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No res judicata defense in commercial landlord tenant case

The Superior Court of New Jersey’s Appellate Division recently reversed a trial court’s decision to deny a property owner’s motion for reconsideration after the Law Division in Morris County determined that the doctrine of res judicata precluded the claim.

In Phillipsburg Deli & Mini Mkt., LLC v. Babla Fuel Stop, LLC, No. A-1792-21 (App. Div. Dec. 8, 2022), a landlord that had leased property challenged a trial court’s decision to deny the landlord’s motion for reconsideration because the claim had previously been the subject of a summary dispossess action. The Appellate Division reversed, finding that the doctrine of res judicata generally does not apply to judgments from summary dispossess actions.

Phillipsburg Deli and & Mini Market, LLC (“Phillipsburg”) had leased commercial property to Babla Fuel Stop, LLC (“Babla”). Phillipsburg filed a complaint against Babla in the Law Division in Morris County for unpaid rent, and then filed a separate action in the Special Civil Part of Warren County seeking a judgement of possession for nonpayment of rent – known as a summary dispossess action – later amended to allege that Bable had abandoned the property and failed to maintain the property pursuant to the lease. Following a trial, the Warren County Special Civil Part judge denied Phillipsburg’s request for a judgment of possession.

Phillipsburg filed another action in the Special Civil Part in Warren County seeking a judgment of possession, arguing that Babla abandoned and failed to properly maintain the property. This second landlord-tenant action was similarly dismissed.

Phillipsburg then filed a motion for partial summary judgement in the Morris County collection action, and Babla filed a cross-motion for summary judgement. The Morris County judge dismissed both parties’ complaints with prejudice, reasoning that the doctrine of res judicata barred the action from being re-litigated because the issues had already been litigated in the previously filed landlord-tenant summary dispossess actions. The court further denied Phillipsburg’s motion for reconsideration, noting that the unpaid rent issue had been fully litigated in both prior landlord-tenant actions. The court relied on Twp. of Bloomfield v. Rosanna’s Figure Salon, Inc., 253 N.J. Super. 551, 562 (App. Div. 1992) for the proposition that it was “seeking to prevent an issue litigated in a summary proceeding from being relitigated again in the law division.”

The Appellate Division reversed the trial court’s decision to deny Phillipsburg’s motion for reconsideration and the underlying order. In doing so, the court noted that despite the general policy in New Jersey of avoiding splitting a controversy into multiple suits, actions for possession in landlord-tenant court are unlike other lawsuits, because their sole purpose is to provide the landlord with an opportunity to obtain speedy recovery of the premises.

Thus, the doctrine of res judicata generally does not apply to judgments from summary dispossess actions and does not bar subsequent actions between landlord and tenant, even with respect to the same subject matter.

The court also distinguished this situation from Bloomfield, noting that in that case, if the court had transferred the case to the Law Division before its decision on the merits, the entered judgement would have prevented re-litigation to the same extent as any other Law Division judgement entered in a plenary proceeding. Because the trial court did not transfer the case to the Law Division, res judicata did not preclude future claims. However, in the Phillipsburg case, the Appellate Division noted that because the cases were not consolidated, the previously litigated landlord-tenant actions did not have a preclusive effect on the Morris County case. Thus, even though the summary dispossess action was based on nonpayment of rent, Phillipsburg was still permitted to raise the same issue as part of its Law Division claim.

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