S. WILLIAM MILLER et al. v. FAHIM MOJAWALLA

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NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NOS. A-1507-04 and A-3336-051507-04T1

A-3336-04T1

WILLIAM MILLER and

ANNE MARIE MILLER,

Plaintiffs-Respondents,

v.

FAHIM MOJAWALLA,

Defendant,

and

UNITED MEDSCAN CORP.,

Defendant-Appellant.

_______________________________________

 

Argued December 19, 2005 - Decided

Before Judges C. S. Fisher and Yannotti.

On appeal from the Superior Court of New Jersey, Special Civil Part, Landlord-Tenant Division, Bergen County, Docket Nos. LT-7605-04 and LT-9620-04.

Thomas J. Romans argued the cause for appellant.

Thomas A. McKinney argued the cause for respondents (Waldman, Renda & McKinney, attorneys; Mr. McKinney, on the brief).

PER CURIAM

These consolidated appeals arise from a dispute concerning a commercial lease dated October 1, 1999 between plaintiffs William P. Miller and Ann Marie Miller, as owners, and Medscan, L.L.C. (Medscan), as tenant. In A-1507-04T1, defendant United Medscan Corp. (defendant) appeals from orders entered November 17, 2004 and November 18, 2004, which granted plaintiffs possession of the premises for non-payment of rent and denied defendant's applications to vacate the judgment of possession and the warrant for defendant's removal from the premises. In A-3336-04T1, defendant appeals from orders entered January 10, 2005, January 19, 2005 and March 4, 2005 which also granted possession of the subject premises to plaintiffs on the ground that defendant was unlawfully holding over in the leased premises. For the reasons that follow, we reverse the judgments granting possession of the premises to plaintiffs.

I.

We begin with a summary of the procedural history and relevant facts. Plaintiffs and Medscan entered into an agreement dated October 1, 1999 under which Medscan leased premises on the first floor of a building located at 88 Market Street in Saddle Brook for the purpose of using and occupying the space for radiology and similar medical and diagnostic uses. The initial term was five years, beginning on October 1, 1999 and ending on September 30, 2004. Under the lease, the tenant is obligated to pay electric and gas charges, a percentage of the water and sewer charges for the building and a percentage of the electric and gas costs for the common areas of the building. The lease further provides for the imposition of late charges in the event any rental payment is overdue for ten days.

Medscan filed a petition in bankruptcy and in September 2003, the leasehold and leasehold improvements were purchased from the bankruptcy trustee by Fahim Mojawalla for $528,000. The lease was then assigned to defendant United Medscan, and on or about October 31, 2003, defendant exercised an option to renew the lease term for an additional five years. Defendant installed a new MRI machine and made certain improvements to the premises. Because of a dispute concerning habitability of the premises, defendant withheld rent for July, August and September 2004.

On or about October 1, 2004, plaintiffs filed a complaint in the Special Civil Part seeking a judgment of possession for non-payment of rent. The matter came before the court for trial on October 20, 2004. The judge found that defendant was in default under the lease and $37,260.82 was due and owing in rent. The judge was asked if defendant paid all of the rent "as of today" would that cure the default. The judge responded by stating that, in those circumstances, defendant would remain in possession. The judge also refused to address the issue of whether defendant had validly exercised an option to extend the lease for an additional five-year period. The judge added that if defendant "want[s] to cure the default and not be evicted, [the defendant had] better pay the amount" stated on the record, which the judge reiterated was $37,260.82.

On October 21, 2004, plaintiffs' attorney wrote to the court and requested that the judge change his finding of the amount of rent due to $48,300.15. On October 25, 2004, the judge filed an opinion in which he stated that he would not change his findings of fact. The court issued a warrant for defendant's removal from the premises on October 29, 2004.

On November 10, 2004, defendant sought the issuance of an order requiring plaintiffs to show cause why the October 20, 2004 order granting possession to plaintiffs should not be set aside and the warrant for removal vacated. Another Law Division judge entered the order and set a return date of November 15, 2004. The order provided that, until further order of the court, the warrant was vacated and defendant restored to possession of the premises.

The matter came before another judge on November 16, 2004. Defendant pressed its application for dismissal of the action and vacation of the judgment of possession by reason of the deposit of $48,719.27 with the Clerk of the Court. Defendant's attorney stated that the amount deposited included the amounts determined by the judge to be due and owing as of October 20, 2004, $1,200 to reflect the increase in rent after renewal of the lease, and rent for the month of November 2004. Plaintiffs' counsel opposed the application, arguing that defendant had not made timely payment of the monies found due and owing and also had not tendered payment of the rent for the month of November 2004.

The judge referred the matter to the trial judge who entered the October 20, 2004 judgment of possession. On November 17, 2004, the trial judge entered an order vacating the November 10, 2004 order. We denied an application by defendant for a stay of the order without prejudice to the defendant's right to apply to the trial judge for access so that the assets remaining in the premises could be removed.

The trial judge heard the application on November 18, 2004. Following the hearing, the judge entered an order denying defendant's application for a stay pending appeal. The November 18, 2004 order provided that defendant would be given full access to the premises to vacate the same in an orderly manner. Defendant was ordered to pay certain utility bills for October and November. The judge also ordered the release to plaintiffs of the $48,719.27 that had been deposited with the Clerk.

Defendant appealed and moved before us for a stay pending appeal. An order was entered temporarily staying the eviction until further order of the court. On December 2, 2004, we entered an order denying the stay. Justice Barry T. Albin granted an emergent stay of the eviction on December 3, 2004, and on December 8, 2004, the Supreme Court stayed the eviction pending disposition of the appeal.

On or about December 8, 2004, plaintiffs commenced a second action in the Special Civil Part. In their complaint, plaintiffs asserted that defendant was unlawfully holding over in the premises. Plaintiffs alleged that, as a result of its default under the terms of the lease, defendant "waived or otherwise negated and rendered null and void any rights that [defendant] had to exercise any option to extend" the lease. Plaintiffs sought a judgment for possession of the premises.

The judge who heard this matter rendered a decision from the bench on January 19, 2005. The judge found that defendant could not exercise the option to extend because when the initial term of the lease expired on September 30, 2004, defendant was in default. The judge concluded that defendant's attempt to extend the lease for an additional five-year period was of no force and effect "because [defendant] [was] in breach of the lease at the time [the extension] was supposed to take effect."

Defendant moved for reconsideration, which was denied by order filed March 4, 2005. The judge entered an order on March 22, 2005 granting possession of the premises to plaintiffs effective May 1, 2005. Defendant appealed and, by order filed April 26, 2005, we consolidated the appeals and stayed the judgment.

Defendant raises the following contentions in their appeals: 1) the trial judge in the first action erred by refusing to vacate the judgment of possession; 2) the plaintiffs were estopped from denying that the lease had been validly renewed because they accepted "renewal rent" for eight months; 3) the trial judge in the first action committed reversible error when he released defendant's funds on deposit with the court without also vacating the judgment of possession; 4) the trial judge in the second action should have transferred the action to the Law Division; and 5) the judge in the second action erred in finding that defendant did not validly exercise its right to renew the lease.

II.

We first consider defendant's contention that the trial judge in the first action erred in refusing to vacate the judgment of possession. Relying upon N.J.S.A. 2A:18-55, defendant argues that the action should have been dismissed because, after the judge ruled on October 20, 2004 that rent was due, defendant tendered payment to plaintiffs.

N.J.S.A. 2A:18-53(b) provides that a non-residential lessee of "any houses, buildings, lands or tenements" may be removed from such premises by order of the Special Civil Part when the lessee "shall hold over after a default in the payment of rent, pursuant to the agreement under which the premises are held." Ibid. However, N.J.S.A. 2A:18-55 states that in an action brought under N.J.S.A. 2A:18-53(b), if the tenant or person in possession of the demised premises:

shall at any time on or before entry of final judgment, pay to the clerk of the court the rent claimed to be in default, together with the accrued costs of the proceedings, all proceedings shall be stopped.

A tenant is entitled to dismissal of the action if, following the entry of final judgment, the tenant immediately thereafter deposits with the clerk the disputed rent and costs while the court is still in session. Saveriano v. Saracco, 97 N.J. Super. 43, 47 (App. Div. 1967).

We are convinced that the trial judge erred in denying defendant's application to dismiss the action after defendant tendered payment to plaintiffs of the amounts determined by the judge to be due and owing. As we stated previously, the judge entered a judgment for possession on October 20, 2004, finding that defendant owed rent in the amount of $37,260.82. The judge stated on the record that an additional $1,200 was due because monthly rent under the renewed lease had increased but the amount stated on the court's file was not changed. It is undisputed that the court's proceedings ended sometime after 4:00 p.m. on October 20.

The following day, plaintiffs' attorney wrote to the trial judge and stated that the court may have made a mathematical error in computing the amount of rent due. The attorney stated that the total amount due was $48,300.15, which included rent, utilities, late charges, repairs and legal fees. Counsel requested that the court advise the parties as to the amount that defendant owed.

On October 21, 2004, defendant sent a check in the amount of $38,887.82 to plaintiffs' attorney by Federal Express. The check had the notation, "Payment of arrears in full." Plaintiffs' attorney received the check on October 22, 2004. Counsel advised defendant's attorney in a letter that the check would not be accepted because the amount was wrong and his client would not accept a check that stated it was full payment of all arrears.

On October 25, the trial judge entered a written opinion in which he adhered to the findings of fact and conclusions that were previously placed on the record. On that day, defendant again forwarded to plaintiffs' counsel the check in the amount of $38,887.82. Defendant crossed out the notation "Payment of arrears in full." Plaintiffs' attorney again returned the check. He stated in a letter to defendant's attorney that the check was not in the "proper amount" and his client was unwilling to accept defendant's "business" check.

Defendant's counsel wrote and asked plaintiffs' attorney to state the correct amount that should be paid. Plaintiffs' attorney did not reply. The court issued a warrant for defendant's removal from the premises on October 29.

On November 1, 2004, defendant's attorney tendered a check in the amount of $40,000 from his trust account. The check was received by plaintiffs' attorney on November 2. Counsel returned the check and informed defendant's attorney that he was proceeding with the warrant for possession of the premises.

The record thus shows that, although the trial judge had determined on October 20 that $37,260.82 was due and owing, and stated on the record that the amount should be increased by $1,200, plaintiffs did not view the matter as having been finally resolved. Indeed, even though a judgment of possession had been issued, plaintiffs did not immediately seek the issuance of a warrant for defendant's removal from the premises. Plaintiffs did not make a formal motion for reconsideration, but wrote to the trial judge and sought a determination that the amount due and owing was $48,300.15.

The judge made clear in the written opinion filed October 25 that the amounts stated on the record on October 20 were the amounts due and owing. On the same day as that opinion was filed, defendant tendered payment of $38,887.82. In our view, defendant substantially complied with the N.J.S.A. 2A:18-55 and, based on the tender to plaintiffs of the amount of rent finally determined by the judge to be due, defendant was entitled to an order dismissing the action.

Plaintiffs argue that defendant failed to comply with N.J.S.A. 2A:18-55 because the monies were not paid into court. We disagree. We are convinced that when defendant tendered payment to plaintiffs' attorney, defendant satisfied the essential purpose of the statute, which is to allow a tenant to remain in possession provided that the tenant pays forthwith the rent found by the judge to be due and owing. Moreover, when plaintiffs' counsel returned defendant's check on October 22, he never stated that plaintiffs must make payment to the Clerk of the Court. Had that demand been communicated to defendant, defendant could have made the deposit with the Clerk on October 25, when the judge re-affirmed his earlier findings and finally resolved the dispute as to the amount of rent due.

We therefore reverse the orders entered in the first action granting possession of the premises to plaintiffs and vacate the warrant for defendant's removal from the premises.

III.

We turn next to defendant's appeal from the orders entered in the second action granting possession of the premises to plaintiffs based on the trial judge's determination that defendant did not have a right to extend the lease for an additional five-year period.

The relevant provision of the lease is section 47, which provides in pertinent part that:

[p]rovided that the Tenant is not then in default under any of the terms or provisions set forth herein, the Tenant shall have the right to renew this Lease for two (2) additional terms consisting each term of five (5) years upon all of the terms and provisions herein contained (the "Option"), except for the Base Rent, by providing the Landlord with written notification of its exercise of the Option at lease nine (9) months prior to the expiration of the then current term.

[Emphasis added.]

The trial judge in the second action opined that under the lease, the tenant does not have a right to renew the lease if the tenant is in default at the expiration of the then-current term.

We disagree with this interpretation of the agreement. The terms of a contract must be given their plain and ordinary meaning. Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997) (citing Kaufman v. Provident Life and Cas. Ins. Co., 828 F. Supp. 275, 283 (D.N.J. 1992), aff'd, 993 F.2d 877 (3d Cir. 1993)). "The judicial function when interpreting a contract is to accord the language a rational meaning in keeping with the purpose expressed." Liqui-Box Corp. v. Estate of Elkman, 238 N.J. Super. 588, 599 (App. Div.), certif. denied, 122 N.J. 142 (1990) (citing Jacobs v. Great Pacific Century Corp., 104 N.J. 580, 586 (1986), and Farber v. Shell Oil Co., 47 N.J. Super. 48, 53-54 (App. Div. 1957)).

Section 47 of the lease is called, "Option to Renew." This section of the agreement essentially provides that the tenant shall have the right to renew the lease for two additional periods of five years by providing the landlord notice at least nine months prior to the expiration of the then current lease term. The exercise of this option is qualified by the introductory statement, "[p]rovided that the Tenant is not then in default under any of the terms or provisions set forth" in the lease. We read the introductory clause as pertaining to the time when the option to renew is exercised, not to the expiration of the then current term.

Plaintiffs argue that the parties here never intended that the lease could be extended if the tenant was in default at the expiration of the lease term. But that situation is dealt with in section 17 of the lease, pertaining to "Default by Tenant." Section 17 allows the lease to be terminated for several reasons, including default in the payment of "Basic Rent" or any amount deemed to be "Additional Rent." Thus, if the tenant is not in default when the tenant exercises the option under section 47 to renew the lease, but is subsequently in default, the lease (including any extensions thereof) may be terminated pursuant to section 17.

In this case, it is undisputed that, at the time when defendant exercised the option to extend the lease, defendant was not in default. Defendant was delinquent in the payment of rent as of September 30, 2004, when the initial lease term ended. However, as we have explained, although rent was due and owing to the plaintiffs as of September 30, 2004, defendant cured that default and was entitled under N.J.S.A. 2A:18-55 to remain in possession of the premises when it tendered payment to plaintiffs of the amounts found by the judge to be due and owing.

We therefore are convinced that defendant validly exercised its option to renew the lease because at the time the option was exercised, defendant was not in default. Because defendant cured the default that existed at the time the initial term expired, and was legally entitled to remain in possession, the lease was not terminated as of September 30, 2004. Because the trial judge erroneously concluded otherwise, we reverse the orders entered in the second action granting possession of the subject premises to plaintiffs.

 
Reversed in A-1507-04 and A-3336-05.

(continued)

(continued)

15

A-1507-04 and A-3336-05

January 10, 2006

 


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