Fanarjian v. Moskowitz

• Decision Date: 19 December 1989
• Citation: 568 A.2d 94,237 N.J.Super. 395
• Parties: Manuel P. FANARJIAN and David K. Marx, Jr., Plaintiffs-Appellants, v. Joel MOSKOWITZ, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 395

237 N.J.Super. 395

568 A.2d 94

Manuel P. FANARJIAN and David K. Marx, Jr., Plaintiffs-Appellants, v. Joel MOSKOWITZ, Defendant-Respondent.

Superior Court of New Jersey,

Appellate Division.

Argued Nov. 27, 1989.

Decided Dec. 19, 1989.

Manuel P. Fanarjian, for plaintiffs-appellants (Marx & Fanarjian, attorneys; Manuel P. Fanarjian, Dover, on the brief).

Jay A. Yanavok, for defendant-respondent (Wiener & Binder, attorneys; Larry I. Wiener and Roy H. Binder, of counsel; Jay A. Yanavok, Rockaway, on the brief).

Before Judges PETRELLA, O'BRIEN and HAVEY.

The opinion of the court was delivered by

PETRELLA, P.J.A.D.

This tenancy appeal raises the issue of whether landlords of a commercial building have a duty to mitigate damages when a tenant breaches the lease. We conclude that reason and logic dictate that the better view is that such a duty to mitigate should exist, and accordingly affirm the decision of the Special Civil Part which so held.

Plaintiffs Manuel P. Fanarjian and David K. Marx, Jr. owned a commercial building in Jefferson Township, New Jersey. Defendant Joel Moskowitz, a dentist, entered into a lease with plaintiffs for a suite in the building on May 9, 1975 for a five year initial term beginning on November 1, 1975. The lease was thereafter extended by addendum to October 31, 1988. Under the addendum, rent in the amount of $825 per month was due from November 1, 1985 through October 31, 1988. A late payment penalty of 5% of the amount due was provided in the event that the rent payment was more than 11 days late.

The lease also provided that the tenant could not assign, sublease or encumber the leasehold premises without the landlord's written consent. The annexed rider to the lease provided that such consent would not be unreasonably withheld, provided the tenant remained a party to the lease and the subsequent use was approved by the landlord.

Moskowitz advised plaintiffs by an October 23, 1987 letter that he would be vacating the suite as of November 3, 1987. After Moskowitz vacated the premises he advertised the space in the newspaper in December 1987 and January 1988 but had no success in subletting the premises. He paid the monthly rental through March 1988. On March 10, 1988 Moskowitz sent plaintiffs a check for the March rent and stated that it was the "final payment" he would make.

Plaintiffs placed a "for rent" sign in front of the building on February 28, 1988 and showed the premises on March 28, 1988 to a prospective tenant. They also spoke with two or three other interested persons and showed the premises one or two other times.

When the plaintiffs did not receive the April 1988 rent they filed the first of several complaints in the Special Civil Part. This complaint sought the April rent, a late payment fee, and costs. After a hearing on May 20, 1988 the trial judge held that plaintiffs had a duty to mitigate damages, notwithstanding that commercial property was involved. The judge found that plaintiffs were not then in default in their duty to mitigate and ordered Moskowitz to pay the April rent. The judge denied the late payment claim. Neither party appealed that decision. Thereafter plaintiffs made further attempts to rent the suite. They had the outside of the building and the parking lot washed and cleaned, and mailed a proposed advertisement to the Morris County Medical Society's journal, a state chiropractic journal, the Morris County Dental Society's journal, and the Morris County Bar Association's publication. They also repainted the "for rent" sign outside the building and placed a "for rent" sign in the window of the suite.

Plaintiffs thereafter filed additional complaints for the May and June 1988 rent. The judge again held after a June 17, 1988 hearing that plaintiffs had a duty to mitigate damages and found that their efforts were reasonable to date. Consequently, Moskowitz was ordered to pay the May and June rent. However, late fees were again denied. Neither party appealed the June 17, 1988 decision.

In July 1988 plaintiffs filed a third complaint which sought the July rent and a fee for late payment. ¹ As in the other cases, in accordance with R. 6:3-1 no answer was filed. The judge heard oral argument on August 5, 1988 and incorporated the testimony from the two prior hearings of May 20 and June 17, 1988. At the August 5, 1988 hearing plaintiff Fanarjian testified that he had placed some weekly and biweekly newspaper advertisements, as well as having forwarded advertisements to some professional journals. He was not certain whether the advertisements had run in any of those journals. The judge ordered the July rent paid, but again denied late fees. In addition, the judge found that plaintiffs' efforts to mitigate damages were minimal. He said he was "amending the answer" to conform to the proofs and treated it as a counterclaim for declaratory relief. The judge ruled "that the obligation to continue to pay rent is terminated and it is terminated as of July, so that the defendant is excused from paying any further rent on the lease." An order was entered on September 8, 1988. It is this order which is the subject of this appeal.

Plaintiffs argue that the judge was without authority to create an answer and counterclaim for declaratory relief and enter judgment thereon. They also challenge the refusal to award payment of late charges. Finally, they argue that a commercial landlord need not mitigate damages, and in any event the conclusion that they failed to mitigate damages was against the weight of the evidence.

As to plaintiffs' challenge to the authority of the trial judge to create a counterclaim and enter declaratory judgment, they direct us to no authority which precludes the judge from ruling that defendant's obligation to make further payments under the lease has ended. We find it unnecessary to conclude whether the judge was so authorized under the Declaratory Judgments Act, N.J.S.A. 2A:16-50, et seq. In our view, the court had inherent authority, as well as authority under R. 4:9-2 and R. 4:42-6, ² both rules are applicable to the Special Civil Part under R. 6:3-1, to declare the rights and responsibilities of the parties to this lease in deciding this litigation. See 68th St. Apts., Inc. v. Lauricella, 142 N.J.Super. 546, 561, 362 A.2d 78 (Law Div.1976), aff'd o.b. 150 N.J.Super. 47, 374 A.2d 1222 (App.Div.1977); J.B. v. G.B., 111 N.J.Super. 33, 266 A.2d 610 (Ch.Div.1970). This is notwithstanding that plaintiffs chose to file their complaint in the Small Claims Section of the Special Civil Part of the Superior Court. At the August 5, 1988 proceeding defendant specifically requested dismissal of the complaint because plaintiffs had not sufficiently mitigated damages. Although this was not an express request for a counterclaim for declaratory relief, plaintiffs were fully aware of the relief defendant had requested and stated they would "submit" to a ruling. Plaintiffs certainly had notice and opportunity to object to the entry of a declaratory judgment, particularly since the issue of mitigation had been addressed at the prior two Special Civil Part proceedings. Hence, we reject plaintiffs' challenge on this ground.

I

Plaintiffs argue that the judge erred in denying late fees under the following provision of the 1981 addendum to the lease:

In the event that the payment of any of the rents as hereinabove set forth is more than 11 days late, then there shall be added thereto a late charge in a sum equal to 5% of the amount then due, which shall be added to and become payable as additional rent with the installment of rent then due.

In denying late fees at the first proceeding the judge stated that such charges would not be allowed because he did not consider this a late payment situation. The proceeding on the second complaint had also resulted in a denial of late fees by the same judge.

The addendum to the lease agreement set forth a late payment penalty as an incentive for defendant to make timely rental payments. However, the trial judge was not presented with a situation concerning lack of timeliness in those payments, but an outright failure to pay rent. We agree with his decision. In our view timeliness of payment was not the issue here. The trial judge decided this issue based on the complete circumstances between the parties. We have been directed to no authority supporting plaintiffs' position. We note that in another context penalties for double rents under the Landlord and Tenant Act, N.J.S.A. 2A:42-1, et seq., have been strictly construed. See, e.g., Wagner v. Mayor, etc., City of Newark, 42 N.J.Super. 193, 210-212, 126 A.2d 71 (Law Div.1956), rev'd on other grounds 24 N.J. 467, 132 A.2d 794 (1957); 200 Washington Street Corp. v. Beltone Hearing Service, 32 N.J.Super. 81, 83-84, 107 A.2d 828 (Law Div.1954). In a similar vein Burstein v. Liberty Bell Village, Inc., 120 N.J.Super. 54, 57, 293 A.2d 238 (Cty.D.Ct.1972), said that late charges were due when rent was accepted, and that since the rent was accepted, the late charges merged with the payment and were no longer due.

II

We next turn to the issue of whether commercial landlords have a duty to mitigate damages. Our Supreme Court has not ruled on this precise issue, nor has this court directly decided this issue. ³ We resolve it now in favor of a rule requiring mitigation of damages.

A residential landlord has a duty to mitigate damages by making reasonable efforts to relet an apartment wrongfully vacated by a tenant. Sommer v. Kridel, 74 N.J. 446, 456-457, 378 A.2d 767 (1977). In Sommer v. Kridel the Supreme Court reversed long-standing law, at least as to residential leases, and held that the principles of mitigation of damages should apply. However, the Sommer Court stated: "[W]e reserve for another day the question of whether a landlord must mitigate damages in a commercial setting." Id. at 456 n. 4, 378 A.2d 767. Thus the Court left open the question...