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GFS/Morristown Limited Partnership v. Vector Whippany Associates

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


April 2, 2009

GFS/MORRISTOWN LIMITED PARTNERSHIP, F/K/A BALCOR/ MORRISTOWN, L.P., PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
v.
VECTOR WHIPPANY ASSOCIATES, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
v.
BALCOR INTERNATIONAL REALTY COMPANY, F/K/A BALCOR/SHERSON LEHMAN INTERNATIONAL REALTY COMPANY, AN ILLINOIS CORPORATION, BALCOR MANAGEMENT SERVICES, INC., AND THE BALCOR COMPANY HOLDINGS, INC., A DELAWARE CORPORATION, THIRD-PARTY DEFENDANTS-RESPONDENTS, AND GOODMAN FINANCIAL SERVICES, INC., A WASHINGTON CORPORATION, THIRD-PARTY DEFENDANTS RESPONDENTS/FOURTH-PARTY PLAINTIFF,
v.
SCHINDLER ELEVATOR CORP. AND NICHOLAS JACANGELO, FOURTH-PARTY DEFENDANTS, AND WILLIAM LENTINI AND JOSEPH LENTINI, FOURTH-PARTY DEFENDANTS/FIFTH-PARTY PLAINTIFFS,
v.
WESTINGHOUSE ELECTRIC CORP. AND SCHINDLER ELEVATOR CORP., FIFTH-PARTY DEFENDANTS.
VECTOR WHIPPANY ASSOCIATES, PLAINTIFF-APPELLANT,
v.
MISAWA HOMES CO., LTD, TAO INTERNATIONAL CO., LTD, TAO INTERNATIONAL AMERICA, INC., ZENRO AMEMIYA, INDIVIDUALLY AND AS PRESIDENT OF TAO INTERNATIONAL AMERICA, INC., AND MASARU HANAOKA, INDIVIDUALLY AND AS VICE CHIEF OF TAO INTERNATIONAL CO., LTD., DEFENDANTS-RESPONDENTS.
VECTOR WHIPPANY ASSOCIATES, PLAINTIFF-APPELLANT,
v.
WESTINGHOUSE ELECTRIC CORP. AND SCHINDLER ELEVATOR CORP., DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-3754-94 and Law Division, Morris County, Docket Nos. L-3373-94 and L-3911-94.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 25, 2009

Before Judges Rodríguez, Waugh and Newman.

Defendant/third-party plaintiff-appellant, Vector Whippany Associates, (Vector), the mortgagor, appeals from a judgment of foreclosure in favor of the mortgagee, Goodman Financial Services, Inc. (GFS), formerly Balcor/Morristown, L.P. (Balcor), jointly with GFS/Balcor, plaintiff-respondent, and a judgment entered in favor of defendants-respondents Misawa Homes Co. Ltd., Tao International Co., Ltd, Tao International America, Inc., Zenro Amemiya and Masaru Hanaoka, the investors who provided the mortgage funds. Vector, as third-party plaintiff-appellant, also appeals from the judgment entered in favor of defendants, Westinghouse Electric Corp. (Westinghouse) and Schindler Elevator Corp., (Schindler) the initial and successor sole tenants of the mortgaged property.

The amount of the judgment entered on September 22, 2006, following a non-jury trial, was for $78,856,655.45 together with costs and a counsel fee of $7,500. GFS cross-appeals, claiming that any monies due to Vector for an alleged breach of lease by Schindler should be credited to GFS by virtue of the mortgage, note and other loan documents upon which Vector defaulted. We reverse as to the breach of Vector's lease by Schindler and remand for entry of an amended judgment to reflect that breach, but it does not affect the damages which have been properly credited to Vector in the foreclosure judgment calculation. In all other respects, we affirm the several judgments.

A.

Vector was a real estate partnership with one property, the building at 20 Whippany Road in Morristown, which it acquired upon its formation in 1984. Vector paid $14,500,000 for the twenty-two-acre site, which was financed through a loan. Vector's partners were William and Joseph Lentini, as well as a group in which Arlene Shapiro was a principal. Shapiro began running the day-to-day operations in 1991. The Lentinis purchased the Shapiro interest in Vector for $15,000 in June 1994.

On March 31, 1986, Vector entered into a lease of the entire property with Westinghouse. The lease was to run for ten years, expiring on December 31, 1996. The rent was $2,286,000 per annum, or $190,500 per month, from January 1, 1987, to March 31, 1991, and then $2,857,500 per annum in $238,125 monthly installments, from April 1, 1991, until the end of 1996. The lease gave Westinghouse an option to renew for three five-year periods at its election. It further provided: "This agreement cannot be changed orally but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought." Westinghouse spent approximately $8,000,000 on improvements.

In the spring of 1987, Vector sought to refinance its loan. On June 16, 1987, Vector and Balcor, an Illinois partnership, entered into a mortgage and security agreement, as well as a secured promissory note, for $27,000,000. Under the note, Vector was to make interest payments of 8.625 percent per annum, at the rate of $6,468.75 per day, until maturity, which was to be December 31, 1987. Vector used the loan proceeds to pay off the existing mortgage as well as its partners' investment. Balcor's sole asset was the $27,000,000 mortgage note.

In conjunction with the execution of the promissory note, the parties entered into an assignment of leases and rents agreement. This agreement provided that rents collected under any lease Vector entered into, including the Westinghouse lease, was "additional security for the payment of all sums due under the Note." Thus, Vector agreed, as an inducement for the mortgage loan, to "assign, transfer and convey to Lender . . . all of the Leases and Rents." In the event of a default, Balcor was given the discretion to do the following:

(i) Borrower's rights to use the Rents shall terminate after written notice from Lender to Borrower and any Rents then or thereafter coming into Borrower's possession are to be held in trust by Borrower for the benefit of Lender and immediately delivered to Lender; thereafter, Borrower shall have no rights to use the Rents without written consent of Lender. . . .

(ii) Lender . . . at its sole election, without notice thereof to the Borrower, and without taking possession of the Mortgaged Property, may notify any or all of the obligors under the Leases that the Leases have been assigned to Lender, and Lender . . . may direct said obligors thereafter to make all payments due from them under the Leases directly to Lender.

(iv) Lender shall have the right at any time or times thereafter, at its sole election, without notice thereof to Borrower, to enforce the terms of the Leases and obtain payment of and collect the Rents, by legal proceedings or otherwise; . . . and to make, modify, enforce, cancel or accept surrender of any of the Leases . . . .

Vector and Westinghouse signed a subordination of lease agreement. Under this agreement, the lease was made subject and subordinate to the mortgage. The agreement further provided that the tenant could not modify the lease without the landlord's consent.

In December 1987, Balcor Real Estate Finance, Inc. assigned the note, mortgage and loan to Balcor/Morristown Limited Partnership, a partnership formed out of Misawa/Tao's investment of $27,000,000. Balcor continued to manage the loan, and retained an approximately six percent interest in the partnership.

On December 15, 1987, the partnership and Vector entered into a new loan agreement and an amended and restated promissory note. Under the note, Vector was obligated to pay annual interest of 8.625 percent through mid-1992, and then 9.5 percent annual interest until the loan's maturity date, December 31, 1996, whereupon the entire principal of $27,000,000 would be due and owing. As reflected by Vector's loan application, Vector was to pay $185,625 per month for the first five years of the loan, and then $213,750 per month until maturity. Vector and Balcor agreed to divide any cash flow from the rental lease in excess of the mortgage debt service payments. Vector was also obligated to pay adjusted gross income (AGI) interest in the amount of fifty percent of the quarterly cash flow, i.e., gross receipts less expenses, fifteen days after the quarter ended. The restated note also provided for liquidated damages of a set amount if the default occurred within the first six loan years, beginning July 1, 1988. For the sixth year, the amount was $2,628,527. If the default arose from a breach of the tenant's lease with Vector, the amount was $2,000,000. Balcor had the right to accelerate the indebtedness upon default. The default rate of interest on any outstanding indebtedness was eighteen percent. A late charge could also be imposed of four cents per each dollar of delinquent payment.

The loan was a non-recourse loan, meaning that the lender could satisfy the obligation only out of the collateral securing the loan, by foreclosing on the property, not by going against the personal assets of the borrower or any of its partners. Specifically, the promissory note provided:

Notwithstanding anything to the contrary contained in this Note, the Mortgage or the Other Agreements, Lender's sole recourse and remedy shall be against the Mortgaged Property . . . to secure any sums due under this Note . . . and no deficiency or other judgment shall be sought or obtained against the Borrower or its partners . . . .

In late 1988, Westinghouse's division operating out of 20 Whippany Road was sold to Schindler. However, Westinghouse remained liable for the rent payments. The building functioned as Schindler's North American corporate headquarters.

Because of declining market rents, which began in 1988, and high vacancy rates for office space in the Morris County area in April 1992, Schindler retained E.S. Gordon Company, a real estate agent, to assess Schindler's headquarters requirement, including looking at other sites. Schindler informed Vector that the analysis was being conducted. E.S. Gordon submitted a report in September 1992, which found that Schindler could generate net present value savings of as much as $10,800,000 by relocating. After receiving the report, Schindler's focus was on staying at the existing location at a reduced rent over an extended term. In addition, Schindler sought to avoid paying E.S. Gordon's approximately $1,000,000 commission. A lesser concern of Schindler's was having Vector perform certain structural maintenance on the building. Robert Rudin, who authored the report, described the building as "functionally obsolete," and William Lentini described it as a "white elephant."

Rudin contacted Vector in the fall of 1992 with a formal proposal about extending the lease in return for a reduction in the rent. By this time, the annual rental stream Vector received from Schindler exceeded its annual interest debt service to Balcor by $300,000, of which Vector retained half. Vector, which was reluctant to embrace the proposal because it did not want to jeopardize the income stream as well as its relationship with Balcor, informed Rudin that it could not do anything unless it was given a reduction in mortgage payments by Balcor to reflect the reduced rent. Nonetheless, Vector approached Balcor about the idea and Balcor encouraged Vector to pursue the matter with Schindler. Balcor considered the loan to be "under water," with the value of the property well below the $27,000,000 mortgage. E.S. Gordon valued the property in January 1993, under the most optimistic reasonable scenario, at $7,300,000. As of the end of 1993, Arlene Shapiro believed the value of the building to be around $10,000,000.

Arlene Shapiro had a conversation with William Lentini towards the end of 1992, in which they discussed the fact that a foreclosure would have adverse and "significant" tax consequences for Vector. Although Shapiro had tax loss carry forward that would cover her exposure, the Lentinis acknowledged that they faced a nearly $3,000,000 tax recapture liability if they lost the property at the end of the lease.

Schindler made a formal proposal to modify the lease and the loan to Vector on January 7, 1993, which Vector passed on to Balcor. John Karnash, general counsel for Westinghouse, and then Schindler, was aware that a modification to the existing lease had to be in writing. Karnash also understood that in order for there to be an adjustment of the rent, Vector had to be able to restructure the underlying mortgage.

In March 1993, members of Balcor's investment research group inspected the building. An internal memo to Balcor's asset management committee from Terri Thompson, Balcor's loan asset manager, dated April 8, 1993, recommended accepting the restructuring of the lease and the loan along the lines of E.S. Gordon's proposal. Dan Duhig, one of Balcor's senior officers, wrote in the memo that Balcor should consider "tak[ing]" the building and modifying it based on his mistaken belief that Vector was then in default. The committee determined that negotiations with Vector on a possible loan modification should continue. Vector was informed by Balcor that, conceptually, Balcor agreed that the interest payments should be reduced to reflect the reduction in the rent payments.

In March or April 1993, Vector indicated to Schindler that it wanted to pursue extending the lease, and reducing the rental payments. Vector was willing to consider such a written modification of the lease only if it received a written modification of the loan, and so informed Schindler. However, Vector objected to the fixed purchase price option proposed by Schindler, as well as its request that Vector pay E.S. Gordon's commission. Discussions between Schindler and Vector continued throughout 1993. By mid-1993, Schindler had set January 1, 1994, as the target date for the rent reduction to begin. If no agreement was reached by then, Schindler intended to stay until the end of the lease, and then move elsewhere.

In May 1993, Nancy Amamura and Jill Wallace of Misawa visited the site and met with William Rafferty, Schindler's facilities engineer. According to Amamura, no negotiations took place during the visit. William Lentini stated that he was unaware of the visit.

On June 24, 1993, Rudin sent Shapiro a letter in which he indicated that Schindler remained interested in Vector's original offer of ten years with a purchase option, and expressed frustration with the length of the process. Shapiro responded by letter dated June 29, 1993, reiterating that Schindler's terms were unacceptable.

Meetings between Vector and Schindler were held in July and August 1993. Shapiro wrote a letter to Christopher Lindenmeyer, Schindler's chief financial officer, on August 4, 1993, proposing that Schindler enter into a new fifteen year lease, at a reduced rent, with Schindler being responsible for any commission due E.S. Gordon. According to Shapiro, the proposal would save Schindler approximately $1,000,000 in annual rent.

On August 18, 1993, Shapiro sent a letter to Jane Hund of Balcor informing her that Schindler had agreed to absorb the cost of the commission, and that the overall proposal, which assumed a reduction in the interest rate Vector was to pay Balcor, was acceptable to both Vector and Schindler. Hund responded by visiting the site a few weeks later to verify the information in the proposal.

In a letter dated September 16, 1993, Misawa/Tao informed Hund that they were not agreeable to the August 18 proposal, describing it as "an insult to our intelligence." This response was conveyed to Vector.

On October 12, 1993, Vector submitted another proposal to Schindler, similar to the August 4 proposal, but with a further reduction in the rent. Vector noted that it was still waiting for written confirmation of the mortgage modification from Balcor, and reiterated that it would not sign the modified lease until it received that commitment. Schindler responded on October 19, 1993, objecting to the requirement that it pay E.S. Gordon's commission. By early November, however, Schindler expressed a willingness to reduce its commission payment request by half in return for a similar reduction in the rent.

Karnash sent a letter to Vector on November 15, 1993, indicating that he wanted Vector to put pressure on Balcor to restructure the mortgage. Shortly thereafter, according to Joseph Lentini, Hund called William Lentini and requested that Vector submit a revised cash flow projection to include a $500,000 amount for the commission.

On November 18, 1993, William Lentini sent a memorandum to Karnash confirming Vector's proposal to enter into a fifteen-year lease with an annual rent of $1,597,000 for the first five years, and $1,815,000 for the remaining ten years. Karnash believed this document reflected a "deal" with Vector, subject to Balcor's and Misawa/Tao's "blessing." According to Karnash, Schindler was satisfied "that we had sufficient paper in place to establish an agreement between us." Joseph Lentini stated that Vector sent the document to inform Schindler of the proposal discussed with Hund. Schindler did not respond to confirm that it was accepting the terms set forth in the November 18 memorandum, and there was never a written lease amendment signed by Vector and Schindler.

Vector sent the November 18 memorandum to Balcor on November 24, and Joseph Lentini claimed that Hund accepted the cash flow projection and indicated she would pass it along to Misawa/Tao. Joseph Lentini also maintained that Hund indicated she would send Vector a written document confirming the terms. By November or December, Vector and Schindler had resolved their differences regarding the structural repairs.

Karnash claimed that he had a conversation on November 30 with Nicholas Jacangelo, Vector's accountant, in which Jacangelo told him to start paying the new rent as of the first of the year. Lindenmeyer claimed that during his discussions with Jacangelo, he got the "impression" that Jacangelo was more than just an accountant. On December 3, 1993, Lindenmeyer instructed Schindler's accounting department to reduce the rent payment from $238,125 to $112,150 as of January 1, 1994. Jacangelo denied telling Karnash to withhold the rent, and he claimed that he told Schindler that he did not have the authority to represent Vector regarding the proposed lease amendment. Karnash did not recall either the Lentinis or Shapiro instructing him to reduce the rent payment, and they denied doing so. In addition, Joseph Lentini denied instructing Jacangelo to do so.

On December 7, 1993, Hund transmitted Vector's proposal to Misawa/Tao. Joseph Lentini claimed that Hund told him that Tao's representatives were coming to the site to "bless" the proposal. However, Shapiro stated that Hund never told her that Balcor had approved the loan modification.

On December 13, 1993, Hund wrote to Wallace of Misawa informing her that Balcor needed to respond to Vector's loan modification proposal within a few days, and that Schindler indicated that it would relocate if an agreement was not reached immediately. Hund expressed her inclination to support the modification, noting the possibility that the building would become vacant within the ensuing three years.

On December 14, 1993, Masaru Hanoaka and Zenro Amemiya of Tao visited the 20 Whippany Road site. William Lentini believed the purpose of the visit was for Tao to give its "blessing" to the deal. Karnash believed the December 14 visit was to give the Tao representatives a chance to tour the property. Hund described it as "just a quick site visit." After taking a tour of the building, the two went into a meeting room with Karnash, Lindenmeyer, Jacangelo, and Joseph Lentini. Joseph Lentini claimed that he was able to communicate with Amemiya in English, but that conversation with Hanoaka was more difficult. Hanoaka stated that he never spoke during the meeting. He claimed that Amemiya stated that he hoped the "conflict" would be resolved amicably. However, there was no discussion of the loan modification proposal.

Karnash claimed that during a conversation with Amemiya about the proposed agreement, Amemiya said that "everything was okay." Joseph Lentini confirmed this account. Lindenmeyer stated that one of the Japanese men said, "you should have this deal," but noted that his English was not very good. Amemiya denied making this statement.

Later that evening, the Lentinis and Jacangelo had tea with Amemiya and Hanoaka. The Lentinis claimed that during tea Amemiya said the deal as submitted by Balcor was approved. William stated that Amemiya spoke English "rather well," better than Hanaoka. Amemiya denied ever discussing the proposed deal.

Karnash called Hund later that day and told her that Tao seemed in favor of the proposed mortgage modification. Hund expressed surprise and told Karnash that she would check that out and get back to him. Joseph Lentini stated that a few days later he listened in while his brother told Hund that Amemiya and Hanaoka were favorable to the deal. Hund then indicated that she would get something in writing to Vector.

Wallace sent a fax to Hund on December 17, 1993, stating that Amemiya had not agreed to the proposed deal, and that Misawa/Tao rejected the proposal; Hund so notified Shapiro on December 21, 1993. In the letter to Shaprio, Hund advised that Vector should consider a revised offer immediately in light of Schindler's impatience. Joseph Lentini expressed surprise at receiving the rejection letter. He stated that around this time he told Karnash and Rudin that Vector had not received a written mortgage modification from Balcor. Vector advised Schindler to "sit tight."

Schindler reduced its rent payment as of January 1, 1994. Schindler's January rent payment was approximately half of what it had been paying previously. Joseph Lentini was surprised to receive the reduced rent. Vector deposited the check nonetheless. Rudin believed Schindler's partial payment was a tactic to pressure Vector and Balcor to enter into a mortgage modification agreement. Shapiro stated that Vector's partners could not make up the difference because they did not have the cash to do so. Nonetheless, Vector submitted a new proposal to Balcor on January 11, 1994, increasing the interest rate it would pay and offering to contribute $50,000 to the deal.

Vector sent Schindler a notice of lease default on January 11, 1994. In response to the notice, Karnash informed Vector that the payment was sufficient because Vector and Schindler had agreed on the modified lease no later than November 1993, and that Schindler had been advised that the contingency regarding Misawa/Tao's approval of the modification had been satisfied. Vector brought an eviction action against Schindler in January 1994, which Vector dismissed the following April.

On January 12 or 13, 1994, Hund received a call from William Lentini informing her about the partial rent payment made by Schindler. Hund told him that, as with previous rent payments, Vector should send the money to Balcor. Hund also told Lentini that if Balcor did not receive funds reflecting the full rental amount from Vector, that would constitute a default under the mortgage agreement. However, William Lentini and Shapiro claimed that Hund told them not to pay attention to any mortgage default notice because it would just be a formality. Joseph Lentini stated that Duhig told him that accepting the lower rent was permissible.

At some point in the next ten days, Hund also told Vector that the approximately $32,000 AGI interest was due and should be sent. Shapiro insisted on a non-foreclosure guarantee from Balcor before making the payment. Karnash claimed that he sat in on a conversation with William Lentini on January 18, 1994, in which Lentini said there was no agreement regarding the mortgage because Misawa/Tao was looking for more money.

On January 25, 1994, Balcor sent Vector a notice of default. William Lentini stated that he was "shocked" by the default notice. He expressed his surprise in a conversation with Hund on January 27 or 28. Hund apparently replied that she would send a written loan modification if Vector sent payment of part of the principal. According to William Lentini, this resulted in a "standoff" between Vector and Balcor.

On January 25, 1994, Balcor sent Schindler a letter informing it of the mortgage default notice and directing Schindler to make its future rent payments to Balcor. In late January, Schindler forwarded to Balcor the reduced rental payment of $112,250 directly to Balcor as the monthly rent payment for February. GFS/Balcor received less than full monthly rental payments thereafter.

Also on January 25, 1994, Vector sent a letter to Schindler challenging Karnash's insistence that a lease modification agreement had been reached between the parties. William Lentini denied that he ever told anyone at Schindler to send less than the full rental amount.

On February 8, 1994, Balcor sent a letter to Schindler demanding full payment of the rent. As of February 10, 1994, Balcor was still contemplating additional discussions with Vector regarding the loan modification. William Lentini sent Hund a letter dated February 17, 1994, noting ongoing communications between the entities' attorneys.

William Lentini sent a letter to Misawa and Tao, dated February 22, 1994, indicating that Schindler would seek to vacate the premises in the event further litigation ensued. On March 17, 1994, Vector sent Balcor a new loan proposal in which it offered to contribute $150,000 to effectuate a settlement. An unsuccessful settlement meeting between Balcor and Vector was held on March 21. Even after the March 23 complaint was filed in this matter, discussions between the two entities continued on the proposed modified lease and mortgage.

On March 31, 1994, Balcor sent a letter to Schindler demanding that Schindler pay the full rent as required by the written lease between Vector and Schindler. On September 20, 1994, Balcor brought an eviction complaint against Schindler for non-payment of rent, which apparently was subsequently withdrawn.

Believing it had the right to negotiate a lease with Schindler under the Assignment of Leases and Rents and the mortgage, Balcor moved for an order declaring that it could enter into a modification and extension of the lease.

On November 18, 1994, Judge Kenneth Mackenzie ordered as follows:

ORDERED that pursuant to the provisions of Section 5(iv) of the Assignment of Leases and Rents, dated June 16, 1987, by and between plaintiff and defendant, and pursuant to the provision of Section 5.5(vii) of the Mortgage by defendant to plaintiff, Balcor has the right to negotiate a lease modification and extension, and a rental reduction, with Schindler Elevator Corporation, containing the following financial terms:

TERM: 15 years

ANNUAL NET NET NET RENTAL: Years 1 to 5, $1,897,000.00 Years 6 to 15, $1,815,000.00

CONTRIBUTIONS FOR TENANT ALTERATIONS: Years 1 to 5, $300,000.00

CREDIT FOR BROKER COMMISSIONS: Years 1 to 2, one half the actual commission, up to $250,000.00 per year.

and containing such other and further terms as are reasonable and appropriate, in the judgment of Balcor. . . .

On April 1, 1995, Balcor and Schindler entered into a lease extending the existing lease to December 31, 2008, retroactive to January 1, 1994. Schindler was to pay approximately $158,000 per month rent through the end of 1998, and then $151,250 through the end of the lease. Balcor signed the amended lease in Vector's name. As part of the lease, Balcor agreed to pay E.S. Gordon a $550,000 commission.*fn1

As of February 9, 2004, GFS claimed that it was owed $78,856,655.45 under the note and mortgage. This included the $27,000,000 principal, approximately $45,000,000 in interest, and approximately $7,000,000 in liquidated damages and late charges.

Julie Clark, an asset manager at GFS, testified regarding the amounts GFS claimed it was owed by Vector. She stated that GFS received less interest than it was entitled to under the mortgage loan from January 1994 until trial. Clark relied on a document she created based on GFS's records setting forth the sums due on the mortgage note as of February 9, 2004. Pursuant to the amended promissory note, Clark calculated interest on the $27,000,000 principal at the rate of nine and one-half percent for one month, and the eighteen percent default rate for the balance. This totaled approximately $49,000,000. Clark then subtracted approximately $17,000,000, representing the monthly amounts GFS received from Schindler between January 1994 and February 2004. Clark then added approximately $33,000,000 as an estimate of the AGI interest that was not collected, bringing the amount owed to over $65,000,000. Clark then calculated liquidated damages in the amount of thirteen percent of the $27,000,000 principal, approximately $7,500,000, subtracted by the AGI interest actually received, resulting in approximately $7,000,000. Clark then added the eighteen percent default rate of interest on the unpaid AGI interest and the liquidated damages, together with a one month four percent late fee, bringing the final total to $78,856,655.45.

B.

In a seventy-one page oral decision, the trial judge made the following relevant findings:

This is an action to foreclose a $27,000,000 non-recourse loan. There's no question that Vector, as landlord, was using the proceeds of the rental stream generated by its lease with Schindler to fund the debt service on the loan. There is also no question that the tenant, Schindler, sought to reduce its rental payments based on the decline in rents in the commercial office markets in Morris County in the early 1990s.

There is no question that Schindler approached Vector in that effort and that Vector, realizing that the rental market had declined, was agreeable to the reduction in order to preserve Schindler as a tenant.

There is no question that Vector sought a reduction in its mortgage payments to GFS as part of the plan to allow Schindler to pay a reduced rent. There is no question that GFS was not adverse to the concept of changing the mortgage debt service and that it received and reviewed many proposals forwarded by Vector over the course of many months in 1993.

However, the court now determines that GFS and Vector were never able to resolve the various issues implicated in the reduction of mortgage debt service, and as a result, modification of a debt service was never achieved between them.

Nevertheless, Schindler, acting in conjunction with Vector, reduced the rental payments as of January 1, 1994 in order to force GFS to agree to the reduced debt service by Vector. GFS did not accept the proposal of Vector, and instead demanded the full monthly debt payment. Vector refused and then failed to make the payment of debt service and an additional payment then due under the amended and restated secured promissory note and mortgage, triggering a default under the loan documents.

The trial court was very explicit about the defaults committed by Vector under the mortgage and note. The judge stated:

Vector's refusal to pay the adjusted gross income interest on January 15, 1994, or within five days thereafter, was an event of default under the note and mortgage. It constituted a knowing, intentional and deliberate breach of the note, the mortgage, and the loan documents by Vector.

Vector's refusal to pay the adjusted gross income interest on January 15, 1994 was not connected to the payment of lower rent by Schindler on January 1, 1994. The adjusted gross income interest for the first three-quarters of 1993 were [sic] $32,990.63, $33,130.29, and $32,990.63. The adjusted gross income due for the fourth quarter would have been at least $32,990.63. Instead of sending the adjusted gross income interest to Balcor, Vector used some of the money to pay its attorneys and disburse the rest to its partners.

GFS sent a letter, dated January 24, 1994, to Vector declaring the amended note to be in default, and to be accelerated, citing as one of the events of default the failure of Vector to pay additional interest due under the amended note. At trial, Vector did not offer any justification for its refusal to pay the adjusted gross income interest. Vector also failed to pay the stated interest due on January 15, 1994. Vector did send a payment of $112,500.00 to Balcor, which was received on January 24, 1994. That payment was approximately half the stated interest due as of January 15th, 1994, namely, $213,750.00.

Arlene Shapiro on behalf of Vector admitted that Vector paid less than the full debt service in January 1994. Vector's failure to pay the stated interest was an event of default under the note and the mortgage. The January 25, 1994 default letter also cited Vector's failure to pay cited interest as an event of default under the note and mortgage.

Vector did not have the money to pay the difference between what it actually paid on the debt service in January 1994 and the amount actually due for the debt service in January, 1994. The general partner of Vector did not make a cash call on the general and limited partners of Vector to pay the shortfall in debt service because none of them had the funds to make up the difference.

The entire principal balance of $27,000,000 remains due.

Vector's failure to pay the note at maturity on December 31, 1996 was an event of default under the note and mortgage. So was its filing of a petition in bankruptcy.

The trial judge then went on to detail the amounts due as a result of the default in the foreclosure action:

In addition to the principal amount of the loan as of January 9, 2004, stated interest was unpaid due and owing in the amount of $32,248,249.92. The per diem rate of interest accruing on the note after that date and through the date of judgment is $13,500.00. Liquidated damages due and owing are $6,948,258.00. There is also interest due on the unpaid additional interest which includes the liquidated damages and adjusted gross income interest which is $12,618,606.90. There are late charges due of $8,850.00. The total amount due and owing under the note and mortgage as of January 9, 2004, exclusive of GFS's claims for attorney's fees, was $78,856,655.45, plus per diem interest to be calculated. The judgment of foreclosure will include the specific amount to be realized by Sheriff's sale.

On appeal, Vector raises the following issues for our consideration:

POINT I: THE TRIAL COURT ERRED AS A MATTER OF LAW IN CONCLUDING THAT SCHINDLER DID NOT BREACH THE LEASE.

A. STANDARD OF REVIEW.

B. THE TRIAL COURT APPLIED THE WRONG STATUTE OF FRAUDS AND THE WRONG STANDARD OF PROOF.

C. THE ALLEGED "MEMORIALIZING" MEMORANDUM IS INEFFECTIVE UNDER THE FORMER AND REVISED STATUTES OF FRAUDS.

D. SCHINDLER PURPOSEFULLY BREACHED THE LEASE AND SUBORDINATION AGREEMENT AND INTERFERED WITH VECTOR'S MORTGAGE WITH ITS LENDER.

POINT II: THE TRIAL COURT ERRED AS A MATTER OF LAW BY FAILING TO CONSIDER OR FIND THE CLEAR INEQUITABLE CONDUCT AND BREACH OF CONTRACT BY GFS AND MISAWA/TAO, INCLUDING BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING, AND THEIR COMPLICITY WITH SCHINDLER IN BREACH OF ITS LEASE WHICH CONDUCT AND BREACHES PRECLUDED DECLARATION OF DEFAULT, ACCELERATION, OR FORECLOSURE AND GIVE RISE TO DAMAGES.

A. EQUITABLE PRINCIPLES PRECLUDE THE HARSH REMEDY OF FORECLOSURE HERE.

B. GFS/BALCOR AND MISAWA/TAO BREACHED THE MORTGAGE AND SUBORDINATION AGREEMENT.

C. GFS AND MISAWA/TAO BREACHED THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING.

D. GFS' AND MISAWA/TAO'S MATERIAL BREACHES EXCUSED VECTOR'S PERFORMANCE; THE CITED EVENTS OF DEFAULT AND ACCELERATION SHOULD HAVE BEEN SET ASIDE BY THE TRIAL COURT.

E. THE NON-PAYMENT OF THE ADJUSTED GROSS INCOME INTEREST ("PARTICIPATION") WAS TECHNICAL AT BEST AND MINOR IN COMPARISON TO THE HARM CAUSED TO VECTOR; ACCELERATION AND FORECLOURE SHOULD NOT HAVE BEEN PERMITTED ON THIS BASIS.

POINT III: THE TRIAL COURT'S FINDINGS OF FACT ARE INCONSISTENT, INCOMPLETE, TAKEN OUT OF CONTEXT, WHOLLY UNSUPPORTED BY THE RECORD, AND WERE RENDERED UNDER CIRCUMSTANCES WHICH REQUIRE THAT NO DEFERENCE BE ACCORDED TO THEM. THIS COURT SHOULD REVERSE THE JUDGMENTS BELOW AND ENTER JUDGMENT FOR VECTOR.

A. STANDARD OF REVIEW.

B. THE TRIAL COURT'S DEFICIENT FINDINGS OF FACT ARE EXTENSIVE.

C. THE TRIAL COURT'S UNEXPLAINED DELAY SHOULD ALSO PRECLUDE ANY DEFERENCE TO ITS FINDINGS.

POINT IV: THE TRIAL COURT ABUSED ITS DISCRETION IN ITS ERRONEOUS AND UNWARRANTED APPLICATION OF THE "FALSE IN ONE, FALSE IN ALL" DOCTRINE TO ALL OF THE TESTIMONY OF THE LENTINI BROTHERS.

POINT V: VECTOR'S AFFIRMATIVE CLAIMS SHOULD BE REINSTATED.

In its cross-appeal, GFS raises the following point:

POINT VI: IF VECTOR PREVAILS ON ANY DAMAGE CLAIMS AGAINST SCHINDLER, ANY PORTION OF THE DAMAGES WHICH COMPENSATES VECTOR FOR THE LOSS OF THE RENTS, ISSUES AND PROFITS OR THE EQUITY, OF THE MORTGAGE PREMISES, MUST FLOW TO GFS.

We address the issues in the order raised, with the GFS cross-appeal discussed in conjunction with Vector's Point I.

I.

In Point I, Vector maintains that the trial court erred as a matter of law in concluding that Schindler did not breach its lease with Vector. Vector contends that the November 18, 1993, memo, which the court found to be a written amendment of the lease, did not comply with the statute of frauds and did not, by clear and convincing evidence, establish the parties' intentions. Moreover, the memo itself stated that it was only a proposal and a draft, reflecting the fact that certain terms remained open, and was not signed by William Lentini. Since the lease was not properly amended, Vector asserts that Schindler's refusal to pay the full monthly rental constituted a breach of contract. Vector seeks judgment in the amount of $15,663,750.12, representing the difference between the rent paid and the rent required under the original lease.

The trial court concluded that Schindler and Vector entered into a lease modification agreement:

The Court is satisfied . . . by a preponderance of the credible evidence that Schindler and Vector entered into a lease modification agreement orally, which was then memorialized in the November 18, 1993 memorandum from William Lentini to John Karnash.

Schindler's conduct thereafter was in accordance with the requirements of the lease modification agreement and, accordingly, there was no breach. As a result there are damages due and owing.

The court found that the November 18 memo confirmed the final aspects contained in the letter sent by Karnash to Hund. Moreover, the court found that the memorandum satisfied the statute of frauds:

The leased premises and the term of the lease are clearly identified. The identities of lessor and lessee, namely, Vector and Schindler, are also identified. The memorandum was marked "dictated, not read" by William Lentini. The Statute of Frauds does not demand a holographic signature. There is no requirement that the signature be in definite or particular form . . . .

The memorandum at issue was typed, reviewed and signed on behalf of William Lentini, and does satisfy the statute. The fact that William Lentini dictated the memorandum and his name was typed at the bottom of the memorandum on his authority is accepted as meeting the requirements of the Statute of Frauds. Mr. Lentini was a principal of Vector and had authority to bind Vector by his conduct.

The court is satisfied that Mr. Lentini intended the writing at the bottom of the agreement to be his signature. Moreover, the conduct of Vector thereafter confirms that it intended to be bound by the agreement.

The purpose of the lease modification was to keep Schindler in the premises. The fact that the memorandum was not intended as the formal lease is unimportant. It is well settled under New Jersey law that the parties may bind themselves by an informal memorandum where the essential terms are agreed to and the parties intend to be bound thereby, even though there may be a contemplation of a more formal agreement thereafter.

The November 18, 2003, memo from William Lentini to Karnash contained the phrase, "DICTATED BUT NOT READ." However, the memo expressly stated as follows:

Pursuant to our earlier correspondence and subsequent faxed memos, we are, herewith, reconfirming our proposal for Schindler . . . to enter into a new lease for 15 years . . . .

We are proposing to Balcor that the first 5-year period will be at an annual rent of $1,597,000 . . . . The next ten years will be at an annual rent of $1,815,000 per year . . . . Vector Whippany will also request a further reduction of rent during the first 2 years for up to $500,000 to offset any brokers commission.

The above is an outline of a proposal we are submitting to Balcor, with hopefully their ability to secure an approval from the lender, Misawa.

This proposal is merely a draft, it does not constitute an offer or acceptance or create any legally binding obligation upon any party identified herein. The proposal does not amend or modify the existing lease in any way.

All of the parties involved in this transaction will be advised of this memo.

A contract arises from an offer and acceptance that must be sufficiently definite so that the performance by each party can be ascertained with reasonable certainty. Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992). The parties must also manifest an intention to be bound by the essential terms of the agreement. Ibid. Whether an offer capable of acceptance has been made depends upon "what meaning the words should have conveyed to a reasonable person cognizant of the relationship between the parties and all of the antecedent and surrounding facts and circumstances." Esslinger's, Inc. v. Alachnowicz, 68 N.J. Super. 339, 344 (App. Div. 1961). Generally, parties may effectively bind themselves by an informal memorandum where they agree upon the essential terms of the contract and intend to be bound by the memo, even though they contemplate the execution of a more formal document. Berg Agency v. Sleepworld-Willingboro, Inc., 136 N.J. Super. 369, 373-74 (App. Div. 1975).

The lease provided that the agreement could not be changed orally, but only by a writing "signed by the party against whom enforcement of any waiver, change, modification or discharge is sought." The November 18 memo, while a writing, does not constitute a modification of the lease because of specific disclaimers by William Lentini that he did not intend to be bound by the writing.

The memo stated that it was a "proposal." The proposal was made expressly contingent on Balcor's securing Misawa/Tao's approval, which never was obtained. Moreover, it bears repeating that the memo expressly stated: "This proposal is merely a draft, it does not constitute an offer or acceptance or create any legally binding obligation upon any party identified herein." The language of this proposal cannot be ignored. There was nothing binding because, as the memo makes clear, the modification of rent under the lease was dependent upon Balcor modifying the payments of interest on the mortgage loan. The November 18 memo did not constitute a contract between Schindler and Vector. Therefore, we need not even address whether the memo complied with the statute of frauds.

The trial court was mistaken in determining that the November 18, 1993, memo constituted a written amended lease between Vector and Schindler. Schindler unilaterally breached its lease with Vector by sending partial rent payments beginning in January 1994.

The remedy for that breach is another matter altogether. Because Vector defaulted on the superseding mortgage loan with GFS/Balcor, the mortgagee was justified, under the mortgage agreements and assignment of lease document, in stepping into Vector's shoes and collecting the rental payments from Schindler. See MetLife Capital Fin. Corp. v. Washington Ave. Assocs. L.P., 159 N.J. 484, 503 (1999) (under absolute assignment of rents provision title to rents passes to assignee upon default, but defaulting party is entitled to accounting of rents collected). In determining the foreclosure amount, the trial court included the $27,000,000 principal and added stated interest of $32,261,749.92, liquidated damages of $6,948,258, AGI interest in the amount of $12,618,606.90, and late charges of $8,850. The trial court found Julie Clark's testimony "accurately reflected the sums that Ms. Clark testified were due to GFS from Vector". In contrast, the trial court found Vector's expert Paula Konikoff not to be credible and rejected her calculation of $32,000,000 which was reached after taking into account the approximately $17,000,000 received from Schindler. However, that calculation did not include the claimed $17,227,500.12 Schindler did not pay under the original lease with renewals through December 31, 2008.

The flaw in Vector's damage calculation is that the proofs establish that Schindler was not about to remain at the property beyond the lease term ending on December 31, 1996, without a substantial rent concession. Moreover, the three five-year renewal options were dependent upon Schindler's election and were not automatic renewals. Thus, Vector's breach of damages claim was not supported by the evidence at worst and speculative at best.

The reduced rental payment made retroactive to January 1, 1994, reflected the terms satisfactory to Vector and Schindler, but without any corresponding reduction in mortgage interest, and/or amount. By order, the court permitted negotiations to take place between GFS and Schindler under the Assignment of Lease whereby GFS stepped into Vector's shoes and GFS and Schindler agreed to the reduced rental terms. Vector then received the benefit of the rental payments throughout this period from January 1, 1994, against the foreclosure judgment amount. Under the mortgage, the mortgagee was entitled to all sums recovered by Vector from Schindler which constitute "rents, issues, avails, profits or proceeds . . . however, occurring, existing, created or arising. . . ." Any proceeds to which Vector was entitled by way of Schindler's breach would be rents or proceeds to which GFS was due.*fn2

Thus, the rental payments made by Schindler were paid to GFS, but Vector received credit for those payments as damages for Schindler's breach.

II.

Vector contends in Point II that GFS and Misawa/Tao breached their mortgage and subordination agreement with Vector, as well as the implied covenant of good faith and fair dealing, by conspiring with Schindler to promote Vector's default and eliminate Vector's ownership of the property, while they engaged in negotiations with Vector when they had no intention of reaching an agreement. As a result, Vector argues that equitable principles should have precluded the remedy of foreclosure in this case and excused Vector's default.

Relevant to Vector's argument on this issue, the trial court had this to say:

There is no question that Schindler approached Vector [to reduce its rental payment] and that Vector, realizing the rental market had declined, was agreeable to the reduction in order to preserve Schindler as a tenant. There is no question that Vector sought a reduction in its mortgage payments to GFS as part of the plan to allow Schindler to pay a reduced rent. There is no question that GFS was not adverse to the concept of changing the mortgage debt service and that it received and reviewed many proposals forwarded by Vector over the course of many months in 1993.

However, the Court now determines that GFS and Vector were never able to resolve the various issues implicated in the reduction of mortgage debt service, and as a result a modification of a debt service was never achieved between them.

Nevertheless, Schindler, acting in conjunction with Vector, reduced the rental payments as of January 1, 1994 in order to force GFS to agree to the reduced debt service by Vector. GFS did not accept the proposal of Vector, and instead demanded the full monthly debt payment. Vector refused and then failed to make the payment of debt service and an additional payment then due under the amended and restated secured promissory note and mortgage, triggering a default under the loan documents.

Accordingly, the trial court held that GFS had the right to foreclose on the mortgage.

In the context of addressing Vector's affirmative claims, the court concluded:

The proofs show that Balcor did not intentionally cause Schindler to pay the lower rent. Schindler put its decision to pay the lower rent . . . into effect on or before December 3, 1993 and prior to any contact between Schindler and Balcor or its limited partner, Tao.

Prior to January 13, 1994, Balcor was not even aware that Schindler was going to pay the lower rent in that month. The contacts between Jane Hund and John Karnash on behalf of Schindler were justified by their relationship between [sic] the lender and the tenant. . . . Under the loan documents, Balcor was authorized to have direct communication with Schindler. However, no communication from Balcor caused Schindler to decide to pay the lower rent in January 1994.

The court added:

Vector has not shown that any of the communications between Schindler and Balcor were inappropriate and has not pointed to any specific conduct that was improper.

There is no proof that Schindler pressured or threatened Balcor, or that Schindler's conduct breached the covenant of good faith and fair dealing. In short, Vector's relationship with Balcor was not in any way affected by Schindler.

Aside from the subordination agreement, Vector does not claim that the express terms of any document were breached. Rather, it contends that GFS and Misawa/Tao acted in bad faith by lulling Vector into believing that a mortgage modification would be forthcoming while they were endeavoring to eliminate Vector's interest in the property by communicating with Schindler in an effort to procure Vector's default. As a result, Vector maintains that GFS and Masawa/Tao were equitably estopped from foreclosing on the property.

As a principle of law, a mortgagee seeking foreclosure on a property may be estopped from doing so as a result of its malevolent conduct. Foreclosure is an equitable remedy and is governed by traditional equitable principles. Spiotta v. William H. Wilson, Inc., 72 N.J. Super. 572, 579 (App. Div.), certif. denied, 37 N.J. 229 (1962). One seeking foreclosure must come into court with clean hands. New Jersey Bank v. Azco Realty Co, Inc., 148 N.J. Super. 159, 166 (App. Div.), certif. denied, 74 N.J. 280 (1977).

Generally, a provision in a mortgage granting the mortgagee an option to accelerate the maturity of the mortgage date upon the default in payment of principal, interest, taxes or insurance is a proper contractual stipulation and a mortgagee has the right to insist upon strict observance of such a stipulation, unless the default can be attributed to his conduct.

[Kaminski v. London Pub, Inc., 123 N.J. Super. 112, 116 (App. Div. 1973).]

Vector asserts that GFS and Misawa/Tao encouraged Schindler to breach its contract with Vector. There is insufficient evidence to support Vector's contention that Schindler reduced its rent payment because it had been assured by GFS that GFS would accept the reduced amount. Rather, the trial record indicates that the decision to make the reduced rental payment, which led to one of the bases*fn3 for default, was made by Schindler alone or possibly with Vector's support, but certainly after extensive negotiations between the two entities on the subject. GFS's and Misawa/Tao's contacts were minimal, and the record does not indicate that they were substantive. Although GFS and Misawa representatives visited the site in May 1993, apparently without Vector's knowledge, the record does not indicate that any negotiations took place during this visit. Karnash had a telephone conversation with Hund on December 14, 1993, in which he informed her that Tao seemed in favor of the mortgage modification. The evidence regarding these contacts in no way establishes that Balcor sought to induce Schindler to pay a lower rent to Vector. In fact, although subsequently withdrawn, GFS brought an eviction complaint against Schindler for non-payment of rent.

Vector also contends that GFS and Misawa/Tao impaired the value of the mortgage collateral, the property, by accepting the lower rent payment from Schindler. The defense of impairment of collateral is a suretyship principle whereby impairment of the collateral will extinguish the obligation of the guarantor, at least to the extent of the value of collateral impaired. Langeveld v. L.R.Z.H. Corp., 74 N.J. 45, 50-51 (1977); Interchange State Bank v. Rinaldi, 303 N.J. Super. 239, 249 (App. Div. 1997). This case does not present a suretyship situation. In any event, Vector fails to show that the value of the property declined after January 1994 as a result of the lower rent payments, or that its ability to re-lease the property was similarly affected.

Vector next argues that GFS and Misawa/Tao violated the implied contractual covenant of good faith and fair dealing by "stonewalling" Vector in the negotiations and then "sandbagging" Vector with the declaration of default. Every contract in this State contains a covenant of good faith and fair dealing by which neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997). Good faith is conduct that does not violate standards of decency, fairness or reasonableness. Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). Proof of bad motive is essential; as a general rule, subterfuges and evasions suffice even though the actor believes his or her conduct to be justified. Id. at 225. The covenant may be breached even though the express terms of the contract are not violated. Id. at 226. However, the covenant cannot override an express term in the contract. Sons of Thunder, Inc., supra, 148 N.J. at 419.

In Brunswick Hills Racquet Club, Inc., supra, 182 N.J. at 214, a commercial tenant timely notified the landlord of its intent to exercise an option for a long-term lease nineteen months prior to the contractual deadline. However, the tenant failed to make an up-front payment necessary to perfect the option because it believed the payment was required only at the time of the closing of the new lease. Ibid. Over the ensuing nineteen months, the tenant repeatedly communicated with the landlord about setting the date and terms of the closing. Ibid. The landlord delayed responding to these persistent requests, and never requested the option payment or advised the tenant that it had not fulfilled an essential term of the contract. Ibid. When the deadline for the option passed, the landlord, for the first time, told the tenant about the payment requirement and declared the option null and void. Ibid. The tenant then sought to enforce the option.

The Supreme Court held that this was a case appropriate for the application of the covenant of good faith and fair dealing, entitling the tenant to specific performance. Id. at 229-32. It reasoned that the landlord withheld vital information from the tenant by engaging in a "pattern of evasion" and "play[ing] possum" with the purpose of exploiting the terms of the contract and its deadline without regard to the harm caused to the tenant. Id. at 229. Only after the deadline had passed, and the option expired, did the landlord break its silence. Ibid.

By contrast here, there was "no pattern of evasion" by GFS and Misawa/Tao. The parties merely engaged in negotiations that never bore fruit. Rather than "playing possum," GFS and Miswawa/Tao were actively involved in attempting to reach an agreement. Nor is there proof that GFS and Misawa/Tao conspired to deprive Vector of its ownership interest in the property.

Furthermore, GFS's and Misawa/Tao's failure to reach agreement on the mortgage reduction is not evidence of bad faith. Nothing in the covenant presupposes that GFS and Misawa/Tao were required to reach an agreement with Vector for the sake of reaching agreement, and regardless of whether the terms were acceptable.

Moreover, in terms of the negotiations, Vector is quick to point to the intransigence of GFS and, more pointedly, to Misawa/Tao in not modifying the mortgage terms and the threats by Schindler to vacate the property at the lease term end in 1996 if no rent reduction was forthcoming. Vector fails to acknowledge it was not making any concessions or contributions to forge an amended lease arrangement. In effect, Vector was asking Misawa/Tao to halve the yield on the $27,000,000 mortgage investment in the property and Schindler to continue to pay an above market rental on a property beyond its space needs where office space was available and vacancies were prevalent in the Morris County area. Vector considered finding the tenant to occupy the entire property was a sufficient bargaining chip to cement an amended lease and mortgage arrangement.

Furthermore, the record indicates that GFS continued to negotiate with Vector about an agreement even after default was declared. Vector also cites Duhig's notation on an internal April 8, 1993, memo that Balcor should consider "tak[ing]" the building and modifying it on its own. However, the record indicates that Duhig did so because he mistakenly believed that Vector was already in default. Vector further cites Hund's assurances that a default would not be declared. However, the record contains contrary evidence, accepted by the trial court, that Hund told Vector that if the full amount was not sent, Vector would be in default. We discern no violation of the covenant of good faith and fair dealing by GFS or Misawa/Tao.

Vector further contends that the trial court erred in failing to find that, under the subordination agreement, Vector's written consent was required before Schindler's lease was canceled or modified. However, the agreement was made subordinate to the mortgage. Vector agreed in the assignment of leases and rents agreement that GFS/Balcor had the right to modify the lease and was entitled to direct Schindler to make payments directly to it in the event Vector defaulted. There was no error in rejecting Vector's contention.

Vector maintains that its default should have been excused because GFS/Balcor and Misawa/Tao had already breached the loan agreement and promissory note, either expressly or as an equitable matter. A material breach by either party to a bilateral contract excuses the other party from rendering any further contractual performance. Magnet Resources, Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 285 (App. Div. 1998). However, neither GFS nor Misawa/Tao committed such a breach. Consequently, Vector's default is not thereby excused.

Lastly, Vector contends that its failure to pay the approximately $32,000 in AGI interest in January 1994 was minor and technical, and thus should not have served as a basis for acceleration of the mortgage. As Vector notes, although the issue has apparently not been addressed explicitly by New Jersey courts, out-of-state courts have been cautious in granting acceleration and foreclosure where the claimed default was minor or technical, resulting in no prejudice to the lender, and where acceleration stemmed from an inequitable desire to take advantage of the default. Brown v. Avemco Inv. Corp., 603 F.2d 1367, 1370 (9th Cir. 1979); Murphy v. Fox, 278 P.2d 820, 826 (Okla. 1955). Defaulting on more than $32,000 in interest, although small in comparison to the overall mortgage, is neither minor nor technical. See Parrott v. Wallace, 900 P.2d 214, 220 (Idaho Ct. App. 1995) (foreclosure justified where nonpayment of $1,555.67 in taxes, although comparatively small to principal balance, not "trivial sum").

III.

Vector argues in Point III that the trial court's findings of fact were inadequate. Specifically, Vector points to the court's findings that Vector and Schindler acted in concert to reduce the rent payments and entered into a lease modification agreement, that Jacangelo told Schindler to start paying the lower rent at the start of 1994, that Vector offered no justification for not paying the AGI interest, that Hund rejected every loan modification proposal, and that the Tao representatives did not offer support for the loan modification plan.

Initially, the trial court found that Vector's failure to pay the AGI interest on January 15, 1994, or within five days thereafter, was a default under the note and the mortgage and constituted a breach of contract. It noted that "Vector did not offer any justification for its refusal to pay the adjusted gross income interest." The court also found that Vector's failure to pay the $27,000,000 principal at maturity on December 31, 1996, was an event of default under the note and mortgage, as was its filing of the bankruptcy petition.

Based on its view of the record, the court concluded that "[b]eginning in November 1992, and continuing through February 1994, Schindler and Vector were acting together to accomplish a lease and loan modification as a common goal, and to convince Balcor to agree with these proposals. Balcor never agreed." In support of its conclusion, the court relied on its credibility findings regarding the Lentinis, which is discussed in Point IV.

Our 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). The fact findings and legal conclusions of the trial judge should not be disregarded unless the court is clearly convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonable credible evidence as to offend the interests of justice. Id. at 484. "That the finding reviewed is based on factual determinations in which matters of credibility are involved is not without significance." Ibid.

Vector sets out what it believes are the inadequacies and inconsistencies in the trial court's findings in a chart. Notwithstanding, what Vector is really raising is a weight of the evidence argument. In essence, Vector maintains that the trial court erred in not adopting its theory of the case based on the facts presented, not that the court's determination to adopt GFS's theory was not supported by substantial credible evidence.

Addressing specifics, Vector's claim that the trial court's conclusion that Vector and Schindler acted in concert to reduce the rent on January 1, 1994, is contradicted by the record and should be rejected. The two entities may have disagreed on whether they reached an agreement to reduce the rent, but there is no dispute that they sought to convince Balcor to agree to the reduction. As to whether Vector and Schindler entered into a lease modification agreement by way of the November 18 memo, we have already determined they did not. There was contradictory evidence as to whether Jacangelo told Karnash on November 30, 1993, that Schindler should start paying the lower rent on January 1. That the trial court accepted that the conversation took place does not mean that its determination was not supported by substantial credible evidence. Similarly, there was conflicting evidence as to whether Tao's representatives "blessed the deal" during their December 14, 1993, visit. That the court chose to believe GFS's and Misawa/Tao's witnesses over Vector's does not mean there was not substantial credible evidence for its conclusion. Whether Vector's non-payment of AGI interest and its tender of reduced rent was a default was primarily a legal question based on the loan documents. Whether Hund approved Vector's proposals is really not relevant given that she lacked the authority to make that decision.

As a final point, Vector asserts that the unexplained delay of approximately twenty-two months by the trial judge in rendering his decision warrants that we accord no deference to the factual findings and exercise de novo jurisdiction. While we do not condone the delay in decision-making, we are nevertheless satisfied that the record supports the facts as found by the trial judge. We see no basis to disturb his credibility assessments. There is nothing in the trial judge's seventy-one page opinion that indicates that the trial record was not carefully and fully reviewed.

IV.

In Point IV, Vector claims that the trial court abused its discretion by applying the "false in one, false in all" doctrine against the Lentinis. Vector contends that there was no deliberate intent to mislead and that none of the discrepancies related to any of the material issues in the case.

In concluding that neither Lentini was a truthful witness, the trial court stated:

Vector's defenses and its affirmative claims against Balcor are largely dependent upon the credibility of Joseph and William Lentini. Upon examining the totality of the record, including specific instances of testimony by the Lentini brothers, comparison with their deposition testimony, and confrontation with contemporaneously generated documents, the court now concludes that neither Joseph nor William Lentini was a truthful witness. The court believes that each of the Lentinis was deliberately false in respect to material factual matters in their testimony. They were contradicted not only by their own sworn statements but by the testimony of other much more believable witnesses.

Specifically, the trial court cited: Joseph Lentini's claim at trial to having a conversation with Hund in December 1993, whereas he stated in his deposition that he did not have any conversation with Hund after November 1993; his admission on cross-examination that he was not present during a conversation between Shapiro and his brother and Balcor's representatives, and his brother and GFS representatives, whereas he testified on direct examination that he did listen in on such conversations; his testimony that he had reviewed the November 18, 1993, proposal before it was sent to Schindler and Balcor, whereas he had stated at his deposition that he did not see the proposal before it was sent out, or even knew that it had been sent out; his admission at trial that he did not discuss with Shapiro Hund's request for financial information regarding Vector's limited partners when, in fact, he had discussed the request with both Shapiro and Hund; his testimony at trial that he had a conversation with Hund between November 15 and 24, 1993, in which she approved the terms of Vector's November 18, 1993, proposal, whereas he stated at his deposition that he had not seen the proposal prior to November 24, 1993, and was not aware that the proposal was being faxed to GFS; and whether Terri Thompson told him that Balcor approved Vector's August 1993 proposal. Thus, the court concluded, with respect to Joseph:

Joseph Lentini's testimony was false at trial in so many instances that the court applies the rule of false in one, false in all.

With respect to all material matters, the court disbelieved Joseph Lentini, and believed the contrary testimony of other witnesses. Specifically, the court disbelieved his testimony about the phone call between his brother and Jane Hund on November 15, 1993. To the contrary, the court finds that there was no approval given by Ms. Hund to the proposal.

The court also disbelieves his testimony that Jane Hund stated in April of 1993 that Balcor had given conceptual approval to the loan modification proposal. The court does not believe that Jane Hund gave approval on behalf of Balcor to any of the loan modification proposals submitted by Vector.

Instead, the court believes Ms. Hund's testimony.

The trial court also found William Lentini's testimony to be fabricated in material respects; specifically, his testimony about Joseph's listening in on the conversations with Balcor, his denial of speaking with Karnash after receipt of the rejection letter from Hund on January 23, 1994, and his testimony regarding the authorship of the December 23, 1993, fax sent to Jacangelo.

The false in one, false in all doctrine may be invoked by a trial judge when a witness has testified falsely to a material fact. State v. Fleckenstein, 60 N.J. Super. 399, 408 (App. Div.), certif. denied, 33 N.J. 109 (1960). The maxim is not a mandatory rule of evidence, but rather a permissible inference. Ibid. Its application is a matter of the trial judge's discretion and goes to the weight to be given to the testimony in question. Hargrave v. Stockloss, 127 N.J.L. 262, 266 (E. & A. 1941).

The specific instances referred to by the court are as follows. Joseph Lentini was cross-examined regarding his assertion at trial that he was present during his brother's January 1994 conversation with Hund regarding the reduced rental payment. Joseph testified that he heard the conversation because William was on speaker phone. However, Joseph testified at his deposition that he had no telephone conversations with Hund after November 1993, and that William had told him about the conversation. At trial, Joseph claimed that there was no contradiction in his two statements regarding how he learned of the conversation because he did not consider the phone call to be between him and Hund given that he was just listening. Joseph also said that the statement in his deposition that he did not know whether his brother had a speaker phone in his office "wasn't true at the time."

The next disputed testimony was Joseph's claim that he had a conversation with Hund in December 1993 about Tao's representatives coming to the property when he said in his deposition that he did not have any conversation with Hund after November 1993. Joseph stated that he so testified at his deposition because he did not believe the December conversation was that important.

Next, Joseph was cross-examined about his testimony at trial that he discussed the November 18 memo with his brother before it was sent. However, at his deposition, Joseph stated that he did not review the memo and discuss its contents with his brother before it was sent. At trial, Joseph explained that his deposition testimony was taken out of context.

Joseph was also cross-examined regarding his assertion that he received a request from Hund for financial information on Vector, and that he discussed the request with Shapiro. However, Joseph stated at his deposition that he had no discussions with Shapiro about such a request. At trial, Joseph admitted that his deposition testimony was true.

Next, Joseph was asked about a November 24, 1993, proposal to Hund from Jacangelo, that was transmitted by Shapiro, and a conversation around that time between his brother and Hund in which Hund agreed that Balcor would pay the E.S. Gordon commission. However, Joseph stated in his deposition that he did not see the proposal or was aware of its terms prior to it being sent to Hund. At trial, Joseph admitted that the deposition testimony was true.

Joseph was also questioned about the August 18, 1993, document sent by Shapiro to Hund. He testified at trial that he discussed the document with his brother and Shapiro before it was sent. However, in his deposition he stated that he did not see the August 18 proposal before it was sent. At trial, Joseph admitted that the deposition testimony was true.

Joseph was next cross-examined regarding a conversation between Shapiro and Thompson in April 1993, at which he alleged he was present. Joseph testified on direct that Balcor gave conceptual approval to the deal during this conversation. However, at his deposition Joseph stated that Vector did not discuss the proposal with Thompson. At trial, Joseph claimed that his deposition testimony was not a "total sequence of the events."

William Lentini was cross-examined about his direct testimony regarding assurances Vector gave to Karnash on or around December 23, 1993, to "sit tight" because a resolution with Balcor was pending. At trial, William testified that he dictated the fax to Jacangelo's secretary, but in his deposition he stated that Jacangelo wrote the fax and added the words regarding resolution. With respect to the deposition, William said, "I suspect there's some truth to it." He claimed that Jacangelo "made the word 'resolution' up."

With respect to Joseph, whether he was privy to conversations with Hund on his brother's speaker phone, whether he discussed the November 18 memo before it was sent, whether Balcor accepted the terms of the November 24, 1993 proposal, and whether Thompson gave conceptual approval to the modified lease and mortgage, were all material issues in the case. The apparent blatant contradiction in Joseph's testimony regarding the August 18, 1993, letter to Hund magnifies the above discrepancies even further. With respect to William, whether he misled Schindler by instructing Jacangelo to tell Karnash that a resolution with Balcor was near, shortly after Hund notified Vector that Misawa/Tao had rejected its proposal, also was a material fact.

We are satisfied that the trial court did not abuse its discretion by invoking the inference that the Lentinis' testimony was false.

V.

In Point V, Vector argues that the court's dismissal of its affirmative claims against GFS, Misawa/Tao and Schindler should be reversed, the claims reinstated and the matter remanded for a jury trial.*fn4 These claims include tortious interference with a contract and prospective economic advantage, civil conspiracy and breach of fiduciary duty.

Vector does not challenge the court's dismissal of certain of its affirmative claims in November 1999. Rather, it challenges the dismissal of those affirmative claims which survived through trial. In dismissing these claims as against Misawa/Tao, the court stated:

Misawa and Tao are two totally unrelated Japanese companies. Neither of those companies nor any of their employees or attorneys acted in any fashion that would give rise to Vector's claims of conspiracy and tortious interference. There is no evidence whatsoever that Schindler decided to make a reduced payment as part of a civil conspiracy with Misawa and Tao or either of them.

Misawa and [Tao] had no contacts with anyone from Schindler other than the two site visits in 1993. Nor did Vector show any evidence of any conduct during either site visit which would constitute intentional interference with malice with Vector's economic relationship with Schindler.

The proofs are to the contrary. Misawa and Tao were in no way involved in Schindler's decision to reduce the lease payments to Vector. . . . They had no interest in, and were not trying to force Vector out of, title to the mortgaged premises. In fact, even after the foreclosure action had been filed, Misawa and Tao were still considering possible loan modification modalities.

In dismissing Vector's affirmative claims against Schindler, the trial court stated:

Vector's claim of tortious interference by Schindler with the lease fails as a matter of law. The tort of tortious interference with an economic relationship can only be directed against a party or parties who are not part of the relationship supposedly interfered with. . . .

Nor did Vector prove that Schindler tortiously interfered with its relationship with Balcor. Vector at all times made it clear that Schindler was not to negotiate any aspect of the mortgage modification with Balcor. Schindler did not. . . .

In addition, the court rejected Vector's claim that Schindler acted in concert with Balcor and Misawa/Tao to defraud Vector. The court added:

In the first place, the court has found against Vector on each of the underlying claims against all of the other parties.

There was no proof of any communication, consultation or cooperation among Schindler, Balcor and Misawa/Tao form which an agreement to harm Vector could be determined.

The court finds that Vector's proofs do not even suggest the existence of some plan between the others to injure and defraud it.

The allegations of conspiracy are totally speculative.

Vector solely bases its claim for reversal on its belief that the trial court gave short shrift to these claims, and that the court offered only "naked conclusions," in violation of Rule 1:7-4. However, as excerpts from the trial court's decision demonstrate, full consideration was given to Vector's contentions. The fact that the trial judge rejected these claims provides no platform to reinstate them. We agree with the trial court's conclusions.

Except to remand to amend the judgment entered against Westinghouse Elevator Corp. and Schindler Elevator Corp. to reflect the breach of the lease, that judgment and the other judgments are affirmed in all other respects.


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