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GCS Enterprises International, LLC v. Grant

August 7, 2007


On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-1763-03.

Per curiam.


Argued October 11, 2006

Before Judges Kestin, Weissbard and Graves.

This case arises out of a fire on December 22, 2002, which caused severe damage to a historic two-story office building located at 9 North Main Street in Allentown, New Jersey (the premises). Defendants Todd Grant, Tia Flavell, and the Grant Group (defendants), owned the premises and leased space to three commercial tenants, including plaintiffs GCS Enterprises International, LLC, and Scott Musser (plaintiffs). After the fire, the premises were uninhabitable and all leases were terminated. Defendants filed a fire-loss claim with its own insurance carrier, CNA Insurance, which paid a total of $419,848.07, consisting of $391,436.99 for the building and $28,411.08 for one year of lost rents. In return, defendants provided CNA with signed "Release and Subrogation Receipt[s]" assigning a right of subrogation to CNA to the extent of the insurance payments made by CNA.

On February 25, 2003, plaintiffs filed a Special Civil Part complaint to recover their security deposit. That matter was transferred to the Law Division, and it was ultimately dismissed when defendants filed a counterclaim alleging plaintiffs' negligence proximately caused the fire. In their counterclaim, defendants sought damages in excess of $400,000. The lease between the parties contained a mutual waiver of subrogation, and CNA did not proceed independently. In January 2005, while these proceedings were pending, defendants sold the premises in a partially damaged condition for $235,000.

A bifurcated jury trial was conducted on defendants' counterclaim. On February 23, 2005, a jury found plaintiffs had negligently caused the fire and, on November 17, 2005, a different jury awarded defendants damages in the amount of $587,368. Because defendants had already received more than the amount awarded by the jury (insurance payments of $419,848.07 and sale proceeds of $235,000, totaling $654,848.07), the court ruled as follows:

I am going to apply against that verdict any payouts that had been made to [defendants]. And the number that has been set forth to me was $654,000 and I have indicated that I will not permit a double recovery in this matter.

So therefore I am going to request [plaintiffs'] counsel to submit a judgment. Following my logic and the way I'm molding this verdict, you would be the prevailing party actually, because this verdict is not going to require a payment by your client because it renders it a nullity. So I'm going to ask you to prepare a judgment, submit it under the five day rule to counsel and that will dispose of this matter.

Defendants appeal from the pre-trial order entered on November 10, 2005, directing any award of damages "shall be limited by any and all payments received from collateral sources [and] any verdict shall be so molded by the court," and a final judgment entered on November 30, 2005, dismissing defendants' counterclaim. In a cross-appeal, plaintiffs appeal from the court's determination on November 10, 2005, that the jury was not to be told defendants sold their building prior to trial. Plaintiffs contend the jury should have been aware of "the full history of the property in question," including the fact that defendants received the sum of $235,000 when the property was sold. We reverse and remand for a new trial on damages.

Because defendants' motion to abbreviate the transcript was granted, we have not reviewed a full transcript of the damages trial. Nevertheless, we have no reason to believe the jury instructions regarding damages were inconsistent with the order entered on November 10, 2005, which provides "[t]he jury shall be charged on the measure of damages to be either the reasonable cost of repair or diminution of value, plus such sum that will fairly and justly compensate defendants." We conclude the trial court erred in allowing the jury to select the legal standard it would use to determine the quantum of damages and in precluding the jury from knowing defendants had sold the property for $235,000 prior to trial.

During pre-trial proceedings on November 10, 2005, defendants claimed the reasonable cost to repair and restore the building was the correct measure of damages because of the building's historical significance and its special value to its owners. Defendants' attorney presented the following argument:

MS. SUH: The details of how the tenant caused the fire are irrelevant at this point. What is at issue right now is the damages in the case. What the tenant is claiming is that the measure of damage should be strictly limited to the fair market value of the property, that is the value of the property the day before the fire and the value of the property after the fire.

What we contend is that that is an overly mechanistic view of the measure of damages in this case. This is a unique piece of property. I'm sure all landowners would say that their piece of property is unique. But this one is listed on the National Registry of Historic Sites in the State of New Jersey as well as nationally. There were ...

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