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Finesse Enterprises, Inc. v. Leyva


June 4, 2010


On appeal from Superior Court of New Jersey, Law Division, Hudson County, No. L-3137-08.

Per curiam.


Argued March 2, 2010

Before Judges Wefing, Grall and Messano.

Following a bench trial, the trial court entered judgment in favor of plaintiff Finesse Enterprises, Inc. ("Finesse"). Defendants Angel Leyva and his wife Edith ("Leyva") have appealed. After reviewing the record in light of the contentions advanced on appeal, we reverse.

Levya owns the building located at 3908 Kennedy Boulevard in Union City. It is a two-story structure; on the ground floor there are two shops, the larger one containing a dry cleaning business, the smaller a hair salon. The second floor contains a large room that is rented out for parties. For many years Leyva owned and operated the dry-cleaning business in the building. On May 31, 2002, Finesse, through its principal Fred Simancas, executed a written lease, renting that store-front portion of the building from Leyva for a five-year period for a monthly rent of $1,300 for use as a dry-cleaning business.

The lease specified that "commencing on the second year and every year thereafter a rent increase of $100.00 per month will be added to the base rent." It also specified that if the real estate taxes on the building increased during the lease term, the tenant would pay "32.5% of the amount by which [the] tax exceeds the annual tax for the base year, inclusive of any increase during any such calendar year." One other paragraph of this 2002 lease is pertinent to the issues on appeal.

If any portion of the premises of which the leased premises are a part shall be taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to purchase and or shall sell and convey the said premises or any portion thereof, to the governmental or other public authority, agency, body or public utility seeking to take said land and premises or any portion thereof, then this Lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as the Landlord shall fix by notice in writing.

The Tenant shall have no claim or right to claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings. All rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the said lands and premises of any portion thereof. The Tenant agrees to vacate the said premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord. The Tenant shall repay the Landlord for such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.

In 2004, some three years before the original lease expired, the parties executed a new lease, which was prepared by Simancas and, he testified, with the assistance of several friends of his from college.

This 2004 document contained terms at significant variance from the original lease. The original lease was silent as to renewal. This second document granted Finesse the right to renew the lease for three separate terms of five years, conditioned upon Finesse "giving written notice to [Leyva] not less than ninety (90) days prior to the expiration of the Initial Term," defined as the period June 1, 2002, and ending May 31, 2007.

Although the second lease set the rent for the first year at $1300 per month and provided for a rent increase of $100 per month in the second, and each succeeding year of the lease term, it also provided that if Finesse exercised its right to renew the lease term, the rent would be "based on the prior term's base rent." Simancas said in a certification that the rent reverted in this manner under the 2004 document "based on the assumption of [the parties] that the market value for real estate in the area would decrease during the rental term."

This second lease, moreover, contained no provision obligating Finesse to absorb its proportionate share of any increase in real estate taxes no matter how long it decided to remain in the premises. It did, however, include the basement as part of the leased space while the earlier document contained no mention of the basement. In addition, this second lease gave Finesse a twenty-year option to purchase the building for $500,000 but was silent as to when and how this option could be exercised. It contained the following provision to deal with the possibility of the municipality taking the premises through eminent domain:

If any legally[] constituted authority condemns the Building or such part thereof which shall make the Leased Premises unsuitable for leasing, this Lease shall cease when the public authority takes possession, and Landlord and Tenant shall account for rental as of that date. Such termination shall be without prejudice to the rights of either party to recover compensation from the condemning authority for any loss or damage caused by the condemnation. Neither party shall have any rights in or to any award made to the other by the condemning authority.

There were other differences as well. The 2002 lease prohibited Finesse from assigning its interest in the lease. The 2004 lease, however, permitted it to assign its lease without Leyva's permission to a corporation with which it merged or consolidated. While the earlier lease charged a $50 late fee for rent paid more than ten days after the due date, the second lease contained, in effect, a forty-five day grace period.

Certain similarities existed between the two leases; both, for example, specified that any required notices had to be sent certified mail, return receipt requested.

The relationship between Leyva and Simancas was quite amicable at the outset. Slowly, however, it deteriorated. The initial cause of the discord was a dispute over whether Finesse owed additional monies for its water usage. This discord was heightened, however, when, in September 2007, Leyva signed a contract to sell the building to a third party for $675,000. Simancas viewed this as an improper attempt to defeat the option rights contained in the 2004 lease.

In March 2008, Leyva's attorney wrote to Finesse, stating that Finesse had not timely renewed the lease and had, as a consequence, become a month-to-month tenant. Simancas responded by certified mail, return receipt requested, that Finesse had earlier exercised the option to renew. He enclosed with the March 2008 letter a copy of a letter dated January 26, 2007, which purported to exercise the option to renew. This January 2007 letter was on the letterhead of Finesse Enterprises, Inc. and was addressed to the Leyvas' home address, but without their names. It was not sent certified mail, return receipt requested.

In June 2008, Leyva began a summary dispossess action, and Finesse responded by filing a verified complaint and order to show cause alleging that its water service had been improperly terminated; it sought the immediate restoration of water service and an injunction against any further interference with its water service. The trial court consolidated this action with the pending dispossess action, and the two complaints were ultimately heard together and resulted in the judgment now on appeal to this court.

Only three witnesses testified at trial: Simancas and Angel and Edith Leyva. At trial, Simancas was unable to identify any of the friends who had assisted him in preparing the second lease; he said he no longer kept up with them. He testified that he did not recognize the term "metes and bounds" but was unable to say where he obtained the metes and bounds description of the property contained in this second lease, other than that it was from one of his friends. No such description had been included in the earlier lease.

Simancas testified that he prepared the 2004 lease at Leyva's request because there was "talk" in the neighborhood beginning in the fall of 2003 that the block on which the property was located was going to be acquired for the construction of a new high school. He said Leyva wished to have a written lease containing this option to purchase for $500,000 to strengthen his hand when condemnation proceedings began. He continued that Leyva told him he could put any provisions he wanted in the lease so long as it contained a reference to purchasing the property for this sum. Based upon that, Simancas came up with the terms ultimately incorporated in this document.

Angel Leyva testified that Simancas came to him when talk of the new high school was current. At that time, the original lease had approximately two years left. He said Simancas asked to have his current lease extended and that he agreed but said that if the proposed high school project did not take place, they would return to the original lease. Leyva testified that he did not understand that under the 2004 lease the rent would revert back to $1300 per month if Simancas renewed the term or that Simancas no longer had any obligation to pay toward an increase in real estate taxes. He said he "would have to be out of [his] mind" to have agreed to such terms. He also said he did not understand that he had committed for twenty years to sell the building to Simancas for $500,000.

He said Simancas arrived at his house one evening with the new lease, accompanied by a notary public. He did not read the document because he trusted Simancas but simply signed it, as did his wife. He testified that when they learned the proposed high school was going to be built at a different location, he asked Simancas to return the second lease but that Simancas refused. Leyva said that he had never received the January 2007 notification of renewal that Simancas said he had mailed to him.

During the course of the trial, both Simancas and Leyva testified at length about their dispute over water bills. We have not noted that testimony in this opinion because it does not bear upon the issues presented on appeal, which focus entirely on whether Finesse was occupying the premises as a month-to-month tenant or as a result of having exercised a right of renewal conferred by the 2004 lease.

Following the trial, the trial court gave an oral opinion, setting forth its conclusion that the 2004 lease was valid and enforceable and that plaintiff's purported January 2007 renewal was valid and effective. It entered judgment declaring that the 2004 lease superseded the 2002 lease, enjoined defendants from interfering with plaintiff's water access and further enjoined them from "commencing eviction actions related solely to said plaintiff's renewal" of that lease and denied plaintiff's request for damages. This appeal followed.

On appeal, defendants contend that the trial court's findings are not supported by the record, that plaintiff failed to renew the lease and is thus a month-to-month tenant, and that the trial court erred when it concluded that defendants had waived their right to contest whether plaintiff had renewed its lease.

We note first the standard governing our review of this matter. It is well-settled.

The appellate tribunal's obligation . . . [is to] review the record in the light of the contention [that the trial court erred], but not initially from the point of view of how it would decide the matter if it were the court of first instance. It should give deference to those findings of the trial judge which are substantially influenced by his opportunity to hear and see the witnesses and to have the "feel" of the case, which a reviewing court cannot enjoy.

The aim of the review at the outset is rather to determine whether the findings made could reasonably have been reached on sufficient credible evidence present in the record. This involves consideration of the proofs as a whole; the appraisal is not to be confined simply to those offered by the plaintiff, for the question is not simply whether there was enough evidence to withstand a defense motion at the end of the plaintiff's case or of the entire case.

When the reviewing court is satisfied that the findings and result meet this criterion, its task is complete and it should not disturb the result, even though it has the feeling it might have reached a different conclusion were it the trial tribunal. That the case may be a close one or that the trial court decided all evidence or inference conflicts in favor of one side has no special effect. [State v. Locurto, 157 N.J. 463, 470-71 (1999) (quoting State v. Johnson, 42 N.J. 146, 161-62 (1964)).]

That, however, does not end the inquiry. We are nonetheless obligated to review the trial court record conscientiously in order to determine whether it does, indeed, contain evidence supporting its factual findings. If, after conducting such a review, we are satisfied that the record is barren of supporting evidence, the trial court's factual findings are not entitled to our deference. State v. Purnell, 394 N.J. Super. 28, 50 (App. Div. 2007); State v. Castagna, 387 N.J. Super. 598, 605 (App. Div.), certif. denied, 188 N.J. 577 (2006).

We do not, however, owe any deference to the trial court's legal conclusions. As to these, our review is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); Hirl ex rel Hirl v. Bank of America, N.A., 401 N.J. Super. 573, 585 (App. Div. 2008), aff'd o.b., in part, 198 N.J. 318 (2009).

In light of those firmly-settled principles, we have no basis to look behind the trial court's stated assessment that it found plaintiff's testimony to be a more credible account of what occurred than defendant's. The trial court clearly rejected defendants' contention that the 2004 lease was unenforceable as the product of fraud and overreaching; the trial court having rejected defendants' testimony, we cannot accept it now. The trial court saw and observed the witnesses; we have only read their words, separated as we are both by time and space from the court room in which they were spoken.

That, however, does not lead inescapably to the conclusion that the trial court's judgment should be affirmed. The trial court, having found that defendants voluntarily signed the 2004 lease, turned to the question whether plaintiff had validly exercised its right to renew the lease for a five-year term. It was undisputed at trial that plaintiff did not, as the lease called for, notify defendants of this decision by certified mail, return receipt requested.

The trial court treated this omission as immaterial; it accepted plaintiff's argument that there was a course of dealing between the parties under which they did not utilize certified mail, return receipt requested to correspond with one another. It concluded that the parties, through their course of conduct, had waived the requirement for notification by way of certified mail, return receipt requested.

We are satisfied that the trial court's determination in this regard was erroneous. We reach this conclusion for several reasons. First, the lease provision did not call for the parties to correspond with one another by way of certified mail, return receipt requested. The limitation to certified mail, return receipt requested applied only to a "notice required or permitted" under the lease. That the parties may have used regular correspondence for other dealings in connection with their landlord-tenant relationship is not sufficient to constitute a waiver of the requirement that plaintiff use certified mail, return receipt requested, to notify defendants it intended to renew the lease.

More importantly, from our review of the record, we can find no other evidence of any other instance in which one of the parties served a notice upon the other. There simply was no course of dealing with respect to notifications under the lease.

Further, even if there had been, the trial court did not take into account paragraph twenty-two of the lease, a non-waiver clause.

No waiver of any default of Landlord or Tenant hereunder shall be implied from any omission to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the express waiver and that only for the time and to the extent therein stated. One or more waivers by Landlord or Tenant shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition.

We cannot overlook the fact, moreover, that it was plaintiff who inserted this clause into the lease; indeed, it was plaintiff who drafted the entire document. In such a context, it is not unfair to construe this clause in defendants' favor. St. George's Dragons, L.P. v. Newport Real Estate Group, L.L.C., 407 N.J. Super. 464, 483 (App. Div. 2009). It is significant that the record is devoid of any evidence that defendants did anything to "lull" plaintiff into the belief that they had accepted the renewal notice. See Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 229-31 (2005).

The parties have not addressed before us the consequences in terms of the option included in the 2004 lease that may flow from a determination that plaintiff had not validly renewed its lease. In certain contexts, a lease and an option to purchase may be severable, depending upon the intention of the parties. Bonnco Petrol, Inc. v. Epstein, 115 N.J. 599, 612-13 (1989). Because the parties have not briefed the question, we express no views on that subject.

The judgment under review is reversed.


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