Xerox Corp. v. Listmark Computer Systems

• Decision Date: 08 June 1976
• Citation: 361 A.2d 81,142 N.J.Super. 232
• Parties: XEROX CORPORATION, Plaintiff-Appellant, v. LISTMARK COMPUTER SYSTEMS, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 232

142 N.J.Super. 232

361 A.2d 81

XEROX CORPORATION, Plaintiff-Appellant, v. LISTMARK COMPUTER SYSTEMS, Defendant-Respondent.

Superior Court of New Jersey Appellate Division.

Submitted May 11, 1976.

Decided June 8, 1976.

Stryker, Tams & Dill, Newark, for plaintiff-appellant (Richard V. Jones, Newark, of counsel and on the brief).

Schneider, Schneider & Behr, Teaneck, for defendant-respondent (Michael P. Feltman, Teaneck, on the brief).

Before Judges MATTHEWS, LORA and MORGAN.

The opinion of the court was delivered by

LORA, J.A.D.

Plaintiff Xerox corporation sued defendant Listmark Computer Systems for damages in the amount of $11,696.40 representing two months rent under a sublease between Xerox and Compusize, Inc. at $3,523 a month, plus real estate taxes and water nd electric bills for the two-month period, all with respect to the entire premises.

Cross-motions for summary judgment were filed and the trial judge in an oral opinion entered judgment against Listmark and in favor of Xerox in the amount of $400,02. Xerox appeals from that judgment contending that the trial judge erred in denying summary judgment to Xerox in the amount sought in its complaint.

The record reveals that, initially, the owner of the premises known as 245 Livingston St., Northvale, New Jersey, Troast-Sletteland Enterprises, leased said premises to Ferrodynamics Corporation (now known as Metex Corporation). Metex subleased the premises to Xerox on May 20, 1964. This sublease was to expire on April 30, 1974, and by its terms Xerox was prohibited from subletting the premises without the written consent of Troast and Metex.

Xerox, in turn, subleased the premises to Compusize on May 13, 1969 for a term of five years terminating on April 30, 1974. By the terms of this lease Compusize was prohibited from subletting or underletting the premises, in whose or in part, without the written consent of Troast, Metex and Xerox. In violation of this lease provision, on October 11, 1972 Compusize underlet approximately 1200 square feet of the 35,000 square foot building located on the subject premises to defendant Listmark.

On June 22, 1973 Compusize filed a petition for an arrangement under Chapter XI of the Bankruptcy Act (11 U.S.C.A. § 701 Et seq.). Under the terms of the Xerox-Compusize lease, the act of filing said petition terminated the lease. By order of the referee in bankruptcy the receiver for Compusize was permitted to remain on the premises until July 31, 1973 and pay Xerox the full rental value of the premises for the period June 22 through July 31, 1973. On September 7, 1973 the referee in bankruptcy amended his previous order to include a denial of Xerox's application to remove Listmark from the subject premises and directed Xerox to have recourse to the courts of New Jersey for this purpose.

Listmark paid rent to Compusize's receiver for the period ending July 31, 1973. Sometime in July and early August 1973 Listmark and Xerox had a series of communications with respect to Listmark's situation as an undertenant of Compusize. Listmark informed Xerox that it did not have another office to relocate to and sought permission to remain at 245 Livingston Street. Xerox asked Listmark to do whatever it could to remove its personnel and equipment from the premises as soon as possible.

On August 14, 1973 Listmark informed Xerox that Listmark expected to vacate the premises within the next two weeks. In a further letter from Xerox to Listmark, Xerox informed Listmark that it must vacate the premises by August 25, 1973 or be subject to appropriate legal proceedings.

On August 17, 1973 Xerox filed a complaint for possession, with an order to show cause requesting that Xerox be given immediate possession of the premises by Listmark. It also appears that Xerox sought damages from Listmark in addition to possession of the premises. By consent order of October 1, 1973 Listmark was ordered to vacate the premises on or before September 30, 1973. It appears the judge did not consider Xerox's request that the court retain jurisdiction of the matter for presentation of proofs respecting damages.

During August and September 1973 Xerox was required to pay rent to its landlord, Metex, in the amount of $2,935.50 a month, and all real estate taxes and other utility charges amounting to $4,650.40. By the terms of the Xerox-Compusize sublease Compusize was charged with $3,523 rent a month plus the additional cost noted above. The total amount which would have been due from Compusize for this period but for the bankruptcy is $11,696.40.

Xerox maintains that Listmark's status vis-a -vis Xerox was that of a trespasser and that the effect of Listmark's trespass was to deprive Xerox of the use and enjoyment of the entire premises, because Listmark's presence therein prevented Xerox from making use of the premises or reletting the same. Xerox's lease, as noted above, was to expire on April 30, 1974.

The record indicates that the building, in which Listmark was occupying 1200 of an available 35,000 feet, would not have been in a condition to sublet, at least until the end of September 1973, due to necessary repair and maintenance work. In addition, representations of counsel before the trial court indicate that Xerox and Metex had shown the premises to prospective tenants while Listmark was still in possession.

The trial judge in his oral decision held that Listmark owed Xerox $400.02, or 3.42% Of the total rent of $11,696.40, owing but for bankruptcy from Compusize. The percentage figure is derived from the ratio which the 1200 square feet occupied by Listmark bears to the 35,000 square feet covered by the Compusize sublease.

It would appear that the trial judge bottomed his award of $400.02 to Xerox on N.J.S.A. 2A:42--4, which provides:

When premises shall be underlet by any tenant, the undertenant shall be liable to the lessor or landlord for the rent which shall accrue from and after notice in writing served for that purpose upon the undertenant, or which shall be unpaid by the undertenant at the time of such notice, and the lessor or landlord shall have all the remedy for the recovery of the same by distress; but the rent to be paid by such undertenant shall in no case exceed the amount agreed to be paid by the first tenant. If only a part of the premises shall be underlet, payment shall be required only for the part underlet, at a rate proportioned to the rent agreed to be paid by the first tenant or lessee.

Xerox contends that this statute is inapplicable to the instant matter because Listmark was a trespasser and not an undertenant during the time period at issue.

There can be no question that Listmark was a tenant of Compusize, that Compusize was a tenant of Xerox, and that the lease executed between Compusize and Xerox prohibited the subletting or underletting to Listmark without the written consent of Xerox, Metex and Troast, which was never obtained.

As a general rule the restriction against lease transfers contained in an express provision in the lease is viewed as a condition subsequent. The lessee may therefore transfer despite the restriction, and the transfer is effective until avoided by the lessor. 1 American Law of Property, § 3.58 (1952); People v. Klopstock, 24 Cal.2d 897, 151 P.2d 641 (Sup.Ct.1944); Citizens Fidelity...