On appeal from Superior Court, Appellate Division, whose opinion is reported at 148 N.J. Super. 493 (1977).
For affirmance -- Chief Justice Hughes, Justices Sullivan, Pashman, Clifford, Schreiber and Handler and Judge Conford. For reversal -- None. Pashman, J., concurring. Pashman, J., concurring with result.
[76 NJ Page 596] This litigation concerns a dispute between plaintiff landlord, Penwag Property Co., Inc., and its tenant, David Landau, the defendant, arising out of a lease agreement under which the tenant leased the first floor and basement
of a building known as 112-114 Nassau Street, Princeton, for use as a department store. The landlord instituted the action for possession and damages due to the tenant's failure to subordinate his lease to a certain mortgage. Defendant's answer questioned the validity of the mortgage and in a counterclaim asserted that the "action has been commenced without reasonable or probable cause and constituted malicious use of process."*fn1
After an extensive trial, the trial court found that defendant had not breached the lease and that the mortgage in question was in fact subordinate to defendant's lease. It also entered a judgment in favor of defendant on his counterclaim, awarding defendant $19,000 compensatory damages, consisting of counsel fees and costs of defense of the main action, and $20,000 punitive damages. The Appellate Division unanimously affirmed the dismissal of plaintiff's claim. Judge Larner, writing for a majority of that court, reversed the judgment based on the counterclaim on the ground that defendant had not suffered a special grievance. 148 N.J. Super. 493 (App. Div. 1977). The dissenting judge held that the circumstances warranted the conclusion that a special grievance had been established.
Defendant filed an appeal, R. 2:2-1(a), and plaintiff a cross appeal, R. 2:3-4. We affirm essentially for the reasons expressed by Judge Larner.
Malicious prosecution or malicious use of process as it is sometimes referred to when the underlying proceeding is civil rather than criminal*fn2 is not a favored cause of action because of the policy that people should not be inhibited
in seeking redress in the courts. Lind v. Schmid, 67 N.J. 255, 262 (1975). Justice (then Judge) Francis expressed the thought in this language:
Although we recognize the countervailing policy that groundless claims motivated by malice should entitle one to maintain such a cause of action, we believe that on balance the rule that the moving party must establish a special grievance should be retained. Special grievance consists of interference with one's liberty or property. Mayflower Industries v. Thor Corp., 15 N.J. Super. at 151-152. Counsel fees and costs in defending the action maliciously brought may be an element of damage in a successful malicious prosecution, but do not in themselves constitute a special grievance necessary to make out the cause of action. Id. at 175-176.
In addition to special grievance the plaintiff in an action for malicious prosecution of a civil suit must show that the suit was brought without reasonable or probable cause, that it was actuated by malice, and that it terminated favorably to the plaintiff. W. Prosser, Torts, § 120 at 850-856 (4th ed. 1971). Favorable termination did not exist when defendant's counterclaim was filed in this cause. Though plaintiff had not moved to strike that counterclaim, it should have been eliminated in the pretrial order. It is not appropriate to institute a suit or file a counterclaim until the litigation has terminated in favor of the party who asserts the malicious prosecution cause of action.