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Yale Enterprises, L.L.C. v. Euksuzian

May 15, 2009


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1885-05.

Per curiam.


Submitted January 12, 2009

Before Judges Reisner, Sapp-Peterson and Alvarez.

Plaintiff, Yale Enterprises, L.L.C., t/a Re-Max Suburban, a real estate agency, was a tenant in a building owned by defendants, Franck and Sarkis Euksuzian (the "Euksuzians"). On September 26, 2007, the court, following a jury trial, entered judgment awarding plaintiff damages against defendants. The damages were to be applied as a set-off against outstanding rent owed to defendants, as well as counsel fees. Plaintiff appeals the trial court rulings that (1) barred plaintiff from producing evidence of lost income, (2) denied plaintiff's request to charge the jury on fraud and to submit a jury question related to fraud on the verdict sheet, and (3) awarded only a portion of the counsel fees and costs sought. Defendants cross-appeal, challenging the court's ruling permitting the question of rent abatement to be presented to the jury and denying their motion to dismiss plaintiff's claim of economic duress. We reject the claims asserted in both the appeal and cross-appeal.

In July 2002, plaintiff entered into a lease agreement to rent commercial space, located at 338 Stokes Road in Medford, from defendants, to commence on October 1, 2002. The lease agreement provided that defendants would perform certain interior renovations prior to occupancy. The premises were not ready for occupancy on October 1. Thereafter, a series of amendments followed, moving the occupancy date back. On June 18, 2003, plaintiff executed an "amendment" to the parties' original lease, extending the commencement date to July 1, 2004. On August 8, 2003, it entered into a month-to-month lease with its existing landlord at 418 Stokes Road. A December 5, 2003 amendment to the agreement required that defendants obtain a certificate of occupancy (CO) before plaintiff took possession of the premises, which, under the amendment, was to be on or before July 2, 2004. By that date, however, defendants had not secured the CO. A July 27, 2004 addendum provided that the commencement date would be amended to January 1, 2005, and pursuant to a subsequent addendum dated February 28, 2005, plaintiff did not commence its occupancy of the premises until March 1, 2005. At the time plaintiff took possession, defendants had not acquired a CO.

Under the terms of the lease, for the first three years of occupancy, plaintiff agreed to pay $60,000 in annual rent, payable in twelve monthly installments of $5000 on the first day of each month commencing the first month of occupancy. For the fourth and fifth years of the lease, plaintiff agreed to pay $80,000 in annual rent, payable at the rate of $6667 per month.

In addition, plaintiff also agreed to be responsible for all of the real estate taxes. Although plaintiff took occupancy of the property on March 1, 2005, it did not commence making the requisite rent payments or tax payments because defendant had not yet obtained a CO or made the necessary improvements.

On March 2, the Medford Township Construction Code Official issued a Notice of Violation and Order to Terminate to defendant pursuant to N.J.A.C. 5:23-2.23(b).*fn2 Six days later a Notice of Unsafe Structure was issued to defendant. On March 14, 2005, plaintiff's principal, third-party defendant, Frank Grungo, received a Notice and Order of Penalty charging him with failure to comply with the order to vacate the premises. N.J.A.C. 5:23-2.31(b)iii. Grungo appealed the citation to the Burlington County Construction Board of Appeals, which upheld the Notice of Penalty and $2000 weekly penalty for continued non-compliance.

Plaintiff then filed a Complaint in Lieu of Prerogative Writs in the Law Division.*fn3

Defendants then commenced an action in the Law Division, Special Civil Part, for summary dispossession against plaintiff based upon plaintiff's non-payment of rent. Grungo filed a motion seeking to transfer the Special Civil Part matter to the Law Division, which the court granted. On July 5, 2005, plaintiff filed a complaint alleging breach of contract, breach of the duty of good faith and fair dealing, anticipatory breach, negligence, and equitable fraud. Defendants subsequently filed their answer denying the allegations, asserting a counterclaim alleging that plaintiff breached the terms of the lease agreement, breached the covenant of good faith and fair dealing, and asserting a claim of guaranty against plaintiff and Grungo based upon their contention that plaintiff and Grungo "had personally guaranteed the payment obligations as set forth in the Lease and other agreements."

In May 2007, the court entered an order directing plaintiff to deposit $136,172 into Superior Court, which the parties agreed represented past due rent and taxes.

During the discovery period, defendants served upon plaintiff document requests and propounded interrogatories. The discovery sought included a request for "all documents that concern any of the damages claimed by the responding party" and to specifically itemize and quantify the "(1) business interruption damages[,] (2) loss of profits[,] and (3) loss of income to which plaintiff refers in the Complaint." Plaintiff provided one document entitled "Analysis of Lost Revenue" that was unaccompanied by any supporting documentation. With respect to defendants' specific request for gross and net income, employee composition, gross commissions, agent or brokerage agreements, and real estate transactions for the period 1998 through 2005, plaintiff objected to the question as being "overbroad, burdensome and irrelevant."

The court conducted a case management conference on November 13, 2006. Following the conference, the court entered an order dated November 16, directing that "[t]here shall be no expert reports nor expert witnesses in this case[.]"

One week prior to trial, defendants filed a motion in limine seeking to bar the introduction of any evidence related to lost revenues or profits occasioned by the delay in the opening of plaintiff's office. The court ruled that it would permit testimony that plaintiff's sales associates "went elsewhere because [the office] wasn't open[,]" but plaintiff would be precluded from presenting testimony, including expert testimony and reports, that "so many dollars in profit[s]" were lost "because of [the agent's] failure to join [plaintiff,]" as plaintiff had failed to "provide the defendant[s] with an opportunity to review the business records and make a determination as to what the impact of any of this lost income stream would be to that business."

At trial, once plaintiff concluded the presentation of its case, defendants moved to dismiss plaintiff's claims of economic duress surrounding the occupancy extensions to which plaintiff agreed in the three addenda to the lease. Defendants argued that on the breach of contract claim, plaintiff had "no viable damage item" to present to the jury because "we have 1, 2, 3 signed extensions each without any indication that rights were being reserved or any discussion of I'm going to come back at you, I'm signing this now but I'm coming back at you later." The court, affording every favorable inference to plaintiff, denied the motion.

Upon the completion of the testimonial stage of the trial, the court conducted a charge conference.*fn4 During the conference, the court denied plaintiff's application to amend the pleadings to reflect a claim for equitable fraud. Additionally, the court, over defendants' objection, permitted the issue of rent abatement and a specific jury instruction on rent abatement to be submitted to the jury. After concluding its deliberations, the eight deliberating jurors returned their verdict, unanimously finding that plaintiff proved its claim of breach of contract and that defendants' material breach caused damages to plaintiff in the form of: (1) fines and penalties paid to Medford Township for occupancy prior to the issuance of the CO; (2) unreimbursed costs expended by plaintiff for improvements to the leased premises; and (3) excess rent paid by plaintiff to its former landlord at 418 Stokes Road through February 28, 2005. The jury unanimously awarded plaintiff: (1) $16,000 for the breach of contract causing plaintiff to pay fines and penalties to Medford Township; (2) $25,000 for unreimbursed costs expended for improvements over and above the $33,000 in expenditures defendants acknowledged plaintiff had expended; and (3) $40,000 for excess rent plaintiff incurred at its previous 418 Stokes Road ...

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