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Mill Creek Mall, LLC v. Fabco Shoes Mill Creek

December 26, 2007


On appeal from Superior Court of New Jersey, Law Division, Hudson County, L-1212-05.

Per curiam.


Argued January 24, 2007

Before Judges Collester and Lyons.

This appeal is from the entry of summary judgment in favor of defendant Fabco Enterprises, Inc. (FEI) based on the interpretation by the motion judge of a commercial lease and guaranty agreement between plaintiff Mill Creek Mall, LLC, (Mill Creek) as landlord, Fabco Shoes Mill Creek, LLC (Fabco Shoes) as tenant and FEI as guarantor of the tenant's obligations under the lease. Mill Creek is a limited liability company created by Hartz Mountain Industries, Inc. (Hartz Mountain), which is self- described as one of the largest private owners and landlords of commercial real estate in the United States. The demised premises is 3,500 square feet of floor space in a Secaucus shopping mall known as the Mall at Mill Creek, one of six major shopping malls in New Jersey owned by Hartz Mountain. Fabco Shoes is a limited liability corporation created by FEI to operate a retail shoe store in the Mall at Mill Creek by FEI, a New York corporation which operates a chain of fifty-six shoe stores in the New York and New Jersey metropolitan area. The lease agreement dates back to November 27, 1985 when it was executed by Hartz Mountain as landlord and Lechters New Jersey, Inc. (Lechters) as tenant. The lease term was extended by agreement of these parties on July 24, 1998 to run through January 31, 2009. However, on May 21, 2001 Lechters breached the lease by filing a voluntary petition under Chapter 11 of the United States Bankruptcy Code.

Sometime later David Weinman, President of FEI, learned there was a vacant store at the Mill Creek and began negotiations with Hartz Mountain for an assignment of the Lechter lease to Fabco Shoes. However, Hartz Mountain would not accept the assignment of the lease to a limited liability company that had no assets without a written guaranty from FEI. Accordingly, a guaranty agreement was signed on January 7, 2002.

It provided in pertinent part as follows:

WHEREAS, in order to induce the Landlord to consent to the assignment the Guarantor has agreed to guarantee the payment of Rent and other charges provided for in the Lease and the performance by Tenant of all of the covenants to be performed and observed on its part pursuant to the Lease for a period of three (3) years from the date of assignment.

(1) The Guarantor agrees that the obligation of the Guarantor is a primary and unconditional obligation, and the Guarantor unconditionally and absolutely guarantees the due and punctual payment of the Rent, the additional Charges and any other monies due or which may become due pursuant to the terms of the lease.*fn1

A week later on January 14, 2002, the Bankruptcy Court of the Southern District of New York approved the assignment of the lease from Lechters to Fabco Shoes. The following day, January 15, 2002, Fabco Shoes began its tenancy at the Mill Creek which was to continue under the assigned lease until January 31, 2009. The guaranty by FEI also began on January 15, 2002, but it expired in January 2005, approximately four years before the lease terminus.

It is undisputed that in the month of November 2004, Weinman called Deborah Stone, the assistant vice-president of retail leasing and marketing for Hartz Mountain, in an attempt to negotiate a rent reduction. He followed the telephone conversation with a certified letter to Ms. Stone dated December 1, 2004 in which he stated:

As I mentioned during our phone conversation several weeks ago the Guaranty on the above-referenced lease expires January 1, 2005. As of that date all obligations of Fabco Enterprises, Inc. as regards this lease will end. We agree to explore whether we could come to new terms acceptable to both parties. Since I have not heard back from you or from your office (I have left several messages) I have decided to write.

If we do not hear from you within the next two weeks we must assume you have no interest in discussing this with us and we will plan accordingly. However, for our part we would like to work out something whereby we can stay at the mall.

Ms. Stone later certified that it was obvious to her that Weinman was trying to use the guaranty expiration date as a bargaining chip to force a reduction in rent and that Weinman planned to breach the lease if the rent was not reduced. After Hartz Mountain refused to re-negotiate the rent, Ms. Stone's suspicions turned to fact as Fabco Shoes began removing inventory from the store. On January 3, 2005, Weinman sent to Ms. Stone another certified latter, this one stating:

Please be advised that we will vacate the above-referenced premises by January 15, 2005. Enclosed find a check in the amount of $5,501.40 which represents payment in full for 1/2 months rent for January 2005.

Three days later on January 6, 2005 a certified letter was addressed by the law firm representing Mill Creek to the attention of David Weinman at ...

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