July 22, 2013
FREEDMAN SERVICE COMPANY, INC., Plaintiff-Appellant,
HAN AH REUM FARM CORP., YOUNG SU HUN and DUK JA YUN, Defendant-Respondents.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically May 7, 2013
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-1884-11.
Samuel H. Davis argued the cause for appellant.
Lawrence C. Weiner argued the cause for respondents (Wilentz, Goldman & Spitzer, P.A., attorneys; Mr. Weiner, of counsel and on the brief; David Kluska, on the brief).
Before Judges Alvarez and St. John.
Appellant Freedman Service Co. (Freedman) appeals from a July 9, 2012 order of the Law Division granting judgment in favor of respondents Han Ah Reum Farm Corp. (Farm), Young Su Hun, and Duk Ja Yun, finding that Freedman breached the terms of the written lease between the parties and failed to return Farm's security deposit in the amount of $13, 383.50. Our examination of the record satisfies us that the Law Division's decision was properly premised on facts in the record and is consonant with relevant statutory provisions. Accordingly, we affirm.
The record discloses the following facts and procedural history leading to the determination under review.
Freedman is the owner of a shopping center in which Farm operated a Korean market under a lease entered into on May 1, 1997. The lease was for a term of ten years, terminating on April 30, 2007. The lease provided for a non-automatic renewal option of five years. If the renewal option were exercised, the rent for those additional five years was to be adjusted in accordance with the consumer price index as set forth in paragraph A 16 of the lease. Additionally, the lease contained a notice provision, requiring that all notices "shall be in writing[.]"
At the end of the initial term on April 30, 2007, neither Farm nor Freedman gave notice to the other exercising the renewal term. Farm remained in possession of the premises and continued to pay rent each month, as billed by Freedman.
On October 26, 2010, Farm sent a letter terminating what it referred to as a month-to-month tenancy, effective November 30, 2010. In a letter dated October 29, 2010, Freedman responded, stating that because Farm continued paying rent after the expiration of the original lease term, Farm had exercised the option for renewal and was not in possession of a month-to-month tenancy. Thereafter, Farm paid rent through the month of November 2010, and vacated the premises in December 2010.
Freedman asserted that by remaining in the premises and paying rent, Farm effectively exercised its option to renew the term of the lease for an additional five years from April 30, 2007, to April 30, 2012. Accordingly, it brought a claim seeking $296, 856.43 in net damages for arrears of rent and additional rent from December 2010 through May 2012. However, it later conceded that this amount was in error by one month, so $10, 488.68 should have been deducted from the total.
Conversely, Farm maintained that it was a month-to-month tenant upon expiration of the original ten-year lease. In its counterclaim, Farm requested the return of its security deposit in the amount of $13, 383.50. A bench trial was conducted, at which only Richard Freedman, vice president of plaintiff, testified.
If the renewal option was executed, the rent should have increased by the aggregate percentage increase of the cost of living. Freedman was unable to produce its rent invoices for the year 2007 and did not establish exactly when in 2007 the renewal rent was increased per the lease provisions. Farm produced the rental invoices for the months of April 2007 through July 2007 to show that there was no rent increase as of May 2007, the first month of what would have been the renewal term. However, Freedman insisted that there was a rent increase in October 2007, and that the delay in charging for this increase was due to the three and one-half month period of free rent given to Farm at the start of the original lease. An invoice for rent in January 2008 was $11, 650.72, and rent as of December 2010 was $12, 301.79. Farm paid the increased rent when charged.
By order dated November 17, 2011, the motion judge dismissed count one of Farm's complaint which sought rent at double the amount in effect which was paid for the last month prior to termination of the term. After a bench trial, the trial judge dismissed the remaining counts of Freedman's complaint and entered an order of judgment dated July 9, 2012, for Farm on the first and second counts of its counterclaim for breach of contract and return of security deposit in the amount of $13, 383.50. The third and fourth counts of Farm's counterclaim were dismissed, with prejudice. It is from that decision that Freedman appeals.
"The scope of appellate review of a trial court's fact-finding function is limited." Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting Cesare v. Cesare, 154 N.J. 394, 411 (1998)) (internal quotation marks omitted). "[W]e do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant[, ] and reasonably credible evidence as to offend the interests of justice." Ibid. (quoting In re Trust Created By Agreement Dated Dec. 20, 1961, 194 N.J. 276, 284 (2008)) (internal quotation marks omitted). "Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility." Ibid. (quoting Cesare, supra, 154 N.J. at 412).
"Because a trial court hears the case, sees and observes the witnesses, and hears them testify, it has a better perspective than a reviewing court in evaluating the veracity of witnesses." Ibid. (quoting Cesare, supra, 154 N.J. at 412). However, we owe no deference to a trial court's interpretation of the law, and review issues of law de novo. State v. Parker, 212 N.J. 269, 278 (2012); Mountain Hill, L.L.C. v. Twp. Comm. of Middletown, 403 N.J.Super. 146, 193 (App. Div. 2008), certif. denied, 199 N.J. 129 (2009). In his July 9, 2012 written opinion the trial judge determined that:
Having heard the testimony of the witness, and reviewed those items received into evidence, I find and believe that the tenant did not exercise the option for an additional five year term. Here, I find that there is no intent on the part of either the landlord or the tenant to extend the term an additional five years. The Court is required to give effect to the terms of the lease as they are written. Here it is apparent that the additional term was an option, which was not automatic and required some action by the tenant to invoke that additional term. The Court also finds that the tenant did not invoke that option for an additional five year term and so by the terms of  N.J.S.A. 46:8-10, a tenancy from month to month resulted by tenants holding over in possession of the premises. Plaintiff's reliance upon the language in the statute that "in the absence of any agreement to the contrary, " nevertheless begs the question, of the existence of an agreement to the contrary. It begs the question because there is no proof whatsoever that either party ever intended to have an exercise of the option for another five year term. There was nothing in the testimony or in the documents submitted by Plaintiff which would establish the exercise of that option by tenant.
We affirm for substantially the reasons set forth by Judge Le Blon in his comprehensive written opinion. We add the following brief comments.
N.J.S.A. 46:8-10 states:
Whenever a tenant whose original term of leasing shall be for a period of one month or longer shall hold over or remain in possession of the demised premises beyond the term of the letting, the tenancy created by or resulting from acceptance of rent by the landlord shall be a tenancy from month to month in the absence of any agreement to the contrary.
Substantial credible evidence supports the trial judge's finding that there was "no intent on the part of either the landlord or the tenant to extend the term an additional five years." The renewal option was not automatic, and there was no written notice that the renewal option was being exercised. We agree with the trial judge's decision that Farm was a month-to-month tenant and therefore was entitled to the return of its security deposit.