Opinion
DOCKET NO. A-0325-14T2
03-04-2016
KIMBERLY BAKER, Plaintiff-Appellant, v. LA PIERRE, INC., Defendant-Respondent.
Constantine Bardis argued the cause for appellant (Law Office of Constantine Bardis, LLC, attorneys; Derek S. Fanciullo, on the briefs). Madeline Buczynski argued the cause for respondent (Law Office of Benjamin H. Mabie, III, attorneys; Douglas W. Jones, Jr., on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Nugent and Higbee. On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. DC-04090-14. Constantine Bardis argued the cause for appellant (Law Office of Constantine Bardis, LLC, attorneys; Derek S. Fanciullo, on the briefs). Madeline Buczynski argued the cause for respondent (Law Office of Benjamin H. Mabie, III, attorneys; Douglas W. Jones, Jr., on the brief). PER CURIAM
Plaintiff Kimberly Baker, formerly a residential tenant of defendant La Pierre, Inc., appeals from an order denying reconsideration of the dismissal of her small claims action seeking recovery of her security deposit balance. The trial judge dismissed her complaint because she had filed the action in the county where the rental property was located, as permitted by Rule 6:1-3, rather than in the county designated in the residential lease's forum-selection clause. Forum-selection clauses are valid unless they are the result of fraud or overweening bargaining power, would violate public policy, or enforcement would seriously inconvenience trial. Here, the forum-selection clause, embedded in an adhesive residential lease, violates the strong public policy underpinning the New Jersey Rent Security Deposit Act (Security Deposit Act), N.J.S.A. 46:8-19 to -26. Under these circumstances, we conclude the forum-selection clause is invalid as it applies to plaintiff's action for her security deposit and reverse.
"A contract that is drafted unilaterally by the dominant party and then presented on a take it or leave it basis to the weaker party, who has no real opportunity to bargain about its terms." Adhesion Contract, Ballentine's Law Dictionary (3rd ed. 1969).
The relevant facts are as follows. On June 23, 2012, plaintiff and defendant entered into a written lease agreement for a condominium located in Monmouth County, New Jersey. The rental fee was $1250 per month for twelve months. The security deposit was calculated at $1689.69. Per the lease agreement, the security deposit was to be returned within thirty days after the lease ended less any deductions incurred by tenant for failure to comply with the lease's terms. The lease was a preprinted form lease with no negotiated changes made to it before it was signed.
The lease contained two provisions regarding where disputes were to be litigated. The first provision stated:
Applicable Law. The terms and provisions of this Agreement and any dispute arising hereunder shall be governed by the Laws of the State of New Jersey. The courts of Ocean County in the State of New Jersey shall have the sole and exclusive jurisdiction in any case or controversy arising under this Agreement or by reason of this Agreement, and for this purpose each party hereby expressly and irrevocably consents to the jurisdiction of such courts located in Toms River, New Jersey.
[(Emphasis added).]
The second provision stated:
Venue. All parties affirmative [sic] acknowledge, consent and agree, as the Landlord is located in Toms River, New Jersey, that any/all legal action which may be commenced or responded to shall be situated and filed in the Courts of Ocean County, New Jersey. The moving party shall voluntarily withdraw any action, which is filed in any other venue. Moreover, if said party fails to voluntary [sic] withdrawal [sic] said action based upon its improper filing, this paragraph and execution of this lease agreement shall serve as his/her consent to have the matter dismissed for improper venue location, without addressing the merits of the alleged action.
[(Emphasis added).]
Plaintiff moved out of the condominium upon the lease's expiration. Defendant returned $964.69 of plaintiff's security deposit and withheld $725. Plaintiff claimed this withholding was in violation of the Security Deposit Act, and she filed suit in Monmouth County for the money withheld from her security deposit, damages, and attorney's fees.
Defendant's counsel moved to dismiss plaintiff's complaint for lack of jurisdiction, asserting the complaint was venued in Monmouth County in violation of the lease agreement's forum-selection clause. Plaintiff opposed the motion. The motion judge dismissed plaintiff's complaint without prejudice, finding it should have been filed in Ocean County pursuant to the agreement.
Plaintiff filed a motion for reconsideration asking to reinstate the complaint. The motion judge denied plaintiff's motion without prejudice. The judge enforced the lease's forum-selection clause, explaining the lease agreement between the parties was clear any dispute would be venued in Ocean County.
We review the motion judge's legal decision de novo. Copelco Capital, Inc. v. Shapiro, 331 N.J. Super. 1, 5 (App. Div. 2000); see also Paradise Enters. Ltd. v. Sapir, 356 N.J. Super. 96, 102-03 (App. Div. 2002), certif. denied, 175 N.J. 549 (2003).
The Security Deposit Act states in pertinent part:
Within [thirty] days after the termination of the tenant's lease or licensee's agreement, the owner or lessee shall return by personal delivery, registered or certified mail the sum so deposited plus the tenant's portion of the interest or earnings accumulated thereon, less any charges expended in accordance with the terms of a contract, lease, or agreement, to the tenant or licensee . . . .The Security Deposit Act is silent on where disputes should be venued, but states:
[N. J.S.A. 46:8-21.1.]
Notwithstanding any law or rule to the contrary, the Division of Small Claims of the Superior Court, Law Division, Special Civil Part shall have jurisdiction of actions between an owner or lessee and tenant for the return of all or a part of a security deposit in which the amount in dispute, including any applicable penalties, does not exceed the sum of $5,000, exclusive of costs.
[N. J.S.A. 46:8-21.4.]
Special Civil Part venue is determined by Rule 6:1-3(a). The Rule is not silent on where venue lies for security deposit disputes, but specifically includes a special exception for complaints seeking protection under the Security Deposit Act. The general requirement under Rule 6:1-3(a) is that complaints in Special Civil Part cases must be venued in the county where the defendant resides, but the tenant is given another option when the action is for recovery of a security deposit:
Except as otherwise provided by statute, venue in actions in the Special Civil Part shall be laid in the county in which at least one defendant in the action resides. For purposes of this rule, a business entity shall be deemed to reside in the county in which its registered office is located or in any county in which it is actually doing business. Actions for the recovery of a security deposit may be brought in the county where the property is situated. If all defendants are non-residents of this state, venue shall be laid in the county in which the cause of action arose.
[R. 6:1-3(a) (emphasis added).]
Forum-selection clauses in contracts are prima facie valid and enforceable in New Jersey. McNeill v. Zoref, 297 N.J. Super. 213, 219 (App. Div. 1997). However we will decline to enforce a forum-selection clause if: "(1) the clause is a result of fraud or 'overweening' bargaining power; (2) enforcement would violate the strong public policy of New Jersey; or (3) enforcement would seriously inconvenience trial." Paradise Enters., supra, 356 N.J. Super. at 103 (quoting Caspi v. Microsoft Network, L.L.C., 323 N.J. Super. 118, 122 (App. Div.), certif. denied, 162 N.J. 199 (1999)). New Jersey courts have previously declined to enforce forum-selection clauses for violating public policy. Kubis & Perszyk Assocs., Inc. v. Sun Microsystems, Inc., 146 N.J. 176, 192-93 (1996); McNeill, supra, 297 N.J. Super. at 223-24 (holding a forum-selection clause in a mortgage brokerage services agreement was invalid because it was counter to the policy objective of the entire controversy doctrine); Param Petroleum Corp. v. Commerce and Indus. Ins. Co., 296 N.J. Super. 164, 170-71 (App. Div. 1997) (holding a forum-selection clause in an insurance policy placing venue in New York for a property situated in New Jersey was void because it contravened the policy that forum should lie where the insured risk was located).
We view the issue in Kubis as analogous to this case. In Kubis, the Supreme Court analyzed a forum-selection clause as it applied to a franchise agreement. Kubis, supra, 146 N.J. at 192-93. The plaintiff entered into a franchise agreement with the defendant which stated disputes were to be venued in California. Id. at 179. After operating under the agreement for approximately three years, the defendant terminated the relationship. Id. at 179-80. The plaintiff brought suit in New Jersey, claiming the agreement termination violated the New Jersey Franchise Practices Act (Franchise Act), N.J.S.A. 56:10-1 to -15. Kubis, supra, 146 N.J. at 180. The trial court dismissed the case, concluding the forum-selection clause was enforceable, and we affirmed. Id. at 180-81.
On review, the Supreme Court noted the Franchise Act was enacted to address concerns regarding unequal bargaining power between a franchisor and a franchisee, where the franchisee executes agreements containing terms it cannot change. Id. at 182-84. The Court held "enforcement of forum-selection clauses in contracts subject to the Franchise Act would substantially undermine the protections that the Legislature intended to afford to all New Jersey franchisees." Id. at 192-93. The Court reasoned forum-selection clauses in franchisor-franchisee contracts conflicted with the Legislature's intent to protect franchisees from the more powerful franchisors. Id. at 193. The Court explained generally the franchisee lacked the sophistication and financial strength of the franchisor in forming these agreements. Ibid.
As they have recognized with franchisors, our courts have also long recognized that landlords generally hold a superior bargaining position over tenants. The Supreme Court has stated, "lease agreements are frequently form contracts of adhesion, they cannot be relied upon to represent a genuine 'meeting of the minds' with respect to the landlord's responsibilities." Trentacost v. Brussel, 82 N.J. 214, 226 (1980); see also Kuzmiak v. Brookchester, Inc. 33 N.J. Super. 575, 586 (App. Div. 1955) (stating a "lessor and the lessee are definitely not in equal bargaining positions where suitable living quarters are at a premium"); see also Mayfair Fabrics v. Henley, 97 N.J. Super. 116, 123 (Law Div. 1967) (stating exculpatory clauses allocating risk were given strict construction against the landlord because he or she usually had superior bargaining power), aff'd, Natell v. Henley, 103 N.J. Super. 161 (App. Div. 1968).
New Jersey courts have specifically recognized the Legislature's intent in enacting the Security Deposit Act to protect tenants from overreaching by landlord. See, e.g., Watson v. Jaffe, 121 N.J. Super. 213, 214 (App. Div. 1972) (explaining the Legislature developed and enacted the Security Deposit Act to protect tenants from landlords who required security deposits but then diverted the funds for their own use); see also Fischer v. Heck, 290 N.J. Super. 162, 174 (Law Div. 1996) (stating "[i]t would also subvert the public policy which carefully guards a tenant's rights to the return of its security deposit by providing for recovery of double the amount of the deposit if the landlord has not complied with the Security Deposit Act."); see also Branch Brook Gardens v. Ramirez, 186 N.J. Super. 241, 244 (Cty. Dist. Ct. 1982) (holding the Security Deposit Act was enacted as a remedial measure to fully protect a tenant's money).
We hold, therefore, that in cases where a residential tenancy was created by an adhesion contract, and the tenant has filed the action for return of a security deposit, in accordance with Rule 6:1-3, in the county where the rental property is located, a forum-selection clause requiring venue be laid in another county is against established legislative policy. The burden of finding transportation and traveling to another county for a trial may discourage tenants from enforcing the rights the Legislature provided them in the Security Deposit Act. The venue clause in such a lease shifts this expense and inconvenience to the tenant contrary to the option provided to the tenant under the rule.
We note if the landlord chooses to return the deposit money to the tenant and then files a complaint for damages against the tenant, the landlord would be required under Rule 6:1-3 to sue the defendant tenant where the tenant resides. The venue clause in this lease would then directly conflict with the venue required by the Rule. --------
We need not look far to find legislative examples requiring similar protections. Contained in the Security Deposit Act, a landlord within thirty days after a lease terminates "shall return by personal delivery, registered or certified mail the sum so deposited[.]" N.J.S.A. 46:8-21.1. In the event delivery is not made within thirty days, a landlord shall continue to make tenant's security deposit available for pickup "at a location in the same municipality in which the subject leased property is located[.]" N.J.S.A. 46:8-21.1(c) (emphasis added).
We also take guidance from other provisions within the same chapter where the Security Deposit Act is housed, to further solidify the holding that venue should lie where the rental property is located. See N.J.S.A. 46:8-47 (stating under the Truth-in-Renting Act, if a landlord fails to post the legal rights and responsibilities of a tenant and landlord in a rental dwelling unit, penalties are litigated where the rental property is located) (emphasis added); see also N.J.S.A. 46:8-41 (asserting jurisdiction lies in the county where the rented property is located for disputes over whether a landlord fails to make available crime insurance information to a tenant) (emphasis added); see also N.J.S.A. 46:8-35 (declaring the county or municipality where the rental premise is located has jurisdiction to enforce a penalty when a landlord fails to provide a tenant a copy of the certification of registration) (emphasis added).
Reversed and remanded for reinstatement of the complaint and trial in Monmouth County. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION