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

• Decision Date: 13 February 1979
• Citation: 398 A.2d 1315,166 N.J.Super. 36
• Parties: RINGWOOD ASSOCIATES, LTD., a New Jersey Limited Partnership, Plaintiff-Appellant, v. JACK'S OF ROUTE 23, INC., a New Jersey Corporation, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 36

166 N.J.Super. 36

398 A.2d 1315

RINGWOOD ASSOCIATES, LTD., a New Jersey Limited Partnership Plaintiff-Appellant, v. JACK'S OF ROUTE 23, INC., a New Jersey Corporation Defendant-Respondent.

Superior Court of New Jersey, Appellate Division.

Argued Dec. 4, 1978.

Decided Feb. 13, 1979.

Richard L. Zucker, West Orange, for plaintiff-appellant (Lasser, Lasser, Sarokin & Hochman, West Orange, attorneys).

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

Before Judges CONFORD, PRESSLER and KING.

The opinion of the court was delivered by

KING, J. A. D.

The principal issue in dispute between plaintiff landlord, owner of a neighborhood shopping center, and defendant tenant, formerly the operator of a small clothing store in the center, is whether the tenant was justified in vacating the premises before the end of the term because the landlord breached the lease by unreasonably withholding its consent to an assignment of subletting. The trial judge, in an opinion reported at 153 N.J.Super. 294, 379 A.2d 508 (Law Div.1977), found that consent was unreasonably withheld by the landlord and accordingly held that the tenant was entitled to vacate the premises and to terminate the lease without liability for subsequent rent.

The facts, as clearly stated in the opinion of the trial judge, and fully supported by the record in this nonjury trial, are as follows 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. (Id. at 299-300, 379 A.2d at 510-11).

Concluding that the tenant was entitled to terminate the lease upon the material breach of the consensual assignment clause by the corporate landlord, the trial judge dismissed plaintiff's complaint for money damages representing the rental sums due until the premises were relet in June 1976.

Plaintiff appeals, raising two claims of legal error. It asserts that the trial judge committed reversible error (1) in admitting into evidence statements made by Linn, a principal of plaintiff's corporate predecessor in title, and (2) in holding that the tenant had the legal right to terminate the lease and vacate when the landlord breached the consensual assignment clause.

We treat the evidential point first. Plaintiff objects to the admission of statements by Linn, a substantial stockholder of the landlord corporation preceding plaintiff in title. These statements were made during the discussions which followed the request by Louis Vento, defendant's secretary, for the landlord's permission to assign the lease and sublet the premises. Linn's statements were made to both Vento and to Joseph Leto, the president of the proposed assignee corporation. Both Vento and Leto testified at trial; Linn did not. Linn's alleged extrajudicial statements during the discussions about the assignment were obviously instrumental in convincing the trial judge that plaintiff's predecessor in title had unreasonably withheld consent to the proposed assignment. The judge specifically found that Linn's statements to Vento and Leto evinced his firm intention to enter into a new lease with the proposed assignee at a higher rent, and that Linn disdained any reasonable consideration of the request to consent to the assignment.

The trial judge appears to have admitted Linn's hearsay statements to Leto and Vento into evidence on the theory that they were admissions made by the authorized representative of plaintiff's predecessor in title. There is no doubt that Linn, as a substantial stockholder who exclusively handled the negotiations surrounding the request for assignment, was authorized to speak for plaintiff's predecessor in the context "of a then existing agency * * * or representative relationship." Evid.R. 63(9)(a). However, statements constituting vicarious admissions under this rule are only admissible if the declarant was in an agency and/or representative relationship with the party against whom the evidence is offered. Linn's principal was not the plaintiff, but plaintiff's predecessor in title. See also, Evid.R. 63(7). Nor were Linn's statements ever authorized by plaintiff within the meaning of Evid.R. 63(8) relating to "authorized admissions." Therefore, the admissibility of Linn's testimony, if hearsay, must be justified by some exception other than these conventional "admission" exceptions.

The New Jersey Rules of Evidence, effective September 11, 1967, never adopted the common law exception under which hearsay statements made by predecessors in interest or other declarants in privity with parties litigant have been traditionally admitted. This despite Dean Wigmore's description of this exception to the hearsay rule as one which "is today nowhere denied" (subject to only one modification not here relevant) and which his text correctly notes was firmly rooted in New Jersey evidence law before the adoption of our Rules of Evidence. 4 Wigmore, Evidence (1972), § 1080 at 192 and § 1082 at 212 fn. 1, the latter citing Townsend v. Johnson, 3 N.J.L. 279 (Sup.Ct.1810); Miller v. Feenane, 50 N.J.L. 32, 11 A. 136 (Sup.Ct.1887), and Turner v. Cole, 116 N.J.Eq. 368, 173 A. 613 (Ch.1934), aff'd 118 N.J.Eq. 497, 179 A. 113 (E. & A. 1935). See also, National Silk Dyeing Co. v. Grobart, 117 N.J.Eq. 156, 160, 175 A. 91 (Ch.1934); Horner v. Stillwell, 35 N.J.L. 307, 310 (Sup.Ct.1871).

The reason for our Supreme Court's and Legislature's rejection of the traditional "privity exception" is expressed in the Report of the Supreme Court's Committee on Evidence (1963):

It should be noted that the Rules presented here make no provision for the admissibility as vicarious admissions of statements made by joint tenants about the joint tenancy, by predecessors in interest, or by other declarants in privity with parties in litigation. This reflects a long standing campaign by Professor Morgan against what he has called the Ignis fatuus of privity. See Morgan, The Rationale of Vicarious Admissions, 42 Harv.L.Rev. 461, 480 (1929). There is no guarantee of trustworthiness in a statement made by a declarant merely because he is in privity with a party to litigation. If self-serving when made it is untrustworthy; if disserving it will probably be admissible as a declaration against interest under Rule 63(10). By virtue of specific deletion from rules relating to admissions, such admissions...