JOY SYSTEMS, INC. VS. FIN ASSOCIATES LIMITED PARTNERSHIP (L-1565-14, MORRIS COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-5373-15T4
JOY SYSTEMS, INC.,
Plaintiff-Respondent/
Cross-Appellant,
v.
FIN ASSOCIATES LIMITED
PARTNERSHIP, a New Jersey
Limited Partnership,
Defendant-Appellant/
Cross-Respondent,
and
UNITED STATES LAND
RESOURCES, LP, a New
Jersey Limited Partnership,
Defendant.
Argued May 22, 2018 – Decided June 7, 2018
Before Judges Yannotti, Mawla, and DeAlmeida.
On appeal from Superior Court of New Jersey,
Law Division, Morris County, Docket No. L-
1565-14.
Lawrence S. Berger argued the cause for
appellant/cross-respondent (Berger &
Bornstein, LLC, attorneys; Robert A. Bornstein
and Gregory J. Cannon, on the briefs).
Marshall T. Kizner argued the cause for
respondent/cross-appellant (Stark & Stark,
attorneys; Marshall T. Kizner, of counsel and
on the briefs).
PER CURIAM
In this commercial landlord-tenant dispute, defendant FIN
Associates, LP (FIN) appeals from judgments entered in favor of
plaintiff Joy Systems, Inc (Joy) on June 29 and August 19, 2016,
following a bench trial. Joy cross-appeals from the judgments.
We affirm for the reasons expressed in the thorough and
comprehensive opinion of Judge Rosemary E. Ramsay.
The following facts are taken from the record. On May 18,
2006, Joy entered into a lease agreement for an industrial
warehouse building located on Finderne Avenue in Bridgewater with
defendants FIN and United States Land Resources, LP (USLR). The
lease was prepared by defendants. Pursuant to the lease, Joy
agreed to pay monthly rent of $31,875, and $82,262 as a security
deposit. In April 2009, the parties entered into an amendment
extending the lease term for two years to May 31, 2011.
Joy's tenancy lasted from May 18, 2006 to May 31, 2011, during
which it paid FIN all of the rents due. Pursuant to the lease
terms, Joy agreed to "take good care of the . . . [p]remises . . .
and . . . keep and maintain the same in good order and condition
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subject to normal wear and tear." The lease also provided FIN
would "perform the work set forth in [e]xhibit B hereto
('[l]andlord's [w]ork')." Exhibit B enumerated eleven items FIN
was required to complete or substantially complete before the
commencement of the lease. Pertinent to this dispute, FIN agreed
the existing overhead doors and dock levelers would "be put in
good working order." FIN also agreed to build a 500 square foot
lunch room. Upon termination of the lease, Joy was required to
"yield . . . the . . . [p]remises 'broom clean' and in the condition
in which [Joy] is required to maintain the same during the term
pursuant to the provision of this [l]ease and . . . return the
. . . [p]remises to [FIN] in the condition it was in as of the
date [FIN] complete[d] [l]andlord's [w]ork[.]"
To fulfill its obligations, Joy employed a full-time
maintenance worker to maintain the property in accordance with the
terms of the lease. Additionally, Joy contracted with a
maintenance services company, which performed general maintenance,
including on the overhead doors and dock levelers located on the
premises. In total, Joy incurred approximately $280,000 to
maintain the premises during the term of the lease. This included
regularly maintaining the dock levelers and overhead doors, and
replacing a dock leveler that failed during the term of the lease.
3 A-5373-15T4
On December 13, 2010, Joy provided a letter to FIN advising
it was vacating the premises. On August 5, 2011, three months
after Joy vacated the premises, FIN advised Joy it "was [Joy's]
responsibility to put the dock levelers, etc. back into good
condition before [Joy] left the building." FIN represented it
would return "whatever remains" of the security deposit after Joy
performed the work. Four days later, Joy advised FIN it hired a
third party contractor who had returned the doors and dock levelers
to good working condition. Joy provided a receipt, which evidenced
its payment for completion of the work.
The lease required FIN to return the security deposit at the
conclusion of the lease, provided Joy had met its obligations
under the lease terms. FIN did not return the security deposit.
As a result, Joy filed a six-count complaint against FIN and USLR
seeking monetary damages for the failure to return the security
deposit. The complaint pled the following counts: breach of
contract; unjust enrichment; fraud; promissory estoppel; and
equitable estoppel. Monetary damages were sought against USLR
based on the theory of piercing the corporate veil.1
FIN filed an answer and counterclaim. In the counterclaim,
FIN alleged Joy breached the lease by failing to surrender the
1
The judge dismissed the claims against USLR without prejudice.
This aspect of the judgment has not been appealed.
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premises in broom-clean condition, failing to remove its property
from the premises, and causing damage to the premises. FIN further
alleged it "suffered damages in excess of [Joy's] security deposit,
and therefore, was entitled to recover all costs of the
aforementioned repairs, replacements, and debris removal that
exceed [Joy's] security deposit."
Joy filed an initial summary judgment motion, which was
denied. Prior to trial, Joy filed a second summary judgment motion
seeking summary judgment on various grounds, including the New
Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. FIN's
opposition did not address Joy's CFA argument. This summary
judgment motion was denied as well.
At the start of trial, Joy's counsel argued his client would
prove a violation of the CFA. FIN's counsel did not object.
During the trial, Joy offered evidence it believed demonstrated
FIN's unconscionable commercial practices in violation of the CFA.
Following summations, FIN's counsel objected to the assertion of
the CFA claim, and moved for a directed verdict to dismiss the CFA
claim for lack of notice and evidence supporting the claim. In
response, Joy's counsel argued the judge should invoke Rule 4:9-2
to amend Joy's complaint to conform to the evidence adduced at
trial.
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Judge Ramsay filed a comprehensive written opinion and
entered judgment finding as follows: (1) FIN had breached the
lease by failing to return the security deposit; (2) Joy's
complaint was amended to conform to the evidence adduced at trial
to include a CFA claim; (3) as a result, Joy was entitled to
recover damages resulting from the CFA violation in the amount of
$52,196.04, plus prejudgment interest on the security deposit from
August 15, 2011, to the date of the judgment, in the amount of
$9305.90, for a total of $61,501.94; (4) Joy was entitled to treble
damages under the CFA totaling $184,505.84. The total amount
awarded Joy was $266,767.84. This appeal followed.
I.
"Trial court findings are ordinarily not disturbed unless
'they are so wholly unsupportable as to result in a denial of
justice,' and are upheld wherever they are 'supported by adequate,
substantial and credible evidence.'" Meshinsky v. Nichols Yacht
Sales, Inc., 110 N.J. 464, 475 (1988) (quoting Rova Farms Resort
v. Inv'rs Ins. Co., 65 N.J. 474, 483-84 (1974)). "Deference is
especially appropriate when the evidence is largely testimonial
and involves questions of credibility. Because a 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." Seidman v. Clifton Sav.
6 A-5373-15T4
Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting Cesare v. Cesare,
154 N.J. 394, 411-12 (1998)). "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, LP v. Twp. Comm., 140 N.J. 366, 378 (1995).
"The decision to grant or deny . . . a motion [to amend a
pleading] lies within the [trial] court's sound discretion."
Balthazar v. Atlantic City Med. Ctr., 358 N.J. Super. 13, 27 (App.
Div. 2003). "While motions for leave to amend pleadings are to
be liberally granted, they nonetheless are best left to the sound
discretion of the trial court in light of the factual situation
existing at the time each motion is made." Fisher v. Yates, 270
N.J. Super. 458, 467 (App. Div. 1994).
"The exercise of this discretion will be interfered with by
an appellate tribunal only when the action of the trial court
constitutes a clear abuse of that discretion." Salitan v. Magnus,
28 N.J. 20, 26 (1958). A trial court decision will only constitute
an abuse of discretion where "the 'decision [was] made without a
rational explanation, inexplicably departed from established
policies, or rested on an impermissible basis.'" United States
v. Scurry, 193 N.J. 492, 504 (2008) (alterations in original)
(quoting Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002)).
7 A-5373-15T4
On appeal, FIN argues it was deprived of due process when the
judge permitted Joy to amend its pleadings pursuant to Rule 4:9-
2, and adjudicated Joy's CFA claim. FIN asserts the CFA claim was
not pled and it had no notice Joy would pursue it. FIN argues
there was no opportunity to contest application of the CFA before
or after trial. FIN further argues the judge should not have
awarded treble damages where Joy suffered no ascertainable losses
as defined by the CFA. FIN also asserts the judge's award of
interest was error because the lease forbade it. FIN argues the
damage award was erroneous because it was calculated utilizing the
damages FIN asserted in its counterclaim. We address these
arguments in turn.
II.
Rule 4:9-2 states:
When issues not raised by the pleadings and
pretrial order are tried . . . without the
objection of the parties, they shall be
treated in all respects as if they had been
raised in the pleadings . . . . Such amendment
of the pleadings . . . as may be necessary to
cause them to conform to the evidence and to
raise these issues may be made upon motion of
any party at any time, even after judgment;
but failure so to amend shall not affect the
result of the trial of these issues. If
evidence is objected to at the trial on the
ground that it is not within the issues made
by the pleadings and pretrial order, the court
may allow the pleadings and pretrial order to
be amended and shall do so freely when the
presentation of the merits of the action will
8 A-5373-15T4
be thereby subserved and the objecting party
fails to satisfy the court that the admission
of such evidence would be prejudicial in
maintaining the action or defense upon the
merits.
[(emphasis added.)]
The Supreme Court has stated the "broad power of amendment
should be liberally exercised at any stage of the proceedings,
including on remand after appeal, unless undue prejudice would
result." Kernan v. One Wash. Park Urban Renewal Assocs., 154 N.J.
437, 457 (1998) (quoting Pressler & Verniero, Current N.J. Court
Rules, cmt. on R. 4:9-1 (1998)). The opposing party is deemed to
be on notice of a claim that has not been formally pled if the
issue has been raised in the case prior to trial, even if in a
technically deficient manner. See Cuesta v. Classic Wheels, Inc.,
358 N.J. Super. 512, 517-18 (App. Div. 2003); see also Winslow v.
Corp. Express, Inc., 364 N.J. Super. 128, 140 (App. Div. 2003).
The rule should be followed when a legal theory not advanced in
the pleadings was fully aired at trial and in post-trial briefs.
68th Street Apts., Inc. v. Lauricella, 142 N.J. Super. 546, 561
(Law Div. 1976).
Judge Ramsay stated:
Here, neither party identified the CFA in
their pretrial submissions. Nor did either
party raise any issue regarding the pleading
requirements of the CFA or the absence of a
claim under the CFA at the commencement of the
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trial. Instead, [FIN] waited until the end
of the trial to seek dismissal of the claim
under the CFA for failure to assert the claim
in a pleading and/or failure to present
evidence demonstrating a consumer fraud.
Although [FIN] objected to the CFA claim, it
did not do so in a timely fashion. The
objection was raised at the close of the
trial, not in advance of the trial. Thus, the
issue was tried without objection because
[FIN] did not object to the introduction of
evidence or testimony bearing on the
issue. . . .
[Joy] asserts that [FIN] w[as] not prejudiced
because this case had been litigated as a
consumer fraud action from its inception.
Prior to trial, the parties moved and/or cross
moved for summary judgment. The briefs filed
in connection with those motions explicitly
presented arguments referring to [Joy's] claim
as a consumer fraud claim. The judge who
decided the motion stated, the claims included
a claim under the [CFA.] Although [FIN]
denied any basis for [Joy's CFA] claim, [FIN]
did not object to [Joy's] pursuit of the claim
based on the failure to plead the claim
specifically in the complaint. [FIN] simply
asserted that the claim had no merit.
Under these circumstances, [FIN] will not be
prejudiced as a result of any amendment of the
pleadings to conform to the evidence. [FIN]
knew that [Joy] purported to seek relief under
the [CFA] when the summary judgment motions
were filed, if not earlier. [FIN] did not
seek dismissal of the claim at that time or
identify any prejudice arising from the late
identification of the claim. [FIN] determined
that [Joy] would be unable to satisfy its
burden of proof on a [CFA] claim and defended
the claim on the merits. Therefore, [Joy's]
motion to amend the pleadings to conform to
the evidence is granted.
10 A-5373-15T4
We agree FIN had adequate notice of the CFA claim. As the
judge noted, FIN failed to object to the CFA claim in a timely
fashion. Moreover, FIN was not deprived of due process because
it could contest the facts Joy adduced to prove its claim before,
during, and after the trial. Thus, FIN was not prejudiced as a
result of the judge's amendment of the pleadings to conform to the
evidence, and the judge did not abuse her discretion under Rule
4:9-2.
III.
FIN contends the judge erred in finding a violation of the
CFA. Specifically, FIN contends it was an error to conclude the
filing of FIN's counterclaim against Joy constituted an
unconscionable commercial practice under the CFA.
The CFA prohibits:
The act, use or employment by any person of
any unconscionable commercial practice,
deception, fraud, false pretense, false
promise, misrepresentation, or the knowing,
concealment, suppression, or omission of any
material fact with intent that others rely
upon such concealment, suppression or
omission, in connection with the sale or
advertisement of any merchandise or real
estate, or with the subsequent performance of
such person as aforesaid, whether or not any
person has in fact been misled, deceived or
damaged thereby, is declared to be an unlawful
practice[.]
[N.J.S.A. 56:8-2.]
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"The standard of conduct that the term 'unconscionable'
implies is lack of 'good faith, honesty in fact and observance of
fair dealing.'" Cox v. Sears Roebuck & Co., 138 N.J. 2, 18 (1994)
(quoting Kugler v. Romain, 58 N.J. 522, 544 (1971)). Omissions
consist of "concealment, suppression, or omission of any material
fact . . . ." Id. at 19 (quoting N.J.S.A. 56:8-2). Consumer
fraud by omission necessarily includes that a defendant's act must
be "knowing." Ibid. "[T]he [CFA] is remedial legislation, which
'should be construed liberally in favor of consumers.'" Allen v.
V & A Bros., Inc., 208 N.J. 114, 128 (2011) (quoting Cox, 138 N.J.
at 15).
As Judge Ramsay noted:
There are three possible bases for
responsibility under the [CFA.] The [CFA]
itself declares two general categories of
conduct as unlawful. The first relates to
that part of the Act which states that "any
unconscionable commercial practice,
deception, fraud, false pretense, false
promise or misrepresentation" is an unlawful
practice. These are considered affirmative
acts. The second general category of unlawful
conduct is referred to as acts of omission.
Such conduct involves the "knowing
concealment, suppression or omission of any
material fact." The third basis for
responsibility under the [CFA] is found in
either specific-situation statutes or
administrative regulations enacted to
interpret the [CFA] itself. Such statutes and
regulations define specific conduct that is
prohibited by law.
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Judge Ramsay concluded:
Here, [FIN] drafted the [l]ease, which
provided the security deposit "shall be
returned . . . provided [Joy] . . . carried
out all of the terms, covenants, and
conditions, on its part to be performed,"
including returning the premises "in good
order and condition subject to normal wear and
tear." [FIN] also expressly agreed to put the
existing overhead doors and dock-levelers "in
good working order." . . .
[FIN's] subsequent performance or lack thereof
relating to its obligations under the [l]ease
. . . reflected unconscionable commercial
practices. [FIN] failed to respond to [Joy's]
request to satisfy [FIN's] obligations to put
the existing overhead doors and dock-levelers
in good working order. Nonetheless, even
though [FIN] did not possess any evidence
supporting the position that [it] had
satisfied that obligation, i.e., no witnesses
possessed first-hand knowledge of the work
done on the doors and dock-levelers to satisfy
the requirements of [the lease] and no
documents were produced to demonstrate the
work had been done during [Joy's] occupancy
or for its benefit, [FIN] withheld the
security deposit at the expiration of the term
of the [l]ease.
When [Joy] requested return of the security
deposit, [FIN] misrepresented that the reason
for the delay related to [FIN's] cash flow
issues. When pressed, [FIN] stated the
security deposit was not returned because
[Joy] allegedly failed to "put the dock-
levelers back into good condition." After
[Joy] provided documents establishing that
Martin Overhead Door had performed work on the
doors and dock-levelers, [FIN] still failed
to return the security deposit.
13 A-5373-15T4
At or about the same time, [FIN] leased the
premises to Brook, which had insisted on the
repair and/or replacement of the existing
overhead doors and dock-levelers. Brook
referred [FIN] to New Jersey Door Works, which
was hired to do the work for Brook's benefit.
Although [FIN] knew [it] could not establish
the condition of the premises that had been
provided to [Joy], [FIN] demanded by way of
counterclaim the costs and expenses of the
repairs made to satisfy the demands of the
subsequent tenant. The demand, however, was
not limited to the cost of repair of the
overhead doors and dock-levelers. [FIN] also
demanded payment of demolition and repair
costs to remove the lunch room and offices
even though the [l]ease did not impose the
obligation for removal of those improvements
on [Joy]. [FIN] did not simply breach the
terms of the [l]ease. [FIN's] evasive and
self-serving conduct relating to their
performance under the lease evidenced a
complete lack of fair dealing and bad faith.
Given these aggravating circumstances, [Joy]
has proven by a preponderance of the evidence
that [FIN] engaged in unconscionable
commercial practices in violation of the CFA.
To recover, however, [Joy] must establish more
than the unlawful conduct of [FIN]. [Joy]
must also demonstrate an ascertainable loss
on the part of [Joy]; and a causal
relationship between [FIN'S] unlawful conduct
and [Joy's] ascertainable loss. N.J. Citizen
Action v. Schering-Plough Corp., 367 N.J.
Super. 8, 12-13 (App. Div. 2003).
[Joy's] ascertainable loss includes the amount
of the interest on the security deposit from
August 15, 2011, through the present. In
addition, in Cox, the New Jersey Supreme Court
concluded that "an improper debt or lien
against a consumer-fraud plaintiff may
constitute a loss under the [CFA], because the
consumer is not obligated to pay an
14 A-5373-15T4
indebtedness arising out of conduct that
violates the [CFA]." Cox, 138 N.J. at 23.
Here, [FIN] asserted an improper debt against
[Joy] when [FIN] sought as damages the costs
and expenses associated with repairing and/or
improving the premises to satisfy [FIN's]
obligation to a subsequent tenant. Unlike
Cox, in this action, these losses occurred
after [FIN] had engaged in the conduct that
violated the [CFA]. [FIN] already had failed
to perform their obligations under the [l]ease
with respect to putting the existing overhead
doors and dock-levelers in good working order,
had failed to communicate effectively the work
that [Joy] needed to complete at the
expiration of the [l]ease, had agreed to
repair and/or replace doors and dock-levelers
and demolish the lunch room and offices for
the benefit of a subsequent tenant, and had
misled [Joy] regarding the reason for not
returning the security deposit. When
plaintiff refused to succumb to [FIN's]
evasive tactics, [FIN] asserted a debt arising
out of their unconscionable commercial
practices, i.e., the amounts incurred to
satisfy [FIN's] obligations to a subsequent
tenant.
We agree with Judge Ramsay's determination FIN asserted an
improper debt when it pursued its counterclaim, which constituted
an unconscionable commercial practice in violation of the CFA.
Additionally, we agree with the judge that Joy's ascertainable
loss derived from FIN's unconscionable commercial practice of
fraudulently retaining the security deposit and asserting a debt
against Joy for a sum greater than the security deposit.
15 A-5373-15T4
IV.
FIN contends the judge's award of interest as part of the
judgment violated the lease, which expressly excluded interest
payable on the security deposit. Thus, FIN contends there could
not have been an ascertainable loss based on interest on the
security deposit.
"In general, we review awards of interest and the calculation
of those awards under an abuse of discretion standard." Belmont
Condo. Ass'n, Inc. v. Geibel, 432 N.J. Super. 52, 91 (App. Div.
2013) (citing Baker v. Nat'l State Bank, 353 N.J. Super. 145, 177
(App. Div. 2002)). "A reviewing court must not disturb an award
of prejudgment interest unless the trial judge's decision
represents 'a manifest denial of justice.'" Id. at 91-92 (quoting
Musto v. Vidas, 333 N.J. Super. 52, 74 (App. Div. 2000)).
Judge Ramsay concluded:
[FIN] asserted that [Joy] owed (1) $36,020.74
for services relating to the repair and
replacement of the overhead doors and dock-
levelers, and (2) $16,175.30 for the
demolition/renovation of the lunch room and
offices, for a total of $52,196.04.
Thus, [Joy] is entitled to recover return of
the security deposit in the amount of
$82,262.00 as damages for [FIN's] breach of
the [l]ease. In addition, [Joy] is entitled
to recover damages resulting from [FIN's]
violation of the [CFA] in the amount of
$52,196.04 plus the interest on the security
deposit from August 15, 2011, to the present,
16 A-5373-15T4
i.e., $9,305.90, for a total of $61,501.94.
Although both the breach of contract and [CFA]
claim justify recovery of the interest on the
security deposit, [Joy] is limited to a single
recovery for that loss.
With respect to the losses arising from the
violation of the [CFA], N.J.S.A. 56:8-19
requires that the amount of those losses must
be trebled. Thus, damages for the violation
of the [CFA] total $184,505.84. In addition,
[Joy] is entitled to recover reasonable
attorneys' fees. . . .
. . . .
For [FIN's] breach of contract, [Joy] is
entitled to recover the security deposit in
the amount of $82,262.00; for [FIN's]
violation of the [CFA], [Joy] is entitled to
recover $184,505.84, for a total judgment in
the amount of $266,767.84, subject to [Joy's]
application for attorneys' fees and costs.
[(emphasis added).]
As we noted, the lease stated "[t]he [s]ecurity [d]eposit
shall be returned to [Joy] without interest, after the time fixed
as the expiration of the term herein, . . . provided [Joy] has
fully, faithfully and timely carried out all of the terms,
covenants and conditions on its part to be performed." This
provision of the lease contemplated the return of the security
deposit without interest in the normal course at the conclusion
of the lease. We do not read this provision as depriving Joy of
interest as part of a CFA damage award where the security deposit
was wrongfully withheld. For these reasons, it was not an abuse
17 A-5373-15T4
of discretion for the trial judge to award interest on the
wrongfully withheld security deposit as an ascertainable loss, and
treble the amount pursuant to the CFA.
V.
Finally, in its cross-appeal Joy argues if we reverse the CFA
award, we should address Joy's claim for punitive damages, which
the judge denied because she determined treble damages under the
CFA were a form of punitive damages. We do not reach this argument
because we have upheld Judge Ramsay's determination.
Affirmed.
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