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Raceway Petroleum, Inc., and Mdn Associates, Inc. D/B/A Red Bank Raceway v. James Gambacorto D/B/A Jimmy's Raceway Service Center and D/B/A Jimmy's Raceway

February 2, 2011


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-5055-00.

Per curiam.


Argued January 5, 2011

Before Judges Fisher, Sapp-Peterson and Fasciale.

In its appeal in this convoluted commercial lease dispute, plaintiff-tenant Raceway Petroleum, Inc. and its subtenant, plaintiff MDN Associates, Inc. (hereafter collectively "plaintiff") contend that the trial court erroneously denied its application for an award of attorneys' fees based upon a provision of the lease that permits a fee award in favor of the prevailing party. In his cross-appeal, defendant-landlord James Gambacorto argues that the trial court erred in entering a partial summary judgment, which determined that defendant was responsible for environmental contamination on the leased property. We reject defendant's arguments regarding the partial summary judgment, but agree the trial court erred by failing to recognize plaintiff was a prevailing party in light of its success on most of the claims asserted.


In 1990, plaintiff leased Red Bank property from defendant for use as a gas station for an initial ten-year term. As a result of issues regarding subsurface contamination, plaintiff commenced this action in 2000 in the Chancery Division in Middlesex County, asserting defendant's breach of the lease; defendant commenced a summary dispossess action in Monmouth County.

On October 20, 2000, the Middlesex Chancery judge entered a series of orders, which, among other things, enjoined defendant from prosecuting the summary dispossess action, compelled defendant to cooperate so plaintiff could make certain repairs on the property, and transferred the action to the Law Division in Monmouth County.

In 2003, plaintiff moved for partial summary judgment on the cause of the property's environmental problems. After hearing oral argument, Judge Robert W. O'Hagan determined that many of the facts were undisputed but a material dispute remained regarding the origination of the subsurface environmental contamination and scheduled a plenary hearing, which occurred on June 16 and 30, 2003, and August 4 and 5, 2003, to resolve that factual dispute. By way of a written opinion issued on January 29, 2004, Judge O'Hagan determined the subsurface contamination existed prior to the commencement of the lease and was a problem for which defendant was responsible. Judge O'Hagan also concluded that the lease "likely entitled" plaintiff to a set-off "against its rental obligation for all monies spent to investigate and remediate the pollution at the site," but that it was premature to fashion a remedy at that time.

In later proceedings, orders were entered by another judge (the motion judge) on October 28, 2004, one of which quantified the damages sustained by plaintiff ($123,694.76); the other quantified the amount of withheld back rent ($164,715.76). A dispute about the net effect of those orders and plaintiff's entitlement to remain as a tenant prompted additional motions. On January 20, 2006, the motion judge found plaintiff was improperly holding over as a result of its failure to properly exercise its option to continue the lease for two additional five-year periods. We permitted an emergent appeal and reversed in light of the presence of disputed material facts about the exercise of the option. Raceway Petroleum, Inc. v. Gambacorto, No. A-3171-05 (App. Div. Mar. 9, 2006). The motion judge also entered an order on February 3, 2006, determining that as a result of the October 28, 2004 orders, plaintiff was indebted to defendant in the net amount of $43,768.64.*fn1

Because of its success on the environmental disputes, plaintiff moved for an award of attorneys' fees as permitted by paragraph 12 of the rider to the lease agreement. The motion judge denied that application on November 17, 2006, concluding that plaintiff's entitlement to fees should await the resolution of the remaining issues.

A jury trial on the remaining issues occurred over the course of six days in September 2008 before yet another judge (the trial judge). The jury determined that plaintiff had properly exercised two five-year options and consequently rejected defendant's claim for holdover damages. The jury also awarded plaintiff $40,000 in damages due to defendant's breach of the lease. On October 2, 2008, the trial judge entered a judgment that memorialized the jury verdict and additionally concluded that in light of plaintiff's withholding of rent, defendant was entitled to be reimbursed the net amount of $46,370.85. In addition, the judgment declared that plaintiff was entitled to submit an application for counsel fees that would, if filed, be adjudicated at a later date.

Plaintiff filed a motion for fees within the month, and defendant quickly cross-moved for fees as well. Prior to the return date of these motions, defendant appealed the March 9, 2004 order of partial summary judgment on the mistaken understanding that the October 2, 2008 order constituted a final judgment. Because that order was not final, we dismissed defendant's appeal, thereby permitting the trial judge the opportunity to rule on the cross-motions for fees. The trial judge denied the fee motions for reasons expressed in a written opinion filed on February 11, 2009.

Plaintiff thereafter filed this appeal, seeking reversal of the denial of its counsel fee application. Defendant filed a cross-appeal, seeking review of the partial ...

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