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R.A.M. Holding Corp. v. Hoboken No. 1 Blimpie

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 24, 2009

R.A.M. HOLDING CORP., PLAINTIFF-APPELLANT,
v.
HOBOKEN NO. 1 BLIMPIE, INC., DEFENDANT-RESPONDENT.

On appeal from Superior Court of New Jersey, Law Division, Hudson County, No. L-1267-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted June 30, 2009

Before Judges Skillman and Wefing.

Plaintiff R.A.M. Holding Corp. ("RAM") appeals from a trial court order granting summary judgment to defendant Hoboken No. 1 Blimpie, Inc. ("Blimpie") and finding that Blimpie had validly exercised its option to renew its lease. After reviewing the record in light of the contentions advanced on appeal, we affirm, although for reasons other than those stated by the trial court.

RAM owns a building located at 110 Washington Street in Hoboken, and in 1997 it leased the building to Blimpie for a period of ten years, commencing September 1, 1997, through August 31, 2007, for a monthly rent of $4,000. Defendant was reluctant to pay rent as of September 1, 1997, because the building required substantial renovations before defendant could open as a Blimpie's restaurant. The parties executed a rider to the lease under which defendant's obligation to pay rent did not commence until December 1, 1997, and defendant agreed that the monthly rent would increase annually in accordance with the cost of living computation included in the rider. Paragraph 48 of the rider granted Blimpie an option to renew the lease for two successive five-year periods. The rider defined the option in the following manner.

Tenant is herein granted an option to renew this lease for an additional five (5) year term (hereinafter the "First Renewal Period") for a monthly rental of the monthly base rent of equal to the monthly rent due for the 120th month plus the COLA annual increase as described in Paragraph 36 above.

Upon the expiration of the First Renewal Period and the five (5) year term, Tenant is herein granted an option to renew this Lease for an additional five (5) year term (hereinafter the "Second Renewal Period") for a monthly rent equal to the 150th month of this Lease plus the COLA annual increase as described in Paragraph 36 above.

Tenant shall furnish the Landlord within 60 days of the termination of this Lease written notification of its intent to exercise its option to renew.

The rider also stated that it was "intended to supplement, and be a part of, the Lease Agreement between the parties. To the extent that any of the terms of this Rider conflict with the terms as contained within the printed Lease Agreement, the terms of this Rider shall be controlling."

In early to mid-September 2007, the principals of RAM and Blimpie held discussions about a new lease, but an agreement was not finalized. There is no indication in the record that these discussions had broken off; rather, they had not been completed. On September 26, 1997, RAM's attorney wrote to Blimpie, informing it that the lease had terminated on August 31, 2007. Blimpie responded by letter dated October 2, 2007, that it was exercising its option to renew the lease for an additional five years. RAM responded in turn that it was willing to negotiate a new lease, but at a substantially increased monthly rental. When Blimpie would not agree, RAM commenced dispossess proceedings which were eventually removed to the Law Division.

The matter was presented to the trial court on cross-motions for summary judgment. RAM argued that Blimpie did not exercise its option within the sixty-day period before the lease expired on August 31, 2007, and that its written notification of October 2, 2007, was of no effect. Blimpie put forth several arguments in support of its position that it had validly exercised its option to renew this lease. It first responded that the language of the rider was ambiguous, specifically, that the phrase "within sixty days of the termination of this Lease" did not necessarily require such notification in the sixty days preceding the termination of the Lease. It contended that it could as easily be read to mean that the option could be exercised within the sixty days succeeding the termination of the lease. It pointed to other portions of the lease in which the phrase "within" clearly referred to a period after a defined event.

The trial court agreed with Blimpie that the phrase was ambiguous and, citing the principle that ambiguities in a lease are generally construed in a tenant's favor, Carteret Props. v. Variety Donuts, Inc., 49 N.J. 116, 127 (1967), it granted summary judgment to Blimpie. This appeal followed.

RAM argues that the construction put forth by Blimpie and adopted by the trial court is unreasonable. In our judgment, RAM's position is correct.

A tenant is generally required to give ample notice of the exercise of an option to renew a lease so that the landlord is not forced to wait until the last day of the lease term before he is informed whether the tenant wishes to remain on the premises. This requirement substantially reduces the risk that the premises will remain unoccupied for an indefinite period of time in the event that the renewal option is not exercised. [Goodyear Tire & Rubber Co. v. Kin Props., Inc., 276 N.J. Super. 96, 102 (App. Div.), certif. denied, 139 N.J. 290 (1994).]

RAM stresses, and we agree, that construing the rider so as to permit the option period to run past the expiration date of the lease would only increase a landlord's risk. In addition, adopting such a construction would lead to the anomalous result of conferring rights upon Blimpie after its leasehold had expired.

Because the trial court agreed with Blimpie's first argument, it had no occasion to consider its other contentions in support of its position. Blimpie also pointed to the terms of the Rider, under which its obligation to pay rent did not commence until December 1, 1997, and extended through November 30, 2007. The rider specifically provides, as we set forth earlier, that to the extent any of its terms conflict with the terms of the printed lease, the rider would prevail.

We agree with Blimpie that the most reasonable construction of this provision is to extend the termination of the lease to November 30, 2007. Blimpie, having exercised its option to renew its lease within sixty days of November 30, 2007, was entitled to summary judgment.

The order under review is affirmed.

20090724

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