On appeal from the Superior Court of New Jersey, Law Division, Hudson County.
Michels, King and Dreier. The opinion of the court was delivered by Michels, P.J.A.D.
Plaintiff Eugene Mori (Mori) appeals from a summary judgment of the Law Division entered in favor of defendant Hartz Mountain Development Corp. (Hartz).
The procedural history giving rise to this appeal is helpful to a resolution of the issues raised by Mori. On April 19, 1979, Mori filed a petition for bankruptcy in the United States District Court under Chapter XII of the Bankruptcy Act. Hartz thereafter filed an application seeking to vacate the automatic stay incident to the bankruptcy proceedings and to obtain authorization to proceed in the Superior Court of New Jersey for the partition of property, located in Secaucus, New Jersey, which the two parties held as tenants in common. Mori owned an undivided 1/12 interest, and Hartz an undivided 11/12 interest in this property. The fee interest in the property was encumbered by a lease which extends through April 30, 2033. Hartz, however, in October of 1979 obtained an assignment of the lessee's
interest in this tract of land. On October 29, 1980 the United States Bankruptcy Court for the District of New Jersey on December 29, 1980 granted Hartz's motion.
Hartz then filed a Complaint in the Chancery Division seeking a judgment permitting it to obtain Mori's interest in the property by tendering to him the fair market value of said interest or, alternatively, compelling the sale of the property with the proceeds to be divided in accordance with the parties' respective interests. Copies of the summons and complaint were sent by regular mail to Mori at the Florida address which had been furnished to Hartz and by certified mail to Mori's attorney in the bankruptcy action. The copy sent by regular mail never returned, and the copy sent certified mail was refused by his attorney. Hartz, pursuant to R. 4:4-5 then applied for, and on February 19, 1981, was granted an order permitting service by certified mail. Service by certified mail was made February 26, 1981. Mori failed to answer or to otherwise appear. A default was entered against Mori on April 15, 1981. On June 5, 1981, the trial court entered a final judgment by default compelling a sheriff's sale of the subject property. Mori thereupon filed a motion seeking to cancel the sheriff's sale and vacate the default judgment on the basis that proper service had not been effected. This motion was denied. Mori subsequently appealed this denial (Default Appeal) and sought to stay execution of the judgment ordering a sheriff's sale of the property. We denied the stay pending appeal.
The sale of the property was held on August 6, 1981, at which Hartz, as the sole bidder, purchased the property at a price of $437,000 for the entire fee interest. Mori then moved to set aside the sale alleging (1) that the sale was improperly conducted; (2) there were no bona fide bidders for the property; and (3) that the sales price was grossly inadequate. The trial court denied the motion seeking to set aside the sale and confirmed the sale of property. Mori thereupon filed an appeal from this determination (Sale Appeal) and concurrently sought to stay the confirmation order pending appeal, which we denied. The default
appeal and the sale appeal were consolidated and on June 23, 1983 the orders under review were affirmed by this court. Hartz Mountain Development Corporation v. Eugene E. Mori, A-5321-80T1 and H-266-81T1.
On or about January 27, 1982, while the default and sale appeals were still pending, Mori filed this action in the Law Division. In the first count of the complaint, Mori alleged that Hartz, as assignee of the prior tenant's interest under the lease, had defaulted by failing to pay rent owing to him under the lease agreement. Mori further alleged that in accordance with the terms of the lease agreement the tenancy was terminated by notice furnished Hartz in a letter dated February 19, 1981. Mori therefore demanded judgment physically partitioning the property and giving him possession of his 1/12 interest, or alternatively, for damages equal to the value of his interest. In the second count, Mori sought to recover 1/12 the present value of the entire rental due through its termination date in accordance with the lease's default provisions. After issue was joined, Hartz moved for summary judgment on the ground that Mori's claims were barred by the judgment below, and, to the extent that it sought unpaid rents, should be dismissed since such claim constituted a mandatory counterclaim and, as such, was required to have been raised in the prior proceeding. Mori thereupon moved for leave to amend the complaint to add a third count seeking a judgment: (1) declaring the lease to have been terminated; (2) setting the date of the termination; and (3) fixing damages for improvements to the leased property allegedly destroyed by Hartz. Judge Connors in the Law Division granted Mori's application permitting the third count to be added to his complaint, and then granted Hartz's motion for summary judgment as to all counts in the complaint as amended. He reasoned in part that all of these issues should have been raised by either "answering counterclaim, set off counterclaim [or] permissive counterclaim" and therefore, Mori was now barred
from litigating these claims by the entire controversy doctrine. ...