January 19, 2012
ERIC BRAM AND COMPANY, PLAINTIFF-RESPONDENT,
KENT PLAZA ASSOCIATES, DEFENDANT-APPELLANT, AND SCOTTSDALE PARTNERSHIP, A NEW JERSEY GENERAL PARTNERSHIP; EDWARD FLATEMAN; JOSE PEREIRA; AND COHEN SCHATZ ASSOCIATES, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-005316-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 21, 2011
Before Judges Fuentes, Graves, and Harris.
This appeal involves a commercial real estate broker's commission for a shopping center lease originally procured in 1988. Plaintiff Eric Bram and Company (EB&C) sued Kent Plaza Associates (Kent), the current owner of a shopping center located in Howell, for refusing to pay a commission triggered by events two decades later. The Law Division granted summary judgment to EB&C for the $64,136.96 commission plus a contractually-reallocated attorney's fee of $21,378.98. We affirm the judgment awarding the commission, but reverse and remand the attorney's fee award for reconsideration.
On February 27, 1987, EB&C entered into an exclusive brokerage agreement with Jose Pereira, Jr., the then-owner of the land that was being developed into the Kent Road Plaza shopping center, which granted EB&C the "sole and exclusive right and authority to sell or lease the property." The brokerage agreement provided that in the event EB&C produced a tenant, it would be paid a commission of six percent of the gross aggregate rentals for the term of the lease plus any extensions, options, renewals, continued occupancies, rental of additional space, re-negotiations, taking space at another premises owned by [Pereira], or purchase thereof by the purchaser/tenant, its successors or assigns whether same occur during or subsequent to the within contract term.
The brokerage agreement also provided that [Pereira] agrees in the event of a sale or other transfer of the property that [Pereira] shall cause the purchasers or transferee to assume or otherwise agree to pay to [EB&C] all sums payable hereunder or which may become payable hereunder with respect to the subject property, and [Pereira] shall furnish [EB&C] with a true copy of said Assumption Agreement.
Lastly, regarding an attorney's fee, the brokerage agreement stated the following:
In the event it should become necessary for [EB&C] to institute a lawsuit for nonpayment of commission hereunder, and should [EB&C] be successful, [Pereira] shall be responsible for all reasonable legal fees, costs and court costs incurred by [EB&C].
On May 20, 1988, Pereira*fn1 and Pizza Huts of Monmouth County, Inc. (Pizza Hut) entered into a twenty-year commercial lease at Kent Road Plaza. The lease gave Pizza Hut the option to rent the location for "three (3) additional periods each of five (5) years" following the initial twenty-year term. Furthermore, the lease permitted Pizza Hut to "assign its interest in this Lease or sublet, or license the use of, the whole or any part of the Demised Premises." Similarly, Pereira had "the right to transfer, assign and convey, in whole or in part, the [Kent Road Plaza] and any and all of its rights under this [l]ease, and in the event [Pereira] shall thereby be released from any further obligations hereunder." The lease also specified that Pereira would "assign all of [his] right, title, interest and obligations in, to and under this [l]ease to Scottsdale Partnership," a New Jersey general partnership with which he was affiliated.
In addition, section thirty-six of the lease expressly stated:
[Pereira] and [Pizza Hut] represent and warrant each to the other that each has not dealt with any real estate agent or broker in connection with this transaction other than [EB&C], . . . and agree to indemnify and save each other harmless from and against all loss, cost and expense incurred by reason of the breach of such representation and warranty. [Pereira] agrees to pay [EB&C] any commissions owing in connection with this transaction for its efforts in consummating this transaction, all in accordance with a separate commission agreement. [(Emphasis added).]
EB&C was paid its brokerage commission on the initial twenty-year term of the lease.
Moreover, the lease provided that "[a]ll terms, covenants and conditions herein contained shall be for and shall inure to the benefit of and shall bind the respective parties hereto, and their heirs, executors, administrators, personal or legal representatives, successors and assigns respectively." Finally, attached to the lease was an addendum stating that during the term of the lease, Pizza Hut had "a right of first opportunity to lease the adjacent 1,600 square feet in the Building of which the Demised Premises forms a part."
In time, both Scottsdale Partnership and Pizza Hut divested themselves of their respective interests in the lease. First, on March 19, 1997, Pizza Hut assigned all of its rights as tenant under the Lease to Mandolfo Acquisitions, L.L.C.*fn2
On March 31, 1999, Scottsdale Partnership and Charles Silberberg executed an agreement to sell the Kent Road Plaza shopping center to Silberberg. The terms permitted Silberberg to assign the agreement "to an entity in which [Silberberg] or members of [Silberberg's] family maintain an interest." In Silberberg's certification submitted in opposition to EB&C's motion for summary judgment he represented himself to be the "Managing Member" of Kent, and indicated that Kent "purchased the Kent Plaza Shopping Center [sic], Howell, New Jersey in May 1999," attaching as evidence thereof, a copy of the agreement dated March 31, 1999.
The agreement required Scottsdale Partnership to provide Silberberg with a list of the names of the tenants, unit numbers, rents, status of tenancies and common area maintenance charges and to "provide any other information required by [Silberberg]." A schedule to the agreement listed all tenants, including Pizza Hut. Additionally, the agreement outlined Scottsdale Partnership's specific obligations at closing, including delivery of "[l]ease originals," "[l]etters of attornment to all tenants, including disposition of security deposits," "security deposits or credits for the same," and "[e]stoppel letters for all tenants."
On January 1, 2000,*fn3 Kent and Mandolfo "entered into an Amendment to Lease Agreement whereby [Mandolfo] exercised its first opportunity . . . to lease the extra 1,600 square feet of space."*fn4 Then, on December 13, 2000, Kent and Mandolfo entered into the Second Amendment to Lease Agreement, which modified the term of the original May 20, 1988 Pizza Hut lease. The lease, as amended, commenced on January 1, 2001, and will expire on December 31, 2020, with one five-year option not to extend past December 31, 2025. The Second Amendment to Lease Agreement also set forth the yearly rent from 2001 through 2025. On December 13, 2000, Kent and Mandolfo also signed a Memorandum of Lease, which explicitly stated, "the landlord's interest in and to" the lease "ha[d] been assigned to [Kent]."
On February 9, 2009, EB&C filed a complaint in the Law Division demanding $22,270.83 in unpaid commissions. EB&C calculated this amount based on its belief that the tenant had exercised an option to extend the lease for five additional years. EB&C asserted that the gross aggregate rental for the option period was $371,180.51 and EB&C's commission was accordingly six percent of that amount.
Following discovery, EB&C filed a motion for summary judgment seeking the amount of its claimed commission plus an award of $7,423.61 in legal fees (one-third of the commission).
On May 28, 2010, the trial court heard argument, but reserved decision.
On June 2, 2010, EB&C submitted a supplemental letter brief to the court with additional documents*fn5 that it had just received pursuant to a subpoena issued to "the tenant whose lease is at issue in this commission claim." EB&C asserted that the "latest extension for the lease for which [EB&C] had not received commissions would run from October 1, 2009 [to] December 31, 2020 giving rise to a net aggregate rental of $1,068,949.23." EB&C concluded that its six percent commission gave rise "to claims of $64,136.96, rather than the five year commission calculated in the motion for summary judgment using the old lease" and that "the legal fee calculation (a one-third contingency fee) would now be $21,378.98."
On June 9, 2010, Kent fully responded to EB&C's post-hearing submission contending, among other things, that Kent was never aware of the brokerage agreement, but it did not otherwise contest the authenticity or existence of the newly-discovered documents.
On June 17, 2010, the motion court granted EB&C's motion for summary judgment, concluding that "no reasonable trier of fact would find in favor of the non-moving party, and that summary judgment should be granted." The decision was based on the finding that Kent knew or should have known of the Pizza Hut lease that referenced EB&C's commission entitlement. In support of this finding, the court cited the schedule of leases attached to the agreement of sale between Kent and Scottsdale, which was "a schedule specifically referencing the Lease with Pizza Hut." In addition, Kent "did not deny that [it] continued to receive rent from Pizza Hut, thus evidencing [its] knowledge of the lease's renewal."
The motion court relied upon Pagano Company v. 48 South Franklin Turnpike, LLC, 198 N.J. 107 (2009) and VRG Corporation v. GKN Realty Corporation, 135 N.J. 539 (1994) and determined that Kent "affirmatively assumed the obligation" set forth in the commission agreement. The court pointed out that "as in Pagano, [Kent] knew of the lease, which contained a paragraph relating to the commission agreement," and that this was "sufficient to bind the parties to the commission agreement."
With regard to damages, the motion court stated that it awarded "damages in accordance with [EB&C's] supplemental papers." However, while the court increased EB&C's claim for commissions from $22,270.83 to $64,136.96 to include the extended lease terms evidenced by the documents produced by Pizza Hut, it mistakenly did not increase the $7,423.61 award for an attorney's fee. Consequently, on July 1, 2010, the court entered, sua sponte, an amended order awarding $21,378.98 for the attorney's fee in connection with bringing the action.
On November 1, 2010, the motion court denied Kent's application for reconsideration. It reiterated that it "found in its previous ruling that [Kent] did have a copy of the lease agreement, which made reference to the brokerage agreement, and as such under [Pagano] made [Kent] liable under the brokerage agreement." Addressing Kent's argument that the award of the attorney's fee was unreasonable, the court found "nothing inherently unreasonable about a contingency fee in this type of case" and did not find "an award of 33-1/3% unreasonable in this matter." Finally, addressing Kent's argument that it lacked proper notice of the sua sponte order, the Law Division found "the evidence of what the proper judgment amount should [have been] was within [Kent's] possession, and was not properly provided in response to discovery requests." Thus, "in accordance with R[ule] 4:9-2," the court permitted amendment of EB&C's complaint "to conform to the evidence." This appeal followed.
When reviewing summary judgment dispositions, we employ the same standards used by the motion court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010); see R. 4:46-2(c) (providing that summary judgment may be granted if the record shows that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law."). We are initially tasked to determine whether the moving party has demonstrated that there is no genuine dispute as to any material fact. If there is none, we next decide whether the motion judge correctly applied the applicable law. Luchejko v. City of Hoboken, 414 N.J. Super. 302, 309-10 (App. Div.), aff'd, 207 N.J. 191 (2011). In so doing, we view the evidence in a light most favorable to the non-moving party. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We review issues of law de novo and accord no deference to the motion judge's legal conclusions. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 384-85 (2010).
The motion court's reliance upon Pagano together with its determination that summary judgment was appropriate were correct. The New Jersey Supreme Court clearly stated the principle that "where a purchaser accepts assignment of leases that 'include or refer to the obligation to pay commissions,' he or she may be considered to have affirmatively assumed that obligation." Pagano, supra, 198 N.J. at 116-17 (quoting VRG, supra, 135 N.J. at 556). In this case, the evidence submitted by EB&C irrefutably proved that Kent accepted assignment of the Pizza Hut lease and bound itself to its terms. Specifically, the December 13, 2000 Memorandum of Lease signed by Kent explicitly stated that Pereira's "interest in and to the said Lease has been assigned to [Kent], the present Landlord." It is equally clear that the Pizza Hut lease included or referred to the landlord's obligation to pay commissions to EB&C, all in accordance with a separate commission agreement.*fn6 If Kent failed or neglected to conduct proper due diligence to learn the terms of that separate agreement, it was not the fault of EB&C. Therefore, applying Pagano to the undisputed facts of this case, Kent is "considered to have affirmatively assumed that obligation" and must pay EB&C's commission. Id. at 118.
In an argument presented for the first time on appeal, Kent submits that the terms of the brokerage agreement are ambiguous and such ambiguities must preclude summary judgment. We disagree for two reasons. First, because this issue was one that could have been raised in the Law Division, but was not, it need not be addressed on this appeal. An appellate court will decline to consider issues not presented to the motion court, unless the issue goes to the jurisdiction of the court or concerns a matter of substantial public interest. State v. Robinson, 200 N.J. 1, 20-22 (2009). Kent provides neither a reason why this issue was not argued to the motion court nor justification for why it should be considered now on appeal.
Second, and more importantly, there is nothing about the payment terms of the brokerage agreement that are either confusing or ambiguous. The brokerage agreement expressly contemplated that EB&C would have an inchoate right to earn a commission if the tenant (which had a right to assign its leasehold interests to another) either exercised a renewal option or otherwise extended the lease. That is exactly what transpired. The circumstance that these events took place after Kent and Mandolfo stepped into the shoes of their predecessors does not negate the clear understanding and operation of the brokerage agreement. See Fry v. Doyle, 167 N.J. Super. 486, 496 (App. Div.) (noting that the execution of a commission-generating transaction by a party's successor-in-interest, as opposed to the party itself that had signed the commission agreement, "did not alter [plaintiff broker]'s status as the procuring or efficient cause of" the agreement), certif. denied, 81 N.J. 287 (1979).
Pursuant to Rule 4:42-9, a party may agree by contract to pay a reallocated attorney's fee. See Pressler and Verniero, Current N.J. Court Rules, Comment 2.10 on R. 4:42-9 (2012); Serpa v. N.J. Transit, 401 N.J. Super. 371, 382 (App. Div. 2008). The contract provision, however, will be strictly construed in light of the general policy disfavoring burdening one's adversary with counsel fees. McGuire v. City of Jersey City, 125 N.J. 310, 326 (1991); Verna v. Links at Valleybrook Neighbor. Ass'n., 371 N.J. Super. 77, 100-01 (App. Div. 2004).
When the motion court first granted summary judgment and then sua sponte corrected the award of an attorney's fee, it did not explain its rationale for the award of one-third of the commission. Indeed, at that time, as far as we can discern from the record, EB&C's attorney had not submitted the required affidavit pursuant to Rule 4:42-9(b) ("Except in tax and mortgage foreclosure actions, all applications for the allowance of fees shall be supported by an affidavit of services addressing the factors enumerated in RPC 1.5(a).").
Several weeks later, in response to Kent's motion for reconsideration, EB&C's counsel provided the motion court with a certification outlining that on an hourly basis his legal fee would be $13,615, but argued for "the reasonable nature of a contingency fee of $21,378.98 as sought here." When it decided the motion for reconsideration, the Law Division, for the first time, explained the following:
The [c]court additionally finds that there is nothing inherently unreasonable about a contingency fee in this type of case, and this [c]court does not find an award of 33-1/3% unreasonable in this matter.
We find this articulation both insufficient to permit appellate review and not consonant with our jurisprudence allowing limited reallocation of an attorney's fee. Rule 1:7-4(a) requires the court to "find the facts and state its conclusions of law thereon . . . on every motion decided by a written order that is appealable as of right." City of Englewood v. Exxon Mobile Corp., 406 N.J. Super. 110, 125-26 (App. Div.), certif. denied, 199 N.J. 515 (2009). Accordingly, we reverse the award of the attorney's fee without prejudice, and remand the matter to the Law Division to reconsider and fully explain the amount, if any, of a reallocated attorney's fee.
We do this notwithstanding our narrow scope of review of such awards. "[F]ee determinations by trial courts will be disturbed only on the rarest occasions, and then only because of a clear abuse of discretion." Rendine v. Pantzer, 141 N.J. 292, 317 (l995); Shore Orthopaedic Group, LLC v. Equitable Life Assurance Soc'y of the U.S., 397 N.J. Super. 614, 623 (App. Div. 2008), aff'd, l99 N.J. 310 (2009). "[A]buse of discretion is demonstrated if the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error in judgment." Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005). In order to ensure fairness and provide the necessary predicate for a meaningful review, the motion court here must analyze the relevant factors and provide its reasons for the amount of an awarded attorney's fee, explicitly taking the factors of RPC 1.5(a) into account.*fn7 R.M. v. Supreme Court of N.J., 190 N.J. 1, 11-12 (2007).
We have considered Kent's additional arguments, including its contention that the motion court erred "in awarding a judgment in excess of the amount sought in the judgment." We find all of those arguments to be without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). Kent had a full and fair opportunity to address the issues raised in EB&C's supplemental submissions following oral argument of the summary judgment motion, as well as on its motion for reconsideration. The motion court acted well within its orbit of authority when it permitted EB&C's pleadings to be deemed amended to conform to the evidence, especially since that evidence was not forthcoming from Kent during discovery.
Affirmed in part; reversed and remanded in part for further proceedings in accordance with this opinion. We do not retain jurisdiction.