Court Opinion

ID: 4212082
Source: CourtListenerOpinion
Date Created: 2017-10-17 13:10:07.966722+00
Date Added: 2024-06-11T14:41:05.165268
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                      APPROVAL OF THE APPELLATE DIVISION
     This opinion shall not "constitute precedent or be binding upon any court."
      Although it is posted on the internet, this opinion is binding only on the
        parties in the case and its use in other cases is limited. R. 1:36-3.

                                       SUPERIOR COURT OF NEW JERSEY
                                       APPELLATE DIVISION
                                       DOCKET NO. A-1734-15T1

PARK CREST CLEANERS, LLC d/b/a
A PLUS CLEANERS AND ALTERATIONS,
SALVATORE TAMBURO and DANIELA
TAMBURO,

              Plaintiffs—Respondents,

v.

A PLUS CLEANERS AND
ALTERATIONS CORP, A PLUS
CLEANERS, LLC, LEE STEPHEN CHIN,
ELSA CHIN and SABRINA "ELSA"
CHIN,

          Defendants.
_________________________________

CHERRY PLAZA, LLC,

          Appellant.
______________________________________________________

              Submitted May 2, 2017 – Decided October 17, 2017

              Before Judges Messano, Suter, and Grall.

              On appeal from the Superior Court of New
              Jersey, Chancery Division, Camden County,
              Docket No. C-0078-14.

              McDowell Posternock Apell & Detrick, PC,
              attorneys for appellant Cherry Plaza, LLC
              (Daniel Posternock and Diana R. Sever, on
              the briefs).
          Genova Burns LLC, attorneys for respondents
          Park Crest Cleaners, LLC, d/b/a A Plus
          Cleaners and Alterations, Salvatore Tamburo
          and Daniela Tamburo (James Bucci, of counsel
          and on the brief; Nicholas J. Repici and
          Michael C. McQueeny, on the brief).

PER CURIAM

      This appeal is from a final judgment in an action on a

contract to purchase an ongoing dry-cleaning business and its

equipment for $500,000.1   Plaintiffs, Park Crest Cleaners, LLC

and its owners Daniela and Salvatore Tamburo, purchased the

business from defendants, A Plus Cleaners and Alterations Corp.,

LLC (A-Plus), Lee Stephen Chin (Chin), and his wife and

daughter, Sabrina and Elsa Chin.     The non-party, Cherry Plaza,

LLC (Cherry), owns the premises and leased it to defendants

prior to the sale and to plaintiffs after the sale.    Although

Cherry was not a party to the action on the contract of sale,

the final judgment includes provisions that affect Cherry's

rights under its lease with plaintiffs.

      Cherry's cross-appeal and plaintiffs' opposition are before

us.   Defendants' appeal was dismissed for failure to prosecute.

1
  The contract includes two agreements: an asset purchase
agreement, which addresses the sale of the business and its
equipment; and an agreement on a note held by the seller that
secures a loan for half of the purchase price.

                                 2                          A-1734-15T1
We reverse on Cherry's appeal and remand for amendment of the

final judgment.

                                I.

     A few months after purchasing the business, plaintiffs sued

defendants on the contract.   They alleged defendants

fraudulently misrepresented and conspired to misrepresent the

value of its sales,2 breached the contract and covenant of good

faith and fair dealing and were unjustly enriched.   Plaintiffs

sought monetary damages and rescission of the contract, and

demanded a jury trial on "all issues so triable."

     The jurors found that plaintiffs proved fraud, conspiracy

to defraud, breach of the contract and the implied covenant and

grounds to pierce the corporate veil.   The jurors awarded

plaintiffs $682,000 for compensatory and $301,000 for punitive

damages.

     Cherry was drawn into the dispute at the conclusion of the

parties' post-trial, pre-judgment motions.   The trial court

2
  In the contract, defendants warranted and represented that the
"financial information of the Business for the past year
provided by the Selling Parties to the Purchaser are true and
correct in all material respects"; and "[n]o representation or
warranty . . . made in any certificate or memorandum furnished
or to be furnished by any of the Selling Parties, or on the
Seller's behalf, contains, or will contain any willful and
knowing untrue statement of material fact or omits [sic] to
state any material fact necessary to make any statement herein
not misleading."

                                3                            A-1734-15T1
denied defendants' motions for judgment notwithstanding the

verdict and a new trial.   On plaintiffs' motion for equitable

relief on the contract of sale, the court rescinded, nullified

and voided the contract and note and restored defendants as

owners of the business and its equipment.

     On its motion for equitable relief, plaintiffs also sought

rescission or reformation of Cherry's lease.     Although that

relief implicated Cherry's as well as plaintiffs' and

defendants' rights, plaintiffs did not join Cherry as a party or

give Cherry notice of the motion.3

     As to Cherry, plaintiffs asked the court to substitute

defendants for plaintiffs as the tenants and guarantors or

reinstate defendants' prior lease with Cherry.     In their

supporting brief, plaintiffs submitted that $344,176.45 of their

compensatory damages award was for their future obligations to

Cherry under the lease and supported a remittitur in that

amount.

3
  There were two pre-trial motions on Cherry's participation.
The first was filed by defendants, who sought to dismiss the
complaint for failure to include an indispensable party, Cherry;
plaintiffs opposed the dismissal and, in the alternative to
dismissal, sought leave to amend to include Cherry. The second
was filed by plaintiffs, who sought leave to amend to include
Cherry; defendants opposed that motion. The court denied both
motions on the ground that plaintiffs did not have an accrued
claim for relief against Cherry at that point. But Cherry was
not joined after the jurors found fraud.

                                4                             A-1734-15T1
    The pertinent circumstances and terms of Cherry's lease

with plaintiffs are as follows.       Plaintiffs signed the lease

with Cherry four days prior to signing the business contract,

which was done on June 14, 2014.      The lease was to commence on

"the earlier of the Business Sale date or July 30, 2014."

    As to use of the premises, the lease permits use "as a

clothing dry cleaner store with a full on-site dry cleaning

plant, and no other use whatsoever without the express written

consent of the Landlord."   Commencement of the lease is linked

to sale of the business: "If the Business Sale does not close by

July 30, 2014 the Lease shall become void."      But, the lease does

not address termination for any reason related to the sale or

the success of the business.   To the contrary, it states: "The

sole relationship between the parties [Cherry and the individual

plaintiffs] created by the agreement is that of Landlord and

Tenant.   Nothing contained in the lease shall be deemed, held,

or construed as creating a joint venture or partnership between

the parties."

    None of the defendants were tenants on the lease.       But Chin

and both Tamburos gave Cherry personal guarantees of payment and

"compliance with and performance of all terms and covenants of

the lease."

                                  5                           A-1734-15T1
     On plaintiffs' post-trial motion seeking revision of the

lease, the court reserved decision pending notice and giving

Cherry an opportunity to be heard.   To that end, the court

authorized plaintiffs to file an order to show cause (OTSC)

"related to the issue of whether the commercial lease should be

rescinded and/or reformed in light of the jury's finding that

defendants committed fraud and/or conspiracy to commit fraud

related to the above-referenced sales contracts, and each of the

parties remaining rights and obligations . . . under the

commercial lease stemming therefrom."4 (initial capitalization

omitted for ease of exposition).

     The court signed the OTSC on October 2, 2015.   It indicates

that plaintiffs seek

          relief by way of summary proceeding at the
          return date set forth . . . pursuant to Rule
          4:67 and as authorized by the [c]ourt, based
          upon the facts set forth in the verified
          complaint and the conclusions of law entered
          by the court following a trial and the issues
          addressed therein, and for good cause shown.
          [(emphasis added)]

     The complaint referenced was not informative, because it

does not name or state a claim involving Cherry.   And, the trial

court's findings and conclusions were stated on the record and

4
  The order quoted was not entered until October 23, 2015, but
plaintiffs indicate argument was heard on September 23, 2015.

                                6                          A-1734-15T1
the transcript was not provided to Cherry.    The OTSC required

plaintiffs to serve Cherry with nothing other than the complaint

and the brief and the certifications they submitted to secure

the OTSC.

    The OTSC compels Cherry to appear on the return date and

show cause why the court should not preliminarily enjoin and

restrain enforcement of the lease; rescind "and/or" reform the

lease; discharge plaintiffs' obligations "and/or" liabilities

under the lease; and grant other relief the court deems

equitable and just.

    Cherry's attorney submitted a written response addressing

preliminary restraints in light of Crowe v. De Gioia, 90 N.J.

126 (1982).   When the hearing on the return date commenced, the

court asked plaintiffs' attorney to address irreparable harm

pertinent to preliminary relief.    Id. at 134.   In response to

that question, plaintiffs' counsel explained that plaintiffs

were "really seeking . . . to go straightforward to final

relief" and moot the question of irreparable harm.    On that

response, the court identified the issue as a declaration of

rights under the lease that would include the right to have the

lease rescinded or reformed.

    Cherry's attorney objected to the court considering the

merits that day and referred to a certification from the manager

                                7                           A-1734-15T1
of Cherry's shopping center, which included the drycleaners.

According to the manager, he had information and believed that

plaintiffs violated the lease by using chemicals prohibited by

environmental laws and failing to provide proof of insurance and

permit annual inspections.    The attorney also pointed to the

unfairness of leaving Cherry to collect rent from tenants and

guarantors who were subject to a sizeable judgment for damages.

The court assured the attorney those matters could be raised by

motion for reconsideration.

     Unpersuaded, the court included provisions in the final

judgment that affected Cherry's rights under the lease, as well

as the rights of the parties to the contract of sale litigated

between them in the contract action.       As a remedy for

defendants' fraud, the court removed the Tamburos as tenants and

guarantors, and rescinded the obligations and liabilities "that

may exist or arise" on or after the date the court voided and

nullified the contract of sale.5       Under the lease as revised by

the court, Chin retained his status as a guarantor and Sabrina

and Elsa Chin were substituted as additional guarantors in lieu

of the Tamburos.   The court further reformed the lease to add

all three Chins as tenants.   In recognition of the shift of

5
  The rescission of obligations that existed can be understood as
absolving them of unsatisfied obligations prior to that date.

                                   8                          A-1734-15T1
responsibility and obligations under the lease, the court

remitted the compensatory damages awarded by $346,223.55.

    In short, plaintiffs were given a remedy that absolved them

of any responsibility to Cherry in lieu of the damages the jury

awarded in a proceeding that did not include Cherry.

                               II.

    Plaintiffs urge us to dismiss Cherry's appeal for non-

compliance with the rules of appellate procedure.   Their

arguments do not require extensive discussion.

    There is no basis for dismissal of Cherry's appeal as

untimely filed.   The final judgment was entered on November 9,

2015, and defendants filed a timely appeal on December 24, 2015,

as required by Rule 2:4-1.   Cherry filed its cross-appeal on

January 5, 2016, within the fifteen days of the filing of the

notice of appeal, as permitted by Rule 2:4-2(a), and pursuant to

that Rule, a respondent "may appeal against a non-appealing

party" by serving and filing a notice of appeal and case

information statement within the time fixed for cross appeals.

This court has no basis for dismissing the appeal for untimely

filing of the notice pursuant to Rule 2:4-1, because it was

timely filed pursuant to Rule 2:4-2(a).   See, e.g., Semexant v.

MIL Ltd., 252 N.J. Super. 318 (App. Div. 1991) (dismissing a

cross-appeal filed in similar circumstances because it was not

                                9                           A-1734-15T1
filed within the time permitted by Rule 2:4-2(a)).     In our view,

the fact that the parties did not identify Cherry as a

respondent or Cherry labelled its appeal as a cross-appeal is of

no moment.

     Plaintiffs also contend we should dismiss the appeal

because Cherry did not file transcripts of all proceedings

conducted in the trial court on the contract action.     Setting

aside plaintiffs' decision to forego a motion to compel and hold

this objection for its brief on the merits, Cherry has provided

the transcript needed to resolve this appeal, which is the only

proceeding conducted on notice to Cherry.6

     For those reasons, we decline to dismiss the appeal for

non-compliance with the Rules.

                                 III.

     Turning to the merits, Cherry contends the court erred in

reforming the lease to remove the Tamburos as tenants and

guarantors, and rescind, void and nullify plaintiffs'

obligations and liabilities under the lease.    Cherry claims

reversible error on several grounds.    We conclude reversal is

6
  Although we do not have a record that allows us to confirm the
validity of plaintiffs' segregation of damages representing
their future obligations on the lease, the trial court accepted
plaintiffs' account, plaintiffs are bound by it and it is not
disputed.

                                 10                         A-1734-15T1
required because Rule 4:67, properly applied, did not permit a

grant of the relief plaintiffs sought in a summary proceeding

conducted on the return date of this OTSC.

    As the Supreme Court recently explained:

               Rule 4:67-1 is designed "to accomplish
          the salutary purpose of swiftly and
          effectively disposing of matters which lend
          themselves to summary treatment while at the
          same time giving the defendant an
          opportunity to be heard at the time
          plaintiff makes his application on the
          question of whether or not summary
          disposition is appropriate." Pressler &
          Verniero, Current N.J. Court Rules, comment
          1 on R. 4:67-1 (2015).

          [Grabowsky v. Township of Montclair, 221
          N.J. 536, 549-51 (2015).]

    Summary disposition is authorized in only two situations.

Grabowsky, supra, 221 N.J. at 549-50; R. 4:67-1(a)-(b).     This

situation, an ex parte OTSC filed against a non-party that was

not accompanied by a complaint, is not covered by Rule 4:67-

1(b).   See also R. 4:67-3, -4(b), 4(b), -5 (all contemplating

summary proceedings involving parties).     And, there is no court

rule or statute expressly authorizing summary disposition of a

claim for reformations or rescission of a contract on a lease.

R. 4:67-1(a).

    There were other problems.      This was not a matter "likely"

to "be completely disposed of in a summary manner."     R. 4:676-

                               11                           A-1734-15T1
1(b).    If the complexity of this matter precluding summary

resolution was not clear earlier, it certainly was clear when

Cherry's counsel raised the question of violations of the lease

that had not been addressed at trial.    R. 4:67-1(b).   The

court's summary dismissal of those concerns as matters that

could be addressed on a motion for reconsideration suggest its

recognition of the fact the matter could not be "completely

disposed of" in a summary proceeding.

    Moreover, "[s]ummary disposition is permitted by agreement

of the court and the parties, evinced by 'a clear and

unambiguous statement from the judge and the unequivocal consent

of the parties to a final resolution . . . .'"    Grabowsky,

supra, 221 N.J. at 550 (quoting Waste Mgmt. of N.J., Inc. v.

Union Cnty. Utils. Auth., 399 N.J. Super. 508, 518-19 (App. Div.

2008)); see R. 4:67-5.    Here, Cherry's counsel objected at the

outset of the proceeding and with the affidavit of Cherry's

manager indicating violations of the lease, it was not

"palpably" shown that there was "no genuine issue of material

fact."   R. 4:67-5.   Certainly, the potential for plaintiffs

acquiring a shield from liability for lease-violations existing

on the return date was a factual matter pertinent to the equity

of reforming the lease and rescinding plaintiffs' obligations.

                                12                             A-1734-15T1
    Simply put, the trial "court's summary disposition" in

plaintiffs' favor denied non-party Cherry a fair opportunity to

be heard on and defend against the relief requested.     See

Grabowsky, supra, 221 N.J. at 551 (reversing because the trial

court's sua sponte summary disposition contrary to Rule 4:67 in

defendant's favor deprived plaintiff of a fair opportunity to

present his claims).    Accordingly, we reverse and remand with

direction to amend the final judgment by reinstating the damages

and plaintiffs' lease and vacating provisions of the judgment

reforming that lease.

    There are several issues we have not addressed and are not

remanding for reconsideration.    Because plaintiffs have not

filed a complaint against Cherry, or against defendants,

pleading a claim for revision of the Cherry's lease, there is no

pending matter to remand.    We have not addressed the

availability of reformation or rescission of the lease, because

it was not necessary to resolve this appeal.    We have not

addressed Cherry's argument based on the entire controversy

doctrine, because Cherry did not raise that issue in the trial

court and it does not implicate the public interest or, at this

point, the jurisdiction to adjudicate any matter in the trial

court.    Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234

(1973).   In the event Cherry, plaintiffs or defendants elect to

                                 13                            A-1734-15T1
proceed with an action addressing the lease in light of the fact

that plaintiffs' no longer own the drycleaner business, see,

e.g., Restatement (Second) of Contracts §§ 153, 164(2), 265, 266

(1981), Cherry may raise the entire controversy doctrine at that

time.

    Reversed and remanded for amendment of the judgment in

conformity with this opinion.

                                14                       A-1734-15T1