On appeal from Superior Court of New Jersey, Law Division, Somerset County.
Michels and Skillman. The opinion of the court was delivered by Skillman, J.A.D.
Plaintiff landlord filed a summary dispossess action in the Special Civil Part alleging that he had terminated defendant's month-to-month tenancy of commercial premises. On defendant's motion the case was transferred to the Law Division. Defendant then filed an answer and counterclaim, which alleged that it was occupying the premises pursuant to a six-year oral lease rather than as a month-to-month tenant.
The trial court determined after a bench trial that the parties had made a six-year oral lease in 1982. Accordingly, it entered judgment denying plaintiff's demand for possession and declaring that defendant enjoys the benefit of a six-year oral lease at $600 per month.
On appeal, the only argument made by plaintiff is that the statute of frauds should have precluded defendant from seeking to establish the existence of an oral lease. Defendant's response is that the trial court correctly determined that the doctrine of part performance permitted it to establish the oral lease.
N.J.S.A. 25:1-1 provides that leases of longer than three years must be in writing to be effective. Defendant acknowledges that since it seeks enforcement of a six-year oral lease the statute of frauds would apply were it not for the doctrine of part performance.
It is well established in this State that part performance of an oral agreement relating to real property may take the agreement out of the statute of frauds. See, e.g., Cauco v. Galante, 6 N.J. 128, 137-138 (1951); Kufta v. Hughson, 46 N.J. Super. 222 (Ch.Div.1957). "Where the statute works the intolerable mischief of operating as a fraud the statute should be no bar to the granting of relief to one who has, in good faith, so performed the parol agreement as to irretrievably change the situation of the parties to the disadvantage of the plaintiff." Cauco v. Galante, supra, 6 N.J. at 138. It is also well established that the part performance doctrine is applicable to
oral leases which otherwise would be rendered unenforceable by N.J.S.A. 25:1-1. See, e.g., Wharton v. Stoutenburgh, 35 N.J. Eq. 266 (E. & A. 1882); Kufta v. Hughson, supra.
The difficult problem raised by the part performance doctrine is determining what kind of performance will bring the doctrine into operation. See Kufta v. Hughson, supra. The New Jersey cases -- most decided before 1948 under our former court system and many decided in the nineteenth century -- do not portray a clear and consistent picture of the circumstances in which the doctrine will apply. On the one hand, there are cases which say that "[s]uch performance must be clearly referable to the execution of the contract, and not to some other relation. . . ." Turkington v. Zuber, 100 N.J. Eq. 285, 289 (E. & A. 1926); accord Delnero v. Serra, 2 N.J. Super. 350 (Ch.Div.1949). On the other hand, there are cases which express the more flexible view that "[t]he fact that the details of the agreement are controverted by the parties will not deter the court from ascertaining what the terms of it really were, and giving effect to the agreement where a complainant shows himself to be entitled to a specific performance, by a part performance, which shall be referable only to a part execution of the agreement." Wharton v. Stoutenburgh, supra, 35 N.J. Eq. at 274-275; see also Rutan v. Crawford, 45 N.J. Eq. 99 (Ch.1858). We conclude from these varying formulations of the doctrine that the statute of frauds will not prevent enforcement of an oral agreement relating to real property if part performance provides a reliable indication that the parties have made an agreement of the general nature sought to be enforced, and in that event parol evidence may be admitted to show the details of the agreement. See Restatement, Contracts 2d, § 129 at 321 (1981); 2 Corbin, Contracts, § 430 at 473 (1950). Our cases have also shown a particular receptiveness to part performance as a substitute for a writing where a refusal to enforce an alleged oral agreement would cause significant hardship. See, e.g., Crowe v. DeGioia, 203 N.J. Super. 22, 33-34 (App.Div.1985), aff'd o.b. 102 N.J. 50 (1986); Cauco v.
Galante, supra; Wharton v. Stoutenburgh, supra; see generally, Cunningham, Stoebuck & Whitman, The Law of Property, § 10.2 at 635 (1984); 8A Thompson, Real Property, § 4463 at 358 (1963).
It is unlikely that part performance could ever establish the specific duration of an alleged oral lease, and hence under an overly rigid view the part performance doctrine would never apply to leases. However, part performance may provide a reliable indication that the parties intended to enter into a long term lease, even if it does not establish the specific term of that lease. Therefore, it is appropriate to recognize part performance as a substitute for a writing under such circumstances. ...