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Mandia v. Applegate

March 27, 1998

FRANK J. MANDIA, JR. AND MIKE BROWN, PLAINTIFFS-APPELLANTS,
v.
EVERETT R. APPLEGATE AND GERARD DAGOSTINO, DEFENDANTS-RESPONDENTS.



Argued February 23, 1998

On appeal from Superior Court of New Jersey, Chancery Division, Ocean County.

Before Judges Skillman, Eichen and Steinberg.

The opinion of the court was delivered by: Skillman, J.A.D.

In June 1976 plaintiffs Frank Mandia and Mike Brown purchased a tract of land in Seaside Park, New Jersey, known as Funtown Pier. At the time of the purchase, Funtown Pier consisted of a small, ocean-front amusement park occupied by various concessionaires. In order to raise money to buy the property, plaintiffs approached a number of the concessionaires and proposed that they purchase ninety-nine year leases instead of continuing to rent their premises on a short term basis. Plaintiffs' financing plan was successful and prior to the closing they obtained commitments for fourteen 99-year leases, consisting of about 20% of the total property. Since that time plaintiffs have maintained and managed Funtown Pier, buying back some of the 99-year leases and selling others, while renting the remaining concession stands to short-term tenants. The area has generally improved over the years and is now completely covered with boardwalk.

The first of the concessionaires to agree to enter into a 99-year lease were defendants Applegate and Dagostino, who acquired their property for $184,505. Defendants tore down an old luncheonette that was on the site and replaced it with a two-story steel and concrete building. The building traced the "footprint" of the space defendants had leased and had a second floor overhang which extended over the walkway areas of the boardwalk approximately five feet on the east, south, and west. Defendants operated several business ventures from this building over the years, the latest and most successful being the Silver Apple Surf Shop which sells upscale beach wear.

Shortly after opening his business on the Funtown Pier, Applegate *fn1 asked Brown if he could display some clothing items under the overhang on the south side of the building for an end of season clearance sale. Brown agreed to the request as a special favor, telling Applegate that he was grateful to him for being the first person to enter into a 99-year lease. From that time forward, Applegate displayed merchandise on the boardwalk under the building overhang without ever again asking Brown's permission. As time went by Applegate made greater and greater use of the overhang area, displaying racks of clothing and other merchandise on a more-or-less permanent basis.

In 1994 Applegate telephoned Brown in Florida and told him that he was planning to install an electrically-operated awning which would extend over some eight feet of boardwalk beyond the southerly overhang to his building. Upon returning to New Jersey, Brown had lunch with Applegate and told him that the awning represented more use of the boardwalk area than Applegate's previous displays of merchandise and that he expected to be compensated for it. When Brown said that he felt that $10,000 was a fair seasonal rent for the area, Applegate replied "how about $5,000, how about $2,000, whatever." Brown laughed and "said, well how about $5,000." The two agreed on $5,000 and decided to let Mandia, who is an attorney, draw up a written agreement concerning Applegate's use of the boardwalk.

After consulting with an attorney who advised him that the proposed agreement gave him nothing, Applegate told Brown that he would not sign it. Nevertheless, Applegate continued to display his merchandise under the overhang and awning during the 1994, 1995 and 1996 seasons, during which time he refused to make any payment to plaintiffs for this use.

On June 19, 1995, plaintiffs' counsel sent defendants a formal demand that they cease using the boardwalk for the display of merchandise. The letter reminded the defendants that their lease provided that they could not encumber or obstruct the boardwalk or entrance to their building and warned that the lease also provided that "if the tenant defaults in any of its obligations ... and fails to cure said default after 30 days' notice from the landlord, the landlord may reclaim the premises and the lease will be at an end." On July 27, 1995, plaintiffs' counsel sent defendants another letter which formally notified them that because of their continued use of the boardwalk area, plaintiffs were invoking the forfeiture clause of the lease and declaring defendants' leasehold to be at an end. Defendants ignored both of these letters and continued to operate the Silver Apple Surf Shop as before, including the unauthorized use of the boardwalk under the overhang and awning.

Plaintiffs then brought the present lawsuit seeking an order enjoining defendants' use of the boardwalk area adjoining their property for the display of merchandise, compensating plaintiffs for defendants' past unauthorized use of this property and declaring that defendants had forfeited their leasehold. The case was tried over four days, at the conclusion of which the court issued an oral opinion. The court concluded that even though plaintiffs own the boardwalk under the overhang to defendants' building, they "waived" their right to prevent defendants from displaying merchandise in this area because they had previously permitted this use. However, because defendants did not show a similar pattern of permissive use of the area under their newly installed awning, the court concluded that they had no right to continue displaying merchandise in that area. Accordingly, the court entered judgment declaring that defendants have the "right to display merchandise on the boardwalk beneath the existing overhang on the defendants' building, without having to pay rent or other compensation for such usage," but enjoining defendants from displaying any merchandise "and from making any other use of any portion of the boardwalk area to the south of the existing overhang on the southerly side of defendants' leased premises." In addition, the court awarded plaintiffs $5,000 as total compensation for defendants' unauthorized use of the area beyond the overhang to their building during the 1994, 1995 and 1996 seasons. Finally, the court dismissed the count of plaintiffs' complaint which sought a declaration that defendants had forfeited their leasehold interest. The court subsequently entered an order denying plaintiffs' motion for a new trial and/or reconsideration.

Plaintiffs appeal from the judgment and the order denying their motion for a new trial and/or reconsideration. We conclude that the trial court erred in ruling that defendants have a right to display merchandise outside their leased premises without plaintiffs' consent and in refusing to grant an injunction prohibiting that use. We also conclude that the court awarded plaintiffs inadequate damages for the unauthorized use of the boardwalk area during the 1994, 1995 and 1996 seasons. Accordingly, we reverse in some respects and modify in other respects the parts of the judgment dealing with those claims. We affirm the part of the judgment denying plaintiffs' demand for a declaration that defendants' leasehold interest has been forfeited.

I

It is undisputed that plaintiffs own the entire area of the boardwalk underneath the overhang to defendants' building and that the lease does not expressly grant defendants any interest in that area. To the contrary, the lease provides that "[the lessee] shall neither encumber or obstruct the sidewalk and front of, or any entrance to, the building on the leased premises," and that "ll sidewalks, walkways and entrances in or around the demised premises shall be kept `as is' with no further construction or encumbrances thereon." Nevertheless, because plaintiffs permitted defendants to display merchandise in certain areas underneath the overhang from 1977 or 1978 to 1993, the trial court concluded that plaintiffs had "waived" their right to prevent defendants from continuing this activity, thereby in effect holding that defendants had acquired a perpetual easement for the display of merchandise over this part of plaintiffs' property.

An easement is a "nonpossessory incorporeal interest in another's possessory estate in land, entitling the holder of the easement to make some use of the other's property." Leach v. Anderl, 218 N.J. Super. 18, 24 (App. Div. 1987). An easement may be created by an express conveyance, by implication or by prescription. Ibid. Because plaintiffs clearly did not convey any express easement to ...


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