NOEL L. HILLMAN, District Judge.
Presently before the Court are the parties' cross-motions for summary judgment on plaintiff's claims that defendant
On October 5, 1983, plaintiff, Frederick W. Forte, entered into a lease agreement with defendant, Texaco Inc., for the lease of Plaintiff's gas station at Route 73 and Beech Avenue in Berlin, New Jersey.
After defendant had exercised the first option to renew, on December 29, 1988, a fire destroyed the gasoline service station building on the property, and the remaining structures had to be demolished. Defendant continued to pay plaintiff the monthly rental payment of $1,800 per month until the lease extension expired on September 30, 1993. Prior to the lease's expiration, on September 17, 1993, Texaco notified plaintiff in writing that it was terminating their lease at the expiration of the first renewal extension period.
During the time period between the fire and the termination of the lease, an environmental evaluation discovered contamination. In May 1990, the underground storage tanks and associated dispensers were removed from the site by defendant. During excavation activities, approximately 1,000 cubic yards of petroleum hydrocarbon-impacted soil were removed and transported off-site for disposal. Remediation has been ongoing since that time, with completion anticipated by May 2019.
Because defendant still required access to plaintiff's property to facilitate the remediation process after the termination of the lease, on November 5, 1993, plaintiff and defendant entered into a License Agreement, which provided defendant access to the site and paid plaintiff $29,615.93 in site access fees per year.
On December 17, 2010, the 1993 License Agreement was terminated pursuant to a License Termination Agreement, and the parties entered into a new Site Access and License Agreement. Under this new agreement, plaintiff was paid $70,000 as a onetime access fee for defendant's access to the property to perform the remediation until it is completed.
In August 2014, defendant became aware that it was plaintiff's contention that a term of the parties' original lease agreement required defendant to return to plaintiff an "operable gasoline filling station with all necessary permits" upon the expiration or termination of the lease. Because defendant disagreed, plaintiff filed suit for breach of contract and, in the alternative, for promissory estoppel. Discovery has been completed, and plaintiff has moved for summary judgment as to liability. Defendant has cross-moved for summary judgment in its favor as to all claims.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000.
Summary judgment is appropriate where the Court is satisfied that the materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations, admissions, or interrogatory answers, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Plaintiff argues that the 1983 Lease Agreement, when read in tandem with the intentions of the parties and surrounding circumstances, clearly demonstrates that defendant was required to return to plaintiff at the expiration of the lease an "operable gasoline filling station with all necessary permits." To support his position, plaintiff presents the testimony of Robert Flynn, who served as the real estate agent for Texaco at the time the parties entered into the 1983 lease. Mr. Flynn states that it was the parties' intention that when the Beech Avenue station was returned to plaintiff, it would be returned to him as a "going" station with the proper permits. What plaintiff received instead is a vacant piece of land which is being remediated for environmental contamination.
Defendant argues that plaintiff's claim is meritless. Defendant first points to the language of the 1983 Lease Agreement, which does not contain any provision for returning the property to plaintiff as a "going" gas station. Defendant also refers to the subsequent agreements between the parties that contain integration clauses that bar claims on prior agreements or representations. Defendant also argues that plaintiff's evidence to support his position is improper parol evidence and violates the statute of frauds. Defendant further contends that plaintiff's claims are barred by the statute of limitations, plaintiff cannot prove any damages, and plaintiff's entire case is frivolous and in violation of Federal Civil Procedure Rule 11.
The Court has fully reviewed all of the voluminous briefs and supporting documents provided by the parties, and has carefully considered all of the parties' arguments. Without needing to address every argument, the Court concludes that plaintiff's claim that defendant was required to provide plaintiff with an operational gas station with required permits at the end of the lease is unsupportable as a matter of law, for two independently dispositive reasons: (1) the terms of the 1983 Lease Agreement and other documents are unambiguous and the extrinsic evidence supports their plain and ordinary meaning, and (2) plaintiff has not met his burden of establishing that he has suffered any damages.
Under New Jersey law, the interpretation of a contract is ordinarily a legal question for the court and may be decided on summary judgment unless there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation.
"In general, the parol evidence rule prohibits the introduction of evidence that tends to alter an integrated written document."
In this case, the terms of the 1983 Lease Agreement do not require defendant to return to plaintiff a fully operational gas station with permits at the end of the lease. The relevant portions of the 1983 Lease Agreement provide:
(Docket No. 57-4 at 3.)
(Docket No. 57-4 at 3.)
(Docket No. 57-4 at 4.)
(Docket No. 57-4 at 4-5.)
(Docket No. 57-4 at 5.) None of these provisions obligate defendant to provide an "operational gas filling station" — whatever that term may mean
In addition to the plain language of the lease, the circumstances before and after the signing of the lease do not support plaintiff's position. First, on October 5, 1983, defendant paid plaintiff $400,000 to own all structures on the land, and then defendant paid a monthly rent to plaintiff for use of just the land. This event comports with Paragraph 20, which permits defendant to remove all structures if it desired to, with no obligation to replace them.
Second, the 1983 Lease Agreement and other subsequent agreements contained integration clauses, which preclude the consideration of extrinsic evidence as to terms not included in the contract.
Even accepting as true that in October 1983, Mr. Flynn and plaintiff anticipated, as a matter of common sense based on the business interests of defendant, that plaintiff would receive an operational service station at the end of the parties' contractual relationship, fire that destroyed the structures, leaking gas tanks that required removal, unconsummated plans for Texaco development at another site owned by plaintiff, and over 20 years of environmental remediation altered that possibility. All of the parties' agreements over the years during the course of these events contained explicit provisions regarding a variety of issues, including destruction of property and site access fees, but none of them contained a provision that set forth the obligation of defendant to provide plaintiff with an operational gas filling station with the attendant licenses.
Also fatal to plaintiff's claims is his lack of proof as to his damages. A breach of contract claim requires proof of three elements: (1) the existence of a valid contract; (2) a breach of that contract; and (3) resulting damage to the plaintiff.
Because plaintiff no longer owns the Beech Avenue property,
The facts in the record show that plaintiff has already received significantly more than the "benefit of the bargain" of his contract with defendant, with the fire and environmental contamination actually causing plaintiff a monetary gain that far exceeded what he would have received under a fully exercised three-option lease.
Had the environmental contamination not occurred during defendant's tenancy, the parties' relationship would have resulted in one of three scenarios. When the lease was signed in October 1983, defendant paid plaintiff $400,000 for the existing structures that caused the land to be an operational gasoline service station. If the property sat unused and unimproved until the termination of the lease in October 1993, the station would have returned to plaintiff as "operational," but he would have gained $400,000, plus more than $198,000 in rental payments, for the property in the exact same state as it was in 1983.
If, however, defendant had demolished and rebuilt the service station during its occupancy, under lease paragraph 20, plaintiff would have been required to repurchase from defendant the improved equipment and other items in order to recover an operational gas station at the end of the lease. If defendant had been required to demolish structures because they were damaged, as ended up being the case, plaintiff would have been obligated under lease paragraph 4(c) to pay for any repairs that defendant made to rebuild an operational gas station, or lose rent payments if defendant had left the property. Under these three scenarios, only if defendant never set foot on plaintiff's property for the 10-year duration of the lease would plaintiff have received an operational gas station without having any additional expenditures as contemplated by the lease.
The environmental contamination turned out to be a windfall to plaintiff despite plaintiff's property no longer having an operational gas station. Plaintiff was never required to pay for repairs or upgrades, which would have been made by defendant if the property had not become contaminated, and defendant paid plaintiff approximately $573,000 in site access fees from 1993 to 2010. Rent for that time period would have provided plaintiff with only about $390,000.
Putting aside the at least $180,000 gain that the unoperational gas station provided to plaintiff over the return of an operational gas station, the appropriate measure of consequential damages for a breach of contract is to place the plaintiff in the same position he would have been in but for the breach. Even if the 1983 Lease Agreement could be read to include the requirement that defendant return to plaintiff an "operational gasoline service and filling station with all required permits," the cost of constructing an undisputedly incomparable brand new service station is not that "same position." Plaintiff has failed to provide any proofs to appropriately define and quantify his damages resulting from the return of property that no longer was a functional gas station.
Defendant has asked this Court to allow it to file a formal motion for sanctions against plaintiff and his counsel. Defendant states that it "does not make this request lightly," and argues that "this case involves more than a failure to inquire into the facts and law before filing an action. It goes beyond well-intentioned zealous advocacy" because "false statements were made on material issues and attributed to witnesses, including one who is deceased." (Docket No. 67 at 16.) Plaintiff's counsel has objected to defendant's view of their actions.
The legal standard to be applied when evaluating conduct which allegedly violates Rule 11 is reasonableness under the circumstances, with reasonableness defined as an "objective knowledge or belief at the time of the filing of a challenged paper" that the claim was well-grounded in law and fact.
If defendant believes that it can demonstrate bad faith and improper motives by plaintiff or his attorneys, or that there was no good faith basis for plaintiff or his attorneys to believe that his claim had a reasonable basis in law or equity, the Court will allow defendant 20 days to file a motion consistent with Federal Civil Procedure Rule 11. Plaintiff shall have 20 days to file an opposition.
A basic principle of contract interpretation is to read the document as a whole in a fair and common sense manner.
Although an unsuccessful claim does not usually suggest a violation of Rule 11, the Court will grant defendant's request for leave to file a sanctions motion against plaintiff and his counsel should it feel it has a good faith basis to do so.
An appropriate Order will be entered.
Relatedly, plaintiff argues that Mr. Flynn had actual or implied authority to bind defendant to his promises to plaintiff. Even if that were true, Mr. Flynn retired in 2002, and plaintiff and defendant executed additional agreements with integration clauses after that time.
