FRICK JOINT VENTURE, et al. v. STARWOOD CERUZZI UNION, LLC, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4234-04T14234-04T1

FRICK JOINT VENTURE,

a Partnership and Trust of

the State of New Jersey

Plaintiff-Appellant,

v.

STARWOOD CERUZZI UNION, LLC,

a limited liability company;

NATIONAL WHOLESALE LIQUIDATORS

OF UNION, INC., a corporation;

and LIGHT UNION, LLC,

Defendants-Respondents,

and

ODD JOB, INC., a corporation,

Defendant.

__________________________________________________________

 

Argued September 19, 2006 - Decided -

Before Judges Kestin, Weissbard and Payne.

On appeal from Superior Court of New Jersey,

Chancery Division, Union County, Docket

No. UNN-C-77-04.

Fred R. Gruen argued the cause for appellant

(Gruen & Goldstein, attorneys; Mr. Gruen,

on the brief).

Alain Leibman argued the cause for respondents Starwood Ceruzzi Union, LLC and Light Union, LLC (Stern & Kilcullen, attorneys; Mr. Leibman and Jane J. Felton, on the brief).

Bryan Blaney argued the cause for respondent

National Wholesale Liquidators of Union, Inc. (Lowenstein Sandler, attorneys; Mr. Blaney, on the brief).

PER CURIAM

Plaintiff Frick Joint Venture (Frick) appeals from an order of summary judgment dismissing its suit against defendants Starwood Ceruzzi Union, LLC (Starwood), Odd Job, Inc. (Odd Job), National Wholesale Liquidators of Union, Inc. (NWLU) and Light Union, LLC (Light Union). Although we affirm one facet of the motion judge's ruling, we conclude that in other important respects, she resolved disputed material issues of fact, inappropriate for summary disposition, and therefore reverse and remand for trial.

Given the basis for our decision, an extensive recitation of the facts is required.

The SGC/Pathmark Lease

Plaintiff owns a retail shopping center, known as Union Plaza (the shopping center), located at Route 22 Westbound in Union. On April 21, 1971, plaintiff's predecessor executed a master lease for space at the premises with Supermarkets General Corporation (the SGC/Pathmark lease). SGC assigned the lease to Lyons Pathmark, Inc., which then reassigned it to SGC. SGC currently operates a Pathmark supermarket on most of its leased premises and subleases a smaller portion to Liquor Savers.

The SGC/Pathmark lease conferred upon SGC/Lyons Pathmark the exclusive right within the shopping center to sell food for off-premises consumption, prescription and non-prescription drugs, health and beauty aids, and alcoholic beverages. The lease provided that if any other tenant sold such merchandise, plaintiff would have no duty to enjoin the violation and would not be liable to SGC/Pathmark for damages, but SGC/Pathmark could, in the name of plaintiff, commence proceedings against any such other tenant for damages.

The Rickel Lease and Relevant Subleases

On September 30, 1971, plaintiff's predecessor entered into a second master lease, with Rickel Bros., Inc. (the Rickel lease). The lease was assigned to Starwood in 1998, and Starwood paid plaintiff a fixed rental for control of approximately 143,000 square feet of the shopping center. In May 2004, Starwood sold its leasehold interest in the shopping center to Light Union, which became a direct tenant of plaintiff. Odd Job and NWLU had been subtenants of Starwood and thus became subtenants of Light Union.

Consistent with the exclusion found in the SGC/Pathmark lease, the Rickel lease contained a restrictive covenant/exclusive that recognized the rights conferred upon Pathmark in the SGC/Pathmark lease. To that end, the Rickel lease contained the following provision:

6. Use and Occupancy

(a) The Demised Premises may be used and occupied for any lawful retail purpose except for any use expressly restricted against in Exhibit E annexed hereto. The permitted uses, exclusives and restrictions set forth in said Exhibit E, which are contained in leases as set forth in said Exhibit E, shall continue in effect without regard to the termination, cancellation or expiration of any one or more of such

leases. . . .

(b) Notwithstanding the provisions of paragraph (a) of this Article 6, so long as Tenant is a subsidiary, parent, sister corporation or affiliate of Supermarkets General Corporation (hereinafter called "Supermarkets"), or is otherwise owned, controlled or operated by Supermarkets, the exclusives and restrictions set forth in Exhibit E in favor of Lyons Pathmark, Inc. shall not be enforceable by Landlord against Tenant, provided, however that the foregoing shall not affect any right of Lyons Pathmark, Inc. or of Supermarkets to enforce such exclusives and restrictions.

[Emphasis added.]

The relevant portion of the attached Exhibit E provided that the tenant was restricted from using the leased premises as a supermarket, drugstore, or store selling alcoholic beverages as long as SGC/Pathmark sells those items. The tenant was also restricted from using the premises as a theatre, bowling alley, restaurant or funeral parlor. Finally, the relevant portion of Exhibit E stated that "Supermarkets has exclusive right, to sell food and food products for off-premises consumption, prescriptions and non-prescription drugs, health and beauty aids and alcoholic beverages." These provisions will be referred to collectively as the "restrictive covenant/exclusive."

Odd Job Sublease

On May 29, 1997, Odd Job entered into a sublease with Starwood's predecessor for space in the shopping center pursuant to the Rickel lease. The sublease obligated Odd Job to honor and abide by all of the restrictions set forth in Article 6 of the master lease, a copy of which was annexed to the sublease. However, as was typical of stores in the chain, at various times the Odd Job store at the shopping center sold food items, health and beauty aids, and non-prescription drugs.

On April 1, 1998, during the time that Odd Job leased space at the shopping center, plaintiff issued an estoppel certificate to Rickel Home Centers, the then-holder of the Rickel lease, which had requested the certificate in conjunction with the assignment of its leasehold interest. The certificate stated that to the best of the landlord's knowledge, Rickel, the tenant, was in full compliance with the lease terms. The certificate expressly provided that it was to be "materially relied upon" by the current holder of the Rickel lease and its successors or assigns.

NWLU Sublease

In October 1998, Starwood sublet a portion of the premises pursuant to the Rickel lease to Filene's Basement, Inc. (Filene's). The sublease restricted the use of the premises to "any lawful retail use consistent with the terms of the Master Lease" and, in addition, expressly required Filene's to abide by all of the exclusives granted by plaintiff to other tenants in the shopping center, including the restriction that no portion of the premises be used to sell food products for off-premises consumption, prescription or non-prescription drugs, or health and beauty aids.

After Filene's filed for bankruptcy in the United States Bankruptcy Court in Massachusetts, Filene's sublease was purchased by NWL Holdings, Inc. in May 2000. During the bankruptcy proceedings, and in connection with its planned bid to purchase the Filene's sublease, NWL Holdings sought approval and permission from Pathmark to allow it to sell health and beauty aids and food items within the shopping center. On May 5, 2000, Pathmark provided NWL Holdings with a letter permitting it to sell "food and health and beauty care items" on up to 4,000 square feet of the premises it rented. The letter stated that it was binding on Pathmark's and NWL Holding's landlord, as well as on Pathmark, NWL, and their mortgagees, successors, assigns, and subtenants. It also indicated that it superseded any lease restrictions to the contrary.

One week after Pathmark submitted its waiver letter to NWL Holdings, the Bankruptcy Court issued an order allowing NWL Holdings to purchase the Filene's sublease. The order found that the parties had provided adequate assurances of future performance consistent with the obligations under the lease as required by the Bankruptcy Code.

On January 31, 2001, NWL Holdings, Inc. assigned the sublease to defendant NWLU. Since its opening at the shopping center, NWLU has operated as a "typical" National Wholesale Liquidator's Store, and has advertised, displayed and sold discounted merchandise, including various food products and health and beauty items.

The Litigation

In March 2004, Starwood asked plaintiff to issue an estoppel certificate respecting the status of the Rickel lease, and whether Starwood was in default of any of the covenants therein, to be used in connection with the sale of the Rickel lease from Starwood to Light Union. In order to prepare an accurate estoppel certificate, plaintiff inspected the premises designated by the Rickel lease, including Odd Job and NWLU. During its inspection, plaintiff determined that Odd Job and NWLU were selling food, health and beauty aids, and non-prescription drugs.

On April 29, 2004, Frick filed a verified complaint seeking declaratory and injunctive relief, alleging that Starwood, Odd Job, and NWLU had violated lease provisions prohibiting the sale of health and beauty aids, non-prescription drugs, and food for off-premises consumption. On June 14, 2004, plaintiff filed an amended complaint upon the assignment of the master lease from Starwood to Light Union, adding Light Union as a defendant and adding a third count for breach of contract. The amended complaint sought declaratory and injunctive relief as well as money damages.

Thereafter, all defendants moved for summary judgment. After hearing oral argument on October 14, 2004, the judge issued a written decision on October 26, 2004, granting summary judgment to all defendants. Regarding plaintiff's claim for damages against Starwood, the motion judge found that plaintiff failed to show that it would be able to prove damages at trial with any reasonable certainty.

As to plaintiff's claims for injunctive relief, the trial court found that equitable estoppel was applicable because plaintiff failed to object to defendants' sales of the prohibited items for six years and affirmatively stated that there was then no breach or default by Rickel Home Centers, Inc., under the lease when plaintiff issued the estoppel certificate to Rickel in 1998. Regarding the NWLU lease, the trial court found that the business NWLU sought to conduct at the shopping center was reviewed by the Bankruptcy Court during Filene's bankruptcy proceedings. Thus, NWLU had the right to rely on the Bankruptcy Court's order approving its use as typical of stores in the chain. Moreover, the Bankruptcy Court retained jurisdiction over any future claims that might arise from its decision. The judge explained that plaintiff failed to establish that the exclusive provision was for plaintiff's benefit and that plaintiff was unable to establish any theory of damages arising from breach of the provisions of the lease negotiated in 1971. The judge also found that plaintiff unreasonably delayed in objecting to the sale of the prohibited items, and that the exclusion contained in the SGC/Pathmark lease was entered into for the sole benefit of Pathmark, not plaintiff. The judge concluded that plaintiff was not entitled to equitable relief because it had not done equity itself.

On appeal, plaintiff presents the following issues for our consideration:

POINT I

THE MOTION JUDGE'S DECISION IS VIOLATIVE OF THE STANDARD OF REVIEW ON SUMMARY JUDGMENT MOTIONS.

POINT II

THE MOTION JUDGE ERRED IN FINDING AS A MATTER OF LAW THAT PLAINTIFF DID NOT HAVE AN INDEPENDENT INTEREST IN ENFORCEMENT OF THE EXCLUSIVE.

POINT III

THE MOTION JUDGE ERRED IN FINDING THAT PLAINTIFF WAIVED THE RIGHT TO ENFORCE THE EXCLUSIVE OR IS ESTOPPED TO DO SO.

POINT IV

THE MOTION JUDGE ERRED IN FINDING THAT PLAINTIFF ABANDONED ITS RIGHTS IN THE EXCLUSIVE RESTRICTIVE COVENANT BY PERMITTING MULTIPLE VIOLATIONS BY OTHER TENANTS.

POINT V

THE MOTION JUDGE ERRED IN FINDING THAT NWL'S VIOLATION OF THE EXCLUSIVE WAS EXCUSED AND PROTECTED BY PATHMARK'S UNILATERAL WAIVER AND THE FILENE'S BANKRUPTCY COURT RULINGS.

POINT VI

THE MOTION JUDGE ERRED IN SUMMARILY DISMISSING FRICK'S DAMAGES CLAIM AS A MATTER OF LAW.

I

Summary judgment is appropriate when the moving party shows that no genuine issue exists as to any material fact, and the proponent is entitled to judgment as a matter of law. R. 4:46-2(c). In deciding whether to grant or deny summary judgment, the motion judge must engage in a weighing process and decide 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 v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). The trial court must not decide issues of fact, but only whether there are any such issues. Ibid. No genuine issue of material fact will be found to exist when only one, unavoidable resolution of the alleged disputed issue can be reached. Ibid. In other words, if the evidence "'is so one-sided that one party must prevail as a matter of law,' . . . the trial court should not hesitate to grant summary judgment." Ibid. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202, 214 (1986).

When a party appeals a trial court's grant of summary judgment, our function is to review de novo whether summary judgment was proper. Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 427 (App. Div. 2004). Accordingly, we must first decide whether there was a genuine issue of fact, and if there was not, we must then decide whether the trial court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998). Like the trial court, we must view the facts in the light most favorable to the non-moving party, here the plaintiff. Coyne v. N.J. Dep't of Transp., 182 N.J. 481, 491 (2005).

Plaintiff contends that the motion judge violated the standard of review on summary judgment, particularly by ignoring genuine issues of fact, not providing plaintiff with the benefit of all legitimate inferences and impermissibly weighing the evidence. For the reasons to be discussed, we agree.

II

In its letter opinion, the trial court found that the restriction in the Rickel lease against the selling of certain items was "really negotiated for the benefit of Supermarkets General (now Pathmark), the anchor tenant." Although recognizing that a landlord may have an independent interest in maintaining a diverse tenant mix, the judge found that plaintiff's delay in seeking to enforce the restriction undermined such an assertion. The court explained that, "[i]t is just not possible for a Landlord to ask the Court to agree that Frick has a legitimate interest in maintaining a tenant mix and simultaneously to ignore six years of passivity." The judge concluded "that the restriction/exclusive provision was not entered into for the reasons now asserted by Frick but for the sole benefit of Pathmark."

Plaintiff argues that the judge's conclusion that plaintiff did not have an independent interest in enforcement of the restrictive covenant/exclusive is contrary to the language of the Rickel lease, which gave plaintiff an enforcement right after the affiliation between Rickel and SGC was terminated.

As a preliminary matter, we first address defendants' argument that a literal reading of the lease terms reveals that no violation of the lease ever occurred. Specifically, Starwood and Light Union argue that defendants never violated the lease, even though food and health and beauty items were continuously sold on the leased premises, because the "use and occupancy" provision of the Rickel lease, Article 6(a), provided that Starwood and its subtenants may use their space at the shopping center for any use not "expressly restricted against" in Exhibit E of the lease, and Exhibit E does not list sales of food or health and beauty aids in the clause pertaining to "restrictions." In other words, defendants claim that the only portion of Exhibit E that applies to the language of Article 6(a) is the language that expressly mentions restrictions, which would be the first sentence of the Lyons clause in Exhibit E, since the next sentence gives SGC/Pathmark an "exclusive right" but does not expressly restrict the other tenants. The relevant portions of the lease are as follows:

6. USE AND OCCUPANCY

(a) The Demised Premises may be used and occupied for any lawful retail purpose except for any use expressly restricted against in Exhibit E annexed hereto.

. . . .

Exhibit E

Permitted Uses, Exclusives and Restrictions

. . . .

LYONS -- to be used for any lawful retail purpose, except as restricted by Article 6 of its lease.

Restriction v. rental for use as a supermarket or drugstore or a store selling alcoholic beverages so long as Supermarkets sells same; further restriction v. leasing premises as a theatre, bowling alley, restaurant (except one Supermarkets may build) or funeral parlor. Supermarkets has exclusive right, to sell food and food products for off-premises consumption, prescriptions and non-prescription drugs, health and beauty aids and alcoholic beverages.

Thus, defendants are correct that the sale of food and health and beauty aids is not mentioned in the "restrictions v." sentence, but rather immediately follows that sentence and is mentioned in the context of an "exclusive right" given to SGC/Pathmark. However, to conclude that the tenants and subtenants were therefore permitted to sell food and health and beauty aids, despite the rest of the language in the lease, reflects too narrow a reading of the contract. The intention of the parties to a contract must be ascertained by looking to the chosen language, taken in its entirety. Driscoll Constr. Co. v. N.J. Dep't of Transp., 371 N.J. Super. 304, 313 (App. Div. 2004) (citing Onderdonk v. Presbyterian Homes of N.J., 85 N.J. 171, 184 (1981)). The objects sought to be achieved by the parties should also be examined. Ibid.

Although contractual provisions should generally be construed narrowly against the drafter, "'the construction should be sensible and in conformity with the expressed intent of the parties.'" Homann v. Torchinsky, 296 N.J. Super. 326, 335 (App. Div.), certif. denied, 149 N.J. 141 (1997) (quoting Broadway Maint. Corp. v. Rutgers, The State Univ., 90 N.J. 253, 271 (1982)). Moreover, the principle that restrictive covenants should be strictly construed is "counterbalanced by an evolving principle that . . . restrictive covenants will be realistically construed in furtherance of their obvious purpose." Barr & Sons, Inc. v. Cherry Hill Ctr., Inc., 90 N.J. Super. 358, 372 (App. Div. 1966) (citing Renee Cleaners, Inc. v. Good Deal Super Markets, 89 N.J. Super. 186, 189 (App. Div. 1965), certif. denied, 46 N.J. 216 (1966)).

Here, taking the language of the lease as a whole, the intent of the parties was clearly to provide SGC/Pathmark with the exclusive right within the shopping center to sell food products for off-premises consumption, prescription and non-prescription drugs, and health and beauty aids, and to restrict the other tenants from doing so. If the other tenants were not restricted from selling those products, it would have been meaningless to include the sentence regarding SGC/Pathmark's exclusive right within their lease. The fact that the "exclusives and restrictions" regarding the lease's relationship to the SGC/Pathmark lease were listed together in the same clause in the same exhibit evinces an intent that they be read together and that their meaning be construed together. Moreover, to interpret the Rickel lease as not restricting the sale of food, drug, and health and beauty items would essentially render meaningless the exclusive right that was granted to SGC/Pathmark in its lease to sell those same items. Such a result could not reasonably have been contemplated by the parties. Having concluded that defendants' lease prohibited them from selling food, drug, and health and beauty items, we turn to plaintiff's argument that it has an independent right to enforce the restriction.

Plaintiff argues that Article 6(b) of the Rickel lease provides it with an independent right of enforcement of the restrictive covenant/exclusive after the affiliation between Rickel and SGC was terminated. According to plaintiff, the landlord's independent interest in enforcement of the restrictive covenant/exclusive arises from the fact that the shopping center as a whole is best served by a "healthy mix of tenant uses," which would increase foot traffic to the benefit of all tenants and the landlord.

Plaintiff contends that because SGC/Pathmark has the exclusive right to enforce the restrictive covenant in favor of Pathmark only as long as Rickel, the tenant, is affiliated with SGC, it must follow that plaintiff, the landlord, has an independent right to enforce the exclusive once the affiliation ends.

Basic principles of contract interpretation direct that "the court's goal is to ascertain the 'intention of the parties to the contract as revealed by the language used, taken as an entirety; and, in the quest for intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain. . . .'" Driscoll Constr. Co., supra, 371 N.J. Super. at 313 (quoting Onderdonk, supra, 85 N.J. at 184 (citation omitted)). The contract "must be accorded a rational meaning in keeping with the express general purpose." Tessmar v. Grosner, 23 N.J. 193, 201 (1957).

Here, additional language in the 1971 SGC lease lends support to the conclusion that the parties intended the landlord to have a right to enforcement of the restrictive covenant/exclusive once Rickel and SGC ended their affiliation. Specifically, Article 6(a) provides that the "permitted uses, exclusives and restrictions set forth in said Exhibit E, which are contained in leases as set forth in said Exhibit E shall continue in effect without regard to the termination, cancellation or expiration of any one or more of such leases." Thus, the lease provides that the landlord, i.e., plaintiff, may enforce the restrictions and exclusions against the Rickel lease tenant even after SGC/Pathmark departs the shopping center. It would make little sense for the restrictions against the sale of certain items to survive the departure of Pathmark if the restrictions were for Pathmark's sole benefit.

Significantly, the provision that the restrictions and exclusives will continue notwithstanding the departure of the referenced tenant contains an exception for the restrictions in favor of tenant Chrome of Union, Inc., which will continue only as long as Chrome of Union occupies space in the shopping center. If the parties wanted to make a similar exception, providing that the restrictions in favor of Pathmark would only continue as long as Pathmark remained in the shopping center, they presumably would have done so. The fact that they did not supports the conclusion that the restrictive covenant/exclusive in favor of Pathmark was not intended only for the benefit of Pathmark.

Admittedly, the Rickel lease does not expressly state whether the landlord retained an independent right to enforce the restrictive covenant/exclusive in favor of Pathmark. Although the interpretation of a written contract usually presents a question of law for the trial judge to resolve, when "there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation, then the doubtful provision should be left to the jury." Great Atl. & Pac. Tea Co. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000) (citing Michaels v. Brookchester, Inc., 26 N.J. 379, 387 (1958)). In other words, when the terminology used in a contract is not free from doubt as to its meaning, the party should typically be given an opportunity to present evidence of extrinsic circumstances that bear on the proper meaning of the document's language. Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 192 (App. Div. 2002). Here, however, the parties to the present litigation are not the original parties to the contract. We have explained that,

in the context of a deed restriction meant to bind subsequent purchasers that are strangers to the initial transaction, the intent of the restriction must manifest itself in the language of the document itself. If ambiguity remains, it cannot be resolved, as would be the case if the initial signatories disputed an ambiguous term, by resort to extrinsic

evidence. . . .

An intention disguised by an ambiguity cannot bind a subsequent purchaser who, as the result of an absence of clarity in the instrument of conveyance, lacks notice of restrictions that the initial parties have attempted to place on the property being conveyed. A holding otherwise would be inconsistent with principles of contract law, which require sufficient definiteness of terms so that the performance required of each party can be ascertained with reasonable certainty, as well as knowledge of and acquiescence in the stated terms. Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435, (1992).

[Cooper River Plaza E., LLC v. The Briad Group, 359 N.J. Super. 518, 527 (App. Div. 2003).]

Similarly, because the contract here between SGC and plaintiff's predecessor was executed in 1971, extrinsic evidence regarding the intent of the original parties cannot be permitted. Thus, we are left with the language of the document itself from which to ascertain intent. Ordinarily, if an ambiguity remains regarding a lease restriction in such a contract, the restriction will be held not to bind subsequent purchasers. See id. at 527-28. Thus, it could be argued that, because the lease does not explicitly state that the landlord retained an enforcement interest in the restrictive covenant/exclusive, the landlord should not be deemed to have such authority. However, taking all of the lease provisions together, we conclude that the clauses discussed above evidence a clear, unambiguous intent that Pathmark was not the sole beneficiary of the restrictive covenant/exclusive and that the landlord was also given authority to enforce the provision once Rickel was no longer affiliated with SGC.

Having concluded that plaintiff possessed an independent right to enforce the restrictive covenant, we next address the focus of appellant's remaining arguments: whether plaintiff's past conduct has extinguished that right.

III

Assuming plaintiff had an independent right to enforce the restrictive covenant/exclusive, the motion judge found that it was estopped to do so and had waived any right it may have had to enforce the provisions. The judge explained:

Frick is the party that issued the estoppel certificate to Odd Job in 1998. Frick is the party that expressly authorized others, including Starwood, to rely on the certificate. And, even assuming it could have done so before, there is no question that Frick waived its right to enforce the restriction when it issued the certificate.

The only difficulty with this case is that the 1971 restriction was never in the contemplation of any of the parties prior to this litigation. Certainly the restriction was not enforced by Frick as Frick now claims it was its right to do. This is because the restriction was really negotiated for the benefit of Supermarkets General (now Pathmark), the anchor tenant. Frick argues that it has an independent interest in having a diverse tenant mix. Admittedly, this is a valid interest for a Landlord to have. However, Frick admits that in the past six years it has had no idea of the inventory of either NWL or Odd Job, two large tenants at the Shopping Center, or even what a typical Odd Job or NWL store might sell. Considering the ubiquity of these stores on the East Coast, the argument that a shopping center landlord could have no idea what they sell is practically impossible. [Defendants] have certified that they sell today what they have always sold -- a mix of closeout items that includes food, health and beauty products. It is just not possible for a Landlord to ask the Court to agree that Frick has a legitimate interest in maintaining a tenant mix and simultaneously to ignore six years of passivity. The Court notes that the Landlord's office is located in Union, not far from the shopping center and that its manager regularly visited the stores.

In W. Jersey Title and Guar. Co. v. Industrial Trust Co., 27 N.J. 144, 149 (1958), the N.J. Supreme Court stated that equitable estoppel is "grounded in the principle that a person shall not be allowed to repudiate an act done, or position taken, where that course would work an injustice to another who, having the right to do so, has relied upon the act done or the position taken." Frick has given no reason why it did nothing for so long. A Landlord, one would assume, has a duty to all tenants, not just future tenants, to ensure a healthy tenant mix. But for six years not only did Frick not object to the sales of the food, beauty and health items, but it issued the entirely opposite opinion when it provided the estoppel certificate in 1998. The request for the certificate was Frick's opportunity, if none had been presented prior to that point, to determine what its tenants were selling and to ensure that they were in compliance with their leases. When this opportunity arose, Frick concluded that the Odd Job store was in full compliance and that others were free to rely on that conclusion. Frick states that the employee in charge of inspecting the Odd Job premises reported that Odd Job was in full compliance. The Court is not going to go back to 1998 to determine the extent of Frick's investigation of the store. . . . Frick knew what it was being asked to provide and knew who would be entitled to rely on the certificate.

Plaintiff argues that the trial court erred in its application of waiver and estoppel to the facts of this case. Specifically, plaintiff contends that, in light of the certifications it presented to the trial court, it was error for the court to find that plaintiff had knowledge of the sales of food and beauty items prior to March 2004 and to find that it was undisputed that Odd Job was selling food in 1998 when plaintiff issued the estoppel certificate. We agree.

It is not contested that plaintiff issued an estoppel certificate to the holder of the Rickel lease in 1998, during which time Odd Job operated a store in the shopping center. The certificate stated that "to the best of the landlord's knowledge, (1) there is no uncured breach or default by Tenant under the Lease and (2) there is no state of facts that with the passage of time or giving of notice or both would result in a breach or default on the part of Landlord or Tenant under the Lease." The estoppel certificate also provided that it was to be "materially relied upon by Rickel and Staples and their successors or assigns."

In July 2004, the Odd Job National Director of Store Operations certified that the Odd Job store in the shopping center has been "openly and continuously" selling close-out merchandise including food, health and beauty aids, and occasionally limited amounts of non-prescription drugs, since 1997 when it became a subtenant of Starwood in the shopping center. The chief financial officer of Starwood and the Starwood property manager also certified that, to the best of their knowledge, Odd Job has sold a variety of close-out merchandise, including food for off-premises consumption and health and beauty aids, since the store opened in the shopping center in 1997.

While plaintiff conceded that it issued the estoppel certificate in 1998, it denied being aware that Odd Job was selling food and health and beauty aids at that time. Specifically, Sheila Robbins, the successor trustee of plaintiff, certified that when plaintiff's property manager, now deceased, presented the estoppel certificate to her for signature, he "assured [her] that he had visited the Rickel lease premises and reviewed all our records, and that the Rickels Lease space was current in its rent and in full compliance with all lease covenants, including the Exhibit E restrictions/exclusives." Robbins certified that, to the best of her knowledge, Odd Job and NWLU were not in violation of the restrictive covenant until plaintiff discovered the violations in March 2004.

Defendants argue that plaintiff failed to raise a genuine issue of fact as to whether Odd Job was selling food and health and beauty items in 1998 when plaintiff issued the estoppel certificate because the only evidence it presented to dispute that fact was based on inadmissible hearsay, i.e., the statement from plaintiff's then property manager to Robbins that he had investigated the premises and no lease violations were found. Defendants' argument is based on the rule that a motion affidavit must be based on personal knowledge and must set forth "only facts which are admissible in evidence to which the affiant is competent to testify." R. 1:6-6; see also Chen Lin Wang v. Allstate Ins. Co., 125 N.J. 2, 15-16 (1991) (affidavit based on hearsay statements insufficient evidence to support allegations).

Here, however, the hearsay statement at issue was made by an individual who is now deceased. Thus, N.J.R.E. 804(b)(6), "trustworthy statements by deceased declarants," is arguably applicable. When a hearsay statement is admissible under an exception that requires the satisfaction of specific conditions, the statement cannot be considered competent unless it is first determined that those conditions have been met. Pressler, Current N.J. Court Rules, comment to R. 1:6-6 (2006) (citing Jeter v. Stevenson, 284 N.J. Super. 229 (App. Div. 1995)). In order to be deemed admissible under N.J.R.E. 804(b)(6), and thus competent evidence for consideration on a motion, a hearsay statement must satisfy four conditions: "(1) the declarant must be dead; (2) the statement must have been made in good faith; (3) the statement must have been made upon the declarant's own personal knowledge; and (4) there must be a probability from the circumstances that the statement is trustworthy." DeVito v. Sheeran, 165 N.J. 167, 194 (2000) (citing Ayala v. Lincoln, 147 N.J. Super. 304, 307 (App. Div. 1977)). The trial court must make particularized findings regarding these conditions before admitting evidence under this hearsay exception. Ibid. (citing Jeter, supra, 284 N.J. Super. at 233)).

Here, without giving any weight to plaintiff's certification to the contrary, the motion judge found that Odd Job and NWLU had been continuously selling the restricted items and that plaintiff must have had knowledge of such sales. In doing so, as the judge's opinion makes clear, she inappropriately resolved disputed issues of fact. In addition, the judge did not make any findings regarding whether the hearsay statement by plaintiff's now deceased property manager could be deemed competent and admissible evidence under N.J.R.E. 804(b)(6). Taking this certification into consideration, and accepting plaintiff's evidence as true, as is required on summary judgment, GE Capital Auto Lease v. Violante, 180 N.J. 24, 28 (2004), we conclude that the doctrine of waiver did not provide an appropriate basis for dismissal here.

Waiver has been defined by our courts as the "voluntary and intentional relinquishment of a known right." Knorr v. Smeal, 178 N.J. 169, 177 (2003); W. Jersey Title and Guar. Co. v. Indus. Trust Co., 27 N.J. 144, 152 (1958). In order for a waiver to be considered effective, a party must have "full knowledge" of its legal rights and must possess the intent to surrender those rights. Knorr, supra, 178 N.J. at 177 (citing W. Jersey Title and Guar. Co., supra, 27 N.J. at 153). The intent to waive does not have to be explicitly stated as long as the "circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference." Knorr, supra, 178 N.J. at 177 (citing Merchs. Indem. Corp. of N.Y. v. Eggleston, 68 N.J. Super. 235, 254 (App. Div. 1961), aff'd, 37 N.J. 114 (1962)). The party waiving a right must do so "clearly, unequivocally, and decisively." Knorr, supra, 178 N.J. at 177 (citing Country Chevrolet, Inc. v. Twp. of N. Brunswick Planning Bd., 190 N.J. Super. 376, 380 (App. Div. 1983)). However, "'waiver cannot be predicated on consent given under a mistake of fact.'" County of Morris v. Fauver, 153 N.J. 80, 105 (1998) (quoting W. Jersey Title and Guar. Co., supra, 27 N.J. at 153). Taking as true plaintiff's assertions that it did not know of any lease violations by Odd Job when it issued the 1998 estoppel certificate, and did not become aware of Odd Job and NWLU's violations of the restrictive covenant/exclusive until March 2004, it cannot be said to be undisputed that plaintiff voluntarily relinquished its right to enforce the covenant, or possessed the intent to surrender its right to do so, as required for an effective waiver. Knorr, supra, 178 N.J. at 177. Giving plaintiff the benefit of all favorable inferences, if Odd Job was in fact selling food and/or beauty products when plaintiff issued the estoppel certificate, plaintiff was unaware of such violations and thus did not consent to the sales.

The motion judge found a Louisiana case, Piggly Wiggly of Mansfield, Inc. v. Wolpert Assocs., 519 So. 2d 371 (La. Ct. App.), cert. denied, 522 So. 2d 1098 (La. 1988), to be on point. There, the court held that an estoppel certificate issued by the grocery store's owner to the landlord, which stated that neither party was in default of the lease, constituted an express waiver of any right the grocery store had to enforce a restrictive covenant in the lease whereby the landlord had agreed to prohibit other tenants in the shopping center from selling groceries. Id. at 372-73. However, in that case, the discount store that was selling food items had entered into its lease with the landlord prior to the grocery store's lease, and the discount store's lease did not restrict it from selling grocery items. Id. at 373. Additionally, there was no dispute that the discount store had been selling grocery items prior to the issuance of the estoppel certificate. Ibid. Here, the SGC/Pathmark lease, which gave Pathmark the exclusive right to sell food items, was entered into prior to the Rickel lease, and the Rickel lease contained the restrictive covenant/exclusive language recognizing Pathmark's rights. Furthermore, by means of the Robbins certification, plaintiff has raised an issue of fact as to whether Odd Job was selling the prohibited items at the time plaintiff issued the estoppel certificate and, even if it were, whether plaintiff was or should have been aware of that fact such that the alleged waiver could be deemed voluntary and intentional. The issue of waiver was for the trier of fact to resolve.

Further, we find that the doctrine of equitable estoppel is inapplicable to the facts presented here. Equitable estoppel has been defined by our courts as:

[t]he effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed . . . as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse.

[Berkeley Dev. Co. v. Great Atl. & Pac. Tea Co., 214 N.J. Super. 227, 242 (Law Div. 1986) (quoting Carlsen v. Masters' Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979)).]

Courts will not hesitate to invoke equitable estoppel in contract actions when the circumstances so warrant: "A party to a written contract who has by some affirmative action led the other party to believe and act on that belief, that he will not be held to a strict performance of covenants, will be estopped in equity from requiring a strict performance of that covenant." Aron v. Rialto Realty Co., 100 N.J. Eq. 513, 518 (Ch. 1927), aff'd, 102 N.J. Eq. 331 (E. & A. 1928).

Here, the only affirmative action taken by plaintiff regarding lease compliance was the issuance of the 1998 estoppel certificate. However, it cannot be said that Odd Job changed its position in reliance on the certificate. According to Odd Job, it has sold a number of food and health and beauty products since it began operating its store in the shopping center, and has continued to do so throughout its time there. Odd Job did not present any evidence to suggest that it changed its position in any way in reliance on the 1998 estoppel certificate. NWLU has likewise continued to sell some food and health/beauty products throughout its tenancy in the shopping center, in apparent reliance on the waiver letter from Pathmark. Plaintiff never took any affirmative actions regarding NWLU, but NWLU cannot claim detrimental reliance based on plaintiff's conduct because its position with regard to selling the restricted items has never changed. Thus, the judge erred in relying on equitable estoppel as a basis on which to grant summary judgment.

IV

In reaching her decision, the motion judge noted that plaintiff had displayed a "double standard" in bringing this suit against defendants while allowing other tenants in the shopping center to continue selling the restricted items:

Frankly, the double standard displayed by Frick has not been lost on the Court. While claiming that the parties to this suit are damaging Frick and violating their leases, Frick has allowed other tenants to continue the same activity unabated. Frick has not proven to the satisfaction of the Court that it suffered any damages because of Odd Job's or NWL's sales. It is not, as Frick claims, the "de minimis" nature of the sales but the fact of the sales being carried on at all which should be of concern to the landlord. This is especially so in light of Frick's argument that if all the tenants went around selling food as they please then the Union Plaza Shopping Center would be turned into one big food court. If that line of reasoning applies to the tenants in this action then it should apply across the board to the other tenants as well.

Plaintiff argues that it cannot be said to have abandoned its rights in the restrictive covenant by permitting violations by other tenants because the other tenants who sold food items did so for on-premises consumption and had the consent of Pathmark, or made merely de minimis sales that were of no concern to either Pathmark or plaintiff.

As Starwood and Light Union have pointed out, plaintiff takes this issue farther than the motion judge's limited commentary on what she deemed to be a "double standard." The judge only discussed plaintiff's alleged double standard within the context of her rulings on waiver, estoppel and laches. The judge did not mention the term "abandonment" in her opinion, and did not hold that plaintiff's actions in permitting other tenants to sell items prohibited by the restrictive covenant/exclusion, without more, prevented plaintiff from enforcing the provisions.

As plaintiff has explained, it permitted two restaurants, Ruby Tuesday and Subway, to operate at the shopping center, but their sale of food was largely for on-premises consumption, not for off-premises consumption as restricted by the exclusive. Additionally, any food sales that took place at the Hallmark store or the gasoline station were deemed de minimis and of no concern to plaintiff. These sales, which amounted to candy sales at the cash register, or soda sales at a vending machine, could not be said to be so pervasive as to cause a "change in the neighborhood" or a "clear intent" by plaintiff to alter its original plan of having a diverse tenant mix, as required to constitute an abandonment of a restrictive covenant. See Steiger v. Lenoci, 323 N.J. Super. 529, 534 (App. Div. 1999); Homann, supra, 296 N.J. Super. at 336-37.

Moreover, although plaintiff did not institute suit against the 99 Cent Store, it did take action upon learning that the store, like Odd Job and NWLU, was selling food and health and beauty items. Specifically, plaintiff sent the store two default notices, and eventually reached an Assignment and Assumption Agreement with the 99 Cent Store and Ishan Dollar LLC, which was obtaining the 99 Cent Store sublease by assignment. Thus, the evidence does not clearly establish that plaintiff was treating other tenants differently than defendants regarding the restrictive covenant.

In any event, because the motion judge did not actually hold that plaintiff's acquiescence to other tenants selling food and beauty products constituted a legal abandonment of its rights under the restrictive covenant, but rather used such evidence as additional support for its overall findings, the judge's comments in this regard do not constitute reversible error.

V

Regarding NWLU's violations of the restrictive covenant/exclusive, the motion judge first found that Pathmark gave express permission for NWLU to use up to 4000 square feet of its store to sell food, health, and beauty products and that the Bankruptcy Court reviewed the business NWLU sought to conduct at the shopping center in accordance with applicable law and approved the assignment of the sublease. The court concluded that "Starwood, as NWL's landlord is bound by the terms of the Court's Order pursuant to which the bankruptcy court retained jurisdiction over any future claims that might arise out of [its] decision."

The judge then proceeded to find that plaintiff was barred from seeking to enforce the restrictive covenant/exclusive more than four years after the bankruptcy proceedings:

That Order was issued four years ago. Frick waited until this year to bring suit and as a result, NWL asserts the defense of laches. . . . In this case, the Court feels that Frick has unreasonably delayed in bringing its objections. Whether or not Frick knew of the Pathmark letter, it certainly must have known that one of the tenants had filed for bankruptcy and that a new tenant was replacing the bankrupt tenant. And if Frick really had an independent interest in ensuring that the exclusives provision was complied with, then it would have, at that time or anytime since, brought its objections to light. But Frick did not take any action. It is not for the Court to speculate as to what action NWL would have taken four years ago prior to getting the Bankruptcy Court's approval if Frick had objected at that time. It is enough to say that NWL had every right to rely on the Bankruptcy Court's Order approving its use of the premises for a typical NWL store. Frick's silence in the intervening years did nothing to alert NWL that it might be acting on a mistaken belief that it had permission to sell the exclusive items. If Frick still feels that NWL's sales of these items constitutes a threat to Frick's best interests then the appropriate course of action would be to request an appeal of the Bankruptcy Court's Order or even to sue Pathmark for purporting to bind Frick.

Plaintiff argues that the trial court erred in holding that NWLU's sale of certain items in violation of the restrictive covenant/exclusive was not actionable by plaintiff. More specifically, plaintiff contends that because it had an independent interest in enforcement of the covenant, it could not be bound by Pathmark's unilateral waiver of the exclusive by letter to NWL Holdings. Plaintiff further argues that the Bankruptcy Court's order does not indicate that it approved NWLU's sale of food items and that, in any event, it cannot be bound by the order because it had no notice of the proceedings. Lastly, plaintiff argues that laches is inapplicable to the facts here because plaintiff had no prior knowledge that NWLU was violating the exclusive. We review this issue of law de novo.

At the outset, we note that plaintiff's argument that the Bankruptcy Court may not have addressed NWLU's sale of food, drug, and health and beauty products because its order did not specifically mention the restrictions or the Pathmark waiver, is not persuasive. The Bankruptcy Code requires the trustee in a bankruptcy action to demonstrate to the court that the party seeking to assume an unexpired lease "provides adequate assurance of future performance under such contract or lease." 11 U.S.C. 365(b)(1)(C). The Bankruptcy Code also explicitly states that adequate assurance of future performance of a lease in a shopping center includes assurance that "assumption or assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as . . . use, or exclusivity provision[s], and will not breach any such provision contained in any other lease . . . relating to such shopping center." 11 U.S.C. 365(b)(3)(C). To conclude that the Bankruptcy Court did not address the use and exclusivity provisions of the Rickel lease when determining that NWL Holdings could operate its NWLU store at the shopping center would be to find that the Bankruptcy Court was unaware of or breached its statutory obligations, which is unlikely. The fact that NWL Holdings sought the Pathmark waiver during Filene's bankruptcy proceedings, and that the Pathmark letter preceded the court's order by one week, bolsters the conclusion that the restrictive covenant/exclusive was on the minds of the participants to the bankruptcy proceedings and was considered by the court.

Nevertheless, neither Pathmark's unilateral waiver letter nor plaintiff's failure to object to NWLU's sales of the restricted items until 2004, when it claims it first became aware of the lease violations, was sufficient to extinguish plaintiff's enforcement right.

First, plaintiff certified that it was not aware of the Filene's bankruptcy proceedings at the time that the proceedings were occurring, and did not receive any notice of an application to the Bankruptcy Court seeking approval of assignment of the Filene's sublease to NWLU. Plaintiff also certified that it did not become aware of Pathmark's waiver letter allowing NWLU to sell food, drugs, and health and beauty products until April 16, 2004, when it received a letter from Starwood's attorney notifying it of that fact. Because plaintiff certified that it did not receive notice of the bankruptcy proceedings, and thus did not appear to assert its interests, its rights in enforcing the restrictive covenant/exclusive could not have been extinguished by the Bankruptcy Court's order. See Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 657, 94 L. Ed. 865, 873 (1950) (due process right to be heard has little worth unless "one is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest"); 7 Collier On Bankruptcy 1109.06[2] (party seeking relief in bankruptcy court not entitled to achieve fait accompli with respect to protectable interests of parties who did not receive notice prior to a loss respecting their interest); cf. U.S. Wire and Cable Corp. v. Ascher Corp., 34 N.J. 121, 126-27 (1961) (indemnitor will not be bound by judgment in suit in which he was not party and in respect of which he did not have timely notice of institution of suit nor opportunity to defend action); Hindi v. Smith, 388 P.2d 60, 63 (N.M. 1963) (person is bound by injunction, even though not party to suit, if person has notice or knowledge of order and is within class of persons whose conduct is intended to be restrained); Appeal of Shaeffner, 41 Wis. 260, 264 (1876) (only those parties in interest who have notice of proceedings are bound by order of court in will construction case).

Moreover, Pathmark's unilateral waiver letter could not extinguish plaintiff's interest in enforcing the restrictive covenant/exclusive without plaintiff's knowledge or consent. In Alexander's Dep't Stores of N.J., Inc. v. Arnold Constable Corp., 105 N.J. Super. 14 (Ch. Div. 1969), the plaintiff, a department store, sought a declaratory judgment against the defendant, a shopping center lessee, that certain restrictions in the defendant's lease did not bar the plaintiff from operating a department store on property adjoining defendant's store. Id. at 18. Defendant argued that it was entitled to enforce restrictive covenants in deeds covering the contiguous parcels on which plaintiff sought to construct its store. Id. at 18-19. The court found that, if defendant was entitled to the benefit of the restrictive covenants, then a release of the restrictions executed by the landlord and shopping center owner "could not effectively release [defendant's] interest in and right to enforce the covenant." Id. at 29. The court based its decision on the principle that, in the absence of a delegation of power, one party lacks the authority to release or alter another's rights in land. Id. at 29-30 (citing Coudert v. Sayre, 46 N.J. Eq. 386, 396 (Ch. 1890)). The court further explained that, when there are multiple beneficiaries of a covenant concerning land use, each beneficiary "'owns his interest in the promise independently of the others,'" and "'a release by one does not affect the rights of the others.'" Id. at 30 (quoting Restatement of the Law of Property 556, Comment (f)). Applying these principles to the present case, we conclude that Pathmark's unilateral release of its interest cannot serve to extinguish plaintiff's independent interest in the covenant.

VI

The trial court found that the defense of laches barred plaintiff from now seeking to enforce the restrictive covenant/exclusive because it failed to object to NWLU's sale of food and health and beauty items for its first four years in the shopping center. The defense of laches is properly invoked "'where there is unexplainable and inexcusable delay in enforcing a known right whereby prejudice has resulted to the other party because of such delay.'" County of Morris, supra, 153 N.J. at 105 (quoting Dorchester Manor v. Borough of New Milford, 287 N.J. Super. 163, 171 (Law Div. 1994)); see also W. Jersey Title and Guar. Co., supra, 27 N.J. at 153 (in order for delay to be sufficient to invoke laches, delay must be unreasonable under circumstances and prejudicial to other party). In determining whether to apply laches, the court should consider the length of the delay, the reasons for the delay, and the changing conditions of the parties during the delay. County of Morris, supra, 153 N.J. at 105 (citing Lavin v. Bd. of Educ., 90 N.J. 145, 152 (1982)). When laches is applied against a party, "'[i]t is assumed that the party . . . has knowledge of his rights, and sufficient opportunity to assert them in the proper forum.'" County of Morris, supra, 153 N.J. at 105 (quoting Dorchester Manor, supra, 287 N.J. at 172).

The mere fact that plaintiff was aware that one of its subtenants left the shopping center and another subtenant entered the premises does not establish that plaintiff was also aware or should have been aware that the new tenant was selling certain items in violation of the restrictive covenant/exclusive contained in its lease. Taking as true plaintiff's certified statement that it was not aware of NWLU's violations of the lease until its March 2004 investigation in connection with Starwood's request for an estoppel certificate, it cannot be said that plaintiff delayed unreasonably in raising its objections. Stated another way, without knowledge of the violations, the delay in objecting cannot be viewed as unreasonable or unexplainable under the circumstances. See Baker v. Schofield, 243 U.S. 114, 121, 37 S. Ct. 333, 335, 61 L. Ed. 626, 631 (1917) (until those authorized to act become aware of wrong, laches inapplicable for failure to prosecute suit); Heagen v. Allendale, 42 N.J. Super. 472, 485-86 (App. Div. 1956) (laches not imputed when plaintiff had no knowledge of facts giving rise to cause of action). Furthermore, plaintiff did object to the lease violations by filing suit shortly after the time it claims that it first became aware of the restricted sales. See Liquid Glass Enters. v. Dr. Ing. h.c.F. Porsche AG, 8 F. Supp. 2d 398, 405-06 (D.N.J. 1998) (delay excusable and laches inapplicable when rights enforced immediately upon becoming aware of improper conduct). Because defendants' laches argument depends on disputed facts, i.e., whether plaintiff knew of the violations prior to March 2004 and thus failed to timely object, summary judgment on this issue was premature.

VII

The motion judge dismissed plaintiff's damages claims against Starwood and Light Union because it found that plaintiff would not be able to prove damages beyond mere speculation:

The material point in the determination of Starwood's motion for summary judgment is whether Frick can hope to prove to any reasonable certainty, that it has incurred any damages due to Starwood's conduct. Based on the briefs and oral argument Frick would not be able to prove damages at a trial with any reasonable certainty. . . .

In its papers Frick took contradictory positions on the question of damages. On April 23, 2004, Frick stated that "the lease provides only the remedy of injunction, since it bars the remedy of lease termination, and damages would be impossible to measure or prove." In the same brief Frick concluded that "plaintiff's damages defy accurate measurement and proof." But then after dropping the counts for declaratory and injunctive relief against Starwood, Frick reversed its position arguing that Frick's damages are not "fatally speculative." Frick is not barred from asserting contradictory positions but Frick still has to show the Court at this point that it will be able to prove with reasonable certainty that it has been damaged. Frick does not do this.

Frick states that "regional and national retail tenants typically figure rent at a percentage of sales; that the proofs will align squarely with fundamental rules respecting damages and the [difference between the] value of a lease bargained for and the value of the lease not bargained for." The Court is not given any guidance as to what these "fundamental rules respecting damages" could be and how Frick will prove their relevance to the negotiation of the Rickel Lease in 1971.

. . . .

Frick states that it would have been able to get higher rents from Rickel if there had been no restrictive/exclusive provision. However, Frick did not, either in its briefs or at oral argument, raise any evidence that would have allowed the Court to find that when Frick and Pathmark agreed to the lease restrictions that they were devised not just for the benefit of Pathmark, the anchor tenant.

. . . .

At oral argument Frick was pressed further on the issue of damages and how it would prove that it had been damaged. Frick stated that it would bring in an expert at trial to support its claim that the "industry standard" is to fix damages as a percentage of sales. However, it was not stated that an expert, or anyone else, would be able to tell the Court how Rickel and Frick negotiated back in 1971 and that if they had negotiated a lease without a use restriction then Rickel would have paid more for its lease. It is mere speculation for Frick to baldly assert thirty-three years later what the original signatories to the lease would or would not have done or what their intent was at that time. . . . Frick gives no indication as to how it could prove its damages at trial other than to speculate what they might have been.

. . . .

It is not possible that Frick will ever be able to prove damages beyond speculation because there has been no damage for which Starwood Ceruzzi can be held accountable.

Plaintiff argues that the motion judge erred in dismissing its claim for damages against Starwood and Light Union. In particular, plaintiff asserts that, even though the quantum of damages might be difficult to quantify, plaintiff should be entitled to an amount that reflects the difference between the value of the lease as bargained for, i.e., with the restrictive covenant/exclusive, and the greater value of the lease as not bargained for, i.e., without the restrictive covenant/exclusive. We disagree.

A plaintiff cannot recover for "damages based upon mere speculation." Lewis v. Read, 80 N.J. Super. 148, 174 (App. Div.), certif. granted, 41 N.J. 121 (1963). Recovery will be permitted, however, when the "evidence affords a basis for estimating the damages with some reasonable degree of certainty." Tessmar, supra, 23 N.J. at 203 (citing Wolcott, Johnson & Co. v. Mount, 36 N.J.L. 262, 272 (Sup. Ct. 1873), aff'd, 38 N.J.L. 496 (E. & A. 1875)). Our Supreme Court has explained that the "rule relating to the uncertainty of damages applies to the uncertainty as to the fact of damage and not as to its amount." Tessmar, supra, 23 N.J. at 203 (citing Oliver v. Autographic Register Co., 126 N.J. Eq. 18, 25 (Ch. 1939)). In other words, as long as certainty exists as to the fact that damage has occurred, uncertainty regarding the amount of damages will not bar recovery. Ibid.

Following these principles, the rule of damages as applied to breach of contract actions is subject to two qualifications:

(1) the damages are those arising naturally according to the usual course of things from the breach of the contract, or such as may fairly and reasonably be supposed to have been in the contemplation of the parties to the contract at the time it was made, as a probable result of the breach; and (2) there must be reasonably certain and definite consequences of the breach as distinguished from the mere quantitative uncertainty.

[Tessmar, supra, 23 N.J. at 203 (citing Weiss v. Revenue Bldg. & Loan Ass'n, 116 N.J.L. 208, 210 (E. & A. 1936)).]

Applying these principles to this case, in order to survive summary judgment on its damages claim against Starwood and Light Union, plaintiff had to establish to a reasonable degree of certainty that it in fact suffered money damages by Starwood's alleged breach of the lease agreement. To that end, plaintiff claims that it should be entitled to recover the difference between the value of the lease as bargained for, i.e., prohibiting the sale of food, and the greater value of the lease as not bargained for, i.e., permitting the sale of food. In support of its argument, plaintiff cites to Barr & Sons, Inc., supra, 90 N.J. Super. at 358. The facts of that case, however, are not analogous to the ones presented here.

In Barr, the defendant, a shopping mall landlord, leased part of the premises to the plaintiff, a jewelry store, and in the contract, gave the plaintiff the exclusive right to sell jewelry on an installment basis in the mall. Id. at 363. Upon learning that another tenant in the shopping mall was selling jewelry on an installment basis, the plaintiff brought suit for an injunction and damages against the landlord and the other tenant. Id. at 366-67. The court held that a lessee is entitled to recover damages in an action against the lessor for breach of a lease covenant that prohibits the lessor from renting any other part of his premises to a competitor of the lessee. Id. at 374. After recognizing that lost profits would not be a proper measure of damages because it is impossible to say whether the plaintiff would have secured those profits in the absence of the competition, the court stated that "[a]n alternative permissible measure of damages in situations such as this is the difference between the rental value of the premises to the aggrieved lessee with the covenant unbroken and the rental value with the covenant broken." Id. at 376.

The facts here are readily distinguishable. It is not a lessee, for whose benefit the restrictive covenant/exclusive was created, that is seeking damages from other tenants, but rather the landlord. It is fairly easy to see that an aggrieved lessee would suffer damages to a reasonable degree of certainty if, because of a breach by another tenant, it did not receive the benefit of a covenant bargained for in its lease. However, it is far less clear that a landlord would suffer money damages as a result of such a breach.

Here, plaintiff failed to establish with any degree of certainty that it suffered a monetary loss as a result of defendants' breach of the restrictive covenant/exclusive. Plaintiff proffered that it intended to produce an expert who would testify that, based on industry standards, a retail tenant pays rent as a percentage of sales per square foot and that NWLU and Odd Job's sales per square foot were greater than they would have been if they had abided by the exclusive; however, plaintiff did not present evidence that the parties at issue actually considered the monetary value of the restrictive covenant/exclusive when negotiating the lease agreement. A suggestion that Starwood or Light Union would have paid plaintiff more rent if the lease did not contain the restrictive covenant/exclusive is merely speculative. Plaintiff presented no evidence that Starwood's or Light Union's rent was in any way tied specifically to the sale of food, drug, or health and beauty items. In fact, the chief financial officer of Starwood certified that the rents paid by Odd Job and NWLU to Starwood were fixed rental amounts that were in no way related to or dependent upon the types or quantities of products sold. More importantly, plaintiff did not provide the motion judge (or defendants) with any report of such a damages expert. A verbal proffer to that effect was insufficient to defeat summary judgment. Plaintiff did not seek time to produce such a report. If it had, there is no reason to think that the judge would not have granted such a request, particularly given the early stage of the proceedings.

Because plaintiff has failed to prove the existence of money damages beyond mere speculation, the judge properly dismissed that aspect of its claim.

VIII

In summary, we affirm the dismissal of plaintiff's claim for monetary damages. We reverse the order of summary judgment, concluding that the issues of waiver and laches raise disputed issues of fact requiring trial.

Affirmed in part, reversed in part and remanded for trial.

 

The original lease between plaintiff's predecessor and Rickel Bros. was first assigned to SGC, then to Plainbridge, Inc., then to Rickel Home Centers, Inc., then to Staples, and finally to Starwood. (The record does not reveal the precise date in 1998 of the assignment to Starwood.) Starwood then assigned the lease to Light Union, the current owner of the lessee's interest.

Rickel Bros. and Rickel Home Centers, Inc. were previously affiliated with or controlled by SGC, but the corporations were no longer affiliated by at least April 1998.

NWL Holdings, Inc. is the parent corporation of NWLU. NWL Holdings purchased the lease during Filene's bankruptcy proceedings and then transferred it to its subsidiary, NWLU.

Plaintiff also discovered that another store in the shopping center, AAA 99 Cents of Union, N.J., Inc. (the 99 Cents Store), was selling similar items. Plaintiff, the 99 Cents Store, and Ishan Dollar LLC, the assignee of the 99 Cents Store lease, entered into an Assignment and Assumption Agreement, in which the tenant agreed to discontinue selling the prohibited items upon the entry of an order in this action similarly restraining defendants.

It appears the judge misspoke. In fact, as noted earlier, the estoppel certificate was issued to Rickel.

In finding that plaintiff must have been aware of Odd Job's and NWLU's continuing violations of the restrictive covenant/ exclusive, the motion judge also noted that plaintiff's offices were located in the same town as the shopping center and that plaintiff's manager often visited the stores. However, Tom Hanson, the facilities maintenance employee of plaintiff who visited the stores with some regularity, certified that his duties were limited to repair and maintenance and that he was not advised of or given responsibility for monitoring compliance with restrictions or exclusives contained in the lease. Here again, the judge resolved disputed issues of fact.

Indeed, NWLU does not raise the issue of equitable estoppel in its brief.

Pizza Hut also had a franchise at the shopping center, but Article 9 F of the SGC/Pathmark Lease apparently permitted a restaurant at the Pizza Hut site. This fact was certified by plaintiff, but that portion of the lease does not appear in the record. Liquor Savers, which sold alcoholic beverages, also operates at the shopping center. However, Liquor Savers occupies part of the Pathmark space and is controlled by the Pathmark lease.

At trial defendants will have the opportunity to offer evidence of what the motion judge referred to as plaintiff's "double standard" in allowing "other tenants to continue . . . unabated" the same activity which plaintiff claims constitutes a lease violation on the part of defendants. It will be for the trial judge, of course, to determine if this evidence, which might demonstrate an improper motivation on the part of plaintiff, is relevant.

(continued)

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A-4234-04T1

December 6, 2006