Liqui-Box Corp. v. Estate of Elkman

• Decision Date: 21 February 1990
• Docket Number: LIQUI-BOX
• Citation: 570 A.2d 472,238 N.J.Super. 588
• Parties: CORPORATION, a Corporation of the State of Ohio, Plaintiff-Appellant-Cross-Respondent, v. ESTATE OF Sidney ELKMAN, Defendant-Respondent-Cross-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 588

238 N.J.Super. 588

570 A.2d 472

LIQUI-BOX CORPORATION, a Corporation of the State of Ohio Plaintiff-Appellant-Cross-Respondent, v. ESTATE OF Sidney ELKMAN, Defendant-Respondent-Cross-Appellant.

Superior Court of New Jersey Appellate Division.

Argued Feb. 7, 1990.

Decided Feb. 21, 1990.

Mitchell S. Berman, for plaintiff-appellant-cross-respondent (Eisenstat, Gabage & Berman, attorneys; Mitchell S. Berman, Vineland, on the brief).

Walter J. Fleischer, Jr., for defendant-respondent-cross-appellant (Shanley & Fisher, attorneys; Walter J. Fleischer, Morristown, on the brief).

Before Judges KING, SHEBELL and BAIME.

The opinion of the court was delivered by

SHEBELL, J.A.D.

This appeal and cross-appeal are from a bench trial which involved the interpretation of a commercial lease agreement for premises located in West Deptford Township. Plaintiff-appellant Liqui-Box Corporation (tenant) filed a verified complaint and obtained an order to show cause in the Chancery Division against the then defendant Jessup Industrial Park. The order to show cause sought judgment for possession of the leased premises and to enjoin defendant from interfering with plaintiff's possession, as well as reformation of the lease and compensatory damages. Thereafter, an order was entered denying plaintiff's request for possession and other injunctive relief, on the grounds that plaintiff could be compensated in damages.

Plaintiff then amended its complaint to substitute the Estate of Sidney Elkman (landlord) as a defendant, as it was Jessup's successor in interest, and seeking a judgment for damages in connection with defendant's allegedly wrongful eviction of plaintiff from the premises. Plaintiff also sought damages for defendant's alleged conversion of certain equipment belonging to plaintiff; however, this claim was later dismissed as defendant agreed to waive any claim for storage charges for the equipment.

Defendant answered the amended complaint asserting that it had lawfully taken possession of the premises pursuant to the authority in the lease. It also filed a counterclaim seeking reimbursement for the costs of repairing the leased premises and of obtaining a new tenant, and for attorneys' fees.

After trial, judgment was entered in favor of defendant and against plaintiff on all claims. On its counterclaim, defendant was awarded: $15,135.21 in damages associated with reentering, repairing and reletting the property; $50,345.08 in attorneys' fees; and $3,531.04 in litigation costs, plus both pre-judgment and post-judgment interest.

The lease in question was entered into on December 1, 1968, by plaintiff's predecessor, Handi-Tap of New Jersey, Inc., and defendant's predecessor, Jessup Industrial Park. The lease was for a 25-year period to commence on January 1, 1969. Annual basic rent for the first year was $23,000, payable in equal monthly installments of $1,916.67.

The agreement allowed for reentry upon default, and provided that if the tenant vacated or abandoned the premises for a period of 30 days, then the landlord could, at its election, reenter and repossess the premises with or without process of law and remove the tenant without such reentry and repossession, working a forfeiture of the rents to be paid and the covenants to be performed during the full term of the agreement. The tenant further agreed to indemnify the landlord for any loss arising from such reentry, including the difference between the net income actually received by the landlord during any month of the demised term and the rent agreed to be paid by the terms of the lease, together with the expenses of reletting, commissions and attorneys' fees.

The lease required the tenant to maintain liability and fire insurance on the premises and allowed the tenant to sublet only upon the landlord's written consent, which consent should not be unreasonably withheld. In addition, the tenant was required to pay all costs and expenses, including attorneys' fees for litigation brought by or against the tenant to which the landlord was made a party. The tenant was permitted under the terms of the lease to remove its equipment from the premises from time to time, and the landlord agreed not to disturb or interfere with the tenant's right of quiet enjoyment of the premises.

Plaintiff had used the premises to produce plastic containers, but apparently decided for business reasons to cease its operations in New Jersey. Plaintiff therefore undertook in early March 1987 to terminate the lease agreement by negotiations with representatives of the landlord. Plaintiff wanted to be compensated for getting out of the lease early, because it felt that the property could be relet for a higher rental than that required by the lease. Plaintiff advised the defendant's representatives that if the parties could not agree on a price, then plaintiff was going to exercise its option to sublet the premises. Plaintiff, in fact, entered into a listing agreement with a real estate broker sometime during March 1987. Defendant authorized a local realtor to negotiate with plaintiff to terminate the lease, but maintained that a physical inspection of the premises would have to be arranged before any deal could be negotiated.

On March 23, 1987, defendant's representative received a call from the individual who owned the land adjacent to the leased premises advising that the premises had already been vacated. Defendant's realtor also advised defendant that he had inspected the building and that no one was at the building any longer and that an employee of plaintiff had told the realtor that plaintiff had moved out on January 14, 1987, "give or take a day." Some employees had remained for two weeks after that date, and according to plaintiff's personnel records, the employees' time cards all ended on February 4, 1987, with the notation "plant closed."

According to the realtor, when he inspected the premises on March 23, he found one passage door unlocked. All furniture had been removed, there were leaks in the ceiling tiles over the men's restroom, and the skylights had holes in them. There were small holes in the floor where machinery had previously been bolted down and electrical piping was hanging from the wall.

Defendant was instructed by legal counsel to verify insurance coverage, and to take possession of the building by changing the locks, and to put the building on the market for reletting. The locks were changed on March 31, 1987. According to a letter defendant's attorney received from plaintiff's attorney on April 6, 1987, insurance was being maintained by plaintiff; however, it was later determined that the insurance was no longer in force and that defendant had not been named as a loss payee in any event, as required by the lease. Apparently, only a property damage insurance policy was in force.

Defendant's attorney notified plaintiff, by letter dated March 30, 1987, of its being in breach of the lease and of defendant's intention to take advantage of all available remedies under the lease. Defendant ultimately relet the premises to another tenant, Mid-Atlantic Bag, for five years beginning October 1, 1987, at a monthly rental of $4,809.60 and increasing thereafter in a pre-set amount yearly; however, defendant agreed to reduce Mid-Atlantic's monthly rent by $500 for its storage of certain equipment left behind by plaintiff. Defendant was responsible for paying a broker's commission of $14,226.98, for procuring the new tenant.

As of the end of March 1987, plaintiff's equipment that remained on the demised premises consisted of two water towers, two air handlers, an air curtain, five chillers, a pit pump, and some piping and duct work, which had a combined estimated value of approximately $17,000. The actual cost of the equipment at plaintiff's premises prior to the pullout had been over one million dollars. A representative from Mid-Atlantic testified that the equipment left behind was completely stripped down, rusted and unusable. When plaintiff finally removed the equipment in the fall of 1988, its representative had told Mid-Atlantic that it could keep any of the equipment it wanted.

Also introduced into evidence by the defense were copies of plaintiff's PSE & G bills for the period of December 1986 through March 1987. The invoices dated December 14, 1986, and January 16, 1987, showed billed amounts of $15,159 and $14,452, respectively. The bill dated February 17, 1987, was for only $65 and subsequent bills were for even less. Defendant introduced into evidence: (1) a letter dated May 18, 1987, which indicated that the security company had removed its leased security equipment from the premises on March 12, 1987, pursuant to a request from plaintiff's Maryland office; (2) a letter dated April 7, 1987, from plaintiff's attorney indicating that the bulk of plaintiff's property had been removed by February 26; and (3) a portion of plaintiff's annual report for 1987 which indicated to plaintiff's shareholders that, at the "beginning of 1987," plaintiff had closed an old manufacturing plant in West Deptford and had moved its production equipment to other locations.

Defendant also produced an insurance expert who testified that most fire and liability insurance policies exclude coverage for risks where the premises remain vacant or unoccupied beyond a certain number of days. She asserted that in the insurance industry, vacant means no longer being used for the intention of the original business, plus the removal of substantially all equipment. In her opinion, the carrier here would have definitely invoked such a vacancy clause to deny a claim had a loss occurred as of March 31, 1987. She based this opinion on the negligible amount of equipment left behind, the removal of the security system and the cessation of all operations. She noted that had the company simply laid off its employees and locked the place up--but left all its equipment--the premises...