Opinion
DOCKET NO. A-1534-14T2
02-02-2016
LOCKHERN ASSOCIATES, LLC, Plaintiff-Respondent, v. NEW YORK MARTS B.H., INC., Defendant-Appellant.
Fong Joe Hou, attorney for appellant (Michael A. Liem, on the brief). Mandelbaum Salsburg P.C., attorneys for respondent (Cheryl H. Burstein and Mara P. Codey, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Rothstadt and Currier. On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Union County, Docket No. LT-000579-14. Fong Joe Hou, attorney for appellant (Michael A. Liem, on the brief). Mandelbaum Salsburg P.C., attorneys for respondent (Cheryl H. Burstein and Mara P. Codey, on the brief). PER CURIAM
After defendant New York Marts (Marts) failed to make payments on a leased space, the landlord, plaintiff Lockhern Associates, filed for possession of the premises. When Marts failed to appear for trial, a judgment of possession was entered. Defendant's motion to vacate the judgment of possession was denied. Marts sought reconsideration, which the court denied by order dated November 3, 2014, and now appeals from that order. After reviewing the record in light of the contentions advanced on appeal, we affirm.
In November 2012, the parties entered into a lease agreement for space in which Marts intended to operate a supermarket. The agreement contained a six-month grace period of occupancy without rent payments unless the store opened sooner. The failure to pay rent within five days after its due date or the failure to open for business were listed as material breaches of the lease.
On April 23, 2013, Lockhern delivered possession of the property. A subsequent letter confirmed that date to be the commencement date of the lease. Rent payments were to begin on October 23, 2013. When Marts neither made a rent payment nor opened for business, Lockhern advised in writing that it was in default. In January 2014, counsel for Marts wrote Lockhern stating that it would not be paying any rent until the store opened for business. In reply, Lockhern reiterated that Marts was in default of the lease, and shortly thereafter, filed a complaint for possession.
The day before the scheduled trial date, counsel for Marts requested and received consent for an adjournment from Lockhern and the court rescheduled the trial. Marts retained new counsel who appeared at the trial call requesting an additional adjournment, which was again granted by the court. At the court's direction the parties also agreed to attend a settlement conference.
On the morning of the settlement meeting, a representative of Marts handed the keys to the premises to Lockhern's property manager. At the meeting later that day, both the owner of Marts and its counsel were in attendance, and confirmed that the keys had been returned, thus surrendering the property. Marts later memorialized the surrender of the property by letter, requesting the return of its security deposit and a dismissal of the court action. Lockhern advised it did not intend to dismiss the case and Marts responded through counsel that they would not be appearing at trial. On March 5, 2014, the court entered default and a judgment for possession.
In April 2014, through new counsel, Marts presented an order to show cause seeking to vacate the order of default. After argument on the application and a plenary hearing, Judge Alan G. Lesnewich rendered a thorough oral decision on August 22, in which he found no exceptional circumstances nor excusable neglect to warrant the vacating of default. In the motion for reconsideration, Marts raised for the first time, the issue of lack of subject matter jurisdiction and that the entry of default judgment was in violation of Rule 6:6-3(b).
Marts argues on appeal that the special civil part lacked both subject matter and personal jurisdiction over this claim. The argument as to subject matter jurisdiction is based on the premise that because the lease contained an option to purchase, the relationship between the parties was purchaser-seller and not landlord-tenant, and therefore it should have been adjudicated in the law division. We reject this argument.
It is well-established that our review of a judge's conclusions of law is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.").
We reject the argument that special civil part did not have jurisdiction to enter a judgment for possession. The parties' agreement was not a contract for the sale of a property. A contract to sell and purchase real estate differs from an option to purchase in that "the former creates a mutual obligation on the one party to sell and on the other party to purchase," while an option to purchase "merely gives the right to purchase, within a limited time, without imposing any obligation to purchase." Sooy v. Henkelman, 104 N.J.L. 540, 542 (E & A 1928) (citation omitted). Jurisdiction does not exist for the entry of a judgment of possession if the dominant relationship between the parties is not of landlord-tenant. Essex Prop. Servs., Inc. v. Wood, 246 N.J. Super. 487, 488 (Law Div. 1991); see also State v. Bakers Basin Realty Co. , 138 N.J. Super. 33, 39 (App. Div. 1975), certif. denied, 70 N.J. 511 (1976). The Bakers Basin Realty court held that
an instrument in writing transferring an interest in real estate shall be construed as an absolute contract for sale and purchase or only an option to purchase depends not on any particular words or phrases, but on the intention of the parties to be derived from the instrument itself by a consideration of its parts, and when that is doubtful, from the circumstances attending it.
[Bakers Basin Realty Co., supra, 138 N.J. Super. at 39.]
Applying these principles, our conclusion is supported by the facts found by Judge Lesnewich. The option to purchase was not exercisable until the fifth year of the lease and only then if Marts was not in default. The first thirty-three pages of this thirty-six page lease address the landlord-tenant relationship; the option to purchase is contained on page thirty-four.
As Judge Lesnewich noted:
[T]he record is replete with facts that make it clear that the dominant relationship between the plaintiff and defendant in this matter was one grounded in that of a commercial landlord and a commercial tenant. . . .
. . . [T]here was not a certification before the Court or anything . . . elicited during the June 25, 2014 plenary hearing to support the argument that the objective of the relationship between the parties was to accomplish a sale and purchase of the leased property. Indeed, apart from a single provision at the end of the 36-page lease, there is nothing in the record that would justify this Court to permit the defendant to transmogrify the relationship between the parties . . . into one that [is] predominantly a seller and purchaser. . . .
. . . [I]t's clear that the primary function of the lease agreement was to create a landlord-tenant relationship.
Further, through counsel, the parties negotiated this lease after three months of correspondence and reviewing seven drafts of the document. The document is entitled "Lease Agreement," Marts is referred throughout as "The Tenant," and rent provisions and a term of years are included. The inclusion of an option to purchase after five years does not transform the parties' relationship into one of seller and purchaser. This document is a commercial lease.
As to the lack of personal jurisdiction, we do not find the argument has sufficient merit to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E). Marts was served with the complaint in this matter and was represented by counsel at every stage of the proceedings including the request for a trial adjournment in court and the decision to not appear for trial and instead accept a default and entry of judgment of possession.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION