April 14, 2010
GIG'S INC., T/A TOM SWIFT'S, PLAINTIFF-RESPONDENT,
KYUNG HEE PARK, DEFENDANT-APPELLANT, AND ESTATE OF JIMMY PARK AND KH&Y CORP., DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-750-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 8, 2010
Before Judges Lisa, Baxter and Alvarez.
This appeal arises from a dispute between a commercial tenant, defendants, and their landlord, plaintiff Gig's Inc.
After defendants' summary judgment motion was denied, the case went to trial. The jury awarded plaintiff $105,775 for damage to the leased premises. The judge subsequently denied defendants' motion for judgment notwithstanding the verdict (JNOV). Defendant Kyung Hee Park (Kyung) appeals, contending that the court erred in (1) denying defendants' summary judgment motion, (2) failing to instruct the jury to consider the applicable six-year limitations period when assessing damages to the building, (3) failing to instruct the jury to consider $116,000 that defendants allegedly overpaid plaintiff, and (4) failing to grant defendants' JNOV motion. We reject these arguments and affirm.
Plaintiff owns the building in Fort Lee that is the subject of this dispute. Plaintiff operated a restaurant in the building for nearly twenty-five years until 1994, when plaintiff's owner, John F. Dalesso, sold the restaurant to Kyung for $350,000. The parties then entered into a lease, which would enable Kyung to operate the restaurant business in plaintiff's building.
The November 15, 1994 lease was for a term of ten years and fifteen days, with monthly rental for the first five years of $8000, and for the last five years of $9000. Kyung signed the lease, and then assigned it to defendant KH&Y Corp., of which she was the sole shareholder, but she remained personally liable for the lease. Her husband, defendant Jimmy Park, was the "manager" of the restaurant and its chief decision-maker.
A rider to the lease gave Kyung an option to renew for an additional five years. The rider provided that if the parties could not agree upon the rental amount for the extended period, the issue would be subject to binding arbitration, in which each party would select a realtor, those two realtors would select a third realtor, and the three would make up the arbitration panel. The lease also contained a non-waiver of rights provision, under which plaintiff's failure to immediately enforce any lease provision would not be deemed a waiver of the right to seek enforcement in the future.
A lease provision obligated defendants to make repairs and maintain the premises in good condition, "and at the end or other expiration of the term hereof, [defendants] shall deliver up the rented premises in good order and condition, wear and tear from a reasonable use thereof, and damage by the elements not resulting from the neglect or fault of the Tenant, excepted." Soon after taking possession, defendants made certain repairs and alterations without plaintiff's prior approval.
Dalesso testified at trial regarding a side agreement he had with Jimmy Park from the beginning of the lease term. The lease provided that a portion of the parking area on the property was not available for use by the restaurant until after 5:00 p.m. This was because Dalesso had leased those parking spaces to another business, Kwasha Lipton, for daytime parking. Dalesso received $1500 per month from Kwasha Lipton. Dalesso said he recognized that starting up a new restaurant business is difficult, he had seen many fail, and he did not want to face the problem of obtaining another tenant if Jimmy Park's restaurant failed, nor did he want to be in a position where he would have to go in and resume operation. Therefore, in an effort to help the new venture get started, he "asked Kwasha Lipton to direct the [$1500 monthly] payment to [Jimmy Park]. So what it did, it took his rent down from 8,000 a month to 6,500 a month, to give him a break."
This arrangement continued for the first seven-and-one-half years of the lease. In apparent furtherance of the arrangement, KH&Y Corp. and Kwasha Lipton entered into a "Parking Area License Agreement" on January 5, 1995, by which Kwasha Lipton paid $1500 per month to KH&Y Corp.
On June 13, 2002, Jimmy Park signed a document given to him by Dalesso which stated that KH&Y Corp. was directing Kwasha Lipton's successor to the parking license to "direct all future payments for the 12 parking spaces to [Gig's] Inc., c/o John F. Dalesso." Therefore, beginning in July 2002, defendant stopped receiving the $1500 per month to apply toward the monthly rent due plaintiff, which had risen to $9000 per month under the lease terms. On the same date, June 13, 2002, Jimmy Park executed an "Amendment to Lease," under which the rent was increased to $10,500 per month for the remaining portion of the ten years in the original lease term. Jimmy Park signed the amendment above Kyung's typewritten name. Kyung was informed of the amendment by her husband and did not dispute its validity.
Dalesso explained in his testimony that the $1500 per month side deal he originally made with Jimmy Park regarding the parking fees was an interest-free loan. When seven-and-one-half years expired, which represented one-half of the lease plus option term, defendants' business was doing very well and defendants could now start repaying the amount of the loan. In anticipation that the five-year renewal option would be exercised, repayment at the same rate of $1500 per month for the next seven-and-one-half years would satisfy the obligation and make the parties even. According to Dalesso, this was the consideration for the rent increase to $10,500. Of course, restoring to its prior status the other $1500 per month for the parking spaces merely reflected an end to the loan period.
Kyung explained the arrangement differently. According to her, as of June 2002, the monthly rent increased by $3000. It was Kyung's contention that Dalesso and her husband, Jimmy Park, agreed that, in exchange for the additional $3000 per month, Dalesso "would give the same conditions during the [five-year] option period. Otherwise, why would we make the $3,000 extra payment each month?" Kyung insisted that "[w]e gave that $3,000 because [Dalesso] promised that he would give the lease with the same conditions [during the option period]. That's why we did it." Unfortunately, Jimmy Park had been diagnosed with leukemia in December 2005, and he died in October 2006. Therefore, he was not available to testify at the 2008 trial.
Kyung admitted that the alleged agreement was "not done directly with me, but with my husband." She also admitted that none of the documents dealing with the lease amendment or the change in the parking space arrangement indicated that those matters had any relationship with the five-year option provision in the lease.
On August 15, 2003, defendants' attorney notified plaintiff that defendants were exercising the option to renew. Defendants initially took the position that arbitration was unnecessary because, by paying the extra $3000 per month since July 2002, defendants secured their right to pay the same rental amount through the option period. Nevertheless, on June 7, 2004, defendants' attorney sent a letter to plaintiff announcing that defendants had selected realtor Anthony J. Rinaldi to represent their "interest in the arbitration process pursuant to the arbitration clause of the Lease Agreement." However, Rinaldi never rendered an opinion regarding the fair rental value of the property during the option period, and the arbitration never took place. On December 28, 2005, plaintiff's attorney wrote to defendants' attorney, stating that Rinaldi had not contacted plaintiff's selected realtor in order to "select the third individual to sit on the arbitration panel and schedule the arbitration."
In the absence of any new rental amount being set through arbitration, on November 16, 2004, plaintiff notified defendants that, commencing December 1, 2004 (the first month of the five-year renewal period) the monthly rent would be $18,500. Defendants never paid that amount. They continued to pay the $10,500 per month they had been paying under the amended original lease.
On January 25, 2006, plaintiff filed its initial complaint, seeking to compel arbitration. On June 1, 2006, defendants vacated the premises and reestablished their restaurant business at a different location in Palisades Park.
Dalesso found the building extensively damaged after defendants left. Plaintiff amended its complaint to seek damages for the damage to the property, and at trial, plaintiff produced two witnesses who testified as to the cost of repair and clean up. One of those witnesses, an air conditioning and refrigeration contractor, testified that he removed the air conditioning unit that had been on the top of the restaurant at plaintiff's building at the request of Jimmy Park, so it could be moved to defendant's new restaurant. The witness testified that it would cost $5800 to replace the unit.
Plaintiff filed additional amendments to the complaint, seeking damages for additional rent due under the lease, adding Jimmy Park and KH&Y Corp. as defendants, and then substituting the Estate of Jimmy Park as a defendant in place of Jimmy Park.
In their answer, defendants asserted various affirmative defenses, but they did not assert a statute of limitations defense. Defendants also filed a counterclaim, seeking damages for plaintiff's breach of the covenant of good faith and fair dealing.
Trial was scheduled to begin on May 27, 2008. On April 25, 2008, defendants filed a motion for summary judgment, arguing there was no expert testimony supporting either the fair market rental value of the property during the option period or the amount of damage to the premises that defendants allegedly had caused. The motion was returnable on May 23, 2008. The judge denied the motion because it was untimely and because there were sufficient factual issues to require a jury trial. The case then went to trial, ending with the result we have previously mentioned, after which defendants' JNOV motion was denied. This appeal followed.
We can dispose quite summarily of Kyung's first argument, that the court erred in denying defendants' summary judgment motion. The motion was denied on procedural and substantive grounds. First, it was untimely under Rule 4:46-1, which requires such motions to be returnable no later than thirty days before the scheduled trial date, except for good cause shown. The motion was returnable four days before the scheduled trial date. Defendants' asserted bases for good cause to allow the late filing lacked merit. Defendants first contended they did not learn of the allegedly deficient expert testimony until discovery was complete. However, defendants had the experts' reports long before making the motion, they deposed one of plaintiff's experts in June 2007, and the discovery period ended on March 15, 2008. The summary judgment motion was not filed until April 25, 2008. Defendants' counsel also asserted that her firm had been told that defendants were "going to switch attorneys," which contributed to the delay in filing the motion. However, the record contains no statement by defendants themselves that they were considering changing attorneys. These circumstances did not constitute good cause for allowing the late motion.
More significantly, the motion lacked substantive merit. Plaintiff had provided reports by experts, who later testified at trial and qualified as experts. The reports of these witnesses created factual issues regarding the fair rental value of the property and the damage caused by defendants, which required resolution by the jury. Accordingly, the judge did not err in denying defendants' summary judgment motion.
We also find unpersuasive Kyung's next argument, that the court erred by failing to instruct the jury to consider the applicable six-year limitations period when assessing damages to the property. After the commencement of the lease period on November 15, 1994, defendants made numerous changes to the building. Some of the changes, such as the manner in which defendants painted the exterior of the building, displeased Dalesso. Jimmy Park assured plaintiff that there was nothing to be "worried about," because "when I leave this place, I'll put it back the way it was. I'll fix it." Plaintiff refrained from taking any action against defendants regarding unauthorized alterations or damage to the property during the course of defendants' occupancy.
Plaintiff first asserted its damage claim in August 2006, after defendants vacated the premises. As we stated earlier in this opinion, although defendants asserted various affirmative defenses, they did not plead statute of limitations as an affirmative defense. Following Dalesso's testimony on the next to last day of trial, defendants first raised the issue, and moved for a directed verdict on the damage claim. They argued that plaintiff was out of time to sue for the majority of its claimed damages to the building because most of the renovations were accomplished in 1994 and 1995, and thus barred by the six-year limitations period.
The judge denied the motion on two grounds. First, defendants unreasonably delayed in seeking dismissal on this basis, when they could have moved for such relief "from day one" of the litigation. Second, the judge concluded that the limitations period did not begin to run until the lease was terminated and the premises were not restored to their prior condition, normal wear and tear excepted. We agree with both reasons.
Concerning defendants' delay in asserting the limitations-period defense:
Statutes of limitations, unlike statutes of repose, "are not self-executing. Such statutes are based on the goals of achieving security and stability in human affairs and ensuring that cases are not tried on the basis of stale evidence." Zaccardi v. Becker, 88 N.J. 245, 256 (1982). For those reasons, the defense that a claim is time-barred must be raised by way of an affirmative defense, either in a pleading or by a timely motion, or it is waived. [Notte v. Merchants Mut. Ins. Co., 185 N.J. 490, 500 (2006) (citation omitted).]
Because defendants did not raise the defense in their answer, the question is whether they timely raised it by motion at the end of the fifth day of a six-day jury trial, even though the circumstances underlying the defense were known to them from the outset of the litigation.
In Zaccardi, supra, 88 N.J. at 257-58, the Supreme Court determined that the defendants were equitably estopped from asserting the limitations-period defense where they delayed for seventeen months in informing the trial court and the plaintiffs that they were going to rely upon the defense. Somewhat similarly, in White v. Karlsson, 354 N.J. Super. 284, 286-87 (App. Div.), certif. denied, 175 N.J. 170 (2002), the defendant asserted a limitations-period defense in its answer, but did not actually rely upon that defense until a week before trial when she successfully moved for summary judgment on that basis. We reversed, holding that the defendant could not rely on the defense in light of her participation in an arbitration hearing and in extensive discovery over an extended period. Given those circumstances, the defense was untimely. Id. at 290-92.
The Zaccardi and White rationales and holdings directly support the trial court's refusal to allow defendants to rely upon the limitations-period defense. In both of those cases, the attempt to assert the defense was made before trial, but well after the defendants had the necessary knowledge to raise the defense. Here, the motion asserting the defense was made well into the trial itself. Thus, based on Zaccardi and White, the trial court did not err in determining that defendants unreasonably delayed in moving for dismissal based on that defense.
Concerning the trial court's determination that plaintiff's claim for damages to the building did not accrue until the lease term had expired, under N.J.S.A. 2A:14-1, there was a six-year limitations period for plaintiff to bring claims under the lease. However, the lease included a provision dealing with defendants' duty to make repairs and, at the end of the lease term, to "deliver up the rented premises in good order and condition," reasonable wear and tear and non-tenant-caused damage from the elements excepted. Thus, the plain language of the lease provided that plaintiff should wait until the lease term expired before it could litigate with defendants about the overall condition of and damages to the building. Only then would it be known whether defendants made the repairs that were necessary and thus whether an action would lie.
Support for this view is found in Winrow v. Marriot Corp., 230 N.J. Super. 189, 192 (App. Div. 1989), in which we addressed the "general rule" that "where an action for breach of a covenant to repair is brought during the term of the lease, the measure of damages is the injury to the lessor's reversion. If the action is brought after the expiration of the lease, the authorities agree, the measure of damages is the cost of repair." The rule is justified because "the lessor's entitlement to damages during the lease term is entirely speculative since the lessee may make the necessary repairs before the lease expires." Id. at 193.
It is also noteworthy that the relevant lease provision states that defendants will deliver up the restaurant premises in a certain state, that is, in "good order and condition." Such a "covenant to surrender the premises in a given condition is not breached so long as required repairs are made before the tenancy ends, even if accomplished on the last day of the tenancy." Robert S. Schoshinski, American Law of Landlord and Tenant § 5:20 at 283 (1980).
If plaintiff had brought its damages action earlier, as defendants argue it should have, the action would have been premature because defendants could merely have asserted that any damages would be repaired before the property was delivered up at the expiration of the lease term. The limitations period began to run on the day that plaintiff's action for damages accrued, which was the day on which plaintiff's right to file the action first arose. Holmin v. TRW, Inc., 330 N.J. Super. 30, 35 (App. Div. 2000), aff'd o.b., 167 N.J. 205 (2001). That day was when the lease expired and defendants no longer had the ability to make repairs and to deliver up the premises in good order and condition.
Accordingly, the judge did not err in determining that the limitations period on plaintiff's damages claim did not begin to run "until the lease was terminated and the premises weren't restored." We therefore reject Kyung's argument that failure to instruct the jury to consider the statutory six-year limitations period when assessing plaintiff's claim of damages to the building was error.
In Point III, Kyung argues that the judge erred in failing to instruct the jury to consider the $116,000*fn1 overpaid by defendants. She contends that defendants were paying this $3000 per month extra to secure a more favorable monthly rental amount during the five-year option period.
Kyung's argument that the jury was not properly instructed on this issue is simply not borne out by the record. Indeed, the judge instructed the jury in the manner requested by defendants at trial as follows:
The defendants, on the other hand, claim that they abided by the terms of the lease and they did not owe any money to the landlord. Defendants claim, in their counterclaim, that the plaintiff breached the agreement under which the defendants paid an additional $3,000 per month which the defendants claim was payment for the option which never occurred and defendants seek the return of the money they paid.
The judge repeated this instruction later in the charge, and subsequently instructed the jury that, "[i]n this case, the defendants are seeking a return of money that the defendants paid for the option which never occurred and in which [sic] the defendants allege is $3,000 per month."
The judge then instructed the jury concerning the verdict-sheet questions, setting out the counterclaim-based inquiry as follows: "Have the defendants proved beyond the preponderance of the evidence that Gig's Inc., breached the agreement whereby $3,000 a month was paid by defendants to plaintiff." The jury answered in the negative.
Although Kyung frames this point of argument in terms of an erroneous jury instruction, much of the argument is a rehash of the argument defendants made to the jury, namely that the only plausible explanation for the payment of the additional $3000 per month was to secure the five-year option. However, the jury had before it a different version of the arrangements, provided by Dalesso, which provided a plausible explanation contrary to that urged by defendants. The jury obviously accepted Dalesso's version. The jury made that determination in fulfillment of its factfinding function, with which we have no basis to interfere.
Kyung's final argument is that the court erred in failing to grant defendants' JNOV motion. The motion was premised on two grounds: (1) that the jury erred in awarding plaintiff $105,775 for damages to the building because the damages occurred early in the lease and were thus outside the six-year limitations period, and (2) plaintiff was unjustly enriched because the proofs demonstrated that defendants had "overpaid" plaintiff $3000 per month for thirty-eight months to secure a reduced rental during the option period. The judge denied the motion, reasoning that the claim for property damage had been made "well within the time of the statute of limitations" and that there was proof supporting the jury's implicit finding that the additional $3000 per month was not intended "as payment for the option agreement." We agree.
"The purpose of JNOV is 'to correct clear error or mistake by the jury,' and not for the judge to 'substitute his [or her] judgment for that of the jury merely because he [or she] would have reached the opposite conclusion[.]'" Barber v. ShopRite of Englewood & Assocs., 406 N.J. Super. 32, 52 (App. Div.), certif. denied, 200 N.J. 210 (2009) (quoting Dolson v. Anastasia, 55 N.J. 2, 6 (1969)). "When considering a motion for JNOV or a new trial, '[t]he trial judge shall grant the motion if, having given due regard to the opportunity of the jury to pass upon the credibility of the witnesses, it clearly and convincingly appears that there was a miscarriage of justice under the law.'" Id. at 51 (quoting R. 4:49-1(a)). The same standard controls an appellate court's review of a trial court's determination of a motion for JNOV. Id. at 52.
Applying this standard, we find no error in the denial of the JNOV motion. As we have previously discussed the judge correctly analyzed the statute of limitations issue, and there was ample evidence to support the jury's implicit finding that the $3000 per month represented repayment of the loan plaintiff had made to defendants over the first-seven-and-one-half years of the lease. Accordingly, it does not clearly and convincingly appear that a miscarriage of justice occurred.