease." Defendants did not consult with an attorney before Maddan signed the document.
The lease also provided for mandatory arbitration, which neither party raises as an issue on appeal.
Seeley, Maddan, and Gillespie all testified that from "day one" of the lease, Caggia assured them that the use of the property for parking was grandfathered-in to his family. In November 1999, defendants applied to the local planning board for certain variances and waivers related to improvements to the restaurant. In the process, the planning board advised that the lot was not zoned for parking and could not be used for that purpose.
Seeley informed Caggia that defendants would not pay rent unless he obtained the appropriate municipal approvals for the use of the lot. He offered to pay Caggia $500 monthly for parking in another area which Caggia owned, also adjacent to the business, but Caggia declined. Seeley also testified that Caggia repeatedly assured him he would resolve the issue with the municipality. Complicating matters, when the problem was discovered, Seeley, Maddan, and Gillespie began to experience internal conflicts, which eventually resulted in Seeley buying out the others' interests in the restaurant.
Defendants made monthly payments in accordance with the lease through October 2002, but ceased making payments by November. Caggia testified that in the following years he regularly wrote to defendants regarding the unpaid rent. Seeley testified that he repeatedly informed Caggia both face-to-face and on the phone that he was not going to pay rent for property that could not be lawfully used for parking.
The extent to which, if at all, defendants continued to use the lot for parking is not clear from the record.
Caggia filed a Chapter 11 bankruptcy petition in 2005. Pursuant to the settlement of the bankruptcy action, Pearlmont, LLC, an entity owned by the Caggias, purchased title from the bankruptcy trustee to all of Caggia's lands, including the property in question, for $550,000. Although the lot was not listed on his bankruptcy schedule, Caggia disclosed the existence of the lease in depositions conducted during the bankruptcy proceedings. He testified as to the monthly rental amount, but did not discuss the arrears and referred to the property as a "driveway."
On April 15, 2009, defendants consented to a judgment of possession being entered against them in the Special Civil Part. In 2010, a different Law Division judge from the one who eventually tried the matter granted defendants' motion for summary judgment on the basis that plaintiffs' failure to provide thirty legal parking spots was a material breach of the lease. We reversed and remanded for further proceedings, concluding that at that stage, it was premature to address the issue. Pearlmont, LLC v. The Waterfall, Inc., No. A-5057-09 (App. Div. July 8, 2011) (slip op. at 2).
Throughout trial, Caggia evaded questions regarding whose responsibility it was to obtain the parking approvals for the property and maintained that the parties never had any discussions addressing this responsibility. He further testified that the grandfathered use for parking "was for the Caggias. And that it was specifically not for anyone that as a tenant would come in and use it." Additionally, Caggia repeatedly denied that defendants ever communicated that their reason for not paying rent was related to the parking approvals.
Caggia testified that he did not attempt to mitigate damages until after he obtained the judgment of possession in 2009, nearly seven years after defendants breached the lease. Although he did not advertise the property, he claimed he received two or three calls from prospective tenants, but did not elaborate further on his efforts. Caggia acknowledged that he did not file this lawsuit until the full ten-year lease term had expired.
Caggia also testified that it was difficult to re-let the property because he believed its "S-shape" only made it suitable for parking by an adjoining business. Caggia claimed that he could not mitigate damages because defendants installed trees, sprinklers, stone curbs, walkways, pipes, and other unspecified improvements. All three defendants disputed this assertion, testifying that they only planted minimal shrubbery, added a dripline for water, and constructed a few feet of brick walkway on the lot. In fact, Seeley testified that when a light stanchion he erected was found to encroach on Caggia's property by nine inches, he promptly moved it, relocating it eighteen inches away from the property line to avoid any conflict.
In rendering his decision in favor of plaintiffs, the judge said:
The lease does not, specifically, state who gets approval of parking.
. . . .
Some important references to documents, D-11. 12/10/2002, landlord letter to [Seeley], confirming the conversation and tenant's counteroffer of $500 a month, unacceptable. Tenant never replied in writing to dispute, saying, no written letters and notices from tenant, to landlord, as to why they were not paying the rent.
Paragraph number 28 of the lease, says that it cannot be changed orally.
Various notices certified, regular mail from landlord to tenant, rent due, default in rent, enforcement of lease, with arrears set forth in each letter. Never received any written responses from tenant with regards to saying tenant never complied with lease regarding written notices if he thought the landlord was not in compliance of same.
. . . .
Regarding the obligation to obtain parking approval. Highlight certain areas, witnesses statements and/or documents put into evidence.
Astringent [sic] evidence, since it did not, specifically, set forth responsibility of approval concerning the parking. Tenant never made an issue to landlord. Never sent any notices regarding the lease to the landlord. Tenant was going for other applications, during certain periods of time, for approvals.
He[] was paying the rent and then just stopped with no written explanation, under the lease.
The question is, why didn't the tenant take the bull by the horns. Notify the landlord that the tenant would be going through the procedure; or that it was responsible that either the landlord or the tenant would go through the procedure. Would hold the landlord responsible for all costs associated with same or deducted from the rent.
Lease page one, conditions of premises.
Tenant accepts the monies [ ] premises present condition. Unless otherwise expressly provided in the lease.
Why the tenant started improvements and then take the position the landlord responsible for improvement -- approvals.
Not notify the landlord [about] tenant's position and/or claims.
I find that not to be credible in regards to the tenant's position in this matter.
Credibility falls — I find, credible evidence in favor of the landlord.
Tenant's testimony in proofs, I do not find credible. Why? Never noticed the
landlord in writing, other than testimony of tenant or some oral communications.
. . . .
[Maddan] indicates in his testimony, the landlord was supposed to get approval. But that was his opinion. Nothing backs up his opinion. I cannot find that to be credible . . . .
. . . .
Numerous discussion[s] on the parking. Never followed it up in writing.
. . . .
Based upon all of the aforementioned facts set forth, testimony, points brought out, and then the trial, through testimony and/or exhibits, clearly shows, through an overwhelming preponderance of the credible evidence, that the parties understood the [d]efendant has to pursue and be responsible for any necessary parking applications concerning the leased property.
Defendant -- the tenant's position, today, was understood the land would be responsible through only oral -- testimony at the time of trial, is not supplement by any type of credible evidence.
In regard to mitigation of damages. The tenant's position [is] that it's an affirmative defense the landlord did not mitigate damage.
The landlord testified, his experience with commercial pieces of property, testified the use of parking surrounding areas, property owners not interested could only be used by parking.
The [c]ourt is unaware of any case law which requires the landlord, the [p]laintiff, to produce any expert opinions, appraisals, e[t] cetera, or reports on leases, values, new tenants, e[t] cetera.
Plaintiff [l]andlord testified, based upon his experience.
The [c]ourt notices the configuration of the property, where he thinks is credible it could — would be used as parking.
The landlord's testimony; areas for parking related to the restaurant and/or nearby stores. It[s] only value. No one interested in it.
Now the burden shifts to the tenant. The person who was using it as an affirmative defense.
No credible evidence offered by the tenant as to other uses of the property. The value to construct the building or other businesses in surrounding area.
The [c]ourt has determined credible evidence shows that the only use of this property could be possibly for parking.
The [c]ourt determines no other uses, shape, configuration, diagrams. No credible evidence to dispute the testimony for the landlord.
The [d]efendant has not satisfied the burden in regard to mitigation of damages as an affirmative defense.
Based upon the foregoing, the [c]ourt determined that the [p]laintiff [l]andlord in this matter, has satisfied the burden, preponderance . . . of the evidence that it was the tenant's obligation to pursue the parking applications [] or approvals.
Therefore, this [c]ourt enters judgment in favor of the [p]laintiff against [d]efendant in the amount of $277,600 plus costs.
In regard to any application for attorneys' fees; the [p]laintiff will submit the order. And after the order is submitted, I shall have 14 days to submit any type of certification of services in regard to paragraph third, of the lease, last sentence, as attorneys' fees for additional rent. The [p]laintiff shall [have] 14 days after receipt of same to respond to certification. The [c]ourt will then determine the certification and make an amended judgment if the [c]ourt deems attorneys' fees are order in this matter pursuant to the lease.
The record contains no further reference to the manner in which the judge decided the issue of counsel fees. We assume that he awarded plaintiffs the entire amount they requested.
II
Our review of a trial judge's decision following a bench trial is limited. Sebring Assocs. v. Coyle, 347 N.J. Super. 414, 424 (App. Div.), certif. denied, 172 N.J. 355 (2002). The court "must review the record in the light of the contention, but not initially from the point of view of how it would decide the matter if it were the court of first instance." State v. Johnson, 42 N.J. 146, 161 (1964). "Because a trial court hears the case, sees and observes the witnesses, and hears them testify, it has a better perspective than a reviewing court in evaluating the veracity of witnesses." Pascale v. Pascale, 113 N.J. 20, 33 (1988) (internal quotation marks and citation omitted). For that reason, a trial court's findings of fact "should not be disturbed unless they are so wholly insupportable as to result in a denial of justice." Rova Farms, supra, 65 N.J. at 483-84 (internal quotation marks and citation omitted). We do not accept factual findings, even those regarding credibility, which are "so manifestly unsupported by or inconsistent with the competent, relevant[,] and reasonably credible evidence." Id. at 484.
A.
We do not understand from this record the basis for the trial judge's conclusion that Caggia, and not defendants, were credible. That determination resulted in the judge finding that plaintiffs' failure to provide thirty legal parking spots was not a material breach of the lease. Since the judge opined that plaintiffs did not violate the agreement, defendants were thus obligated to pay the rent called for by the lease.
Aside from Caggia's evasive responses when asked if he represented that the lot could be used for parking, there is no basis to conclude that property owners, who were law abiding enough to seek waivers and variances to make improvements to the building, would have knowingly rented a lot they could not legally use for parking at a significant monthly rent, first $2 750, then $3000 a month. Furthermore, it defies logic to conclude that Caggia, as drafter of the lease, would not have explicitly placed the burden of obtaining municipal approval for parking on defendants if that was the parties' intention. The lease Caggia completed was for a parking lot. The only plausible reading of the agreement within the four corners of the document is that the land was approved for use as parking.
Recognizing that memories fade, and that defendant's in-house disputes may have contributed to inaction regarding the issue, we conclude that the record was entirely at odds with the judge's factual findings and credibility rulings. The findings are manifestly unsupported by and inconsistent with the reasonably credible evidence. Hence the judgment cannot stand, and the matter must be retried.
B.
As a matter of law, we find the judge's rationale for deciding that Caggia met his obligation to mitigate damages to be mistaken and offer the following for consideration at a retrial. The following assumes, of course, that the trial judge concludes that Caggia is credible, and that there was no material breach of the agreement because the lot was not zoned for use as parking.
Certainly, evaluating mitigation of damages is more complex when the land's potential uses were limited and it had no prior rental history. This lease theoretically resulted in a windfall to Caggia. During the retrial, the court should address the question of whether that windfall should be funded by tenants who may not have ever been able to lawfully use the property.
Additionally, we disagree as a matter of law with the judge's determination that Caggia's minimal efforts to re-let the property sufficed to meet his burden to mitigate damages. Landlords have a duty to mitigate damages caused by tenants that breach residential and commercial leases. See Sommer v. Kridel, 74 N.J. 446, 458 (1977); McGuire v. City of Jersey City, 125 N.J. 310, 320 (1991); Fanarjian v. Moskowitz, 237 N.J. Super. 395, 406 (App. Div. 1989). The landlord has the burden of proving the reasonableness of his or her mitigation efforts. Sommer, supra, 74 N.J. at 458-59.
In assessing whether the landlord has satisfactorily carried this burden, the factfinder should weigh "whether the landlord, either personally or through an agency, offered or showed the [premises] to any prospective tenants, or advertised it in local newspapers." Ibid. The issue is fact-sensitive and "there is no standard formula for measuring whether the landlord has utilized satisfactory efforts in attempting to mitigate damages, and each case must be judged upon its own facts." Id. at 459.
A landlord's duty of mitigation is supported by public policy considerations including "denying the injured party the opportunity to sit idly by and exacerbate damages; discouraging economic and physical waste; and society's interest in encouraging that vacant property be put to a practical use as soon as possible." Fanarjian, supra, 237 N.J. Super. at 404.
"The admissibility of opinion evidence rests within the discretion of the trial court." State v. LaBrutto, 114 N.J. 187, 197 (1989). A lay witness may, in accordance with N.J.R.E. 602, testify as to his or her personal knowledge. Phillips v. Gelpke, 190 N.J. 580, 589 (2007). Additionally, "N.J.R.E. 701 permits lay witness testimony regarding common knowledge based on observable perceptions." In re Trust Created by Agreement Dated Dec. 20, 1961, ex rel. Johnson, 194 N.J. 276, 283 (2008).
Caggia explained that the property's inherent characteristics limit its potential uses. The property is "S-shaped," wrapping around the neighboring restaurant property. The property is "forced into a limitation with regard to frontage, [] in terms of depth," and there's "a creek that runs by the rear." As a result, Caggia testified as a lay witness that the property would be most suitable as a parking lot.
Caggia claimed he contacted STS, an automobile service center that repairs and replaces tires, which he believed would have parking needs. Caggia also testified that he was approached by Avis America, a modular home manufacturer, about adding on to the tile store building that neighbored the property. Neither of these negotiations were successful and at the time of trial Caggia was still looking for a tenant for the property.
During this testimony, Caggia seemed to contradict his earlier assertion that he never assured defendants that the lot could be used for parking. He offered to rent the lot for parking to STS, knowing the land was not zoned for the use. --------
On cross-examination, Caggia admitted that before this action was filed in 2008, he did not advertise the property for rent in any periodical, newspaper, or website. Caggia did not "formally go out and advertise or solicit [r]ealtors, other than the people that approached [him] about the possibility of using the property." Caggia also testified that during this time he received "periodic inquiries" from interested parties that would contact him "[a]s soon as they heard that there was [a] dispute." Caggia also admitted that he never asked defendants to remove the alleged encroachments before filing this lawsuit.
In our view, the judge's decision that Caggia attempted to mitigate damages is not supported by the record. Caggia waited nearly seven years, from November 2002 until April 2009, before attempting to re-let the property. While testifying that he received some inquiries regarding the property, he did not elaborate on any ensuing negotiations or offers.
A "lessor must mitigate damages arising from the breach of a lease by reasonable attempts to re[-]let the premises." McGuire, supra, 125 N.J. at 320 (emphasis added). Caggia was not entitled to idly wait for the lease term to expire before attempting to regain possession and re-let the property. An injured party must mitigate damages from the time the breach occurs. See, e.g., id. at 321 (discussing New Jersey's "increasing tendency to analogize landlord-tenant law to conventional doctrines of contract law"); Fanarjian, supra, 237 N.J. Super. at 403 ("The policy of this State has long been to require mitigation in all cases involving claims for damages, whether contract or tort." (internal citations omitted)).
C.
The record is devoid of any analysis by the judge in awarding attorneys' fees in the full amount requested by plaintiffs. Attorneys' fees, regardless of the reason for the award, must be governed by principles of reasonableness. Green v. Morgan Props., 215 N.J. 431, 455 (2013). The party seeking fees must establish the reasonableness of the sums demanded, even when the request is grounded on a clause in a contract. McGuire, supra, 125 N.J. at 326-37. The record contains no information regarding the certification submitted by counsel in support of any claimed fees.
On retrial, should plaintiffs prevail, the amount of counsel fees must be related to the amount awarded. Where a prevailing party achieves "only limited relief in comparison to all the relief sought, the court must determine whether the expenditure of counsel's time on the entire litigation was reasonable in relation to the actual relief obtained, . . . and, if not, reduce the award proportionately." Singer v. State, 95 N.J. 487, 500 (1984). There must be some correlation between the recovery amount and attorneys' fees that arise from a contract provision. N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 573 (1999).
D.
Defendant's remaining arguments on appeal are made moot by our decision requiring a new trial.
Reversed and remanded. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION