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Mainardi Management Co. v. Estate of Fanale


August 14, 2009


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-3368-05.

Per curiam.


Argued January 28, 2009

Before Judges Rodríguez, Payne and Waugh.

Plaintiff, Mainardi Management Co. (Broker), appeals from a no cause determination in favor of the Estate of Salvatore J. Fanale (Landowner), following a bench trial. We affirm.

Sometime in 1998, Landowner and Broker began discussing the possibility of a lease agreement with CVS. At that time, Landowner was primarily a residential developer with little experience in commercial development. In 1999, Broker sent CVS a proposed site plan. In May 2000, Broker sent Landowner a proposed commission agreement that offered a payment arrangement of twenty percent of the commission upon execution of the lease and site plan approval, and eighty percent upon CVS's opening for business and obtaining a certificate of occupancy. After several months of negotiations, CVS signed a letter of intent on December 13, 2000. Landowner and Broker signed a formal commission agreement, which Broker drafted, providing:

The [Landowner] hereby agrees that if a Lease is executed between [Landowner] and [CVS], [Landowner] will pay [Broker] a commission in the amount of One Hundred Fifty Thousand ($150,000) Dollars to be paid out as follows:

Twenty Thousand ($20,000) Dollars upon execution of Lease and [Landowner]'s receipt of Site Plan Approval.

Eighty Thousand ($80,000) Dollars upon [CVS] obtaining a Certificate of Occupancy and opening for business. Twenty Five Thousand ($25,000) Dollars each year for the next two (2) years on the anniversary of [CVS] obtaining a Certificate of Occupancy.

Despite the execution of the commission agreement, negotiations over the terms of the lease and the site plan continued for the next two years. Finally, Landowner and CVS signed a lease agreement on July 11, 2003. Landowner paid Broker the first $20,000 installment of the commission.

On July 25, 2003, Landowner obtained the necessary zoning variances and approvals, subject to various conditions, including final approval from the New Jersey Department of Environmental Protection (DEP). Landowner's development plan included construction of three buildings: the CVS store, a bank, and an office building. Landowner was specifically required to obtain a permit from the DEP for excess septic usage in the office building, which was separate from and unrelated to the CVS building.

For reasons that are not clear in the record, Landowner never commenced construction. The parties dispute whether Landowner was unable to obtain the necessary permits to obtain final approval for construction and, if this was the case, whether Landowner did so intentionally in order to escape the lease. Landowner alleges that additional permits and approvals were required. Broker contends that all prerequisites to commencing construction had been satisfied prior to CVS's termination of the lease. The record is devoid of any indication as to what additional approvals may have been necessary, the status of such approvals, and the degree of effort Landowner engaged in to obtain those approvals.

Broker made several attempts to purchase the property to preserve the lease with CVS but was unsuccessful. On April 29, 2005, CVS exercised its rights under the lease to terminate because Landowner had failed to complete the building and grant possession by August 1, 2004.

Broker sued for the remaining balance of the commission agreement. Prior to the start of the bench trial, the judge urged the parties to settle and indicated he was inclined to rule in Landowner's favor if the parties went forward. The parties did not reach a settlement agreement. Each party made an offer of settlement, neither offer was accepted. The matter proceeded to trial. Broker put on its case, which consisted of a variety of documents and the testimony of one witness, Richard Mainardi, Broker's Vice President.

On the second day of trial, Broker moved for a mistrial and for recusal on the grounds that the judge had demonstrated bias and prejudgment of the matter. Specifically, Broker alleged the judge pressured the parties to settle. According to Broker, the judge's law clerk stated, "The judge said you're going to lose this case . . . . The judge is leaning toward the other side."

In addition, Richard Mainardi certified that he overheard the judge make a derogatory comment about "brokers," although he did not recall or state the specific wording. Broker also alleged that, while on the bench but before going on record, the judge stated, "Someone is going to be hurt here." Mainardi also certified that, during his testimony on the first day, he saw the judge "surfing the net" and looking at "" The judge denied the motion for mistrial and recusal.

At the conclusion of the Broker's case, both sides rested. The judge dismissed Broker's claim, finding the commission agreement drafted by Broker expressly conditioned the second payment of $80,000 on CVS obtaining a certificate of occupancy.

The central question is whether Broker was entitled to the entire commission once the lease was executed or if Broker was only entitled to the specified amounts as various contingencies were fulfilled. The answer turns on whether the term "upon [CVS] obtaining a Certificate of Occupancy and opening for business" indicated a condition for payment or was intended to function as a time-spacing provision to spread payments over a longer period. This is a question of law. Therefore, we decide the issue based on the controlling principles and without deferring to the trial judge's analysis. Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). Nonetheless, we reach the same legal conclusion as the judge. We hold that the disputed language required CVS to occupy the property before Broker became entitled to the second commission payment. Therefore, Broker has no contractual claim of entitlement to the balance of the commission.

Broker argues the lease agreement contained Landowner's express promise to CVS to complete construction within one year, and that Broker did not bear the risk of loss if the construction never commenced. Broker argues its only obligation was to find an acceptable tenant for the property and, once it completed this obligation, it had fully performed and was entitled to the full commission. Broker further urges that this limitation on its contractual obligations is underscored by the fact that it had no power to influence Landowner's construction of, or CVS's occupation of, the property.

Broker cites to numerous foreign authorities in support of this proposition. However, the courts in every case Broker cites found first that there existed an unambiguous obligation to pay the disputed amount. These holdings essentially refused to allow a contract to be defeated by failure of an arbitrary or inessential condition. For example, a subcontractor who has fully performed cannot be denied payment simply because the owner never paid the general contractor. Restatement (2nd) of Contracts §227, cmt. b, illus. 1 (1979).

This line of analysis returns to the question of the parties' intent in drafting the contract. Contracting parties are bound by the language of the contract and their intent as outwardly manifested to the other party. Schor v. FMS Financial Corp., 357 N.J. Super. 185, 191 (App. Div. 2002). To prove it was entitled to the full commission upon signing the lease agreement, Broker was required to establish the parties intended the commission agreement to have this meaning when they signed it. Broker failed to do so.

First, Broker presented only limited evidence that, in the course of the parties' dealings, Broker and Landowner outwardly manifested the belief that once the lease agreement was procured Broker was entitled to the full commission to be paid out at staggered intervals. The evidence Broker presented was limited to Mainardi's hearsay testimony as to the reasons why Landowner wanted to stagger the payments and a demand letter dated February 23, 2005, stating "Mainardi Management Co. expects its full commission from Beacon Realty Corp. at [sic] respect to the CVS lease, regardless of who you might sell this property to, or if CVS terminates their Lease." In other words, aside from the hearsay testimony, the sole evidence supporting Broker's assertions was its unilateral claim of entitlement four years after the commission agreement was signed and the deal had already soured. Obviously, the judge did not credit this evidence or did not consider it sufficiently weighty.

Second, ambiguities in contractual language are construed against the drafter. Schor, supra, 357 N.J. Super. at 193. Although the language of the commission agreement could sustain Broker's interpretation, it could be read with equal or greater validity to indicate Broker was not entitled to full payment of the commission until Landowner actually realized the benefit of its bargain by securing a rent-paying tenant.

Broker also argues there is insufficient factual basis to support the dismissal of its case and that the judge misinterpreted the import of the evidence presented. Specifically, Broker challenges the findings that Landowner was inexperienced in commercial matters and was simply incapable of completing all the procedural steps necessary to commence construction; the transaction was financially impossible for Landowner to complete; Landowner was not as capable as Broker in matters of commercial development; and Landowner proceeded in good faith without animus to Broker.

Broker also argues that, because Landowner did not produce David Fanale, with whom most of the transactional discussions and negotiations took place and who was a potential witness within Landowner's control, the judge was required to make an adverse inference that his testimony would have been unfavorable to Landowner's case. State v. Clawans, 38 N.J. 162, 170-71 (1962), Wild v. Roman, 91 N.J. Super. 410 (App. Div. 1966), Bender v. Adelson, 187 N.J. 41 (2006).

The sole factual issue in dispute was whether Landowner intentionally subverted the lease agreement by not taking the final steps necessary to commence construction. Broker did not present any significant evidence that Landowner intentionally delayed construction so CVS would terminate the lease. Richard Mainardi only testified as to observations of Landowner's demeanor as the development project began to stagnate. There was no direct evidence in the record that Landowner could have proceeded with the development and chose not to, nor is there evidence that Landowner allowed the lease to lapse with the goal of depriving Broker of its commission. Although Broker urges this Court find the dismissal of its claim was a "denial of justice" wholly contrary to the "uncontroverted testimony" and "substantial body of documentary evidence," there is no basis for these assertions. Broker bore the burden of proving its case by a preponderance of the evidence.

It is well settled that we will not disturb a trial judge's findings of fact, "unless they are so wholly insupportable as to result in a denial of justice" and are binding on a reviewing court where they are "supported by adequate, substantial, and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974) (internal citations and quotations omitted). This deferential standard is based in large part on the trial judge's ability to view the live witness testimony and make firsthand credibility determinations. Ibid.

Here, we conclude that Broker did not produce any substantial testimony that Landowner actively subverted the lease agreement so as to prevent Broker from collecting the full amount due on its commission.

Broker failed to establish, either as a matter of law or as a matter of fact, that the parties intended that Broker would be entitled to full payment of the commission upon obtaining a signed lease agreement with CVS.

An adverse inference under Clawans was not appropriate. Broker never attempted to call David Fanale as a witness, the basis for Broker's Clawans charge, and it never attempted to produce any witnesses, expert or otherwise, who could testify as to whether Landowner diligently undertook to complete the final procedural steps to begin construction of CVS's building.

Broker next contends that the lease agreement included an express covenant for Landowner to complete construction within one year, and that this, in turn, created an implied covenant in the commission agreement. The essence of this argument is that Landowner promised both CVS and Broker that it would carry out its performance of the lease agreement in good faith. Even if this is the case, a party alleging breach of the implied covenant of good faith and fair dealing implicit in every contract must prove the breaching party acted with an "improper motive." Wilson v. Amerada Hess Corp., 168 N.J. 236, 244-47 (2001). As noted above, the judge found Broker failed to establish by a preponderance of the evidence that Landowner did not act in good faith. We see no reason to disturb this finding.

The cases Broker cites in broad support of its assertion that the lease agreement contained an implied promise to Broker are inapposite. See New Jersey Bank v. Palladino, 77 N.J. 33 (1978) (reading an otherwise illegal contract to include the statutory requirements necessary to validate the contract and give effect to the intentions of both parties); Palisades Properties, Inc. v. Brunetti, 44 N.J. 117 (1965) (holding that the contract implicitly included the restrictive covenants necessary to conform to parties' manifest intent).

Broker further attempts to make out a claim for unjust enrichment on the theory that it invested a lot of time and effort into furthering the development of the property. However, there is a statutory requirement that brokerage commission agreements be put in writing to be enforceable. N.J.S.A. 25:1-16(b). A broker may not seek a commission payment in the absence of a written agreement. Where, as here, the parties had a written agreement, they will be held to the terms of that agreement. Broker's unjust enrichment argument thus fails.

We turn next to Broker's claims of judicial bias and prejudgment.

Broker reiterates its claim, brought on the second day of trial, that the judge demonstrated prejudgment of the case and bias against Broker. We are mindful that, pursuant to Rule 1:12-1(d), a judge may be disqualified for expressing an opinion on a matter in question in the action. State v. Medina, 349 N.J. Super. 108, 129 (App. Div.), certif. denied, 174 N.J. 193 (2002). This requirement is qualified, however, such that "[t]he rule's prohibition 'is directed primarily at statements made outside of the declarant's role as judge.'" Ibid. (quoting State v. Marshall, 148 N.J. 89, 278, cert. denied, 522 U.S. 850, 118 S.Ct. 140, 139 L.Ed. 2d 88 (1997)). A judge may thus express an opinion on an issue in controversy without such comments meriting disqualification.

Broker relies on All Modes Transp., Inc. v. Hecksteden, 389 N.J. Super. 462 (App. Div. 2006) for the proposition that a judge may exceed the bounds of propriety by over-zealously pushing parties to settle a matter. In All Modes, the trial judge interrupted a witness in the middle of cross-examination to encourage the parties to settle, suggesting further testimony could result in criminal prosecution. Id. at 469. Broker did not allege any such coercion or improper threat was made here. In general, New Jersey strongly favors settlements. Ziegelheim v. Apollo, 128 N.J. 250, 263 (1992).

Nor is Broker's claim of judicial bias supported by the body of case law. The bulk of the cases alleging judicial bias involved juries. See, e.g., Carey v. Lovett, 132 N.J. 44 (1993). Although Broker asserts that a judge presiding over a bench trial has an even greater obligation to maintain the appearance of impartiality than in a jury trial, the principles do not translate. The issue in jury cases is whether the judge acted in a way which could impinge on the jury's impartiality; there is no such danger where a jury is absent. Davanne Realty Co. v. Brune, 67 N.J. Super. 500, 511 (App. Div. 1961).

Similarly, there was nothing improper in the judge questioning Richard Mainardi, particularly in a bench trial, where the judge sits as the finder of fact and is entitled to ask questions to gain a better understanding of the facts being presented or to clarify ambiguous testimony. Ibid.

Pursuant to Medina, there is nothing to prohibit a judge in a bench trial from expressing an opinion as to the merits of a particular position prior to the resolution of those issues, provided the party is given ample opportunity to present the merits of that case. Medina, supra, 349 N.J. Super. at 129. Although the judge's law clerk indicated that the judge was "leaning toward" Landowner, the judge here allowed Broker to present its case. There were numerous documentary exhibits, and Richard Mainardi testified for two days. Most of this evidence was suited to proving Broker's unjust enrichment claim, which was not raised in the complaint and is precluded by statute.



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