APERION ENTERPRISES, INC. v. GOTHAM BEVERAGE, INC. (L-5307-19, BERGEN 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NOT FOR PUBLICATION WITHOUT THE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-1840-20
APERION ENTERPRISES, INC.,
Plaintiff-Appellant,
v.
GOTHAM BEVERAGE, INC.,
GEORGE MATTHEWS,
HARAMBOS TSOTSOS,
HELEN MATTHEWS,
JOANNE MATTHEWS and
STEVEN MATTHEWS,
Defendants-Respondents.
___________________________
Submitted January 20, 2022 – Decided August 22, 2022
Before Judges Haas and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-5307-19.
O'Brien Thornton LLC, attorneys for appellant (Merrill
M. O'Brien, on the briefs).
The Levine Law Firm, LLC, attorneys for respondents
(Kenneth T. Gallo, on the brief).
PER CURIAM
In this commercial landlord-tenant dispute, plaintiff Aperion Enterprises,
Inc. appeals a February 2, 2021 judgment of the Law Division dismissing its
claims for underpayment of rent under a lease agreement with defendant Gotham
Beverage, Inc. The judgment also dismissed defendant's counterclaim for
overpayments of rent. We conclude the judge impermissibly modified the terms
of the contract between the parties and thereby deprived plaintiff of rent to which
it was entitled under the clear rent escalation provision in the lease.
Accordingly, we reverse.
Aperion owns and leases the land and building located at 39-10 Broadway,
Fair Lawn, N.J. (the property). On March 27, 1998, plaintiff entered into a
thirty-five-year lease with non-party Quo Non Ascendet, Inc. (QNA). In
consideration of QNA's $2,000,000 capital investment spent constructing a diner
on the premises, plaintiff agreed to a below-market rent for the first fifteen years
of the lease term, with a fixed monthly rent subject to a $150 per month rent
increase each year for the first fifteen years. These terms are explicitly set forth
in Lease Rider ONE B and are not in dispute. Lease Rider ONE C provided that
in the fifteenth year of the lease, the parties would work to agree upon a new
base rent, representing the fair market value, to be effective in the sixteenth year.
A-1840-20
2
On November 13, 2007, defendant assumed the lease. During the fifteenth
year of the lease – April 1, 2012 to March 31, 2013 – the parties could not agree,
as provided for in the lease and rider, on which appraisers would assess fair
market rent. The parties therefore agreed to submit the issue to binding
arbitration through the American Arbitration Association (AAA). The sole issue
submitted to AAA for resolution was the fair market rental value of the demised
premises in March 2013. In a May 31, 2017 award, the arbitrator determined
that "[t]he fair market value of the first floor of the Premises as of March 2013
is $25.50 [per square foot] (PSF) for 5146 square feet[,]" and "[t]he fair market
value of the basement of the Premises as of March 2013 is $9.00 PSF for 3339
square feet." Based on the arbitrator's calculations, the March 2013 fair market
annual rent for the property was $161,274. Defendant's pre-arbitration annual
rent was $82,200.
Arbitration took four years to complete. During that time, defendant
continued to pay below-market rent over plaintiff's objection. After the
arbitration award, plaintiff sent defendant a calculation of the underpayment ,
which he reached by applying cumulative yearly increases to the base rent
starting in 2013. Defendant paid the requested amount with funds that cleared
on June 23, 2017. Thereafter, defendant continued to pay, and plaintiff
A-1840-20
3
continued to accept, rent based on the calculations used to determine
underpayment for the years 2014-2017.
When calculating the rent increase that was scheduled to begin April 1,
2019, plaintiff realized it had made an alleged mistake in the retroactive
calculation of the additional rent owed for 2014-2017. On May 2, 2019,
plaintiff's counsel sent a letter informing defendant of the mistake and seeking
an additional $41,217. Defendant disputed plaintiff's application of the rent
escalation formula in Lease Rider ONE D, and refused to pay the additional rent.
On July 18, 2018, plaintiff filed a two-count complaint. Count one alleged
a breach of the lease by failure to pay the full amount of rent due under its terms.
Count two alleged that the failure to pay the rent also breached the five personal
guarantees of the rent and that the guarantors each breached the guarantees by
failing to provide a certification that the guaranty was unmodified and in full
force and effect.1
1
The trial judge did not address whether there was a breach of the personal
guarantees. As defendants noted, however, a condition precedent for a breach
of the guarantees was not shown, and thus the claims could not succeed as a
matter of law. Specifically, each guarantee stated:
Guarantor agrees that it will, at any time and from time
to time, within five (5) days following written request
by Landlord and without charge therefor, execute,
A-1840-20
4
On August 26, 2019, defendant and defendant-guarantors filed an answer
and three-count counterclaim alleging breach of the lease (count one), breach of
the lease's covenant of good faith and fair dealing (count two), and equitable
fraud (count three). As part of its counterclaim, defendant sought return of
$1,969.21 it claims to have overpaid in retroactive rent for 2014-2018.2
A February 8, 2021 bench trial occurred via Zoom and consisted of the
testimony of two witnesses. The first witness was George Konstantinitis, the
President of Aperion, who testified for the plaintiff, and the second was George
Matthews, the President and co-founder of Gotham, who testified for defendant.
acknowledge and deliver to Landlord a statement
certifying that this Guaranty is unmodified and in full
force and effect (or if there have been modifications,
that the same is in full force and effect as modified and
stating such modification). Guarantor agrees that such
certificates may be relied upon by anyone holding or
proposing to acquire any interest in the building (of
which the demised premises is a part) from or through
Landlord or by any mortgagee or prospective
mortgagee of said building or any interest therein.
Because plaintiff produced no evidence it made the required written request, we
conclude the breach-of-guarantee claim must fail notwithstanding the trial
court's silence on the issue.
2
Defendant did not file a cross-appeal of the dismissal of its counterclaims and
we deem the issues waived.
A-1840-20
5
In his testimony, Konstantinitis explained that Lease Rider ONE D, the
primary subject of this appeal, provides that the base rent for each year
beginning in 2014 and concluding in 2022 would be calculated using the
Consumer Price Index 3 (CPI) for New York and Northeastern New Jersey for
"urban wage earners and clerical workers." Specifically, Lease Rider ONE D
provides:
D. The rent thereafter [after February 28, 2014] shall
be computed, for years 2014 through 2022, by
multiplying that base rent by a factor determined by
comparing the [CPI] for New York – Northeastern New
Jersey as published by the U.S. Department of Labor,
Bureau of Labor Statistics (BLS) for urban wage
earners and clerical workers, or if not available, any
similar statistical cost of living study customarily
utilized to determine the [CPI] shall be used, as noted
in F. below, utilizing that index for January of the pre-
increase year, with January of the year of increase and
converting that factor to a percentage, said percentage
to be multiplied by a new base rent, and the resultant to
be the increase for the then current year, commencing
March 1, 2014 and, in the same manner, annually
through the [twenty-fifth] year of the term. The rent so
computed shall not be less than the monthly rent for the
prior year, nor more than an increase of four percent
(4%) over the prior year's rent.
3
The Consumer Price Index is a measure of the average change over time in
the prices paid by urban consumers for a market basket of consumer goods and
services. Indexes are available for the U.S. and various geographic areas.
Average price data for select utility, automotive fuel, and food items are also
available. Consumer Price Index, U.S. BUREAU OF LABOR STATISTICS,
https://www.bls.gov/cpi/.
A-1840-20
6
[i.e.] If the rent for the year 2013 to 2014 is $6850, and
the CPI for January 2012 is 156.3, and the[] CPI for
January 2013 is 158.2, the difference of 1.9 shall be
deemed as a percentage, and the prior year's rent ($6850
x 12 = $82,200) shall be multiplied by 1.9% (=$1561.80
÷ 12 = 130.15) so that the monthly rent commencing on
March 1, 2014 will[] be $6980.15 per month, through
February 28, 2015.
The same computation shall be made annually, through
the [twenty-fifth] year of the term, to arrive at a
monthly rent.
Simply put, the CPI for January of the pre-increase year is deducted from
the CPI for the then current year, commencing March 1, 2014 and the resulting
difference is deemed the percentage rent increase for that year, capped at four
percent. Although it is unclear precisely how plaintiff misapplied the formula,
no one seriously disputes that he did not apply the plain language of the lease. 4
4
Defendant's theory at trial was that the lease formula was not the "standard in
the industry." It preferred a "sample" formula provided online by the (BLS) in
response to a frequently asked question. Defendant's "preference," however, is
not evidence that the method agreed to in the lease is illegal or otherwise
prohibited, nor was any competent evidence presented that the BLS suggestion
is, in fact, standard in rent escalation contracts. To the contrary, the posting itself
notes it merely provides factors to consider in developing an escalation contract,
many or most of which were considered in the subject lease. Further, the agency
posting states it "can neither develop certain wording for contracts, nor mediate
legal or interpretive disputes" that arise between parties to an escalation
contract.
A-1840-20
7
At the conclusion of the bench trial, the judge delivered an oral opinion
finding that plaintiff calculated the underpayment of the rent based initially on
the March 2013 fair market value and then "offered" that rate to defendant,
which was accepted. The judge reasoned that plaintiff's claim that it made a
mistake
is of no moment because of the fact that the landlord
themselves knew that there was . . . a rent dispute.
Submitted it to arbitration. And then, pursuant to that
arbitration award, calculated what the rent should be.
Offered that rent to the tenant. And the tenant accepted
that . . . from the landlord as the proper formulation for
CPI increases.
That is the undisputed testimony. The concept
that they could now relate back to a lease that this
tenant had signed when there, in fact, was a new offer
and acceptance made by the landlord which the tenant
accepted based on a CPI formula which seems clear and
certain, and which is, in fact, what the tenant still says
should be the formula that is in place, is uncontradicted
as to being what the parties had agreed to. That was the
meeting of the minds that occurred after the Triple A
arbitration.
And the CPI relationship to the rent increases
again seems to be what was offered by the landlord and
accepted by the tenant, and is still being maintained by
the tenant as the proper calculation. And the tenant has
put forth D-6 which the Court finds again coincides
with the landlord's calculation.
Now, again, back to offer and acceptance, while
D-6 may show a little bit less than what the landlord
A-1840-20
8
promulgated, that is what the tenant agreed would be
the new rent. . . . The landlord, therefore, has not
proved that there has been a breach of the lease, and is,
therefore, not entitled to legal fees nor any rent
increases, other than what is promulgated under the
appropriate CPI increase that he offered and that the
defendant accepted.
On February 22, 2021, the judge entered final judgment and dismissed the
plaintiff's claims and the defendant's counterclaims in full with prejudice. The
judge also ordered "that all past rent increases from March 1, 2014 to present
and all future rent increases, other than base rent increases pursuant to Section
[ONE] E of the Rider to Lease, shall be made in accordance with the standard
CPI escalation calculation" subject to the four-percent cap provided in the lease.
On appeal, plaintiff presents the following arguments for our
consideration:
POINT I
THIS COURT SHOULD REVERSE THE COURT
BELOW AND ENFORCE THE LEASE AS WRITTEN
BECAUSE THE TRIAL COURT'S CONCLUSION
THAT THE PARTIES ENTERED INTO A NEW
AGREEMENT IS NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE. (No party raised the
issue that they had signed or agreed to a new lease or
lease modification. The Court below introduced it sua
sponte . . . .).
A. The June 1, 2017 Calculation of
Underpayment Was Not An Offer.
A-1840-20
9
B. There Was No Rent Dispute After Landlord
Sent The First Mistaken Increase Calculation
And Before Landlord Sent the Corrected
Calculation.
C. The Defendant's Counterclaim Disproves
There Was a Meeting Of the Minds.
D. There Was No Consideration To Support The
Purported New Agreement.
POINT II
THIS COURT SHOULD REVERSE THE LOWER
COURT AND ENFORCE THE LEASE AS WRITTEN
BECAUSE THE LOWER COURT'S SUA SPONTE
INSERTION OF AN OFFER AND ACCEPTANCE
VIOLATED DUE PROCESS BECAUSE NO PARTY
EVEN PLEADED OR OTHERWISE CLAIMED THE
EXISTENCE OF A NEW AGREEMENT. (No party
raised the issue that they had signed or agreed to a new
lease or a lease modification. The Court below
introduced it sua sponte . . . .).
POINT III
THE COURT BELOW COMITTED REVERSIBLE
ERROR BECAUSE THE STATUTE OF FRAUDS
RENDERS UNENFORCEABLE A MOIFICATION
OF A LEASE FOR LONGER THAN THREE YEARS
WHERE THE MODIFICATION IS NOT IN A
SIGNED WRITING. (No party raised the issue that
they had signed or agreed to a lease modification. The
Court below introduced it sua sponte . . . .).
A-1840-20
10
POINT IV
THE COURT BELOW COMMITTED REVERSIBLE
ERROR BY NOT ENFORCING THE LEASE AS
WRITTEN. (The Court below acknowledged the
annual rent increase method which is included in the
Lease Rider Section D, Ex. JE1, but failed to enforce it
. . . .).
A. The Rational Meaning Of The Actual Lease
Rider ONE D Formula Is To Determine The
Annual Percentage Rent Increase By Subtracting
The CPI Number Of Two Successive Januarys
And To Attach The Percentage Sign To That
Resulting Difference So As To Provide The
Landlord With Above-Market Rent Increases For
Lease Years [sixteen to thirty five].
B. This Court Should Reverse The Lower Court
And Enforce The Lease As Written Because The
Trial Court's Modification Of The Lease Does
Not Identify Which Month's CPI Is To Determine
Annual Increases And Because The Calculation
Methods "Presented At Trial" Were Not
Sufficiently Clear to Comply with the Statute of
Frauds.
POINT V
THE TRIAL COURT ERRED BY OMITTING A
REQUIREMENT IN THE FINAL ORDER
ENFORCING THE GUARANTEE WHICH
REQUIRES THE GUARANTORS TO DELIVER A
SIGNED REPRESENTATION THAT THE
GUARANTEES REMAIN IN EFFECT AND
INSTEAD SIMPLY TRUSTING DEFENDANTS TO
PROVIDE THE LEGALLY REQUIRED
DOCUMENT.
A-1840-20
11
POINT VI
THE TRIAL COURT ERRED BY DENYING AN
AWARD OF ATTORNEY'S FEES TO APERION,
WHICH SHOULD BE REVERSED AND THE
MATTER REMANDED TO THE TRIAL COURT
FOR AN AWARD OF REASONABLE ATTORNEY'S
FEES AND COSTS TO APERION PURSUANT TO
[RULE] 4:42-9.
Appellate review of a judge's decision following a bench trial is limited.
Our standard of review requires that we uphold the trial judge's factual findings,
provided they are "supported by adequate, substantial and credible evidence."
Rova Farms Resort, Inc. v. Invs. Ins. Co. of Am., 65 N.J. 474, 484 (1974). Thus,
"we do not disturb the factual findings and legal conclusions of the trial judge
unless we are convinced that they are so manifestly unsupported by or
inconsistent with the competent, relevant and reasonably credible evidence as to
offend the interests of justice[.]" Seidman v. Clifton Sav. Bank, S.L.A., 205
N.J. 150, 169 (2011) (alteration in original) (quoting In re Tr. Created By
Agreement Dated Dec. 20, 1961, 194 N.J. 276, 284 (2008)). "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.
Comm. of Manalapan, 140 N.J. 366, 378 (1995). When construing contract
terms, "unless the meaning is both unclear and dependent on conflicting
A-1840-20
12
testimony," its interpretation is a matter of law subject to de novo review.
Celanese Ltd. v. Essex Cnty. Improvement Auth., 404 N.J. Super. 514, 528
(App. Div. 2009) (quoting Bosshard v. Hackensack Univ. Med. Ctr., 345 N.J.
Super. 78, 92 (App. Div. 2001)).
"The polestar of contract construction is to discover the intention of the
parties as revealed by the language used by them." Karl's Sales & Serv., Inc. v.
Gimbel Bros., 249 N.J. Super. 487, 492 (App. Div. 1991). Courts "should not
torture the language of [contracts] to create ambiguity." Nester v. O'Donnell,
301 N.J. Super. 198, 210 (App. Div. 1997) (quoting Stiefel v. Bayly, Martin &
Fay, Inc., 242 N.J. Super. 643, 651 (App. Div. 1990)). Courts may not re-write
a contract or grant a better deal than that for which the parties expressly
bargained. See Solondz v. Kornmehl, 317 N.J. Super. 16, 21 (App. Div. 1998).
With these guiding principles in mind, we conclude that the judge erred
in determining that there was a new offer and acceptance between the parties at
the conclusion of arbitration which had the effect of altering the rent escalation
formula.5 At the time the parties resorted to arbitration, the sole dispute was the
fair market rental of the property in March 2013. The arbitrator was not charged
5
It is not clear that the issue of whether there was a new offer and acceptance
or modification was properly before the judge. Neither party raised the issue
directly in the pleadings or before the judge, who raised the issue sua sponte.
A-1840-20
13
with determining the rent escalation formula, which was clearly spelled out in
the lease.
Once the parties completed arbitration, plaintiff sent defendant a
calculation of the amount of rent underpaid for the period of 2014-2017 which
defendant proceeded to pay. Against the backdrop of defendant's preexisting
obligation to pay rent established in the lease, the parties would have had to
modify the contract at this juncture to implement a new rent escalation formula.
"A proposed modification by one party to a contract must be accepted by the
other to constitute mutual assent to modify" and it "must be based upon new or
additional consideration." Cnty. of Morris v. Fauver, 153 N.J. 80, 100 (1998).
"Such modification can be proved by an explicit agreement to modify , or, . . .
by the actions and conduct of the parties, so long as the intention to modify is
mutual and clear." Id. at 99. Additionally, "[u]nilateral statements or actions
made after an agreement has been reached or added to a completed agreement
clearly do not serve to modify the original terms of a contract, especially where
the other party does not have knowledge of the changes, because knowledge and
assent are essential to an effective modification." Id. at 100. We discern nothing
in the record that suggests the parties were consciously modifying the lease in a
A-1840-20
14
manner that made their intention to modify mutual and clear. We further
observe that there was no additional consideration to support a modification.
Next, in the absence of a properly modified contract, the fact that plaintiff
accepted less rent than it was entitled to under the lease is not evidence of an
intention to modify. See id. at 101 (citing favorably the conclusion of the court
in Walker v. Associated Dry Goods Corp., 231 Md. 168, 180 (1963), that "mere
acceptance by [a plaintiff] for several years of payments in less amounts than
they were entitled to under the lease does not evidence an intention on their part
to modify the terms of the lease."). Additionally, lease paragraph twenty-two
states: "[t]he various rights, . . . of the Landlord, expressed herein, are
cumulative, and the failure of the Landlord to enforce strict performance by the
Tenant of the . . . covenants of this lease, . . . shall not be construed or deemed
to be a waiver . . . by the Landlord of any such conditions and covenants . . . ."
As a result, by the clear terms of the parties' agreement, plaintiff is entitled to
collect the rent plaintiff is owed, regardless of plaintiff's past performance.
Finally, because defendant owes plaintiff rent under the lease, plaintiff
may be entitled to attorney's fees. Lease Rider Article Twelve provides that the
costs and attorneys' fees incurred in this action will be paid by the losing party.
A-1840-20
15
The judge short-circuited an analysis of fees by improperly concluding that there
had not been a breach of the lease.
To the extent we have not addressed them, any remaining contentions
raised by the parties lack sufficient merit to warrant discussion in a written
opinion. See R. 2:11-3(e)(2).
Reversed and remanded for entry of judgment in plaintiff's favor in
accordance with the terms of the lease, and for a determination of attorney's fees.
We do not retain jurisdiction.
A-1840-20
16