DURAPORT REALTY TWO, LLC v. IMT STEEL, LLC (L-3964-17, HUDSON COUNTY AND STATEWIDE) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE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-3346-20
DURAPORT REALTY TWO, LLC,
DURAPORT REALTY FOUR LLC,
and DURAPORT HOLDING
COMPANY, LLC,
Plaintiffs-Respondents,
v.
IMT STEEL, LLC, GIACOMO
ABRUSCI and PRESTIGE
CAPITAL CORPORATION,
Defendants-Respondents,
and
INTERNATIONAL METALS
TRADING, LLC, BRET HEDGES
and IAN PARKER,
Defendants-Appellants,
and
FGH STEEL, LLC and METAL
PARTNERS REBAR, LLC,
Defendants.
___________________________
Argued May 05, 2022 – Decided July 21, 2022
Before Judges Mawla and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Hudson County, Docket No. L-3964-17.
Daniel C. Stark argued the cause for appellants
International Metals Trading, LLC, Bret Hedges and
Ian Parker (Newman, Simpson & Cohen, LLP,
attorneys; Daniel J. Cohen and Daniel C. Stark, on the
briefs).
Jonathan T. Guldin argued the cause for respondents
(Clark Guldin, attorneys; Jonathan T. Guldin, of
counsel and on the brief; Janesa Urbano, on the brief).
PER CURIAM
In this landlord-tenant dispute arising from an industrial lease and
guaranty, defendants International Metals Trading, LLC (IMT), Bret Hedges,
and Ian Parker appeal from a June 7, 2021 judgment awarding damages in favor
of plaintiffs Duraport Realty Two, LLC, Duraport Realty Four LLC, and
Duraport Holding Company, LLC (collectively "Duraport"). We affirm in part
and reverse and remand for a recalculation of damages.
Duraport owns and operates various properties for the storage, shipment,
and warehousing of goods. Two of Duraport's properties are located close to
each other in Bayonne and are generally used for stevedoring and offloading
materials. One of the properties is located at 85 East 2nd Street ("Duraport II")
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and the other is located at block 476.01, lot 10.01 ("Duraport IV"). Defendant
IMT is a company that produced rebar and a guarantor of its subsidiary IMT
Steel's obligations under 2015 and 2016 leases with Duraport. Defendant Parker
is a member of the IMT executive team and a guarantor of IMT Steel's
obligations under the subject lease agreements. Defendant Hedges is another
signatory to the same guaranties.
On November 17, 2015, Duraport Realty Two and IMT Steel entered into
a Ware Yard Temporary Workspace License Agreement1 ("the 2015 license
agreement") for use of Duraport II "for the purposes of storing[,] bending,
shearing, and fabricating rebar structures[.]" The license term commenced on
December 1, 2015, and was to end on December 31, 2016. Per the agreement,
IMT Steel was required to pay Duraport Realty Two monthly rent, or a "license
fee" of $25,500. Upon expiration of the one-year term, IMT Steel had sixty days
to remove all its equipment, machinery, and other property from the premises.
During the sixty days, IMT Steel would be required to pay an increased rent of
1
The lease agreement and subsequent agreements refer to IMT Steel as "IMT."
At the time of the execution of the 2015 and 2016 leases and guaranties , IMT
Steel, was a wholly owned subsidiary of IMT. In December 2017, defaulting
defendant Giacomo Abrusci (and others) took over IMT Steel by means that are
not clear from the record. That takeover is apparently the subject of an ongoing
shareholder dispute in New York.
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$38,250 per month, which is equal to 150% of base rent. For any remaining
holdover period, the rent would remain at $38,250 per month. 2
Also on November 17, 2015, defendants Parker, Hedges, IMT, and
Abrusci signed a guaranty ("the 2015 guaranty"), under which each guaranteed
to Duraport Realty Two: "the full performance, payment, and observance of all
the covenants, conditions, and agreements provided to be performed and
observed under the [2015 license agreement] by IMT [Steel] for the period from
and after the date hereof until the expiration of the term of the [2015 license
agreement]."
On May 9, 2016, while the 2015 license agreement was in effect, Duraport
Realty Four leased Duraport IV to IMT Steel under a separate lease agreement
("the 2016 lease agreement"). The 2016 lease agreement was to commence on
September 15, 2016, and contained the following section referencing the 2015
license agreement:
2.3 Prior Lease. [IMT Steel] currently leases space (the
"Prior Premises") from Duraport Realty Two . . ., an
affiliate of [Duraport Realty Four], in Bayonne . . .,
2
Additionally, "[a]ll costs associated with the use of [Duraport II] including
electric usage, office cleaning, common area maintenance, repairs,
replacements, security, HVAC maintenance, water and sewer usage, and all
other costs associated with IMT [Steel's] use of the Workspace" were to be borne
by IMT Steel.
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pursuant to the Prior Lease dated November 17, 2015[,]
which was entered into between [IMT Steel] and
Duraport [Realty Two]. The Prior Lease remains in full
force and effect. Notwithstanding the foregoing,
provided that [IMT Steel] is not in monetary default of
the Prior Lease and/or this Lease, then from and after
the Commencement Date of the Lease [IMT Steel] may
notify [Duraport Realty Four] that [IMT Steel] shall
remove itself from the Prior Premises, leave the Prior
Premises in the condition required by the Prior Lease
and specify a date (after the Commencement Date) that
such removal shall be completed and upon which date,
subject to compliance with the foregoing, that the prior
Lease shall be cancelled and terminated ("the Prior
Lease Termination Date").
At the request of either party hereto[,] the parties shall
execute a document which shall memorialize the Prior
Lease Termination Date and the release of the parties
hereto of and from any obligation in the Prior Lease
related to matters occurring after the Prior Lease
Expiration Date.
Defendants Parker, Hedges, and IMT signed a guaranty ("the 2016
guaranty") on the same day the 2016 lease was executed. The 2016 guaranty
provided for "the full payment, performance and observance of all of the terms,
covenants, conditions, provisions and agreements therein provided to be paid,
performed or observed by [IMT Steel] under the [2016 lease agreement.]"
As the motion judge found, the 2015 license was always intended to be
temporary in anticipation of IMT Steel's moving its operation from Duraport II
to Duraport IV to keep up with the demands and growth of its business. IMT
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Steel did not, however, ultimately occupy Duraport IV. In or about July 2017,
defaulting defendant Abrusci advised Duraport that IMT Steel would not take
possession of Duraport IV. Consequently, on August 24, 2017, plaintiffs
declared defendants to be in default.
In August 2017, IMT Steel began moving its equipment from Duraport II
without notice to plaintiffs. Plaintiffs acknowledged that the last of IMT Steel's
equipment and material was removed on or around January 19, 2018. From
February 2018 until the beginning of August 2018, no rent was collected for
Duraport II.3
Following IMT Steel's vacation of Duraport II, plaintiffs made efforts to
find a replacement tenant for Duraport IV. Plaintiffs were ultimately able to
negotiate and execute a lease with Ferrara West LLC, which commenced paying
rent on August 5, 2018.
3
The 2015 license agreement required IMT Steel to cover certain costs in
addition to rent, which it failed to do. As a result, to mitigate damages and find
a new tenant, Duraport needed to clean up the space and perform electrical work.
Duraport paid for this work in the amount of $4,918.04. During its tenancy, one
of IMT Steel's employees backed into and damaged one of Duraport's vehicles.
Duraport paid $7,463.39 to have the damage repaired. Finally, IMT Steel was
required to pay for snow removal and failed to do so. Duraport covered this cost
as well and spent $9,934.75.
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On September 26, 2017, plaintiffs filed a complaint against defendants
IMT Steel; IMT, Abrusci; Hedges; Parker; FGH Steel, LLC; Prestige Capital
Corporation; and Metal Partners Rebar, LLC alleging: 1) breach of contract
against IMT Steel; 2) negligence against IMT Steel; 3) breach of guaranty
against IMT, Hedges, Parker, and Abrusci; 4) breach of contract against IMT
Steel (for the 2016 lease agreement); 5) breach of guaranty against IMT, Hedges,
and Parker (for the 2016 lease agreement); 6) breach of contract against IMT
Steel (for equipment rental agreements); 7) promissory estoppel against IMT
Steel; 8) unjust enrichment/quantum meruit against IMT Steel; 9) piercing the
corporate veil against IMT and IMT Steel; 10) declaratory judgment against
IMT, IMT Steel, Prestige, and Metal Partners; 11) fraud against IMT, IMT Steel,
Hedges, Parker, and Abrusci; and 12) successor liability against FGH Steel.
On March 2, 2018, defendants Hedges, Parker, and IMT filed an answer
with affirmative defenses and cross claims. Defendants IMT Steel and Abrusci
failed to respond to the complaint or otherwise appear in the action. As a result,
on September 17, 2019, plaintiffs obtained final judgment by default in the
amount of $331,630.76 against IMT Steel and Abrusci, jointly and severally.
Other defendants were dismissed by stipulation or agreement not to prosecute.
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As a result, the only remaining defendants pending trial were Hedges, Parker,
and IMT.
On June 19, 2020, plaintiffs moved for summary judgment against
defendants based on breach of the guaranty. On July 10, 2020, the motion judge
entered an order granting the application in part, finding defendants under the
guaranty. The judge reserved for trial the amount of lost rent, taxes, late fees,
interest, and counsel fees (as provided for under the lease) to resolve the issues
of the date calculation begins/ends, sufficiency of the mitigation of damages, if
any, and the validity of calculations of all elements of the damages claim .
On February 9, 2021, the judge conducted a bench trial to resolve the
damages issue. The sole witness was Duraport's principal, Vincenzo Alessi.
Defendants did not call any witnesses. Based on the evidence, the judge
determined that IMT Steel had breached its duties under the 2015 license
agreement and the 2015 guaranty was enforceable. She found the 2016 lease
agreement was voidable for a mutual failure of performance and awarded no
damages under that agreement. 4 The judge also found that Duraport acted
diligently to mitigate its damages by locating a new tenant and awarded holdover
4
The determination not to award damages under the second lease has not been
appealed.
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rent until the new tenant took occupancy in August 2018. On June 7, 2021, the
judge entered a final order of judgment against defendants, jointly and severally,
in the amount of $799,445.18, plus pre-judgment interest in the amount of
$82,551.84, for a total judgment of $881,997.02, plus post-judgment interest.
On appeal, defendants-appellants present the following arguments for our
consideration:
POINT I
THE TRIAL COURT ERRED IN RULING THAT THE
2015 GUARANTY IS ENFORCEABLE AGAINST
DEFENDANTS-APPELLANTS FOR HOLDOVER
RENT ACCRUED AFTER EXPIRATION OF THE
TERM AND THE 2015 LEASE AGREEMENT.
POINT II
THE TRIAL COURT ERRED IN DETERMINING
THE PERIOD OF TIME AND AMOUNT FOR
WHICH THE GUARANTORS ARE RESPONSIBLE.
A. The Trial Court Wrongly Awarded
Plaintiff[s] Holdover Rent for Several Months
After IMT [Steel] Vacated the Duraport Two
Property.
B. The Trial Court Improperly Found
Defendants-Appellants' Liability as Guarantors
was Greater than That of the Party Whose
Obligations They Guaranteed.
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POINT III
THE TRIAL COURT MADE COMPUTATIONAL
ERRORS IN DETERMINING THE AMOUNT OF
THE JUDGMENT.
The scope of our review of a non-jury case is limited. Seidman v. Clifton
Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011). The findings on which a trial court
bases its decision will "not be disturbed unless 'they are so wholly insupportable
as to result in a denial of justice[.]'" Rova Farms Resort, Inc. v. Invs. Ins. Co.,
65 N.J. 474, 483-84 (1974) (quoting Greenfield v. Dusseault, 60 N.J. Super. 436,
444 (App. Div. 1960)). However, although a trial court's factual findings will
not be overturned absent an abuse of discretion, questions of law are subject to
de novo review. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 373
(1999).
A "lease is a contract . . . which sets forth [the parties'] rights and
obligations to each other in connection with [a] temporary grant of possession
of [one party's] property to [the other party]." Town of Kearny v. Disc. City of
Old Bridge, Inc., 205 N.J. 386, 411 (2011). "[The Court's] function in
interpreting a contract is to give meaning to the symbols of expression chosen
by the parties." Ibid. "Courts enforce contracts 'based on the intent of the
parties, the express terms of the contract, surrounding circumstances and the
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underlying purpose of the contract.'" Manahawkin Convalescent v. O'Neill, 217
N.J. 99, 118 (2014) (quoting Caruso v. Ravenswood Devs., Inc., 337 N.J. Super.
499, 506 (App. Div. 2001)). "We do not supply terms to contracts that are plain
and unambiguous, nor do we make a better contract for either of the parties than
the one which the parties themselves have created." Maglies v. Est. of Guy, 193
N.J. 108, 143 (2007). In addition, the conduct of the parties after a writing is
signed, but before any alleged breach, coupled with their manner of dealing with
one another, may be probative of their intent in making the agreement. Joseph
Hilton & Associates, Inc. v. Evans, 201 N.J. Super. 156, 171 (App. Div. 1985).
Guaranty agreements are similar to surety agreements in that the guarantor
signs a separate agreement attendant to the underlying contract (in this case, the
agreement) to be responsible for the financial obligations of the tenant.
Feigenbaum v. Guaracini, 402 N.J. Super. 7, 18 (App. Div. 2008). It is also well
settled that a guaranty agreement can only be applied to the strict terms of the
underlying agreement and is not subject to extension beyond those strict terms.
Peoples Nat'l Bank v. Fowler, 73 N.J. 88, 101 (1977).
With these guiding principles in mind, we reject defendants' contention
that the guaranty expired after the initial one-year term of the temporary license
ended. The 2015 license agreement addressed the eventuality of a holdover
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tenancy, providing for an increased rent that applied to any holdover period
without limitation. As the judge found, the 2015 guaranty signed by Parker,
Hedges, and IMT was a "continuing guaranty" that "unconditionally
guarantee[d] to Duraport the full performance, payment, and observance of all
the covenants . . . under the [2015 license agreement.]" The guaranty remained
in full force and effect with respect to any "renewal, modification, or extension"
of the 2015 license agreement. The guaranty goes on to state that the obligations
of the guarantors are "continuing" and will not be terminated, affected, or
impaired in the event Duraport asserts any of its rights to enforce any clause of
the agreement.
Included among the covenants and conditions of the underlying 2015
agreement is IMT Steel's obligation to deliver possession or pay holdover rent
if possession continues beyond the termination date. The fact that plaintiffs are
asserting their right to enforce that holdover rent clause does not limit or alter
the guarantors' obligation to pay holdover rent.
We also reject defendants' assertion that IMT Steel was not liable for
holdover rent after it delivered possession in January 2018. The same parties
entered in the 2016 lease agreement, executed in May 2016, before the end of
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the one-year term of the initial lease. Section 2.3 of the 2016 lease agreement
states:
[IMT Steel] currently leases space (the "Prior
Premises") from Duraport Realty Two . . ., an affiliate
of [Duraport Realty Four], in Bayonne . . ., pursuant to
the Prior Lease dated November 17, 2015[,] which was
entered into between [IMT Steel] and Duraport [Realty
Two]. The Prior Lease remains in full force and effect.
Notwithstanding the foregoing, provided that [IMT
Steel] is not in monetary default of the Prior Lease
and/or this Lease, then from and after the
Commencement Date of the Lease [IMT Steel] may
notify [Duraport Realty Four] that [IMT Steel] shall
remove itself from the Prior Premises, leave the Prior
Premises in the condition required by the Prior Lease
and specify a date (after the Commencement Date) that
such removal shall be completed and upon which date,
subject to compliance with the foregoing, that the prior
Lease shall be cancelled and terminated ("the Prior
Lease Termination Date").
The judge correctly observed that IMT Steel never provided the necessary notice
to establish a termination date. The effect of this failure was that "the licensing
agreement and all its terms and obligations remained in full effect despite the
signing of the [2016] lease." She further explained that the "[t]he termination
date never changed and as long[] as [d]efendants remained in possession of the
original site beyond the termination date, the period of holdover tenancy and the
required rent associated with it began." We discern no error in the judge's
determination, as it is amply supported by the credible evidence in the record.
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We also reject defendants' claim that the trial court erred in imposing
greater liability on the guarantors than that which was imposed on IMT Steel.
The number of damages for which the guarantors are responsible is not limited
by the amount of the default judgment entered against IMT Steel. Rather, under
the 2015 guaranty, Duraport is entitled to collect from defendants the full
amount of any damages proven. Specifically, the guarantors' liability "shall be
primary" and "Duraport may, at its option, proceed against Guarantor and IMT
[Steel], jointly and severally, and may proceed against Guarantor without having
obtained any judgment against IMT [Steel]." Additionally, the guarantors
specifically waived "any right to require Duraport to proceed against or to
exhaust any rights, remedies or recourse against IMT [Steel.]" See Midstates
Res. Corp. v. Burgess & Fenmore, 333 N.J. Super. 531, 536 (App. Div. 2000)
(determining that where guarantors are jointly and severally liable under a
guaranty, a creditor "may proceed against the guarantor . . . without first
exhausting any obligation the creditor may have to proceed against the
partnership"). Further, the guaranty provides that "the obligations of Guarantor
hereunder shall not be terminated, affected, or impaired by reason of . . . any
indulgence [or] forbearance . . . granted by Duraport to IMT [Steel.]" There was
no error.
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Finally, both parties agree that the judge made a mathematical error when
calculating damages. Because there is no dispute that the judge made a
mathematical error, we vacate the judgment as to the quantum of damages only,
and remand for a recalculation of damages.
Affirmed in part and reversed and remanded in part for a mathematical
recalculation of damages consistent with this opinion. All other aspects of the
judge's decision are affirmed, including defendants' liability and its duration
under the 2015 license agreement and guaranty. We do not retain jurisdiction.
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