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Boardwalk Regency Corp. v. Square Brighton Corp.

March 13, 1996

BOARDWALK REGENCY CORPORATION, A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
v.
SQUARE BRIGHTON CORPORATION, INC., A NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT/CROSS-APPELLANT. BOARDWALK REGENCY CORPORATION, A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
v.
SQUARE BRIGHTON CORPORATION, INC., A NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT/CROSS-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Atlantic County; and Law Division, Atlantic County.

Approved for Publication March 13, 1996.

Before Judges Michels, Villanueva, and Kimmelman. The opinion of the court was delivered by VILLANUEVA, J.A.D.

The opinion of the court was delivered by: VILLANUEVA

The opinion of the court was delivered by VILLANUEVA, J.A.D.

In this consolidated appeal, plaintiff in both actions, Boardwalk Regency Corporation, appeals from two summary judgments, one entered in the Special Civil Part dismissing its complaint against defendant Square Brighton Corporation, Inc. for summary dispossession; and one entered in the Law Division dismissing its complaint against defendant seeking to collect accumulated late-payment charges considered to be past-due rent under the terms of a sublease between the parties. Defendant cross-appeals from the Law Division judgment for the limited purpose of extending the scope of the entire controversy doctrine and including as additional legal grounds res judicata and collateral estoppel to support the judgment entered in its favor.

The factual background is relatively simple. *fn1 Plaintiff has leased from Cynwyd Investments the site of the former Traymore Hotel in Atlantic City adjacent to the Boardwalk and situate between Indiana and Illinois Avenues (Traymore site). On October 1, 1981, plaintiff subleased the property to defendant for the operation of a parking lot, and on April 26, 1989, the parties entered into the second sublease agreement (sublease) at issue in this case. Pursuant to its terms, defendant agreed to pay rent of $125,000 on the first day of each month through April 26, 1994, and $133,333.33 on the first day of each month through April 26, 1999 (reserved rent).

According to the sublease, the monthly rent is to be paid without demand and, if not paid within ten days after the due date, a late charge of five percent of the amount past due is added as additional rent which, in turn, becomes due and payable on the first day of the succeeding month. Thus, if the reserved monthly rent of $125,000 was paid late, a five percent late charge of $6250 would be added as additional rent. Assuming that the $6250 of additional rent was not paid along with the reserved rent by the tenth day of the following month, an added late charge of five percent on $6250 would become due in the amount of $312.05 so that over the years the unpaid late charges deemed to be additional rent were subject to being compounded at the rate of five percent per month.

Defendant has always paid the reserved monthly rent, although on numerous occasions since July 1989 the rent was more than ten days late. It is undisputed that from May 1989 through April 1994, plaintiff accepted each and every payment made by defendant without complaint as to lateness, demand for late charges, or threat of eviction.

A collateral dispute involving other litigation appears to have disrupted the relationship between plaintiff and defendant. A sixteen-foot strip (Pop Lloyd strip) of the Traymore site at its northwesterly (inland) end had for years been utilized as part of a city street primarily for the benefit of Greate Bay Hotel and Casino, Inc. (Sands). In 1991, Sands instituted suit against the City of Atlantic City (Sands litigation) to compel the City to condemn the Pop Lloyd strip since Sands was forced to rent the strip from defendant in order to render its hotel casino fully operational. Both plaintiff and defendant successfully moved to intervene in the Sands litigation and were later named as additional defendants. Defendant filed a counterclaim against Sands for rent due for the strip and cross-claimed against plaintiff alleging, in part, that plaintiff failed to assist defendant in defending its sublease against Sands. In April 1993 summary judgment was entered dismissing defendant's cross-claims against plaintiff as premature. The Sands litigation came on for trial during the summer of 1994. Plaintiff did not participate at the trial. Sands settled its case with the City *fn2 and on September 13, 1994, final judgment was rendered in favor of defendant on its counterclaim against Sands for past-due rent accrued for the Pop Lloyd strip. No claim by plaintiff had been asserted against defendant in the Sands litigation for past-due late charges under the lease although the lease between the parties was in issue within the framework of the pleadings.

By letter and invoice dated May 26, 1994, plaintiff advised defendant that an audit revealed late charges were due. In a follow-up letter dated August 31, 1994, plaintiff advised defendant that the aggregate amount of late charges due was $163,750 and that non-payment of the same constituted a default under the lease. Defendant was put on notice that if payment was not made by September 12, 1994, plaintiff would commence summary dispossess proceedings to evict defendant from the Traymore site. Payment was not made. Consequently, on September 14, 1994, plaintiff instituted the summary dispossess action in the Special Civil Part and on the same day commenced an action in the Law Division to recover the allegedly past-due late charges.

On November 29, 1994, the day set for trial of the summary dispossess action, the trial court considered defendant's motion for summary judgment in limine. *fn3 On December 8, 1994, after oral argument, the trial court dismissed plaintiff's complaint for summary dispossession, relying upon the holding in A.P. Dev. Corp. v. Band, 113 N.J. 485, 550 A.2d 1220 (1988), that the course of dealings between the parties over the years and acceptance without complaint of the late rent payments made it necessary for plaintiff, as landlord, to first give notice to defendant, as tenant, that strict compliance with the lease would be required before an action for eviction could be maintained. Id. at 501, 505. The trial court stated:

plaintiff had engaged in a course of conduct whereby the agreement between the parties was modified so that the tenant's obligation to pay a late charge as additional rent was no longer in effect.

The trial court also ruled, as an alternative but equal holding, that the entire controversy doctrine, at least for the period through April 1993, *fn4 barred plaintiff's claim for summary dispossession and money damages because these causes of action should have been asserted as part of the Sands litigation.

On January 20, 1995, the trial court granted defendant's further motion for summary judgment in the Law Division action and dismissed plaintiff's complaint for the recovery of damages for the alleged past-due rent based upon the accumulated late charges. The trial court relied upon the same legal grounds for the dismissal ...


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