Cichowski, Karen M.

English

Loyola University Chicago, School of Law: LAW eCommons

Loyola Consumer Law Review
Volume 2 | Issue 1 Article 9
1989
New Jersey's Anti-Eviction Act Protects Tenants
from Eviction Induced by Unreasonable Lease
Changes
Karen M. Cichowski
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Recommended Citation
Karen M. Cichowski New Jersey's Anti-Eviction Act Protects Tenants from Eviction Induced by Unreasonable Lease Changes, 2 Loy.
Consumer L. Rev. 22 (1989).
Available at: http://lawecommons.luc.edu/lclr/vol2/iss1/9
Loyola Consumer Law Reporter
Anti-Waiver Provision (from page 21)
557 (Ala. 1977). In Byrd, the credi-
tor asked the debtor to come to its
office to discuss the disputed de-
fault. While the debtor was review-
ing the creditor's records, the cred-
itor repossessed his car. The Byrd
court held that the repossession
violated U.C.C. section 9-503 be-
cause the creditor engaged in trick-
ery. The court in the present case
held that Byrd was not applicable
because FMCC did not use trickery
to repossess Tillquist's car, and
because Tillquist knew he was be-
hind in payments.
Tillquist also claimed that
FMCC's repossession notice vio-
lated section 9-504(3) of the
U.C.C. because it demanded more
money than Tillquist owed. Till-
quist was three payments behind
when FMCC repossessed the car.
Tillquist subsequently made two
payments, on October 18 and 19,
but the October 21 repossession
notice did not reflect these pay-
ments. The court rejected Till-
quist's claim that section 9-504(3)
of the U.C.C. prohibited mistaken
repossession notices. Even if it did,
the court held that the October 21
notice did not constitute a mistake
because FMCC did not have suffi-
cient opportunity to change its
records.
Tillquist further alleged that the
repossession notice was misleading
because it informed him that he
could reclaim his car within fifteen
days of receipt of the notice (Octo-
ber 21), or within fifteen days from
the date of repossession (October
18). Tillquist argued that the con-
flicting dates impaired his rights
under the Retail Installment Sale
Financing Act ("RISFA"), Conn.
Gen. Stat. §§ 42-83 - 100a (1988),
because if he chose to rely on the
later of the two dates he may not
have been able to reclaim his car.
The court concluded, however,
that October 21 was not a redemp-
tion date but the last day Tillquist
could reinstate the contract. Thus,
the court held that the notice did
not violate the RISFA because it
did not contain conflicting re-
demption dates.
FMCC's Communications with
Tiliquist Constituted Harassment
The court then addressed Till-
quist's final claim that FMCC vio-
lated the Connecticut Creditor's
Collection Practices Act
("CCPA"), Conn. Gen. Stat. §§ 36-
243a-243c (1988). The CCPA lim-
its who a creditor may contact in
connection with collecting a debt.
The list does not include members
of the debtor's family. Accord-
ingly, the court concluded that
FMCC had violated the CCPA by
calling Tillquist's home and talking
to his children about the debt. The
CCPA also forbids direct commu-
nications with a debtor whom the
creditor knows is represented by an
attorney, unless the attorney fails
to respond to the creditor's inqui-
ries. The court found that FMCC
violated the CCPA by contacting
Tillquist after he informed FMCC
that he was represented by an
attorney. The court also held that
FMCC violated the CCPA by call-
ing the Tillquists while they were at
work. Overall, the court found that
FMCC had engaged in a pattern of
general harassment in violation of
the CCPA.
Finally, the court addressed
whether the CCPA violations were
also violations of the Connecticut
Unfair Trade Practices Act
("CUTPA"), Conn. Gen. Stat. §§
42-110a - ll0q (1988). A trade
practice violates the CUTPA if the
practice constitutes a breach of
public policy. The court held that
FMCC's violations of the CCPA
amounted to a breach of public
policy under the CUTPA.
The court found that Tillquist
had not shown any actual damages,
but recognized its discretionary
power to award punitive damages
where the defendant's actions
demonstrate a willful disregard for
others. The court held that FMCC
intentionally violated the CCPA
by its embarrassing and harassing
phone calls and awarded Tillquist
$500 in punitive damages plus
reasonable attorney's fees.
Michael I. Leonard
New Jersey's Anti-
Eviction Act Protects
Tenants From Eviction
Induced By
Unreasonable Lease
Changes
In 447 Associates v. Miranda,
115 N.J. 522, 559 A.2d 1362
(1989), the New Jersey Supreme
Court examined New Jersey's
Anti-Eviction Act, N.J. Rev. Stat.
§§ 2A:18-61.1 - 61.12 (1988) ("the
Anti-Eviction Act"), and held that
in an action to evict a tenant for
nonpayment or late payment of
rent, the tenant may raise the de-
fense that late rent payments
stemmed from an unreasonable
change in the tenant's renewal
lease. The court also held that
landlords must take into account
the totality of the tenant's circum-
stances and not impose lease
changes that will cause undue
hardship to tenants.
Background
In October of 1984, Carmen
Miranda ("Miranda") entered into
a lease agreement for an apartment
in Newark, New Jersey. Under that
lease, Miranda paid her monthly
rent, in cash, directly to her land-
lord or his agent after she had
received and cashed her public
assistance check. Although the
public assistance check typically
arrived on the third of the month
or later, Miranda was never
charged a penalty for late payment
of her rent.
In May of 1986, the apart-
ment building in which Miranda
lived was sold to 447 Associates
("Associates"). On May 18, 1986,
Associates mailed Miranda a "No-
tice of Rent Increase" which termi-
nated her lease on August 31, 1986,
and offered her a new lease. Under
the new lease, Miranda's rent was
increased and she was required to
pay her rent by mail no later than
the fifth of the month. If the rent
check was received after the fifth of
the month, Miranda would be
22 Volume 2, Number I/Fall, 1989
Loyola Consumer Law Reporter
charged a twenty-five dollar pen-
alty. The "Notice of Rent In-
crease" also stated that Miranda's
continued possession of the apart-
ment would constitute acceptance
of the new lease and its provisions.
Miranda never signed a new
lease with Associates, but she re-
mained in the apartment after Au-
gust 31, 1986, and paid the in-
creased rent. Miranda was able to
comply with the payment deadline
only by cashing her public assist-
ance checks, purchasing a money
order and mailing it to Associates.
Because Miranda did not receive
her public assistance check until on
or after the third of the month,
Associates received her rental pay-
ments two to four days late in four
of the next six months. Pursuant to
the conditions of the renewal lease,
Associates assessed a twenty-five
dollar late fee for each late pay-
ment. Miranda refused to pay the
late fees and on February 19, 1987,
Associates filed a complaint seek-
ing possession of Miranda's apart-
ment.
Procedural History
The trial court held that Mir-
anda's continued possession of the
apartment, after Associates noti-
fied her of the lease changes, con-
stituted acceptance of all the re-
newal lease terms, including the
penalty for late payments. Conse-
quently, the court ordered Mir-
anda to pay Associates the late
fees, plus court costs, or lose pos-
session of the apartment. The ap-
pellate court affirmed the trial
court's decision. The New Jersey
Supreme Court accepted the case
to clarify the rights of landlords
and tenants under the Anti-Evic-
tion Act.
Opinion of the New Jersey
Supreme Court
The Anti-Eviction Act was
passed in 1974 during a statewide
housing shortage to protect resi-
dential tenants from unfair and
arbitrary evictions. The Anti-Evic-
tion Act provided that a landlord
could only evict a tenant for one of
the "good cause" reasons stated in
the statute and only if the landlord
gave the tenant "suitable notice"
before instituting an eviction pro-
ceeding. A landlord has good cause
to evict a tenant if the tenant fails
to pay rent owed, N.J. Rev. Stat. §
2A:18-61.1(a), fails to pay a rent
increase after the tenant was noti-
fied of the increase provided if the
increase is not unconscionable,
N.J. Rev. Stat. § 2A: 18-61.1 (f), or
refuses to accept reasonable
changes in the terms of a lease, N.J.
Rev. Stat. § 2A:18-61.1(i).
Associates argued that Mir-
anda had accepted all the renewal
lease provisions by retaining pos-
session of the apartment and that
Miranda's failure to pay the late
rent penalties constituted "good
cause" for eviction under the Anti-
Eviction Act.
Miranda, however, argued
that she had a right to challenge the
reasonableness of the new late-
payment fee provision before it
became binding on her. She also
argued that she never accepted the
late-payment fee provision con-
tained in Associates' "Notice of
Rent Increase," and that the late-
payment fee provision was unrea-
sonable and should not be en-
forced.
The court held that in an
action to evict a tenant for nonpay-
ment or late payment of rent the
tenant may raise the defense that
the failure to abide by the rent-
payment requirements of the lease
resulted from an unreasonable
change in the tenant's lease. The
court further held that after the
tenant raises this defense, the land-
lord has the burden of proving that
the change was reasonable. In
doing so, the court distinguished
challenges to changes in lease
terms and conditions under N.J.
Rev. Stat. § 2A:18-61.1(i), from
challenges to the amount of a rent
increase under N.J. Rev. Stat. §
2A: 18-61.1 (f). When a tenant chal-
lenges a rent increase the tenant
has the burden of proving that the
increase was unconscionable.
The court first addressed
whether Miranda had accepted the
new late-payment fee by retaining
possession of the apartment. In a
month-to-month lease where there
is no written lease, a tenant im-
pliedly accepts a rent increase if
the tenant remains after receiving
notice of a rent increase. There-
fore, Miranda impliedly accepted
the new lease's increased rent by
retaining possession of the apart-
ment. However, under the Anti-
Eviction Act a tenant has the right
to challenge the reasonableness of a
lease change in court within thirty
days after being notified of the
change. The court concluded that
acceptance of a renewal lease
should not bar tenants from later
challenging the reasonableness of a
term contained therein. The court
held that Miranda did not have an
adequate opportunity to challenge
the late-payment fee provision be-
cause she was not invited to sign a
lease or negotiate the terms con-
tained in the "Notice of Rent
Increase." The court noted that
absent some direction from land-
lords, tenants in Miranda's situa-
tion could not be expected to know
the legally acceptable method of
challenging the reasonableness of a
lease renewal term. Therefore, al-
though Miranda had accepted
some of the provisions of the re-
newal lease, her consistent refusal
to pay the late-payment fees consti-
tuted a valid refusal to accept that
lease change.
The court next addressed
whether Associates had "good
cause" to evict Miranda for refus-
ing to accept the late payment
provisions. The court agreed with
Miranda that, in light of her cir-
cumstances, the change in the lease
imposing late fees whenever the
rent was not paid by mail by the
fifth of the month was unreasona-
ble. The court stated that the rea-
sonableness of a lease change must
be determined by considering the
interests of both the landlord and
the tenant. In addition, the court
stated that when making changes
in the material terms or conditions
of leases, landlords must take into
account the totality of the tenant's
circumstances and not impose
changes that will cause undue
hardship to tenants who attempt in
good faith to meet their rent obli-
gations. The court noted that Mir-
randa did not complain about hav-
ing a rent deadline, only the timing
of the deadline. Because Miranda's
dependence on public assistance
(continued on page 24)
Volume 2, Number I/Fall, 1989 23
Loyola Consumer Law Reporter
Anti-Eviction Act (from page 23)
consistently prevented her from
paying the rent by the fifth of the
month, the court held that the
provision requiring her to do so
was unreasonable and therefore
unenforceable.
Karen M. Cichowski
Iowa Supreme Court
Establishes Exhaustion
Presumption In
Tortfeasor Liability
Policy Settlements For
Underinsured Motorist
Insurance
In Estate of Rucker v. National
General Insurance Co., 442
N.W.2d 113 (Iowa 1989) (en banc),
the Supreme Court of Iowa consid-
ered a dispute concerning the ef-
fects of a settlement upon an un-
derinsured motorist policy which
contained an exhaustion require-
ment. The exhaustion requirement
precluded coverage if the injured
party settled for less than the tort-
feasor's full policy amount. The
court held that the exhaustion re-
quirement was against public pol-
icy. Instead, the injured party will
be assumed to have exhausted the
tortfeasor's policy limits by settling
the claim. The injured party may
then recover from the underin-
sured motorist policy the differ-
ence between the actual injury and
the tortfeasor's policy limit, sub-
ject to the underinsured motorist
policy limits.
Background
While bicycling on June 4,
1986, Herbert F. Rucker
("Rucker") was struck and killed
by a pick-up truck driven by Carl
F. Bunse ("Bunse"). Bunse had a
$100,000 automobile liability in-
surance policy with Farm Bureau
Mutual Insurance Company
("Farm Bureau"). Under Rucker's
settlement with Farm Bureau,
Rucker would receive an immedi-
ate payment of $25,750, monthly
payments of $500, and a guaran-
teed minimum total payout of
$115,750. The present value of the
guaranteed payout was $85,250.
Rucker had underinsured motorist
coverage of $20,000 through his
automobile insurance agency, Na-
tional General Insurance Com-
pany ("National"). Iowa Code Sec-
tion 516A. 1 requires that automo-
bile insurance policies include this
type of coverage unless the insured
objects in writing. Iowa Code §
516A.1 (1988). The goal of the
underinsured motorist coverage
statute is to fully compensate the
victim. The underinsured motorist
coverage applies whenever the
tortfeasor has less insurance than
the victim has injury.
After Rucker's estate ("the
estate") settled with Farm Bureau,
the estate sought benefits from
National under Rucker's underin-
sured motorist policy. When Na-
tional refused to pay, the estate
filed suit against National for the
underinsured motorist policy ben-
efits. National argued that the pol-
icy explicitly required that the es-
tate exhaust Bunse's liability policy
limits before claiming underin-
sured policy benefits. The estate
failed to do this because the settle-
ment with Farm Bureau had a
present value less than Bunse's
policy limits. In contrast, the estate
argued that the exhaustion require-
ment was against public policy.
The District Court's Decision
The district court held that
the exhaustion requirement did
not violate public policy. However,
the district court held that the
estate satisfied the exhaustion re-
quirement because the $115,000
guaranteed pay-out under the set-
tlement exceeded the $100,000
policy limit. Therefore, the estate
was entitled to the underinsured
motorist benefits to the extent it
could demonstrate damages in ex-
cess of the $ 100,000 liability policy
limit. The Supreme Court of Iowa
granted National's application for
interlocutory appeal.
The Iowa Supreme Court Decision
The Iowa Supreme Court held
that, as a matter of law, a settle-
ment must be valued at its present
value. The $85,250 present value
of the estate's settlement was $14,
750 below the liability policy limit
and therefore the estate failed to
fulfill the exhaustion requirement.
The court also held, however,
that the exhaustion requirement
was against public policy and
therefore void. The goal of the
underinsured motorist coverage is
to fully compensate the victim; it
applies whenever the tortfeasor has
less insurance than the victim has
injury. If the tortfeasor's liability
insurance does not fully compen-
sate the insured's loss, the insured
can recover the amount of the loss
minus the amount paid by the
tortfeasor's insurance, subject to
the limits of the policy.
The court stated that private
and public policy considerations
support encouraging an injured
party to settle for less than a tort-
feasor's liability policy limits. It
may be in the injured party's best
interest to settle with the tortfea-
sor's liability insurer for an
amount less than the policy limit,
even when liability and damages
are certain, to avoid the cost, delay
and uncertainty of a lawsuit. An
exhaustion requirement discour-
ages prompt settlement and in-
creases courts' litigation caseload.
When settlement is in the injured
person's best interest, failure to
fully exhaust the liability policy
should not be a bar to receiving
underinsured motorist coverage.
An exhaustion requirement that
does so, the court held, violates
public policy.
The court held that an injured
person may accept what he or she
considers the best settlement offer
without losing the underinsured
motorist benefits. The court will
assume that the settlement ex-
hausted the tortfeasor's liability
policy. The injured person may
then recover the difference be-
tween the damages actually suf-
fered and the limit of the underin-
24 Volume 2, Number I/Fall, 1989


New Jersey\u27s Anti-Eviction Act Protects Tenants from Eviction Induced by Unreasonable Lease Changes

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New Jersey\u27s Anti-Eviction Act Protects Tenants from Eviction Induced by Unreasonable Lease Changes

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