HABERMAN GROUP, L.P. v. Haberman West Orange Corp.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5977-04T55977-04T5

HABERMAN GROUP, L.P., as

Successor in Interest to

Haberman West Orange Corp.,

Plaintiff-Appellant,

v.

ESSEX COUNTY VOCATIONAL

SCHOOLS BOARD OF EDUCATION,

Defendant-Respondent.

__________________________________

THE ESSEX COUNTY VOCATIONAL

TECHNICAL SCHOOLS,

Plaintiff-Respondent,

v.

HABERMAN WEST ORANGE CORP.,

Defendant-Appellant.

__________________________________

 

Argued June 5, 2006 - Decided July 19, 2006

Before Judges Yannotti and C.L. Miniman.

On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6280-03.

Michael D. Malloy argued the cause for appellant (Finestein & Malloy, attorneys; Mr. Malloy and Alison R. Lam, on the brief.

Thomas E. Durkin, Jr. argued the cause for respondent (Durkin & Durkin, attorneys; Mr. Durkin, of counsel; Gregory F. Kotchick, on the brief).

PER CURIAM

Appellant Haberman Group, L.P. ("Haberman") appeals from a final judgment in favor of respondent The Essex County Vocational Technical Schools ("Essex County Vo-Tech") following a bench trial. At issue is a March 24, 1997, lease between Haberman and Essex County Vo-Tech for a building located at 61 Main Street in West Orange, New Jersey. The lease was for a period of five years beginning on July 1, 1997, and ending on June 30, 2003. It required payment of $23,000 per month for a total payment of $1,380,000 over sixty months. It also required a $46,000 security deposit concurrently with the execution of the lease.

Sometime prior to the execution of the lease, the parties to the agreement entered into a discussion of certain fit-out work which needed to be done to the space. Essex County Vo-Tech organized the work into two separate lists, one for which it would be responsible to pay and one consisting of work for which Haberman was to pay. In addition, Essex County Vo-Tech wanted Haberman to act as the general contractor for all of the work. The lease was amended on August 15, 1997, to reflect these proposed changes. Essex County Vo-Tech paid $200,000 over four months for the fit-out work on the rental space.

In July 1997 the parties also discussed the possibility of extending the lease for an additional five years. In a letter dated July 27, 1997, Essex County Vo-Tech indicated that under certain conditions it would be prepared to sign an extension. However, the school was subject to the provisions of N.J.S.A. 18A:20-4.2(e)(4), which requires that "any lease in excess of five years shall be approved by the Commissioner of Education and the Local Finance Board in the Department of Community Affairs."

On August 21, 1997, Annette D'Angelo, the President of Essex County Vo-Tech, sent a letter to Allen R. Haberman to confirm the proposed additional terms of the lease. The pertinent proposed additional terms were:

1. Upon Tenant's occupancy of the Premises, the Tenant will promptly apply for the necessary approval from the New Jersey Department of Education to have the lease term extended from a five year term to a ten year ten.

2. Assuming the State Department of Education approves the extension of the lease term, the Tenant shall have the right, upon one year prior written notice, to terminate the lease effective as the end of the fifth year, but only if the Tenant moves or relocates its administrative and executive offices to other premises owned by the Tenant.

Haberman countersigned this letter indicating its assent.

Haberman's sole witness, David N. Dubrow, Esquire, testified that Haberman relied on this letter. Dubrow went on to state that when he received D'Angelo's letter he expected that:

they were going to go through the process of getting whatever the necessary approval was. And, you know, I understood that it was [a] fairly routine matter, nobody ever gave me a reason to believe that there was going to be any difficulty in obtaining that approval.

On March 13, 1998, Robert Noonan, the superintendent of the Essex County Vo-Tech, sent a letter to Commissioner Leo Klagholz, Department of Education, requesting pursuant to N.J.S.A. 18A:20-4.2(a) that the lease for the premises in question be extended for an additional five-year term. Dubrow was copied on the letter. The letter recited the proposed changes and sought approval of them:

Of course, under N.J.S.A., 18A:20-4.2, the Board must obtain the Commissioner of Education's approval if a lease is in excess of five (5) years. The Board, therefore, respectfully requests your approval of the Landlord's proposal to extend the lease term for an additional five (5) years . . . .

Klagholz referred that letter to Peter A. Capodice at the Essex County Office of Education. On April 15, 1998, Capodice wrote to Dr. Noonan and requested a written report justifying the reason, the need, and the benefits of the lease amendment so that the County Superintendent of Education could make a recommendation to the Commissioner. On April 23, 1998, Noonan responded with several reasons for the extended term.

On July 16, 1998, Capodice responded to Noonan and advised that "we will require assurance that your board has an escape clause in the agreement during years 6 through 10." The letter also stated that "[u]pon receipt of such written documentation, including a copy of the section of the lease specifically addressing that issue, we will grant approval of the requested extension." On July 30, 1998, John Mariano, Esquire, counsel to the Essex County Vo-Tech, wrote to Dubrow and enclosed a copy of the July 16 letter from Capodice. Mariano indicated to Dubrow that he thought the requirement for an escape clause after each of years six through ten was a mistake.

Dubrow ultimately sent a letter to Capodice on September 24, 1998, to confirm Haberman's agreement to the terms of the extension, but only as indicated in the March 13 letter from Noonan to Klagholz. He specifically pointed out that the school would only be allowed to terminate the lease at the end of five years and only if it moved into property owned by it. In a letter dated October 16, 1998, Mariano informed Dubrow that he had spoken to Capodice two days earlier and that Capodice was concerned that the termination provision applied after only the fifth year and not every year thereafter.

Mariano advised Dubrow that Capodice was reevaluating the situation. On November 16, 1998, Mary Louise Malyska, Ph.D., on behalf of the Essex County Office of Education, wrote to Noonan stating that "the lease, as drawn, may not be approved." She explained that in order for her to recommend the lease to the Commissioner, it would have to include an annual escape clause. Mariano promptly sent a copy of this letter to Dubrow. Haberman never agreed to this requirement and Essex County Vo-Tech never secured the consent of the Commissioner to the ten-year lease without the termination provision required by Capodice and Malyska.

On February 13, 2003, Nicholas Greico, new counsel to Essex County Vo-Tech, sent a letter to Haberman placing it on notice that as of March 31, 2003, the school would be vacating the premises. On February 20, 2003, Dubrow responded that the school had no right to terminate the lease as the parties had extended the lease to a ten-year term.

On July 29, 2003, Haberman filed its complaint against the Essex County Vo-Tech alleging that the school breached the lease, which had been extended to a period of ten years. On August 14, 2003, Essex County Vo-Tech, apparently unaware of Haberman's lawsuit, filed a complaint against Haberman seeking the return of its deposit in the amount of $46,000 plus the cost of suit and reasonable attorney's fees. After the parties filed answers to each other's complaints, a consent order for the consolidation of the cases was entered on February 24, 2004. A bench trial on the issue of reasonable reliance took place on May 11 and 12, 2005. Exhibits submitted by the parties were admitted into evidence and the only testimony taken at the trial was from Dubrow.

The trial judge found that the extension of the lease from five to ten years was unrelated to the earlier amendments respecting changes to the demised premises. He further found that although the parties anticipated that approval of the ten-year term would be forthcoming, in fact the ten-year term was not approved as stated in Malyska's November 16, 1998, letter, which both parties had received. The trial judge found that there was no reasonable reliance by Haberman on the perceived agreement to a ten-year term. Therefore, judgment was entered in favor of the Essex County Vo-Tech on Haberman's claims. Further, judgment was entered in favor of the school on its claim for return of the security deposit. On May 31, 2005, final judgment was entered and this appeal followed.

Haberman raises the following issues on appeal:

I. THE TRIAL COURT'S ENTRY OF JUDGMENT AGAINST HABERMAN WAS MANIFESTLY UNSUPPORTED BY THE COMPETENT, RELEVANT AND REASONABLE CREDIBLE EVIDENCE.

A. SCOPE OF REVIEW.

B. THE TRIAL COURT'S DECISION WAS CLEARLY INCORRECT AND THE APPELLATE DIVISION MUST USE ITS ORIGINAL JURISDICTION TO REVIEW THIS MATTER.

C. THE TRIAL COURT ERRED IN FINDING THAT HABERMAN HAD NOT ESTABLISHED REASONABLE RELIANCE, AND THEREFORE ERRED IN FAILING TO DETERMINE WHETHER EQUITABLE ESTOPPEL SHOULD BE APPLIED.

II. EQUITABLE ESTOPPEL, AND PRINCIPLES OF FUNDAMENTAL FAIRNESS, OPERATE TO PRECLUDE THE ESSEX BOARD FROM REPUDIATING ITS OBLIGATION UNDER THE LEASE, AS EXTENDED.

A. PUBLIC BODIES ARE HELD TO A STANDARD OF FAIR DEALING IN THEIR TRANSACTIONS WITH PRIVATE CITIZENS.

B. THE DIFFERENCE BETWEEN PRIMARY AND SECONDARY ULTRA VIRES.

C. SECONDARY ULTRA VIRES IN THE CASE AT BAR.

D. CASES IN WHICH IT IS APPROPRIATE TO APPLY EQUITABLE ESTOPPEL.

E. THERE IS NO "PUBLIC INTEREST" THAT WOULD PREVENT APPLICATION OF EQUITABLE ESTOPPEL IN THIS CASE.

F. THE FACTS OF THIS CASE COMPEL APPLICATION OF EQUITABLE ESTOPPEL.

G. THIS IS A CASE FOR WHICH EQUITABLE ESTOPPEL WAS DESIGNED.

H. THE BOARD IS NOT ENTITLED TO A "PASS."

I. EQUITY MUST BE DONE IN THIS CASE, REGARDLESS OF ANY IRREGULARITIES IN THE APPROVAL OF THE LEASE EXTENSION.

J. EVEN IF THE ANNUAL ESCAPE CLAUSE GOVERNED, THE BOARD WOULD STILL BE LIABLE BASED ON A LEASE TERMINATION OF JUNE 30, 2004.

We will not disturb factual findings and legal conclusions made by the trial court, unless they are so wholly unsupported by the evidence that a manifest denial of justice has occurred. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). As the Rova Farms Court held, the findings of a trial court are binding if supported by "adequate, substantial and credible evidence." 65 N.J. at 484.

The trial court's legal conclusion that there must be reasonable reliance to support a claim of estoppel is unassailable. Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519, 527 (2005); Middletown Twp. Policemen's Benevolent Ass'n Local No. 124 v. Twp. of Middletown, 162 N.J. 361, 367 (2000); Summer Cottagers' Ass'n of Cape May v. City of Cape May, 19 N.J. 493, 503-04 (1955).

We have reviewed the largely undisputed evidence in this case. It is clear that both of parties were aware of the fact that approval of a ten-year lease had to be given by the Commissioner of Education. The agreement which was signed by both parties was contingent on that approval and on November 16, 1998, Malyska advised Noonan in writing that the ten-year term, as written, would not be approved. That disapproval was promptly forwarded to Dubrow. Although the parties were both willing to enter into a ten-year lease, both parties knew the Commissioner's approval was necessary, and knew that the extension had not been approved. We find no error in the trial judge's conclusion that in these circumstances, any reliance on the parties' agreement to extend the lease was not reasonable.

We have considered the balance of Haberman's claims of error and conclude that they do not merit further discussion in this opinion. See R. 2:11-3(e)(1)(A) and (E).

Affirmed.

 

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A-5977-04T5

July 19, 2006