Opinion
DOCKET NO. A-3052-12T3
07-23-2014
ATUL SHAH, Plaintiff-Appellant, v. U.S. CARPET & FURNITURE, INC., AWAD ODEH, JERUSALEM CARPET & FURNITURE, INC. and YASER BAKER, Defendants-Respondents and PASSAIC LOFTS, LLC, Defendant.
Atul Shah, appellant, argdue the cause pro se. Respondents have not filed a brief.
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Ostrer and Carroll.
On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-2717-10.
Atul Shah, appellant, argdue the cause pro se.
Respondents have not filed a brief. PER CURIAM
Plaintiff Atul Shah appeals from the trial court's December 11, 2012 order dismissing on statute of limitations grounds his lawsuit for rent against former tenants, U.S. Carpet & Furniture, Inc. and Jerusalem Carpet & Furniture, Inc., and their respective owners, Awad Odeh and Yaser Baker. He also appeals from the court's subsequent order denying his motion for reconsideration.
Plaintiff filed his complaint seeking to recover unpaid rents from defendants on May 26, 2010, just a day short of six years after he closed on his sale of the rented properties, on May 27, 2004. As part of the sale agreement, plaintiff retained the right to collect "rent arrears" of the tenants that existed on or before the closing date. All other rights to rent, and equitable remedies belonged to the new owner, Passaic Lofts, LLC.
In their answers, defendants asserted that the suit was time-barred under N.J.S.A. 2A:14-1. After conducting an evidentiary hearing, Judge Philip H. Mizzone, Jr., held that any rent or charges were already due as of May 15, 2004. Consequently, plaintiff's complaint was time-barred. Having reviewed plaintiff's arguments in light of the record and applicable principles of law, we affirm.
Plaintiff's claims arise out of three leases on commercial properties in Passaic. Jerusalem Carpet, as tenant, executed the leases in late 1995 and early 1996. The leases were assigned to U.S. Carpet in 1997. Eventually, the leases became month-to-month tenancies. Baker and Odeh allegedly agreed to be guarantors. For purposes of the issue before us, the leases are identical. Each consisted of a form lease and an extensive rider. The combined document set various deadlines for the payment of base rent, additional rent, and additional charges. The deadlines are critical, because they dictated the date defendants would be delinquent on their lease obligations, and in arrears.
The combined document required payment of monthly base rent before the first day of each month. Additional rent, including various identified expenses and costs, was due "immediately upon [the] occurrence of any circumstance, event . . . lack-of-action . . . and/or any other matter which would give rise to" the expense. However, the leases provided a seven-day grace period for payment of "[r]ent, [m]inimum [r]ent, [a]dditional [r]ent and/or any other payable amount," before the tenant would be liable for a late charge equal to five percent of any "payable amount." The late charge was "payable on demand." Interest - denominated an "administrative fee" — was also chargeable at the rate of 1.5 percent per month on any form of rent or payable amount due and owing for more than ten days. Plaintiff retained the option, without prior notice to tenants, to add any unpaid "arrearages to any monthly installment of rent payable."
The lease required the tenants to pay all "rents or charges for water or other utilities used by the Tenant," and charged to the premises or to plaintiff. If unpaid, such rents or charges would become payable "as additional rent with the installment of rent next due or within 30 days of demand therefor, whichever occur[red] sooner." However, the rider required tenants to pay water charges, consisting of fifteen percent of the total meter charges, payable on the first of each month. The leases also required tenants to contribute toward the depreciation of various systems: $115 per year on October 1 for the sprinkler system; $48 per year on November 1 for the heating system; and $30 per year on November 1 for the hot water system.
Plaintiff reserved the option to increase monthly rent "from time to time" according to the Consumer Price Index (CPI). The CPI charge was "due and payable immediately upon Landlord giving such notice." However, the lease stated that if notice to pay a CPI-based charge was given after the start of the month against which the inflation adjustment was made, then the tenant was required to pay the charge within ten days of notice.
The tenants were required to contribute their "[p]roportionate [s]hare" of taxes assessed against the properties each fiscal year. The tax payment "[was] . . . payable . . . as and when any and/or all final or tentative Taxes [became] fixed or within five (5) days after demand from Landlord therefor, whichever [was] earlier."
The tenants also agreed to pay the landlord a fee in connection with removal of fixtures at the start of their tenancies. Those fees were all due and payable in 1995 and 1996. If unpaid, the charges were added to rent.
In the evidentiary hearing, the court admitted into evidence the "Agreement of Rights of Rents," dated May 27, 2004, which stated: "Rent arrears of any tenant including and prior to the date of transfer of title ("Closing Date") shall belong to Atul Shah and Amola Shah, who shall have the right, after Closing Date, to take actions related to such rent arrears . . . ."
Plaintiff also offered into evidence a "Notice of Demand of Payment of Rent," seeking payment of "all . . . rent due" under the three leases. Attached to the notice was an extensive "Statement of Account" asserting that defendants owed over $136,000 in minimum rent, CPI adjustments, equipment depreciation, water charges, and taxes. The document reflected various due dates for the various charges; the latest pre-closing due date was May 1, 2004. The document also projected due dates of June 15, 2004 for various CPI charges, taxes, and water charges; October 1, 2004 as the due date for prorated sprinkler depreciation; and November 1, 2004 for prorated hot water and heating system depreciation. The statement listed a $5000 late charge per lease, stating it was "approximate, and can be calculated accurately only after you make the account up to date." Also included was a $25,000 charge for interest, which was "very approximate and can be figured out accurately only after you make your balance zero."
The letter was unsigned, and defendants denied ever receiving it; in particular, they denied it was hand-delivered. Plaintiff testified that the statement of account was not attached to the "Agreement of Rights of Rents" between plaintiff and the buyer. The court also admitted into evidence a letter, signed by plaintiff and addressed to U.S. Carpet, which simply stated it was notice that U.S. Carpet was in default of the lease due to non-payment of rent.
On May 26, 2010, plaintiff filed an eight-count complaint seeking to recover allegedly unpaid rents from defendants. As noted, defendants asserted the complaint was time-barred, and Judge Mizzone conducted an evidentiary hearing.
Plaintiff also named Passaic Lofts as a defendant, but voluntarily dismissed his claims against that party.
During his testimony, plaintiff admitted the last day base rent was payable to him was May 1, 2004, although in practice, he "sometimes" allowed tenants to pay rent ten days late. Regarding the yearly charge for depreciation of the heating and hot water systems, plaintiff claimed he was entitled to payment, prorated from November 2003 to May 2004, when he still owned the property. Plaintiff also asserted he was entitled to interest for unpaid rent, and late charges.
Plaintiff argued that his suit was not barred because he assumed the "same statute of . . . limitation[s] as [Passaic Lofts]." Thus, the limitations period did not begin to run until 2007, when U.S. Carpet terminated its lease with Passaic Lofts. Plaintiff also argued that the continual accrual of interest on unpaid rent tolled the running of the statute.
Judge Mizzone rejected plaintiff's arguments. Reviewing the lease terms pertaining to each form of rent or charge, Judge Mizzone reasoned that the amounts claimed were due and owing prior to May 26, 2004, more than six years before plaintiff filed his complaint. Accordingly, the complaint was time-barred by the six-year limitations period set forth in N.J.S.A. 2A:14-1. Specifically, rent was due on the first of each month. Even accounting for a default period before accrual of late charges and interest, the May 2004 rent, if unpaid, was due before May 26, 2004. The same conclusion applied to CPI charges. Also, because quarterly tax bills are payable on the tenth of February, May, August, and November of each year, defendants' last tax payments to plaintiff were due May 10, 2004. Water bill charges were due on the first of each month. The fixture removal charges were due and payable in 1995 and 1996. The depreciation charges were due in October and November of the previous year.
Plaintiff's appeal followed. He renews arguments made before the trial court. He also argues that the court failed to address his claim to interest and late charges, which he asserts, tolled the limitations period. We affirm substantially for the reasons expressed by Judge Mizzone.
There is no dispute that the applicable statute of limitations period on a lease not under seal, as in this case, is six years "after the cause of any such action shall have accrued." N.J.S.A. 2A:14-1. The six-year period is counted from the day after the date of accrual of a cause of action. See Hein v. GM Constr. Co., 330 N.J. Super. 282, 284 (App. Div. 2000). The "relevant question is when did the party seeking to bring the action have an enforceable right." Metromedia Co. v. Hartz Mountain Assocs., 139 N.J. 532, 535 (1995) (internal quotation marks and citation omitted). Generally, "a claim accrues, for statute of limitations purposes, on the date on which the right to institute and maintain a suit first arose." Cnty. of Morris v. Fauver, 153 N.J. 80, 107 (1998) (internal quotation marks and citations omitted).
The leases are properly viewed as installment contracts. See id. at 107-09; Metromedia Co., supra, 139 N.J. at 535-36. See also Fed. Deposit Ins. Corp. v. Valencia Pork Store Inc., 212 N.J. Super. 335, 338-39 (Law Div. 1986) (stating that absent acceleration, the statute of limitations on a claim under a lease should use the installment method), rev'd on other grounds, 225 N.J. Super. 110 (App. Div. 1988).
[C]laims based on installment contracts or other divisible, installment-type payment requirements accrue with each subsequent installment. In other words, a new statute of limitations begins to run against each installment as that installment falls due and a new cause of action arises from the date each payment is missed.Consequently, the statute of limitations began to run upon the alleged failure to pay rent or a charge.
[Fauver, supra, 153 N.J. at 107.]
As part of plaintiff's sale of the property, he retained only the right to seek "rent arrears" existing on or before the date of closing, May 27, 2004. "There can be no ambiguity concerning the term 'arrears;' it is universally defined as [a]n unpaid and overdue debt or unfulfilled obligation or, more generally, [t]he state of being behind in fulfilling contracted obligations or payments." Highland Lakes Country Club & Cmty. Ass'n v. Franzino, 186 N.J. 99, 117 (2006) (alterations in original) (internal quotation marks and citation omitted). Arrears are amounts that "should have been paid in the past." Id. at 118 (internal quotation marks and citation omitted).
Consequently, plaintiff was entitled to bring a claim only for those payments already overdue and owing as of the closing. As Judge Mizzone correctly noted, plaintiff's claims for rent and charges pertained to amounts that were already overdue before May 26, 2004. We recognize that plaintiff sought the payment of various additional rent and charges in the unsigned statement of account dated May 27, 2004. Even assuming for argument's sake that the document was delivered on that date, the amounts demanded were, according to the document itself, due no later than May 15, 2004, or due in June 2004. As to the former, the six-year statute ran before May 26, 2010. As to the latter, the amounts were not "arrears" on the date of closing.
We also reject plaintiff's argument that the continuous accrual of late charges and interest on unpaid rent tolled the limitations period. The late fees and interest derived from the underlying alleged breach of the duty to pay rent. The cause of action for breach began to run upon those alleged defaults. The fact that additional elements of damages in the form of late fees and interest conceivably could accrue after the initial breach does not toll the statute.
Plaintiff's remaining arguments lack sufficient merit to warrant discussion in a written opinion. See R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF APPELLATE DIVIDION