New Jersey Superior Court, Appellate Division - 237 N.J. Super. 385
In Farese v. McGarry (1989), Frank Farese (landlord) sued James M. McGarry (tenant) for breaking a rental contract and causing damage to a one-family house. The case took place in New Jersey's Superior Court, Appellate Division. The written lease between both parties allowed the tenant to buy the house within a specific time frame. The tenant made improvements to the property, thinking he had activated his purchasing option. However, the landlord disagreed and wouldn't sell the house. The landlord also wanted the tenant to leave but the tenant stayed for six and a half months.
The landlord sued the tenant for breaking the contract and asked for damages. The tenant made a counterclaim to force the purchase or to be compensated for the improvements made. The jury found in favor of the landlord for the contract breach, but not for the damages. The jury found in favor of the tenant for the counterclaim, giving him $13,000 for the improvements.
The landlord appealed, but the Appellate Division upheld the jury's decision, as they deemed it appropriate to award damages based on unjust enrichment and quantum meruit principles. This case is important because it shows how courts choose different methods of recovery for contract breaches and balance contract enforcement with avoiding unjust enrichment. It also highlights how courts decide if a purchasing option has been activated correctly and the available remedies for parties who have made improvements in expectation of buying a property.
The tenant counterclaimed for specific performance or damages, alleging a breach of the option to purchase the property and seeking compensation for improvements made to the property. The jury awarded the tenant $13,000 for the reasonable value of improvements made to the property. The court ruled that the tenant's counterclaim is valid and can seek damages for both the difference between the option price and the fair market value of the property and the value of improvements made to the property. The court also ruled that pleadings can be amended to serve the presentation of the merits of the action. The jury found that the tenant made improvements to the property due to a mistake about their option to purchase, and the landlord encouraged or did not correct the mistake. Therefore, the tenant may be entitled to recover under a theory of quasi-contract or unjust enrichment. The amount of damages awarded to the tenant was not supported by evidence, and the proper measure of damages is the value of the improvements to the landlord, estimated by the tenant to be $3,150 based on their labor and hours worked. The landlord's appeal was rejected.
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