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Kellam Associates, Inc. v. Angel Projects

January 22, 2003


On appeal from Superior Court of New Jersey, Law Division, Sussex County, L-369-00.

Before Judges King, Wecker and Lisa.

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


Submitted December 11, 2002

Plaintiff, Kellam Associates, Inc., appeals from an order denying its motion for attorneys' fees and costs, which was based upon a provision in the contract upon which this litigation was brought. The trial judge concluded Kellam is not entitled to fees and costs because the subject of the litigation is not within the purview of the contractual provision, and, further, that Kellam was not a prevailing party. We disagree and reverse.

Kellam owns a thirty-five acre tract of land which it leased to defendant Angel Products, LLC. Defendant, Intrawest Corporation, operates a recreational facility on the property and pays the rent. Intrawest is apparently a successor in interest or assignee of Angel Projects, LLC under the lease. The lease was entered into on November 1, 1997 and runs through 2035. It provides for "Initial Annual Rent" of $212,000, payable monthly, through December 31, 1998. Beginning January 1, 1999, the rent shall be adjusted each year based on a designated consumer price index (CPI) increase. The lease provides:

The Initial Annual Rent shall be increased on each January 1st, commencing January 1, 1999, by the same percentage by which the [designated CPI] shall have increased since the prior January 1st. The percentage increase in the cost of living over the prior year shall be multiplied times the Initial Annual Rent to determine the annual rent (the "Annual Rent") for the next year.

The CPI increased 2.2% from January 1, 1998 to January 1, 1999. Without dispute, the parties adjusted the rent for the year 1999 by applying the 2.2% to the $212,000, resulting in annual rent for 1999 of $216,664, which Intrawest paid. From January 1, 1999 to January 1, 2000, the CPI again increased by 2.2%. Intrawest contended the annual rent for the year 2000 would be $216,664, derived by applying the most recent CPI percentage increase to the Initial Annual Rent. It refused to pay any higher amount. Kellam contended the rent increase provision was intended to be cumulative and the most recent 2.2% CPI increase should be applied to the previous year's rent ($216,664), resulting in an annual rent for 2000 of $221,430.60.

Because Intrawest refused to pay any amount greater than $216,664 for 2000, and because of the obvious long-term ramifications of Intrawest's position on this thirty-eight year lease, Kellam sued the defendants on June 22, 2000. Its Law Division complaint was in three counts, seeking (1) a declaratory judgment that each year's rent increase would be based on the prior year's rent, (2) attorneys' fees and costs, pursuant to a lease provision and (3) damages for unpaid rent.

Intrawest moved for dismissal on the pleadings, and Kellam cross-moved for summary judgment. Based upon the motion record, the trial judge denied both motions, supported by a written opinion. The judge rejected Intrawest's position in its entirety. Although the judge accepted Kellam's rationale that annual CPI increases should be cumulative over the duration of this long-term lease, the judge's interpretation of the lease provision resulted in a different method of calculation than that advanced by Kellam. The judge concluded "that each annual percentage increase in the cost of living shall be added to the prior accumulated [percentage] increases and then multiplied times the Initial Annual Rent."

Applying this methodology, the 2000 rent is determined by cumulating the 1998 2.2% CPI increase with the 1999 2.2% CPI increase, resulting in a total 4.4% CPI increase, which is then applied to the Initial Annual Rent of $212,000, which equals $221,328. The judge's opinion directed that a similar calculation should be made each year. The figure determined for 2000 by the trial court's method is $102.60 lower than that derived from Kellam's method and $4,664 higher than derived from Intrawest's method.

Although the judge issued an order denying both parties' motions, because the supporting opinion disposed of all issues except counsel fees, the parties submitted an "Order Entering Judgment," which the judge signed on May 4, 2001. It (1) declared and determined the methodology, as described above, for determining each year's rent increase, (2) entered a money judgment against Intrawest in favor of Kellam "in the amount of $4,664, representing unpaid rent increases for 2000," (3) ordered that annual rent increases for 2001 and all subsequent years be determined as set forth above, and (4) ordered that Kellam's claim for attorneys' fees and costs be determined upon a further motion by Kellam.

Kellam then filed its motion for attorneys' fees and costs, requesting a total amount of $16,692.17, including accountants' expenses and costs incurred in making the motion for fees and costs. The lease provides: "The Landlord shall be entitled to recover reasonable attorneys' fees and costs actually incurred in connection with any effort to collect past-due rent or enforce any other term of this Lease breached by Tenant."

The judge denied Kellam's motion, reasoning that this was a declaratory judgment action in which a legitimate justiciable controversy or dispute existed between the parties; the actual amount of rent due was not determined until the trial court's decision was rendered; upon issuance of the trial court's decision, and before this motion was made, Intrawest paid the amount determined to be deficient; and the ...

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