December 2, 2008
SERVICE REFRIGERATED TRANSPORT, A DIVISION OF SERVICE WAREHOUSE, PLAINTIFF-APPELLANT,
WILLIAMS DEVELOPMENT, INC., DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-456-00.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 27, 2008
Before Judges Lisa and Reisner.
Plaintiff appeals from an order denying its motion to enforce a stipulation of settlement (stipulation) with defendant. Plaintiff argues that the trial court mistakenly exercised its discretion in failing to enforce the stipulation in the manner argued by plaintiff, or, alternatively failing to schedule a plenary hearing because material facts were disputed. Plaintiff further argues that the trial court order should be reversed because the judge failed to adequately set forth findings of fact and conclusions of law. We reject these arguments and affirm.
Plaintiff leased from defendant a portion of defendant's building in South Brunswick for a ten-year term beginning February 15, 1997. The leased premises consisted of 38,000 square feet of refrigerated warehouse space and 2770 square feet of office space. The lease provided for annual rent for the first five years of $195,930, and for the second five years of $222,081. The lease also obligated plaintiff to pay other sums as "additional rent."
A condition of the lease required plaintiff to post a $32,655 security deposit, which plaintiff deposited on December 17, 1996. It is plaintiff's effort to obtain a return of that security deposit that forms the basis of this litigation.
On October 15, 1998, plaintiff abandoned the lease and vacated the premises. Defendant was able to secure a new tenant for the space covered by the lease, Wisconsin Express Lines (WEL), which occupied the space immediately upon plaintiff's departure. WEL apparently paid a comparable rent to that plaintiff was paying. However, WEL vacated the premises at the end of March 2004. The premises remained vacant for a time. Unable to find other suitable tenants to lease refrigerated warehouse space, defendant conducted extensive modifications and renovations, converting the refrigerated space to nonrefrigerated space. Eventually, other tenants were found to occupy subdivided portions of the space previously leased to plaintiff.
On January 5, 2000, plaintiff initiated this action, seeking return of the security deposit. Defendant answered and counterclaimed for damages it alleged were caused by plaintiff's breach. On October 3, 2001, the parties entered into the stipulation, in which they acknowledged that plaintiff's entitlement to the return of the security deposit could not be determined at that time, but must abide future events over the remaining portion of the ten-year lease term between the parties. The stipulation provided that defendant would pay plaintiff three yearly installments of $10,885 on October 30 of 2004, 2005 and 2006, provided defendant was able to fully rent the space from June 15, 2001 through October 15, 2004, 2005 and 2006 respectively, for the net rental income plaintiff would have paid but for the breach. "Net rental income" would not include, however, "the costs of improvements, modifications, repairs or changes reasonably necessary and related to attracting or obtaining a new tenant." Additionally, if defendant was not required to pay a broker's commission of $69,668.62 by February 15, 2007, plaintiff would receive a credit for that sum, which would be added to gross rent actually received by defendant.
The stipulation further provided that if defendant's damages resulting from plaintiff's breach exceeded the amount of the security deposit ($32,665), defendant would be authorized to reinstate its counterclaim by serving a motion on plaintiff by June 15, 2007. The stipulation further provided that defendant would be entitled to credit in calculating "net rental income" for all costs of construction, as determined in defendant's sole discretion, reasonably necessary and related to attracting or obtaining a new tenant, together with architects, engineers or attorney's fees incurred after June 15, 2001 in dealing with existing, future or potential tenants. Conversely, if defendant failed to make any payment as required by the stipulation, plaintiff could file a motion to enforce the terms of the settlement agreement embodied in the stipulation.
The stipulation contained the following provisions pertaining to a claim by defendant that it was entitled to an offset against its obligation to refund plaintiff's security deposit because of costs incurred to re-rent the space or because of lost rental income:
5. In the event defendant claims an offset to any costs incurred, as provided for within paragraph 3 of this settlement agreement, defendant shall so provide copies of any and all invoices, and proof of any payment thereto, to plaintiff, and/or its counsel.
6. In the event defendant claims that the net rental income, as defined within paragraph 3 of this agreement, is less that what defendant would have collected from plaintiff, defendant shall provide to plaintiff, and/or its counsel, copies of any and all lease agreements, and/or any other memorandum, communication, and/or agreement which would indicate and evidence the amount so received by the defendant.
On January 22, 2007, plaintiff's attorney wrote to defendant's attorney demanding a refund of the full $32,655 deposit.*fn1 Defendant's attorney responded, advising that substantial construction costs had been incurred and the space remained vacant for a period of time, all of which would serve to wipe out any claim plaintiff might have had for a refund. Plaintiff's counsel requested documentation, as required by paragraphs 5 and 6 of the stipulation. Further correspondence was exchanged but no resolution was achieved.
On May 8, 2007, plaintiff filed a motion seeking to enforce the stipulation and demanding judgment for the full amount of the security deposit. Defendant filed opposition and a cross-motion to allow reinstatement of its counterclaim for damages incurred as a result of plaintiff's breach. The parties agreed to adjourn the return date of their motions until July 20, 2007, to enable defendant to provide plaintiff with a construction cost breakdown. On that date, the trial court denied plaintiff's motion without prejudice, ordering defendant to deliver to plaintiff all documents relating to defendant's claimed damages.*fn2 On August 14, 2007, plaintiff filed another motion seeking enforcement of the stipulation, demanding a full refund of the security deposit.
The record also includes a July 12, 2007 submission by defendant's attorney to the court and to plaintiff's attorney submitting documentation verifying construction costs, leases for various portions of the space previously rented by plaintiff, along with certificates of occupancy and portions of the leases to verify when the tenants moved in and what rent they paid. These materials were supported by a certification of defendant's president.
The construction cost documentation was partial, reflecting that which could be assembled to date, totaling $533,313.70. After comparing rents that plaintiff would have paid under its lease with those actually received, a deficit of $28,283.42 resulted. Adding to that the partial construction costs that were documented, the deficit increased to $561,597.12. After deducting plaintiff's security deposit, the deficit was reduced to $528,932.12. Finally, after crediting plaintiff with the unpaid brokerage commission of $69,668.62, the deficit in defendant's favor was reduced to $459,263.50.
This evidence demonstrated that this was not a close call. Plaintiff apparently had filed bankruptcy when it vacated the leased premises, was out of business, and had no assets. Therefore, defendant realized the futility of attempting to collect on its counterclaim, and was understandably attempting to minimize further court proceedings, expenditure of attorney's fees, and the like. It was defendant's position in the trial court that plaintiff had no realistic prospect of demonstrating entitlement to a refund.
In denying plaintiff's motion to enforce the stipulation, the trial court essentially found that plaintiff had more than ample opportunity to provide a basis for the relief and failed to avail itself of that opportunity. On September 7, 2007, the court noted that the agreement between the parties talks over and over about documents to be exchanged . . . . [F]or both parties to come to the Court now, in 2007, and say I want the money that was held by the defendant, you waited too long. Plaintiff, you should have filed a motion to say I'm not getting what I want.
You had the right to do that under the agreement. You could have said, I'm not getting that, the deadline is coming up. . . . If you wanted relief, and you wanted documentation, there's no reason that your client didn't make application to compel, which you need. . . . You submitted nothing further to me to really give me any benefit of what was going on. And I really do find that both parties sat on their rights in terms of trying to resolve this matter.
Although defendant was allowed by the stipulation to wait until February 15, 2007 to await a possible demand by a broker before it could seek recoupment of the broker's fee from plaintiff, the trial court pointed out that plaintiff "didn't file anything until May, the expiration of the agreement." And, as we have pointed out, the record contains a certification by the president of defendant, which included partial costs of converting the leased space, and certificates of occupancy and leases demonstrating the rents actually received.
The court determined that further court proceedings were not warranted. We find no mistaken exercise of discretion in this determination. We will not interfere with a discretionary determination of a trial court unless a clear error of judgment exists, State v. Koedatich, 112 N.J. 225, 313 (1988), such that a manifest denial of justice would result, State v. Kelly, 97 N.J. 178, 216 (1984).
The public policy of this State encourages litigants to settle their disputes prior to trial. Puder v. Buechel, 183 N.J. 428, 437-38 (2005). Settlement agreements between parties are governed according to contract law principles. Thompson v. City of Atlantic City, 190 N.J. 359, 379 (2007). Courts "should be free to exercise their discretion to prevent unnecessary duplication of proofs and arguments," and, as such, hearings on settlement agreements are not necessary unless a party "clearly demonstrate[s] the existence of a genuine issue as to a material fact." Lepis v. Lepis, 83 N.J. 139, 159 (1980). To determine whether a "material fact" is in dispute, courts look to the parties' affidavits and other supporting documents. Ibid.
Plaintiff was not wrongfully precluded from availing itself of the discovery procedures in the Court Rules to obtain documentation from defendant, if plaintiff believed defendant was withholding such needed information. The uncontradicted information furnished and made part of the record by defendant overwhelmingly establishes that plaintiff is not entitled to a refund of the security deposit. Based upon this record, there was no need for a plenary hearing, and we find no error in the court's refusal to order one.
We are further satisfied that the trial court gave sufficient reasons for its ruling. We accordingly reject plaintiff's argument that a reversal is required because of an inadequate statement of findings of fact and conclusions of law.