Penwag Property Co. v. Landau

This litigation concerns a dispute between plaintiff landlord, Penwag Property Co., Ine., and its tenant, David Landau, the defendant, arising out of a lease agreement under which the tenant leased the first floor and basement of a building known as 112-114 Nassau Street, Princeton, for use as a department store. The landlord instituted the action for possession and damages due to the tenant’s failure to subordinate his lease to a certain mortgage. Defendant’s answer questioned the validity of the mortgage and in a counterclaim asserted that the “action has been commenced without reasonable or probable cause and constituted malicious use of process.”

After an extensive trial, the trial court found that defendant had not breached the lease and that the mortgage in question was in fact subordinate to defendant’s lease. It also entered a judgment in favor of defendant on his counterclaim, awarding defendant $19,000 compensatory damages, consisting of counsel fees and costs of defense of the main action, and $20,000 punitive damages. The Appellate Division unanimously affirmed the dismissal of plaintiff’s claim. Judge Larner, writing for a majority of that court, reversed the judgment based on the counterclaim on the ground that defendant had not suffered a special grievance. 148 N. J. Super. 493 (App. Div. 1977). The dissenting judge held that the circumstances warranted the conclusion that a special grievance had been established.

Defendant filed an appeal, R. 2:2-1 (a), and plaintiff a cross appeal, R. 2:3-4. We affirm essentially for the reasons expressed by Judge Larner.

Malicious prosecution or malicious use of process as it is sometimes referred to when the underlying proceeding is civil rather than criminal is not a favored cause of action because of the policy that people should not be inhibited in seeking redress in the courts. Lind v. Schmid, 67 N. J. 255, 262 (1975). Justice (then Judge) Ffancis expressed the thought in this language:

* * :f' the law does not look with favor upon actions for malicious prosecution; it does not encourage them. The reason is embedded deeply in our jurisprudendei. The courts must be freely accessible to the people. Extreme care must be exercised so as to avoid the creation of a reluctance on their part to seek redress for civil or criminal wrongs for fear of being subjected to a damage suit if the action results adversely. [Mayflower Industries v. Thor Corp., 15 N. J. Super. 139, 153 (Ch. 1951), aff’d 9 N. J. 605 (1952)]

Although we recognize the countervailing policy that groundless claims motivated by malice should entitle one to maintain such a cause of action, we believe that on balance the rule that the moving party must establish a special grievance should be retained. Special grievance consists of interference with one’s liberty or property. Mayflower Industries v. Thor Corp., 15 N. J. Super. at 151-152. Counsel fees and costs in defending the action maliciously brought may be an element of damage in a successful malicious prosecution, but do not in themselves constitute a special grievance necessary to make out the cause of action. Id. at 175-176.

In addition to special grievance the plaintiff in an action for malicious prosecution of a civil suit must show that tire suit was brought without reasonable or probable cause, that it was actuated by malice, and that it terminated favorably to the plaintiff. W. Prosser, Torts, § 120 at 850-856 (4th ed. 1971). Favorable termination did not exist when defendant’s counterclaim was filed in this cause. Though plaintiff had not moved to strike that counterclaim, it should have been eliminated in the pretrial order. It is not appropriate to institute a suit or file a counterclaim until the litigation has terminated in favor of the party who asserts the malicious prosecution cause of action.

Affirmed.

Defendant’s pretrial memorandum does not refer to this cause of action in his description of the nature of the action (item 1), factual and legal contentions (item 2), or legal issues (item 7). R. 4:25-3 (b). Further, the pretrial order does not mention the. defendant’s claim based on malicious use of process or malicious prosecution. R. 4-.25-1 (b).

W. Prosser, Torts, § 120 at 853 (4th ed. 1971).