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Lawyers Guild Realty, Inc. v. ICSD

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


October 6, 2009

LAWYERS GUILD REALTY, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
ICSD, L.L.C., A LIMITED LIABILITY CORPORATION OF THE STATE OF NEW JERSEY, ISADORE CAPELOUTO, SAMUEL DENORCHIA AND BINOD SINHA, M.D., DEFENDANTS, AND COURTHOUSE MEDICAL GROUP, L.L.C, A LIMITED LIABILITY CORPORATION OF THE STATE OF NEW JERSEY, AND ALFRED MAURO, M.D., DEFENDANTS-RESPONDENTS/CROSS-APPELLANTS, AND COURTHOUSE MEDICAL GROUP, L.L.C., AND ALFRED MAURO, M.D., THIRD-PARTY PLAINTIFFS,
v.
JOHN MCCANN, THIRD-PARTY DEFENDANT.

On appeal from Superior Court of New Jersey, Law Division, Hudson County, No. L-628-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted September 15, 2009

Before Judges Wefing, Messano and LeWinn.

Plaintiff Lawyers Guild Realty, Inc. ("Lawyers Guild") owns the building located at 610 Newark Avenue in Jersey City, New Jersey. It leased a portion of the premises to defendant ICSD, L.L.C. ("ICSD"), an entity formed by defendants Isadore Capelouto and Samuel DeNorchia. ICSD, in turn, entered into a sublease with defendant Courthouse Medical Group, L.L.C. ("Courthouse"), an entity formed by defendant Alfred Mauro, M.D., and defendant Binod Sinha, M.D. Mauro and Sinha each held a fifty-percent interest in Courthouse. Disputes arose between and among the parties as to their respective rights and duties under this lease and sublease, and litigation ensued. Lawyers Guild, Courthouse and Mauro appeal and cross-appeal from various orders entered by the trial court during the course of this litigation.

I.

The matter has a complex history, both factually and procedurally, which must be set forth for a proper analysis of the issues that the parties present to us. The building in question houses office space, and for many years Arthur Taubman, M.D., now deceased, leased a portion of the building for his medical practice. Several physicians worked for Dr. Taubman in his practice, which included conducting examinations and performing physical therapy. Defendant Capelouto, who is not a physician, had a nearby office from which he handled accounting and collecting receivables for Taubman's practice. Defendant DeNorchia leased adjoining space to Taubman's in which MRI examinations were conducted. A large number of the patients who received MRIs through DeNorchia were referred by Taubman's practice.

After a long illness, Dr. Taubman died in 2002, leaving a number of creditors, including Lawyers Guild, to whom he owed more than $600,000. Following Taubman's death, the practice continued to operate for a period of time, apparently under Capelouto's management.

Defendant Mauro had worked in Taubman's practice, and Capelouto introduced Mauro to Frank Guarini, the principal of Lawyers Guild, proposing that Mauro lease the space Taubman had rented until his death. Guarini was agreeable to this but wanted some methodology to reduce the debt Taubman had owed to Lawyers Guild at his death. From the portions of Guarini's deposition that have been provided to us, it is apparent that there were no substantive discussions between Guarini and Mauro with respect to the terms of the lease to be executed.

Some time after Guarini and Mauro met, Capelouto proposed that, rather than have Mauro lease the space from Lawyers Guild, he and DeNorchia would form ICSD, which would lease the premises from Lawyers Guild and then sublet it to Courthouse, an entity to be formed by Mauro and Sinha. Capelouto evidently believed this would help him retain the accounting and collection work he had performed for Taubman's practice while DeNorchia believed it would help him continue to receive MRI referrals as he had in the past. This structure was agreeable to all of the parties, and the attorneys for Lawyers Guild set about preparing the requisite lease and sublease.

Lawyers Guild had, in the interim, commenced suit against Taubman's estate for the money it was owed at his death. Guarini testified in his deposition that Capelouto and DeNorchia agreed, as part of this lease transaction, to compensate Lawyers Guild for any shortfall it might experience in its efforts to collect from Taubman's estate, capping their liability at $325,000. Guarini also testified at his deposition that he personally did not discuss that topic with defendant Mauro.

Multiple drafts were prepared of the proposed lease between Lawyers Guild and ICSD and the sublease between ICSD and Courthouse. ICSD was to lease Dr. Taubman's space, on the same terms and conditions as had been in Taubman's lease, for a period of ten years. Courthouse was to sublet that space, again for ten years. These drafts were prepared by counsel for Lawyers Guild and reviewed by counsel for ICSD and Courthouse and their principals, all of whom used the same attorney.

The final form of ICSD's lease with Lawyers Guild, executed in February 2003, contained the following language in an attached rider:

Tenant is aware that Landlord has asserted a claim against the prior tenant at the premises for unpaid rent, for loan repayments on credit advanced by the Landlord for physical improvements to the premises, designated as additional rent under the prior lease and its rider. Tenant is also aware that, as of February 15, 2003, the amount claimed by Landlord as due to it from the prior Tenant, Arthur E. Taubman, MD, PA, amounted to $620,078.17.

As further consideration for the creation of the leasehold interest herein, Tenant agrees to pay, upon the signing of the within Lease, the sum of $100,000 to the Landlord for immediate set up, which sum shall also be used to reduce the amount of Landlord's claim for unpaid rent and other indebtedness asserted in the above paragraph. Tenant further agrees to guarantee an amount up to $325,000 of the aforesaid sums under the terms and conditions set forth herein.

Tenant further agrees that, as security for its guarantee of the Landlord's recovery of its past due rent and other charges, Tenant shall obtain and furnish Landlord with security interests under a security agreement on all accounts receivable of the medical corporations or other entities which will operate at the premises under the within lease. Tenant warrants that it is empowered and authorized to pledge or to obtain pledges of the said accounts receivable and acknowledges that Landlord is relying upon such warrant in agreeing to lease the premises.

Landlord shall use its best efforts to recover and enforce a judgment against the prior Tenant for the aforesaid sums and to recover any assets claimed as collateral therefor. Should the funds recovered by Landlord amount to less than the entire sum due and owing to the Landlord, Tenant agrees to satisfy the Landlord in an amount up to $325,000 by advancing any sum or sums necessary to complete the Landlord's recovery of the amounts due.

Also attached to ICSD's lease with Lawyers Guild were separate guarantees, executed by both Capelouto and DeNorchia individually, which guaranteed "the punctual payment by the lessee [ICSD] . . . of all rents and other payments payable or at any time falling due under said lease . . . ."

Also in February 2003, Courthouse signed a sublease for the space ICSD had leased from Lawyers Guild. Attached to Courthouse's sublease was a document entitled "Rider," which is identified as a rider to the lease "between ICSD, L.L.C., (Tenant) and Courthouse Medical Group, L.L.C., ('Sub-Sub-Tenant')." In the balance of the rider, the term "sub-sub-tenant" never appears while the term "sub-tenant" is used repeatedly. The rider, however, never identifies the party intended by the term "sub-tenant."

Paragraph 46 of this rider contained the following pertinent provisions:

Sub-Tenant is aware that Tenant has asserted a claim against the prior Sub-Tenant at the premises for unpaid rent, for loan repayments on credit advanced by the Tenant for physical improvements to the premises, designated as additional rent under the prior lease and its rider. Sub-Tenant is also aware that, as of February 15, 2003, the amount claimed by Tenant as due to it from the prior Sub-Tenant, Arthur E. Taubman, MD, PA, amounted to $620,078.17.

As further consideration for the creation of the leasehold interest herein, Sub-Tenant agrees to pay, upon the signing of the within Lease, the sum of $100,000 to the Tenant for immediate set up, which sum shall also be used to reduce the amount of Tenant's claim for unpaid rent and other indebtedness asserted in the above paragraph. Sub-Tenant further agrees to guarantee an amount up to $325,000 of the aforesaid sums under the terms and conditions set forth herein.

Sub-Tenant further agrees that, as security for its guarantee of the Tenant's recovery of its past due rent and other charges, Sub-Tenant shall obtain and furnish Tenant with security interests under a security agreement on all accounts receivable of the medical corporations or other entities which will operate at the premises under the within lease. Sub-Tenant warrants that it is empowered and authorized to pledge or to obtain pledges of the said accounts receivable and acknowledges that Tenant is relying upon such warranty in agreeing to lease the premises.

Tenant shall use its best efforts to recover and enforce a judgment against the prior Sub-Tenant for the aforesaid sums and to recover any assets claimed as collateral therefor. Should the funds recovered by Tenant amount to less than the entire sum due and owing to the Tenant, Sub-Tenant agrees to satisfy the Tenant in an amount up to $325,000 by advancing any sum or sums necessary to complete the Tenant's recovery of the amounts due.

In addition, paragraph 48 of this rider provides, "The undersigned individuals personally guarantee the performance of the obligations of the Sub-Tenant in favor of the Tenant unconditionally and fully."

This sublease was signed by Capelouto on behalf of ICSD and Mauro and Sinha on behalf of Courthouse. The names Alfred Mauro and Binod Sinha are handwritten twice under the typed name, "COURTHOUSE MEDICAL GROUP, L.L.C." Each is written once in cursive form and once in printed form. Underneath those signatures appears the word "GUARANTORS:". No signatures are written beneath that word and there are no separate guarantees appended to the sublease as are appended to ICSD's lease. Courthouse did execute a security agreement giving Lawyers Guild a continuing security interest in all of its accounts receivable to secure both its performance under its sublease and the performance of ICSD under its lease with Lawyers Guild.

Sometime after Courthouse took up occupancy of the premises, disputes erupted. Mauro was concerned about the poor air quality in the premises and testing revealed the presence of mold. Both Courthouse and ICSD eventually vacated the premises, and Lawyers Guild thereafter commenced suit, naming both Courthouse and ICSD and their respective principals as defendants. In its complaint, Lawyers Guild sought to collect rent it alleged to be due and also to be reimbursed for the balance remaining from its attempt to collect from Taubman's estate the money it was owed at his death.

Within its complaint Lawyers Guild alleged that, of the more than $600,000 due from Taubman, it had only been able to collect slightly less than $285,000. It sought payment from ICSD of some $235,000 under the provisions of its lease set forth above. It also claimed unpaid rent, for a total of more than $400,000. The complaint also alleged that Courthouse had assumed the same obligation under its sublease and thus owed Lawyers Guild more than $400,000. It also alleged that Capelouto, DeNorchia, Mauro and Sinha were all individually liable to Lawyers Guild for the same sums.

Courthouse and Mauro filed an answer and counterclaim against Lawyers Guild; a cross-claim against ICSD, Capelouto and DeNorchia; and a third-party complaint against the attorney who had represented them in connection with the sublease.*fn1 Within their pleadings Courthouse and Mauro alleged not only environmental problems with the premises but also that ICSD had not forwarded to Lawyers Guild the rental payments that Courthouse had made during the term of its occupancy.

During the course of that litigation, Courthouse, Mauro, ICSD and Capelouto eventually resolved their differences and executed a settlement agreement.*fn2 Under that agreement, they "rescinded" the sublease on the basis of "material environmental problems" with the premises that had been unknown to Courthouse or Mauro and agreed the sublease would be deemed "void ab initio." They further agreed that ICSD and Capelouto would not seek any unpaid rent from Courthouse or Mauro and that Courthouse and Mauro would not seek the return of any rent previously paid to ICSD.

Finally, we note that Lawyers Guild has obtained a default judgment against Capelouto for more than $850,000 and has settled its claims against DeNorchia. The order contained in the record before us that disposes of those particular claims does not contain the terms of the settlement.

II.

A.

We turn now to the various orders which the parties contest before us. According to plaintiff's notice of appeal, it is appealing from the orders of August 17, 2007; January 18, 2008; and March 14, 2008. The trial court entered two orders on August 17, 2007, one of which granted summary judgment to defendant Mauro and dismissed all claims against him individually. The companion order denied the motion of Lawyers Guild for summary judgment against Mauro and Courthouse. Lawyers Guild argued below and contends on appeal that Mauro was personally obligated to it, both under the language of the sublease set forth earlier and the signature he appended to the sublease. It thus seeks to reverse the first of these two orders. In our judgment, the trial court correctly granted Mauro's motion.

We note first the standard governing our review of this question. Summary judgment is proper when "there is no genuine issue as to any material fact challenged and [] the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). In considering such a motion, a court must look at all the facts presented by the parties "in the light most favorable to the non-moving party . . . ." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Without weighing the merits of the evidence presented, it must determine only whether there is a genuine issue for trial. Ibid. In considering whether the trial court's determination in this regard was correct, this court applies the same standard as did the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

Lawyers Guild presents three arguments in support of its contention that the trial court erred when it granted summary judgment to Mauro individually. It maintains that Mauro intended to provide a personal guarantee, that the clause in the sublease set forth earlier in this opinion contains scrivener's errors and was intended to run in favor of Lawyers Guild, and that the manner in which Mauro signed the sublease granted his personal guarantee.

The first two contentions revolve around Lawyers Guild's position that the sublease is ambiguous. Based upon that contention, it urges that we should look to the underlying intention of the parties which, it asserts, included a grant of a personal guarantee by Mauro to Lawyers Guild.

We reject this argument for several reasons. Guarantee agreements are to be strictly construed. Peoples Nat'l Bank v. Fowler, 73 N.J. 88 (1977). The terms of a guarantee agreement are to be "interpreted most strongly against the party" who inserted the terms of guarantee. Center 48 Ltd. P'ship v. May Dep't Stores Co., 355 N.J. Super. 390, 405 (App. Div. 2002). "It has long been settled law that a [guarantee] is chargeable only according to the strict terms of its undertaking and its obligations cannot and should not be extended either by implication or by construction beyond the confines of its contract." Peoples Nat'l Bank v. Fowler, supra, 73 N.J. at 101 (quoting Monmouth Lumber Co. v. Indemnity Ins. Co. of N. Am., 21 N.J. 439, 452 (1956)) (citations omitted). The sublease in question must thus be interpreted against plaintiff and in favor of Mauro.

From our review of the record, we can find no basis to conclude that Mauro intended to provide a personal guarantee to Lawyers Guild for a portion of Taubman's pre-existing indebtedness. Guarini admitted in his deposition that he never discussed the topic with defendant Mauro and the attorneys who handled the negotiations and drafting of documents on behalf of Lawyers Guild could not testify to their having had any communications with Mauro about such a personal guarantee.*fn3

Plaintiff contends that the language of guarantee in paragraph 48 of the rider to the sublease was intended to run in favor of Lawyers Guild, not ICSD. That contention flies in the face of the clear language of the paragraph, which states that it runs "in favor of the Tenant," who is clearly defined as ICSD. Nothing within the sublease or the attached rider makes Lawyers Guild a party to the sublease or confers any rights upon Lawyers Guild.

The final argument of Lawyers Guild with respect to this issue, that Mauro's signature on the sublease constituted his guarantee, is, in our judgment, easily disposed of. We have previously set forth the manner in which Mauro signed the sublease, both in terms of the physical placement of his name on the document and its appearance. Our examination of this document convinces us that Mauro signed this sublease solely on behalf of Courthouse, and not in any individual capacity. The signatures of Mauro and Sinha are contained entirely within the space between the typed headings Courthouse Medical Group, L.L.C. and Guarantors. No signatures appear beneath the word "Guarantors:". The conclusion is inescapable that Mauro did not sign the sublease individually but only on behalf of Courthouse.

B.

Plaintiff appeals from the second order of August 17, 2007, which denied its motion for summary judgment against Courthouse. We decline, however, to address this question for an order denying summary judgment is clearly interlocutory in nature.

We have recently had occasion to express our disapproval of litigants dismissing their claims without prejudice in order to secure appellate review of interlocutory orders. Grow Co. v. Chokshi, 403 N.J. Super. 443, 460 (App. Div. 2008).

[We] condemn the creation of the appearance of finality through the dismissal without prejudice of unadjudicated claims that have not been concluded in fact but are left to be resurrected in a new suit. To have the finality required to create appellate jurisdiction, an order must not only completely dispose of all pleaded claims as to all parties, but all its dispositions must also be final. (citations omitted)

The methodology of dismissing unadjudicated claims without prejudice in order to create the appearance of a final order confounds the manner in which appellate jurisdiction was meant to arise in our judicial system. In the present circumstances, we conclude that the order in question is not a final order and we repeat the admonishment expressed in CPC Int'l, Inc. v. Hartford Acc. & Indem. Co., 316 N.J. Super. 351, 366 (App. Div. 1998), certif. denied, 158 N.J. 73 (1999), that the dismissal of claims without prejudice must not become a device "to foist jurisdiction upon this court" over what is, in reality, an interlocutory order. [Grow Co., supra, 403 N.J. Super. at 460-61.]

We decline to permit these parties to circumvent the principles of appellate practice and review through their consensual draftsmanship. We apply the same analysis and reach the same conclusion with respect to the other order Lawyers Guild challenges, that of January 18, 2008, which denied its motion to dismiss Courthouse's counterclaim asserting a breach of the warranty of habitability and a breach of the covenant of good faith and fair dealing. We decline to address the merits of that contention as well.

III.

We noted earlier that during the course of this litigation, Courthouse, Mauro, ICSD and Capelouto settled their claims against one another. They memorialized that resolution in a settlement agreement executed in March 2007. On January 18, 2008, the trial court granted the motion filed by Courthouse and Mauro to enforce that settlement. In March 2008, the trial court denied plaintiff's motion to "clarify" the trial court's order of January 18, 2008. Plaintiff has appealed from both orders.

Our review of this record convinces us that both orders should be affirmed, but we deem it necessary to note what we consider the limited scope of the order of January 18, 2008.

We note, as did the trial court, that plaintiff failed to oppose this motion at the time it was initially presented to the trial court. Only thereafter, under the guise of seeking clarification, did plaintiff interpose any concerns about this relief.

More importantly, however, the settlement agreement by its terms only ran between ICSD, Capelouto, Courthouse and Mauro. Those parties could only agree to resolve the differences that existed between themselves. ICSD and Capelouto, by agreeing to release any claims they may have had against Courthouse and Mauro, could not release any claims that Lawyers Guild may have had against Courthouse and Mauro. We have set forth our reasons for concluding that the trial court correctly granted summary judgment dismissing plaintiff's claims against defendant Mauro. Whether plaintiff has a viable claim against Courthouse is a separate issue, unaffected by the March 2007 settlement agreement.

We recognize that the trial court entered an order dated April 30, 2008, which stated that by virtue of the earlier orders enforcing the settlement agreement and denying the motion for clarification, all of plaintiff's claims against Courthouse were dismissed with prejudice.

The order of April 30, 2008, was a consent order, which also provided: "Nothing herein shall affect, limit, or extinguish plaintiff's right to file a notice of appeal from the January 18, 2008 Order, the March 14, 2008 Order, and the August 17, 2007 Order." It is evident to us that this order was intended as a vehicle for the parties to seek appellate review of what are clearly interlocutory orders and as such, was improper.

IV.

We turn now to the cross-appeal filed by Courthouse and Mauro. In their notice of cross-appeal, they identify the orders of August 17, 2007; November 7, 2007; and January 18, 2008; as the subject of their cross-appeal. We address each in turn.

We have noted that the trial court entered two orders on August 17, 2007, which had the effect of granting partial summary judgment to defendant Mauro and leaving in place plaintiff's claim against defendant Courthouse. Clearly, defendants are not challenging the order granting summary judgment to defendant Mauro. And, as we have indicated earlier in this opinion, the trial court's decision in that regard was correct; he was not liable individually to Lawyers Guild, either on the sublease or as a guarantor. As to the second order, denying summary judgment to Courthouse, we have also set forth that the order was interlocutory, and we will not address the merits of that question on this appeal; we thus dismiss that portion of the cross-appeal.

We noted in another section of this opinion that disputes developed with respect to the air quality in the premises and that eventually Courthouse and Mauro vacated the site. For some period of time Courthouse and Mauro deposited the rent that was due to ICSD into an escrow account held by their attorneys. Later, they began to pay that rent into the Superior Court clerk's office.

Lawyers Guild filed a motion to direct that the funds held in the escrow account and on deposit with the clerk's office be released to it. Defendants filed a cross-motion, seeking an award of counsel fees pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1. After argument, the trial court ruled that plaintiff was entitled to receive the funds on deposit in the clerk's office but was not entitled to receive the funds in the escrow account. It also denied defendants' request for counsel fees. Those rulings are incorporated in the order of November 7, 2007, the second order challenged in the cross-appeal.*fn4

The only aspect of that order which defendants urge us to reverse is the denial of counsel fees. We have reviewed this record in detail, and we are satisfied that the trial court's order denying fees was entirely correct. That defendant Mauro ultimately prevailed by way of summary judgment, a determination which, as we have indicated, was correct, does not mean that plaintiff's suit against him was the product of bad faith or malice.

The third order that defendants contest on their cross-appeal is the trial court's order of January 18, 2008, which, in substance, restated its earlier order denying summary judgment to defendant Courthouse. We decline to address this order for the reasons we have previously stated: orders denying summary judgment are interlocutory, and we do not sanction the parties' attempts to circumvent the ordinary principles of appellate review.

In sum, as to both the appeal and the cross-appeal, we affirm in part and dismiss in part as interlocutory.


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