July 29, 2009
JOHN ZAKLAMA, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
SUSANNE ZIEGLER, DEFENDANT-RESPONDENT/ CROSS-APPELLANT, AND SUSANNE ZIEGLER, THIRD-PARTY PLAINTIFF,
ESMAT ZAKLAMA AND ZAKLAMA IRREVOCABLE TRUST, THIRD-PARTY DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2410-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 30, 2009
Before Judges R. B. Coleman, Sabatino and Simonelli.
This matter arises out of a summary dispossession action in which the landlord contended, pursuant to N.J.S.A. 2A:18-61.1(l)(3), that he planned to occupy the apartment personally after the tenant was evicted. After a bench trial, the trial court concluded that the landlord's claimed intention to occupy the premises was insincere, and denied the landlord possession. The trial court then awarded the tenant counsel fees and costs under the Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1.
The landlord appeals the trial court's denial of summary dispossession, principally arguing that the court misapplied the eviction statute in an unprecedented manner. The landlord also appeals the award of counsel fees and costs, contending that his action was not frivolous, and that his legal contentions concerning the proper construction of N.J.S.A. 2A:18-61.1(l)(3) had, at the very least, a reasonable basis in the law, or was supported by a good faith argument for the extension, modification or reversal of existing law. The tenant cross-appeals the award of counsel fees as insufficient.
For the reasons stated in this opinion, we affirm the entry of the judgment dismissing the landlord's summary dispossession action. However, we vacate the counsel fee award, thereby mooting the tenant's cross-appeal as to the insufficiency of the fee. Lastly, the award of costs to the tenant as the prevailing party is affirmed, pursuant to Rule 4:42-8.
These are the relevant facts that emerged in the two-day bench trial in the Law Division.
Plaintiff, John Zaklama, is the present owner of a three-story brownstone located at 1204 Garden Street in Hoboken. At the times relevant to this litigation, defendant, Susanne Ziegler, resided in an apartment on the third floor of the brownstone. Her tenancy commenced in or about April 1997. The premises are rent-controlled.
As the trial court found, the relevant history of efforts to evict defendant from her apartment stems back to an earlier time frame when plaintiff's father, Esmat Zaklama,*fn1 a physician, directly or indirectly owned the premises. Plaintiff's father purchased the building in December 1998 through the Trust.
Following acquisition of the premises, plaintiff's father and/or the Trust unsuccessfully attempted on three separate occasions in 1999, 2002 and 2004*fn2 to evict defendant from the premises. In each of those attempts, the landlord filed an action in the Special Civil Part seeking to dispossess defendant. The landlord relied each*fn3 time on an assertion that he intended to occupy the premises personally, thereby constituting grounds for eviction under N.J.S.A. 2A:18-61.1(l)(3). All of those complaints were dismissed before trial for lack of prosecution. When the 2004 action was dismissed, defendant successfully obtained an order awarding $6,222.17 as reimbursement for her counsel fees, lost wages, and other expenses.
In November 2005, plaintiff's father, as trustee of the Trust, conveyed the property through a quitclaim deed to plaintiff for $1000. The transfer to plaintiff occurred at this modest price, despite the fact that the premises had been advertised for sale in a local newspaper in April 2005 for $1.295 million.
On January 31, 2006, plaintiff served upon defendant a "Notice Terminating Lease." The Notice announced that defendant's "lease is terminated because[:] this new owner has purchased the building to personally occupy it, with his wife to be as their marriage nest." (Italics in original).
The present litigation commenced on April 17, 2006, when plaintiff, represented by counsel, filed a complaint in the Special Civil Part, under Docket No. LT-5941-06, seeking possession of defendant's apartment. The complaint attached the Notice of Termination previously issued on January 31, 2006. The complaint also alleged that defendant was in arrears the sum of $700 for the April 2006 rent.*fn4
Defendant, also represented by an attorney, moved to transfer the Special Civil Part action to the Law Division. In support of that motion, defendant relied upon the chronology of the landlord's three prior attempts to evict her from the premises on the same statutory grounds. The trial court granted the transfer application, noting that "there are issues that are complex [here] that deal with ownership, that deal with fraudulent conveyance, and that deal with possible abuse of process."
After the case was transferred to the Law Division, defendant filed an answer and affirmative defenses. Defendant also asserted, in combined form, a counterclaim against plaintiff and a third-party complaint against plaintiff's father and the Trust.
In Count One of the counterclaim/third-party complaint, defendant sought a judgment "declaring the ownership rights in the Property between and among Plaintiff John Zaklama and Third Party Defendants, Esmat Zaklama and the Zaklama Irrevocable Trust." In Count Two, defendant asserted that plaintiff's complaint is frivolous because "there has never been a genuine intention on behalf of the Zaklamas to personally occupy [defendant's] apartment." Defendant claimed that her landlord has been harassing her for the past seven years, despite the fact that she allegedly has always paid her rent on time. Defendant also noted that there was a larger two-bedroom apartment available in the building, which the landlord did not occupy when it became vacant. Defendant maintained that the complaint is therefore "without any reasonable basis in law or equity and is therefore frivolous."*fn5
Plaintiff filed an answer to the counterclaim, which maintained, among other things, that he acted "reasonably and in good faith at all times with due care as to the rights of others." Plaintiff asserted that defendant's counterclaim itself was frivolous. Plaintiff's attorney filed a similar answer on behalf of the Trust as a third-party defendant. Plaintiff's father, pro se, also filed a similar answer as to the third-party claims against him personally.
After the trial court issued various orders to compel and extend discovery, the case was tried as a non-jury case in July 2007. Plaintiff, plaintiff's father, and defendant all testified, as well as several third parties.
Plaintiff testified that he personally wanted to occupy the property with his then-fianceé after they got married.*fn6 He asserted that he wanted his future wife, a medical resident, to live in a safe area like Hoboken since she kept irregular hours. Plaintiff stated that the property only contained two apartments, with the "[b]asement, first floor, [and] second floor being one apartment, and the third floor being the second apartment." He contended that the third-floor apartment was an optimal size for him and his fianceé, and that they both "loved it."
Plaintiff confirmed that he served defendant with the "Notice Terminating Lease" on January 30, 2006, stating that he and his fianceé wanted to use the third floor "as their marriage nest." He stated that they were willing to remain in the apartment for more than six months,*fn7 noting that his wife's residency would not end for at least two more years.
Plaintiff was questioned about when he first visited the property. Plaintiff replied that he had first visited it prior to serving the eviction notice in January 2006 However, plaintiff's deposition testimony contradicted this assertion, because at the deposition he stated that he had first visited the apartment at a later time, between January and May 2006.
Plaintiff's father also testified. He acknowledged that within ten days of arranging for the Trust to purchase the property, he served a notice on defendant in 1999 to vacate the premises because he had then planned to move his entire family into the building. He also acknowledged that this eviction complaint was eventually withdrawn.
Plaintiff's father also admitted that on January 31, 2000, and again on October 31, 2001, he served eviction notices on defendant, again asserting an intent to occupy the entire premises. His eviction complaint based upon these notices was withdrawn in April 2002. Plaintiff's father could not recall ever serving an eviction notice on any other tenant in the building while the Trust owned it.
Additionally, plaintiff's father indicated that he served another notice to terminate the lease on July 31, 2002, again with the professed intent to move his family into the building. No complaint was filed as a result of this particular eviction notice.
The father acknowledged that on March 31, 2004, another notice was issued stating that he, as beneficiary of the Trust, intended to move into defendant's apartment. An eviction complaint was then filed, but, as we previously noted, the court dismissed this third action for failure to prosecute.
On cross-examination, plaintiff's father admitted, despite his notice to defendant in 1999 that his family planned on moving into the apartment, the property had been listed for sale in March 1999, three months after the first notice to quit. Although plaintiff's father does not admit authorizing it, he conceded that there was a published advertisement offering to sell the property for a price of $1,295,000.00, and that an open house was advertised for April 16 and April 17, 2005. In addition, plaintiff's father admitted that in the spring of 2006, the basement apartment in the premises was made available for rental.
Defendant presented testimony from Carol McLaughlin, a rent regulation officer with the City of Hoboken. McLaughlin stated that plaintiff's father had registered defendant's base rent with the City at $1500, when, in fact, defendant was only paying $700 per month.
Defendant also called Mark Meyer, a next-door neighbor. Meyer testified to the "continuing deterioration in the number of things that you can see from the outside" of defendant's unit, including falling "concrete sides of the windows" and parts of the "façade of the building."
In addition, the defense called Robert Darish, who lived in the basement of the property. Darish claimed that his unit is a completely separate apartment from the other floors of the building. Darish testified that he came to live there in May 2006 after responding to an advertisement. He contended that plaintiff and plaintiff's father had asked him to sign a false certification stating that the property was a two-family residence, but Darish refused to do so because he knew that this was not true.
Another third-party witness, Sharon Guynup, provided particularly damaging testimony against plaintiff. She testified that she had been looking for a temporary short-term lease and met with plaintiff's father in April 2005 to explore the prospect of living at the property. According to Guynup:
We met at the Dunkin Donuts in Hoboken, and I reiterated to him, you know, my need for not a yearly lease, but a month-to-month lease because it would take, you know, two, three, four more months for the construction [of Guynup's condominium] to be finished.
He said that the only way he would rent it to us was with a month-to-month lease because he just wanted to get rid of the building. And then he -- he went into a rant and just said that, you know, the building had been nothing but a problem since he bought it, and he particularly mentioned the woman in the upstairs apartment, that he had been trying to get rid of her since he bought the place because she paid a very low rent, and, pardon my vernacular, but because she was a pain in the ass. [(Emphasis added).]
Defendant then called Elizabeth Terrill, who lived in the property from 1999 until the spring of 2004. Terrill testified that she had the following conversation with plaintiff's father about the third-floor tenancy, just before she left in the spring of 2004:
Q: Did you ever have occasion to have conversations with Dr. Zaklama [plaintiff's father] regarding the third-floor tenancy?
A: Yes. You know, just before I left in 2004, I overheard Zak [plaintiff's father] say to [defendant] that he planned to move into her apartment, and when he came downstairs, I said, hey, Zak, is that true?
Are you really moving in? And he said, no, I want her out so I can raise the rent. [(Emphasis added).]
The defense next called Traci Lamantea-Kuther, who lived in a home next door to the property. Kuther testified that in August 2006, during the pendency of the current litigation, she had the following discussion with plaintiff:
Q: So you understood, at that time, he lived at 11 Bellevue in Weehawken?
Q: And did he discuss where he intended to move?
A: That was where he intended to stay.
Q: He said that?
Q: And did he say what his plans were for 1204 Garden Street if he was able to make the repairs he talked about?
A: He wanted to make the repairs and fix the house up nice and make it look like the rest of the houses on the block. He asked me for some plumbing referrals. He asked me for some contractor referrals, which I gave him, and he asked me for some advice on ways that he could improve the look cosmetically, that wouldn't cost a lot of money. Even willing to pay for my repairs, again, if it was somewhere in the neighborhood of two or $3,000. That much money he could come up with on his own, without having to go to his father.
Q: Did he discuss what his intent was in making those repairs? Was it to sell it?
A: No. It was not to sell it.
Q: What was the purpose? Did he say what the purpose was?
A: The purpose was that the house had fallen into a state of disrepair. He had not been in the house very many times, and when he finally did see the conditions of the house, he wanted to make it right, in order to get good rent, because the fact of the matter was Hoboken is a booming real estate market and he thought that a lot of money would be made off of the property.
Q: He said that to you?
A: Yes. And he asked me if I had any interest in renting out mine, and I said no. [(Emphasis added).]
In her own trial testimony, defendant contended that during her very first conversation with plaintiff's father, he stated to her that: he had purchased the house at the sheriff's sale. He welcomed me as a tenant. He said that he had bought this as an investment and had no intention of living there because he had a large and beautiful home of his own, and he said that he got along great with all of his tenants they refer to him as Dr. Zak.
He noted that he had noticed that I was a physical therapist, and that they made a lot of money, and he asked me how much I was paying for rent currently, and when I told him that I paid $700, he actually got angry and he said, that's not true, I know what the rents are in Hoboken. I talked to all the landlords on your block. The only other person I knew on my block at the time, who was renting, was paying 800 [dollars], but whatever. He just -- he was very angry, and the conversation didn't really go anywhere from there. He just told me he was going to raise the rent and I said, you do whatever you have to do, and we hung up, and we didn't speak again until he called me a couple days later and told me that I was going to have to move by the holiday, which would have been Christmas because his family was going to move in my apartment.
Defendant also claimed there were various problems with the apartment that she had repeatedly complained about, including that the "ceilings were actually falling in and [her] walls were buckling way back, probably in 99 or 2000." Defendant stated that plaintiff never set foot in her apartment until three months after serving notice in January 2006, announcing that he intended to move into her apartment.
After considering this testimony and various documentary exhibits, the trial judge issued an oral opinion on July 3, 2007. In that opinion, the judge concluded that plaintiff had failed to sustain his burden of proving under N.J.S.A. 2A:18-61.1(l)(3) that he was going to "personally occupy the unit." To the contrary, given the context of the prior attempts to evict defendant dating back to 1999, the judge found that the landlord's professed intention to occupy the premises himself was pretextual:
Under the facts of this case, I find that the evidence is overwhelming in this case that the landlord's announced intention to personally occupy the unit was used as a pretext to satisfy the whim of his father, to satisfy the eight or nine-year campaign by the father to remove this tenant for other reasons, presumably for the reasons that the witnesses had testified about, and that is to increase the rental income on this property because this tenant has been paying significantly low rent for a significant period of time. [(Emphasis added).]
The judge continued:
So, as I've indicated, I'm satisfied that the plaintiff has failed to meet his burden of proving that there was a bona fide intention to occupy this apartment, and as I've indicated, I think, already, based upon not only the history between the parties, which clearly is a contentious history, a history that goes back for many, many years, from the moment that Dr. Zaklama obtained the property, I believe that the evidence clearly shows that there has been an attempt to evict this tenant. There were several eviction complaints filed, later either abandoned or withdrawn. There were many, many notices that were sent based upon the alleged -- the alleged desire to personally occupy the premises. I've already indicated that based upon the evidence that I've seen in this case, I do not believe that Dr. Zaklama had ever had an intention to move into this apartment, and for the reasons I've already indicated. For the conversations that he's had with his neighbors to the conversations that he's had with his tenant, to the fact that he's got a beautiful home in which he's lived in for a significant period of time, a Weehawken property which is very valuable property, or the fact that this is a -- frankly, a small unit that may no -- would not have, perhaps, accommodated [the] doctor and his family. [(Emphasis added).]
The judge noted that he was especially impressed by the testimony from the other tenants and third-party witnesses, who stated that the landlord had expressed different reasons for attempting to evict defendant:
But I think most compelling are the statements of the various witnesses that appeared before this Court that clearly indicated that conversations were had with Mr. Zaklama, Dr. Zaklama, and that he indicated that it was not his intention to move in this apartment, that he was frustrated with [defendant], that he wanted [defendant] out, and I think all of those witnesses testified honestly and candidly.
I believe them. I think, again, as a result of the submissions by both parties regarding repair issues and this property, the fact that there were various violations, the act that neighbors testified that the property was in great disrepair, the fact that tenants came in and testified on the lack of candor, the lack of respect for them in terms of their right to live in proper, habitable premises, the fact that they were allowed to live in these premises with serious violations and serious repairs and conditions that certainly affected their living conditions. [(Emphasis added).]
Based upon the proofs as a whole, the trial judge concluded that the landlord's stated desire to occupy defendant's apartment was, at bottom, simply not credible:
I think that all leads to the conclusion that Dr. Zaklama simply cannot be believed, that Dr. Zaklama (plaintiff's father) has not told, frankly, the truth in this case, and that it was always his intention to remove this tenant for other than the reasons that he has asserted.
Now, as far as John Zaklama [plaintiff] is concerned, as I indicated, I frankly found him to be more credible. I found him to have good motives, but because he is his son's father and respects his -- his father's son, I'm sorry, he is his father's son and respects his father, and he, frankly, did what his father told him to do, and that was to conspire with him to attempt to remove this tenant as well. I don't believe that his intentions were honorable. They were not bon[a] fi[d]e. He lives in a beautiful home. He lives in a basement apartment. There was an apartment available to him in his father's home, as well. There were other apartments that were readily available in this building, as well, throughout his ownership.
I think that all leads to the conclusion that he did not really have a bona fide intent to move into this property. But again, most compelling was the testimony of the various witnesses who had conversations with John Zaklama and who indicated that he, as well, indicated to them that he had no intention to move into this property. The advertisements, as well, were critical pieces of evidence that convinced this Court that defendants -- the plaintiffs did not have a bona fide intent to move in. The evidence regarding the listing of the property for sale, the listing of various apartment for many years, for rent, as well, all support, I think, the defendant's contention that there was no bona fide intention to occupy. ([Emphasis added).]
The judge also found significant that plaintiff failed to explain, in a credible manner, his prior inconsistent statements at depositions.
By comparison, the judge found defendant's own narrative of the events to be credible and compelling:
Compelling, as well, was the testimony of the defendant. I found the defendant to be extremely credible, extremely sincere, and I believed her. I believed that she has gone through eight years of, frankly, torture living in an apartment that has not been fixed, that has not been adequately cared for, dealing with a landlord who has not, frankly, cared about her condition in this apartment, and whose intent was simply to make a profit on this building, which I do not condemn. Obviously, landlords are in the business of making a profit, but not in violation of our statutes, and not to the extent that they deprive a rent-paying tenant of the lawful right to live in peace and harmony, and in a habitable -- habitable residence. A tenant should be able to have enjoyment of his property, so long as . . . they do not violate the tenant's rules and regulations, and so long as they pay the lawful rent. I think the defendant has done that, and I think her testimony clearly supports her contentions that there was never an intent to move into this apartment, as well.
Turning to the counterclaim for damages, the judge agreed with the defense that plaintiff's lawsuit was frivolous, and that defendant was entitled to an award of reasonable counsel fees and costs under N.J.S.A. 2A:15-59.1. In his analysis, the judge essentially treated such fee-shifting to be mandatory under the present circumstances:
With respect to the counterclaim for damages, obviously, since I have made a finding that the plaintiff has lacked credibility and that this was not a complaint based upon a bona fide intent to occupy the premises, the Court must make a finding that this was a frivolous complaint, that under the statute, requires this Court to enter judgment against the plaintiff, John Zaklama, for reasonable attorney's fees and costs.
[N.J.S.A.] 2A:15-59-1 establishes the cause of action and it says that when a party prevails in a civil action, that party may be awarded all reasonable litigation costs, including reasonable attorney's fees if the Court finds, at any time during the proceedings a complaint was frivolous.
Under the circumstances, given the fact that I have found that his complaint for eviction was filed not in good faith, that it was filed with knowledge that there was never an intention on the part of the landlord to move in, I must make a finding that the filing of the complaint was frivolous, that it was done in bad faith, solely for the purposes of harassing this defendant, of causing her to be unlawfully and unreasonably displaced from this apartment. [(Emphasis added).]
As invited by the court, defense counsel subsequently tendered a certification of services. The certification requested a total of $67,845.20 in counsel fees and costs. Upon hearing oral argument, the trial judge awarded defendant the reduced sum of $25,000 in fees and the full claimed amount of costs, in the sum of $4,505.20, for a total award of $29,505.20.
In explaining why he had reduced the counsel fee portion of the award, the judge found, among other things, that, based on the "limited facts available," plaintiff, who is unemployed, did not have the present ability to pay the amount sought by defendant. The judge further observed that an award of the full amount in fees demanded would be "unduly harsh and punitive," given that plaintiff had "acted mostly and at the urging of his father." The judge also alluded to the fact that defendant's lead attorney was a relative of hers, and that he had represented her in the previous three eviction cases on a pro bono basis.
The judge further noted that the case "started out as a routine landlord/tenant case," and that the matter was not sufficiently complicated to justify the $350 hourly rate of defendant's lead attorney, although the judge recognized that the firm had done a "fantastic job" in representing defendant. Instead, the judge found that an uniform hourly rate of $250.00 was more appropriate for the case, and that one hundred hours of billable time would be compensable, thereby yielding the $25,000 sum awarded.
Plaintiff appeals both the denial of his action for summary dispossession and the trial court's award of counsel fees and costs. He argues that the trial court misapplied the eviction statute by reading a so-called "subjective" element into N.J.S.A. 2A:18-61.1(l)(3), requiring a landlord to prove not only that he served a notice declaring his prospective intention to occupy the leasehold, but also to prove that the objective declaration of intent was subjectively true. Plaintiff argues that the statute already provides an adequate remedy in N.J.S.A. 2A:18-61.6, for situations in which a landlord fails to honor his or her declared intention to occupy and remain in the premises for at least six months, and that the trial court added an unwarranted gloss to the plain and objective terms of N.J.S.A. 2A:18-61.1(l)(3).
Plaintiff maintains that the trial court unfairly ascribed to him personally the implications of the prior eviction actions brought by his father and the Trust. He argues that the trial court engaged in unauthorized "judicial lawmaking"; improperly granted "general equity relief" to defendant in a summary dispossession case; and that the court's conclusions ran against the weight of the evidence.
As to the award of counsel fees and costs, plaintiff argues that the defense did not satisfy the requirements of the Frivolous Litigation Statute. Plaintiff contends that he reasonably attempted, in good faith, to evict defendant under the literal terms of N.J.S.A. 2A:18-61.1(l)(3), and that his eviction action was not filed maliciously or in bad faith. Plaintiff asserts that, even though his lawsuit was unsuccessful, he had a sufficiently reasonable basis in law or equity to be considered non-frivolous, and that his construction of the statute was supported by "a good faith argument for extension, modification or reversal of existing law." N.J.S.A. 2A:15-59.1.
Lastly, plaintiff contends that the counsel fees awarded were excessive, maintaining that the case was simple and did not require transfer to the Law Division from the Special Civil Part. In this regard, plaintiff noted the judge's post-trial observation that this was not a "complex" landlord/tenant case.
Defendant cross-appealed the fee award, arguing that the trial judge unreasonably reduced her counsel's compensable hours and his hourly rate. Defendant maintained that the case was made complex as a result of plaintiff's own improper conduct, and that the attorney hours and the expertise devoted in defending the case were totally justified. Defendant also faults the trial judge for accepting plaintiff's assertion of an inability to pay the fee award in the amount sought by the defense, and also for improperly considering defendant's familial relationship with her counsel.*fn8
We now address these substantive arguments, and the propriety of the counsel fee award under the Frivolous Litigation Statute. We note that during the pendency of the appeal, defendant has vacated the subject premises and plaintiff has taken up residence in the apartment.
We begin with an examination of the substantive issues.
A residential tenant in New Jersey may not be evicted unless the landlord can establish one of the grounds for summary dispossession set forth under the Anti-Eviction Act, N.J.S.A. 2A:18-61.1 to -61.12. One of the enumerated grounds furnishing good cause to evict is where an owner of a building with three or less residential units decides to occupy the leased premises personally, or to sell them to a buyer who intends such personal occupancy. Specifically, N.J.S.A. 2A:18-61.1(l)(3) provides in this regard that:
No lessee or tenant or the assigns, under-tenants or legal representatives of such lessee or tenant may be removed by the Superior Court from any house, building, mobile home or land in a mobile home park or tenement leased for residential purposes, other than (1) owner-occupied premises with not more than two rental units or a hotel, motel or other guest house or part thereof rented to a transient guest or seasonal tenant; (2) a dwelling unit which is held in trust on behalf of a member of the immediate family of the person or persons establishing the trust, provided that the member of the immediate family on whose behalf the trust is established permanently occupies the unit; and (3) a dwelling unit which is permanently occupied by a member of the immediate family of the owner of that unit, provided, however, that exception (2) or (3) shall apply only in cases in which the member of the immediate family has a developmental disability, except upon establishment of one of the following grounds as good cause:
l. . . . (3) The owner of a building of three residential units or less seeks to personally occupy a unit, or has contracted to sell the residential unit to a buyer who wishes to personally occupy it and the contract for sale calls for the unit to be vacant at the time of closing. [(Emphasis added).]
See also Durruthy v. Brunert, 228 N.J. Super. 199 (App. Div. 1988) (applying the eviction grounds of N.J.S.A. 2A:18-61.1(l)(3) to a situation in which the landlord owned a mixed-use building with two residential units and two commercial units).
Additionally, the Anti-Eviction Act separately provides a remedy under N.J.S.A. 2A:18-61.6(a) for a tenant where, after eviction, the landlord did not personally occupy the tenant's former unit. In such a wrongful eviction action brought by a former tenant, the remedy includes the recovery of treble damages, counsel fees, and costs:
Where a tenant vacates the premises after being given a notice alleging the owner seeks to personally occupy the premises under subsection l. of section 2 of P.L. 1974, c. 49 (C. 2A:18-61.1) and the owner thereafter arbitrarily fails to personally occupy the premises for a total of at least six months, or arbitrarily fails to execute the contract for sale, but instead permits personal occupancy of the premises by another tenant or instead permits registration of conversion of the premises by the Department of Community Affairs pursuant to "The Planned Real Estate Development Full Disclosure Act," P.L. 1977, c. 419 (C. 45:22A-21 et seq.), such owner shall be liable to the former tenant in a civil action for three times the damages plus the tenant's attorney fees and costs. [(Emphasis added).]
See also Hale v. Farrakhan, 390 N.J. Super. 335 (App. Div. 2007) (applying the terms of N.J.S.A. 2A:18-61.6(a) to a tenant's wrongful eviction claim).
As we held in Hale, supra, whether an eviction dispute concerning a landlord's personal occupancy is litigated as a summary dispossession action under N.J.S.A. 2A:18-61.1(l)(3), or as a wrongful eviction case under N.J.S.A. 2A:18-61.6(a), in either instance the landlord bears the burden of proving any disputed fact relevant to the non-arbitrariness of his or her conduct. Id. at 340-41. The main reason for assigning the burden of proof to the landlord is that the tenant ordinarily "does not have ready access to the information necessary to disprove the landlord's claim." Id. at 341. This approach furthers the Anti-Eviction Act's "general purpose," i.e., to "'prevent the eviction of blameless tenants[.]'" Id. at 342 (quoting Chase Manhattan Bank v. Josephson, 135 N.J. 209, 234 (1994)).
As we noted in Hale, "the specific purpose of the wrongful eviction causes of action created by N.J.S.A. 2A:18-61.6 is to protect tenants against pretextual evictions[.]" Ibid. (citations omitted). "Placing the burden upon the landlord to prove that his or her failure to occupy the vacated unit was not arbitrary will serve to assure that the landlord's announced intention to personally occupy the unit is not used as a pretext to remove the tenant for some other reason." Ibid.
Here, plaintiff argues that the trial court injected an unauthorized "subjective" component into the landlord's burden of proving the personal occupancy criteria of N.J.S.A. 2A:18-61.1(l)(3). Plaintiff emphasizes that this statutory provision only literally requires that the owner demonstrate that the building is "of three residential units or less" and also that the owner "seeks to personally occupy a unit" or is under contract to sell the unit to a buyer "who wishes to personally occupy it." Ibid. (emphasis added). Plaintiff argues that the statute merely calls for an objective manifestation by the landlord of his or her prospective intent to occupy the unit. Unlike subjective intentions, such outward manifestations can be objectively verified, such as the presence or absence of a written notice in which the owner makes an explicit declaration of a plan to occupy the unit in the future.
We agree with the trial judge that N.J.S.A. 2A:18-61.1(l)(3) is reasonably interpreted to require an authentic, subjective intention on the part of the landlord to personally occupy the unit that he or she owns. Such an interpretation advances the goals of the statute in assuring that, as Hale recognized, the owner-occupancy exception is not invoked in a "pretextual" manner. Hale, supra, 390 N.J. Super. at 342. If the statute were read otherwise, landlords might illicitly send out eviction notices falsely professing an intention to occupy the tenant's unit, simply as a means to get the tenant out. Our courts have sensibly discouraged the service or filing of such sham documents to gain a legal advantage. Cf. Shelcusky v. Garjulio, 172 N.J. 185, 200-02 (2002) (disapproving of the use of "sham affidavits" as a means to resist the entry of summary judgment).
Moreover, insisting upon the authenticity of the landlord's stated desire to occupy the premises comports with the overall statutory scheme in the Anti-Eviction Act to protect tenants from unfair treatment. We reject the notion that N.J.S.A. 2A:18-61.6 comprises an exclusive means to deter landlords from falsely claiming a desire to occupy their leased residential units. We discern no reason to force tenants to endure the disruption and inconvenience of moving out of their premises while waiting and seeing if, in fact, the landlord will carry out his or her stated plan to occupy the vacated unit for at least six months. By the time that period has passed, the wrongfully dispossessed tenant may lack the resources or motivation to sue his or her former landlord, despite the prospect of recovering treble damages and counsel fees under N.J.S.A. 2A:18-61.6. The harm sustained by the tenant in relocating may be more intangible than monetarily quantifiable, thereby making an after-the-fact damages remedy less attractive. Considering the protective policies of the Anti-Eviction Act as a whole, we believe that the Legislature would prefer to give a tenant another arrow in the quiver at an earlier stage of the process, before the tenant has already been ejected from his or her residence.
For these various reasons, we affirm, as a matter of law, the trial judge's construction of these pertinent statutes. See also Durruthy, supra, 228 N.J. Super. at 203 (observing that landlords have the burden of proving under N.J.S.A. 2A:18-61.1(l)(3) "their asserted bona fide intention" to occupy a tenant's apartment).
Given our agreement with the trial judge about the governing legal standard, we readily affirm his detailed findings of fact applying that standard to the evidence in this case. The trial judge made numerous critical findings about the credibility, on the one hand, of defendant and the third-party witnesses and, on the other hand, what he perceived to be the less believable testimony presented by plaintiff and plaintiff's father. As is our custom and practice, we defer to the judge's fact finding in this bench trial. See Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974).
We also reject plaintiff's contention that the judgment was against the weight of the evidence. To the contrary, the record is very persuasive------particularly in light of the numerous statements made by plaintiff and his father to third parties disavowing an actual intention to move into defendant's apartment------in providing more than ample evidence to support the judge's findings. We also discern no error by the judge considering, in context, the three prior efforts by plaintiff's father to evict defendant on the very same asserted grounds.
On the whole, we agree with the trial judge's substantive analysis in all respects, and therefore affirm the dismissal of plaintiff's action for summary disposition.
We turn to the more difficult question of whether the trial judge appropriately imposed a fee-shifting sanction upon plaintiff under the Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1.
N.J.S.A. 2A:15-59.1 provides that a plaintiff or defendant who prevails in a case "may be awarded all reasonable litigation costs and reasonable attorney fees . . . if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous." N.J.S.A. 2A:15-59.1(a)(1). See also Rule 1:4-8 (authorizing similar fee-shifting consequences as to frivolous litigation conduct by attorneys).
N.J.S.A. 2A:15-59.1 and Rule 1:4-8 are limited exceptions to the "American Rule" for civil justice, whereby litigants are expected to bear their own counsel fees. Our courts traditionally have adhered strictly to the American Rule because "sound judicial administration will best be advanced by having each litigant bear his own counsel fees." First Atlantic Federal Credit Union v. Perez, 391 N.J. Super. 419, 425 (App. Div. 2007) (citing Gerhardt v Continental Ins. Co., 48 N.J. 291, 301 (1966)). As a consequence, we have approached fee-shifting requests under the Frivolous Litigation Statute and Rule 1:4-8 restrictively, because "the right of access to the court should not be unduly infringed upon, honest and creative advocacy should not be discouraged, and the salutary policy of the litigants bearing, in the main, their own litigation costs, should not be abandoned." Gooch v. Choice Entertaining Corp., 355 N.J. Super. 14, 18 (App. Div. 2002) (citation omitted); see also Belfer v. Merling, 322 N.J. Super. 124, 144 (App. Div. 1999); Venner v Allstate, 306 N.J. Super. 106, 113 (App. Div. 1997).
A claim is frivolous "if no rational argument can be advanced in its support, when it is unsupported by any credible evidence, when a reasonable person could not have expected its success, or when it is completely untenable." Belfer, supra, 322 N.J. Super. at 144; see also McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561 (1993). In general, "[t]he nature of conduct warranting sanction" for litigation said to be frivolous "has been strictly construed." First Atlantic, supra, 391 N.J. Super. at 432 (citing Wyche v. Unsatisfied Claim & Judgment Fund, 383 N.J. Super. 554, 560 (App. Div. 2006)); see also LoBiondo, supra, 199 N.J. at 99-100 (noting the customary "strict application" of Rule 1:4-8). Where "some of the allegations made at the outset of litigation [are] later proved to be unfounded[, that] does not render frivolous a complaint that contains some non-frivolous claims." First Atlantic, supra, 391 N.J. Super. at 432 (quoting Iannone v. McHale, 245 N.J. Super. 17, 32 (App. Div. 1990)).
Of particular significance here is the language in N.J.S.A. 2A:15-59.1 treating as non-frivolous the taking of a position in litigation that could be supported by a good faith argument "for an extension, modification or reversal of existing law." The purpose of this exclusionary language is to avoid penalizing a litigant for seeking a judicial ruling on a fairly debatable legal issue within a "developing" area of New Jersey law. Semexant v. MIL Limited-Boston Machinery Div., 252 N.J. Super. 318, 322 (App. Div. 1991).
Plaintiff argues that it was inappropriate for the trial judge to impose sanctions for its pursuit of the summary dispossession action because the judge construed the Anti-Eviction Act in a novel manner. In exploring the contours of the statute, plaintiff asserts that he was justifiably advocating a tenable position concerning the construction, extension or modification of statutory law. Such advocacy, he maintains, should not subject him to onerous obligations to pay defendant's counsel fees and costs.
Although the issue is not entirely free from doubt, we are persuaded, despite the pointedly adverse factual findings of the trial court, that plaintiff's legal arguments concerning the construction of N.J.S.A. 2A:18-61.1(l)(3) were sufficiently colorable to make it inappropriate to subject him here to fee-shifting sanctions.
The trial judge himself initially expressed an appreciation of the debatable nature of the limits of the statute in the course of his oral ruling dismissing the summary dispossession action. The judge made those observations in the context of noting that the substantive legal issues presented under N.J.S.A. 2A:18A-61.1(l)(3) could present viable issues for appeal:
The only possibility of an appeal, and I know you're talking about appeal, and I don't have a problem with appeals, it happens all the time. The only issue, really, on appeal is whether or not, because this property was transferred to [plaintiff], does the history involved here apply to him, as well? And I say yes, and I say yes because this is a unique situation in which there is a strong bond between the father -- between the trust, between the son. And the fact of the matter is, one cannot ignore the fact that the father is still very much in control of the management of this property. I don't think there's any question in anyone's mind with respect to that, and I think, frankly, the evidence supports that conclusion.
The question really is -- the question really is, for an Appellate Court, is to what extent -- to what extent a party, a plaintiff, must show, or how is the bona fide intention to be defined, what are the parameters to be defined in a case like this?
Now, [defense counsel] says look at New York law, and generally, I'm not adverse to doing that, but New York case law really is different because in the New York cases, the standard really is the establishment of immediate and compelling necessity, and that's not in our statute. In fact, our statute is very simple in terms of the language. It just says, you know, you can -- you can provide a notice and evict based upon your intent to occupy.
Now, it was left to the courts to further refine that and define that, and the cases of Fresco v. Policastro (phonetic), which is a 1982 case, 186 N.J. Super. 204, Patricia McQueen v. Brown, a 2001 case, 342 N.J. Super. 120. There's a case of DiRuthi v. Brunerit (phonetic), 228 N.J. Super. 199 and the most recent case that addresses some of these issues is a case called Hale v. Farrakhan, under docket 390 N.J. Super. 335. Now, that case is instructive, but the case involves a suit by a tenant for wrongful eviction, and that case really stands for the proposition that the landlord has the burden of proving that there was a bona fide intention, and the landlord's intention to personally occupy the unit is not to be used as a pretext to remove a tenant for some other reason.
But all of these cases address the standard in this case, and all of them address the statute which allows for this exception that we've been talking about, and all of these cases make it clear that the landlord has the burden in a summary dispossession action of proving that he or she plans to personally occupy the tenant's premises. [(Emphasis added).]
We note that Hale, supra, which the trial judge described in the above-quoted passage as "instructive" on the issues of pretext and the bona fides of a landlord's intent to occupy a leased apartment, was decided by a panel of this court on February 5, 2007. That was more than a year after plaintiff served defendant with the Notice of Termination on January 31, 2006, and about ten months after plaintiff brought the instant action for summary possession. It would be unfair to penalize plaintiff for not being sufficiently prescient in 2006 to anticipate the clarification of the statutory scheme we issued in Hale in 2007.
We recognize that our earlier opinion in Durruthy, supra, 228 N.J. Super. at 203, instructed that the landlords in that case were obligated to prove, on remand, their "bona fide intention" to occupy the leased premises, but Durruthy did not articulate exactly what such a "bona fide" showing would entail, and whether it would be measured by an objective or subjective standard. The case did not elaborate upon, as the trial judge here described it, the "parameters" of a landlord's bona fide intention to occupy. Durruthy also did not address, as Hale did nine years later, the interplay between the summary dispossession provision codified at N.J.S.A. 2A:18A-61.1(l)(3) and the wrongful eviction remedies contained in N.J.S.A. 2A:18A-61.6.
Additionally, the trial court's consideration of the prior conduct of plaintiff's father in attempting to evict defendant, although reasonably deemed relevant under the statute, was not an imputation that had similarly been made in a prior reported decision under the statute. As the trial judge observed, the relationship between father and son here presented "a unique situation." We also bear in mind that the sanctions imposed by the court were exclusively directed at the son rather than his father.
We are cognizant that the trial judge expressly found that plaintiff and his father had acted in bad faith and "solely for the purposes of harassing . . . defendant." This finding, if considered in isolation, seemingly authorizes fee-shifting under N.J.S.A. 2A:15-59.1(b)(1). Nevertheless, viewing the dimensions of the litigation as a whole, we do not agree that fee-shifting under the stature was appropriate here, in light of the pre-Hale debatable legal issues inherent in the case.
Moreover, the trial judge apparently perceived that fee-shifting was mandatory under the statute, inasmuch as the judge described his disposition in mandatory verbiage (e.g., "the Court must make a finding that this was a frivolous complaint"; plaintiff's conduct "requires this Court" to enter a judgment for fees and costs; "I must make a finding that the filing of the complaint as frivolous") (emphasis added). We hasten to point out, however, that fee-shifting under N.J.S.A. 2A:15-59.1 is discretionary, not mandatory. The statute states that "a party may be awarded all reasonable litigation costs" if the requirements of the statute are otherwise met. Ibid. (emphasis added). We cannot tell from the record whether the trial judge was under a mistaken apprehension that fee-shifting was mandatory once he found that plaintiff's intention to occupy the premises was not genuine, or whether the judge's choice of words was simply inadvertent. In any event, we find that the imposition of fee-shifting in the present matter was neither mandatory, nor, considering the "developing" nature of this area of the law, appropriate under the statute. See Semexant, supra, 252 N.J. Super. at 322.
Apart from these considerations, we have an independent concern about the propriety of shifting counsel fees in this case under N.J.S.A. 2A:15-59.1. Specifically, the record supplied to us contains no indication that defendant complied with the mandatory so-called "safe-harbor" procedures affording plaintiff a twenty-eight-day window to reconsider his complaint and withdraw it without penalty. This safe-harbor provision, originally adopted in Rule 1:4-8 and patterned after Fed. R. Civ. P. 11, also applies to litigants under the Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, "[t]o the extent practicable." See R. 1:4-8(f). The law does not automatically excuse non-compliance with the safe-harbor provision just because the moving party believes that any notice and demand would be meaningless and ignored by the offending party. Cf. Toll Brothers, Inc. v. Twp. of West Windsor, 190 N.J. 61, 71-73 (2007) (requiring a "fact-sensitive analysis" of a claim that compliance with the safe-harbor procedure was impracticable).
When we inquired of defense counsel at oral argument about this procedural requirement, he advised us that the safe-harbor language could be found in the text of defendant's counterclaim. Our review of the counterclaim, however, discloses no such language. Moreover, the safe-harbor procedure is more appropriately carried out in the form of a written notice or correspondence to opposing counsel, rather than as an affirmative pleading filed in court that demands a responsive filing under a shorter, twenty-day time frame. See R. 4:6-1(a).
The safe-harbor requirement has been "strictly construed" with respect to parties as well as their attorneys. Toll Brothers, supra, 190 N.J. at 69. We recognize that plaintiff in his brief has not complained of the absence of a safe-harbor notice, nor did he raise such a deficiency with the trial court. Even so, the judiciary itself has an institutional interest in assuring that the safe-harbor prerequisite to fee-shifting is strictly enforced. Such enforcement promotes the withdrawal of frivolous pleadings that might otherwise burden the court, as well as adversaries. Toll Brothers, supra, 190 N.J. at 71 (noting that the safe-harbor mechanism helps preserve, among other things, judicial resources). See also Community Hosp. Group, Inc. v. Blume Goldfaden Berkowitz Donnelly Fried & Forte, P.C., 381 N.J. Super. 119, 127 (App. Div. 2005) (sustaining the denial of a counsel fee award where the prevailing party failed to give the adversary the notice and opportunity to withdraw under the Rule); Trocki Plastic Surgery Ctr. v. Bartkowski, 344 N.J. Super. 399, 406 (App. Div. 2001) (holding that a plaintiff's failure to give "specific and detailed notice" of the withdrawal provisions required rejection of the plaintiff's motion for fees pursuant to N.J.S.A. 2A:15-59.1) (emphasis added), certif. denied, 171 N.J. 338 (2002).
We do not lose sight of the possibility that, notwithstanding his response to our sua sponte query at oral argument, defense counsel did, in fact, serve a safe-harbor notice or letter upon plaintiff before filing his counterclaim. Nonetheless, in the absence of such proof of safe-harbor compliance in the present record, we have an additional reason for not sustaining the trial court's award of counsel fees. The counsel fee award is accordingly vacated.*fn9
The award of costs to defendant as the prevailing party is authorized, as a matter of course, under Rule 4:42-8, irrespective of the non-applicability of the Frivolous Litigation Statute. We thus affirm the $4,565.20 in taxed costs.
The final judgment is affirmed in part and reversed in part, consistent with this opinion.