December 29, 2011
JOSEPH COHN AND VERONICA FINKELSTEIN, PLAINTIFFS-APPELLANTS,
LORRAINE HINGER AND GINA VOIRO, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. SC-2950-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 7, 2011
Before Judges Fuentes and Harris.
This appeal involves the disposition of a demand for a rent abatement in connection with a residential lease. Plaintiffs were tenants, renting the first floor and unfinished basement of defendants' duplex in Westmont. Plaintiffs never missed a rent payment. Around Thanksgiving 2009, the premises suffered water infiltration and mold growth in the basement, where plaintiffs had laundered their clothing and stored some of their belongings. Plaintiffs moved their belongings upstairs to the living and dining rooms, and the condition was repaired four months later. A few months after that, in mid-2010, defendants sought to sell the duplex to a third party. During a routine inspection of the premises in anticipation of sale, it was serendipitously discovered that the premises lacked ground fault circuit interrupter (GFI) outlets, carbon monoxide sensor devices, and asbestos was present in the basement. After defendants sold the premises, plaintiffs sued for damages occasioned by what they described as breaches of the implied warranty of habitability and the parties' lease. After a trial in the Small Claims Section, the Law Division dismissed the complaint, finding "no evidence of any damages which flow as a result of the property not being safe or sanitary." We affirm.
We derive the facts from the record that was presented to the trial judge. According to plaintiffs, defendants informed them at the lease signing in September 2008 that "there is a window on one end of the basement that . . . leaked water in" and that "some water sometimes seeps into that corner of that basement and the sump pump takes care of it in a few days." Defendants assert, however, that they "never said that the basement only got a little bit of water in the corner," but rather that "[i]t has always been a wet basement."
Plaintiff Joseph Cohn indicated that in late November 2009, "[w]ater was seeping in through the foundation of the basement" following a period of "pretty heavy" rainfall in the area. Plaintiffs contacted defendants about the seepage and "asked them to take care of it," to which defendants responded that they would wait to see if the issue resolved itself within "a few days." When the condition did not subside, defendants began contacting professional waterproofing companies to repair the problem. Defendants hired a waterproofer to assess the situation in late December 2009, and actual repairs commenced in early February 2010. The waterproofing was completed in late March 2010.
Subsequently, defendants decided to sell the property. During the pre-sale home inspection, it was determined that the duplex lacked carbon monoxide detectors and did not have GFI outlets in the kitchen, bathroom, and basement. The inspection also revealed the presence of "openly exposed asbestos" in the basement. All of the conditions were remediated by defendants by mid-June 2010. Plaintiffs were not obliged to vacate the premises for any of the repairs and they paid their full rent due. Plaintiffs continued to live in the duplex after it was sold.
Plaintiffs filed a complaint against defendants in the Small Claims Section, Camden Vicinage, on November 24, 2010, specifically alleging a breach of the implied warranty of habitability and breach of contract. A one-day bench trial was held on December 15, 2010. At trial, Cohn was plaintiffs' only witness. He contended that as a result of the four months it took to complete the basement repairs, he and co-plaintiff Veronica Finkelstein suffered "massive amounts of inconvenience." They were unable to utilize the basement for storage, and they needed to "wear galoshes to go down there every day" to use the washer and dryer. Cohn testified that "incredible amounts of mold" were present as a result of the seepage, and presented the court with photographs of the basement from that time period.
In addition, Cohn asserted that he and Finkelstein suffered inconvenience because they were required to remove all of their belongings from the basement and had to keep their personalty upstairs for at least one week following the repair while the concrete cured. Plaintiffs also moved their belongings out of the basement and into the living and dining rooms during the asbestos removal. Finally, Cohn urged that he and Finkelstein were "exposed to unsafe conditions throughout" their tenancy as a result of the water infiltration, lack of carbon monoxide detectors, uninstalled GFI outlets, and the presence of asbestos in the basement.
Cohn testified that he and Finkelstein did not move out of the apartment or stay at a hotel at any time during this period. He further confirmed that they resided in the duplex even at the time of trial. Plaintiffs stated in their complaint that they "never missed or were late in remitting their rental payments to [d]efendants in full," and that "[i]n total, [they] paid [d]efendants $24,990" in rent." When questioned by the court as to why they "didn't . . . just stop paying the rent, put it into a court escrow, and go into the landlord and tenant court" over their asserted issues, Cohn responded:
Because when you do that, and putting the money in escrow, habitability issues and abatements are not assigned. They're really -- they're really kind of an art. And it's a different value in terms of what you're entitled to and what you're not.
[B]ut there's a strategic reason. And the reason why . . . is because at the end, when you decide whatever it is that we're entitled to back, and whatever that number is, if I put it in escrow it comes in a judgment on the record against me for that amount. Now, sure, that comes out of an escrow account, but that affects my credit, something that I shouldn't have to expose to do it. That's an unfortunate -- you know, it's, you know, built into the system when you go through that route. Instead we chose to pay it in full, discuss the issues with [defendants] in good faith, try to work something out over the course of that year. And when that didn't work, we chose to bring our action to small claims, which is also allowed as a procedure. So, that's what we chose to do because that was more sound to us.
At the close of all of the testimony,*fn1 the court issued an oral decision from the bench, dismissing plaintiffs' complaint in full. The court set forth its reasons, in relevant part, as follows:
Now, I've listened very carefully today to the issues raised by the plaintiff. And, quite honestly, the plaintiff . . . seems to me that he is doing more argument over the definition of habitability than the actual damages which may have occurred regarding the lack of habitability. That's what I've heard today over and over again.
Habitability to me means that the property is not in a way that the tenant can have the normal enjoyment that the law requires a tenant to have, the enjoyment of the property. That's the purpose of me defining habitability. If I find that habitability has been breached, if the legal definition of habitability has not occurred and it has become uninhabitable, obviously, I'm going to find that there may be a cause to give some credit of rent to the tenant.
What have I heard today? I have heard the tenant/plaintiff argue the legal definition of habitability. He has argued to me that as a result of some flooding problems that he was inconvenienced, but the rent was paid, nevertheless, every month.
And an argument could be made, I'm not making that argument, but an argument could be made by the landlord that if the tenant was so inconvenienced, why did he pay the rent every month? He could have put it in escrow with the Court.
Now, here's what we have. This tenant has stayed there all through the tenancy, and, in fact, continues to stay there with the new owner, I assume. I don't know anything about the present situation. But the tenant has presented a case based upon some legal definitions of the word habitability. He has presented absolutely no, and I'll say it again, no evidence of any specific damages to him or his co-tenant.
In my opinion there has been absolutely no evidence of specific damage to the tenant. He has shown me pictures. He has shown me that there were some conditions of water marks. He has shown me that there were conditions of his belongings which had to be put in one place as opposed to another, which he says is inconvenience to him.
He said that there may have been mold. I've seen no evidence of the mold. I've heard no expert testimony regarding the mold. I've seen pictures here of discoloration on the floor, which the tenant says may be mold. And it may have been. But I've heard no expert testimony regarding the mold. I've heard no medical testimony regarding what affect this mold had on the tenants.
I've heard no expert testimony at all regarding any of these damages, other than a theoretical argument that the property could have caused some specific damages. But it wouldn't make any difference to this tenant anyway, because his argument is that I don't even have to see specific evidence of damages if I find that the landlord and tenant legislation has not been followed. He . . . argues that . . . in and of itself is a breach of habitability.
I don't agree with him. I find there's no evidence of any damages whatsoever. The rent was paid fully. And I can understand his explanation. He said if he didn't pay the rent there could have been something on somebody's credit report which may have caused him a problem, which may have caused the landlord a problem. So, I can understand that.
But in this case, as far as I'm concerned, there has been no evidence whatsoever of any damages regarding the lack of habitability. The tenant lived there, paid the rent normally. Showed me no testimony regarding any specific damages to the tenant. None whatsoever.
He argues that the property was not safe and sanitary, but there's no evidence of any damages which flow as a result of the property not being safe or sanitary. None whatsoever.
As far as I'm concerned, there has been no testimony which rises to the preponderance of the believable testimony, which I need in a civil case. And as far as I'm concerned, there has been no evidence whatsoever of the breach of habitability neither in the lease or in the law. And so I'm dismissing the complaint.
This appeal followed.
The scope of our review of a non-jury case is limited. Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011). The findings on which a trial court bases its decision will "not be disturbed unless they are so wholly insupportable as to result in a denial of justice[.]" Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974) (internal citations and quotations omitted). On the other hand, although a trial court's factual findings will not be overturned absent an abuse of discretion, questions of law are subject to de novo review. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999).
Plaintiffs argue that the trial court erred as a matter of law in dismissing their complaint, finding that no breach of the implied warranty of habitability or breach of contract*fn2 occurred.
Plaintiffs first contend that the trial court improperly dismissed their claims because they "had not supplied evidence that they personally suffered any damages which flowed as a result of the property not being sanitary." They argue that "[e]vidence of personal injury is not required to prove a violation of the warranty of habitability," and that the court should instead have focused on the factors set forth in Berzito v. Gambino, 63 N.J. 460, 470 (1973), for determining whether a breach of the implied warranty of habitability occurred.
Next, plaintiffs contend that the court erred by "impermissibly [taking] into account that [plaintiffs] chose to pay rent in full while negotiating a resolution in good faith, rather than opt to pursue alternate lawful remedies such as vacating the premises, withholding rent in escrow, or repairing the premises and deducting the same." Plaintiffs assert that the trial court's statements were contrary to the Court's holding in Berzito, that a subsequent suit for rent abatement is a proper remedy for breach of warranty of habitability. Id. at 469.
Finally, plaintiffs assert that the trial court's conclusion that they "offered 'no evidence whatsoever of the breach of habitability neither in the lease [n]or in the law'" is against the weight of the evidence and requires a reversal and remand of the matter.
An implied warranty of habitability is "a covenant that at the inception of the lease, there are no latent defects in facilities vital to the use of the premises for residential purposes because of faulty original construction or deterioration from age or normal usage." Marini v. Ireland, 56 N.J. 130, 144 (1970). The warranty is further "a covenant that these facilities will remain in usable condition during the entire term of the lease." Ibid. "In performance of this covenant the landlord is required to maintain those facilities in a condition which renders the property livable." Ibid.
"Habitability is synonymous with suitability for living purposes; the house must be occupiable." Aronsohn v. Mandara, 98 N.J. 92, 104 (1984) (citing Trentacost v. Brossel, 82 N.J. 214, 225 (1980) ("At a minimum, the necessities of a habitable residence include sufficient heat and ventilation, adequate light, plumbing and sanitation, and proper security and maintenance.")). As such, "[n]ot every defect or inconvenience will be deemed to constitute a breach of the covenant of habitability." Berzito, supra, 63 N.J. at 469. The defect or problem "must be such as truly to render the premises uninhabitable in the eyes of a reasonable person." Ibid.
To guide courts in the determination of whether a condition rises to the level of breaching the implied warranty of habitability, Berzito adopted a list of relevant factors:
1. Has there been a violation of any applicable housing code or building or sanitary regulations?
2. Is the nature of the deficiency or defect such as to affect a vital facility?
3. What is its potential or actual effect upon safety and sanitation?
4. For what length of time has it persisted?
5. What is the age of the structure?
6. What is the amount of the rent?
7. Can the tenant be said to have waived the defect or be estopped to complain?
8. Was the tenant in any way responsible for the defective condition?
[Id. at 470.]
The Court held that these factors are "intended to be suggestive rather than exhaustive," and "[e]ach case must be governed by its own facts" so as to come to a result that is "just and fair to the landlord as well as the tenant." Ibid.
Three paradigms have emerged for claims of breach of the implied warranty of habitability. One approach applies the doctrine of constructive eviction, which allows a tenant to vacate the premises and be relieved from the obligation to pay rent if the condition found to breach the implied warranty is deemed permanent and "amount[s] to a substantial interference with use and enjoyment of the premises for the purpose of the lease." Reste Realty Corp. v. Cooper, 53 N.J. 444, 458-59 (1969). Another means of dealing with the issue was recognized by the Court in Marini, which permits a tenant to make the necessary reasonable repairs to end the cause of the breach of the implied warranty, and to offset the cost of such repairs against the amount of rent paid. Supra, 56 N.J. at 146. The third manner of addressing alleged implied warranty of habitability breaches is outlined Berzito: a tenant may initiate an action against his landlord to recover either part or all of a deposit paid upon the execution and delivery of the lease or part or all of the rent thereafter paid during the term, where he alleges that the lessor has broken his covenant to maintain the premises in a habitable condition. [Supra, 63 N.J. at 469.]
Should a tenant choose to pursue such a course and breach of the implied warranty of habitability is proven, "the tenant will be charged only with the reasonable rental value of the property in its imperfect condition during his period of occupancy." Ibid. However, "[a]s a prerequisite to maintaining such a suit, the tenant must give the landlord positive and seasonable notice of the alleged defect, must request its correction and must allow the landlord a reasonable period of time to effect the repair or replacement." Ibid. As such, "tenants are not entitled to an abatement [of rent] when the landlord repairs the defective condition within a reasonable time after learning of its existence." Chess v. Muhammad, 179 N.J. Super. 75, 80 (App. Div. 1981).
To the extent that the trial court considered plaintiffs' failure to pursue an alternate remedy as a factor to be weighed against them, the court erred. While the court did comment upon plaintiffs' choice of remedy in its oral decision, making reference to the fact that plaintiffs' "paid their rent normally" and stating that "an argument could be made by the landlord that if the tenant was so inconvenienced, why did he pay the rent every month," we are satisfied that this was not the primary factor underlying the court's ultimate decision to dismiss plaintiffs' complaint.
The trial court opined extensively that plaintiffs did not present adequate evidence of any damages suffered as a result of the alleged defects cited as grounds for breach of the implied warranty of habitability. Here, the decision focused almost exclusively on the fact that plaintiffs failed to demonstrate that the alleged defects had a significant effect on their occupancy or safety. While plaintiffs argue that the court's failure to consider all of the Berzito factors rises to the level of reversible error, the Court noted that its proposed list of factors was merely "suggestive" and that "[e]ach case must be governed by its own facts." Supra, 63 N.J. at 470. Accordingly, the mere fact that the trial court failed to specifically enumerate findings on each Berzito factor is not enough to warrant reversing its decision to dismiss plaintiffs' complaint.
As previously noted, "tenants are not entitled to an abatement when the landlord repairs the defective condition within a reasonable time after learning of its existence." Chess, supra, 179 N.J. Super. at 80. Defendants in this case acted reasonably in remediating all of the cited conditions, even if the four-month repair of the water seepage was longer than the duration plaintiffs assert they could have gotten a contractor to complete the work.
Further, and most significantly, plaintiffs' primary claims regarding the water in the basement cannot be said to rise to the level of breaching the implied warranty of habitability as a matter of law. Plaintiffs assert that they suffered "massive amounts of inconvenience" when they had to move items from the basement into their living and dining rooms during the repairs and had to don galoshes while doing their laundry. Such inconvenience, however, does not equate to the loss of "a vital facility" of the rental property, nor did it render the apartment unlivable during the limited period that the seepage was occurring. Id. at 78.
Plaintiffs argue that Reste Realty Corp. considers basement flooding "to constitute not only a breach of warranty of habitability, but also that it was tantamount to a constructive eviction." In Reste Realty Corp., the basement area suffering the water infiltration was leased as commercial offices and the significant flooding experienced by the tenants (at times rising to a level of five inches) completely prevented them from hosting meetings and classes as was their primary intention in renting the space. Supra, 53 N.J. at 449-50. Here, plaintiffs utilized the basement only for laundry and storage, and it cannot be said that their primary intention in leasing the duplex was to utilize the basement for living purposes.
Plaintiffs further cite Terrace Condominium Association v. Midlantic National Bank, 268 N.J. Super. 488, 498 (Law Div. 1993) in support of their claim. We find Terrace neither instructive nor comparable to plaintiffs' situation. The "substantial water infiltration" in Terrace caused damage not only to the condominium units themselves, but also to the terraces, parking decks, and other common areas, thus affecting a significantly larger portion of the vital facilities expected to be available to the occupants than is at issue in the present matter. Id. at 493, 497-98. Also, the court in Terrace noted that the building defects were particularly adverse to the habitability of the premises "in light of the fact that each unit was marketed as a luxury condominium." Id. at 495. Here, the duplex in question was asserted by defendants to be "[sixty] years old" and plaintiffs do not dispute that they were informed prior to signing their lease that the basement had suffered water leakage issues in the past. Finally, the property owners in Terrace ultimately "ceased all remedial activity . . . without fully curing the problem areas," unlike the present matter where defendants responsibly completed repairs in relatively short order. Id. at 494.
In light of our analysis, the trial court was not so wide of the mark when it held that plaintiffs failed to demonstrate that the defects alleged in their complaint rose to the level of breaching the implied warranty of habitability. Cf. Berzito, supra, 63 N.J. at 463 ("[S]creens and storm windows were either broken or missing, a number of windows were boarded up where the panes had been broken, several radiators were not to be found, there were holes in the floors and wall, plaster was falling, several electric fixtures were inoperable, there was a sewage backup in the cellar and the premises were infested with roaches and rodents."); see also Drew v. Pullen, 172 N.J. Super. 570, 572 (App. Div. 1980) ("The most serious defects included hazardously defective wiring, a kitchen and living room ceiling in imminent danger of falling down, and open holes in the floors of most of the rooms existing by virtue of uncovered heating vents."); Timber Ridge Town House v. Dietz, 133 N.J. Super. 577, 578-80 (Law Div. 1975) (tenant's townhouse was adjacent to a retaining wall that was being constructed, the process of which caused significant amounts of mud and water to constantly cover the unit's main entranceway, patio, and the common parking area for tenants and guests for a period of several months).
We also view the failure of plaintiffs to produce evidence consonant with the appropriate measure of damages, even though, as Cohn testified, "primarily we're here to talk about rental abatement over the diminished value of the property while this was going on," with great significance.
The purpose of compensatory damages is "to put the injured party in as good a position as he would have had if performance had been rendered as promised." 525 Main Street Corp. v. Eagle Roofing Co., 34 N.J. 251, 254 (1961) (internal citations omitted). Specific rules or formulas are "subordinate to this broad purpose" and should not be invoked if they "defeat a common sense solution." Ibid. Generally speaking, because a breach of the implied warranty of habitability involves an injury to the tenancy -- a species of real property -- we look to the law of realty for guidance as to damages.
"The appropriate measure of damages for injury done to land is a complex subject" and depends "upon the evidence in the particular case." Velop, Inc. v. Kaplan, 301 N.J. Super. 32, 64 (App. Div.), certif. granted, 152 N.J. 9 (1997), appeal dismissed, 153 N.J. 45 (1998) (citing Dobbs, Remedies, § 5.2 to 5.16 at 310-34 (1973)). In almost every case, one of two measures is employed. The first measure, which has been described as "the one most commonly mentioned in the [reported] opinions," is the diminution-of-value measure:
Under this measure the plaintiff is entitled to recover the difference in the value of his property immediately before and immediately after the injury to it, that [is], the amount his property has diminished in value as a result of the injury. [Ibid. (quoting Dobbs, supra, at 312) (emphasis added).]
A second measure is the replacement-cost or restoration-cost measure. That alternative "awards the plaintiff the reasonable cost of restoring or repairing the damage." Ibid. "Each of these tests has a wide sphere of application, and the court's selection of one test or the other is basically an assessment of which is more likely to afford full and reasonable compensation." Ibid. (emphasis added). [Mosteller v. Naiman, 416 N.J. Super. 632, 638 (App. Div. 2010).]
This is consonant with abatement principles that bar tenants in habitability disputes from withholding the entire rent. See Berzito, supra, 63 N.J. at 469 ("[T]he tenant will be charged only with the reasonable rental value of the property in its imperfect condition during his period of occupancy."); see also C.F. Seabrook Co. v. Beck, 174 N.J. Super. 577, 595 (App. Div. 1980)("The tenant of a dwelling affected by serious defects which impair habitability must pay the reasonable rental value only.").
While it may prove to be too much to ask a plaintiff in the Small Claims Section to present expert appraisal evidence to compare the rental value of the premises on the date of the inception of the lease with the rental value during the period of supposed breach of the implied warranty of habitability, we nevertheless view the present record as utterly barren of any evidence of valuation damages whatsoever. By this, we do not subscribe to the trial court's implicit suggestion that plaintiffs failed to demonstrate the economic value of supposed medical injuries. Rather, we have searched in vain for objective evidence of diminution in rental value, which would be required for the court to award damages for the claimed breach in a principled manner. Without such evidence, any monetary award for abatement of rent would be subjective and untethered to reality.
We note that plaintiffs alleged that "[c]ertain belongings were damaged by the water and mold [in the basement], including a wooden cabinet, extra large cat tree, and many boxes of books [that] had to be discarded or replaced." Plaintiffs asserted a value "in excess of $300" for these items. Plaintiffs further stated that they "purchased numerous cleaning supplies in attempts to rid the basement of the mold," which "cost [p]laintiffs approximately $175." These claims may have given rise to a cause of action against defendants for personal property damage suffered as a result of the basement flooding, but the gravamen of the complaint narrowly asserted claims of breach of the implied warranty of habitability and breach of contract, neither of which were established and neither of which provides for independent reimbursement for personalty.