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K-T Corp. v. JB Associates

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 4, 2009

K-T CORPORATION, JAMES THUL AND LAWRENCE THUL, PLAINTIFFS-APPELLANTS,
v.
JB ASSOCIATES, THUL AUTO PARTS, INC. AND THUL ENGINE & PARTS WAREHOUSE, INC., DEFENDANTS-RESPONDENTS, AND FREDERICK W. THUL, JR. AND NICHOLAS R. THUL, DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS,
v.
FREDERICK W. THUL, LOUISE THUL, LAWRENCE THUL, JAMES THUL AND THUL MACHINE WORKS, INC., THIRD-PARTY DEFENDANTS-APPELLANTS.

On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-659-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 29, 2008

Before Judges Skillman, Graves and Grall.

This case involves a family business dispute between, on the one side, a father and his two younger sons, and on the other side, the father's two older sons.

The father, third-party defendant Frederick W. Thul (Fred) inherited part of the business from his father and purchased the other part from his sister. Fred made gifts to his sons of their shares of the business.

The business consists of three operating companies: Thul Auto Parts, Inc. (TAP), Thul Engine and Parts Warehouse, Inc. (TEPW), and Thul Machine Works (TMW). Each of the four brothers and their families own 25% of the stock in each of these operating companies. However, the two older brothers, defendants Frederick W. Thul, Jr. (Rick) and Nicholas R. Thul (Nick), are solely responsible for the operation of TAP and TEPW, and the two younger brothers, plaintiffs James Thul (Jim) and Lawrence Thul (Larry), are solely responsible for the operation of TMW.

In addition to these three operating companies, the family business includes a real estate management company, plaintiff KT Corporation (K-T). Fred and his wife (also the four brothers' mother), third-party defendant Louise Thul (Louise), own 246 of the 250 voting shares of K-T stock. There are also 5,460 non-voting shares of K-T, 1,150 of which are owned by Louise and 1,077.50 of which are owned by each of the brothers and their families. Fred is the President and a Director of K-T. His four sons were also officers and directors.

As of 1998, K-T owned the properties on which TAP, TEPW and TMW operated their businesses. Each of these operating companies paid rent to K-T. However, there were no written leases as of that time, and the amount of rent the operating companies paid to K-T appears to have depended more on their financial success than the fair rental value of the properties.

The parties also operated another entity called JB Associates (JB), which was used primarily as a vehicle for distributing the profits from the family business to the four brothers. The three operating companies and K-T would pay JB what were designated as "management fees," and JB would make payments to the brothers which were apparently designated as "salaries." JB also paid for certain other benefits for the brothers and their families, such as health insurance. At Fred's direction these payments were approximately equal.

The four brothers also operated another business called TB Investments (TB), which invested in equipment, vehicles, computers and real estate, and leased these assets to third parties. This business appears to have been operated independently of TAP, TEPW, TMW, K-T and JB.

As of 1998, TMW, operated by Jim and Larry, was enjoying significantly greater financial success than TAP and TEPW, operated by Rick and Nick. To improve TAP's financial outlook, Rick and Nick decided to mount a marketing campaign to introduce TAP's newly remodeled stores. However, TAP was unable to borrow money from a financial institution for the marketing campaign. Consequently, TMW advanced money to TAP for this purpose.

TAP apparently failed to use all of the money advanced by TMW for the planned marketing campaign and instead used part of it for other purposes. As a result of his dissatisfaction with TAP's use of the money advanced by TMW and general dissatisfaction with TMW's subsidization of TAP, TEPW, Rick and Nick, Larry confronted Rick in the summer of 1998 about TAP's failure to apply monies advanced by TMW for marketing purposes. In the course of this confrontation, Larry told Rick that Rick and Nick should go their own way with TAP and TEPW, and that Larry and Jim would go their own way with TMW. Thereafter, the four brothers had a series of communications regarding proposals for the separation of the business of TAP and TEPW from the business of TMW.

In December 1998, two letters of intent relating to the separation of the businesses were prepared at the direction of the brothers, the first on December 17, 1998, and the second on December 30, 1998. The primary issue presented by this appeal is whether those letters of intent, followed by alleged performance of certain obligations set forth in the letters, resulted in a binding contract, which was subsequently breached by Larry, Jim, Fred and Louise. The text of the letters, the circumstances surrounding their preparation, and the alleged performance of certain obligations set forth therein are discussed in detail later in this opinion. Suffice it to note at this point that the letters not only provided for a separation of the business of TAP and TEPW from the business of TMW but also the transfer to Rick and Nick of all of Jim's, Larry's, Fred's and Louise's shares of stock in K-T and that Fred and Louise were not named parties to the letters of intent.

On March 12, 1999, the attorney for Jim and Larry sent a letter to the attorney for Rick and Nick, which stated:

As a follow[-]up to our telephone call this morning, this is to give you formal written notice that Larry and James Thul have terminated all negotiations with their brothers, pursuant to the Letter of Intent which was executed as of December 30, 1998. While it is my understanding that negotiations along different lines may ensue in the future, there will be no further discussions respecting the [transactions] that were proposed in the Letter of Intent.

I have also been requested to inform you that Frederick Thul, Sr., is no longer committed to undertake anything that had been proposed as part of the Letter of Intent.

Starting in January 1999, Rick and Nick assumed responsibility for the day-to-day management of K-T, which included the lease of one of its properties to a third-party and the sale of another property. Rick and Nick also maintained the books of K-T from January 1999 until April 2005. However, Fred continued to be the president and a director of K-T during this period and major decisions regarding the management of K-T were subject to his approval. Jim and Larry also continued to be directors and officers of K-T, but were not actively involved in management.

In July 1999, the property on which TMW's business operates was purchased from K-T for $756,341,52. The purchaser was L-J Real Property L.L.C. (L-J), which was established by Jim, Larry and Louise for the purpose of taking title to this property and leasing it to TMW. The purchase price, which was paid by promissory note, was fixed by Fred after consulting with Rick. Despite Rick's and Nick's request for security, Fred directed that the promissory note not be secured by a mortgage or other collateral.

On September 1, 2001, again at Fred's direction, a new promissory note was executed that replaced the July 1999 note, under which L-J's monthly payments were reduced and the note's term was extended. The reason for the modification of the terms of the note was a downturn in the profitability of TMW between 1998 and 2001, which made it difficult for TMW to pay the rent provided under its lease with L-J.

In May 2002, Fred, as President of K-T, agreed to a moratorium on payments under the amended promissory note due to a further downturn in TMW's financial situation. This moratorium lasted until April 2005.

In April 2005, Fred, Jim and Larry convened a meeting of K-T's Board of Directors at which they removed Rick and Nick as officers and directors. Since that time, Jim and Larry have assumed responsibility for the day-to-day management of K-T, subject to Fred's direction, and Rick and Nick have had no role in management of the company.

On May 3, 2005, shortly after the removal of Rick and Nick as officers and directors, K-T brought this action against Rick, Nick, and the two companies they operate, TAP and TEPW. The complaint asserted claims for breach of fiduciary duty, conversion, waste of K-T's assets, and unjust enrichment. The complaint also sought to reform leases that K-T had entered into with TAP and TEPW while K-T was controlled by Rick and Nick. The complaint was subsequently amended to add Jim and Larry as plaintiffs.

Rick and Nick filed what they designated as a third-party complaint against Jim, Larry, Fred and Louise,*fn1 which asserted an oppressed minority shareholder claim under N.J.S.A. 14A:12-7(1)(c), and a claim for breach of fiduciary duty. The third-party complaint sought compensatory and punitive damages.

The case was tried over five days in a bench trial, and following the trial, the parties submitted proposed findings of fact and conclusions of law.

The trial court decided the case by a written opinion, which in large part incorporated by reference the proposed findings of fact and conclusions of law submitted by Rick and Nick. The trial court found that "[t]he December 30, 1998 Letter of Intent became a legally binding and enforceable contract as a result of the conduct by all parties in performing their respective obligations under the agreement[,]" and that "[t]he Plaintiffs breached the December 30 Agreement by failing to fully perform their obligations, while retaining the benefits they received under the agreement." Based on these findings, the court entered an order requiring "Plaintiffs [to] comply with all terms and conditions of the December 30, 1998 Letter of Intent including completion of the severance payments[,]" and also providing that "all stock shall be transferred such that:

(1) Defendants own all of [K-T, TAP, TEPW] and Regional Automotive Warehouse, Corp."*fn2 The order also provided for transfers of stock so that plaintiffs would own all of TMW and all real property associated therewith.

The trial court concluded that there was nothing improper about the way Rick and Nick operated K-T between January and April 2005 when they were removed as officers and directors. Accordingly, the court rejected the claims asserted in plaintiffs' complaint. The order entered by the court on July 23, 2007 does not reflect this part of its decision.

However, the trial court sustained the claims asserted in Nick's and Rick's third-party complaint, including the claim that they were oppressed minority shareholders within the intent of N.J.S.A. 14A:12-7(1)(c). The only relief the court granted based on these conclusions, in addition to specific performance of the December 30, 1998 letter of intent, was an award of counsel fees and costs. This award totaled $156,295.52, and was memorialized by an order entered on November 16, 2007.

Jim, Larry, Fred and Louise (sometimes hereafter referred to collectively as appellants) appeal from the July 23, 2007 and November 16, 2007 orders. The trial court entered a stay pending appeal of the part of the July 23, 2007 order that required transfers of stock of the various Thul corporations, but returned control of K-T to Rick and Nick subject to various conditions set forth in the stay order.

On appeal, appellants argue that the trial court erred in concluding that the December 30, 1998 letter of intent was a binding contract subject to specific performance and that Rick and Nick were oppressed minority shareholders within the intent of N.J.S.A. 14A:12-7(1)(c). In addition, they argue that the court erred in rejecting their claims based on Rick's and Nick's alleged mismanagement of K-T and their claim for reformation of the leases from K-T to TAP and TEPW.

We conclude that the trial court erred in finding that the letter of intent constituted a binding contract and ordering specific performance of its terms and conditions. We also conclude that the court erred in finding that Rick and Nick were oppressed minority shareholders and awarding them counsel fees on that basis. We affirm the dismissal of appellants' damage claims. We reverse the dismissal of appellants' claims for reformation of TAP's and TEPW's leases from K-T.

I.

"It is well settled that 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 memorandum, 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). Whether a preliminary agreement such as a letter of intent "is binding is a matter of the parties' intent." Morales v. Santiago, 217 N.J. Super. 496, 501 (App. Div. 1987). "If the parties intend to be bound by their preliminary agreement and view the later written contract as merely a memorialization of their agreement, they are bound by the preliminary agreement." Id. at 501-02. "On the other hand, if the parties intend that their preliminary agreement be subject to the terms of their later contract, they are not bound by their preliminary agreement." Id. at 502. In determining whether the parties to a preliminary agreement intend to be bound even without execution of a formal contract, a court should consider the language of the preliminary agreement, the circumstances of its preparation and the course of dealings between the parties before and after the document's preparation. See McBarron v. Kipling Woods, L.L.C., 365 N.J. Super. 114, 116-17 (App. Div. 2004); Morales, supra, 217 N.J. Super. at 502-03; Berg Agency, supra, 136 N.J. Super. at 374-75.

There were two letters of intent prepared at the direction of the Thul brothers, the first dated December 17, 1998, and the second dated December 30, 1998. There are only minor differences between the two letters, and the parties appear to agree that the December 17th letter was superseded by the December 30th letter. Therefore, we consider only the later letter.

The December 30th letter contains multiple indications that the parties did not intend it to be a binding agreement. The first sentence of the letter states: "The purpose of this Letter of Intent . . . is to set forth certain non-binding understandings and agreements between [TMW, TAP, TEPW, K-T, JB, Rick, Nick, Larry and Jim] with respect to the realignment of [TMW, TAP, TEPW, K-T and JB] . . . on the terms and subject to the conditions set forth below." (Emphasis added). Immediately following this first sentence is a statement, separated from the prior and subsequent sentences by spaces, indented, and set forth in bold print:

"NON-BINDING PROVISIONS"

The next sentence of the letter reiterates this theme: "The following paragraphs reflect our understanding of the matter described in them, but do not constitute a complete statement of, or a legally binding or enforceable agreement or commitment on the part of, [TMW, TAP, TEPW], K-T, JB, Rick, Nick, Larry and Jim with respect to the matters described herein." (Emphasis added). After setting forth the terms and conditions of the proposed realignment of the Thul brothers' business interests, the letter closes with this statement:

We propose that, upon execution of this Letter by each of you, our accountants and corporate and tax attorneys meet to discuss the mechanics and tax implications of the Realignment. Once our professional advisors are in agreement, we will instruct our attorneys to prepare drafts of the documents necessary to effectuate the Realignment.

Up and until the consummation of the Realignment, the rights and liabilities of Rick, Nick, Larry and Jim, with respect to [TMW, TAP, TEPW, K-T and TB] including, but not limited to, the rights to management fees and salaries, shall remain unchanged from that in existence prior to the entering into of any transactions in connection with the Realignment. [Emphasis added.]

It is thus apparent that the draftsman of this letter made a concerted effort to foreclose any argument that the parties intended the letter to be a binding agreement even if no formal contract was subsequently executed.

Furthermore, even though the December 17th letter of intent was apparently drafted by or at the behest of Jim and Larry, Nick testified that the previously quoted closing statement in the December 30th letter of intent was added by him and Rick:

Q: The middle of that paragraph there's a sentence that begins up until the consummation of the realignment. Do you see that?

A: Yes.

Q: That -- that line does not appear in the December 17, 1998 letter of intent. Do you know why it was added and by whom?

A: Yes. It was added by -- by Rick and I, in the event the lawyers couldn't make this legal, that everything would go back to the way it was prior to the letter of intent.

Consequently, it is clear that Rick and Nick did not intend The December 30th letter of intent to be a binding agreement.

In addition, even though one of the essential terms of the letter of intent was that Fred and Louise would transfer "all of their interests in K-T to Rick, Nick, Larry and Jim in equal shares," there is no indication in the text of the letter that Fred and Louise had agreed to its terms, and there are no spaces at the end of the letter for their signatures. Thus, the fact that Fred and Louise were not parties to the letters of intent, even though action by them (the transfer of their stock in K-T) was a prerequisite to implementation of the plan of realignment set forth therein, is a further indication that the parties did not intend this letter to be a binding contract.

Moreover, there is no subsequent document executed by Fred and Louise indicating that a copy of the letter of intent had been provided to them and that they agreed to its terms. Nor did any of the four brothers testify that they provided a copy of the letter of intent to or reviewed its terms with their parents, much less that Fred and Louise agreed to transfer their shares of stock in K-T, as would have been required for its implementation.

In attempting to establish that Fred agreed to the letter of intent even though he was not a party to the document, Rick and Nick rely upon the previously quoted portion of the March 12, 1999 letter from Jim and Larry's attorney, which stated: "I have also been asked to inform you that Frederick Thul, Sr., is no longer committed to undertake anything that had been proposed as part of the Letter of Intent." Rick and Nick argue that "[t]he obvious import of this statement is that Sr. previously was committed to doing so." However, the oblique suggestion in the March 12th letter from Larry and Jim's attorney that Fred had changed his views concerning the letter of intent falls far short of the evidence that would be required to establish that he was familiar with the letter and had agreed to be bound by its terms. Indeed, there is no indication that Fred, rather than Larry or Jim, was the source of the statement in the March 12th letter upon which Rick and Nick rely.

Rick and Nick also rely upon Nick's answers to several leading questions from his attorney to show that Fred agreed to the terms of the letter of intent:

Q: Prior to this letter of March 12, 1999, isn't it a fact that Fred Thul, Sr., your father, had expressed his commitment to the brothers' agreement?

A: Yes.

Q: So there's no question here that your father knew what the brothers had been talking about and what they agreed to, is there?

A: No question.

Despite this conclusionary testimony, Nick never testified that he communicated directly with Fred about the terms of the letter of intent or that either Jim or Larry told him they had communicated directly with Fred about those terms.

Moreover, there is no indication in the March 12th letter that Louise, who also would have been an indispensable party to the implementation of the terms of the letter of intent, ever agreed to its provisions.

In addition, we note that the letter of intent does not provide for any payment or other benefit to Fred and Louise in exchange for the transfer of their shares of stock in K-T.

Thus, it appears that any such transfer would have been a gift. A mere promise to make a gift is not enforceable. See In re Dodge, 50 N.J. 192, 216 (1967). Although a promise to transfer property may provide the necessary evidence of donative intent, in the absence of a delivery and relinquishment of control, there is no enforceable gift. Id. at 216. Therefore, even if Rick and Nick had presented evidence that Fred and Louise agreed to the letter of intent, thus establishing that they had an intent to transfer their shares, such a promise probably would have been unenforceable against them as a valid gift, as the record lacks the requisite evidence of delivery and relinquishment of ownership and dominion.

Rick's and Nick's primary argument is that Jim and Larry took various actions after December 30, 1998, which show that they considered themselves bound by the terms of the letter of intent notwithstanding the letter's clear statements that its provisions were "non-binding." However, Rick and Nick do not dispute that Fred and Louise's transfer of their shares of stock in K-T was an essential element of the series of proposed transactions set forth in the letter of intent; they do not argue that even if the court concludes that the provisions for transfer of Fred and Louise's stock in K-T to Rick and Nick are unenforceable because Fred and Louise were not parties to the letter, that letter should nevertheless be read to have created a binding contract between Rick, Nick, Larry and Jim with respect to its other provisions. Therefore, our conclusion that Rick and Nick failed to establish that Fred and Louise were parties to the letter of intent, or subsequently agreed to its provisions, compels the conclusion that the letter did not constitute a binding contract, regardless of the steps the four brothers may have taken subsequently to fulfill their obligations thereunder.

In any event, the brothers' actions after December 30, 1998 fall short of demonstrating an unequivocal intention to be bound by the terms of the letter of intent. In reviewing these actions, it is important to keep in mind that the letter constituted a plan to change long-standing business arrangements among family members that had been conducted in a highly informal manner, with Fred playing a dominant role. Rick and Nick argue that one indication of the post-December 30, 1998 implementation of the letter of intent was that they played no role in the management of TMW and Larry and Jim played no role in the operation of TAP and TEPW after that date. However, Larry and Jim had generally operated TMW independently of Rick and Nick, and Rick and Nick had generally operated TAP and TEPW independently of Jim and Larry before execution of the letter of intent. Therefore, there was no significant change in the method of operation of these companies after December 30, 1998. Similarly, the payments that Jim and Larry had TMW make to JB during January and February of 1999 were simply a continuation of the past manner of operation of these businesses within the Thul family.

TMW's severance payments to Rick and Nick during January and February 1999 did constitute a change in the family business operations, but they do not establish that Larry and Jim intended the letter of intent to be binding even though the undertakings set forth therein had not yet been formalized by the preparation and execution of a formal contract. Rather, the severance payments appear to have reflected Larry's and Jim's expectation that the letter of intent would be formalized and their desire to promote that objective. Moreover, those payments were made during a period of time when TMW, which was then far more successful than TAP and TEPW, was subsidizing Rick and Nick and their business operations in furtherance of Fred's policy of providing his sons and their families with substantially equal incomes.

The division of the assets held by TB and Fred's payments to Rick and Nick in connection with that transaction do not reflect an intent on the part of the brothers to be bound by the provisions of the letter of intent relating to TMW, TAP, TEPW and K-T because the brothers' investments in TB's assets appear to have operated independently of their conduct of the businesses of the three operating companies and K-T.

Therefore, even disregarding the fact that Fred and Louise never agreed to the letter of intent, which was indispensable to implementation of its provisions, Jim and Larry's actions after December 30, 1998 did not manifest an unequivocal intent to be bound by the provisions of the letter.

For all these reasons, the trial court erred in concluding that the letter of intent constituted a binding contract and ordering specific performance of its terms and conditions.

II.

We turn next to the trial court's conclusion that Rick and Nick were oppressed minority shareholders entitled to relief under N.J.S.A. 14A:12-7(1)(c). In reaching this conclusion, the court stated:

The Plaintiffs breached common law and statutory duties owed to the Defendants including: fraudulently inducing them to expend monies from the refinancing of the K-T mortgage for use in improvements to [TAP] store locations and then demanding that the improved operations be shared with the Plaintiffs; by failing after April, 2005 to have K-T Corp. pay the real estate taxes, insurance, maintenance, and utility charges for the [TAP] store locations as had been the family practice; directing that L-J not be required to make its payments to K-T Corp. under the Amended Note from September 2001; lifting the moratorium on L-J's payment obligations to K-T Corp. until the time when Defendants were no longer in a position to receive the benefits of those monies, and from willfully refusing to complete the terms and conditions of the December 30 Agreement.

The Defendants are oppressed minority shareholders because the Plaintiffs frustrated their reasonable expectations as shareholders in K-T Corp.

This part of the court's opinion, which concludes that K-T, Jim and Larry violated Rick and Nick's rights in multiple respects, is confusing and difficult to disentangle. However, it is clear that the grounds upon which the court granted relief to Rick and Nick pursuant to this part of its opinion are unsustainable.

First, the court's conclusion that K-T, Larry and Jim violated Rick's and Nick's rights by "wilfully refusing to complete the terms of the December 30 Agreement" is erroneous because, for the reasons set forth at length in Section I of this opinion, the December 30, 1998 letter of intent was not a binding contract.

Second, there is no evidence in the record to support the court's finding that Rick and Nick were "fraudulently induc[ed] . . . to expend monies from the refinancing of the K-T mortgage for use in improvements to [TAP] store locations" and that Jim and Larry "then demand[ed] that the improved operations be shared with [them]." In fact, Rick and Nick never made such an allegation in their pleadings or trial testimony. It is undisputed that the refinancing of the K-T mortgage was for the benefit of TAP, which had been unable to obtain financing for desired improvements on its own due to its poor financial condition. It also appears that TAP failed to repay the amount it borrowed from K-T out of the proceeds of that refinancing.

Third, there is no basis for the trial court's conclusion that K-T, Jim and Larry breached any duty to Rick and Nick by "directing that L-J not be required to make its payments to K-T Corp. under the Amended Note from September, 2001 [and] lifting the moratorium on L-J's payment obligations to K-T Corp. until the time when Defendants no longer were in a position to receive the benefit of those monies" because Rick and Nick were operating K-T when those modifications of the original promissory note were made and they acquiesced in Fred's requests for the modifications. Moreover, the moratorium has expired and L-J is now making payments under the promissory note.

Fourth, there is no evidence to support the trial court's finding that K-T, Larry and Jim "fail[ed] after April, 2005 to have K-T Corp. pay the real estate taxes, insurance, maintenance and utility charges for [TAP] store locations as had been the family practice." To the contrary, there is documentary evidence that K-T continued making those payments at least through March 21, 2007.

Therefore, we reverse the part of the July 23, 2007 order that concluded that Rick and Nick were oppressed minority shareholders and awarded them counsel fees on that basis.

III.

Appellants also argue that the trial court erred in denying their claims for compensatory damages and for reformation of the TAP and TEPW leases. As previously noted, the court's denial of these claims is not reflected in the July 23, 2007 order from which this appeal has been taken. Nevertheless, the court's opinion makes it clear that these claims were rejected. Therefore, we deem the July 23, 2007 order to impliedly memorialize that disposition.

A.

In denying appellants' claims for compensatory damages, the trial court found:

The Plaintiffs have not established that there was anything improper with the administrative/management fees the Defendants received from K-T Corp.

Frederick Thul, Sr.'s testimony established that he was aware of this practice and in fact directed its use to minimize tax consequences. Testimony and evidence also established that these fees were being utilized appropriately by the Defendants.

The administrative/management fees were also ratified by the Plaintiffs through their knowledge of and failure to challenge them.

None of the exhibits put forth by the Plaintiffs established any improper expenditures by the Defendants while in control of K-T Corp.

The plaintiffs failed to establish any improper spending by the Defendants.

These findings are supported by sufficient credible evidence in the record, see Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974), and provide an adequate factual foundation for the rejection of appellants' damage claims except for the claims based on the leases between K-T and TAP and TEPW.

B.

In rejecting appellants' claims relating to those leases, the trial court made the following findings:

The Plaintiffs did not demonstrate any material differences between the written leases of 2001 and the previously existing oral leases, nor that the Defendants received any additional benefits from them.

The Plaintiffs could not prove that they suffered any harm as a result of the leases going from oral to written.

It has been established that Frederick W. Thul, Sr. had knowledge of the terms of the written leases and was given copies of those documents at their inception or close thereto.

It has been demonstrated that at all times, the Plaintiffs were made aware of the financial conditions of the leases as well as all other businesses. Plaintiffs were provided with bank statements and financial documents dictating all expenditures for real estate taxes, insurance, utilities and maintenance. No objection was raised by them at any time.

By their failure to complain or take action sooner, the Plaintiffs are deemed to have ratified the terms and conditions of the written leases. Additionally, the Plaintiffs are now estopped from challenging the terms of the written leases, and as such they are enforceable, valid contracts.

Insofar as appellants' claims relating to the leases are based on the amount of rent provided thereunder, including responsibility for payment of taxes, insurance, utilities and maintenance, these findings are supported by sufficient credible evidence in the record, see Rova Farms, supra, 65 N.J. at 483-84, and provide an adequate factual foundation for the court's rejection of those damage claims. However, the court failed to distinguish between appellants' damage claims based on the alleged insufficiency of the rent provided under the leases and their claims for reformation of the parts of the leases providing for rights of renewal which could last until 2021 and allowing TAP and TEPW to assign or sublet the premises. Moreover, appellants' reformation claim appears to be substantial. Although K-T's bank statements and financial documents revealed the amounts of rent it was receiving for TAP and TEPW and its expenditures for the properties, those documents would not have revealed the provisions of the leases relating to renewals and the right of TAP and TEPW to sublet or assign the premises. Moreover, it is unclear when the leases were furnished to Fred (there is evidence that this did not occur until 2004, rather than "at [the leases'] inception or close thereafter," as found by the trial court), and whether they were ever provided to Larry and Jim. Therefore, the dismissal of those claims must be reversed and the case remanded for specific findings of fact and conclusions of law relating to those claims and reconsideration based on those findings and conclusions.

Accordingly, we reverse the parts of the July 23, 2007 order that determined that the December 30, 1998 letter of intent was a valid contract, which was breached by the appellants, and ordered specific performance. We also reverse the part of that order and the November 16, 2007 order that awarded Rick and Nick counsel fees and costs. We affirm the part of the July 23, 2007 order that impliedly dismissed appellants' damage claims. We reverse the part of the July 23, 2007 order that impliedly rejected appellants' claims for reformation of TAP's and TEPW's leases for K-T and remand that part of the case to the trial court for further proceedings in conformity with this opinion.


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