JOSEPH LAKOWITZ, JR., Plaintiff–Appellant, v. SUSAN BROWN and STEVEN BROWN, Defendants–Respondents.
SUSAN BROWN and STEVEN BROWN, Plaintiffs, v. JOSEPH LAKOWITZ, JR. and FERN KATZMAN, Defendants.
In these matters consolidated by the Law Division, we review the terms of an agreement between the parties regarding the use and occupancy of certain real estate located on a thirteen-acre parcel on Hillsborough Road in Hillsborough Township (the property). Initially, we identify the parties and their relationships. Although some parties are plaintiffs in one of the actions and defendants in the other, for simplicity, we will consistently use a single designation in our opinion as noted below.
Plaintiff Joseph Lakowitz, Jr. is the half-brother of defendant Susan Brown, who is married to defendant Steven Brown. We refer to the Browns collectively as defendant. Plaintiff also has a sister, Jennifer Lakowitz. Fern Katzman married plaintiff in 2007. Eva Marie Lakowitz and Joseph Lakowitz (the Lakowitzes) are plaintiff and Susan Brown's parents.
The controversy surrounds the effect of an agreement between the Lakowitzes and defendant regarding the property and whether the agreement inures to the benefit of tenants residing at the property, that is, plaintiff and his wife, despite the fact they did not execute the agreement. Plaintiff filed an action alleging anticipatory breach of the agreement and defendant, who owned the property, filed a separate action seeking eviction of plaintiff and his wife. After discovery, cross-motions for summary judgment were filed. The trial judge denied plaintiff's motion, granted defendant's motion, dismissed plaintiff's complaint with prejudice, transferred the rent escrow to defendant and dismissed defendant's eviction complaint. We affirm.
The Lakowitzes owned the property, which they sold to defendant in 1990 for $500,000. Defendant paid $47,000, with the balance of the purchase price satisfied by defendant's execution of a non-interest bearing note to the Lakowitzes, which was secured by a purchase-money mortgage on the property. The terms of the loan agreement required defendant to pay the Lakowitzes $1000 per month for 453 months.
At the time of the sale, the Lakowitzes intended to move to Tennessee; however, their two children, plaintiff and Jennifer, remained on the property. The Lakowitzes and defendant executed an addendum to the mortgage note, which acknowledged plaintiff and Jennifer's residence and set forth their agreement to each pay defendant $300 per month rent. Notably, neither plaintiff nor Jennifer executed the addendum or any other document involved in the real estate transaction between the Lakowitzes and defendant. Additionally, the addendum stated defendant had notified the Lakowitzes of the need for a third tenant “for income purposes.” The addendum stated that because the Lakowitzes “wished” plaintiff and Jennifer to remain on the property, they agreed that if a third tenant was not located, the mortgage payment due under defendant's note would be reduced from $1000 to $700 per month. If plaintiff or Jennifer left the property, or if the Lakowitzes located a third tenant, the monthly mortgage payment would return to $1000. Apparently a third tenant was never secured, so plaintiff and Jennifer paid $600 rent per month and defendant's mortgage payment was $700 per month, so essentially defendant paid the Lakowitzes $100 each month. When the Lakowitzes returned to reside in the property this financial arrangement continued.
Defendant satisfied the balance due under the mortgage note on November 25, 2006. The Lakowitzes executed a discharge of mortgage. At some point that year, the Lakowitzes moved from the property and plaintiff was the sole remaining resident. Defendant informed plaintiff if he desired to remain on the property, he would need to pay $1500 per month rent. He apparently agreed and commenced payments.
On August 29, 2011, defendant issued a notice to quit and termination of plaintiff's month-to-month tenancy, giving him two months to leave the property. The notice stated defendant intended to occupy the premises. When plaintiff learned of the terms of the addendum agreement, he reduced his monthly rental payments to $1000, and declined to vacate the property.
Plaintiff filed his action alleging defendant breached the terms of the addendum, which he maintained gave him the right to occupy the property until April 18, 2028, so long as he paid $1000 per month rent. Defendant initiated an eviction proceeding, terminating plaintiff's month-to-month tenancy. The actions were consolidated by the Law Division.
In a written decision addressing the cross-motions for summary judgment, the judge denied plaintiff's motion and granted defendant's motion. He dismissed plaintiff's complaint with prejudice, and entered a judgment for defendant releasing the escrowed rent; upon payment of the rent defendants' complaint for eviction premised on plaintiff's non-payment of rent was also dismissed with prejudice. Further, the judge dismissed, without prejudice, defendant's claim for possession after determining the notice provisions of the pleadings were defective. Plaintiff's appeal ensued.
In our review of a trial court's order granting or denying summary judgment,
we apply the same standard as the motion judge. EMC Mortg. Corp. v. Chaudhri, 400 N.J.Super. 126, 136 (App.Div.2008) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445–46 (2007)). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J.Super. 224, 230 (App.Div.) (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)), certif. denied, 189 N.J. 104 (2006). See also R. 4:46–2(c) (entitling moving party to judgment as a matter of law “if the pleadings ․ show that there is no genuine issue as to any material fact challenged”). We then decide “whether the motion judge's application of the law was correct.” Atl. Mut. Ins. Co., supra, 387 N.J.Super. at 231. In doing so, we owe no deference to the motion judge's conclusions on legal issues, which we review de novo. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
[Fedor v. Nissan of N. Am., Inc., 432 N.J.Super. 303, 311 (App.Div.2013), certif. denied, _ N.J. _ (2014).]
Plaintiff argues the rental amount was designed to offset the mortgage payments and he, as a third-party beneficiary of the addendum agreement, was granted a life estate in the property conditioned only on the payment of a fixed amount of rent, which would end coincident with the proposed end date of the mortgage, April 18, 2028. Prior to our review of this claim, we recite the legal principles governing the interpretation of a contract, which are matters of law subject to our plenary review. Kaur v. Assured Lending Corp., 405 N.J.Super. 468, 474 (App.Div.2009). See also Celanese Ltd. v. Essex Cnty. Improvement Auth., 404 N.J.Super. 514, 528 (App.Div.2009) (stating “unless the meaning is both unclear and dependent on conflicting testimony[,]” the court interprets the terms of a contract as a matter of law) (internal quotation marks and citations omitted).
When interpreting a contract, “we first examine the plain language of the [contract] and, if the terms are clear, they ‘are to be given their plain, ordinary meaning.’ ” Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 270 (2008) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001)). “We do not supply terms to contracts that are plain and unambiguous, nor do we make a better contract for either of the parties than the one which the parties themselves have created.” Maglies v. Estate of Guy, 193 N.J. 108, 143 (2007). The determination of “[w]hether a term is clear or ambiguous is ․ a question of law.” Nester v. O'Donnell, 301 N.J.Super. 198, 210 (App.Div.1997) (internal quotation marks and citation omitted).
Courts have recognized the right of a third-party beneficiary to enforce a contract. Drewen v. Bank of Manhattan Co., 31 N.J. 110, 116 (1959). “A person for whose benefit a contract is made, ․ may sue thereon in any court and may use such contract as a matter of defense in an action against him although the consideration of the contract did not move from him.” N.J.S.A. 2A:15–2.
In this matter the initial question is whether plaintiff was the intended beneficiary of the addendum. We answer in the negative.
The addendum describes the sale of the property and the related mortgage note; it explains plaintiff and Jennifer lived with their parents on the property and included their agreement to pay $300 per month rent. The addendum's provisions go on to describe defendant's need to have a third tenant in the property in order to meet the $1000 per month mortgage payment and the Lakowitzes's obligation to secure the third tenant. Then the addendum includes the disputed provision, which states:
The LAKOWITZES wish for their children to remain on the premises at the above-stated rental. As consideration for same, in the event a third tenant is not located and placed on the premises, the monthly payment of principal as provided in the Mortgage Note will be reduced from $1,000.00 to $700.00 for as long as the children of the LAKOWITZES remain on the premises. In the event a third tenant begins residing on the premises, ․ the monthly payment of principal will increase from $700.00 to $1,000.00. This provision shall take effect immediately.
Plaintiff suggests this provision grants him a long-term lease or life tenancy until the stated end date of the mortgage. He supports this by identifying that the rent and mortgage payment were identical amounts and believes the two sums were intended to offset each other. Further, he suggests the absence of a pre-payment provision in the mortgage reinforces his position that the proposed right to reside in the property continued until April 18, 2028.
Despite plaintiff's proffered characterization regarding the import of the document, the Statute of Frauds requires a long-term lease to be in writing. See Willow Brook Recreation Ctr., Inc. v. Selle, 96 N.J.Super. 358, 364 (App.Div.1967), certif. denied, 51 N.J. 187 (1968). The statute provides:
A transaction intended to create a lease of real estate for more than three years shall not be enforceable unless:
a. the leased premises, the term of the lease and the identity of the lessor and the lessee are established in a writing signed by or on behalf of the party against whom enforcement is sought; or
b. the real estate, the term of the lease and the identity of the lessor and the lessee are proved by clear and convincing evidence.
The addendum alone is insufficient to prove by “clear and convincing evidence” the terms of a purported long-term lease. Indeed, the motion judge correctly noted the term of the alleged lease is absent from the addendum's terms. Plaintiff's assertion the lease runs the length of the mortgage term, because the $1000 per month lease payments matched the mortgage obligation, is mere speculation. The identical payment amounts of these two obligations are not dispositive, let alone clear and convincing, on this issue. Accordingly, plaintiff's proofs do not satisfy the requirements of the statute of frauds. Therefore, the provisions in the addendum, even if intended to benefit him, are unenforceable as a long-term lease. At best, plaintiff enjoys a month-to-month tenancy based upon the oral understanding he reached with defendant in 2006. World Traditions, Inc. v. DeBella, 316 N.J.Super. 537, 548 (Ch. Div.1998).
We also note the absence of a pre-payment provision does not preclude a borrower's right to satisfy the debt. “Prepayment of a mortgage loan may be made by or on behalf of a mortgagor at any time without penalty.” N.J.S.A. 46:10B–2.
We reject plaintiff's claim he was granted a life tenancy in the realty as that claim is unsupported. Not only does plaintiff present no legal authority to support this proposition, he simply offers no evidence to show such a transaction was intended or even contemplated. Based upon our review of the record, we conclude the provisions of the statute of frauds, N.J.S.A. 25:1–12, preclude the relief sought by plaintiff.
All arguments advanced by plaintiff but not addressed were found to lack merit. R. 2:11–3(e)(1)(E). The January 11, 2013 orders incorporating the conclusions reached by Judge Fred H. Kumpf will not be disturbed.