SMART REALTY, INC v. 986 RIVER ROAD, INC.
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1325-09T1
SMART REALTY, INC.,
Plaintiff-Respondent,
v.
986 RIVER ROAD, INC.
and HUGO IM,
Defendants-Appellants.
________________________________________________________________
Argued March 17, 2010 - Decided August 26, 2010
Before Judges Fisher and Espinosa.
On appeal from Superior Court of New Jersey,
Bergen County, Chancery Division, Docket No.
C-253-08.
Leon J. Greenspan argued the cause for
appellants (Greenspan & Greenspan, attorneys;
Mr. Greenspan, of counsel and on the
briefs).
Jeffrey A. Bronster argued the cause for
respondent.
PER CURIAM
The issue at the heart of this declaratory judgment action
is whether plaintiff Smart Realty, Inc. (Smart) validly
exercised an option to renew the lease it had with defendant,
986 River Road, Inc. (986). Defendant appeals from the judgment
declaring that Smart validly exercised its option to renew the
lease in a timely manner and that said option was binding on
986. We affirm.
Judge Ellen L. Koblitz, P.J. Ch., presided over the trial
of this matter and set forth detailed findings of fact in her
oral opinion, which need not be repeated at length here. The
salient facts can be summarized as follows.
Lennard Charles (Charles) is a licensed New Jersey real
estate broker and the sole shareholder and president of Smart.
In 1995, Smart moved its offices to 986 River Road, in
Edgewater, New Jersey. Initially, Smart leased the property
from Ingold Realty Co. (Ingold). Through the course of the
years, Smart and Ingold were parties to a number of agreements
regarding the leasehold that included provisions for how notice
was to be given and options for renewal.
In 2003, Ingold sold the property to 986, a corporation
owned by Hugo Im. 986 never entered into a new agreement with
Smart or provided Smart with instructions regarding the exercise
of the renewal option or how notice was to be given to the
landlord. 986 never notified Smart of its status as the new
landlord and just sent invoices for rent that listed "986 River
Road, Inc., c/o MADHATTER REALTY, INC., 2417 Third Ave., Bronx,
NY 10451" at the top left of the invoice and instructed that the
A-1325-09T1
2
check for rent should be made payable to "986 River Road, Inc."
The return envelope for this correspondence was on stationery of
Madhatter Realty, Inc. (Madhatter) at the Bronx address.
Smart's action to exercise its renewal option consists of
the following. By letter dated April 4, 2007, Charles wrote to
Ingold's attorney, Jack Zakim. Charles explained that he was
providing notice to Zakim because David Watkins, the attorney
for 986, had not responded to his prior correspondence. The
letter advised:
In accordance with paragraph 15 of the First
Amendment to Business Lease I am providing
Notice that I, Lennard Charles, on behalf of
SMART Realty, am exercising the FIVE YEAR
OPTION to renew as identified in the
Compromise and Settlement Agreement and the
Lease dated August 1, 19[9]8.
The letter was hand-delivered to Zakim's former law office
but, because he had changed firms, Zakim did not receive the
letter. Carbon copies were sent to Madhatter and to Charles's
attorney, Jeffrey Bronster. On April 16, 2007, Charles called
Im to confirm that he had received the letter exercising the
Im told him that he had received the letter.
renewal option.
At trial, Im testified that he did not receive the letter
sent to Madhatter. However, he admitted that he received and
cashed the check for that month's rent payment that was sent in
court explicitly found Im's
the same envelope. The trial
A-1325-09T1
3
testimony on this point "was not believable" and that he "was
not truthful." Im also initially denied having the conversation
with Charles on April 16, 2007. After telephone records
reflected a call between Im's and Charles's telephone numbers,
Im gave varying accounts as to what was discussed. However, he
still denied confirming receipt of the letter to Charles. The
trial court found this testimony to be false as well. The court
found the following facts: Charles made the call to confirm that
Im had received the letter and that he was aware that Smart was
exercising the renewal option and further, Im had confirmed
receipt.
Despite these facts establishing that 986 received actual
notice that Smart was exercising the renewal option, 986 argues
that this effort was insufficient. 986 contends that a valid
exercise of the renewal option required "strict compliance" with
"an appropriate written notice, delivered and directed to the
then landlord (986) and to its attorney David Watkins
("Watkins"), all as set forth in the leasehold and settlement
documents ("the renewal requirements")." 986 contends that
these requirements were established in Articles 4 and 15 of a
2003 amendment to the lease.
Smart and Ingold entered into the "First Amendment to
Business Lease" (the Amendment) referred to by 986 as part of
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their October 2003 settlement of a dispute over real estate
taxes. The Amendment set forth the required procedure for the
exercise of a renewal option for the period from November 1,
2020 through October 31, 2023 as follows:
4. ... All of the option periods
including this Fourth Option may only be
exercised by forwarding written notice of
the Tenant's intention to exercise the
option, at least 180 days prior to the
termination of the term1 by certified mail,
return receipt requested.
The Amendment also contained a more general notice
provision:
15. Any notices to be given under this
Agreement by either party to the other may
be effected either by personal delivery in
writing or by mail, registered or certified,
postage prepaid with R.R.R. Notices
delivered personally shall be deemed
communicated as if actual receipt [sic];
mailed notices shall be deemed communicated
when received. Notices to Landlord so long
as Ingold is the owner of the premises shall
be forwarded to Ingold at the address set
forth above with a copy to Ingold's attorney
Jack Zakim c/o Kleeblatt Galler Abramson &
Zakim, 25 Main Street, Hackensack, New
Jersey 07601.
[(Emphasis added).]
The "Compromise and Settlement Agreement" (Compromise
Agreement), which was also executed as part of the October 2003
1
986 does not dispute the timeliness of the notice.
A-1325-09T1
5
settlement, contained still another general provision for giving
notice:
11. Any notices to be given under this
Agreement by either party to the other may
be effected either by personal delivery in
writing or by mail, registered or certified,
postage prepaid with RRR at the address
provided for herein.
Therefore, each of the provisions relied upon by 986 required
the delivery of written notice by personal delivery in writing
or by mail, registered or certified, postage prepaid with R.R.R.
However, because the provisions were agreed upon when Ingold was
the landlord, the provisions only required delivery to Ingold's
address and Ingold's attorney "so long as Ingold is the owner."
The Amendment did not dictate where notice should be delivered
if Ingold was not the owner. 986 never took any action to
instruct Smart to whom and where notice should be given after it
became the owner.
The April 2007 letter was not the first time that Smart
communicated with its landlord by sending a letter to Madhatter
Realty at the Bronx address. Three years earlier, he wrote a
letter to Im at Madhatter Realty regarding leaks at the
property. At trial, Im acknowledged that he received the 2004
letter and never advised Charles that Madhatter was not, in
fact, the landlord.
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986 is located at 2417 Third Avenue, Bronx, New York, which
is owned by Madhatter Realty, Inc. Im was the exclusive owner
of both Madhatter and 986, operated both from the same address,
and used the same fax and phone number. Im opened and responded
to the mail of both companies.
The judge declined to find that Im had acted in bad faith,
despite stating, "I can't believe in my view anything that Mr.
Im says, because so much of what he said was proven to be
untrue." The court also rejected 986's argument that, without
such a finding of bad faith, Smart could not exercise the option
through substantial compliance with the notice requirements.
The trial court concluded that the notice requirements were
satisfied in light of the fact that Im had received actual
notice of Smart's intent to exercise the renewal option. The
court observed that Charles could not be expected to know that
Madhatter was not the name of his landlord on the facts of this
case and stated,
Mr. Im opens all the mail. Mr. Im got the
option for renewal. Mr. Im is, for all
intents and purposes, 986 River Road Inc.,
and Mr. Im is Mad Hatter Realty Company, and
in my view it would elevate form over
substance in a completely unreasonable way
to allow Mr. Im to avoid the repercussions
of this renewal because the renewal notice
was addressed to Mad Hatter Realty.
A-1325-09T1
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Accordingly, the court concluded that Smart had validly
exercised its renewal option in a timely manner.2 Finding Smart
to be the prevailing party, the court awarded Smart attorney's
fees pursuant to a provision in the lease.
After the trial, 986 and Im moved for judgment
notwithstanding the verdict pursuant to Rule 4:40-2 on the
grounds that, absent a finding of bad faith on the part of the
landlord, Smart could not effect a valid exercise of the renewal
option through "substantial compliance" with the notice
requirements. The court rejected this argument and stated, in
part,
In my view, any lack of compliance by
sending mail certified is cured when the
recipient acknowledges receipt. In this
case not only did the recipient acknowledge
receipt, but he cashed the rent check which
was in the envelope where the option was
placed. So he received it. There is no
question about it. And having not sent it
certified is cured. He as good as sent it
certified. It is not a significant
deviation from the contract. The fact that
it was not addressed to the landlord but
copied to the landlord is not a difference
2
In ruling, the court also stated that counts two and three of
the complaint, which sought damages for breach of contract and
tortious bad faith, respectively, were dismissed. Counsel for
Smart then stated that when the matter was pending before a
different judge, he had written the court to advise that the
claims for monetary damages were being withdrawn. Counsel
stated, "So I should have let you know earlier that's an issue
that you don't have to reach."
A-1325-09T1
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that causes the failure of the renewal of
the option.
986 also argued that, because the counts seeking monetary
damages were dismissed, it was the prevailing party and
therefore entitled to attorney's fees pursuant to the lease.
The court rejected this argument and denied 986's motion.
In this appeal, 986 raises the following issues:
POINT I
THE TRIAL COURT MUST CONSTRUE AND INTERPRET
CONTRACTS AS THE LAW IS NOT AS THE TRIAL
COURT WISHES IT TO BE.
POINT II
A UNILATERAL OPTION MUST BE STRICTLY
CONSTRUED SO THAT THE CONCEPT OF SUBSTANTIAL
COMPLIANCE IS INAPPLICABLE IN THE ABSENCE OF
A VIOLATION OF THE COVENANT OF GOOD FAITH
AND FAIR DEALING.
POINT III
THE PLEADINGS AND PROOF DID NOT PERMIT
JUDGMENT FOR SMART.
POINT IV
THE TRIAL COURT ERRED IN FAILING TO GRANT
THE POST TRIAL RELIEF SOUGHT BY 986 AND IM.
POINT V
986 AND IM ARE ENTITLED TO LEGAL FEES.
After carefully reviewing the record, briefs and argument
of counsel, we are satisfied that none of these arguments have
merit and affirm substantially for the reasons expressed by
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Judge Koblitz in her opinions following the trial and at oral
argument of the motion for a verdict notwithstanding the
verdict.
"Whether to enforce an option to renew is a question within
the court's discretion." Goodyear Tire & Rubber Co. v. Kin
Prop., Inc.,
276 N.J. Super. 96, 106 (App. Div.), certif.
denied,
139 N.J. 290 (1994). A trial court's findings should
not be disturbed on appeal unless they are "'so wholly
insupportable as to result in a denial of justice.'" Ibid.
(quoting Rova Farms Resort, Inc. v. Investors Ins. Co.,
65 N.J.
474, 484 (1974)). Moreover, appellate courts "defer to the
factual findings of the trial court because it has the
opportunity to make first-hand credibility judgments about the
witnesses who appear on the stand; it has a 'feel of the case'
that can never be realized by a review of the cold record." N.J.
Div. of Youth & Family Servs. v. E.P.,
196 N.J. 88, 104 (2008).
We are satisfied that the credibility determinations made
by Judge Koblitz here, which lay the foundation for her finding
that 986 received actual notice of Smart's exercise of the
renewal option in a timely manner, were based upon a thoughtful
consideration of the evidence as well as the opportunity she had
to make first-hand credibility judgments. The thrust of 986's
argument is that strict compliance was required with lease
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provisions regarding a specific manner of delivery and which
never identified the precise name and address of the landlord to
be served after 986 purchased the property. We agree with Judge
Koblitz's conclusion that, in light of the fact that 986
received actual notice of Smart's exercise of the renewal
option, this argument lacks merit. See Goodyear, supra,
276 N.J. Super. at 107. We also agree with her assessment that
Smart was the prevailing party in this litigation and her
conclusion that 986 is not entitled to legal fees.
Affirmed.
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