July 29, 2009
PATHMARK STORES, INC., A DELAWARE CORPORATION, PLAINTIFF-RESPONDENT,
BERNARD OSTER, INC., A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-232-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 9, 2009
Before Judges R. B. Coleman and Simonelli.
Defendant Landlord Bernard Oster, Inc., a New Jersey corporation, appeals from an April 9, 2008 order of the Chancery Division that granted summary judgment in favor of its tenant, plaintiff Pathmark Stores, Inc. The order permanently enjoined defendant from proceeding with its construction plans. After careful review of the record and the arguments of the parties, we affirm.
The following is a summary of the facts of the record. Plaintiff, a Delaware corporation, owns and operates Pathmark, a supermarket, in the Maple Avenue Shopping Center (the Shopping Center). The Shopping Center is owned by defendant and located in Fair Lawn, New Jersey. On July 3, 1974, before construction of the Shopping Center began, plaintiff and defendant's predecessor in title entered into a Lease pertaining to the anchor store at the Shopping Center (the Lease). The term of the Lease was for an initial twenty-five years, with five successive options to extend the term: the first for a ten-year period, and the subsequent four for five-year periods. With all options exercised, the Lease would expire in 2030.
Article 2 of the Lease granted plaintiff "an easement to use, in common with other tenants . . ., the portions of the Shopping Center intended to be for common use, including but not limited to parking areas . . . ." The Lease provided that the construction of the anchor store and remainder improvements, including satellite stores, was to be completed according to an attached plan, referred to in the record as the 1973 site plan.
Article 9(B)(1), entitled "Remainder of the Improvements," provides that the "Landlord shall not at any time during the term of this Lease construct or permit to be constructed any buildings or improvements on the Land which do not conform thereto." That Article provided that "[t]he aggregate gross floor area of buildings constructed on the Land, exclusive of the Tenant's Building, shall not at any time during the term of this Lease exceed 30,500 square feet." Pursuant to Paragraph C of Article 9, the Common Area is required to be "sufficient for the parking of not less than 8.3 automobiles for each 1,000 square feet of gross floor area of buildings in the Shopping Center," with stalls being of a specific size. According to plaintiff, the 1973 site plan depicted 447 spaces for customer parking. Under the Lease, employees are not allowed to park in customer-parking areas.
A separate provision, Article 11, entitled "Common Area," recites the Landlord's agreement that parking shall be available during all times Pathmark is open for business and that "[t]he layout of, and striping in, the Common Area, as indicated in [the 1973 site plan] shall not be changed without Tenant's consent." Article 12 provided that the landlord shall make roof repairs to tenant's building and "shall keep and maintain the Roadway Easement in good condition and repair, including but not limited to repairing and replacing paving; keeping the same properly drained . . . and suitably lighted."
In addition, Article 44 provides that "Landlord shall promptly forward to Tenant any notice or other communication received by Landlord from . . . any municipal or governmental authority in connection with any hearing or other administrative procedure relating to the use of the Land or any adjoining or adjacent property."
According to defendant, it had been unable to retain and attract tenants in the 10,000 square foot satellite store space, due to the antiquated design of the Shopping Center and the lack of visibility of the storefronts. Defendant claims that the vacant store space became an "eye-sore to the community and a detriment to the remaining Maple Avenue Shopping Center tenants and to [defendant]." Thus, without prior discussion with plaintiff, defendant met with the Fair Lawn Mayor and the River Road Improvement Corporation and explored its plan to modify the Shopping Center so as to keep up with current shopping center designs, which were more efficient and aesthetically pleasing.
In or about February 2006, defendant applied for approval of the Fair Lawn Planning Board to modify the Shopping Center. The proposed site plan included the "elimination of four satellite stores attached to the Pathmark premises, comprising approximately 10,000 square feet, and the construction of a single story, 19,665 square foot retail building near a wooded area . . . and a single story, 3,600 square foot branch bank building with a drive-thru facility on the eastern side." The proposed site plan provided for 482 parking spaces, which exceeded the number of spaces mandated by Fair Lawn by fourteen spaces.
On August 14, 2006, the Fair Lawn Planning Board approved defendant's site plan. Still, defendant did not provide plaintiff with a copy of its plans. According to plaintiff, defendant informed it of possible renovations but indicated that no final decision had been made.
In November 2006, defendant commenced construction at the Shopping Center. In January or February 2007, it demolished 10,000 square feet of store space adjoining Pathmark and created approximately 12,000 square feet of parking spaces in that area. Between November and July 2007, defendant constructed a demising wall, installed storm drainage at one corner of the Pathmark building, installed an underground conduit for accent lighting, removed four concrete islands and associated curbing at the front of Pathmark and installed about 800 feet of curbing in the front and the back of the Pathmark building.
In early July 2007, defendant erected a temporary construction safety fence on the western side of the property in preparation for the construction of the 19,665 square foot retail building. According to plaintiff, at that time, it contacted the Planning Board and one of defendant's representatives and learned of the specifics of defendant's plans. Next, "[o]utraged that it had not been consulted," plaintiff demanded that defendant discontinue construction. Shortly after, plaintiff commenced litigation against defendant, seeking injunctive relief and claiming breach of contract, trespass and private nuisance.
At some point, defendant obtained a report from Totally Secure, Inc. that revealed that only up to ten spaces in the area blocked for construction were utilized by Pathmark customers at any time. In addition, defendant claims that Pathmark employees park in the customer parking area, in violation of the Lease agreement. Defendant claims that it has already spent $1 million on the project, and it loses $10,000 everyday the project is delayed.
On appeal, defendant argues the trial court failed to adhere to the standards applicable to a motion for summary judgment, and that genuine issues of material fact rendered the granting of summary judgment in general, and the granting of the permanent injunctive relief in particular, patently erroneous. We are not persuaded by these arguments.
Defendant contends that the trial court failed to adhere to the standards applicable to a motion for summary judgment. Specifically, defendant contends that there were multiple factual disputes, which the trial court addressed by "resolving them on the papers or finding them to be inapplicable based upon an incorrect reading of the law." Based on careful review of the record and relevant law, we reject such contention.
On appeal from summary judgment, our review is de novo. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162 (App. Div.), certif. denied, 154 N.J. 608 (1998). We address defendant's contentions in turn.
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). The judge's role is to determine whether any genuine issues for trial exist, not to weigh the evidence and decide on the truth of the matter. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The inquiry is whether the evidence "viewed in the light most favorable to the non- moving party, is sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
To obtain a permanent injunction, the applicant must demonstrate that its "legal right to such relief has been established and that the injunction is necessary to prevent a continuing, irreparable injury." Verna v. Links at Valleybrook Neighborhood Ass'n, 371 N.J. Super. 77, 89 (App. Div. 2004) (citing McCullough v. Hartpence, 141 N.J. Eq. 499, 502 (Ch. 1948)). Notably, "[s]uch an injunction must be no more extensive than is reasonably required to protect the interest of the party in whose favor it is granted." Ibid. (citing Sunbeam Corp. v. Windsor-Fifth Ave., 14 N.J. 222, 232-33 (1954)).
When reviewing an order granting a permanent injunction, we consider the non-exclusive list of factors proposed by the Restatement (Second) of Torts and adopted by the court in Sheppard v. Township of Frankford, 261 N.J. Super. 5 (App. Div. 1992). Paternoster v. Shuster, 296 N.J. Super. 544, 556 (App. Div. 1997) (citing Sheppard, supra, 261 N.J. Super. at 10). "To the extent the factors are present, the judicial process is to weigh and balance each factor in a qualitative rather than quantitative manner." Sheppard, supra, 261 N.J. Super. at 10. The factors to be considered include:
(1) the character of the interest to be protected; (2) the relative adequacy of the injunction to the plaintiff as compared with other remedies; (3) the unreasonable delay in bringing suit; (4) any related misconduct by plaintiff; (5) the comparison of hardship to plaintiff if relief is denied, and hardship to defendant if relief is granted;
(6) the interests of others, including the public; and (7) the practicality of framing the order or judgment. [Paternoster, supra, 296 N.J. Super. at 556 (citing Sheppard, supra, 261 N.J. Super. at 10).]
Judicial consideration of these factors "'necessarily require[s] an individualized balancing of rights' and 'a sensitive evaluation of the entire situation.'" Ibid. (internal citations omitted) (quoting Horizon Health Ctr. v. Felicissimo, 135 N.J. 126, 148 (1994), certif. denied, 142 N.J. 574 (1995); Trans American Trucking Serv., Inc. v. Ruane, 273 N.J. Super. 130, 133 (App. Div. 1994)).
It is undisputed that Pathmark has a leasehold interest in the property with certain easement rights. Defendant contends that "[e]ven if the trial court was correct in determining that Pathmark's rights under the easement were impinged upon, the trial court should have considered the totality of the circumstances in light of the limited purpose of the easement and the intent of [defendant] to improve the Shopping Center." We agree that "[t]he conclusion that plaintiff has the right to enforce the restrictive covenant does not end the inquiry." Perelman v. Casiello, 392 N.J. Super. 412, 423 (App. Div. 2007) (citing Hemsley v. Marlborough House Co., 68 N.J. Eq. 596, 601 (1905) (concluding that although the subsequent landowner had the right to enforce the restrictive covenant, strict enforcement would be inequitable under the circumstances of the case)). That is because "[n]o plaintiff is entitled to such an injunction as of course, merely because of a violation of a covenant affecting real property, for which, to be sure, there is no adequate remedy at law." Gilpin v. Jacob Ellis Realties, Inc., 47 N.J. Super. 26, 30 (App. Div. 1957) (holding that even though it was undisputed that defendant breached a valid covenant, there was a question as to "what should be the remedy" and "whether plaintiff [was] entitled to a mandatory injunction"). Indeed, "[t]he allowance of injunctive relief is a discretionary matter, in that the court may be called upon to give or withhold relief depending upon variables, namely, the circumstances of the case." Ibid.
The exercise of judicial discretion in this type of case "may involve a consideration of such matters as whether the violation of the covenant was wanton in character and either of the parties acted unreasonably"; or it may involve the "application of the doctrine of relative hardship, under which such an injunction may be denied where the benefit to plaintiff, if it were issued, would be 'grossly less than the expense which would thereby be put to the defendant in carrying out the injunction.'" Roehrs v. Lees, 178 N.J. Super. 399, 410 (App. Div. 1981) (quoting Gilpin, supra, 47 N.J. Super. at 31). The application of the doctrine of relative hardship in Gilpin has been cited with approval by the Supreme Court and the Appellate Division, in several occasions. See, e.g., Davidson Bros. v. D. Katz & Sons, Inc., 121 N.J. 196, 230 (1990); Tide-Water Pipe Co. v. Blair Holding Co., 42 N.J. 591, 600, n.4 (1964); Steiger v. Lenoci, 323 N.J. Super. 529, 537 (App. Div. 1999); Szymczak v. Laferrara, 280 N.J. Super. 223, 231 (App. Div. 1995).
"An injunction is the strong arm of equity, and it . . . 'should never be granted when it will operate oppressively or contrary to the real justice of the case, . . . or when the benefit it will do the complainant is slight in comparison with the injury it will do the defendant.'" Sautto v. Edenboro Apartments, Inc., 84 N.J. Super. 461, 478 (App. Div. 1964) (quoting Sternberg v. O'Brien, 48 N.J. Eq. 370, 376 (1891)). Significantly, "a court may compel relocation of an easement to advance the interests of justice where the modification is minor and the parties' essential rights are fully preserved." Kline v. Bernardsville Ass'n, Inc., 267 N.J. Super. 473, 480 (App. Div. 1993). However, the "relocation of an easement without the mutual consent of the parties is an extraordinary remedy and should be grounded in a strong showing of necessity." Ibid. The determination is fact-sensitive. Ibid.
In Kline, the site plan for a shopping center required a slight relocation of "a right of way easement held by the adjacent property owners." Id. at 475. We remanded the case to the Law Division for a determination as to whether it should "exercise its equitable power and compel relocation of the easement." Id. at 481. We noted that notwithstanding case law that a landowner may not, "'unreasonably interfere with [an easement holder's] rights or change the character of the easement so as to make the use thereof significantly more difficult or burdensome,' . . . our courts have deviated from these principles on rare occasions where justice and equity plainly mandated that course." Id. at 478-79 (quoting Tide-Water Pipe Co., supra, 42 N.J. at 604). Such decisions "are based in large part on the doctrine of relative hardship as it pertains to applications for injunctive relief [and] . . . reveal a flexible approach toward the end of advancing essential justice." Id. at 479.
For example, in Kruvant v. 12-22 Woodland Ave. Corp., (Law Div. 1975), the court ordered the relocation of an easement consisting of a bridle trail held by a riding club in a location where the landowner wished to build a shopping center, "as long as the change was minor and the easement holder's right of way was not significantly burdened." Kline, supra, 267 N.J. Super. at 478 (citations omitted). Similarly, in Tide-Water Pipe Co., the Court "upheld the Chancery Division's order allowing the landowner to relocate the easement holder's pipelines where the landowner had improperly constructed a building over the easement holder's right of way." Kline, supra, 267 N.J. Super. at 479 (citing Tide-Water Pipe Co., supra, 42 N.J. at 591). In Tide-Water Pipe Co., supra, the defendant acquired the property with actual notice of the easement. 42 N.J. at 596. Nevertheless, it proceeded to build directly above plaintiff's pipelines and continued construction during the pendency of litigation. Id. at 597. The court gave defendant the "alternative of removing the building or paying the cost of relocating the lines." Id. at 599-600.
Even with these considerations in mind, we are not convinced that defendant was suffering from such hardship as to justify its interference with plaintiff's easement rights without plaintiff's consent.
Next, defendant claims that the process of construction was visible, plaintiff delayed in bringing suit from November 2006 to July 2007, and the trial court erroneously determined that the doctrines of estoppel, laches and waiver do not apply to the case at bar as a matter of law.
Estoppel is a doctrine "designed to prevent injustice by not permitting a party to repudiate a course of action on which another party has relied to his detriment." Knorr v. Smeal, 178 N.J. 169, 178 (2003). To establish equitable estoppel, the asserting party must show that the other party engaged in conduct, either intentionally or under circumstances that induced reliance, and that the asserting party acted or changed its position to its detriment. Ibid. "Laches is an equitable doctrine which penalizes knowing inaction by a party with a legal right from enforcing that right after passage of such a period of time that prejudice has resulted to the other [party] so that it would be inequitable to enforce the right." L.V. v. R.S., 347 N.J. Super. 33, 39 (App. Div. 2002) (citing Matter of Adoption of a Child of Indian Heritage, 111 N.J. 155 (1988)). Accordingly, the essential factors are "knowledge and delay by one party and change of position by the other." Ibid. (citation omitted). "'Waiver' has been defined as a voluntary and intentional relinquishment or abandonment of a known existing legal right, advantage, benefit, claim or privilege, which except for such waiver the party would have enjoyed." Long v. Bd. of Chosen Freeholders, 10 N.J. 380, 386 (1952) (citations omitted).
Here, we are not satisfied that any work which defendant completed on the property prior to July 2007 should have informed plaintiff of defendant's plan for extensive renovation. Most of the activity performed up to that time could have been reasonably interpreted to be repairs and maintenance, as described in Article 12. Therefore, we find no merit to defendant's claims that the motion judge erred in not concluding that these equitable doctrines precluded the grant of relief in favor of Pathmark.
Defendant further contends that the trial court committed plain error by concluding that "Pathmark's refusal to consent to any changes to the Common Area was not subject to the implied covenant of good faith and fair dealing." "A covenant of good faith and fair dealing is implied in every contract in New Jersey." Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001) (citing Sons of Thunder v. Borden, Inc., 148 N.J. 396, 420 (1997) (citations omitted)). "Although the implied covenant of good faith and fair dealing cannot override an express term in a contract, a party's performance under a contract may breach that implied covenant even though that performance does not violate a pertinent express term." Ibid. (citing Sons of Thunder, Inc., supra, 148 N.J. at 419). As defendant notes, "when a contract has afforded a party unbounded discretion, it is perfectly proper to impose a duty on that party to exercise its discretion in good faith." Sterling Nat'l Mortg. Co. v. Mortgage Corner, 97 F.3d 39, 44 (3d Cir. 1996).
Here, defendant's contention is based on Article 11(A)(2)(b) of the Lease, which states in relevant part that "[t]he layout of, and striping in, the Common Area . . . shall not be changed without Tenant's consent." The trial court, on the other hand, focuses on Article 9(B)(1) of the Lease, which states that "[i]mprovements shall conform to [the 1973 site plan] and, except as otherwise provided herein the Landlord shall not at any time during the term of this Lease construct or permit to be constructed" any non-conforming buildings or improvements. Defendant offered no proof that plaintiff's enforcement of its rights under the Lease constituted bad faith or that it had engaged in conduct calculated to induce defendant's reliance.
Plaintiff's complaint alleged that (1) defendant decided to redesign the common area "without the authorization and consent of Pathmark," in violation of Pathmark's rights; (2) defendant was unlawfully "interfering with Pathmark's right to use the Common Area parking for its intended purpose" and (3) Pathmark is entitled to use the common area "without unreasonable interference of defendant." Enjoyment of the common area and parking issues are addressed in Article 11, which conditions changes upon the tenant's consent. Thus, we reject the suggestion of the motion judge that plaintiff could not have consented to defendant's construction plans. Notwithstanding the rejection of that suggestion, we do not disagree with the motion judge's conclusion because defendant never asked for plaintiff's consent. Whether it would have consented, if asked, is irrelevant at this juncture.
Regarding a comparison of the hardships, defendant contends that plaintiff's actual hardship is minor, speculative, theoretical and far outweighed by defendant's hardship. Specifically, defendant claims that plaintiff would continue to have adequate parking, which could be further increased by plaintiff requiring its employees to park in the areas designated under the Lease. Defendant defines its own hardships as the loss of $1 million already spent, "losses of approximately $10,000 every day" and 10,000 square feet of retail store space already demolished. We observe initially that these are not irreparable injuries. Such losses may be compensated by a monetary award.
Plaintiff contends that the proposed construction would eliminate over fifty percent "of the prime spaces in front of [its store]." This is a disputed fact that we resolve in favor of defendant for purposes of summary judgment. However, as the trial court concluded, defendant's voluntary expenditure in furtherance of its violation of express terms of a valid contract is not a compelling reason to deny a permanent injunction. In addition, defendant is not precluded from making improvements that conform to the 1973 site plan, nor from coming to an agreement on a construction plan which is amenable to the plaintiff.
Defendant's final contention is that the proposed improvements to the Shopping Center would benefit the community of Fair Lawn by providing more visible storefronts, making the Shopping Center more conducive to foot traffic, attracting more customers and ultimately more tenants, eliminating "empty store fronts which benefit no one" and providing a "better mix of shops." We are not persuaded.
As the trial court noted, even though the proposed redevelopment might "contribute to a more economically vibrant Fair Lawn," such benefits must be weighed against private property interests. As an instructive analogy, in the eminent domain context, the government cannot act in the interest of the community "solely because the property is not used in an optimal manner." Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, 191 N.J. 344, 373 (2007). The enforcement of a valid contract is a competing, and more persuasive, public interest in this case.
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