June 4, 2007
DECO DAVIS, INC., PLAINTIFF-APPELLANT,
GLOBAL INTERNATIONAL TRADING CO., DEFENDANT-RESPONDENT, AND I.G. SECOND GENERATION PARTNERS, L.P., IBLDG CO., INC., AND WEMBLY MANAGEMENT CO., DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. ESX-L-8130-02.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 9, 2007
Before Judges Parker, C.S. Fisher and Yannotti.
In this appeal, we consider whether the trial judge mistakenly granted summary judgment dismissing plaintiff's complaint for damages against its former landlord. The landlord had terminated the lease by declaring its intention to demolish the two buildings that contained the leased premises, yet evidence indicated that one building was never demolished but was instead leased to another party, and the other building was not demolished as represented but later destroyed by fire. Because, among other things, the trial judge mistakenly held that the former tenant was required to prove the landlord's fraudulent intent in terminating the lease, we reverse the entry of summary judgment in favor of the landlord.
Beginning in 1986, plaintiff Deco Davis, Inc. occupied, as a commercial tenant, 30,000 square feet of 408 Freylinghuysen Avenue and 20,000 square feet of 410 Freylinghuysen Avenue in Newark. Upon its original entry into the premises, Deco Davis and the property's then owner agreed to a ten-year lease. In 1996, they agreed to another ten-year lease, which included a provision that gave the landlord the right to cancel the lease upon its "elect[ion] to demolish the building of which the demised premises form a part."
Deco Davis received a letter dated March 16, 2000 advising that the owner had elected to terminate the tenancy as of June 20, 2000 because it had decided to demolish 408 to 440 Freylinghuysen Avenue. On April 14, 2000, defendant Global International Trading Co. purchased the property from the prior owner.
On July 24, 2000, Global commenced a summary dispossess action against Deco Davis in the Special Civil Part. The parties eventually entered into a stipulation of settlement, which contained Deco Davis's agreement to vacate the premises by November 30, 2000, upon the understanding that Global "is demolishing the demised premise[s]."
Deco Davis did not vacate as agreed, and, as a result, was locked out by Global. On January 24, 2001, at the request of Deco Davis, the Special Civil Part judge ordered Global to show cause why Deco Davis should not be allowed to enter the premises to remove equipment and other property. The judge granted access, but ordered Deco Davis to completely remove itself from the premises by February 21, 2001.*fn1 Global's attorney forwarded by telecopier on February 14, 2001 what he referred to as an "Important Reminder," advising Deco Davis that "you must be out of building as per your agreement made in court by the end of 2/21/01 -- Demolition starts 2/22/01."
Demolition did not commence on February 22, 2001. And, although Global contends that part of 410 Freylinghuysen Avenue was demolished at some later point, Deco Davis provided a certification and photographs in opposition to summary judgment demonstrating that the building remained standing at the time the motion for summary judgment was heard in the Fall of 2005. In fact, there is no dispute that some part of that building was leased to Verizon prior to February 2001. In addition, Deco Davis's opposition to summary judgment suggested that 408 Freylinghuysen was never demolished despite the urgency in Global's February 2001 representations that demolition was imminent. Instead, 408 Freylinghuysen burned down on June 20, 2001 -- four months after Global had advised Deco Davis that demolition was to begin.
As a result, Deco Davis commenced this action in the Law Division on August 21, 2002, seeking compensatory and punitive damages, and other relief, based upon its claims that (1) Global had conducted unlawful eviction proceedings; (2) Global interfered with its prospective business advantages; (3) Global breached the covenant of quiet enjoyment contained in the 1996 lease; (4) Global had wrongfully locked Deco Davis out of the premises in November 2000; and (5) Global's representations and conduct in seeking Deco Davis's removal from the premises were fraudulent. Following a period of discovery, the parties cross-moved for summary judgment.
In granting summary judgment in favor of Global, the trial judge did not separately examine the various causes of actions asserted by Deco Davis in its complaint, but instead held that the facts were undisputed, or at least "overwhelming," regarding Global's intention to demolish the buildings in question, which the judge found sufficient regardless of what later occurred with these buildings:
While . . . the exact positions of the [b]uildings, 408,  that were actually burned or demolished [are unclear], . . . this [c]court does not believe this is a relevant issue in light of the overwhelming evidence submitted by [Global] based on the evidence cited. It is clear that Global intended to demolish the buildings in question from . . . the time [it] acquired the premise[s] to at least March of 2001 when they received all the demolition permits. Based on this overwhelming evidence, correspondence, and actions taken by [Global] it seems clear that demolition was always in mind in this particular case. The fact that the premises burned to the ground is irrelevant. It's just an unforeseen circumstance that may have changed their plans.
The lease provides that landlord/tenant acknowledge and agree that the landlord had the right at any time after July 1, '97 to cancel the lease on giving ninety days notice. The lease does not address the situation and that landlord honestly intends to demolish the building, gives notice to tenant, tenant vacates, for some reason the building is not demolished. The language in the lease does not address [when] the building must, in fact, be demolished. It only states the landlord has the right to evict. If he elects to demolish[,] the lease is silent as to either landlord or tenant[']s responsibility. If tenant vacates due to Paragraph 64 and the landlord later changes [its] mind, there's no doubt that if Global acted in bad faith in evicting that they could have been liable under [N.J.S.A. 2A:18-59] which states if fraudulent means are used to vacate, to evict someone then the plaintiff could recover damages.
In this case Global used the demolition clause. There's no evidence to show that Global used the eviction clause . . . as a pretense. It does not appear to be the case here. Every indication is and all the evidence presented seems to indicate that all permits and proceedings had gone through to prepare the buildings for demolition. There is no reasonable evidence that this [c]court could conclude that there was anything other than an intent to demolish the buildings in question.
[Deco Davis] has not come forwarded with any credible evidence to suggest that Global had no intentions to demolish the building. [P]laintiff alleges there's no proof of permits when, in fact, there are permits. He relies on the fact that the building was burned down instead of demolished. The fact [is that] there were numerous steps taken by the defendant with PSE & G, and the city, and exterminators, and contractor[s] to get the permits necessary to get all the, everything in place to proceed with the demolition. There is [the] fact that plaintiff took eight months to get out and because of an eight month delay would certainly, might be part, if not all of the cause, for maybe some of the changes and plans, the sale of the business, the fire that took place. I don't know how the [c]court can reward a plaintiff who delays eight months in getting out of the premises, in violation of lease agreement clearly, and then reward them by saying, well, the plans that they originally had didn't go through. It seems to me that the intent was always to demolish the building, and for those reasons, [Global's] [m]otion for [s]ummary [j]udgment will be granted.
We conclude that the trial judge applied an incorrect legal standard and also mistakenly drew inferences regarding Global's intentions that favored the moving instead of the opposing party.
Despite the fact that removal was ordered as a result of summary proceedings in the Special Civil Part, Deco Davis was not precluded from commencing an action for damages based upon a claim that Global wrongfully instituted proceedings that led to its removal. After having been ordered out of the leased premises, Deco Davis filed this suit alleging that the reasons given by Global for terminating the lease were wrongful because Global never demolished the leased premises and, in fact, leased a portion of those premises to another party. In granting summary judgment, the trial judge concluded that Deco Davis was required to prove that Global had used fraudulent means to obtain Deco Davis's removal and that the evidence was "overwhelming" that Global had an honest intention to demolish regardless of what may have subsequently occurred. We conclude that the trial judge was mistaken in holding Deco Davis to a heavier burden than required by law and also because the judge failed to recognize that the evidence was sufficient to support a claim of fraud let alone the lesser standard Deco Davis was obligated to meet to sustain its causes of action.
In requiring that Deco Davis had to prove that Global had fraudulently asserted its intention to demolish the buildings in order to terminate the lease, the trial judge relied upon N.J.S.A. 2A:18-59, which states in part that despite the entry of a judgment of dispossession in the Special Civil Part, "[t]he landlord . . . shall remain liable in a civil action for unlawful proceedings under this article." Certainly, there is nothing in this language that would suggest the accuracy of the trial judge's interpretation of N.J.S.A. 2A:18-59 as authorizing a former tenant's action for damages "if fraudulent means are used to vacate" the former tenant (emphasis added). Neither the word "fraud" nor the phrase "fraudulent means or intent" are contained in the statute.
N.J.S.A. 2A:18-59, in the same or similar form, has been part of the statutory scheme applicable to tenancy matters for more than a century. See L. 1898, c. 113 (". . . the landlord shall remain liable in an action of trespass for any unlawful proceedings under this action"); see also Coe v. Haines, 44 N.J.L. 134, 135 (Sup. Ct. 1882). Despite its long history, the statute has not generated any decisional law that would support a construction of the statute as requiring proof of the landlord's fraudulent intent or use of fraudulent means as held by the trial judge here. The few decisions that have considered the scope and meaning of N.J.S.A. 2A:18-59 suggest a contrary construction. See Wilbur v. Good, 3 N.J. Misc. 377 (Sup. Ct. 1925); O'Donnell v. Weiler, 72 N.J.L. 142 (Sup. Ct. 1905).
We are satisfied that N.J.S.A. 2A:18-59 does not define the contours of an action by a tenant against a landlord, but merely authorizes a former tenant's right to pursue a wrongful eviction action or a claim that the landlord breached the lease or otherwise caused damage to the tenant regardless of the landlord's success in summarily obtaining possession through the processes of the Special Civil Part. O'Donnell, supra, 72 N.J.L. at 143-44; Galka v. Tide Water Assoc. Oil Co., 133 N.J.Eq. 137, 140-41 (Ch. 1943). In short, that Global was able to gain Deco Davis's ouster by utilizing the Special Civil Part's processes does not limit Deco Davis's right to seek relief in a civil action nor does N.J.S.A. 2A:18-59 relegate Deco Davis to proving Global's fraud when seeking any tort or contractual remedies in a later civil action.
We, thus, reject the trial judge's holding that Global could only be held liable for the termination of the lease if it invoked the demolition clause with a fraudulent intent. Global was contractually obligated to do more than simply act without fraudulent intent in seeking the termination of the lease. As a general matter, Global was prohibited by the implied covenant of good faith and fair dealing from "destroying or injuring the right of the other party to receive the fruits of the contract." Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997).
Here, by way of the 1996 lease, Global's predecessor preserved the right to terminate the lease upon electing to demolish the leased premises. We acknowledge that the implied covenant of good faith and fair dealing does not justify the overriding of a contract's express term, Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001), but it does require that a party "act in good faith when exercising either discretion in performing its contractual obligations, or its right to terminate," Seidenberg v. Summit Bank, 348 N.J. Super. 243, 258 (App. Div. 2002) (citations omitted). In other words, it would be insufficient for Deco Davis to contend that Global did not have a right to terminate the lease for demolition purposes, but Deco Davis could legitimately contend, as it does here, that Global was required to exercise its right to terminate for that reason in good faith.
In addition, although not expressly applicable because the lease in question is a commercial lease, we are mindful that the Legislature has declared that a landlord who has obtained the removal of a residential tenant by asserting an intent "to permanently board up or demolish the premises or to retire permanently the premises from residential use," and who later permits residential use of the premises, "shall be liable to the former tenant in a civil action for three times the damages plus the tenant's attorney fees and costs of suit." N.J.S.A. 2A:18-61.6(c). This statute makes such conduct actionable without requiring proof of the landlord's state of mind at the time of a residential tenant's removal. We therefore find it incongruous, in the face of this clear expression of public policy, to require a commercial tenant in the same or similar circumstances to prove that the landlord had a fraudulent state of mind when obtaining its removal.
In turning to the facts relevant to the summary judgment entered in favor of Global, we are required, as was the trial judge, to view the evidence in the light most favorable to Deco Davis. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We acknowledge that Global presented documentation demonstrating the arrangements it had allegedly made to demolish some portion of 408-440 Freylinghuysen. But we also observe that Deco Davis provided evidential material which indicated that: one of the two buildings, 408 Freylinghuysen, remained standing more than four years later; another party, Verizon, entered into a lease with Global for part of 408 Freylinghuysen after service of Global's notice to quit and before Deco Davis's ultimate removal from the premises; and 410 Freylinghuysen remained standing for four months after Global represented that demolition would begin before it was ultimately destroyed by fire. As we have held, the first four counts of Deco Davis's complaint did not require proof of Global's fraudulent intent. Since the facts asserted by Deco Davis in opposition to Global's motion more than sufficiently raised questions of fact as to whether Global breached the lease agreement by declaring an intent to demolish the leased premises that appears never to have been fulfilled, we conclude that the summary judgment entered in favor of Global must be reversed.
The fifth count of Deco Davis's complaint alleged common law fraud and, thus, requires proof of a fraudulent intent. Our courts have recognized that motions for summary judgment in such matters must be treated with caution. As Judge Michels observed in Shanley & Fisher, P.C. v. Sisselman, 215 N.J. Super. 200, 212 (App. Div. 1987), "the court should be particularly hesitant in granting summary judgment where questions dealing with subjective elements such as intent, motivation and duress are involved." See also Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. 276, 291 (1988); McBarron v. Kipling Woods, 365 N.J. Super. 114, 117 (App. Div. 2004).
The failure of Global to actually demolish the leased premises, in whole or in part, and the fact that Global apparently leased part of the premises to another -- when viewed in the light most favorable to Deco Davis -- are sufficient to permit an inference that Global acted with a fraudulent intent in terminating the lease and required a denial of the motion for summary judgment as to the fifth count of the complaint. It may be true that the record does not contain a statement from a Global representative that Global harbored an intent to remove Deco Davis through use of the demolition clause so that it could make another use of some or all of the leased premises. Nevertheless, "[w]hat a person's intentions were need not be proved from what he said, but they may be inferred from all that he did and said, and from all the surrounding circumstances of the situation under investigation." Wilson, supra, 168 N.J. at 254 (quoting Mayflower Indus. v. Thor Corp., 15 N.J. Super. 139, 162 (Ch. Div. 1951), aff'd o.b., 9 N.J. 605 (1952)). We are satisfied that Deco Davis provided sufficient evidence of surrounding events and circumstances from which a fraudulent intent could be inferred and that the trial judge erroneously granted summary judgment dismissing the fifth count of the complaint.
We lastly observe that Deco Davis also has argued on appeal that the trial judge erred in denying its motion for summary judgment. We conclude that the conflicting evidential material submitted by the parties precluded the granting of this motion as well.
The order under review is reversed insofar as it granted Global's motion for summary judgment and affirmed insofar as it denied Deco Davis's motion for summary judgment. We remand for further proceedings in conformity with this opinion and do not retain jurisdiction.