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Steve & Peg, Inc. v. Melanie's at Avenue E

November 4, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-125-07.

Per curiam.


Submitted September 15, 2010

Before Judges Sapp-Peterson and Simonelli.

Plaintiffs, Steve & Peg, Inc. and Margaret Flora (Flora), are the owners of a bar and delicatessen business known as Peg's Tavern located at 99 Avenue E in Bayonne (the business). They appeal two orders issued from the Chancery Division: an order dated January 13, 2009, and a second order dated March 6, 2009. We affirm.

The first order dated January 13, 2009, arises out of a multi-count complaint plaintiffs filed against defendants alleging, among other claims, breach of contract, interference with economic advantage, violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -181, and common law fraud. The January 13 order entered a $9,989 judgment in favor of plaintiffs against defendants, Melanie's at Avenue E, Inc. (Melanie's), former owner of the business, and Henry Budny, the principal of Melanie's and owner of the premises at 99 Avenue E that housed the business as well as nine residential units (collectively referred to as defendants). The judgment represented plaintiffs' overpayment to the utility company for heating charged to plaintiffs for utility service that had been provided to the nine residential units. The court dismissed the remaining claims in plaintiffs' complaint. The second order dated March 6, 2009, denied plaintiffs' motion seeking to alter or amend the January 13 order.

By way of background, in October 2003, plaintiffs purchased the business, including the liquor license, for $50,000. Plaintiffs paid $18,000 in cash, and the balance of the purchase price was secured by a promissory note in the amount of $32,000. The note also required plaintiffs to: (1) provide a security agreement pledging their stock in Steve and Peg, Inc.; (2) record UCC financing statements to secure all sums due under the note; and (3) deliver an endorsed stock certificate and resignation of officers to be exercised in the event of default under the note. Further, under the parties' agreement, all assets of the business were also pledged to secure full performance under the terms of the note.

The purchase agreement also expressly stated that in the event of: any default in any obligation or agreement made by the [b]uyer to the [s]eller, the escrow agent shall have the authority to deliver to the stockholders of the [s]eller the said [s]tock [c]ertificates and resignations of the corporate buyer, which may then be assigned to the stockholders of the [s]eller[.]

Further, once the resignations were filed, the seller stockholders would become the new owners of the business. In addition to the note and security agreement, plaintiffs also executed a commercial lease agreement for the business' premises.

Plaintiffs defaulted on the note and separately defaulted on the lease. The New Jersey Division of Taxation seized the liquor license as a result of non-payment of taxes in May 2007. Defendants asserted their rights under the various agreements and claimed the collateral. Ultimately, plaintiffs were locked out of the business premises. Plaintiffs filed a verified complaint and jury demand alleging breach of contract, damages to property, interference with economic advantage, intentional and malicious harm to another, violation of the CFA, and common law fraud. Plaintiffs sought equitable relief, as well as compensatory and punitive damages. Defendants, in addition to answering the complaint, filed a counterclaim seeking reimbursement for counsel fees and costs incurred.

Trial proceeded before Judge Thomas P. Olivieri. Plaintiffs claimed that Budny deliberately caused business losses when he erected scaffolding in front of the premises that effectively discouraged patrons from coming to the bar and blocked their ability to enter the delicatessen. They also claimed that Budny bore responsibility for sewerage problems and leaks to the premises from an upstairs residential unit and that they had been overcharged by the utility company for services that had been provided to the nine residential units but billed to the business.

Other than the overpayment of the utility bill, Judge Olivieri rejected plaintiffs' remaining claims and denied defendants' counterclaim for counsel fees.*fn1 He found there was no competent evidence to support the remaining claims. For example, the judge found that the scaffolding was erected to repair loose bricks on the building. The judge found there was no competent evidence demonstrating that Budny undertook the repairs "with any intention of affecting... plaintiff[s'] business." He noted that "[Budny]... erect[ed] the scaffolding, as a result of some safety concerns that were in fact communicated to him by... [Flora's] husband."

As for the leak, the judge determined that it was eventually repaired after the leak was found, but he noted that under Paragraph 5 of the lease, plaintiffs were required to make all repairs, and under Paragraph 23 of the lease, plaintiffs were required to hold defendants harmless for any damages arising out of broken plumbing lines. The judge also noted that after plaintiffs presented the repair bill to Budny, it was paid in full. The court concluded that other than reimbursement to plaintiffs for overpayment of the utility bills, the parties' written agreement determined the duties and responsibilities. The court found:

In this case, pursuant to the lease at the aforementioned paragraphs, the tenant, or the plaintiff, was responsible for whatever happened regarding the leak, the sewer pipe[.] [T]he scaffolding was a situation that was brought to the attention of the defendant by the plaintiff's husband, and he took appropriate action, so the defendant has filed a ...

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