On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, DC-017701-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Rodríguez and Reisner.
Defendant Herod Rutherford Developers, L.L.C. (Herod), appeals from a $10,084 judgment entered by the Special Civil Part on December 22, 2008, in favor of plaintiff The Benmoore Construction Group, Inc. (Benmoore). We reverse.
These are the most pertinent facts drawn from the trial record. Submax Services, L.L.C. (Submax) leased space from the property owner, Herod, to use as a Quizno's sub shop. The lease required the tenant to submit its construction plans to the landlord for its approval, provided that any permanent improvements would become the landlord's property at the end of the tenancy, and precluded the tenant from making either "structural alterations" or "any other alterations costing in any one instance in excess of $10,000" without the landlord's prior written consent. A schematic plan for the tenant's proposed improvements was attached to the lease.
Submax contracted with Benmoore to make the improvements needed to transform the unimproved leased space into a Quiznos restaurant. The contract between Submax and Benmoore was not attached to the lease or referenced in it; nor did Herod sign the contract. Although there were change orders, which added to the price of the job, Benmoore's principal, Jeffrey Pittel, confirmed that those change orders were signed by the tenant, not the owner. After Benmoore completed the job, Submax filed for bankruptcy without paying Benmoore approximately $14,000 still owed for the work.*fn1 On June 11, 2008, Benmoore filed a complaint against Submax and other related parties, and against Herod. Benmoore sought recovery against Herod on theories of unjust enrichment, quantum meruit and breach of contract.*fn2
According to Pittel, before the work was done, he discussed with the owner the fact that the owner would be entitled to "receive the fixed items that were being installed in place... within the structure." Pittel testified that the municipal building permit applications were submitted in the name of the owner. Pittel also confirmed that the owner received a copy of the architectural plans and proof of insurance. Pittel did not know whether the contract between Benmoore and Submax was submitted to the owner. Pittel testified that, among other improvements, Benmoore finished an existing bathroom, added a second bathroom, and added ductwork, an exhaust system, an improved sprinkler system and a fire alarm system. However, significantly, Pittel did not testify that he undertook these improvements in the expectation that the owner would pay for them if the tenant did not pay. Nor did he testify that the owner in any way induced him to believe that it would pay for the work.
Herod presented testimony from its manager, Jonathan Litt. According to Litt, Herod was "created... as an investment vehicle between two partners to purchase... a retail condominium" consisting of seven retail units on the first floor of a five-story commercial building. The space at issue in this case was one of those units. Litt described it as "vanilla" space, with only unpainted sheetrock walls, electricity and other utilities. Submax, which was a Quiznos franchisee, made the arrangements to have the space transformed into a restaurant. Herod did not enter into any contract with Benmoore or arrange for any of the renovation plans that Benmoore carried out. Nor, according to Litt, did Herod inspect any of the work done by Benmoore. On cross-examination, Litt explained that although an architectural drawing was attached to the lease, it did not contain the kind of detail needed to actually perform the improvements. Rather, the "schematic" attached to the lease was there to assure the landlord that the plans conformed to the space and would not "encroach into someone else's space."
After running the sub shop for a period of time, Submax stopped paying rent. In addition to failing to pay Benmoore, Submax failed to pay Herod more than $38,000 in rent. According to Litt "a lot of" the fixtures and equipment Submax had installed in the space were repossessed by another creditor. Herod removed some of the other improvements, such as "the counters, the floor, [and] the wallpaper which was Quiznos specific," because other tenants would not want those items in the space. However, other improvements remained, such as grease traps, ductwork, and a completed HVAC system. Nonetheless, at the time of the trial on November 21, 2008, Herod still had not been able to find a replacement tenant. In particular, Herod had tried to rent to another restaurant tenant which declined the space.
In an oral opinion placed on the record on December 3, 2008, the trial judge characterized the issue in the case as whether Benmoore had "a viable cause of action" for unjust enrichment where "there was no contract between these parties, but... the defendant was aware of the construction work." She concluded that the landlord approved or authorized the tenant to undertake the construction work. Further, from the fact that the lease required the tenant to pay any increased property taxes attributable to its improvements, she inferred that the parties understood that the Benmoore improvements would increase the value of the property.
The judge also relied on the lease clause providing that the improvements would become the landlord's property at the end of the tenancy. From a lease provision requiring the tenant to obtain a discharge of any mechanics liens placed on the property arising out of work performed for the tenant, she reasoned that "the landlord knew that there was a ...