Opinion
DOCKET NO. A-2568-11T2
02-21-2013
PEGILL, INC., a New Jersey Corporation, and TOJO REALTY CO., a General Partnership of the State of New Jersey, Plaintiffs-Respondents/ Cross-Appellants, v. 4 PALMS, INC., a New Jersey Corporation, 4 PALMS, LLC, a New Jersey Limited Liability Company and JOHN CHIODI, Individually, Defendants-Appellants/ Cross-Respondents.
David G. White argued the cause for appellants/cross-respondents (Pashman Stein, attorneys; Mr. White, of counsel and on the briefs; Michael J. Zoller and Adam B. Schwartz, on the briefs). Silvana D. Raso argued the cause for respondents/cross-appellants (Schepisi & McLaughlin, P.A., attorneys; Ms. Raso and Glenn M. Finkel, on the briefs).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner, Harris and Hoffman.
On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-354-10.
David G. White argued the cause for appellants/cross-respondents (Pashman Stein, attorneys; Mr. White, of counsel and on the briefs; Michael J. Zoller and Adam B. Schwartz, on the briefs).
Silvana D. Raso argued the cause for respondents/cross-appellants (Schepisi & McLaughlin, P.A., attorneys; Ms. Raso and Glenn M. Finkel, on the briefs). PER CURIAM
This appeal concerns a dispute between a seller/landlord and a buyer/tenant, over a restaurant business in Hillsdale. Defendants 4 Palms, Inc., 4 Palms L.L.C., and John Chiodi (collectively, defendants) appeal from a December 23, 2011 order denying defendants' application to specifically enforce a purchase option and for other relief. Plaintiffs Pegill, Inc. and Tojo Realty Co. cross-appeal from the December 23 order insofar as the court determined that defendants did not breach the lease or default under the terms of a promissory note, and that plaintiffs were not entitled to retake the property or the liquor license.
The case was tried without a jury, before Judge Harry G. Carroll. Following the bench trial, Judge Carroll issued a comprehensive, eighteen-page written opinion on December 23, 2011. Having reviewed the record, we conclude that Judge Carroll's factual findings are supported by sufficient credible evidence, and in light of those findings, his resolution of the litigation was both legally correct and entirely equitable. We find no merit in either side's challenges to Judge Carroll's decision, and we affirm substantially for the reasons stated in his cogent opinion.
I
The facts are described at length in Judge Carroll's opinion and need not be repeated in detail here. On January 9, 2006, defendants entered into a long-term lease on a commercial property owned by Tojo. On the same date, defendants purchased from Pegill a restaurant/bar that was located on the property.Pegill held a note and an assignment of the liquor license, as collateral for a loan used to fund a large portion of the purchase price. The lease had a purchase option, under which defendants could buy the property for $2.75 million, provided the lease had not been canceled, they gave plaintiffs timely notice, and they tendered both a signed contract and a $275,000 deposit. The lease required defendants to exercise the option by no later than the beginning of the sixtieth month of the lease.
Both of the plaintiff entities are controlled by John Schepisi. The defendant corporations are controlled by John Chiodi. 4 Palms, Inc. holds the liquor license. 4 Palms, L.L.C. holds the lease from Tojo, runs the restaurant, and is obligated under the promissory note to Pegill. We will refer to the parties collectively as "plaintiffs" and "defendants," but in essence, this case is a dispute between Schepisi and Chiodi.
At some point, the parties had a falling out. According to plaintiffs, defendants fell behind on some of the required payments and failed to maintain the building's slate roof, leading plaintiffs to terminate the lease. According to defendants, they were preparing to exercise the option and brought to plaintiffs' attention certain environmental problems that might require remediation prior to a closing. Defendants contend that, as a pretext to defeat their option rights, plaintiffs began dredging up various relatively minor infractions that defendants committed in the past, and sought to terminate the lease.
On December 6, 2010, defendants sent plaintiffs a letter invoking the purchase option. But they failed to tender the $275,000 deposit required by the express terms of the option. They also failed to tender a signed contract, contending that a contract was supposed to have been attached to the lease but was not.
In a detailed written opinion, Judge Carroll rejected plaintiffs' claims that defendants defaulted under the lease and the note. He found that any potential breaches of the lease or the note were either timely cured or were de minimis, and did not warrant forfeiture. He also found that defendants overpaid the real estate taxes on the property in an amount greater than any of the late fees and interest plaintiffs claimed defendants owed for making late payments. The judge therefore declined to declare a forfeiture of the lease or the purchase of the business.
The judge also rejected defendants' claim that they effectively exercised the option to purchase the premises, finding that they wrongfully failed to tender the $275,000 deposit required under the terms of the option. He found that the deposit was a material element of the option and defendants were obligated to strictly comply with the option provision in order to exercise their rights under it. Distinguishing Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Center Associates, 182 N.J. 210 (2005), Judge Carroll rejected defendants' claim that payment would have been futile, noting that defendants could have offered to escrow the funds or moved for permission to pay the money into court.
The judge considered the fact that his decision would not result in defendants losing the restaurant business, because the lease continued in force for another nineteen years, with an option to extend it for another twenty years. The lease also gave defendants the right of first refusal if the landlord decided to sell. Consequently, defendants still had ample protection against a forfeiture of their investment in the business.
Finally, the judge found neither side had presented sufficient evidence on defendants' claims relating to two oil tanks on the property. He concluded that, because he was not requiring plaintiffs to sell defendants the property, it was premature to address environmental remediation that might be required prior to a closing. He dismissed defendants' environmental claims without prejudice.
II
On this appeal, we are bound by the judge's factual findings so long as they are supported by sufficient credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). "Trial court findings are ordinarily not disturbed unless 'they are so wholly unsupportable as to result in a denial of justice.'" Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 475 (1988)(quoting Rova Farms, supra, 65 N.J. at 483-84).
In reviewing the trial judge's findings, we owe particular deference to his evaluation of witness credibility. State v. Locurto, 157 N.J. 463, 474 (1999). Having heard the witnesses testify firsthand, the trial judge is in the best position to develop a feel for what happened in this case, including an evaluation of the parties' good faith, or lack thereof. See Rova Farms, supra, 65 N.J. at 483-84; Trusky v. Ford Motor Co., 19 N.J. Super. 100, 104 (App. Div. 1952).
We review the judge's legal interpretations de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). We apply an abuse of discretion standard to the judge's determination to grant or withhold equitable relief, see Goodyear Tire and Rubber Co. v. Kin Properties, Inc., 276 N.J. Super. 96, 106 (App. Div.), certif. denied, 139 N.J. 290 (1994), so long as the decision is consistent with applicable legal principles. See Dunkin' Donuts of Am., Inc. v. Middletown Donut Corp., 100 N.J. 166, 183 (1985).
Applying those principles to the record on appeal, we find sufficient support for Judge Carroll's findings that defendants seasonably cured any defaults under the lease and note, and that any minor errors in payment were so de minimis as not to warrant a forfeiture. We also find no basis to disturb his conclusion that defendants did not properly exercise the purchase option, because they failed to make the $275,000 deposit.
Notably, defendants' transactional attorney testified that in an ordinary, non-litigated purchase situation, the deposit money would be escrowed pending the closing. Even if defendants did not have a completed contract to sign and submit along with the deposit, they certainly could have placed the deposit in escrow with their own attorney. Alternatively, they could have filed a motion for leave to deposit the funds into court. Instead, using the lack of a finalized contract as a pretext, they attempted to tie up the property without putting any of their funds at risk.
Before the lease was signed in 2006, plaintiffs' attorney e-mailed defendant's counsel a draft purchase contract along with the lease. Although the parties never finalized that contract, its terms called for the option deposit to be escrowed pending the closing. Defense counsel clearly had a copy of the draft contract, despite his later request to plaintiffs' attorney for a copy of the document. Her failure to comply with that request was inexplicable, and the overheated rhetoric in both sides' correspondence was regrettable. However, we are no more impressed than was Judge Carroll with defendants' insistence that they could not escrow the $275,000 because they did not have a finalized contract.
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Although Stamato v. Agamie, 24 N.J. 309 (1957), concerned a purchase contract rather than an option, its language aptly describes defendants' conduct here: "Manifestly, he did not perform the agreement he would now enforce. Rather he sought to play the game cagily, without a penny on the line." Id. at 317. We find no abuse of discretion in the trial court's equitable decision declining to enforce the option.
The parties' appellate arguments do not warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION