PARK CREST CLEANERS, LLC VS. A PLUS CLEANERS AND ALTERATIONS CORP.(C-0078-14, CAMDEN COUNTY AND STATEWIDE)

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APPROVAL OF THE APPELLATE DIVISION
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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.
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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