August 26, 2010
SMART REALTY, INC., PLAINTIFF-RESPONDENT,
986 RIVER ROAD, INC. AND HUGO IM, DEFENDANTS-APPELLANTS.
On appeal from Superior Court of New Jersey, Bergen County, Chancery Division, Docket No. C-253-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 17, 2010
Before Judges Fisher and Espinosa.
The issue at the heart of this declaratory judgment action is whether plaintiff Smart Realty, Inc. (Smart) validly exercised an option to renew the lease it had with defendant, 986 River Road, Inc. (986). Defendant appeals from the judgment declaring that Smart validly exercised its option to renew the lease in a timely manner and that said option was binding on 986. We affirm.
Judge Ellen L. Koblitz, P.J. Ch., presided over the trial of this matter and set forth detailed findings of fact in her oral opinion, which need not be repeated at length here. The salient facts can be summarized as follows.
Lennard Charles (Charles) is a licensed New Jersey real estate broker and the sole shareholder and president of Smart. In 1995, Smart moved its offices to 986 River Road, in Edgewater, New Jersey. Initially, Smart leased the property from Ingold Realty Co. (Ingold). Through the course of the years, Smart and Ingold were parties to a number of agreements regarding the leasehold that included provisions for how notice was to be given and options for renewal.
In 2003, Ingold sold the property to 986, a corporation owned by Hugo Im. 986 never entered into a new agreement with Smart or provided Smart with instructions regarding the exercise of the renewal option or how notice was to be given to the landlord. 986 never notified Smart of its status as the new landlord and just sent invoices for rent that listed "986 River Road, Inc., c/o MADHATTER REALTY, INC., 2417 Third Ave., Bronx, NY 10451" at the top left of the invoice and instructed that the check for rent should be made payable to "986 River Road, Inc." The return envelope for this correspondence was on stationery of Madhatter Realty, Inc. (Madhatter) at the Bronx address.
Smart's action to exercise its renewal option consists of the following. By letter dated April 4, 2007, Charles wrote to Ingold's attorney, Jack Zakim. Charles explained that he was providing notice to Zakim because David Watkins, the attorney for 986, had not responded to his prior correspondence. The letter advised:
In accordance with paragraph 15 of the First Amendment to Business Lease I am providing Notice that I, Lennard Charles, on behalf of SMART Realty, am exercising the FIVE YEAR OPTION to renew as identified in the Compromise and Settlement Agreement and the Lease dated August 1, 198.
The letter was hand-delivered to Zakim's former law office but, because he had changed firms, Zakim did not receive the letter. Carbon copies were sent to Madhatter and to Charles's attorney, Jeffrey Bronster. On April 16, 2007, Charles called Im to confirm that he had received the letter exercising the renewal option. Im told him that he had received the letter.
At trial, Im testified that he did not receive the letter sent to Madhatter. However, he admitted that he received and cashed the check for that month's rent payment that was sent in the same envelope. The trial court explicitly found Im's testimony on this point "was not believable" and that he "was not truthful." Im also initially denied having the conversation with Charles on April 16, 2007. After telephone records reflected a call between Im's and Charles's telephone numbers, Im gave varying accounts as to what was discussed. However, he still denied confirming receipt of the letter to Charles. The trial court found this testimony to be false as well. The court found the following facts: Charles made the call to confirm that Im had received the letter and that he was aware that Smart was exercising the renewal option and further, Im had confirmed receipt.
Despite these facts establishing that 986 received actual notice that Smart was exercising the renewal option, 986 argues that this effort was insufficient. 986 contends that a valid exercise of the renewal option required "strict compliance" with "an appropriate written notice, delivered and directed to the then landlord (986) and to its attorney David Watkins ("Watkins"), all as set forth in the leasehold and settlement documents ("the renewal requirements")." 986 contends that these requirements were established in Articles 4 and 15 of a 2003 amendment to the lease.
Smart and Ingold entered into the "First Amendment to Business Lease" (the Amendment) referred to by 986 as part of their October 2003 settlement of a dispute over real estate taxes. The Amendment set forth the required procedure for the exercise of a renewal option for the period from November 1, 2020 through October 31, 2023 as follows:
4. . . . All of the option periods including this Fourth Option may only be exercised by forwarding written notice of the Tenant's intention to exercise the option, at least 180 days prior to the termination of the term*fn1 by certified mail, return receipt requested.
The Amendment also contained a more general notice provision:
15. Any notices to be given under this Agreement by either party to the other may be effected either by personal delivery in writing or by mail, registered or certified, postage prepaid with R.R.R. Notices delivered personally shall be deemed communicated as if actual receipt [sic]; mailed notices shall be deemed communicated when received. Notices to Landlord so long as Ingold is the owner of the premises shall be forwarded to Ingold at the address set forth above with a copy to Ingold's attorney Jack Zakim c/o Kleeblatt Galler Abramson & Zakim, 25 Main Street, Hackensack, New Jersey 07601. [(Emphasis added).]
The "Compromise and Settlement Agreement" (Compromise Agreement), which was also executed as part of the October 2003 settlement, contained still another general provision for giving notice:
11. Any notices to be given under this Agreement by either party to the other may be effected either by personal delivery in writing or by mail, registered or certified, postage prepaid with RRR at the address provided for herein.
Therefore, each of the provisions relied upon by 986 required the delivery of written notice by personal delivery in writing or by mail, registered or certified, postage prepaid with R.R.R. However, because the provisions were agreed upon when Ingold was the landlord, the provisions only required delivery to Ingold's address and Ingold's attorney "so long as Ingold is the owner." The Amendment did not dictate where notice should be delivered if Ingold was not the owner. 986 never took any action to instruct Smart to whom and where notice should be given after it became the owner.
The April 2007 letter was not the first time that Smart communicated with its landlord by sending a letter to Madhatter Realty at the Bronx address. Three years earlier, he wrote a letter to Im at Madhatter Realty regarding leaks at the property. At trial, Im acknowledged that he received the 2004 letter and never advised Charles that Madhatter was not, in fact, the landlord.
986 is located at 2417 Third Avenue, Bronx, New York, which is owned by Madhatter Realty, Inc. Im was the exclusive owner of both Madhatter and 986, operated both from the same address, and used the same fax and phone number. Im opened and responded to the mail of both companies.
The judge declined to find that Im had acted in bad faith, despite stating, "I can't believe in my view anything that Mr. Im says, because so much of what he said was proven to be untrue." The court also rejected 986's argument that, without such a finding of bad faith, Smart could not exercise the option through substantial compliance with the notice requirements. The trial court concluded that the notice requirements were satisfied in light of the fact that Im had received actual notice of Smart's intent to exercise the renewal option. The court observed that Charles could not be expected to know that Madhatter was not the name of his landlord on the facts of this case and stated, Mr. Im opens all the mail. Mr. Im got the option for renewal. Mr. Im is, for all intents and purposes, 986 River Road Inc., and Mr. Im is Mad Hatter Realty Company, and in my view it would elevate form over substance in a completely unreasonable way to allow Mr. Im to avoid the repercussions of this renewal because the renewal notice was addressed to Mad Hatter Realty.
Accordingly, the court concluded that Smart had validly exercised its renewal option in a timely manner.*fn2 Finding Smart to be the prevailing party, the court awarded Smart attorney's fees pursuant to a provision in the lease.
After the trial, 986 and Im moved for judgment notwithstanding the verdict pursuant to Rule 4:40-2 on the grounds that, absent a finding of bad faith on the part of the landlord, Smart could not effect a valid exercise of the renewal option through "substantial compliance" with the notice requirements. The court rejected this argument and stated, in part, In my view, any lack of compliance by sending mail certified is cured when the recipient acknowledges receipt. In this case not only did the recipient acknowledge receipt, but he cashed the rent check which was in the envelope where the option was placed. So he received it. There is no question about it. And having not sent it certified is cured. He as good as sent it certified. It is not a significant deviation from the contract. The fact that it was not addressed to the landlord but copied to the landlord is not a difference that causes the failure of the renewal of the option. 986 also argued that, because the counts seeking monetary damages were dismissed, it was the prevailing party and therefore entitled to attorney's fees pursuant to the lease. The court rejected this argument and denied 986's motion.
In this appeal, 986 raises the following issues:
THE TRIAL COURT MUST CONSTRUE AND INTERPRET CONTRACTS AS THE LAW IS NOT AS THE TRIAL COURT WISHES IT TO BE.
A UNILATERAL OPTION MUST BE STRICTLY CONSTRUED SO THAT THE CONCEPT OF SUBSTANTIAL COMPLIANCE IS INAPPLICABLE IN THE ABSENCE OF A VIOLATION OF THE COVENANT OF GOOD FAITH AND FAIR DEALING.
THE PLEADINGS AND PROOF DID NOT PERMIT JUDGMENT FOR SMART.
THE TRIAL COURT ERRED IN FAILING TO GRANT THE POST TRIAL RELIEF SOUGHT BY 986 AND IM.
986 AND IM ARE ENTITLED TO LEGAL FEES.
After carefully reviewing the record, briefs and argument of counsel, we are satisfied that none of these arguments have merit and affirm substantially for the reasons expressed by Judge Koblitz in her opinions following the trial and at oral argument of the motion for a verdict notwithstanding the verdict.
"Whether to enforce an option to renew is a question within the court's discretion." Goodyear Tire & Rubber Co. v. Kin Prop., Inc., 276 N.J. Super. 96, 106 (App. Div.), certif. denied, 139 N.J. 290 (1994). A trial court's findings should not be disturbed on appeal unless they are "'so wholly insupportable as to result in a denial of justice.'" Ibid. (quoting Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974)). Moreover, appellate courts "defer to the factual findings of the trial court because it has the opportunity to make first-hand credibility judgments about the witnesses who appear on the stand; it has a 'feel of the case' that can never be realized by a review of the cold record." N.J. Div. of Youth & Family Servs. v. E.P., 196 N.J. 88, 104 (2008).
We are satisfied that the credibility determinations made by Judge Koblitz here, which lay the foundation for her finding that 986 received actual notice of Smart's exercise of the renewal option in a timely manner, were based upon a thoughtful consideration of the evidence as well as the opportunity she had to make first-hand credibility judgments. The thrust of 986's argument is that strict compliance was required with lease provisions regarding a specific manner of delivery and which never identified the precise name and address of the landlord to be served after 986 purchased the property. We agree with Judge Koblitz's conclusion that, in light of the fact that 986 received actual notice of Smart's exercise of the renewal option, this argument lacks merit. See Goodyear, supra, 276 N.J. Super. at 107. We also agree with her assessment that Smart was the prevailing party in this litigation and her conclusion that 986 is not entitled to legal fees.