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Farese v. McGarry

Decided: December 18, 1989.

FRANK FARESE, PLAINTIFF-APPELLANT,
v.
JAMES M. MCGARRY, JR., DEFENDANT-RESPONDENT



Michels and Brochin. The opinion of the court was delivered by Brochin, J.A.D.

Brochin

Defendant James M. McGarry, Jr. rented a one-family house from plaintiff Frank Farese pursuant to a written lease. Despite a notice to vacate, the tenant continued in possession for approximately six and a half months after the expiration of the term of the lease. After the tenant had moved out, the landlord sued him, seeking compensation for damage which the tenant had allegedly caused to the property, twice the monthly rent pursuant to N.J.S.A. 2A:42-6 for the period during which he had remained in the house after the expiration of his lease, and an attorney's fee.

The tenant counterclaimed for specific performance or damages. He claimed a breach of his option to purchase the property, and he sought damages for the breach and compensation for the amount by which the landlord had allegedly been

unjustly enriched as the result of improvements made by the tenant to the property in anticipation of his acquiring it under what he believed was his purchase option.

The case was tried to a jury which returned its verdict on special interrogatories. It rejected the landlord's claims that he was entitled to damages because the tenant had continued in possession beyond the term of his lease or because the premises had been injured by the tenant's neglect. The jury also found that the landlord had not breached his contractual obligation to sell the property to the tenant. However, the jury returned a verdict awarding the tenant $13,000 as the reasonable value of improvements which the tenant had made to the property.

The landlord appealed. He contends that the trial court erred in permitting the jury to return a verdict based on "an implied contract or quasi-contract" when both parties had pleaded and relied upon an express contract dealing with the same subject matter, and that the court should have granted his motion for a new trial on the ground that the verdict was against the weight of the evidence. He also asserts that the court should have excluded the tenant's testimony about the reasonable value of the work which he expended on repairs to the house because, according to the landlord, the lease called for the tenant to make those repairs as part of the rent for occupying the premises. In addition, the landlord alleges that the tenant's counterclaims are barred by an arbitration clause in the lease and that the court permitted evidence of prior negotiations to vary the terms of the lease in violation of the parol evidence rule.

The first count of the tenant's counterclaim seeks specific performance or damages for violation of an option contained in the lease entitling the tenant to purchase the property. The second count alleges that the tenant improved the property in reliance on the purchase option, that the landlord breached the option agreement by refusing to convey, and that the landlord was unjustly enriched as the result of his breach.

Both counts are predicated on a single theory of the landlord's liability, that he gave his tenant an option to purchase the leased premises and breached his option agreement by refusing to convey. The difference between the two counts is the measure of damages which each asserts or implies. The first count does not specify a measure of damages. Under that count, a counterclaimant would be entitled to prove general damages measured by the difference between the option price of the property and its fair market value at the time that the option was exercisable. If there was no surprise to his adversary, he would also be entitled to prove other measures of damages; for example, expenditures which he reasonably incurred in reliance on being able to exercise the option agreement. The second count alleges, apparently as an alternative measure of damages, that the landlord "has been unjustly enriched in the improvements made to his property to the extent of the value of said improvements." If the tenant had succeeded in showing that the landlord had breached the tenant's option to purchase the leased property, the tenant would surely have been entitled to show the value of the improvements as a measure of his damages. If the issue before the trial court or before this court were, as the landlord seems to be arguing that it is, whether the tenant could properly offer evidence in support of both counts, the answer would clearly be that he could. Alternative counts are permissible and these two alternative counts do not allege inconsistent facts. R. 4:5-6.

What actually happened in the present case, however, was that the case was pleaded on the theory that the landlord breached his obligation under the purchase option. But the case was submitted to the jury on a different theory. The court instructed the jury as follows:

In other words, if you determine that the improvements made by this defendant on the premises were in reliance on an option he thought he had, which he attempted to exercise, as opposed to being done pursuant to the lease agreement, whereby he was going to be reimbursed only for materials, and as opposed to being done solely to make the premises occupiable by himself during a lease term because he was getting a favorable ...


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