WASHINGTON AND COURT LLC v. BANGZ SALON HOBOKEN LLC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6214-10T1

WASHINGTON AND COURT, LLC,

Plaintiff-Respondent,

v.

BANGZ SALON HOBOKEN, LLC and

JOSEPH E. BRANCO,

Defendants-Appellants.

______________________________

February 27, 2013

 

Argued October 17, 2012 - Decided

 

Before Judges Grall, Simonelli and Koblitz.

 

On appeal from Superior Court of New

Jersey, Law Division, Special Civil Part,

Hudson County, Docket No. DC-012632-08.

 

Matthew Cono Capozzoli argued the cause for

appellants (Windels Marx Lane & Mittendorf,

LLP, attorneys; Mr. Capozzoli, on the brief).

 

Gerald D. Miller argued the cause for

respondent (Miller, Meyerson & Corbo,

attorneys; Mr. Miller, of counsel and on

the brief).

PER CURIAM

This is the second appeal taken following a bench trial to resolve a dispute about allocation of an "Overhead Charge" under a commercial lease for second floor commercial space at 89 Washington Street in Hoboken. The plaintiff is Washington and Court, LLC (Landlord), and the defendants are Bangz Salon Hoboken, LLC (Bangz) and its former owner Joseph E. Branco (collectively Tenant).1 Tenant appeals from a $3248.10 judgment in favor of Landlord as amended on cross-motions for reconsideration following the second bench trial. That trial was conducted on remand from this court. We affirm the judgment but modify it to eliminate portions of the "Overhead Charge" that are not supported by the record.

This dispute centers on paragraph 42 of the lease, which defines the scope of Tenant's obligation to pay a share of the "Overhead Charge." It requires Tenant to pay, as additional rent, 10.272% of the "Overhead Charge" for "the Building." Lease, 42 (b)-(c).2 The "Overhead Charge" includes costs and expenses Landlord incurs for insurance, property taxes, utilities, water and sewer charges, janitorial and snow removal service, repairs and maintenance. Id. at 42(a)-(b). Some of the costs included in the "Overhead Charge" are limited to expenditures made on behalf of "the common areas of the Building," while other costs encompass expenditures made in relation to the entire "Building in which the Premises are situated." Id. at 42(b)(i)-(iii). The lease also specifies that the real estate taxes included in the "Overhead Charge" are for the tax "imposed upon the land and improvements of which the leased premises are a part." Id. at 42(a).

The lease has a payment plan that is as intricate as the allocation of the "Overhead Charge." Tenant must pay $800 per month as additional rent. Id. at 42(d). That $800 monthly payment represents only an estimate of Tenant's 10.272% of the total "Overhead Charge." Ibid. Accordingly, the lease provides for an annual adjustment to bring Tenant's estimated $9600 annual payment and its actual share of the "Overhead Charge" in line. Ibid. Within 120 days of a year's end, Landlord must determine actual costs and provide "an annual statement/reconciliation" of Tenant's actual share. Ibid. If the estimated payments are short, Tenant must pay the balance due; if Tenant has overpaid, Landlord must either retain and credit the overpayment to Tenant's next bill or refund it. Ibid.

This is a ten-year lease that commenced on October 1, 2004, but this dispute did not arise until 2007 when Tenant received the statement/reconciliation for the 2006 "Overhead Charge." That was the first time Tenant's estimated payments were short of actual costs. Landlord reported that Tenant's share for 2006 was $15,891.29, $6291.29 more than Tenant's estimated share, and Tenant refused to pay the alleged overages.

The primary point in contention is the meaning of the term "the Building" as it is used in paragraph 42. The lease describes the leased premises as "second floor commercial space . . . at 89 Washington Street . . . in the building known as 89 Washington Street . . . (the 'Building')." Lease, 38. But Landlord, through more than one corporation, owns more than one property on Washington Street in Hoboken, and Landlord's statement/reconciliation for 2005 and 2006 include expenses incurred for 89, 91 and 93 Washington Street, as well as addresses on Newark and Court Streets.

On appeal from the first bench trial, the panel affirmed in part, reversed in part and remanded for a trial on the issues that remained. Washington & Court, L.L.C. v. Bangz Salon Hoboken, L.L.C., No. A-1405-08 (App. Div. Nov. 6, 2009) (slip op. at 14). Consequently, the scope of the dispute about the meaning of the term "the Building" has been narrowed. The panel held: (1) that the term "the Building" does not include 93 Washington Street; (2) that the basement of "the Building" is not a common area; and (3) that the conflicting evidence presented at the first trial was inadequate to support the trial court's determination that "the Building" was limited to the premises with the address 89 Washington Street. Id. at 9-11. Accordingly, the panel remanded "in order that proofs [might] be taken to determine the parameters of 'the Building' referenced in [p]aragraph 42 of the lease." Id. at 9-10.

Because the "Overhead Charge" could not be calculated until the meaning of the term "the Building" was determined, the panel also directed the trial court to adjudicate the "Overhead Charge" for 2006.3 Id. at 11, 14. In that regard, the panel affirmed a portion of a post-judgment order entered by the trial court requiring "an accounting for the 2006 Overhead Charge" and directed adjudication of the amount "once the accounting is obtained." Id. at 14. The panel did not reiterate the terms of the order it referenced, but that order requires the parties to agree on an independent certified public accountant who would review Landlord's books and records and be paid as if the fee were part of the "Overhead Charge."4

The second bench trial was conducted on March 11 and April 19, 2011.5 For ease of presentation, we discuss the evidence and issues relevant to the meaning of the term "the Building" in part A and discuss the calculation of Tenant's 10.272% share of the "Overhead Charge" in part B.

A

At the remand hearing the parties presented testimony and documentary evidence addressing the question whether the term "the Building" for purposes of paragraph 42 includes 89-91 Washington Street or just 89 Washington Street. That evidence can be summarized as follows.

The deed reflects that the property consists of lots 1.1 and 1.2 of Block 211 on Hoboken's tax map. The metes and bounds description filed with the deed reveals that the property is bordered by public streets on three sides, Washington, Newark and Court Streets, and that it has an area of 5000 square feet. There is no dispute that the structure at 89-91 Washington Street abuts Newark and Court Streets as well. In addition, the affidavit of consideration filed with the deed lists multiple addresses 89-91 Washington Street and 60-64 Newark Street. The property and its improvements are taxed by the City of Hoboken as 89-91 Washington Street, its Newark and Court Street addresses are not referenced in the tax bill.

The lease indicates Tenant's leasehold consists of approximately 1200 square feet of second floor commercial space. Defendant Branco estimates that the space is somewhat larger, about 1250 square feet. The lease confirms that "the Building" has premises entered via Newark Street. It states that Tenant's access is through the Washington Street sidewalk entrance, "not the Newark Street side of the building." Lease, 38.

An architectural report prepared in 1988 provided the area of the leased portions of the various commercial and residential premises at 89-91 Washington Street, 60- 64 Newark Street and 90 Court Street. That report indicates the total area of the several leaseholds is 11,585 square feet, with the space Tenant occupies having an area of 1190 square feet, or 10.272% of the leased area. There is no indication that any of the leaseholds are in the basement or that the total area stated includes the common areas.

A licensed architect, who had done work on the building in the past, surveyed 89-91 Washington Street and testified for Landlord at the trial on remand. He determined that the structure comprising 89-91 Washington Street has a single basement and a total area, as opposed to the area of the leased space only, of 11,827 square feet. This total area included the basement. Accordingly, 10.272% of that total area is 1215 square feet.

The acting construction official for Hoboken testified and produced six City records relating to the property a construction permit, two certificates of occupancy, an application to renovate the second floor of the building and two certificates of zoning compliance. All of the records, except the application to renovate the second floor premises leased by Tenant, which was prepared by Landlord, list the address as 89-91 Washington Street. As noted above, property tax receipts for 2005 and 2006 also list the address as 89-91 Washington Street.

There was other evidence suggesting that 89 and 91 Washington Street are two buildings. Photographs showed that there are different facades and elevations. But there was no testimony as to the significance of those differences. In fact, when shown a photograph of the Washington Street facades, Landlord's architect indicated that it showed two buildings.

According to defendant Branco, he understood that Tenant's share of the "Overhead Charge" would be for 89 Washington Street. Despite that testimony, Branco acknowledged that Landlord gave him the 2005 and 2006 tax receipts issued for 89-91 Washington Street. On remand, Branco also admitted that the first time he objected to paying expenses for 91 Washington Street on the ground that they were not for "the Building" was after the judge raised that question during the first trial.

After recounting and considering the terms of the lease, the parties' conduct and the evidence tending to show the parameter of "the Building," the judge presiding over the remand hearing determined that the parties intended to include expenses for the building known as 89-91 Washington Street in the "Overhead Charge" when the lease was executed. The evidence the judge deemed most persuasive was the fact that the leased premises was, in fact, roughly 10.272% of the total area of 89-91 Washington Street the share of the "Overhead Charge" Landlord agreed to accept and Tenant agreed to pay. The judge further reasoned that if the term "the Building" referred only to the portion known as 89 Washington Street, the portion occupied by Tenant would be about 42% of its total area.6 Finally, the judge relied on Branco's conduct specifically, his failure to object to paying a share of the total property taxes for 89-91 Washington Street.

In reviewing a determination based on evidence and testimony presented at a bench trial, this court "'do[es] not disturb the factual findings and legal conclusions of the trial judge unless . . . convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.'" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963)). Absent legal error, the question for us is whether "there is substantial evidence in support of the trial judge's findings and conclusions." Ibid.

Applying that standard, we see no basis for disturbing the judge's determination. On the prior appeal, the panel also focused on Branco's assertion that he had no "objection to paying [T]enant's pro rata share of a tax bill for the property even though it covered the large building with multiple addresses." For that reason, the panel concluded that a remand was required for proofs to be "taken to determine the parameters of 'the Building' referenced in [p]aragraph 42 of the lease."7 The judge complied with that mandate, and the evidence presented on the remand provides adequate support for the judge's findings and conclusions.

We have considered Tenant's objections to the admission of evidence pertinent to the meaning of the term "the Building" in paragraph 42 of the lease. The objections are to documentary evidence presented by the City's employee admitted as business records, the architect's testimony about the total area of the building and the allowance of rebuttal testimony. The claimed errors involve matters left to the sound discretion of the trial court, and there is no discernible abuse of that discretion here. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 383-84 (2010). No argument Tenant presents in support of any of these several claims has sufficient merit to warrant any additional discussion in a written opinion. R. 2:11-3(e)(1)(E).

B

We turn to consider whether the evidence presented supports the judge's calculation of Tenant's 2006 share of the "Overhead Charge."

Tenant raises a preliminary question about Landlord being permitted to proceed without providing the accounting directed by this court in its decision on the prior appeal. Tenant suggests that Landlord is to blame, but the parties share that responsibility. As noted above, the panel referred to the accounting the trial court had directed in a post-judgment order, and under the terms of the trial court order the parties were required to cooperate to obtain an accounting from an independent certified public accountant. Thus, Tenant is in no position to contend that reversal is required because Landlord did not comply with the mandate from this court and the trial court proceeded without one.

In hindsight, it would have been more productive for the parties to obtain an accounting after the judge resolved the dispute about the meaning of the term "the Building," which is critical to the calculation of Tenant's share of the "Overhead Charge." But the trial transcript does not indicate that the parties urged the judge to reconsider the order, entered by a different judge, denying bifurcation on the ground that it should have been completed when the motion to bifurcate was filed. Accordingly, we address the 2006 "Overhead Charge" on the record that the parties have made. In doing so, we recognize that Landlord, the plaintiff in this action, had the obligation to establish its entitlement to the contribution it sought a responsibility Landlord assumed when it agreed to send Tenant an "annual statement/reconciliation of Tenant's share." Lease, 42(d).

The evidence Landlord presented is adequate to support a finding that Landlord paid $72,924.42 for 2006 property tax on 89-91 Washington Street. A tax receipt prepared by the City establishes that payment. Tenant's 10.272% share is $7490.80.

The evidence is also adequate to support a finding that Landlord paid $8223.42 in 2006 as a management fee for 89-91 Washington Street. The property manager testified that her fee was $1100 per month for 89-91 Washington Street and $1100 per month for 93 Washington Street. Cancelled checks for the 89-91 Washington Street expense in the total amount of $8223.42 were produced demonstrating payments for the 2006 management fees. Tenant's 10.272% share of that expense is $844.71.

In addition, payment records for supplies purchased for 89 Washington Street from City Paint & Ace Hardware that clearly indicate payment made for 89 or 91 Washington Street reflect total expenses of $1593.33. Tenant's 10.272% share of that expense is $163.67.

Apart from Tenant's share of taxes, management fees and supplies, a total of $8499.18, Landlord failed to establish its entitlement to shift 10.272% of any other expenses to Tenant. Thus, Tenant's estimated payments, $9600, exceed the amount due by $1100.82.

Our conclusion about what Landlord did not establish warrants some explanation. Landlord sought a share of the expense for insurance policies that cover 89-91 and 93 Washington Street. Landlord allocated 50% of its permissible insurance cost to 89-91 Washington Street. But there is nothing in this record that provides a rational basis for a fifty-fifty allocation of the cost. In short, the division, as far as we can discern, was based on nothing other than Landlord's opinion of a fair allocation. The lease does not contemplate calculation of the "Overhead Charge" based on Landlord's opinion of the expenses incurred for 89-91 Washington Street. Because Landlord did not present any evidence to show a cost for insuring 89-91 Washington Street, it did not meet its burden of proof on this portion of the "Overhead Charge."

Landlord's proofs for allocating its expenditures for janitorial costs and extermination fees are wanting for the same reason absence of any explanation as to allocation of those expenses between 89-91 and 93 Washington Street. The bill for janitorial services simply indicates that "10% of the total is paid by 93 Washington Street." The only explanation given for that ninety-ten division is the property manager's assertion hardly any janitorial work was done in 93 Washington Street and 93 Washington Street is "a smaller building."

There is no documentary evidence supporting inclusion of extermination fees in the "Overhead Charge." Eight invoices of varying amounts ranging from $400.68 to $556.50, and seven checks indicating payment of exterminating expenses were produced. Each invoice indicates that the work was done for "Washington & Court LLC - 93 Washington Street." By the opinion of the panel that decided the first appeal, Tenant may not be assessed a share of the expenses for 93 Washington Street.

The property manager testified that the exterminating bills covered work at both buildings, 89-91 and 93 Washington Street, and produced a spreadsheet allocating $80.89 of each invoiced bill to 93 Washington Street. She did not explain how she or Landlord determined that all but $80.89 billed in each invoice was for work done at 89-91 Washington Street. Accordingly, Landlord did not prove the amount of the extermination expense chargeable to Tenant.

The foregoing discussion of the proofs on the 2006 "Overhead Charge" accounts for all of the expenses addressed at the trial on remand. The significant difference between Tenant's share calculated by the judge and the share we have calculated is based on a complete absence of adequate evidence to allocate the expenses for extermination, janitorial services and insurance costs to Tenant. As deferential as our standard of review may be, where a determination is not supported by the evidence no deference is due. Rova Farms, supra, 65 N.J. at 484. To the extent that Tenant has objected to the admission of evidence supporting the portions of the "Overhead Charge" we have affirmed, we find that they are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We have relied on billing records supported by checks and a receipt for property taxes issued by the City of Hoboken.

Our disposition of the case makes it unnecessary for us to address Tenant's claim that the trial judge erred in reconsidering the initial judgment and in denying Tenant's requests for reconsideration. To the extent Tenant sought reconsideration of the judge's conclusion about the meaning of the term "the Building," we have addressed that issue in part A of this opinion. To the extent that Tenant argues that the judge should have ruled on the "Overhead Charge" for years subsequent to 2006, that question was not before the judge on remand.

C

Tenant also argues that the judge erred in denying its request for counsel fees in accordance with paragraph 52 of the lease. The judge denied that request based on an assessment of the parties' relative success. The disposition of this case on appeal alters that balance. Accordingly, we remand for reconsideration of the judge's determination on counsel fees. Because fees on this appeal must abide by the trial judge's determination of fees in the trial court, we "refer the issue of attorney's fees for appellate services [on this appeal] to the trial court for disposition." R. 2:11-4.

D

In sum, the judge's determination that the term "the Building" within the meaning of paragraph 42 includes 89-91 Washington Street is affirmed. As this court previously held, "the Building" does not include 93 Washington Street. The judgment in favor of Landlord is vacated and the matter is remanded for entry of judgment in favor of Tenant in the amount of $1100.82 that amount represents the difference between the $9600 Tenant paid in $800 monthly installments for its estimated share of the "Overhead Charge" and Tenant's actual share of the charge, $8499.18. On remand, the trial court must reconsider its determination on counsel fees incurred on the first remand and the question of fees on this appeal, which we have referred.

To the extent that there is an order in effect concerning escrow that must be resolved, the parties are free to bring that matter to the attention of the trial court for resolution of that question informed by this opinion if they are unable to resolve that matter by consent order.

 

Appendix

In pertinent part, paragraph 42 provides:

(a) "Real Estate Taxes" shall mean ad valorem taxes, fee assessments and charges, general or special, ordinary or extraordinary, imposed upon the land and improvements of which the leased premises are a part by the municipality or other taxing authority, including any gross receipts, sales or use taxes imposed upon Landlord against or measured by rent; real estate taxes shall included any fee imposed by the municipality or subdivision or agency thereof for refuse collection or other municipal service separately charged now or during the term.

 

(b) During the initial term and option term, if exercised, Landlord shall incur costs and expenses for the following:

 

(i) general overhead charge for owning and operating the Building in which the Premises are situated, Real Estate Taxes as defined in subpar. (a), above, water and sewer charges, comprehensive commercial liability/fire and property-casualty/

business interruption insurance, management, administrative and leasing fees;

 

(ii) utility/electric charges, janitorial services, exterminating, snow and ice removal, landscaping and other activities related to or concerning the common areas of the Building; and

 

(iii) repairs (including replacements), maintenance and upkeep of the Building, including without limitation, major components (e.g., roof) thereof, building operating systems and equipment but excluding (x) Landlord's repair obligation under Rider Par. (45); (y) repairs and maintenance which are the sole responsibility of Tenant (including HVAC maintenance obligations) under Rider Par. (46); and (z) water and sewer charges attributable to other tenants in the Building.

 

Landlord's aggregate annual costs, expenses and charges for the foregoing items (i), (ii) and (iii) for the Building shall be known as "Overhead Charge."

 

(c) Overhead Charge shall be allocated among commercial tenants in the Building and Tenant's allocable share of Overhead Charge shall be 10.272%.

 

(d) Tenant shall pay Landlord, as additional rent, as Tenant's estimated Overhead Charge, based on Tenant's allocable share of Overhead Charge in subpar. (b), above, the sum of Eight Hundred ($800.00) during each month of the term. Except as hereinafter provided, within 120 days after the conclusion of each calendar year, Landlord shall determine the actual Overhead Charge for the preceding calendar (or portion thereof) and shall prepare and send Tenant an annual statement/reconciliation of Tenant's share thereof after crediting estimated Overhead Charge actually paid by Tenant.

 

If the year end statement/reconciliation reflects that a balance due for Overhead Charges for the preceding calendar year (or portion thereof) after crediting aggregate estimated Overhead Charges actually paid by Tenant then Tenant shall pay Landlord, as additional rent, the balance of Overhead Charge due for the preceding calendar year (or portion thereof) based on the actual Overhead Charges for the preceding calendar year. If the statement/reconciliation reflects that Tenant has overpaid for Overhead Charge, Landlord shall either retain such overpayment and provide a credit to Tenant toward then current year Overhead Charges or refund such overpayment to Tenant.

 

. . . .

[(Emphasis added).]

In pertinent part, paragraph 38 provides:

During the term, Landlord leases to Tenant and Tenant does hereby rent from Landlord the second floor commercial space of approximately 1200 square feet at 89 Washington Street, Hoboken, New Jersey (the "Premises") in the building known as 89 Washington Street . . . (the "Building") provided that access to the Premises for Tenant and its employees, customers, invitees, service providers and contractors shall be through the Washington Street sidewalk entrance and stairway of the Building (which areas are available to Tenant on a non-exclusive basis) and not through the Newark Street side of the Building. . . .

 

. . . .

 

 

 

1 We recognize that, at the second trial, Branco testified that he had sold and was no longer the owner of Bangz. Neither party contends that the sale of the business has any relevance to the issues raised on appeal.

2

For ease of reference, the pertinent parts of paragraph 42, which appears in a rider executed with the lease, are set forth in full as the appendix to this opinion.

 

 

3 The panel resolved other questions pertinent to the allocation of the "Overhead Charge" for "the Building" and its common areas. It held that Tenant's share of expenses listed in paragraph 42(b)(i) were for the entire building, but did not include water and sewer charges for other tenants; and that Tenant's share of expenses listed in paragraph 42(b)(ii) were limited to the common areas of "the Building." Id. at 13-14.

4 The panel reversed a provision of the trial court's post-judgment order that required "such an accounting" in future years. In doing so, the panel reasoned that the lease did not require review by an accountant.

5 Prior to the trial on remand, Tenant moved to bifurcate the trial on the ground that the question about the scope of "the Building" had to precede the accounting. The judge, who had not entered the post-judgment order addressing the accounting, denied the motion to bifurcate on the ground that the accounting should have been completed long before the motion to bifurcate was filed.

6 That finding is supported by the 1988 architectural report. It lists the area of each commercial and residential leasehold by address 89 and 91 Washington Street, 60, 62 and 64 Newark Street and 90 Court Street. The area attributed to the 89 Washington Street address is 2870 square feet, 1190 square feet of which is Tenant's.

7 Tenant presented no argument based on the definition of real estate taxes set forth in subparagraph (a) of paragraph 42 in the trial court on remand and presents none on appeal. Accordingly, any argument based on subparagraph (a) has been abandoned.