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Gonzalez v. Stanley Moland Little Friends Day School, Inc.

Superior Court of New Jersey, Appellate Division

July 12, 2013

AMY GONZALEZ, Plaintiff-Appellant,


Submitted May 21, 2013

On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Morris County, Docket DC-9566-11.

Amy Gonzalez, appellant, pro se.

Respondents Stanley Moland Little Friends Day School, Inc., and Paula Fetchen have not filed a brief.

Before Judges Messano and Ostrer.


In this appeal, we are asked to consider whether plaintiff Amy Gonzalez's Special Civil Part complaint seeking money damages for alleged breaches of a commercial lease with defendant Paula Fetchen, also known as Paula Stanley, doing business as Stanley Moland Little Friends Day School, Inc., was properly dismissed based upon the entire controversy doctrine (ECD). In considering the propriety of granting a motion to dismiss in such circumstances, we examine the record in a light most favorable to plaintiff. Alpha Beauty Distributors, Inc. v. Winn-Dixie Stores, Inc., 425 N.J. Super. 94, 96 (App. Div. 2012) (citation omitted).

Plaintiff purchased commercial property from Kenneth W. Battiato, and, pursuant to the sale, was assigned Battiato's interests in a long-term lease with defendant that permitted operation of a "children's nursery/day school and related activities" on the premises. The lease commenced on July 1, 1999 and terminated on June 30, 2011. Defendant continued to operate her business pursuant to the lease, but in June 2009, she ceased paying rent to plaintiff. Plaintiff filed a summary landlord-tenant action and obtained a default judgment for possession in October 2009.

The following month, plaintiff filed a complaint seeking money damages for unpaid rent for the months of June, July and August 2009.[1] Plaintiff obtained a default judgment. In March 2010, plaintiff filed a second complaint in the Special Civil Part seeking money damages for unpaid rent for the months of September, October and November 2009. Again, default judgment was entered in plaintiff's favor.

Plaintiff filed the subject complaint in the Special Civil Part in September of 2011, seeking damages for unpaid rent for the months of December 2010, and January and February 2011.[2]Defendant filed an answer and counterclaim, alleging "[p]laintiff previously sued th[is] same [d]efendant[] . . . and [this] action is barred by the [ECD]." Defendant sought "damages in the amount of $15, 000" arising out of "additional costs in having to re-litigate previously asserted claims" due to "[p]laintiff's multiplicity of lawsuits . . . ." Before trial, defendant orally moved to dismiss the complaint based upon the ECD.

After considering oral argument and reserving decision, the judge granted defendant's motion and dismissed the complaint. In his written statement of reasons, citing Rule 4:30A, the judge determined "there is no question that the current cause of action stems from the same transaction as the prior cases filed by . . . [p]laintiff." The judge posited the issue as, "whether the present cause of action accrued at the same time" as plaintiff's prior complaints. He concluded that plaintiff "chose not once, but twice, to bring [c]omplaints . . . rather than sue for the entire amount in the Law Division." The judge further stated, "It is clear that the present cause of action accrued at the same time as the prior [c]omplaints and . . . [p]laintiff could have sought to collect on all the rent in one action without the constraint of the limitations of damages in the Special Civil Part." Since "plaintiff did not reserve the right to bring further actions, " "no exception to the [ECD] is applicable in the present case." This appeal followed.[3]Plaintiff argues that the judge "failed to recognize the equitable considerations of the [ECD], " and "the [ECD] does not bar a subsequent action for rent that had not accrued." Based upon the particular facts of the case, we agree with plaintiff's second point and reverse.

The ECD reflects our courts' "long-held preference that related claims and matters arising among related parties be adjudicated together rather than in separate, successive, fragmented, or piecemeal litigation." Kent Motor Cars, Inc. v. Reynolds and Reynolds, Co., 207 N.J. 428, 443 (2011). "Underlying the [ECD] are the twin goals of ensuring fairness to parties and achieving economy of judicial resources." Ibid.

The ECD "requires parties to a controversy before a court to assert all claims known to them that stem from the same transactional facts . . . ." Joel v. Morrocco, 147 N.J. 546, 548 (1997) (citation omitted). However, the ECD "should not be viewed as encouraging or requiring the filing of premature or unaccrued claims." K-Land Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 74 (2002).

"[T]he polestar for the application of the [ECD] is judicial fairness." Ibid. (citation omitted). Thus, the [ECD] "remains an equitable doctrine whose application is left to judicial discretion based on the factual circumstances of individual cases." Highland Lakes Country Club & Cmty. Ass'n v. Nicastro, 201 N.J. 123, 125 (2009) (quoting Oliver v. Ambrose, 152 N.J. 383, 396 (1998) (citations and internal quotation marks omitted)); see also Prevratil v. Mohr, 145 N.J. 180, 190 (1996) (noting application of the ECD "depends on the exercise of judicial discretion in the facts of each case").

However, in this case, resolution of the appeal turns solely on construction of the lease between plaintiff and defendant, to which we apply basic principles of contract law. See N.J. Indus. Props. v. Y.C. & V.L., 100 N.J. 432, 456 (1985) ("New Jersey has been a leader in its recognition that the modern lease should be construed in accordance with principles of contract law."). Accordingly, we conduct our review de novo. See Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 375 (App. Div. 2008) ("The interpretation of contracts and their construction are matters of law for the court subject to de novo review.") (citation omitted)).

"In interpreting a lease agreement the function of the court is to enforce the lease as written, not to write for the parties a different or better contract." Liqui-Box Corp. v. Estate of Elkman, 238 N.J. Super. 588, 600 (App. Div.) (citing Swisscraft Novelty Co., Inc. v. Alad Realty Corp., 113 N.J. Super. 416, 421 (App. Div. 1971)), certif. denied, 122 N.J. 142 (1990). "In general, the polestar of construction is the intention of the parties as disclosed by the language used, taken in its entirety, and evidence of the attendant circumstances may be considered, not to change the agreement made but to secure light by which to measure its actual significance." Renee Cleaners, Inc. v. Good Deal Super Markets, Inc., 89 N.J. Super. 186, 190 (App. Div. 1965), certif. denied, 46 N.J. 216 (1966).

The lease at issue in this case contained the following provision:

[S]hould the Tenant be evicted by summary proceedings or otherwise, the Landlord, in addition to any other remedies . . ., may . . . as agent for the Tenant or otherwise, re-let the premises and receive the rents . . . and apply the same, first to the payments of such expenses, reasonable attorney fees and costs, as the Landlord may have been put to in re-entering and repossessing the same and in making such repairs and alterations as may be necessary; and second to the payment of the rents due hereunder. The Tenant shall remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the re-entry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month.

Plaintiff maintains that the lease did not include an acceleration clause making all rent due upon eviction or default. Instead, plaintiff argues that the lease created a continuing cause of action that accrued monthly when rent became due and deficiencies were calculable.

New Jersey courts have long recognized that "[f]or failure to pay rent under a lease, the lessor has a continuing cause of action and may sue for rent upon each recurring period, or at the end of the term . . . ." Stark v. National Research & Design Corp., 33 N.J. Super. 315, 323 (App. Div. 1954). Although the motion judge cited Stark, he found this general rule inapplicable because defendant was "no longer a tenant and was evicted through a summary dispossession action."

Instead, the motion judge wrote, "[t]he New Jersey judiciary has sensed a potential entire controversy issue with these types of cases before[, ]" citing a footnote in our decision in Fanarjian v. Moskowitz, 237 N.J. Super. 395 (App. Div. 1989). In Fanarjian, id. at 396-99, the plaintiffs-landlords brought successive actions for damages based on nonpayment of rent. In dicta we stated: "It may be questioned whether plaintiffs, after a known breach of the entire lease, in effect an anticipatory breach as to each remaining month of the lease, should be permitted to file separate complaints for each month without violating the entire controversy rule and the mandatory joinder provisions of R. 4:27-1(b)."[4] Id. at 399 n.1. Reliance by the motion judge upon that footnote was misplaced, if for no other reason than the actual lease provisions were not discussed in our opinion.

Instead, we take guidance from the Court's decision in New Jersey Industrial Properties, supra, in which the general principles enunciated are instructive, even if the legal issue presented was slightly different. There, as stated by Justice Garibaldi, "[t]he sole question . . . [was] whether the landlord or the defaulting tenant receives the rent, in excess of that due under the original lease, that the landlord collects from a subsequent tenant for the unexpired term of the original lease." Id. at 433.

The Court noted that New Jersey recognizes "an exception to the rule that when a landlord terminates a lease, reenters the premises, and relets for his own account, the tenant is relieved of any future liability for the rent. Parties to a lease may agree that certain obligations will survive the termination of the landlord-tenant relationship." Id. at 439 (citations omitted).

[A] survival covenant, recognizes the termination of the lease and provides for the payment of damages in an amount equal to the excess of the rents reserved in the lease above the rents actually collected by the landlord upon reletting. Under a survival covenant, the landlord may commence successive monthly lawsuits to recover the deficiency computed in accordance with the covenant, or may file one lawsuit for the aggregate deficiency upon the expiration of the lease term.
[Laurence D. Cherkis & Thomas E. Patterson, Collier Real Estate Transactions and the Bankruptcy Code 3.03 (Alan N. Resnick, Steven M. Abramowitz, Laurence D. Cherkis and Henry J. Sommer eds., 2011).]

The lease in New Jersey Industrial Properties included such a "survival covenant":

In the event that the relation of the Landlord and Tenant may cease or terminate by reason of . . . abandonment of the premises by the Tenant, the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord . . . during the remainder of the unexpired term, such difference of [sic] deficiency between the rent reserved and the rent collected, if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained.
[Id. at 440 (emphasis added).]

The plaintiff-landlord relied upon this provision "to establish that damages [we]re to be based on the monthly lost rent, thus creating a separate and independent cause of action for each month in which there is a deficiency in rent." Id. at 441. Meanwhile, the defendant-tenant "relie[d] on [the] paragraph . . . to show that the proper period for measuring damages is the entire period of the lease." Ibid. The Court noted that "similar provisions have been interpreted as providing that after a lease is terminated, a separate and independent cause of action for damages accrues each month, for the rent due until the end of the lease period." Ibid. The Court cited McCready v. Lindenborn, 65 N.E. 208 (N.Y. 1902), as one such case involving a similar lease provision.

The lease in McCready provided that the tenant would pay "'as damages for breach of the covenant for rent' the difference between the rent reserved and the rent received, 'in equal monthly payments, as the amount of such difference shall from time to time be ascertained.'" N.J. Indus. Props., supra, 100 N.J. at 441 (quoting McCready, supra, 65 N.E. at 210). "Based on that lease provision, the [McCready] court held that damages would be measured by the rent lost monthly, not the total rent lost at the end of the lease term." Ibid. "Further, the [McCready] court held that the landlord 'was at liberty to allow the causes of action for monthly deficiency to accumulate, and to recover upon several at the same time.'" Ibid. (quoting McCready, supra, 65 N.E. at 210).

Noting that, as in McCready, the provision at issue established "not only the manner of payment but also the quantum of payment, " the Court in New Jersey Industrial Properties held that the lease "provide[d] for the calculation of rent owed by the breaching tenant each month after the lease [was] breached" and did not "require[] the landlord to await the end of the lease term to calculate damages . . . ." Id. at 442-43.

In this case, the lease between the parties contained a survival clause by which defendant "remain[ed] liable for such rents as may be in arrears and also the rents as may accrue subsequent" in amounts "ascertained each month" We conclude that under the specific lease terms plaintiff's cause of action for rent continued to accrue on a monthly basis Therefore it was error to dismiss her complaint pursuant to the ECD

Reversed and remanded for trial.

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