June 26, 2007
BAPU CORP., PLAINTIFF-APPELLANT,
SANJIV MODY AND ETHNIC CATERERS, INC., DEFENDANTS-RESPONDENTS.
ETHNIC CATERERS, INC., PLAINTIFF-RESPONDENT,
BAPU CORP., DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket Nos. LT-6894-03 and UNN-L-2394-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted June 6, 2007
Before Judges Parker, C.S. Fisher and Messano.
In these back-to-back appeals, we review orders entered in the Chancery Division, Law Division, and Special Civil Part regarding the contractual relationship existing between the parties and, in particular, how that relationship was impacted by the parties' dispute about the dispensing of alcohol at the banquet facilities leased by Bapu Corp. (Bapu) to Ethnic Caterers, Inc. (Ethnic). Bapu contended that the parties' agreement permitted only Bapu to serve alcohol, that Ethnic breached this term, and that, as a result, Bapu was entitled to possession of the premises. Ethnic responded that Bapu had remained silent for a significant period of time knowing that Ethnic had served liquor at banquets, and, thus, Bapu could no longer be heard to complain.
This factual dispute spawned a good deal of litigation, which produced numerous orders and judgments, only some of which are referenced in Bapu's notices of appeal. Finding no reason to disturb the orders and judgments under review, we affirm.
On October 22, 2001, Bapu and Ethnic entered into an agreement whereby Bapu appointed Ethnic to be the exclusive caterer and food service management company for Clinton Manor, with the exception of its café, and with "the exception of distribution of alcoholic beverages on the Premises," for a five-year period effective November 1, 2001.*fn1
Under the agreement, Ethnic was required to "utilize the services of Bapu for the sale and distribution of alcoholic beverages" on the premises. In exchange for the payment of rent in the amount of $23,000 per month, subject to further revision depending upon adjustments in the property tax base, Ethnic was entitled to all the gross revenue, "excluding revenue from the sale of alcoholic beverages," from the operation. In addition, the agreement required Ethnic to obtain $6 million in liability and property insurance with Bapu named as landlord on the policy. Default would occur if any three checks were returned for insufficient funds within one year. And, the agreement stated that if it were to be found void or illegal, it would be immediately terminated without penalty to either party.
The record reveals that, on average, Ethnic catered two parties per weekend. Ethnic would provide Bapu with its liquor orders, usually on a weekly basis, and would then pick up the order at Clinton Manor's front desk. On occasion, guests were permitted to bring in their own liquor. When doing so, the customers served the liquor. Otherwise, Bapu would supply the bartender. When Bapu failed to comply, Ethnic supplied the bartender from an ABC-approved list.
In January 2003, problems arose between Ethnic and Bapu when Bapu demanded that Ethnic start charging by drink, rather than by person, and that Bapu's employees, rather than Ethnic's, serve the liquor. When Ethnic refused, Bapu stopped accepting Ethnic's liquor orders. From December 14, 2002, to November 17, 2003, Bapu did not supply liquor to Ethnic. Nonetheless, guests at the banquet hall were observed consuming alcohol during that time period.
As a result, Bapu sent a notice of termination of the leasing agreement claiming that the agreement was not enforceable. This triggered the various legal proceedings that culminated in these appeals.
The proceedings that relate to A-5724-03T5 began on August 25, 2003, when Bapu commenced an action in the Special Civil Part seeking to evict Ethnic from the premises. Bapu alleged that Ethnic breached their agreement by serving liquor at banquets, failing to collect sales tax, failing to obtain the liability and property insurance contractually required, and by violating various municipal regulations. A trial of this action was commenced on September 23, 2003 and proceeded over various other dates in October and November 2003.
On January 29, 2004, the tenancy judge issued a written decision finding that Bapu had failed to establish its right to possession under the lease. On February 2, 2004, the judge issued an addendum to his decision in which he directed that Ethnic pay certain months of back rent.
On May 5, 2004, after additional proceedings, the judge entered an order vacating a judgment of possession and warrant of removal that had previously been entered. This order resolved all issues as to all parties.
Bapu filed a notice of appeal, seeking our review of what it referred to as the "decisions" of January 29, 2004 and March 23, 2004, as well as from the May 5, 2004 order.
While the trial in the tenancy matter was in progress, the procedural events that led to the issuance of orders that are before us in A-0665-05T5 began.
In November 2003, Ethnic sought a temporary restraining order in the Chancery Division. This application was filed in connection with an earlier suit between the parties. As part of an order to show cause entered on November 18, 2003, the Chancery judge directed Bapu to continue, at least temporarily, to supply liquor to Ethnic pursuant to the terms of their written agreement. On February 17, 2004, the Chancery judge rendered a decision imposing particular prices to be charged for alcohol served at banquets.
On April 16, 2004, Ethnic filed a complaint in the Chancery Division against Bapu seeking specific performance or reformation of their written agreement, as well as damages for lost revenue. The complaint also demanded the entry of an order directing repairs to be made to the roof, plumbing and parking lot.
On June 28, 2004, the Chancery judge transferred the action to the Law Division, where it was assigned Docket No. L-2394-04.
Although the pleadings are not contained in the record, Bapu brought another landlord-tenant action, LT-9075-04, in the Special Civil Part, in 2004. This action sought Ethnic's eviction because payment on five Ethnic checks had been stopped. This action was consolidated with L-2394-04.
A trial regarding the issues contained in these consolidated actions took place before a Law Division judge on various dates in March and April 2005. The transcripts are not contained in the record on appeal. On June 22, 2005, the Law Division judge rendered an opinion finding that Bapu wrongfully withheld liquor from Ethnic. On the same date, the Law Division judge signed an order entering judgment in favor of Ethnic for $900 relating to the alcohol sales and $2,000 with respect to the roof of Clinton Manor; Bapu was also ordered to repair plumbing on the site.
Bapu's motion for reconsideration was denied by order entered on October 7, 2005.
On October 13, 2005, Bapu filed a notice of appeal in A-0665-05T5 from what it describes as the "November-December 2003 Order" entered by the Chancery judge. On November 18, 2005, Bapu filed an amended notice of appeal, clarifying that it was appealing from the Chancery judge's order of November 18, 2003, and the Law Division judge's order of October 7, 2005.
During the pendency of this appeal, Ethnic filed a motion in the Law Division seeking to enforce the June 22, 2005 judgment. Bapu has not sought our review of the June 22, 2005 judgment. Ultimately, a different Law Division judge entered an order on May 12, 2006 directing Bapu to provide liquor to Ethnic and to undertake roof repair under the terms and conditions set forth in the June 22, 2005 judgment.
On May 19, 2006, Bapu filed an amended notice of appeal, seeking our review of the May 12, 2006 order.
As we have observed, Bapu's appeals in these back-to-back matters seek our review of a number of orders.
In Docket No. A-5724-03T5 -- the appeal regarding the tenancy proceedings heard in the Special Civil Part -- Bapu seeks our review of the tenancy court's judgment of May 5, 2004, which denied Bapu's demand for possession of the premises.*fn2
The tenancy judge concluded that the agreement in question was a lease, relying primarily on the fact that the agreement was for a specific term of years with an option to renew; he also took note of the numerous references to the word "lease" in several paragraphs of the agreement. In so viewing the agreement, the judge concluded there was "no ground to dispossess the tenant whatsoever since there was never a breach or violation of covenants or agreements in the lease where there was a reservation of the right of re-entry for such breach."
The judge also found that even if there had been a right of re-entry, there was no violation with regard to the sale and distribution of alcohol:
It further appears from the undisputed testimony of [Ethnic] that from the time of the entry into the agreement until April 28, 2003 business was, with regard to liquor distribution and sales, always conducted the same way. [Ethnic] would deliver to [Bapu] or a representative of [Bapu] a list of liquor required for a particular event and pay for the liquor directly to distributors or to Bapu or to Dryland or to a representative of Bapu . . . .
I am satisfied, therefore, that the agreement was performed, at least for the first year thereof, by [Bapu] or its representatives supplying liquor to [Ethnic] and its representatives to be served by [Ethnic] and its representatives on the premises during the catering business of [Ethnic], and that this performance of the contract was with the permission, consent, and approval of [Bapu]. It should be noted that . . . no violations were issued . . . with regard to the misuse of the liquor license.
But for this previous performance, according to the tenancy judge, Ethnic's service of alcohol would seem to have constituted a violation of the agreement. However, he found that Bapu, by its conduct, was equitably estopped from claiming such a violation:
[The parties] performed the agreement in the same way for more than a year. To allow [Bapu] to declare this same performance [as] a breach of the lease would violate the implied covenant of good faith and fair dealing . . . . I find that [Bapu] breached its obligation of good faith and fair dealing by failing to disclose to [Ethnic] that it was not authorized to sell liquor from the beginning of the contract and by passively agreeing to accept [Ethnic's] representatives as distributors or sellers of the liquor provided their names were on the liquor service roster. It is apparent to this court that Bapu misled [Ethnic] with regard to its intentions regarding performance of the contract once Bapu became the owner of the liquor license. Since [Ethnic] ha[d] every right to rely upon the representations of Bapu as set forth in . . . the agreement that it was the "owner and operator" of the Clinton Manor and impliedly the liquor license attached thereto, this court finds that it is not [Ethnic] who breached the agreement with regard to the service of liquor, but rather [Bapu].
Moreover, the tenancy judge concluded that any violation of the lease by Ethnic did not represent a "constant violation of any rules or regulations but only [the] result of [Bapu's] changing the rules after a year of a certain type of performance." Finally, the tenancy judge concluded that the enforcement provisions of the agreement were "clearly ambiguous," and that any ambiguity should be resolved in favor of Ethnic as tenant.
The scope of review of a judgment entered in a non-jury case is limited. The findings on which the judgment is based should not be disturbed unless they are not supported by adequate, substantial and credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). Having carefully reviewed the tenancy judge's thorough written findings and conclusions in light of the arguments raised on appeal, we conclude that there is no reason for this court to disturb the judgment entered by the tenancy court.
In considering whether Ethnic breached the agreement, the judge correctly focused on whether Bapu should have been estopped from claiming a breach as a result of Ethnic's service of liquor and reached the conclusion that Bapu acquiesced in that arrangement. The judge found that Bapu was aware that Ethnic was serving alcohol at the functions that it catered, but did not seek relief as a result for over one year.
It has been stated that "[w]here a party fails to declare a breach of contract, and continues to perform under the contract after learning of the breach, it may be deemed to have acquiesced in an alteration of the terms of the contract, thereby barring its enforcement." Garden State Bldgs. v. First Fidelity Bank, 305 N.J. Super. 510, 524 (App. Div. 1997), certif. denied, 153 N.J. 50 (1998). Thus, where a party acts in a manner that is inconsistent with an intention to repudiate, so that the other party is induced to suppose that the validity of the contract has been recognized, then the former may be estopped from contesting the validity of the contract. Taner v. Atlantic Cas. Ins. Co. of Newark, 37 N.J. Super. 9, 12 (App. Div. 1955). Such an estoppel may arise by silence or omission where one is under a duty to speak or act. Davin, L.L.C. v. Daham, 329 N.J. Super. 54, 69 (App. Div. 2000).
After carefully reviewing the record, we find no reason to disturb the tenancy judge's finding that Bapu acquiesced in Ethnic's conduct. We emphasize, as further discussed in the next section of this opinion, that we do not discern from the judge's ruling a determination that the parties were free to violate the laws and regulations regarding the dispensing of alcohol. The chief question raised in this tenancy matter was whether there was a basis for granting Bapu possession of the premises, and the judge concluded that Bapu was aware of what Ethnic was doing and acceded to its conduct. As a result, the judge concluded that it would be inequitable to award Bapu possession of the premises. We find no error in that determination or any other aspect of the orders under review in Docket No. A-5724-03T5.
In Docket No. A-0665-05T5, Bapu initially appealed from an order entered in the Chancery Division on November 18, 2003, and, in amended notices of appeal, Bapu also identified for review orders entered on October 7, 2005 and May 12, 2006 after the matter was transferred.
In the first of these three orders, the Chancery judge, among other things, temporarily ordered Bapu, on November 18, 2003, to (1) "provide for the sale and distribution of alcoholic beverages in accord" with the parties' agreement; (2) "sell and distribute alcoholic beverages to Ethnic Caterers at cost plus the payment of sales tax" at the premises; and (3) "list certain employees of Ethnic Caterers on the appropriate licensing roster to permit the lawful distribution of alcoholic beverages" on the premises. The second order in question was entered on October 7, 2005, after the matter had been transferred to the Law Division. On that occasion, a Law Division judge denied Bapu's motion for reconsideration of the June 22, 2005 judgment, which is not under review, and thus denied again Bapu's application for reimbursement of the revenue derived from the sale of liquor on the premises. And the third order, entered by a different Law Division judge on May 12, 2006, ordered Bapu to continue to provide alcohol to Ethnic under the terms and conditions of the court's prior directives.
Bapu argues, among other things, that these orders permitted Ethnic to distribute alcohol in an unlawful manner, citing N.J.S.A. 33:1-1(x) and N.J.S.A. 33:1-2(a), and that the court was mistaken in enforcing and requiring Bapu's performance of what it claims to be illegal conduct.
It is true that the dictates of public policy may require invalidation of private contractual arrangements where those arrangements directly contravene express legislative policy or are inconsistent with the public interest or detrimental to the common good. Sacks Realty Co., Inc. v. Shore, 317 N.J. Super. 258, 269 (App. Div. 1998). A contract provision that is contrary to the requirements of a statute is void, Bryant v. Atlantic City, 309 N.J. Super. 596, 629 (App. Div. 1998), and a court, in that circumstance, will invalidate or modify such contracts, Vasquez v. Glassboro Serv. Ass'n, 83 N.J. 86, 98-99 (1980). We are also mindful that it is unlawful for anyone to sell liquor without a license. N.J.S.A. 33:1-2(a). "Sale," in this regard, is broadly defined in part as "exchange, barter, traffic in, keeping and exposing for sale, serving with meals, . . . [and] possessing with intent to sell." N.J.S.A. 33:1-1(w).
We reject Bapu's argument that the agreement itself is unlawful. The agreement does not permit Ethnic to dispense liquor, only Bapu. In her order of November 18, 2003, the Chancery judge ruled in a manner consistent with that lawful undertaking, finding only that Bapu had breached the agreement by not supplying and distributing liquor pursuant to the agreement, and, in that context, ordered Bapu to supply liquor to Ethnic "as needed." In a later order also under review, a Law Division judge directed that Bapu remained obligated to provide liquor to Ethnic in the manner previously ordered by the Chancery judge.
We agree with the premise of Bapu's argument that it cannot validly be ordered to engage in a course of conduct that violates the laws applicable to the service or sale of alcohol. However, we do not interpret the orders under review as compelling Bapu to do so. The relief awarded by these orders mirrors the provision of the agreement, which only obligated Ethnic to use Bapu's services regarding the dispensing of liquor at banquets. Nothing in the orders directs Ethnic to serve the liquor, or bars Bapu from taking appropriate action if Ethnic unlawfully dispenses liquor. Nothing in the agreement or in the challenged orders prevented, or prevents, Bapu from seeking to enjoin Ethnic from serving liquor in violation of law. Nor did the orders prevent Bapu from seeking the involvement of the ABC in this matter, if necessary. In short, we conclude that the orders under review were not intended and should not be interpreted in a manner that conflicts with the laws regarding the dispensation of liquor. Both parties remain bound by the laws regarding the sale or service of alcohol and the orders in question do not suggest otherwise.
For these reasons, we affirm the orders under review in A-0665-05T5.
We also find insufficient merit in any of Bapu's other arguments in either appeal to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).