METROMEDIA COMPANY V. HARTZ MOUNTAIN ASSOCIATES

SYLLABUS
 

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

METROMEDIA COMPANY V. HARTZ MOUNTAIN ASSOCIATES (A-100-94)
 

Argued February 27, 1995 -- Decided April 11, 1995

O'HERN, J., writing for a unanimous Court.

Metromedia Company (Metromedia) is a national conglomerate with numerous business interests, including: computer software development; motion picture production and distribution; restaurant franchises; and the manufacturing of motor vehicle engines and parts. In 1978, Metromedia leased space at the Harmon Tower office complex in Secaucus, New Jersey, which is owned by Hartz Mountain Industries (Hartz), a New Jersey partnership engaged in the development of commercial real estate. Metromedia's initial rent under the lease with Hartz was $455,366.00 per year.

Metromedia was unhappy with the cleaning services provided by Hartz through the lease. Therefore, Metromedia negotiated an agreement with Hartz under which Metromedia could hire its own cleaning service that would be paid directly by Hartz upon the presentation by Metromedia of the bills for those services. Metromedia's rent was to remain the same but, in effect, Hartz would be reimbursing Metromedia for the cleaning costs. The agreement became effective on January 1, 1985.

Unfortunately, the parties failed to adequately discuss the process for issuing the monthly cleaning service payments. For six and one-half years, Metromedia paid the bills for its cleaning service but did not submit those bills to Hartz for reimbursement. In May 1991, a Metromedia employee discovered that Hartz had not reimbursed Metromedia for the cleaning services and contacted Hartz' property manager for Harmon Tower regarding payment under the cleaning-service agreement.

Initially, the manager denied the existence of an agreement. Eventually, the parties did attempt to amicably resolve the dispute but were unable to do so. As a result, Metromedia filed suit in February 1992, seeking reimbursement for cleaning service costs pursuant to the agreement. In its answer, Hartz asserted that any claim for reimbursement for cleaning services arose in 1985 and was, therefore, barred by the six-year statute of limitations. The lower courts disagreed, finding that the cause of action did not arise until Hartz refused to pay in May 1991.

The trial court did find that an agreement to reimburse for cleaning-service costs existed. The court's calculations began with January 1, 1985 and, with certain adjustments, it allowed recovery for each month thereafter, for a total due to Metromedia of $190,481.09. On appeal, the Appellate Division affirmed the decision of the trial court with a minor adjustment for a duplicate billing of $2632.

The Supreme Court granted certification.

HELD: Under the installment contract theory of accrual of a cause of action, Metromedia's claims for a monthly credit for cleaning services accrued on a monthly basis beginning on January 1, 1985; however, any recovery for cleaning services for the period from January 1, 1985 to February 1, 1986 is barred by the six-year statute of limitations.

1. There was an agreement to credit Metromedia for cleaning services and Hartz failed to reimburse Metromedia from January 1985 until May 1992. However, the Court disagrees in part with the lower courts' resolution of the statute-of-limitations issue. (pp.3)
 
2. In determining when the statute of limitations period begins to run, the question is: when did the party seeking to bring the action have an enforceable right? Here, the enforceable right arose immediately on the completion of the cleaning services; therefore, the claims for a monthly credit accrued on a monthly basis beginning on January 1, 1985. The Court applies this "installment contract" theory of accrual that has been applied by courts in other periodic-payment cases. (pp. 3-4)

3. Under the installment contract approach, a new cause of action arises from the date each payment is missed and the statute of limitations begins to run against each installment as it comes due. Under the installment theory of accrual, Metromedia is entitled to recover for monthly credits commencing on February 1, 1986, six-years prior to the filing of the complaint. That would bar recovery for cleaning services due from January 1, 1985 to February 1, 1986, resulting in an adjustment of $34,216. Thus, the amount owed by Hartz to Metromedia is $153,633.09. (pp.4-5)

As MODIFIED, the judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and COLEMAN join in JUSTICE O'HERN'S opinion.

SUPREME COURT OF NEW JERSEY
A- 100 September Term 1994

METROMEDIA COMPANY, a general
partnership,

Plaintiff-Respondent,

v.

HARTZ MOUNTAIN ASSOCIATES, a
New Jersey general partnership,

Defendant-Appellant.

Argued February 27, 1995 -- Decided April 11, 1995

On certification to the Superior Court, Appellate Division.

David J. Hughes argued the cause for appellant (Horowitz, Rubino & Patton, attorneys).

Richard D. Stanzione argued the cause for respondent (Hiering, Dupignac & Stanzione, attorneys; Mr. Stanzione and Tracy A. Armstrong, on the brief).

The opinion of the Court was delivered by
O'HERN, J.
This case provides an insight into the management practices of large business enterprises. Plaintiff, Metromedia Company (Metromedia), is a national conglomerate with diversified business interests. Those interests include: computer software development; restaurant franchises; motion picture production and distribution; and the manufacturing of motor vehicle engines and parts. In 1978, Metromedia became a tenant at the Harmon Tower office complex in Secaucus, New Jersey, owned by Hartz Mountain Industries (Hartz), a New Jersey partnership engaged in the development of commercial real estate in that area. The initial rent was $455,336.00 per year.
Dissatisfied with the cleaning services provided by Hartz through the lease, Metromedia negotiated an agreement with Hartz to resolve its concerns. Under that agreement, effective January 1, 1985, Metromedia could hire its own cleaning service and Hartz would "pay the monthly amount of $2,632.00 directly to [Metromedia's cleaning service] upon presentation of bills." The rent due under the lease was to remain the same and Hartz would, in effect, reimburse Metromedia for cleaning costs.
It appears that the parties did not thoroughly discuss the mechanics for issuing the monthly payments. For six and one-half years, Metromedia paid the bills from its cleaning service but did not submit those bills to Hartz for reimbursement.
In May 1991, an employee of Metromedia realized that Hartz had not reimbursed it for the cleaning services and contacted Hartz' property manager for Harmon Tower regarding the cleaning-service agreement. The Hartz manager initially denied the existence of such an agreement. On June 5, 1991, Metromedia's Vice President and Controller sent a letter to the Hartz manager and amicably inquired, "[D]o you have any suggestion as to how we can best resolve the situation?"
The parties were unable to resolve the matter, and Metromedia filed suit in February 1992. In its answer to Metromedia's complaint, Hartz asserted that any claim for reimbursement for cleaning services arose in 1985 and, therefore, was barred by the six-year statute of limitations. N.J.S.A. 2A:14-1. The lower courts disagreed with Hartz. They held that the cause of action did not arise until Hartz refused to pay in May 1991.
On the merits, the trial court found that an agreement to reimburse Metromedia for its expenditures on cleaning services existed. The court's calculations began with January 1, 1985, and with certain adjustments, it allowed recovery for each month thereafter. While adjusting for months in which Metromedia did not occupy all of the space under the lease and months for which Metromedia could not locate any bills, the trial court entered judgment in the amount of $190,481.09. The Appellate Division affirmed with a minor adjustment for a duplicate billing of $2632.00.
We agree with the trial court's resolution of the factual issues. There was an agreement to credit Metromedia for the cleaning services, and Hartz did not do so from January 1985 until May 1992. We disagree, in part, with the lower court's resolution of the statute-of-limitations issue.
Ordinarily, "[f]or purposes of determining when a cause of action accrues so that the applicable period of limitation commences to run, the relevant question is when did the party seeking to bring the action have an enforceable right." Andreaggi v. Relis, 171 N.J. Super. 203, 235-36 (Ch. Div. 1979). In the unusual circumstances of this case in which the procedure for payment of cleaning services was unclear, it is possible to view the cause of action as not arising until the rejection of the claims presented by Metromedia to Hartz. But the "enforceable right" arose immediately upon completion of the cleaning services. We believe, therefore, that the claims for a monthly credit accrued on a monthly basis commencing January 1, 1985. That is a familiar method for treatment of limitation issues under installment contracts when no acceleration clause is present.
Courts have used the "installment contract" approach in a variety of situations. Coupons on county bonds due annually, periodic payments for promissory notes, periodic payments under a divorce settlement, and monthly payments under an equipment lease have all been considered installment contracts for the purpose of determining accrual of a cause of action. F.D. Stella Prods. Co. v. Scott, 875 S.W.2d 462, 464-65 (Tex. Ct. App. 1994). In an installment contract a new cause of action arises from the date each payment is missed. 4 Arthur L. Corbin, Corbin on Contracts 951 (1951 & Supp. 1994). Corbin has explained that absent a repudiation, a plaintiff may sue for each breach only as it occurs, and the statute of limitations begins to run at that time. Corbin, supra, 989. In Federal Deposit Insurance Corp. v. Valencia Pork Store, Inc., 212 N.J. Super. 335, 338 (Law Div. 1986) (citing Masonic Temple Ass'n. v. Kistner, 11 N.J. Misc. 761 (Sup. Ct. 1933)), rev'd on other grounds, 225 N.J. Super. 110 (App. Div. 1988), Judge Selikoff noted that, "[i]n the case of an obligation payable by installments, the statute of limitations may begin to run against each installment as it falls due." To hold otherwise would allow a claimant to trigger the statute of limitations upon presentation of a claim rather than having the existence of a claim trigger the statute of limitations.
Plaintiff's complaint was filed on February 19, 1992, approximately seven years and one month after its claims began to accrue. Hartz concedes that under an installment theory of accrual, plaintiff is entitled to recover for monthly credits commencing on February 1, 1986 (six years before the suit was filed). That would bar recovery for cleaning services due from January 1, 1985 to February 1, 1986. The result is an adjustment of $34,216.00.
As modified, the judgment of the Appellate Division is affirmed. The amount due to plaintiff under its judgment is $153,633.09.

Chief Justice Wilentz and Justices Handler, Pollock, Garibaldi, Stein, and Coleman join in this opinion.

SUPREME COURT OF NEW JERSEY
 

NO. A-100

SEPTEMBER TERM 1994
ON APPEAL FROM ON CERTIFICATION TO Appellate Division, Superior Court

METROMEDIA COMPANY, a general
partnership,

Plaintiff-Respondent,

v.

HARTZ MOUNTAIN ASSOCIATES, a
New Jersey general partnership,

Defendant-Appellant.

DECIDED April 11, 1995 Chief Justice Wilentz

PRESIDING
OPINION BY Justice O'Hern CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST
MODIFY & AFFIRM CHIEF JUSTICE WILENTZ X JUSTICE HANDLER X JUSTICE POLLOCK X JUSTICE O'HERN X JUSTICE GARIBALDI X JUSTICE STEIN X JUSTICE COLEMAN X TOTALS
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