N.J. Indus. Properties, Inc. v. Y.C. & v. L., Inc.

CourtUnited States State Supreme Court (New Jersey)
Writing for the CourtGARIBALDI; STEIN
Citation100 N.J. 432,495 A.2d 1320
Decision Date31 July 1985
Parties, 50 A.L.R.4th 369 N.J. INDUSTRIAL PROPERTIES, INC., a New Jersey Corporation, Plaintiff- Appellant, v. Y.C. & V.L., INC., a New Jersey Corporation, Vito Licari, Individually, and Yaffa Licari, Individually, Defendants-Respondents.

Page 432

100 N.J. 432
495 A.2d 1320, 50 A.L.R.4th 369
N.J. INDUSTRIAL PROPERTIES, INC., a New Jersey Corporation,
Plaintiff- Appellant,
v.
Y.C. & V.L., INC., a New Jersey Corporation, Vito Licari,
Individually, and Yaffa Licari, Individually,
Defendants-Respondents.
Supreme Court of New Jersey.
Argued Feb. 20, 1985.
Decided July 31, 1985.

[495 A.2d 1321]

Page 433

Martin F. Siegal, Westfield, for plaintiff-appellant (Farer, Siegal & Fersko, Westfield, attorneys; Jack Fersko, Westfield, on brief).

Timothy Boderck, Irvington, for defendants-respondents (Eichler, Forgosh, Gottilla & Rudnick, Irvington, attorneys).

The opinion of the Court was delivered by

GARIBALDI, J.

The sole question here is 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. Specifically, the issue is whether the excess rent is to be applied retroactively as a full credit against the rent the prior defaulting tenant owes for the period the property was vacant. The landlord, New Jersey Industrial Properties, Inc. (N.J.I.P.), agrees that the defaulting tenant is entitled to credit in the amount of monthly rent due from the tenant for the rent paid by the subsequent tenant during the latter's occupancy of the premises for the unexpired term of the defaulting tenant's lease. However, the landlord denies the right of the defaulting tenant to have the excess rent applied retroactively as a credit against the unpaid rent the defaulting tenant owes for the period when the property lay vacant.

Page 434

I

On December 17, 1976, N.J.I.P. leased commercial property located at 42 Mileed Way, Woodbridge, New Jersey to Sheina Industries, Inc. (Sheina), which later changed its name to Y.C. & V.L., Inc. (Y.C.V.L.). The lease between N.J.I.P. and Sheina was for a term of five years and one month, commencing January 1, 1977 and terminating on January 30, 1982. The lease was a triple net lease, with the tenant responsible for maintaining the premises and for paying all utilities, taxes, and other charges associated with the property. In addition, the tenant agreed to an annual rent of $50,004, to be paid in equal monthly installments of $4,167. The monthly rent was later raised to $4,461.91.

The premises were to be used for manufacturing and sales, with space for offices and showrooms. On December 29, 1977, Vito Licari and Yaffa Chirnomas (later Yaffa Licari) (the Licaris), the principals of Sheina, executed a written guarantee in conjunction with the lease, covenanting and agreeing that if the tenant defaulted in the payment of rent or the performance of the covenants in the lease, they would pay all rent and damages that might arise out of the nonperformance of the lease to the extent of $26,000.

[495 A.2d 1322] On July 7, 1977, the landlord agreed to Y.C.V.L.'s assignment of all of its rights, title and interest as tenant under the lease to Crayonne, U.S.A., Inc. (Crayonne). Pursuant to a rider to the lease, if the tenant defaulted, as assignor, Y.C.V.L. remained liable at all times for the full performance of the lease. In conjunction with the assignment, the Licaris agreed in writing that their personal guarantee survived the assignment, and, hence, that they would continue to be liable for the rent upon the tenant-assignee's default.

Crayonne occupied the premises for four years. In June 1981, it vacated the premises and stopped paying rent. On June 11, 1981, the attorney for the landlord notified Crayonne by letter that "[p]ursuant to paragraph 20th of the lease, you

Page 435

are notified that the landlord terminates the lease and lease terms with respect to both premises by reason of your default in payment of rent and your abandonment of the properties * * *." By letter dated June 23, 1981 the landlord's attorney notified Y.C.V.L. and the Licaris that Crayonne had abandoned the premises and had failed to pay the June, 1981 rent and other additional rent; that by reason of the breach by Crayonne, the landlord had terminated the lease; that as assignor and pursuant to paragraph 25 of the lease, Y.C.V.L. was liable to the landlord; and that in addition Vito Licari and Yaffa Licari were liable to the landlord as guarantors of the lease to the extent of $26,000.00 of damages suffered by the landlord.

Promptly after the property was abandoned, the landlord printed and posted signs in front of the property announcing its availability for rent. The landlord then distributed mailers to more than 300 brokers so that they could advertise the premises. Nevertheless, the property remained vacant for four months, from June through September, 1981. In October, 1981, the landlord relet the premises to Insulation Distributors Corporation (Insulation). The new lease ran from October 1, 1981 to September 30, 1986 and provided for a monthly rental of $7,182.55 during the first two years of the lease. Thus, for the four months remaining on Crayonne's lease, the landlord received excess rent totalling $10,881.56.

In August, 1981 the landlord sued Y.C.V.L. and the Licaris for damages based upon the rent due under the original lease for the months of June through September, 1981, when the premises were vacant. This action was premised on the survival clause in paragraph 25 of the lease, which extends the tenant's liability beyond the time that the lease was expressly terminated.

The landlord alleges that damages should be measured on the basis of rent lost monthly, thereby creating a separate and independent cause of action for each month in which there was a deficiency in rent. Accordingly, the landlord gave Y.C.V.L. a

Page 436

credit in the amount of monthly rent due from it for rent received from the subsequent tenant for the remaining term of the original lease, but did not extend a credit of the excess rent to Y.C.V.L. for any of the rent due for the period when the property was vacant prior to Insulation's occupancy. Consequently, N.J.I.P. determined that Y.C.V.L. owed $17,846.64 in rent, for the four months when the property remained vacant. 1

In contrast, the Licaris, guarantors of the defaulting tenant, claim that the defaulting tenant is entitled to a credit of the excess rent against the rent it owes for the period the property was vacant prior to the subsequent tenant's occupancy. The defaulting tenant alleges that the entire period of the original lease is the proper period for measuring damages. The Licaris argue that for the remaining period of the original lease the landlord will receive from them 4 months rent, from June, 1981 to September, 1981, and 4 months rent from Insulation for October, 1981 to January, 1982, for a total rent of $45,398.00. If the [495 A.2d 1323] defaulting tenant had remained on the premises during the entire lease term, the landlord would have received $33,336.00 for the same period. Consequently, the landlord will receive $12,072.00 more than it would have received under the original lease if there had not been a default. Thus, the landlord received the excess rent because of the defaulting tenant's breach of its lease; ergo, the defaulting tenant should be entitled to a credit for this excess rent. Under this theory, if the excess rent exceeds the tenant's liability, the defaulting tenant, rather than the landlord, is entitled to receive all of the excess.

The landlord contends that this result gives a windfall to the breaching tenant, is basically unfair, and fails to comport with the lease or the reasonable expectations of the parties. The landlord argues that the tenant's position penalizes the landlord

Page 437

for mitigating its damages and rewards the defaulting tenant for its wrongful breach of the lease. If the landlord had immediately re-let the premises at the higher rent, by applying the principle espoused by the defaulting tenant, the tenant would have been entitled to a payment from the landlord in addition to the credit it would have received for the rent owed under the lease.

The trial court held for the landlord. In awarding the landlord damages of $19,636.14 (which consists of rent, repairs, cleaning, utilities, insurance, etc., and credits for security and tax escrow), the court stated:

Plaintiff gave defendants credit for rent and additional rents received from Insulation from October 1, 1981 until January 30, 1982, the remainder of the term of the lease. Defendants are not entitled to a credit for the surplus rent paid by Insulation over and above the monthly rent due from Y.C. & V.L.

The Appellate Division affirmed the trial court in all respects except for the amount of credit it gave the defaulting tenant. The Appellate Division found that paragraph 10 of the lease "expressly recognizes that after reimbursement of the landlord's reentry expenses, all of the balance of subsequent tenant's rent is to be applied to the defaulting tenant's account even if that balance exceeds the defaulting tenant's own rent obligation." (Emphasis in original). Accordingly, the Appellate Division held that the excess rent received from the subsequent tenant was to be applied towards the rent due from the defaulting tenant for the period during which the property was vacant.

We granted the landlord's petition for certification, 97 N.J. 690, 483 A.2d 202 (1984), limited to a determination of the amount of the credit the defaulting tenant is entitled to receive.

II

We first examine the terms of the lease to determine whether the defaulting tenant is entitled to credit the excess rent the landlord received from the subsequent tenant towards the unpaid rent it owed for the time the property was vacant.

Page 438

While no provision in the lease specifically addresses the issue of who receives "excess rent," several lease provisions are relevant.

The lease provides the landlord with two alternative methods by which to reenter the premises: (1) as...

To continue reading

Request your trial
25 practice notes
  • Del Tufo v. Township of Old Bridge
    • United States
    • United States State Supreme Court (New Jersey)
    • December 12, 1996
    ...It has application in the law of contract as well as in the law of torts. New Jersey Indus. Properties, Inc. v. Y.C. & V.L., Inc., 100 N.J. 432, 461, 495 A.2d 1320 (1985) (Stein, J., dissenting) (quoting 5A Corbin, Contracts § 1039 at 241 (1964)). The doctrine proceeds on the theory that a ......
  • Brenner v. Amerisure Mut. Ins. Co., No. 2014AP2376
    • United States
    • United States State Supreme Court of Wisconsin
    • April 18, 2017
    ...and amortization, leaving the lessor with an amount free of all claims."); see also N.J. Indus. Props., Inc. v. Y.C. & V.L., Inc. , 100 N.J. 432, 495 A.2d 1320, 1321 (1985) (explaining that a "triple net lease" is a lease in which "the tenant [is] responsible for maintaining the premises an......
  • Ostrowski v. Azzara
    • United States
    • United States State Supreme Court (New Jersey)
    • August 11, 1988
    ...of damages. It has application in the law of contract, as well as in the law of torts. N.J. Indus. Properties, Inc. v. Y.C. & V.L., Inc., 100 N.J. 432, 461, 495 A.2d 1320 (1985) (Stein, J., dissenting) (quoting 5A Corbin, Contracts § 1039 at 241 (1964)). The doctrine proceeds on the theory ......
  • Circuit City v. Rockville Pike, No. 122
    • United States
    • Court of Appeals of Maryland
    • August 1, 2003
    ...for rent, but for damages"); Hart v. Vermont Inv. Ltd. Partnership, 667 A.2d 578 (D.C.1995); N.J. Ind. Properties v. Y.C. & V.L., Inc., 100 N.J. 432, 495 A.2d 1320 (1985); P.S.G. Ltd. v. August Income/Growth Fund, 115 N.M. 579, 855 P.2d 1043 (1993); Winshall v. Ampco Auto Parks, Inc., 417 F......
  • Request a trial to view additional results
25 cases
  • Del Tufo v. Township of Old Bridge
    • United States
    • United States State Supreme Court (New Jersey)
    • December 12, 1996
    ...It has application in the law of contract as well as in the law of torts. New Jersey Indus. Properties, Inc. v. Y.C. & V.L., Inc., 100 N.J. 432, 461, 495 A.2d 1320 (1985) (Stein, J., dissenting) (quoting 5A Corbin, Contracts § 1039 at 241 (1964)). The doctrine proceeds on the theory that a ......
  • Brenner v. Amerisure Mut. Ins. Co., No. 2014AP2376
    • United States
    • United States State Supreme Court of Wisconsin
    • April 18, 2017
    ...and amortization, leaving the lessor with an amount free of all claims."); see also N.J. Indus. Props., Inc. v. Y.C. & V.L., Inc. , 100 N.J. 432, 495 A.2d 1320, 1321 (1985) (explaining that a "triple net lease" is a lease in which "the tenant [is] responsible for maintaining the premises an......
  • Ostrowski v. Azzara
    • United States
    • United States State Supreme Court (New Jersey)
    • August 11, 1988
    ...of damages. It has application in the law of contract, as well as in the law of torts. N.J. Indus. Properties, Inc. v. Y.C. & V.L., Inc., 100 N.J. 432, 461, 495 A.2d 1320 (1985) (Stein, J., dissenting) (quoting 5A Corbin, Contracts § 1039 at 241 (1964)). The doctrine proceeds on the theory ......
  • Circuit City v. Rockville Pike, No. 122
    • United States
    • Court of Appeals of Maryland
    • August 1, 2003
    ...for rent, but for damages"); Hart v. Vermont Inv. Ltd. Partnership, 667 A.2d 578 (D.C.1995); N.J. Ind. Properties v. Y.C. & V.L., Inc., 100 N.J. 432, 495 A.2d 1320 (1985); P.S.G. Ltd. v. August Income/Growth Fund, 115 N.M. 579, 855 P.2d 1043 (1993); Winshall v. Ampco Auto Parks, Inc., 417 F......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT