## Facts

- A landlord rented a one-family house to a tenant under a written lease.
- After the lease term expired and the tenant received notice to vacate, the tenant remained in possession for about six and a half months.
- After the tenant moved out, the landlord sued for property damage, statutory double rent for the holdover period under N.J.S.A. 2A:42-6, and attorney’s fees.
- The tenant counterclaimed, asserting an option-to-purchase understanding and seeking specific performance or damages; he also sought restitution for improvements made in anticipation of buying the property.
- A jury, using special interrogatories, rejected the landlord’s claims for holdover damages and physical damage.
- The jury found the landlord did not breach a contractual obligation to sell the property.
- The jury awarded the tenant $13,000 as the reasonable value of improvements made to the property.

## Issues

1. Whether a tenant may recover in quantum meruit/unjust enrichment for improvements when a written lease governs the parties’ relationship.
2. Whether the tenant’s testimony about the reasonable value of his labor and improvements was admissible and sufficient to support the award.
3. Whether an arbitration clause in the lease barred the tenant’s counterclaims after the landlord litigated through trial.
4. Whether admitting evidence of prior negotiations violated the parol evidence rule by varying the written lease.
5. Whether the restitution verdict was against the weight of the evidence requiring a new trial.

## Decision

- The Appellate Division affirmed the judgment awarding the tenant $13,000 for the reasonable value of improvements.
- The court held restitution was available because the lease did not fully address allocation of the benefit conferred by the improvements under the circumstances found by the jury.
- The court upheld admission and use of the tenant’s valuation testimony as competent evidence supporting the jury’s award.
- The court rejected reliance on the arbitration clause, concluding it did not require vacating the verdict in light of the landlord’s litigation conduct.
- The court found no reversible parol-evidence error and no abuse of discretion in denying a new trial.

## Legal Principles

- A quasi-contract/unjust enrichment remedy may be available despite an express contract when the contract does not fully govern the specific benefit unjustly retained.
- Restitution may be awarded for the reasonable value of improvements conferred on another to prevent unjust enrichment, even when an asserted purchase-option contract claim fails.
- A party who performs work or makes improvements may testify to the reasonable value of that work, and the factfinder may credit that testimony in setting restitution.
- A contractual arbitration right may be waived by substantial participation in litigation without timely insisting on arbitration.
- Contextual evidence of negotiations may be admissible to explain the parties’ dealings relevant to an equitable claim when not used to contradict integrated contract terms.

## Conclusion

The court affirmed a jury’s restitution award to a tenant for improvements made in anticipation of purchase, holding that the written lease did not foreclose quantum meruit where it did not allocate the benefit at issue, the tenant’s valuation proof was admissible, the landlord’s arbitration defense was unavailable after litigation through trial, and the verdict was supported by the evidence.


Farese v. McGarry, 237 N.J. Super. 385, 568 A.2d 89 (App. Div. 1989)