On appeal from the Superior Court of New Jersey, Law Division, Cumberland County, Docket No. L-229-04.
The opinion of the court was delivered by: Gilroy, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo, S. L. Reisner and Gilroy.
This appeal arises out of a commercial lease of a 25,200 square foot store (the Property) in the Lincoln Shopping Center, in Vineland. Defendant/third-party plaintiff, Wakefern Food Corp., appeals from two August 4, 2006 orders of the Law Division, which: 1) granted summary judgment in favor of defendants Frank Guaracini, Jr., and Elizabeth Guaracini (the Guaracinis), in the amount of $30,000; and 2) denied its motion for summary judgment against the Guaracinis.
This commercial landlord-tenant matter requires us to analyze the law of suretyship, guaranty, indemnification and equitable subrogation. Based on that analysis, we conclude that the trial court mistakenly exercised its discretion in applying equitable subrogation to hold Wakefern liable to the Guaracinis. Accordingly, we reverse.
Plaintiffs James Feigenbaum, Sam Feigenbaum, and the Syma Feigenbaum Testamentary Trust (collectively, the Feigenbaums) are the owners of the Lincoln Shopping Center. On August 19, 1996, the Feigenbaums entered into a lease agreement with Frank Guaracini, Jr. Supermarkets, Inc. (GSI), whereby GSI agreed to lease the Property to use as a supermarket for a term of ten years.*fn1 Pursuant to the lease, GSI was obligated to pay a fixed rent of $7,500 per month, together with a payment proportionate to its share of all: (a) real estate taxes; (b) common area maintenance costs; and (c) fire and extended coverage insurance premiums. The lease did not impose an obligation on GSI to pay the Feigenbaums' legal expenses and costs, if the Feigenbaums instituted legal proceedings to enforce the terms of the lease on default of GSI; except, under Paragraph 15 of the lease, GSI agreed to pay the Feigenbaums reasonable legal fees and other expenses incurred by the Feigenbaums in obtaining possession of the Property, an exception not applicable to this matter.
On the same day the lease was executed, the Guaracinis executed a separate document, unconditionally guaranteeing to the Feigenbaums GSI's performance under the lease (the Guaranty). The Guaranty provided that it was a continuing obligation, that is, it would remain in effect and bind the Guaracinis during the full term of the lease. The Guaranty also provided that the Guaracinis would pay the Feigenbaums, on demand, all costs and expenses, including reasonable legal fees and disbursements that may be incurred by the Feigenbaums in enforcing either GSI's obligations under the lease, or the Guaracini's obligations under the Guaranty.
On May 19, 1998, GSI assigned the lease to Wakefern. Under the assignment, Wakefern agreed to indemnify GSI against any claims or damages, including "reasonable legal fees and disbursements," arising from its default under the lease; however, Wakefern did not agree to indemnify the Guaracinis personally. On December 23, 1998, with the consent of the Feigenbaums, Wakefern reassigned the lease to third-party defendant Vineland Supermarket, Inc. Under the assignment, Vineland agreed to indemnify Wakefern and its predecessor in interest, GSI, from and against any claims or damages, including reasonable legal fees and disbursements, arising from Vineland's failure to perform under the lease. Vineland's sole shareholder, Jay Daunoras, personally guaranteed a portion of Vineland's obligations to Wakefern.*fn2
In July 2003, Vineland failed to pay the monthly rent. On March 2, 2004, the Feigenbaums filed their complaint, seeking all monies due under the lease against the Guaracinis and Wakefern. Each defendant filed an answer, not only asserting cross-claims for contribution or indemnification against each other, but also third-party complaints against Vineland and Daunoras.*fn3
On completion of discovery, the Feigenbaums, the Guaracinis, and Wakefern cross-moved for summary judgment. The Feigenbaums claimed that the Guaracinis were primarily liable as guarantors of the lease, and Wakefern was liable as assignee of the lease from GSI. The Feigenbaums estimated their damages through August 31, 2006, at $616,815.66, which included projected attorneys' fees and costs through trial in the sum of $32,113.95.
On April 20, 2006, the trial judge entered two orders supported by a written decision, which: 1) granted the Feigenbaums partial summary judgment on liability only against Wakefern for its breach of the lease, but denied the Feigenbaums' motion against the Guaracinis; and 2) denied the Guaracinis' cross-motion against the Feigenbaums. On May 11, 2006, the judge entered a third order, which granted Wakefern partial summary judgment, directing that Vineland indemnify Wakefern for any and all liability or judgments that may be entered against it, and that Daunoras's Estate indemnify Wakefern for any and all liability or judgments that may be entered against Wakefern in an amount equal to 50% of the balance of the base rent due under the lease.
On June 2, 2006, the Guaracinis settled with the Feigenbaums for $30,000. However, the Guaracinis continued to assert their cross-claims against Wakefern, seeking to recoup the $30,000 paid to the Feigenbaums. On June 5, 2006, the morning of trial, after the Feigenbaums advised that they were no longer pursuing their claim for attorneys' fees and costs, Wakefern settled with the Feigenbaums for $500,000. On June 22, 2006, the Feigenbaums executed a general release ...