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Pearlmont, LLC, Janet L. Caggia, and Alfred Caggia v. the Waterfall

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 8, 2011

PEARLMONT, LLC, JANET L. CAGGIA, AND ALFRED CAGGIA, PLAINTIFFS-APPELLANTS,
v.
THE WATERFALL, INC., D/B/A THE PORTER HOUSE, FINTAN SEELEY, BRENDAN MADDAN, AND EUGENE GILLESPIE, DEFENDANTS-RESPONDENTS.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9562-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 1, 2011

Before Judges Graves and Waugh.

Plaintiffs Pearlmont, L.L.C. (Pearlmont), Janet Caggia, and Alfred Caggia appeal from an order of the Law Division granting summary judgment to defendants The Waterfall, Inc. (Waterfall), Fintan Seeley, Brendan Maddan, and Eugene Gillespie. We reverse in part, and affirm in part.

I. We discern the following facts and procedural history from the record on appeal.

In 1997, the individual defendants formed and were equal shareholders of Waterfall, which did business as a restaurant known as The Porter House. The restaurant was located on Kinderkamack Road in Montvale.

In August 1999, the Caggias leased their property on Kinderkamack Road, which was adjacent to the restaurant, to defendants for a term of ten years, to commence on September 1, 1999 and terminate on August 31, 2009.*fn1 The lease provided that defendants would pay a monthly rent of $2750 for the first sixty months, and a monthly rent of $3000 for another sixty months commencing September 1, 2005. The lease provided that "[t]he Tenant covenants and agrees to use the demised premises as a parking area for cars associated with the operation of The Porter House Restaurant . . . to accommodate a minimum of thirty (30) cars." At the time the lease was signed, the Caggias had neither sought nor obtained Montvale's formal approval for use of their property as a parking lot. Plaintiffs, however, contend they had informal, oral permission for that use.

Customers of the restaurant subsequently used the property for parking. In November 1999, Waterfall applied to the Montvale planning board for variances needed to make improvements on its property, but did not seek approval for parking on the Caggia property. On April 30, 2000, defendants Maddan and Gillespie signed a letter agreeing to extend the lease terms "as originally designated." Seeley did not sign the letter.*fn2

At some point in 2002, Seeley bought Gillespie and Maddan's shares of Waterfall.*fn3 During the same time period, the planning board raised the issue that there was no approval for parking on the Caggias' property. In November 2002, lease payments stopped, although Seeley offered to pay a reduced rent of $500 per month.

On December 10, 2002, the Caggias sent Seeley a letter stating that he was two months in arrears on the rent and demanding that he comply with the terms of the lease. The letter also rejected Seeley's offer to pay a lower monthly rent. No further rent was paid, and the Caggias continued to send monthly demand letters for several years.

On April 6, 2005, Alfred Caggia filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the District of New Jersey. The lease was not listed as an asset in his filing. The property was transferred to the Bankruptcy Trustee on August 16, 2006, and subsequently sold to Nancy Caggia Smith, the Caggias' daughter. On December 5, 2006, the property was transferred by her to Pearlmont, an entity owned by the Caggias.

On December 18, 2008, the Caggias filed a complaint against defendants for unpaid rent and late fees in the amount of $215,000, plus rent for the balance of the lease. On April 15, 2009, after plaintiffs initiated a summary dispossess action, possession of the property was returned to plaintiffs by consent of the parties. Pearlmont was added as a plaintiff in January 2010.

Alfred Caggia and Seeley were deposed on March 2, 2010. Seeley testified that while applying for permits to make improvements to the restaurant property, at some point between 1999 and 2002, the chair of the local planning board requested that an application be submitted for parking approval. Seeley subsequently informed Caggia that the lease was "illegal" and refused to pay rent for that reason in late 2002. Seeley testified that "[a]ccording to the town, [Caggia] had to make the application" for parking approval.*fn4 At his deposition, Caggia confirmed that he had never made any application for approval to have thirty cars parked on the property rented to defendants. Caggia stated: "It was not my position to do that. My position was to provide a lease that said we would provide parking for a minimum of thirty cars."

On April 6, 2010, plaintiffs filed a motion for summary judgment. Waterfall and Seeley filed a cross-motion for summary judgment, arguing that the lease was unenforceable. They also asserted that plaintiffs' claims should be barred by the statute of limitations, laches, or both. Gillespie joined Seeley and Waterfall's cross-motion.

After oral argument, the judge denied plaintiffs' motion and granted defendants' cross-motion for summary judgment in an oral decision. He found that the Caggias committed "a material breach. The purpose of this lease was to have . . . at least a minimum of 30 parking spaces, [which] was not delivered . . . . Clearly, the lease is silent; it's construed to their detriment."

An implementing order was entered on May 14, 2010. In an accompanying memorandum of decision, the judge reiterated that the Caggias' failure to provide thirty parking spaces to defendants as required by the lease was a material breach. The judge also rejected plaintiffs' claim that the lease was an installment contract. Based upon that determination, he also held that the claim was time-barred. The judge further concluded that Seeley, Gillespie, and Maddan were not individually liable for Waterfall's obligations under the lease. This appeal followed.

On July 9, 2010, the motion judge heard oral argument on Waterfall and Seeley's motion for sanctions, on the basis that plaintiffs' suit was frivolous. The judge denied the motion. Defendants filed a notice of cross-appeal with respect to the denial, but have not submitted any appellate argument in support of their cross-appeal. Consequently, we dismiss the cross-appeal.

II. On appeal, plaintiffs argue that the motion judge erred in refusing to consider extrinsic evidence on the issue of which party was obligated to obtain any required municipal approvals and in declining to treat the lease as an installment contract for statute of limitation purposes. Waterfall, Seeley, and Gillespie argue that the judge was correct on both issues.*fn5

It is well-established that our review of a trial judge's conclusions of law is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference."). Consequently, we review a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46-2(c). Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 539-40 (1995).

Generally, a court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill, supra, 142 N.J. at 540; see also R. 4:46-2(c). However, a "'genuine' issue of material fact" does not exist if there is only one "unavoidable resolution of the alleged disputed issue of fact." Ibid. (citation omitted).

A. The motion judge held, as a matter of law, that the lease required plaintiffs to obtain any required municipal approvals for use of the leased property as a parking lot. The language of the lease, however, does not support that conclusion. It provided that the tenant "agrees to use the demised premises as a parking area for cars associated with the operation of The Porter House Restaurant . . . to accommodate a minimum of thirty (30) cars." It contains no representation that there is municipal approval for such use and is silent on the issue of which party to the lease would have to obtain such approval. It does, however, require that the tenant comply with municipal requirements in using the property.

While we agree with the motion judge that, as a general proposition of contract law, certain ambiguities will be construed against the drafter of a document, mere silence does not necessarily create that type of ambiguity. In addition, courts must seek to ascertain the intent of the parties from the available extrinsic evidence before employing such rules of construction.

The rules of contractual interpretation are well-established. The role of the court is to give "juristic effect" to the intention of the parties as expressed in the contract. George M. Brewster & Son, Inc. v. Catalytic Constr. Co., 17 N.J. 20, 27-28 (1954) (citing Corn Exch. Nat'l Bank & Trust Co. v. Taubel, 113 N.J.L. 605 (E. & A. 1934)); Domanske v. Rapid-Am. Corp., 330 N.J. Super. 241, 246 (App. Div. 2000). For the purposes of this appeal, ascertaining the intent of the parties requires an analysis of the language of the lease. Kearny PBA Local #21 v. Town of Kearny, 81 N.J. 208, 221 (1979) ("The polestar of construction of a contract is to discover the intention of the parties." (citing Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301 (1953))); Caruso v. Ravenswood Developers, Inc., 337 N.J. Super. 499, 506 (App. Div. 2001) ("Courts are generally obligated to enforce contracts based on the intent of the parties, the express terms of the contract, surrounding circumstances and the underlying purpose of the contract." (citations omitted)).

If a contract is unambiguous, it must generally be enforced as written. Schenck v. HJI Assocs., 295 N.J. Super. 445, 450 (App. Div. 1996) (citing U.S. Pipe & Foundry Co. v. Am. Arbitration Ass'n, 67 N.J. Super. 384, 393 (App. Div. 1961)), certif. denied, 149 N.J. 35 (1997). A contract is ambiguous if it is reasonably susceptible of two interpretations. Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997) (quoting Kaufman v. Provident Life & Cas. Ins. Co., 828 F. Supp. 275, 283 (D.N.J. 1992), aff'd, 993 F.2d 877 (3d Cir. 1993)). The issue of ambiguity is one of law. Ibid. As we held in Caruso, supra, 337 N.J. Super. at 506, the "surrounding circumstances and the underlying purpose of the contract" must be considered along with the "express terms" in ascertaining the "intent of the parties."

In Conway v. 287 Corporate Center Associates, 187 N.J. 259, 269 (2006), the Supreme Court held that our courts will "consider all of the relevant evidence that will assist [them] in determining the intent and meaning of [a] contract."

This is so even when the contract on its face is free from ambiguity. The polestar of construction is the intention of the parties to the contract as revealed by the language used, taken as an entirety; and, in the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain are necessarily to be regarded. . . . The judicial interpretative function is to consider what was written in the context of the circumstances under which it was written, and accord to the language a rational meaning in keeping with the expressed general purpose. [Ibid. (quoting Schwimmer, supra, 12 N.J. at 301-02).]

When examining the extrinsic evidence to interpret a contract, a court may consider "'the particular contractual provision, an overview of all the terms, the circumstances leading up to the formation of the contract, custom, usage, and the interpretation placed on the disputed provision by the parties' conduct.'" Ibid. (quoting Kearny PBA Local #21, supra, 81 N.J. at 221). "Semantics cannot be allowed to twist and distort [the words'] obvious meaning in the minds of the parties. Consequently, the words of the contract alone will not always control." Id. at 269-70 (citation and internal quotation marks omitted).

Nevertheless, once the intent of the parties has been ascertained, "the parol evidence rule comes into play to prohibit the introduction of extrinsic evidence to vary the terms of the contract." Id. at 270. As the Court said in Schwimmer, supra, 12 N.J. at 301-02:

The admission of evidence of extrinsic facts is not for the purpose of changing the writing, but to secure light by which to measure its actual significance. Such evidence is adducible only for the purpose of interpreting the writing-not for the purpose of modifying or enlarging or curtailing its terms, but to aid in determining the meaning of what has been said. So far as the evidence tends to show, not the meaning of the writing, but an intention wholly unexpressed in the writing, it is irrelevant. [(Emphasis added).]

Here, the lease has a specific provision about how the tenant could use the property, but there was no representation that there was municipal permission for such use and no allocation of the burden of obtaining any such permission. In such circumstances, a court must first assess the available extrinsic evidence to ascertain whether it will reveal the intent of the parties with respect to those issues. Both sides argue that it will, although they disagree as to what intent will be discovered. If that analysis does not reveal the intent of the parties, the court can then use rules of construction to provide missing terms.

Consequently, we conclude that the judge erred in interpreting the lease against plaintiffs without having examined the extrinsic evidence in an attempt to ascertain the intent of the parties. Whether that can be done on motion or whether a trial is necessary, due to the presence of genuine issues of material fact, must be determined on remand.

B. In determining that the lease was not an installment contract, the motion judge relied on County of Morris v. Fauver, 153 N.J. 80 (1998). In Fauver, the Court stated:

Under the installment contract method, claims based on installment contracts or other divisible, installment-type payment requirements accrue with each subsequent installment. In other words, a new statute of limitations begins to run against each installment as that installment falls due and a new cause of action arises from the date each payment is missed. [Metromedia Co. v. Hartz Mountain Assocs., 139 N.J. 532, 535-36 (1995)]. The Court in Metromedia, supra, noted that, absent a repudiation, a plaintiff may sue for each breach only as it occurs because "[t]o hold otherwise would allow a claimant to trigger the statute of limitations upon presentation of a claim rather than having the existence of a claim trigger the statute of limitations." Ibid. [Fauver, supra, 153 N.J. at 107-08 (emphasis added).]

We conclude that, under Fauver, the lease was an installment contract, such that the statute of limitation would ordinarily begin to run for each rental payment when it fell due.

That conclusion does not, however, end the inquiry. There is an issue of whether there was a repudiation of the lease in late 2002, and if so when that repudiation took place. Such an anticipatory breach may have caused the entire rent to become due, so that the complaint in this action may have been untimely for that reason. However, none of those issues were briefed by the parties.

It is not clear from the record whether there was a repudiation or when it occurred. We cannot, for example, ascertain whether customers of the Porter House continued to use the property for parking or whether Waterfall exercised control over it after December 2002. Those issues, factual and legal, will need to be explored on remand.

C. Finally, while we agree with the motion judge that the record presents no basis for liability on the part of the individual defendants simply because they were shareholders of Waterfall, we note that they were each listed as tenants in the lease. Despite being listed as tenants, there appears to be an issue as to whether they all actually signed the lease or a related document sufficient to bind them on the lease as tenants, or whether they only signed on behalf of Waterfall. Consequently, we affirm their dismissal solely in their capacity as shareholders, but reverse to the extent they are found to be tenants in their own rights.

We otherwise reverse the order for summary judgment and remand for further proceedings consistent with this opinion.

Reversed in part, affirmed in part.


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