Court Opinion

ID: 4427828
Source: CourtListenerOpinion
Date Created: 2019-08-20 18:56:27.046716+00
Date Added: 2024-06-11T14:50:47.347067
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NOT FOR PUBLICATION WITHOUT THE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-4967-16T2

CHILDREN OF AMERICA, INC.,
CHILDREN OF AMERICA
(PARSIPPANY), LLC and
VISITEL ENTERPRISES, CORP.,

          Plaintiffs-Appellants/
          Cross-Respondents,

v.

PAVILION PROPERTIES, LLC and
MICHAEL PUSCHAK, Individually,

          Defendants-Respondents/
          Cross-Appellants,

and

DOODLE BUGS! CHILDREN'S
CENTER, DB 70 OLD
BLOOMFIELD, LLC, and
ANTHONY INSINNA, individually,

     Defendants.
________________________________

                    Argued October 18, 2018 – Decided August 16, 2019

                    Before Judges Simonelli, O'Connor and DeAlmeida.
            On appeal from the Superior Court of New Jersey, Law
            Division, Morris County, Docket No. L-1056-16, and
            Chancery Division, Docket No. C-000100-15.

            Joseph V. Meyers argued the cause for appellants/
            cross-respondents.

            Robyne D. LaGrotta argued the cause for respondents/
            cross-appellants (LaGrotta Law, LLC, attorneys;
            Robyne D. LaGrotta, of counsel and on the brief).

PER CURIAM

      Plaintiffs Children of America, Inc. (COA), Children of America

(Parsippany), LLC (COA Parsippany), and Visitel Enterprises, Corp. (Visitel)

(collectively COA Parsippany) appeal from the May 30, 2017 order of the Law

Division entered after trial of this commercial lease dispute.     Defendants

Pavilion Properties, LLC (Pavilion) and Michael Puschak cross-appeal from a

September 30, 2015 order of the Chancery Division setting the lease

commencement date. We affirm the May 30, 2017 order in part, reverse the

September 30, 2015 order, and remand for further proceedings.

                                      I.

      The following facts are derived from the record. Pavilion is the owner of

property in Morris County (the subject property) on which the outside shell of

an office building was constructed in 2005. Puschak is a member of Pavilion.

                                                                       A-4967-16T2
                                      2
      COA operates child care centers. Visitel, which shares principals with

COA, is a Florida real estate broker. At the times relevant to this appeal, Visitel

did not have a New Jersey real estate broker's license. In May 2007, Visitel

identified the subject property as a potential site for a COA child care center.

Visitel alleged that Pavilion agreed to pay it a commission for brokerage

services.

       COA Parsippany, a wholly-owned subsidiary of COA, was formed for the

purpose of leasing the subject property and operating a child care center on the

parcel. On July 29, 2007, COA Parsippany and Pavilion entered into a fifteen-

year lease for the subject property. Pavilion agreed to provide COA Parsippany

with a "turnkey" facility built to meet architectural plans and specifications

supplied by COA Parsippany for the operation of a child care center. The plans

included a playground to be constructed by Pavilion.

      According to the lease, its commencement date

            shall not be more than (i) thirty (30) days after the
            unconditional Certificate of Occupancy [(CO)]
            (including the completion of the playground per the
            plans and specifications) is issued or (ii) all
            governmental approval[s] have been received by
            Tenant to operate a child care facility.

                                                                           A-4967-16T2
                                        3
According to the lease, "[i]it is understood that Landlord will get the Certificate

of Occupancy and that Tenant will obtain all state and local approvals to operate

a day care center by the appropriate governmental authority."

      The lease provides Pavilion is obligated to obtain the CO within 270 days

of issuance of a building permit. After the 270th day, Pavilion incurs a penalty

of $500 per day for every day until a CO, temporary or permanent, is obtained.

However,

            [t]his period of 270 days shall be extended when delays
            are out of the landlord's control. Items of circumstances
            deemed out of the Landlord's control include but are not
            limited to weather delays, acts of God, government
            delays, and or actions, availability of specific material,
            changes by tenant, labor disputes, fire, unavoidable
            casualties, unusual delay of delivers [sic] and legal
            actions.

      The rent for the first twelve months of the lease is considerably less than

the annual rent for the second through fifteenth years.           Once the lease

commences, COA Parsippany is responsible for "all ad valorem taxes, real estate

taxes and assessments and other charges which may be levied, assessed or

charged against the real estate and improvements . . . ." Pavilion also agreed to

pay COA Parsippany $70,000 for furniture, fixtures, and equipment (FF&E)

necessary for a child care center. The parties agreed that COA Parsippany

                                                                           A-4967-16T2
                                        4
provided a slight credit through a change order, which reduced the amount due

from Pavilion to $62,290.

      The lease provides that Visitel's commission will be set forth in a separate

agreement between Pavilion and Visitel.           A letter signed by Puschak

acknowledges that Pavilion will pay Visitel $75,144.22 to be paid in twelve

monthly payments of $1,043.69 beginning on the commencement of the lease,

followed by twenty-four monthly payments of $2,609.

      The lease also contained a three-year limited corporate guarantee from

COA. Finally, the lease provides that "[i]f any action or lawsuit is brought to

enforce any of the provisions of the [l]ease, the prevailing party to any such

lawsuit shall be entitled to reimbursement of all reasonable costs and expenses,

including reasonable attorney's fees from the nonprevailing party at pre-trial,

trial, and all appellate levels.”

      Pavilion engaged in a protracted process to gain municipal approval to

construct a child care center on the subject property, including the initiation of

two lawsuits. Ultimately, the township planning board approved the project on

November 2, 2011, more than four years after the lease was signed.

      During the four-year period, the Site Remediation Reform Act (SRRA),

N.J.S.A. 58:10C-1 to -29, became effective. The SRRA provides that a license

                                                                          A-4967-16T2
                                        5
to operate a child care center will not be issued until the applicant obtains a

Response Action Outcome (RAO) letter from the New Jersey Department of

Environmental Protection (DEP) stating that no further action is needed to

remediate contamination on the property where the child care center will be

located.

      COA Parsippany provided Pavilion with the architectural drawings on

March 22, 2012. On June 8, 2012, an Executive Vice President of COA, sent

Pavilion a letter with a list of required vendors for the development of the site.

The letter noted the requirement to have a licensed site remediation professional

perform a preliminary assessment (PA) of contamination on the subject property

for purposes of securing an RAO. On December 19, 2012, Adams, Rehmann &

Heggan Associates, Inc. (ARH) sent Puschak a proposal to perform a PA to

determine whether or not the subject property was contaminated.

      On January 20, 2013, COA Parsippany sent Puschak a letter stating that it

was Pavilion's obligation to obtain an RAO from the DEP, that doing so would

be a lengthy process, and an RAO was a condition to obtain a child care center

license. Puschak objected to Pavilion having to obtain the RAO, arguing it was

COA Parsippany's obligation. However, he ultimately agreed to have Pavilion

obtain the RAO.

                                                                          A-4967-16T2
                                        6
      On February 28, 2013, the township issued a building permit.

Construction commenced immediately. On the same day, ARH sent Puschak a

proposal regarding the State’s soil sampling requirements with respect to

historic fill discovered on the subject property that needed to be addressed to

obtain an RAO. Puschak was unable to hire ARH due to scheduling. On June

13, 2013, Brinkerhoff Environmental Services, Inc. (Brinkerhoff) sent Puschak

a proposal to provide environmental services at the subject property. Puschak

subsequently hired Brinkerhoff to provide those services.

      On August 14, 2014, Brinkerhoff provided Puschak with an estimate for

continued services based upon the findings of the PA report. The letter outlined

several outstanding items that needed to be completed for an RAO to be issued.

      On August 21, 2014, COA Parsippany applied for a license to operate a

child care center with the New Jersey Department of Children and Families

(DCF). The application was made in anticipation of receipt of a CO for the

building.

      On September 19, 2014, the township issued a temporary CO for the

building. This was 298 days past the 270-day penalty provision in the lease.

Despite having received a temporary CO for the building, COA Parsippany was

                                                                        A-4967-16T2
                                       7
unable to occupy the building because it did not have an RAO or a child care

center license. The final CO was issued on November 13, 2014.

      On March 4, 2015, COA filed for bankruptcy. Around that time, COA

Parsippany requested a reduction in rent (although they did not yet have

possession of the subject property). Pavilion denied that request.

      On June 4, 2015, the DEP granted COA Parsippany a soil remedial action

permit to remediate the contamination on the subject property. On June 26,

2015, Brinkerhoff informed Pavilion that it was issuing an RAO for the

remediation of the subject property.

      On July 20, 2015, Puschak signed a lease for the subject property with

Doodle Bugs! Children's Center (Doodle Bugs) as tenant. On July 23, 2015,

Pavilion sent COA a letter terminating the lease between Pavilion and COA

Parsippany. The letter enumerated the following acts, which Pavilion alleged

constituted default by COA Parsippany: (1) failure to pay rent after the lease

commenced following issuance of the CO in November 2014; (2) failure to

comply with the terms, provisions, and covenants of the lease, specifically by

revocation of the lease guarantee by COA's bankruptcy filing; (3) failure to

comply with lease terms by refusing to take occupancy of the subject premises

and alternately demanding a reduction in rent and a diminished lease guarantee;

                                                                       A-4967-16T2
                                       8
and (4) failure to diligently pursue tenant's required governmental approvals and

reimburse Pavilion for the expenses associated with obtaining an RAO.

      On July 23, 2015, COA, COA Parsippany, and Visitel filed a complaint

and order to show cause with restraints in the Chancery Division against

Pavilion and Puschak seeking performance of the lease. They alleged: (1)

breach of contract; (2) anticipatory breach of contract; (3) breach of the covenant

of good faith and fair dealing; (4) lost profits; (5) failure to pay commissions

due to Visitel; and (6) interference with contractual relations.1

      On August 3, 2015, the trial court entered an order granting the restraints.

On August 18, 2015, the court entered an order continuing the August 3, 2015

restraints, and finding that: (1) COA Parsippany did not repudiate the lease,

which remained in full force and effect; (2) COA's bankruptcy filing was not an

event of default under the lease; and (3) the commencement date of the lease

was to be September 1, 2015. On August 27, 2015, COA Parsippany employees

broke a lock box attached to the subject property in order to gain access to the

premises.

1
  The complaint also alleges claims against Doodle Bugs and other defendants
that were later withdrawn, as was the claim for lost profits.
                                                                           A-4967-16T2
                                        9
      Plaintiffs moved for reconsideration of the August 18, 2015 order, arguing

that the provision setting the lease commencement date was erroneous. They

argued that because it was Pavilion's responsibility to obtain the RAO, the lease

could not commence until the RAO was issued.

      On September 30, 2015, the court granted COA Parsippany's motion for

reconsideration. In a written statement of reasons, the court concluded that

because the SRRA was enacted after the lease was executed, the parties could

not have contemplated which party would have the responsibility for obtaining

an RAO. The court concluded that N.J.S.A. 58:10C-2, a provision of the SRRA

defining who is responsible for obtaining an RAO, while broad enough to

include a tenant, did not extend to a future tenant. Thus, the court concluded,

because the parties did not "shift this burden" in the lease, Pavilion and not COA

Parsippany was responsible for obtaining the RAO under the lease. The court

concluded the commencement date of the lease "shall be established to be 30

days after the issuance of plaintiff's child care license or, if earlier, then on the

date that licensed operations begin." A September 30, 2015 order memorialized

the court's decision. The court also directed that possession of the subject

property be given to COA Parsippany immediately.

                                                                             A-4967-16T2
                                        10
      On October 15, 2015, Pavilion filed its answer and counterclaim seeking

damages for: (1) the cost of obtaining the RAO; (2) lost rent and other expenses

including real estate taxes and utilities based on COA's intentional delay in

obtaining a license to operate a child care center; (3) property damages for the

destroyed lock box; (4) additional costs it incurred as a result of COA receiving

kickbacks from the vendors it required Pavilion to use when constructing and

furnishing the building; (5) punitive damages; and (6) attorney's fees.

      On November 20, 2015, after considering Pavilion's motion for

reconsideration of the September 30, 2015 order, the court entered an order: (1)

resetting the commencement date of the lease to December 1, 2015 and directing

COA Parsippany to take possession of the subject property on that date; (2)

ordering COA Parsippany to pay all utilities, insurance, and other expenses

required under the lease from the day it takes possession; and (3) prohibiting

COA Parsippany from taking possession until it has adequate insurance

coverage. The court transferred the remaining issues raised in the complaint and

counterclaim to the Law Division.

      On December 4, 2015, COA Parsippany received approval to operate a

child care center on the subject property. COA Parsippany took possession of

the subject property and, in January 2016, began operation of a child care center.

                                                                          A-4967-16T2
                                       11
Although COA Parsippany paid rent beginning in December 2015, it took the

position that it did not have to pay the local property taxes on the subject

property during the initial twelve months of the lease, because its reduced rent

during that period was a rent concession, triggering a provision of the lease

excusing its obligation to pay local property taxes during concessionary periods.

      On December 19, 2016, Pavilion filed a complaint against COA

Parsippany in the Special Civil Part for possession of the subject property. The

complaint alleged there was no concessionary period in the lease because there

was no period of free rent and, therefore, COA Parsippany was responsible for

local property taxes on the subject property in the amount of $53,883.51.

Pavilion sought an order requiring COA Parsippany to vacate the subject

property. The court transferred the Special Civil Part complaint to the Law

Division for consolidation with the parties' pending claims, conditioned on COA

Parsippany's payment of the outstanding local property taxes.

      The court held a three-day bench trial.       Among other relief, COA

Parsippany sought $62,290 for Pavilion's failure to pay for the FF&E, a

monetary penalty for the 298-day delay in completing construction after the 270-

day contractual period, based on the $500 per day penalty in the contract,

reimbursement for the local property taxes it paid on the subject property during

                                                                         A-4967-16T2
                                      12
the first year of the contract, a $75,144.22 commission for Visitel, and

$87,883.29 in attorney's fees.     Pavilion sought a finding that the lease

commenced in December 2014, thirty days after issuance of the CO, and an

award of $282,917.43 in rent for the period December 2014 to November 30,

2015, unspecified damages for the break in, and attorney's fees.

      The court issued an oral opinion. The court found credible Puschak's

testimony that the delays in completing construction were out of Pavilion's

control, due to weather, resistance to the project from municipal officials, and

other causes. In addition, the court found that COA and COA Parsippany caused

or acquiesced in many delays, likely because of COA's precarious financial

condition.   The court, therefore, concluded that COA Parsippany was not

entitled to any damages for delay of completion of the building.

      The court also found COA Parsippany did not use due diligence to obtain

its license to operate the child care facility, including securing an RAO. The

court concluded that while Pavilion was responsible for the cost of

environmental remediation, COA Parsippany was responsible for ensuring the

RAO was obtained in a timely fashion. The court attributed to COA Parsippany

the obligation to obtain a preliminary assessment of whether environmental

remediation was necessary and to Pavilion the obligation to undertake that

                                                                        A-4967-16T2
                                      13
remediation. The court awarded Pavilion $4200 for the cost of the initial

environmental assessment, and denied its request for costs associated with the

remediation required by that assessment.

      With respect to the commencement date of the lease, the court expressed

its view that the lease commenced thirty days after issuance of the final CO in

November 2014. However, the court noted a different judge had previously

determined at an earlier stage in the proceedings that the lease commenced on

December 1, 2015. The court declined to disturb that ruling.

      The court found COA Parsippany's request for reimbursement of the local

property taxes it paid on the subject property to be "totally unsupported by the

evidence or the agreement between the parties" and "unsustainable by any

credible evidence presented." In addition, the court found no basis for the claim

that Pavilion breached the covenant of good faith and fair dealing in the lease.

To the contrary, the court found several instances of bad faith on the part of

COA Parsippany, including its employees breaking into the subject property.

The court awarded $1500 in punitive damages for the break in. The court found

COA Parsippany's demand for $62,209 for the FF&E to be supported by the

evidence and the unequivocal terms of the lease and awarded that amount.

                                                                         A-4967-16T2
                                      14
      The court rejected Visitel's demand for a commission, finding that Visitel

was not licensed as a real estate broker in New Jersey at the time it solicited the

lease or when the lease was signed. The court also concluded Visitel was not

registered to do business in this State until 2017, ten years after the lease was

executed. The court also noted there was no evidence Puschak was aware that

COA and Visitel shared principals when he agreed to a commission.

      Finally, the court denied the award of attorney's fees to any party. The

court concluded that no party prevailed completely on its claims and, therefore,

an award of attorney's fees was not warranted.

      A May 30, 2017 order memorialized the court's decision. This appeal and

cross-appeal followed. COA Parsippany argues the court erred by not granting

it damages for construction delays, a reimbursement of local property taxes it

paid, and attorney's fees.    Visitel argues the court erred in denying it a

commission. Pavilion cross-appeals the September 30, 2015 order to the extent

it set a lease commencement date of December 1, 2015.

                                        II.

      Our scope of review of the judge's findings in this nonjury trial is limited.

We must defer to the judge's factual determinations, so long as they are

supported by substantial credible evidence in the record. Rova Farms Resort,

                                                                           A-4967-16T2
                                       15
Inc. v. Inv'rs Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). "Appellate review

does not consist of weighing evidence anew and making independent factual

findings; rather, [this court's] function is to determine whether there is adequate

evidence to support the judgment rendered at trial." Cannuscio v. Claridge Hotel

& Casino, 319 N.J. Super. 342, 347 (App. Div. 1999). "Deference to a trial

court's fact-findings is especially appropriate when the evidence is largely

testimonial and involves questions of credibility." In re Return of Weapons to

J.W.D., 149 N.J. 108, 117 (1997). Since the trial court "'hears the case, sees and

observes the witnesses, [and] hears them testify,' it has a better perspective than

a reviewing court in evaluating the veracity of witnesses." Pascale v. Pascale,

113 N.J. 20, 33 (1988) (alteration in original) (quoting Gallo v. Gallo, 66 N.J.

Super. 1, 5 (App. Div. 1961)). However, "[a] trial court's interpretation of the

law and the legal consequences that flow from established facts are not entitled

to any special deference."       Manalapan Realty, L.P. v. Twp. Comm. of

Manalapan, 140 N.J. 366, 378 (1995).

      After carefully reviewing the parties' arguments in light of the record and

applicable legal principles, we conclude that the record contains substantial

credible evidence supporting the court's findings of fact. We also, with one

                                                                           A-4967-16T2
                                       16
exception, agree with the court's legal conclusions. We disagree only with the

court's conclusion that the lease commenced on December 1, 2015.

      Our review of the court's interpretation and construction of a contract is

de novo. Manahawkin Convalescent v. O'Neill, 217 N.J. 99, 115 (2014). "[A]

lease is a contract and its terms are governed by contract principles." Maglies

v. Estate of Guy, 193 N.J. 108, 143 (2007). Our task is to "ascertain the intention

of the parties as revealed by the language used, the situation of the parties, the

attendant circumstances, and the objects the parties were striving to attain."

Celanese Ltd. v. Essex Cty. Imp. Auth., 404 N.J. Super. 514, 528 (App. Div.

2009). "Where the terms of a contract are clear, we enforce the contract as

written and ascertain the intention of the parties based upon the language."

Pollack v. Quick Quality Rests., Inc., 452 N.J. Super. 174, 187-88 (App. Div.

2017). "[U]nambiguous contracts are to be enforced as written[.]" Grow Co. v.

Chokshi, 403 N.J. Super. 443, 464 (App. Div. 2008).

      The lease contains an unambiguous provision defining the commencement

date of the lease as not "more than (i) thirty (30) days after the unconditional

[CO] is issued or (ii) all governmental approval[s] have been received by Tenant

to operate a child care facility." Contrary to COA Parsippany's suggestion, the

lease does not contain a "whichever is later" provision. Nor does the lease

                                                                           A-4967-16T2
                                       17
provide that both the issuance of the CO and the receipt of all government

approvals must take place before the lease commences, as seems to have been

concluded by the court when it issued the September 30, 2015 order .

      The plain language of the lease provides that it will commence no later

than thirty days after either one of the identified events takes place. It is

undisputed that the unconditional CO was issued on November 13, 2014, prior

to the receipt of all government approvals to operate a child care center. The

lease, therefore, commenced within thirty days of November 13, 2014. The trial

court's conclusion to the contrary, as well as the September 30, 2015 order

setting a lease commencement date of December 1, 2015, is therefore reversed.

      The matter is remanded for entry of an order setting a lease

commencement date within thirty days of November 13, 2014. Because COA

Parsippany's obligation to pay rent, local property taxes, and other costs

commenced on the lease commencement date, Pavilion is entitled to recover

back rent for the period between the recalculated commencement date and the

date on which COA Parsippany began paying rent, as well as any local property

taxes or other costs for which COA Parsippany was responsible during this

period. The court shall recalculate the damages awarded in the May 30, 2017

order accordingly. The remainder of the May 30, 2017 order is affirmed.

                                                                       A-4967-16T2
                                     18
      Affirmed in part, reversed in part and remanded for further proceedings

consistent with this opinion. We do not retain jurisdiction.

                                                                      A-4967-16T2
                                      19