Penwag Property Co., Inc. v. Landau

• Decision Date: 10 July 1978
• Citation: 76 N.J. 595,388 A.2d 1265
• Parties: The PENWAG PROPERTY CO., INC., a corporation of the State of New York, and the Penwag Property Co., Inc., a corporation of New Jersey, Plaintiffs-Respondents and Cross-Appellants, v. David LANDAU, Defendant-Appellant and Cross-Respondent.
• Court: New Jersey Supreme Court

Page 595

76 N.J. 595

388 A.2d 1265

The PENWAG PROPERTY CO., INC., a corporation of the State of New York, and the Penwag Property Co., Inc., a corporation of New Jersey Plaintiffs-Respondents and Cross-Appellants, v. David LANDAU, Defendant-Appellant and Cross-Respondent.

Supreme Court of New Jersey.

Argued April 24, 1978.

Decided July 10, 1978.

Robert Alan Vort, Newark, for defendant-appellant (Weston, Kravitz & Rank, Trenton, and Robert Alan Vort, attorneys).

Ronald Berman, Trenton, argued the cause for plaintiffs-respondents (Warren, Goldberg & Berman, Trenton, attorneys).

PER CURIAM.

This litigation concerns a dispute between plaintiff landlord, Penwag Property Co., Inc., and its tenant, David Landau, the defendant, arising out of a lease agreement under which the tenant leased the first floor and basement of a building known as 112-114 Nassau Street, Princeton, for use as a department store. The landlord instituted the action for possession and damages due to the tenant's failure to subordinate his lease to a certain mortgage. Defendant's answer questioned the validity of the mortgage and in a counterclaim asserted that the "action has been commenced without reasonable or probable cause and constituted malicious use of process." ¹

After an extensive trial, the trial court found that defendant had not breached the lease and that the mortgage in question was in fact subordinate to defendant's lease. It also entered a judgment in favor of defendant on its counterclaim, awarding defendant.$19,000 compensatory damages, consisting of counsel fees and costs of defense of the main action, and $20,000 punitive damages. The Appellate Division unanimously affirmed the dismissal of plaintiff's claim. Judge Larner, writing for a majority of that court, reversed the judgment based on the counterclaim on the ground that defendant had not suffered a special grievance. 148 N.J.Super. 493, 372 A.2d 1162 (App.Div.1977). The dissenting judge held that the circumstances warranted the conclusion that a special grievance had been established.

Defendant filed an appeal, R. 2:2-1(a), and plaintiff a cross appeal, R. 2:3-4. We affirm essentially for the reasons expressed by Judge Larner.

Malicious prosecution or malicious use of process as it is sometimes referred to when the underlying proceeding is civil rather than criminal ² is not a favored cause of action because of the policy that people should not be inhibited in seeking redress in the courts. Lind v. Schmid, 67 N.J. 255, 262, 337 A.2d 365 (1975). Justice (then Judge) Francis expressed the thought in this language:

* * * the law does not look with favor upon actions for malicious prosecution; it does not encourage them. The reason is embedded deeply in our jurisprudence. The courts must be freely accessible to the people. Extreme care must be exercised so as to avoid the creation of a reluctance on their part to seek redress for civil or criminal wrongs for fear of being subjected to a damage suit if the action results adversely. (Mayflower Industries v. Thor Corp., 15 N.J.Super. 139 at 153, 83 A.2d 246 at 253 (Ch.1951), aff'd 9 N.J. 605, 89 A.2d 242 (1952))

Although we recognize the countervailing policy that groundless claims motivated by malice should entitle one to maintain such a cause of action, we believe that on balance the rule that the moving party must establish a special grievance should be retained. Special grievance consists of interference with one's liberty or property. Mayflower Industries v. Thor Corp., 15 N.J.Super. at 151-152, 83 A.2d 246. Counsel fees and costs in defending the action maliciously brought may be an element of damage in a successful malicious prosecution, but do not in themselves constitute a special grievance necessary to make out the cause of action. Id. at 175-176, 83 A.2d 246.

In addition to special grievance the plaintiff in an action for malicious prosecution of a civil suit must show that the suit was brought without reasonable or probable cause, that it was actuated by malice, and that it terminated favorably to the plaintiff. W. Prosser, Torts, § 120 at 850-856 (4th ed. 1971). Favorable termination did not exist when defendant's counterclaim was filed in this cause. Though plaintiff had not moved to strike that counterclaim, it should have been eliminated in the pretrial order. It is not appropriate to institute a suit or file a counterclaim until the litigation has terminated in favor of the party who asserts the malicious prosecution cause of action.

Affirmed.

PASHMAN, J., concurring in the result.

For affirmance: Chief Justice HUGHES, Justices SULLIVAN, PASHMAN, CLIFFORD, SCHREIBER, and HANDLER and Judge CONFORD 7.

For reversal: None.

PASHMAN, J., concurring.

I concur in the Court's holding that in order for a plaintiff to establish a cause of action based upon an alleged malicious use of civil process (or its counterpart in the criminal context, malicious prosecution) he must demonstrate a "special grievance." This seemingly harsh rule is necessary to avoid having prospective plaintiffs discouraged from seeking vindication of their rights by the threat of such a retaliatory suit. I agree with the statement in the recent case of Pantone v. Demos, 375 N.E.2d 480 (Ill.App.1978), a suit by former medical malpractice defendants against the plaintiff in the prior suit and his counsel, that

* * * public policy requires a safeguarding of a suitor's access to the courts without fear of easily maintained countersuits for bringing such actions. (375 N.E.2d at 484)

However, this particular plaintiff obviously acted in bad faith and improperly...