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Cheesequake Realty, L.L.C. v. Finkelstein

July 28, 2010


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-4031-07.

Per curiam.


Argued February 9, 2010

Before Judges Grall, Messano and LeWinn.

The dispute that gave rise to this litigation involves the rental and use of commercial real estate. The premises includes a gas station with a service area and a parking area. The tenant vacated the premises before the term of the lease expired, claiming it was terminated pursuant to a clause requiring the tenant to use nationally-branded gasoline. The tenant had subleased a portion of the premises to a limousine company, which used a portion of the parking area, and the sublessee remained after the tenant departed.

The landlord commenced this action to recover damages from the tenant, the guarantors of the tenant's performance under the lease, and the sub-lessee. In addition to breach of the lease by the tenants, the landlord alleged violations of the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.11z; negligence; strict liability for damage to the premises; nuisance; and unjust enrichment. The tenant counterclaimed for return of its security deposit and filed a cross-claim against the sub-lessee for indemnification.

On cross-motions for summary judgment, the judge dismissed the landlord's claims against the tenant and the guarantors because the landlord did not make any effort to obtain a new tenant and failed to establish damage to the premises warranting an award of damages or retention of the security deposit. On the landlord's claims of unjust enrichment, the judge found the sub-lessee, but not the tenant, liable. Accordingly, judgment was entered in favor of the tenant on their cross-claim for return of the security deposit, and against the sub-lessee on the landlord's claim of unjust enrichment in the amount of $9300 plus prejudgment interest.

The landlord appeals and the sub-lessee cross-appeals. With the exception of the award of the security deposit to the tenant, the landlord's competing claims to that deposit and the award of prejudgment interest to the sub-lessee, we affirm.

The facts, viewed in the light most favorable to the non-prevailing party on the respective claims, are as follows. Plaintiff Cheesequake Realty, L.L.C. is the owner of the gas station, which is located on Bordentown Avenue in the Township of Old Bridge. On July 31, 1997, William Delizia, the owner of Cheesequake, and defendant Thomas Heim, as the president of defendant Rendl Corp., signed a lease that was to terminate on May 31, 2007. Under the terms of the lease, it was to be used "solely for a retail gasoline service station, the sale of gasoline and petroleum products at retail, and for the storage, repair and maintenance of motor vehicles as permitted by law, and for no other purpose."

Rendl's performance under the lease was guaranteed by Heim, defendant Mark Finkelstein, who is the director and a fifty-percent shareholder of Rendl Corp., and defendant Tanzboden Corp., a second corporation owned by Heim and Finkelstein (collectively the Rendl defendants). The guaranty provides that it is given "absolutely, unconditionally and irrevocably" with respect to "the full and prompt performance and observance of all of [Rendl's] obligations under the Lease."

Between 1997 and 2000, defendant J. Enterprises, Inc. (J. Enterprises), an entity owned by defendant Joseph Longo and doing business as defendant Longo Limousine, leased parking spaces on the premises through Cheesequake. Thereafter, J. Enterprises made other arrangements, but beginning on January 1, 2004, Rendl sub-leased the parking spaces to J. Enterprises without seeking the landlord's approval as required by the lease. On March 25, 2005, Rendl and J. Enterprises entered into a lease at a rate of $3600 per year for a period commencing on March 1, 2005 and ending on March 1, 2008.

Rendl, however, vacated the premises before the lease expired. Rendl asserted that circumstances warranted termination pursuant to a provision of the lease addressing the source of petroleum products to be sold. The Rendl/Cheesequake lease required Rendl to sell petroleum products produced by a "'major' oil refiner." That provision further stated that the lease would cease upon "thirty (30) days notice after the termination or non-renewal date of the supply agreement, unless owner shall have arranged for a substitute branded supplier of a nationally recognized brand and trademark." Initially Rendl's supplier was Amoco. Subsequent to Amoco's merger with British Petroleum, BP supplied the petroleum products.

In the fall of 2004, Rendl attempted but failed to negotiate acceptable terms for a supply agreement with BP. Although BP continued deliveries for a time, on March 31, 2005, BP notified Rendl that it would cease supplying gasoline effective June 30, 2005 unless Rendl agreed to its terms. On April 8 and 12, 2005, Rendl's attorney advised Cheesequake's attorney of the situation and outlined the options under the lease, including Cheesequake's option to consent to Rendl's continuance of operations as an independent dealership. No response was received, and by letter dated June 22, 2005, Rendl advised that it would vacate the premises on June 30, 2005. By letter dated June 24, 2005, Cheesequake advised that Rendl's "purported surrender" was rejected, that it could sell unbranded petroleum products and that the guarantors would be liable if Rendl left before the lease expired on May 31, 2007.

Rendl left the leased premises on June 30, 2005. At that time, J. Enterprises was paying $300 per month in rent in accordance with the Rendl/J. Enterprises lease. While Rendl directed J. Enterprises to leave as of June 30, 2005, J. Enterprises stayed and offered to pay the rent to Cheesequake. Cheesequake refused to accept payment, and Delizia told Longo to send the rent ...

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