Ringwood Associates, Ltd. v. Jack's of Route 23, Inc.

• Decision Date: 15 September 1977
• Citation: 379 A.2d 508,153 N.J.Super. 294
• Parties: RINGWOOD ASSOCIATES, LTD., a New Jersey limited partnership, Plaintiff, v. JACK'S OF ROUTE 23, INC., a corporation of the State of New Jersey, Defendant.
• Court: New Jersey Superior Court

Page 294

153 N.J.Super. 294

379 A.2d 508

RINGWOOD ASSOCIATES, LTD., a New Jersey limited partnership, Plaintiff, v. JACK'S OF ROUTE 23, INC., a corporation of the State of New Jersey, Defendant.

Superior Court of New Jersey, Law Division Sept. 15, 1977.

Richard L. Zucker, Newark, for plaintiff (Lasser, Lasser, Sarokin & Hochman, Newark, attorneys).

Lawrence D. Katz, Pompton Plains, for defendant (Scangarella & Feeney, Pompton Plains, attorneys).

MARTIN, J. S. C.

This is a suit by plaintiff landlord, against defendant, a commercial tenant, for rent and other miscellaneous items, such as utility charges, increases, real estate taxes and snow removal assessments, which plaintiff alleges are due and owing as a result of defendant wrongfully vacating the premises and defaulting on the lease. Defendant asserts that plaintiff unreasonably withheld consent to an assignment of the lease, raises as a defense plaintiff's failure to mitigate damages, and counterclaims for the return of its security deposit.

Defendant, which operates a men's and boy's retail clothing store, entered into a ten-year lease with the previous owner, Ringwood Plaza, Inc., the leasehold to commence on April 1, 1970. The leased premises, designated as Store No. 10, was located in a "strip"-type, neighborhood shopping center in Ringwood, New Jersey. The shopping center consisted of about 15 stores, with tenants engaged in various small business enterprises. On December 31, 1975, the present owner, Ringwood Associates, purchased the property with an assignment of all existing leases and now brings suit as a successor in interest.

With about five years remaining on the lease, defendant, having determined that the store was too small for its expanding business, decided to move to a larger location in another shopping center across the street. In January 1975 Louis Vento, secretary of defendant corporation, advised the lessor, through counsel, that defendant, pursuant to paragraph five of the lease, wished to assign the lease or sublet the premises to Comtap, Inc., which sells and repairs televisions and other appliances.

Paragraph five of the lease states:

That the tenant shall not assign this agreement, or underlet or underlease the premises, or any part thereof, or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra hazardous on account of fire, under penalty of damages and forfeiture, without the consent of the landlord, which consent shall not be unreasonably withheld.

Having received no response from the lessor after several requests, Vento, along with Joseph Leto, president of Comtap, directly contacted Dr. Harold Linn, a substantial stockholder in the lessor corporation, concerning the assignment of the lease to Comtap. On several occasions both Vento and Leto informed Dr. Linn that Comtap was willing to take an assignment of the lease or enter into a new leasing arrangement directly with the lessor under the same terms and conditions contained in the lease with defendant. Further, Dr. Linn was advised that defendant was willing to guarantee performance of all tenant covenants contained in the lease.

Dr. Linn did not request information concerning the financial condition of Comtap, nor did he find that the proposed tenant was unacceptable to the lessor. Rather, he informed Vento that the lessor would not consent to a tripartite assignment arrangement, but would be willing to enter into an entirely new leasing agreement directly with Comtap at an increased rent. This proposal was rejected by Leto. Thereafter, Dr. Linn directly negotiated with Leto, who again rejected the lessor's consistent demand for an increased rent within the context of a direct rental by Comtap. It should be noted that the original lease provided for periodic increases in rent.

Defendant, having advised the lessor, through its attorney, that it considered the withholding of consent to be unreasonable and a breach of paragraph five of the lease, vacated the premises in March 1975, the last rental being paid through April 1975. It appears that from April until December 1975, when the shopping center was sold to plaintiff Ringwood Associates, Ringwood Plaza, Inc. made no effort to obtain a new tenant. Upon acquiring the property, plaintiff did not contact defendant. However, within 21/2 months a new tenant for the store was secured, although he did not commence paying rent until June 18, 1976. As a successor in interest, plaintiff is suing for rent and other miscellaneous charges for the entire period from May 1, 1975 to June 18, 1976.

In Broad & Branford Place Corp. v. J.J. Hockenjos Co., 132 N.J.L. 229, 39 A.2d 80 (Sup.Ct.1944), the court considered the effect of a lease provision which provided that the lessor's consent to an assignment or subletting would not be unreasonably withheld. It was found that The essential question here is whether a landlord's refusal to sanction the subletting of the demised premises and the use thereof for a purpose not authorized by the lease was "unreasonable", and therefore a breach of covenants obliging the tenant to devote the premises to a particular use and not to sublet or underlet them, without the landlord's consent. (at 230, 39 A.2d at 81)

Thus, even though the lease in issue specifically stated that the premises were to be used for a men's and boy's clothing store, the lessor, under paragraph five of the lease, was still required to consider the suitability of a proposed tenant who was engaged in a different business, and further, had to have a reasonable basis for rejecting the proposed tenant.

In determining whether a landlord has acted reasonably in refusing consent, the court in Broad & Branford Place Corp., supra, stated:

Arbitrary considerations of personal taste, sensibility or convenience do not constitute the criteria of the landlord's duty under an agreement such as this. Personal satisfaction is not the sole determining factor. Mere whim or caprice, however honest the judgment, will not suffice. Gerisch v. Herold, 82 N.J.L. 605, 83 A. 92; Whitcomb v. Brant, 76 (N.J.L.) 201 (68 A. 1102); Id. (76 N.J.L.) 246 (69 A. 1086); Vide Williston on Contracts (rev. ed), § 675A. And compare, also, Muller v. Beck, 94 N.J.L. 312, 110 A. 831. The standard is the action of a reasonable man in the landlord's position. What would a reasonable man do in like circumstances? The term "reasonable" is relative and not readily definable. As here used, it connotes action according to the dictates of reason such as is just, fair and suitable in the circumstance. (at 232, 39 A.2d at 82)

A landlord acts in an arbitrary manner when his decision to refuse an assignment is made without fair, solid and substantial cause or reason. Grossman v. Barney, 359 S.W.2d 475 (Tex.Civ.App.1962). The tenant has the burden of proving that the landlord's conduct was arbitrary and unreasonable. Broad & Branford Place Corp. v. J.J. Hockenjos Co., supra.

Whether the lessee-assignor is willing to guarantee payment of rent and the performance of all other tenant covenants under the lease is a substantial factor to be considered in determining the reasonableness of the lessor's refusal of consent. Johnson v. Jaquith, 189 So.2d 827 (Fla.App.1966); Adams, Harkness & Hill Inc. v. Northeast Realty Corp., 361 Mass. 552, 281 N.E.2d 262 (Sup.1972); Grossman v. Barney, supra. The financial solvency of the proposed tenant, the nature of his business, its suitability for the premises and general business area, the necessity of altering the premises to suit the assignee's business, are additional factors to be considered. See Johnson v. Jaquith, supra; Adams, Harkness & Hill, Inc. v. Northeast Realty Corp., supra; Roundup Tavern Inc. v. Pardini, 68 Wash.2d 513, 413 P.2d 820 (Sup.Ct.1966); Broad & Branford Place Corp. v. J.J. Hockenjos Co., supra; Time Inc. v. Tager, 46 Misc.2d 658, 260 N.Y.S.2d 413 (N.Y.City Ct.1965); Grossman & Barney, supra.

Although the burden is on defendant lessee vis a vis financial stability, the cases which have considered the proposed tenant's financial condition involved situations where the lessor requested such information as a condition precedent to his consent to the assignment. Johnson v. Jaquith and Adams, Harkness & Hill, Inc. v. Northeast Realty Corp., supra.

The court finds that defendant unequivocally stated to the lessor, Ringwood Plaza, that it would guarantee performance of all tenant covenants under the lease not just the payment of rent. The lessor apparently did not question the solvency of the proposed tenant, for both Vento and Leto testified that Dr. Linn never requested information concerning its financial condition. Although neither plaintiff nor defendant raised the point at trial, it appears that no alterations to the premises were necessary in order to convert it from a clothing store to an appliance store. Both witnesses for defendant testified that the lessor did not object to the nature of Comtap's business. Rather, from Dr. Linn's direct negotiations with Leto and his statements to both parties, the court concludes that the lessor was perfectly willing to accept Comtap as a tenant under a new, direct leasing arrangement, but would not allow Comtap to occupy the premises as assignee under the defendant's lease. The fact that the lessor could obtain a higher rent under a new lease agreement but not under an assignment of defendant's lease did not justify the lessor's refusal to consent to the assignment where the proposed tenant was acceptable and the existing lease already provided for periodic increases in rent.

In Krieger v. Helmsley-Spear, Inc., 62 N.J. 423, 302 A.2d 129 (1973), the sole objection made by the landlord was that the proposed subtenant was then a tenant in another building owned by the landlord, so that if he consented to the subletting it would create a vacancy in the other building. In holding the landlord's refusal of...