SPJ, INC. v. FARGO HOTELS (POOL C) REALTY, L.P.

 
(NOTE: The status of this decision is .)

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2965-09T3

SPJ, INC.,

Plaintiff-Respondent/

Cross-Appellant,

v.

W2005/FARGO HOTELS (POOL C)

REALTY, L.P.,

Defendant-Appellant/

Cross-Respondent.

October 28, 2010

Argued October 6, 2010 - Decided

 

Before Judges Axelrad, Lihotz, and J. N. Harris.

 

On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1983-08.

 

Jaimee Katz Sussner argued the cause for appellant/cross-respondentW2005/Fargo Hotels (Pool C) Realty, L.P. (Herrick, Feinstein LLP, attorneys; Ms. Sussner and Alexandra Edelman, on the brief).

 

John F. Palladino argued the cause for respondent/cross-appellantSPJ, Inc. (Archer & Greiner and Hankin, Sandman & Palladino, attorneys; BenjaminD. Morgan,on the brief).

 

 

 

 

PER CURIAM

This appeal involves a contractual dispute between a commercial landlord and its tenant. Specifically, it relates to the manner of allocating real property taxes1 as part of a triple net2 ground lease. In the context of cross-motions for summary judgment, the Law Division granted declaratory relief in favor of the tenant, which adjusted the parties' admeasurement and allocation of real property taxes. In denying the landlord's cross-motion, the motion judge dismissed the counterclaim that sought recovery of several years' of underpaid real property taxes by the tenant. Because we find that the Law Division erred as a matter of law in reforming the ground lease, we reverse and remand for further proceedings.

I.

On January 1, 2000, plaintiff SPJ, Inc. (SPJ) entered into a ground lease with defendant's predecessor in title, Midwest Heritage Inn of Deptford, Inc. (Midwest). The leased premises an area of approximately one acre consisted of a portion of Midwest's land located in Deptford Township. The overall property once was comprised of three lots, designated as lots 5, 6, and 7 in block 484, but was billed to the owner for real property tax purposes as a single parcel, identified as block 484, lot 5.

The property contained substantial improvements, including a Fairfield Inn Hotel and an accessory parking lot with access to public streets. The ground lease contemplated leasing an unimproved area of 42,788 square feet, upon which SPJ subsequently established and operated a Pizzeria Uno Chicago Bar & Grill. The ground lease conveyed to SPJ the right to use all common ways and areas on the overall property, plus a license for vehicle parking and vehicular and pedestrian ingress and egress to and from the premises.

On March 31, 2006, defendant W2005/Fargo Hotels (Pool C) Realty L.P. (Realty) purchased the entire parcel and was assigned the ground lease.

The ground lease provided for a term of twenty-five years, with a conditional option to renew for five additional five-year periods. The contracting parties expressly intended the ground lease to be a "net-net-net" lease. Accordingly, SPJ was obliged first to pay its landlord "Basic Rent," then pay the "Lessee's Proportionate Share . . . of the Operating Costs of the Property," and finally pay "Additional Rent."

Section VI(A) of the ground lease states:

Lessee shall pay as Additional Rent, Lessee's Proportionate Share of: (i) all real estate taxes, ad valorem taxes and assessments, general and special, use and occupancy taxes and any other tax imposed upon or levied against real estate, or upon owners of real estate as such rather than persons generally, which are assessed against Lessor, payable with respect to or allocable to the Property.

In Section V(A)(2), the ground lease defines "Lessee's Proportionate Share" as a fraction "which shall be equal to the number of gross square feet in the Premises." Although arithmetically imperfect a fraction requires both a numerator and a denominator the parties do not dispute that what was intended was for the "Lessee's Proportionate Share" of real property taxes to be equal to the total square footage of the leased premises (42,788 square feet) divided by the total square footage of the overall property (128,723 square feet). This produces a fraction of one-third, or 33% of the real property tax bill for the property.

The ground lease provides an alternate procedure for the allocation of real property taxes. It grants an option to the tenant, on notice to the landlord, to seek a separate assessment for the leased premises. Section VI(C) states:

Lessee shall have the option to have the Premises separately assessed for real estate tax purposes; provided, however, that Lessee gives Lessor at least sixty (60) days prior written notice of the exercise of such option. In the event that Lessee exercises such option and the Premises is separately assessed for real estate tax purposes, Lessee shall, in lieu of paying Lessee's Proportionate Share of Taxes, as aforesaid, pay the Lessor all real estate taxes, ad valorem taxes and assessments, general and special, use and occupancy taxes and any other tax imposed upon or levied against real estate, or upon owners of real estate as such rather than persons generally, which are assessed against Lessor, payable with respect to or allocable to the Premises.

 

The ground lease neither defines the phrase "separately assessed for real estate tax purposes" nor provides guidance as to how the separate assessment is to be obtained.

Shortly after its restaurant was completed, SPJ complained to Midwest's managing agent that the ground lease's real property tax allocation was being unfairly determined. SPJ expressed its concern that the cost to build the facility was only $732,000, but it was being allocated a real property tax burden, using the proportionate share fraction of one-third, as if its improvements were assessed for $1,583,000. Accordingly, SPJ requested that Midwest "appeal the assessed taxes and have the taxes separately assessed. We shall agree to pay for the costs in accordance with our agreement but need for you to submit said appeal."

After the restaurant was completed in 2002, the Deptford Township Tax Assessor (Tax Assessor) maintained a permanent property record and appraisal card3 for the overall property, which itemized the land and improvement values, listing $1,030,000 for the land and $5,663,000 for all improvements. Real property tax bills reflecting the property's total assessment of $6,693,000 were presented by the municipality to the owner for payment. Because Midwest did not initiate the requested tax appeals, SPJ filed its own appeals with the Tax Court of New Jersey for the years 2003, 2004, 2005, and 2006, claiming "the assessment is in excess of the true or assessable value of the property."

When Realty acquired the property in March 2006, SPJ executed a document akin to a tenant's estoppel certificate. The instrument contained a provision that specifically addressed the simmering real property tax allocation dispute and corresponding tax appeals:

6. Except as set forth herein to the best of [SPJ]'s knowledge, both [SPJ] and [Midwest] have performed all of their respective obligations under the Lease and [SPJ] has no knowledge o[f] any event which with the giving of notice, the passage of time or both would constitute a default by [Midwest] under the Lease. Notwithstanding the above, [Midwest] and [SPJ] have exchanged numerous letters on the issue of the real estate tax assessment and appeal. [SPJ] has requested [Midwest] to join in the appeal of the real estate assessment and to date, [Midwest] has not agreed to join any appeal. [SPJ]'s position is that [Midwest] is required to join in and [Midwest] has yet to agree to join in the appeal. Without the joinder of [Midwest], the Board of Assessment Appeals [sic] will not accept, hear and decide an [a]ppeal by [SPJ] only. [SPJ] believes that [Midwest] has an obligation under the Lease Agreement to join in the appeal even if it is only for [SPJ]'s assessment.

Approximately nine months after Realty's acquisition, on November 10, 2006, counsel for SPJ provided Realty with written notice that, among other things, SPJ intended to explore "a separate assessment for SPJ's portion of the Property as provided for under Paragraph VI(C) of the Lease." Within weeks, SPJ unilaterally requested that all of its then-pending tax appeals in the Tax Court be withdrawn, and judgments dismissing its claims were entered accordingly.

Around that same time, SPJ was informed by the Tax Assessor that an assessment of SPJ's property, separate and apart from Realty's hotel, could only be accomplished by a subdivision. In the Tax Assessor's summary judgment certification he stated:

I advised SPJ that I could only assess properties as a whole, and that the only way an entirely separate tax bill for the [SPJ] property could be generated was for the owner to subdivide the property as an entirely separate lot. It is my understanding that this has not yet occurred.

 

Another nine months elapsed. Then, on October 18, 2007, SPJ's counsel informed Realty that SPJ had received an analysis dated several months earlier, in February 2007, performed by an appraiser hired by Deptford Township regarding the 2007 real property tax assessment of the entire property. The appraiser4 not the Tax Assessor determined that the "appropriate improvement assessment allocation" as of October 1, 2006,5 for SPJ's improvements was only $769,000. This assessment allocation was $814,000 lower than the $1,583,000 improvement assessment Midwest had used for the 2005 tax year.

In its response to SPJ dated December 20, 2007, Realty asserted that "until the [Tax Assessor] separately assesses the [p]remises for real estate tax purposes, [SPJ] is obligated to pay Lessee's Proportionate Share of [t]axes under the Lease." Realty averred that the Tax Assessor "has not changed the allocation of property taxes as set forth in its records nor is the [p]remises currently separately assessed for real estate tax purposes." Therefore, Realty's letter concluded, "under any fair reading of the Lease, [SPJ] should pay 33% of the property tax bill for the [p]roperty received by [Realty]."

Realty's letter also addressed what it perceived to be an underpayment of real property taxes by SPJ based upon inaccurate calculations made by Midwest prior to Realty's purchase of the property. The letter stated:

[W]e understand from reviewing past correspondence that the way [Midwest] handled the apportionment of real estate taxes was to separate out the assessed value of the land from the assessed value of the improvements. For instance, with respect to the 2005 tax bill, [Midwest] allocated $344,843 of the total assessed land value of $1,030,000 and $1,583,000 of the total assessed improvements value of $5,663,000 to [SPJ]. As a result, [SPJ] was allocated 33% of the assessed land value and 28% of the assessed improvements value . . . . The records seem to indicate that [Midwest] allocated $1,583,000 of the improvements value to [SPJ] because the assessed value of the improvements increased by that amount between the years of 2000 and 2002 during which the restaurant was constructed. The method that [Midwest] used to allocate [t]axes with respect to the Leasehold Improvements actually resulted in [SPJ] being assessed less than 33% of the Taxes for the Property

 

. . . .

 

We intend to continue using the same property tax allocation method as did [Midwest] until such time as the provisions of Paragraph VI(C) of the Lease are applicable . . . . As you will see, by using [Midwest]'s method, [SPJ's] portion of the tax burden is almost $12,000 less than if the full 33% were allocated.

Almost another year passed before SPJ filed its single-count declaratory judgment complaint. In it, SPJ asked primarily that the Law Division declare that SPJ had satisfied its option under Section VI(C) by means of the HRWG allocation and, therefore, was no longer obligated under the ground lease to pay its share of the real property taxes based on the one-third fraction. In response, Realty filed a two-count counterclaim seeking underpaid real property taxes pursuant to theories of breach of contract and unjust enrichment.

Cross-motions for summary judgment were ultimately filed. SPJ's motion sought the declaratory relief requested in its complaint, and a dismissal of the counterclaim. Realty sought to dismiss SPJ's complaint, and to enter a money judgment in Realty's favor on the claim for underpaid real property taxes.

The trial court agreed with SPJ's arguments, holding that until "the property is subdivided and/or there is a separate assessment for SPJ's leasehold, [Realty] must accept the HRWG appraisal in lieu of an assessment." As a result, SPJ was entitled to a new real property tax allocation based upon the work of the appraiser, HRWG. Furthermore, the court found that Realty had "no viable claim for back taxes," and dismissed the counterclaim. This appeal followed.

II.

A.

When this court reviews a grant of summary judgment, we do so de novo and employ the same standards used by the trial court. See Liberty Surplus Ins.Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Wells Reit II--80 Park Plaza, LLC v. Dir., Div. of Tax., 414 N.J. Super. 453, 462 (App. Div. 2010). This paradigm recognizes that summary judgment is only appropriate if the motion record demonstrates that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We accord no deference to the motion judge's conclusions on issues of law. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); Dep't of Envtl. Prot. v. Kafil, 395 N.J. Super. 597, 601 (App. Div. 2007).

B.

The interpretation of a contract is such an issue of law that is reviewed de novo, with no special deference to the trial court's interpretation of the law and the legal consequences that flow from the established facts. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009); Homesite Ins. Co. v. Hindman, 413 N.J. Super. 41, 46 (App. Div. 2010).

In the interpretation of a contract, the court's goal is to ascertain the "intention of the parties . . . as revealed [not only] by the language used," Driscoll Constr. Co. v. N.J. Dep't of Transp., 371 N.J. Super. 304, 313 (App. Div. 2004), but also with reference to "the surrounding circumstances and the relationships of the parties at the time it was entered into." Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999). "Even when the contract on its face is free from ambiguity, evidence of the situation of the parties and the surrounding circumstances is admissible in aid of interpretation." Great Atl. & Pac. Tea Co. v. Checchio, 335 N.J. Super. 495, 501 (App. Div. 2000).

"A basic principle of contract interpretation is to read the document as a whole in a fair and common sense manner." Hardy ex. rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 103 (2009). In doing so, the paramount concern is to "enforce the contract as written and not make a better contract for either party." Graziano, supra, 326 N.J. Super. at 342.

Moreover, a court is required to consider what is written in the context of the circumstances at the time of drafting and to apply a rational meaning in keeping with the expressed general purpose. Atlantic N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953)). If "the terms . . . are clear and unambiguous, there is no room for construction and the court must enforce those terms as written." Watson v. City of E. Orange, 175 N.J. 442, 447 (2003); see also Impink ex rel. Baldi v. Reynes, 396 N.J. Super. 553, 560 (App. Div. 2007).

An additional principle of contract law provides that an implied covenant of good faith and fair dealing is inherent in every contract in New Jersey. Kalogeras v. 239 Broad Ave., L.L.C., 202 N.J. 349, 366 (2010); Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001). "[G]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party." Wilson, supra, 168 N.J. at 245. A breach of the covenant of good faith and fair dealing necessarily requires "[b]ad motive or intention" on the part of the breaching party, because "'[c]ontract law does not require parties to behave altruistically toward each other[.]'" Id. at 251 (quoting Original Great Am. Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 280 (7th Cir. 1992)).

 

 

C.

With the foregoing concepts in mind, we review the ground lease and its provisions for the allocation of real property taxes between landlord and tenant. Starting with the parties' express understanding that the ground lease would be "construed in accordance with the laws of the State of New Jersey," we consider briefly the framework for the rendering of real property tax assessments in this State.

Our State Constitution provides:

Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district.

 

[N.J. Const., art. VIII, 1, 1.]

 

To carry out this constitutional mandate, the Legislature enacted N.J.S.A. 54:4-23, which provides:

All real property shall be assessed to the person owning the same on October 1 in each year. The assessor shall . . . determine the full and fair value of each parcel of real property situate in the taxing district at such price as, in his judgment, it would sell for at a fair and bona fide sale by private contract on October 1 next preceding the date on which the assessor shall complete his assessments.

This governmental function is performed by municipal tax assessors, under the direction of the Division of Taxation. See Casamasino v. City of Jersey City, 158 N.J. 333, 344 (1999); Carlson v. City of Hackensack, 410 N.J. Super. 491, 498-99 (App. Div. 2009); see also N.J.S.A. 54:4-1 and -26; N.J.A.C. 18:12-2.8. Among the many duties of a tax assessor is the statutory mandate, pursuant to N.J.S.A. 54:4-24, to "make a list in tabular form of the names of the owners . . . of each parcel

. . . and the taxable value of each parcel as determined by him." See Young v. Bergen Cnty. Bd. of Tax., 5 N.J. Tax 102, 106 (Tax 1982).

In Regent Care Center, Inc. v. City of Hackensack, 362 N.J. Super. 403, 415 (App. Div.), certif. denied, 178 N.J. 373 (2003), we held that by statute, municipal tax assessors are obliged to keep the tax rolls current by assessing each property at its full and fair value each year. Ibid. The law calls for the separate assessment of each parcel annually at its true value on the assessing date. Tri-Terminal Corp. v. Bor. of Edgewater, 68 N.J. 405, 413 (1975). The municipal tax assessor is further charged to fulfill those duties by valuing all real property in the municipality "without favor or partiality." N.J.S.A. 54:4-36(a).

To put these provisions in the context of the ground lease, it is plain that the contracting parties intended that the Tax Assessor would be the arbiter of the real property tax assessment to be used for the allocation of real property taxes. This could be accomplished one of two ways: either by an overall tax assessment of block 484, lot 5, or by the creation of separate tax assessments for SPJ's and Realty's interests. Either way, the parties would have a streamlined and transparent process to determine their annual obligations for real property taxes under the ground lease.

The unambiguous terms of Section VI(C) do not authorize any other process, procedure, or surrogate for the usual local real property tax assessment system governed by Title 54. Thus, the use of an appraiser even an appraiser retained by the Tax Assessor to allocate the respective tax assessment of the parties is clearly not within the contemplation of the ground lease. Nonetheless, a separate assessment legally born of a subdivision was agreed to by the parties as a ready means to allocate real property taxes. We agree with the advice given by the Tax Assessor that he could provide a separate assessment only upon subdivision of the property. We further recognize that subdivision of the land is a concept beyond the scope of Title 54, and instead lies within the framework of the Municipal Land Use Law, (MLUL), N.J.S.A. 40:55D-1 to -163 and local ordinances. See N.J.S.A. 40:55D-47; -48.

The summary judgment record is wholly barren of any effort to subdivide block 484, lot 5. More telling, there is no evidence in the record to suggest that SPJ ever requested Realty's consent or assistance in applying for a subdivision.6 We cannot speculate whether, if requested, Realty would have acquiesced or cooperated in making such an application. Nor can we presume whether such an application, if prosecuted, would have been granted by the municipality. As a matter of law, the impracticability or impossibility of attaining first, a subdivision, and second, a separate assessment, is unknown.

Arguably, just as Realty would have had a good faith obligation to consider SPJ's request for consent to and assistance in prosecuting a subdivision application,7 SPJ had a reciprocal duty to make such request. In the absence of this legally (and logically) necessary first step in attempting to fulfill the contractual option of securing a separate real property tax assessment, we find that the Law Division's reformation of the ground lease was at least premature. As we have often stated, we will "not rewrite contracts in order to provide a better bargain than contained in [the parties'] writing." Grow Co. v. Chokshi, 403 N.J. Super. 443, 464 (App. Div. 2008) (citing Christafano v. N.J. Mfrs. Ins. Co., 361 N.J. Super. 228, 237 (App. Div. 2003)). The reformation of the ground lease did exactly that.

D.

SPJ's declaratory judgment complaint sought a very narrow declaration of rights and did not expressly demand reformation of the ground lease. Reformation of a contract is an equitable remedy, traditionally available when there exists "either mutual mistake or unilateral mistake by one party and fraud or unconscionable conduct by the other." Dugan Constr. Co. v. N.J. Tpk. Auth., 398 N.J. Super. 229, 242-43 (App. Div.), certif. denied, 196 N.J. 346 (2008). However, reformation on the basis of mistake will not be granted when "the mistake is the result of the complaining party's own negligence." Millhurst Milling & Drying Co. v. Auto. Ins. Co., 31 N.J. Super. 424, 434 (App. Div. 1954). Generally, reformation is viewed as an "extraordinary remedy," requiring "[c]lear, convincing proof of facts pertinent to the remedy." Martinez v. John Hancock Mutual Life Ins. Co., 145 N.J. Super. 301, 312 (App. Div. 1976), certif. denied, 74 N.J. 253 (1977) (citing Heak v. Atl. Cas. Ins. Co., 15 N.J. 475, 481 (1954)).

Reformation for mutual mistake requires that "the minds of the parties have met and reached a prior existing agreement, which the written document fails to express." Bonnco Petrol, Inc. v. Epstein, 115 N.J. 599, 608 (1989). The mutual mistake must be one that is made at the time the parties reduced their agreement to writing. Id. at 609. "For a court to grant reformation there must be 'clear and convincing proof' that the contract in its reformed, and not original, form is the one that the contracting parties understood and meant it to be." Central State Bank v. Hudik-Ross Co., 164 N.J. Super. 317, 323 (App. Div. 1978).

From the foregoing principles, it is apparent to us that reformation was not available to vary the unambiguous terms of the ground lease's real property tax allocation provision. Not only was there no finding of mistake or unconscionable conduct to merit relief, the motion judge did not address whether the requisite burden of clear and convincing evidence had been satisfied. In their place, the motion judge substituted a seemingly pragmatic solution, one that on its face appears reasonable, but which was never the product of the parties' meeting of the minds. The remedy imposed by the grant of summary judgment does violence to the notion that in the absence of ambiguity, courts are dutibound to enforce the terms as negotiated and written.

E.

We are convinced further that because the parties did not commence upon or engage the MLUL-required procedures for a subdivision, it would be improper to grant equitable relief under the principles of impracticality or frustration of purpose. Our law recognizes that even if an agreement fails to expressly provide that a party will be relieved of the duty to perform if an unanticipated condition occurs making performance impracticable, a court may relieve the non-performing party of that duty if performance has suddenly become impracticable as a result of a supervening event. See M.J. Paquet, Inc. v. N.J. Dep't of Transp., 171 N.J. 378, 390-91 (2002). Just because the exercise of the option for a separate real property tax assessment is subject to governmental oversight does not automatically render the provision impossible to perform. The summary judgment, which obviated SPJ's responsibility to follow through on the land use process, erroneously negated the terms of the ground lease.

F.

There is a related reason why the Law Division should have denied SPJ's motion for declaratory relief. Although the Declaratory Judgment Act, N.J.S.A. 2A:16-50 to -62, is remedial legislation required to be liberally construed and administered, New Jersey courts have the discretion to withhold declaratory relief in actions that are found to have been improvidently filed. See, e.g., Donadio v. Cunningham, 58 N.J. 309, 325 (1971), Indep. Realty Co. v. Twp. of N. Bergen, 376 N.J. Super. 295, 302 (App. Div. 2005); Rego Indus., Inc. v. Am. Modern Metals Corp., 91 N.J. Super. 447, 453 (App. Div. 1966); Util. Blade & Razor Co. v. Donovan, 33 N.J. Super. 566, 570-73 (App. Div. 1955).

We believe that before seeking a judicial pronouncement concerning the ground lease's real property tax allocation, SPJ was required to exhaust its contractual remedies by actually attempting to obtain as the Tax Assessor advised it to do in 2006 a subdivision of the overall property, resulting in the concomitant separate real property tax assessment. See Indep. Realty Co. v. Twp. of N. Bergen, supra, 376 N.J. Super. at 303 (not an abuse of discretion to require exhaustion of administrative remedies before resorting to the courts).

G.

We now turn to Realty's argument that it was entitled to summary judgment on its counterclaim for unpaid real property taxes. The motion judge devoted a single paragraph in her written opinion to this issue:

In his letter of December 7, 2007,[8] defendant's president acknowledged SPJ's

efforts to have its leased property separately assessed for real estate tax purposes and agreed to continue to calculate SPJ's tax liability based on the formula used by its predecessor until such time as the separate assessment was realized. There is no viable claim for back taxes.

We cannot be sure what legal principle the motion judge relied upon when she held Realty to its unilateral statement that it would continue the real property tax allocation methodology deployed by Midwest. It is unclear whether the court found waiver; estoppel (promissory, equitable, or legal); or another legal principle as the basis for the conclusory statement, "[t]here is no viable claim for back taxes." R. 1:7-4(a). We are obliged to reverse the denial of summary judgment and remand the matter for reconsideration in light of all applicable legal principles, including the Brill summary judgment standard.9

In certain circumstances, a court may conclude that the parties to a contract have modified its terms by a subsequent oral agreement, even if the contract purported to allow only written changes, and the parol evidence rule will not bar evidence of the oral agreement. Lewis v. Travelers Ins. Co., 51 N.J. 244, 253 (1968); Sodora v. Sodora, 338 N.J. Super. 308, 312 (Ch. Div. 2000). More generally, a party may be estopped if it acted or made a representation "intentionally or under such circumstances that it was both natural and probable that it would induce action," and an adverse party relied on that action or representation to its detriment. Miller v. Miller, 97 N.J. 154, 163 (1984). The estoppel would prevent the first party "from asserting rights which might perhaps have otherwise existed" in the absence of the detrimental reliance. Carlsen v. Masters, Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979).

It has also been stated that "[w]here a party fails to declare a breach of contract, and continues to perform under the contract after learning of the breach, it may be deemed to have acquiesced in an alteration of the terms of the contract, thereby barring its enforcement." Garden State Bldgs. v. First Fid. Bank, 305 N.J. Super. 510, 524 (App. Div. 1997), certif. denied, 153 N.J. 50 (1998). Thus, where a party acts in a manner that is inconsistent with an intention to repudiate, so that the other party is induced to suppose that the validity of the contract is undisturbed, then the former may be estopped from contesting the validity of the contract. Taner v. Atl. Cas. Ins. Co. of Newark, 37 N.J. Super. 9, 12 (App. Div. 1955). Such an estoppel may arise by silence or omission where one is under a duty to speak or act. Davin, L.L.C. v. Daham, 329 N.J. Super. 54, 69 (App. Div. 2000).

III.

In conclusion, we determine that summary judgment was erroneously granted in favor of SPJ because there were no cognizable grounds for reformation of the ground lease. Summary judgment dismissing SPJ's complaint without prejudice was the correct outcome of the competing cross-motions. Additionally, the dismissal of Realty's counterclaim for back taxes was a mistaken exercise of summary judgment jurisprudence. That aspect of the parties' dispute remains ripe for disposition through renewed motion practice or trial and a remand is required to illuminate the facts and legal principles that will undergird the definitive resolution of the dispute. We express no opinion as to what that ultimate outcome should be.

Reversed and remanded for further proceedings in conformity with this opinion. We do not retain jurisdiction.

1 We use the phrase "real property taxes" interchangeably with the phrase "real estate taxes."

2 Under a triple net lease, "a commercial tenant is responsible for 'maintaining the premises and for paying all utilities, taxes and other charges associated with the property.'" Geringer v. Hartz Mountain Dev. Corp., 388 N.J. Super. 392, 400 n.2 (App. Div. 2006) (quoting N.J. Indus. Props. v. Y.C. & V.L., Inc., 100 N.J. 432, 434 (1985)).

3 See Real Property Appraisal Manual for New Jersey Assessors 13 (Vol. I) (3d ed. 2002); N.J.A.C. 18:12-4.8(a)(7).

4 Herskowitz, Rosen, Walton & Glasgow (HRWG) was the appraisal firm hired by Deptford Township "to analyze market data to arrive at an allocation of the existing improvement assessment between the Fairfield Inn and the Pizzeria Uno portions of the property."

 

5 See N.J.S.A. 54:4-23 ("All real property shall be assessed to the person owning the same on October 1 in each year.").

6 SPJ's letters of November 10, 2006, and October 18, 2007, may have given Realty notice of SPJ's intention to exercise its option to seek a separate assessment, but both letters failed to mention what SPJ already knew or should have known, that is, a subdivision application was a legal prerequisite to a separate assessment, and Realty was a necessary party in that submission.

 

7 We need not address whether a refusal to consent to a subdivision application by Realty or its placing obstacles in the way of the required land use application would be a breach of the implied covenant of good faith and fair dealing entitling SPJ to compensatory damages. We also need not reach the question of which party is obliged under the ground lease to shoulder the considerable costs of such an application.

8 At the conclusion of oral argument on February 8, 2010, the motion judge referred to this letter as being dated December 20, 2007. We believe the correct date is as orally stated by the judge, and not as contained in her written opinion. Also, the motion judge explained, "I am satisfied that the issue . . . for my purposes is resolved today and that the landlord is bound by its language that it would honor the prior method of calculation until such time as the separate assessment issue was resolved."

 

9 Upon reflection, the Law Division may conclude that there are, indeed, genuine issues of material fact in dispute that require a plenary trial. We leave it to the motion judge and the record presented at the time to decide if Realty's counterclaim is appropriate for disposition through summary judgment.