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Atul Shah v. Barry F. Jones


November 16, 2012


On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-2694-10.

Per curiam.


Submitted October 1, 2012

Before Judges Espinosa and Guadagno.

Plaintiff Atul Shah appeals from the October 11, 2011 order of the Law Division dismissing his complaint against defendant Barry F. Jones, as outside the six-year statute of limitations. Based on a thorough review of the record below, we affirm.

Defendant Jones leased commercial space in a building owned by Shah. The term of the lease began December 1, 2001, and ended December 1, 2003. The rent for the first year was $3060 per annum ($255 per month), increasing to $3213 per annum ($267.75 per month) for the second year. The lease was signed by both parties on December 2, 2001, and again on December 3, 2001, when a notary public was available to witness their signatures.

At the end of the term of the lease, Jones remained as a holdover tenant. Shah continued to accept rent from Jones without protest and without invoking a clause in the lease which provided for liquidated damages when the tenant fails to surrender possession at the expiration of the term.

On March 10, 2004, Shah sent Jones a "Notice to Surrender and Pay Rent," as follows:

(1) Your lease expired on December 1, 2003. You are hereby notified to surrender the possession of the Premises immediately to me instead of continuing as a holdover tenant.

(2) You are in default of Article number 167 of lease captioned "Indemnity and Insurances." You are hereby notified to cure the said default.

(3) You are in arrears of payment of rent pursuant to the terms of the lease. You are hereby notified to make payments and make your account up to date.

There is no evidence that Shah provided Jones with any specifics as to what arrears he considered outstanding.

Shah sold the property to Passaic Lofts on May 27, 2004. At closing, Shah executed an assignment of all of his rights to existing leases for the property including Jones's lease. Jones continued his tenancy after the sale to Passaic Lofts until September 2005, when he vacated.

Shah filed this complaint on May 26, 2010. On July 14, 2010, Jones filed an answer denying the allegations and interposing several defenses including the statute of limitations. Jones also demanded a written statement of damages pursuant to Rule 4:5-2.

When the parties appeared for trial on September 19, 2011, plaintiff told the trial court he was seeking back rent of $65,000. When asked by the judge how he calculated this amount, Shah explained that when the lease expired in December 2003, the "base rent" was $300 per month but he raised the rent to "about $390" per month. Shah conceded that there was nothing in writing to memorialize the increase and that he continued to accept the rent that Jones paid.

Jones denied that he owed any back rent and maintained that he paid the rent in full every month and offered cancelled checks as proof. Jones also produced cancelled checks for the rents he paid to Passaic Lofts after Shah sold the building.

When the judge inquired as to the timeliness of the filing of his complaint, Shah claimed that the statute of limitations was extended to December 2004 as the result of an assignment of rents by Passaic Lofts. Shah conceded that the Jones lease expired on December 1, 2003, and the last rent he was entitled to collect before he sold the building was due on May 1, 2004. The judge determined that the complaint was filed six years and twenty-six days after Shah's cause of action arose.

Shah then argued that the lease was under seal and therefore subject to the sixteen-year statute of limitations of N.J.S.A. 2A:14-4, rather than the six-year statute of limitations of N.J.S.A. 2A:14-1. The judge examined the lease and decided to conduct a Rule 104 hearing on whether the markings on the lease constituted a seal as Shah claimed.

On September 20, 2011, the court heard testimony from both parties. Jones acknowledged that he received notices of two rent increases from Shah and paid them as requested. Shah informed the court that he was seeking additional damages including payments for taxes and utilities. While Jones acknowledged receiving notice of two rent increases, he denied ever receiving a demand for any additional charges and Shah had no proof that any demand was communicated to Jones.

Shah testified that he prepared the lease and it was initially signed in his office on December 2, 2001. Shah explained that after the initial signing, he and Jones went to a notary public on December 3, 2001, to have their signatures notarized. Shah identified a triangle next to his signature and a circle next to Jones, and explained that these markings constituted the "seals" of each party.

Jones testified that he signed the lease on December 2 and again on December 3 before a notary. Jones denied there was any discussion as to seals and claimed he did not affix the circle that appears next to his name. Jones also testified that from December 1, 2001 until March 2004, when the building was sold, Shah never asked him to pay for any of the additional charges he sought in his complaint. After Shah sold the building, Jones paid rent to Passaic Lofts in the amount of $345 per month.

Shah identified the contract of sale executed March 24, 2004. The court noted Section 5.5 of the contract, which provides:

Rent arrears of any tenant including and prior to the date of transfer of title ("Closing Date") shall belong to Atul Shah and Amola Shah, who shall have the right, after Closing Date, to take actions related to such rent arrears, including, but not limited to, collect, litigate and place landlord's lien; however, Atul Shah shall not have the right to evict any tenant after date of Closing of Title. If Purchaser collects any money from any tenant in excess of the amount than then currently due, Purchaser shall turn over such excess money to Atul Shah & Amola Shah to the extent owed for rent arrears. This provision shall survive closing.

The judge then questioned Shah as to his claim that Jones was not paying the full amount of rent owed after the expiration of the lease:

THE COURT: Okay. The lease P-1 had a term of two years, expiring December 1, 2003. Is that correct?

MR. SHAH: Yes.

THE COURT: . . . Did you accept rent from the tenant after . . . December 1, 2003?

MR. SHAH: Yes.

THE COURT: Did you ever protest and indicate to the tenant that the rent was not in accordance with your understanding of the obligations of the lease?


At the conclusion of the hearing, the trial judge made several findings. As to Shah's testimony that both parties made marks on the lease to indicate that it was executed under seal, the judge found Shah to be "incredible, not worthy of belief." The court did not believe the marks were made on the lease when it was signed but "placed there at some other time, and not at the time in question." The court concluded that the six-year statute of limitations of N.J.S.A. 2A:14-1 applied as opposed to the sixteen-year statute of limitations of N.J.S.A. 2A:14-4.

The court found that after the expiration of the lease on December 1, 2003, Shah did not exercise his right to evict Jones and continued to accept rent from him "as tendered," without ever notifying him of any deficiency. Jones became a holdover tenant and remained lawfully in possession under the terms of the original lease. Jones was free to terminate his tenancy at any time without further liability.

Finally, the judge found that Shah sold the building on May 27, 2004, and the six-year period for filing a claim based on nonpayment of rent began on May 1, 2004. Any claim for taxes or utilities had to be filed within six years of May 15, 2004, the latest date when that cause of action could have arisen. The complaint was dismissed with prejudice.

We first address Shah's argument that this is a sealed lease and subject to the sixteen-year statute of limitations of N.J.S.A. 2A:14-4, which provides in pertinent part:

Every action at law for rent or arrears of rent, founded upon a lease under seal . . . shall be commenced within 16 years next after the cause of any such action shall have accrued.

N.J.S.A. 1:1-2.1 describes the requirements for a sealed document:

Every instrument, to which it is required or permitted by law that a seal be attached, shall be deemed to be sealed when there is affixed thereto, or printed, impressed or marked thereon a scroll or other device by way of a seal, and no such instrument shall be impeached or questioned for lack of a wax seal. This section shall apply to sealings by corporations as well as individuals; but any sealing required or permitted by law of a public officer, board, body or commission having an official seal shall be by the impress of such official seal. [N.J.S.A. 1:1-2.1.]

Here, the judge found Shah's testimony that he made a triangle next to his signature, intending it to represent his "seal," to be not worthy of belief. "We grant substantial deference to a trial court's findings of fact and conclusions of law, which will only be disturbed if they are 'manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence.'" Crespo v. Crespo, 395 N.J.

Super. 190, 193-94 (App. Div. 2007) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)). We grant this deference as the trial judges "are often influenced by matters such as observations of the character and demeanor of witnesses and common human experience that are not transmitted by the record." State v. Locurto, 157 N.J. 463, 474 (1999).

Here, the trial judge noted that he had an opportunity to listen to the testimony of both parties and assess their credibility. His finding that Shah was not believable as to the sealing of the lease finds adequate support in the record, and we defer to that finding.

Appellant argues that when he sold the building to Passaic Lofts, the new owner assigned his "rights" to him and, as a result, the statute of limitations did not begin to run until Jones vacated the property in September 2005.

Appellate review of statutory interpretation is de novo. Jennings v. Borough of Highlands, 418 N.J. Super. 405, 418 (App. Div. 2011). Accordingly, "review of a trial judge's decision as to the applicable statute of limitations is plenary . . . ." Psak, Graziano, Piasecki & Whitelaw v. Fleet Nat'l Bank, 390 N.J. Super. 199, 203 (App. Div. 2007).

As the trial court noted, the portion of the contract of sale addressing rent arrears gave Shah the right after closing "to take actions related to such rent arrears, including, but not limited to, collect, litigate and place landlord's lien . . . ." This right permitted Shah to collect any arrears that accrued up until the time of closing. There was also an Assignment of Lease executed at closing between Shah and Passaic Lofts which provides "Assignor assigns all its rights to certain leases between the Assignor and certain tenants as indicated on the attached Appendix 'A' which was attached to the original Contract of Sale dated March 24, 2004." Shah argues that, read together, these provisions extend his cause of action until September 2005 when Jones vacated the building. They do not.

Jones was not a party to either of these agreements and nothing in the lease to which he was a party permitted the extension of the statute of limitations. Neither the Assignment of Lease nor the Contract of Sale purports to grant Shah anything more than the ability to collect arrears after the building was sold.

"The statutory language and well-established case law, make clear that the six-year statute of limitations period is to be measured from the date a plaintiff's cause of action accrues." Holmin v. TRW, Inc., 330 N.J. Super. 30, 35 (App. Div. 2000). It is also clear that the date when a cause of action is deemed to have "accrued" is "the date upon which the right to institute and maintain a suit first arises." Hartford Accident and Indem. Co. v. Baker, 208 N.J. Super. 131, 135-36 (Law Div. 1985). The trial court found that, after his lease expired, Jones became a month-to-month tenant. The lease provided that rent payments were due on the first of each month. Shah sold the building on May 27, 2004. Therefore, the last month he was entitled to collect rent from Shah was May 2004 and any cause of action for unpaid rent accrued on May 1, 2004.

Although Shah made no demand for payment of taxes from Jones and did not specifically seek that relief in his complaint, Shah claimed a cause of action for Jones' failure to comply with a section of the form lease that provided:

Tenant shall pay taxes for any Tax Year or any part thereof, as Additional Rent for such Tax Year, an amount equal to Tenant's Proportionate Share of the amount of Taxes.

The judge addressed this claim by finding:

The second quarter taxes would have been due by May 15th. The lease provided that the base rent was due May 1st. The taxes were due May 15th. Assuming that the tenant was obligated to pay the proportionate share, that amount was known by May 15th. But then the landlord did not institute an action within six years of May 15th on that.

We agree with the trial judge that plaintiff's claim for failure to pay rent arrears accrued on May 1, 2004 and the claim based upon an alleged non-payment of taxes and utilities accrued on May 15, 2004. As a result, the statute of limitations barred the arrears claim as of May 1, 2010 and the taxes and utilities claim as of May 15, 2010.



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