Court Opinion

ID: 7307315
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:55:34.910303+00
Date Added: 2024-06-11T16:19:30.789410
License: Public Domain

STEIN, J.,
dissenting.
In this case the assignee of a commercial tenant abandoned the leased premises and defaulted in the payment of rent. The landlord terminated the lease, but asserted its contractual right under a survival clause to hold the original corporate tenant and two individual guarantors liable for the rent reserved to the end of the term. Before the lease term expired, the landlord entered into a new lease for the property at a higher monthly rent. The issue before us is the proper measure of damages that should determine the original tenant’s and guarantors’ liability to the landlord. Specifically, should the original tenant and guarantors receive a credit against their liability for all of the rent the landlord will receive until the end of the original term, or should the credit be limited by the amount of the monthly rent under the original lease?
*450The majority holds that the original tenant's and guarantors’ credit against their total liability cannot in any given month exceed the rent reserved in the original lease. For this conclusion it relies on the proposition that “as between the wrongdoer, the defaulting tenant here, and the landlord, who promptly attempted to mitigate his damages, any benefit must go to the landlord.” Ante at 447.
Not only do I disagree with the majority’s reliance on equitable principles to decide this case, but I believe that its reliance is based on a misconception as to the conduct of the respective parties. Furthermore, in my view the majority ignores the growing modern trend in the interpretation of leases to replace antiquated precepts of property law with the more relevant principles of contract law. I respectfully dissent.
I
Plaintiff, New Jersey Industrial Properties, Inc. (NJIP), is the owner of a large industrial building in Woodbridge. In December, 1976, it leased the premises to Sheina Industries, Inc. (Sheina), for a period beginning January 1, 1977 and ending January 30, 1982. The lease initially provided for an annual rent of $50,004, payable in equal monthly installments of $4167, and the tenant was obligated to pay for utilities, taxes, and maintenance. A rider to the lease increased the monthly rent to $4461.91 commencing August 1, 1977, but reduced the rent to $2000 per month during the first seven months of the term. The lease was personally guaranteed by Yaffa and Vito Licari, the officers of Sheina, up to a maximum joint liability of $26,000.
In addition to the building, the leased premises included a loading dock and parking area for trucks and tractor trailers. Sheina used the premises for the manufacture and sale of plastic houseware products. In July, 1977, Sheina sold its assets to an unaffiliated company, Crayonne, U.S.A., Inc. (Cray-onne). Concurrently, Sheina assigned its lease to Crayonne *451with the landlord’s consent. As a condition of the assignment, Sheina and the Licaris were to remain liable under their respective lease and guaranty agreements.
Pursuant to the contract with Crayonne, Sheina’s name was changed to Y.C. & V.L., Inc. (YCVL). Subsequent to the sale and assignment, Yaffa and Vito Licari were employed by Cray-onne for approximately one year, after which they had no further dealings with Crayonne or the leased premises. After leaving Crayonne’s employ, the Licaris started a new plastic houseware products business in Cliffwood Beach under the name Basic Line, Inc.
Crayonne occupied the leased premises for almost four years until June, 1981, when it abandoned the property without prior notice. On June 11, 1981, NJIP notified Crayonne that pursuant to paragraph 20 of the lease, it was terminating the lease for failure to pay rent and abandonment. On June 23, 1981, NJIP advised YCVL and the Licaris that Crayonne’s lease had been terminated due to the latter’s breach. The letter demanded that YCVL pay the June rent and real estate tax payment as well as a roof repair bill of $293.95. The letter also asserted a claim for future rent and damages in an unspecified amount. In addition, NJIP reminded the Licaris of their personal liability for damages up to $26,000.
It is undisputed that after receipt of NJIP’s demand letter, Mrs. Licari telephoned the landlord’s attorney and proposed that the Licaris’ new houseware enterprise, Basic Line, Inc., occupy the premises. This proposal was either rejected or ignored by NJIP.
During the summer of 1981, without notice to defendants, NJIP incurred expenses of $6800 to repair and repave the parking lot and $4284 to clean and repair damage to the building that had been caused by Crayonne.
On August 20, 1981, NJIP leased the premises to Insulation Distributors Corporation (Insulation) for a five year term com-*452meneing October 1, 1981 and terminating September 30, 1986.1 The lease permitted Insulation to occupy the premises during September, 1981 for $1.00. During the first two years of the lease term the annual rent was $86,190.60, payable in monthly installments of $7,182.55. Thus, during the four months that the original lease and the Insulation lease overlapped, NJIP collected rent in the amount of $28,730.20, or $10,882.56 more than the rent payable under the original lease.
In August, 1981, the landlord sued YCVL and the Licaris, alleging unpaid rent and taxes for June, the $293.95 roof repair bill, interest, attorney’s fees, and claims for unspecified damages not yet accrued. The complaint also alleged a claim against the Licaris to the extent of the $26,000 limit of liability under their guaranty.
In October, 1982, the landlord filed an amended complaint seeking rent, taxes, repairs, interest, expenses, and attorney’s fees that accrued since the filing of the original complaint.
The trial court computed plaintiff’s damages to be $32,-958.42.2 After deducting YCVL’s security deposit and tax escrow payment totaling $13,322.28, the court awarded judgment for plaintiff in the amount of $19,636.14. In computing plaintiff’s damages, the trial court credited the defendants with *453that portion of the new tenant’s rent that equaled the rent under the original lease for the period from October 1981 through January 1982, but it refused to credit defendants with Insulation’s rent in excess of the original monthly rent.
Subsequently, the trial court considered plaintiff’s application for counsel fees and entered an amended judgment against YCVL in the amount of $31,730.42, consisting of the original judgment of $19,636.14, attorney’s fees and costs of $11,290.76, and interest of $753.53.3 An amended judgment against the individual defendants was entered in the amount of $26,000.
The Appellate Division reversed the trial court’s computation of damages, concluding that the terms of the lease agreement as well as general principles of compensatory damages required that the tenant and guarantors receive a credit for all rent received by the landlord from the date of the lease termination to the end of the lease term. We granted certification as to this issue only. 97 N.J. 690 (1984).
II
A proper resolution of the issue in this case requires an historical perspective. Because a lease was traditionally regarded as a conveyance of an interest in real estate, courts have traditionally relied upon principles of property law in resolving disputes between parties to a lease. Javins v. First Nat’l Realty Cory., 428 F.2d 1071, 1074 (D.C.Cir.), cert, denied, 400 U.S. 925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970).
*454For example, at common law a landlord had no duty to mitigate damages caused by a defaulting tenant. See Sommer v. Kridel, 74 N.J. 446, 452 (1977). This rule was based on the theory that a lease effected a transfer of part of the owner’s property interest. As we observed in Sommer v. Kridel, supra:
Under this rationale the lease conveys to a tenant an interest in the property which forecloses any control by the landlord; thus, it would be anomalous to require the landlord to -concern himself with the tenant’s abandonment of his own property. Wright v. Baumann, 239 Or. 410, 398 P.2d 119, 120-21, 21 A.L.R.3d 527 (1965). [74 N.J. at 453.]
Although this rule no longer applies to residential leases in this state, we have expressly reserved for decision its application to leases of commercial property. Sommer v. Kridel, supra, 74 N.J. at 456-57 & n. 4.
The principles of property law that argue against the landlord’s duty to mitigate damages severely restricted the landlord’s options at common law in the event of a tenant’s default. For example, a landlord who sought to enter the leased premises after default, rent to a new tenant, and hold the original tenant liable for any losses was confronted with the rule that such conduct constituted a surrender of the original lease by operation of law. The common-law theory that two exclusive possessory rights to the same land could not coexist simultaneously required that the prior tenancy be expunged in favor of the new one. C. McCormick, “The Rights of the Landlord Upon Abandonment of the Premises by the Tenant,” 23 Mich.L.Rev. 211, 212 (1925). If, however, either with the defaulting tenant’s consent, or pursuant to the express provisions of the lease, the landlord made a new lease as the tenant’s agent and for his account, no surrender by operation of law occurred. Id. at 212-13. Indeed, an entry by the landlord after the tenant’s default, even without a reletting, could cause a surrender or forfeiture of the leasehold estate. Id. at 213-14.
If the landlord continued to recognize the lease and allowed the premises to remain vacant, his right of recovery was ordinarily limited to the rent as it became due. 2 R. Powell *455and P. Rohan, Powell on Real Property (1983 ed.) ¶ 230[3] at 326-27 [hereinafter Powell on Real Property ]; Restatement (Second) of Real Property § 12.1, comment (i), illustrations 10 & 11 (1977); J. Hicks, “The Contractual Nature of Real Property Leases,” 24 Baylor L.Rev. 443, 516 (1972).
Because of widespread dissatisfaction with the impact that these antiquated rules of property law have had on modern lease transactions, lessors and lessees have made distinct efforts to overcome them with express covenants that override their restrictions. As a result, the modern lease is often based on property law principles modified by specific covenants that permit the intention of the parties to supersede those doctrines no longer viable in our society:
The complexities of city life, and the proliferated problems of modern society in general, have created new problems for lessors and lessees and these have been commonly handled by specific clauses inserted in leases. This growth in the number and detail of specific lease covenants has reintroduced into the law of estates for years a predominantly contractual ingredient. [Powell on Real Property, supra, 11221[1] at 180-81.]
It is one thing to recognize the general impact that modern contract principles have had upon the real property lease; it is more difficult, however, to apply those principles in a manner that reflects their inherently contractual character, free from the taint of the property law principles that they were designed to overcome. As Judge Wright observed in Javins v. First Nat’l Realty Corp., supra:
Ironically, * * * the rules governing the construction and interpretation of “predominantly contractual” obligations in leases have too often remained rooted in old property law.
Some courts have realized that certain of the old rules of property law governing leases are inappropriate for today’s transactions. In order to reach results more in accord with the legitimate expectations of the parties and the standards of the community, courts have been gradually introducing more modern precepts of contract law in interpreting leases. Proceeding piecemeal has, however, led to confusion where “decisions are frequently conflicting, not because of a healthy disagreement on social policy, but because of the lingering impact of rules whose policies are long since dead.” [428 F.2d at 1074-75 (footnotes omitted).]
*456New Jersey has been a leader in its recognition that the modern lease should be construed in accordance with principles of contract law. See Trentacost v. Brussel, 82 N.J. 214, 225-28 (1980) (landlord’s implied warranty of habitability requires furnishing of reasonable safeguards to protect tenants from foreseeable criminal activity); Sommer v. Kridel, supra, 74 N.J. at 454-57 (antiquated real property concepts no longer control where there is a claim for damages under residential lease; landlord has duty to mitigate damages); Berzito v. Gambino, 63 N.J. 460, 468-69 (1973) (implied warranty of habitability and covenant to pay rent construed as mutually dependent); Marini v. Ireland, 56 N.J. 130, 141-47 (1970) (landlord’s implied covenant to make repairs and tenant’s covenant to pay rent construed as mutually dependent; landlord’s breach of covenant entitles tenant to repair and offset cost of same against rent); Reste Realty Corp. v. Cooper, 53 N.J. 444 (1969) (recognizing implied warranty against latent defects and of fitness of premises for leased purposes).
A similar trend importing principles of contract law into real property leases can be discerned in other states, particularly with respect to the landlord’s duty to mitigate damages. As noted, a duty to mitigate damages is incompatible with the property law concept that restricts a landlord’s right to interfere with the defaulting tenant’s property interest. C. McCormick, supra, 23 Mich.L.Rev. at 212-16. However, one commentator has observed that
the imposition of a landlord’s duty to mitigate has received substantial endorsement in connection with residential leaseholds, and although there has been less readiness to accept the principle for commercial leases, the trend in that direction is clear. Despite contrary pronouncements, the no-mitigation duty rule appears to be a moribund doctrine. [G. Weissenberger, “The Landlord’s Duty to Mitigate Damages on the Tenant’s Abandonment: A Survey of Old Law and New Trends,” 53 Temp.L.Q. 1, 5-6 (1980) (footnotes omitted).]
At least twenty states, either by statute or by judicial decision, impose upon a residential landlord a duty to mitigate damages, and ten states expressly recognize a duty to mitigate with respect to commercial leases. Id. at 8-10 & nn. 33 & 36. See *457generally Model Residential Landlord-Tenant Code § 2-308(4) (Tent.Draft 1969) (imposing a duty on landlord to mitigate damages); Uniform Residential Landlord and Tenant Act § 1.105(a) (1972) (imposing-a duty to mitigate, on both landlords and tenants).
Judicial recognition of acceleration clauses in lease agreements reflects another incursion of contract principles into the realm of property law. Powell on Real Property, supra, § 231[3][b] at 330.60(98)-330.60(101); Note, “The Validity of Lease Acceleration Clauses Under a Contractual Approach to the Landlord-Tenant Relationship,” 10 Cap.UL.Rev., 159, 165 (1980). The general rule regarding lease acceleration clauses is that if the tenant abandons the premises,
the landlord may enforce the acceleration clause if he does not terminate the lease. In this event, the landlord will receive the rent for the remainder of the term from the tenant who abandoned, and is obligated to account to him for any rent received from a new tenant. [Restatement (Second) of Property, supra, § 12.1, comment k.]
See Powell on Real Property, supra, § 231[3][b] at 330.60(102).
Another contractual clause intended to supersede the rigid property-oriented rules of the common law — and the clause specifically at issue in this case — is the “survival” clause, which customarily provides that even though the lessee has been removed from possession of the leased premises because of a material breach, the lessee’s obligation to pay damages based on lost rent “survives” the loss of possession. The majority rule as to survival clauses is that
the parties may agree that the tenant is liable for subsequent “rents” as they accrue. Such statement must be clear and will be strictly construed against the landlord. Generally, the landlord’s recovery is limited to the deficiency in rents if he does relet, or to his actual damages, thus making the remedy look more like damages than rent. [Powell on Real Property, supra, § 231[1] at 330.52-330.53 (footnotes omitted).]
The use, validity, and contractual origin of survival clauses was explained by Professor McCormick in 1925, when he quoted with approval from a Texas decision upholding the right of a landlord to collect damages from an abandoning tenant for unpaid rent:
*458“It is contended that the abandonment of the premises to the lessor, though against his wish, and with notice that he would hold the lessee responsible for the rent for the full term, and his subsequently letting the place to another tenant, was a surrender and termination of the lease, and that the plaintiff has no right to recover rent since the termination of the lease. * * * But it does not follow that because of the wrongful act of the defendant in the breach of his contract by the abandonment of the rented premises, when the landlord, to protect his property from the injury it might suffer from lying idle and abandoned, and having given the tenant due notice of his intention, lets the premises and puts another tenant in possession, that [sic] though the first tenant is not any longer responsible eo nomine for rent, he is absolved from all liability to make good the loss which the landlord may sustain from his failure to perform his contract. * * * The plaintiff in this case was entitled to recover, not, indeed, for rent of the premises after the abandonment of them by the defendants, but for compensation for the injury done him; and the proper measure of his damage is set out in the account upon which he sues; that is, the difference between the rent he was to receive and the rent he did receive, if that were the utmost for which, by the exercise of ordinary diligence, the premises could be rented. * * *” [C. McCormick, supra, 23 Mich.L.Rev. at 217-18, quoting Randall v. Thompson Bros., 1 Tex.Civ.App. § 1102 (Comm. App.1881) (emphasis in McCormick).]
New Jersey recognizes and enforces survival covenants in leases. Fibish v. Bennett, 131 N.J.L. 98 (Sup.Ct.), aff’d per curiam, 132 N.J.L. 168 (E. & A. 1944); Raleigh Realty Corp. v. Jacobs, 127 N.J.L. 454 (Sup.Ct.1941); Fleming v. Matter Constr. Corp., 11 N.J.Misc. 129, 132-33 (Hudson County Ct. 1933).
Ill
The lease in this case is faithful both to the historic precepts of property law and the more modern trends of contract law. Paragraph 10 of the lease afforded the landlord, in the event of tenant’s breach, the right to relet the premises as the tenant’s agent. Thus, the tenant would receive any surplus rents and remain liable for any deficiency, thereby thwarting the common-law doctrine that reletting by the landlord caused a surrender of the lease by operation of law. See C. McCormick, supra, 23 Mich.L.Rev. at 212-14.
*459I agree with the majority that to the extent the Appellate Division in this case relied upon paragraph 10 of the lease, it did so improperly. In this case the landlord terminated the lease under paragraph 20, ante at 439, and such termination is inconsistent with the right afforded by paragraph 10 to relet as the tenant’s agent. Accordingly, it is clear that the landlord relet for its own account pursuant to the survival clause of the lease in paragraph 25:
In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant shall pay as damages for the breach of the covenants contained in this lease the difference between the rent reserved and the rent collected and received, if any, by the Landlord, during the remainder of the unexpired term, such difference of [sic] deficiency between the rent reserved and the rent collected, if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained.
Although we were advised at oral argument that the body of the lease, including paragraphs 10 and 25, was drafted by the landlord’s attorney — and therefore subject to the rule that any ambiguity be strictly construed against the draftsman, In re Miller, 90 N.J. 210, 221 (1982) — I find no ambiguity in the landlord’s survival clause. In a historical context, the paragraph is simply a mixture of property concepts and contractual covenants. The requirement that the tenant “shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord” reflects the familiar property-law doctrine preventing a landlord from accelerating rental payments and restricting recovery to the rent as it becomes due. McCready v. Lindenborn, 172 N.Y. 400, 65 N.E. 208 (1902); Powell on Real Property, supra, § 230[3][b] at 326-27.
The heart of the survival clause is the requirement that
the Tenant shall pay as damages for the breach of the covenants contained in this lease the difference between the rent reserved and the rent collected *460and received, if any, by the Landlord, during the remainder of the unexpired term, such difference of [sic] deficiency between the rent reserved and the rent collected, if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained, [(emphasis added).] 4
This language affords the landlord not a claim for rent under the lease but a contractual claim for damages based on the survival clause. The amount of such damages, including the amount of any credit to the tenant from the landlord’s reletting, should be based on accepted principles of contract law. See Powell on Real Property, supra, § 231[1] at 330.53; Restatement (Second) of Property, supra, § 12.1, Reporter’s Note 7 (“[T]he parties may agree that ‘rent’ is to continue after termination, and the obligation may be enforceable as damages, since the payments are not rent in the strict sense of the word.”); J. Hicks, supra, 24 Baylor L.Rev. at 521 (“Thus, even if the lessee is no longer liable on the lease because of lack of privity of estate, he may still be liable as a party to a contract.”).
Professor McCormick best explains the contractual nature of the lessor’s claim under a survival clause:
Assuming the destruction of the relation and of the tenant’s estate, it is submitted that the landlord's acts show no desire on his part to rescind or terminate the contract between the parties; they are, on the contrary, perfectly consistent with an intent on his part to hold the tenant liable as for a breach of the contract. Usually the tenant’s abandonment has been accompanied by some present breach of covenant to pay rent, to repair, or the like, or even if not, his abandonment ought, it seems, to constitute an anticipatory breach, a repudiation in advance of his future obligations under the contract, and hence under the overwhelming weight of authority, the source of a cause of action in favor of the lessor for the value of the further performance of the contract. The value of such performance is of course the amount of the rent for the balance of the term, less the reasonable rental value or the amount received by the *461landlord upon the reletting. [C. McCormick, supra, 23 Mich.L.Rev. at 217-18 (footnote omitted; emphasis in original).]
IV
A universally-accepted contract principle is that compensatory damages are designed to put the injured party “in as good a position as he would have been in had the defendant kept his contract.” 11 S. Williston, A Treatise on the Law of Contracts § 1338 at 198 (3d ed. 1968); see 525 Main Street Corp. v. Eagle Roofing Co., 34 N.J. 251, 254 (1961); N.J.S.A. 12A:1-106 (Uniform Commercial Code — “remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed”); 5 A. Corbin, Contracts § 992 (1964). This principle has a broad and general application, not only to commercial contracts but also to leases of property. See Som-mer v. Kridel, supra, 74 N.J. at 456-57 (duty to mitigate, which necessarily assumes damages to be compensatory); Spialter v. Testa, 162 N.J.Super. 421, 430 (Cty.D.Ct.1978) (“New Jersey landlord-tenant law follows a basic principle. Landlords in residential tenancies are entitled to actual damages upon breach of lease by the tenant. The landlord is not" entitled to any windfall profit when the tenant breaches.”), aff’d, 171 N.J.Super. 181 (App.Div.1979), certif. denied, 82 N.J. 300 (1980).
Since the purpose of the rule is to put the injured party in as good a position as he would have enjoyed but for the breach, it is generally accepted that damages are not recoverable for avoidable consequences. As Professor Corbin explains:
[T]he plaintiff is never given judgment for damages for losses that he could have avoided by reasonable effort without risk of other substantial loss or injury. Likewise, gains that he could have made by reasonable effort and without risk of substantial loss or injury by reason of opportunities that he would not have had but for the other party's breach are deducted from the amount that he could otherwise recover. [5 A. Corbin, supra, § 1039, at 241.]
See 11 S. Williston, supra, § 1353, at 274.
In this case we need not consider the obligation of a commercial landlord to mitigate damages, since the landlord voluntarily *462did so.5 The only question is whether we follow the normal rule of mitigation and credit defendants with all the rent received by the landlord until the end of the term. The majority declines to do this, and has fashioned a special rule for the mitigation of damages for breaching a lease: the tenant’s credit in any month can never exceed the rent under the original lease.
It should be plainly understood that a landlord not wishing to share the bounty of a more lucrative lease with a defaulting tenant can achieve this result by terminating the tenant’s liability prior to the inception of the new lease. In such event, the tenant is accountable for the landlord’s damages up to the date on which its liability is terminated, and it will receive no credit for the rent paid by the new tenant.6 This was the holding in Waxman Indus., Inc. v. Trustco Dev. Co., 455 N.E. 2d 376 (Ind.Ct.App.1983), relied upon by the majority opinion.7
It is only when, as here, the landlord desires to preserve the original tenant’s liability under the survival clause that the issue of so-called “excess rent” arises. In this situation, however, under generally accepted principles of contract law, the total rent received by the landlord until the end of the term should be credited against the tenant’s liability, even if the new monthly rent exceeded the original monthly rent.8 The appliea-*463ble principle is stated in the Restatement of the Law of Contracts:
After the plaintiff has reason to know that a breach has occurred, or that a breach is impending under circumstances such that it is not reasonable for him to expect the defendant to prevent harm, he is expected to take such steps to avoid harm as a prudent person would take. He cannot get damages for harm that could thus be avoided. Furthermore, gains that he could thus make, by reason of opportunities that he would not have had but for the breach, are deducted from the amount otherwise recoverable. [Id. § 336(1), Comment a, at 536 (1932) (emphasis added).]
See 5 A. Corbin, supra, §§ 1039, 1041 at 241, 256 (gains made by injured party on other transactions are deducted if the gains could not have been made but for the breach); C. Goetz & R.. Scott, “The Mitigation Principle: Toward a General Theory of Contractual Obligation,” 69 Va.L.Rev. 967, 975 n. 22 (1983) (“Joint minimization of costs generally requires that a mitigator credit the breacher with any new profits he obtains by virtue of the breach.”).
Application of this general principle of mitigation in a commercial setting is discussed in Locks v. Wade, 36 N.J.Super. 128 (App.Div.1955). There, plaintiff leased a juke box to defendant for two years at a minimum rental of $20 per week. Defendant repudiated the contract and plaintiff sued to recover lost profits for the two-year period of the lease. Defendant contended he was entitled to a credit since plaintiff was able to lease the component parts of the juke box to others after defendant’s breach. Judge Clapp rejected defendant’s contention and noted as follows:
Defendant would have us apply here the rule obtaining on the breach of an agreement to lease realty; that is, he claims the measure of the lessor’s damages here is the difference between the agreed rental and the rental value of the property. His contention further is that even though under the agreement before us, the lessor is obliged to perform some personal services, he, in order to establish the rental value, has the burden of proving what he received on a reletting. * * *
*464We think the position plaintiff takes on the matter is sound. Where, as here, a plaintiff lessor agrees to lease an article of which the supply in the market is for practical purposes not limited, then the law would be depriving him of the benefit of his bargain if on the breach of the agreement, it required his claim against the lessee to be reduced by the amount he actually did or reasonably could realize on a reletting of the article. For if there had been no breach and another customer had appeared, the lessor could as well have secured another such article and entered into a second lease. * *
* * * In the case of realty which (unlike the juke box) is specific and not to be duplicated on the market, the lessor could not properly lease it to another for the same period unless the first lease were broken or terminated. In such a case the lessor should not be awarded two profits merely because of the first lessee’s default.
So in general we may say that gains made by a lessor on a lease entered into after the breach are not to be deducted from his damages unless the breach enabled him to make the gains. [36 N.J.Super. 130-31 (emphasis added).]
In the instant case, defendant’s breach clearly enabled plaintiff’s gain. Hence, the damages suffered by plaintiff should be reduced by the amount of that gain.
The precise question before us was decided by the District of Columbia Court of Appeals in Truitt v. Evangel Temple, Inc., 486 A.2d 1169 (D.C.Ct.App.1984). In that case, after twelve months of occupancy, the tenant abandoned the premises when its application for a certificate of occupancy was denied. The premises were vacant for eight months. The landlord sued for damages contending that the tenant had breached the lease by failing to pursue the necessary permits diligently or in good faith. The trial court found that the rent received by appellants from a substitute tenant during the balance of the unexpired term exceeded the rent reserved in the original lease and concluded that the landlord had suffered no damages. The landlord, as in this case, contended that its claim was for rent and that the tenant was not entitled to benefit from the excess rent paid by the new tenant. The Court of Appeals affirmed the trial court and its discussion .of the issue is particularly pertinent to the question in this case:
[T]he only issue is whether the long established rule in the District of Columbia regarding the options available to a landlord upon a tenant’s wrongful abandon*465ment should be modified when the landlord has gained an unanticipated net profit under a new lease. We are unpersuaded it should be. In Ostrow v. Smulkin, supra, 249 A.2d at 520 [1969], this court described the basic ingredients of a tenancy as consisting of the tenant’s entitlement to possession and the landlord’s entitlement to rent, but pointed out that
[i]f the landlord retakes possession by legal process or by accepting a voluntary surrender of possession by the tenant, the obligation of the tenant to pay future rent ceases____ And depending on the circumstances and contractual provisions of the lease, the tenant may be liable for damages even after the landlord has retaken possession, but this liability is for breach of contract and not for rent.
Id. at 521.
“In fixing the amount of damages, the general purpose of the law is, and should be,” according to Professor Williston, “to give compensation, that is, to put the plaintiff in as good a position as he would have been had the defendant kept his contract.” 11 WILLISTON ON CONTRACTS § 1338 at 198 (3d ed. 1968). “[C]ompensation involves not only assessment of gains prevented by the breach but also of losses ensuing which would not have occurred had the contract been performed. From these must be deducted any saving to the plaintiff due to the non-performance of the contract. The result will give the net loss to the injured party.”
Id. at 202-03 (citing the RESTATEMENT OF CONTRACTS § 329). Moreover, while in some instances any “saving may be merely negative in being freed from the necessity of performance, [i]t may, however take a positive form when this freedom enables the injured party to acquire pecuniary advantages which he otherwise would not have been able to obtain.” Id. at 203 n. 16. The cases relied upon by appellants are not to the contrary. For example, in Whitcomb v. Brant, 100 A. 175 (N.J.1917), cited by appellants, the court affirmed dismissal of a suit by the original tenant to recover the incidental profits realized by the landlord upon his reletting of the premises to another tenant. The court held that after the landlord had obtained a new tenant and applied the rent received from the second tenant to relieve the original tenant of his obligation to pay rent, that was the extent to which the original tenant was entitled to benefit. The trial court did no more in the instant case. [486 A.2d 1173-74 (footnote omitted; emphasis added).]
Other cases that reached the same conclusion as the District of Columbia Court of Appeals are Dalamagas v. Fazzina, 36 Conn.Super. 523, 414 A.2d 494 (Super.Ct.1979); Wanderer v. Plainfield Carton Corp., 40 Ill.App.3d 552, 351 N.E.2d 630 (App.Ct.1976); The Way Int’l v. Ohio Center, 3 Ohio App.3d 451, 445 N.E.2d 1158 (Ct.App.1982).
The majority opinion relies primarily on Whitcomb v. Brant, 90 N.J.L. 245 (E. & A. 1917). In that ease the plaintiff-tenant, who had occupied the landlord’s property for six years at a *466monthly rent of $200, abandoned the premises in May, 1912. The property remained vacant for two months and the landlord then entered into a new lease for approximately three years at a rental of $225 per month. The original tenant sued, claiming that the excess rental under the new lease was his property. There was no counterclaim by the landlord for the two months’ lost rent. Although the court denied the tenant’s claim to recover affirmatively the excess rent, it acknowledged the tenant’s right to have the rent received by the landlord under the new lease “applied pro tanto to benefit the plaintiff, and to relieve him to that extent under the obligation of the covenant.” Id., 90 N.J.L. at 251. Since the landlord did not counterclaim, it is unclear if the Court meant that the plaintiff had been relieved of his obligation for the two months that the premises were vacant, in which event plaintiff would have been credited with the excess rent, or merely for the rental obligation during the period the property was occupied by the new tenant. The only clear principle that can be distilled from Whitcomb is that the tenant could not affirmatively recover the excess rent. Accordingly, the majority’s reliance on that holding in this case appears to be misplaced.9
*467The majority opinion also asserts that the defendants in this ease are “wrongdoers” who should not be permitted to profit from the excess rent obtained by a landlord who voluntarily mitigates damages. However, the record indicates that the breaching party in this ease was the defendants’ assignee, and there is evidence that the defendants attempted to relet the premises but were rejected by the landlord. Other facts also suggest that the equities are not entirely with the landlord. For example, the landlord incurred repaving and cleaning expenses in excess of $10,000 without giving notice to defendants, and the new tenant was permitted to occupy the premises without paying rent for the month of September.
The majority opinion also errs in its reliance on language in the survival clause imposing on the tenant the obligation to make monthly payments of the difference between the rent received and the rent reserved, as the same may be ascertained. Incorrectly construing this language to impose a continuing liability on the tenant to pay rent, the majority concludes that since the obligation is for rent, the credit to offset that obligation should be limited to the monthly rental under the original lease. Ante at 441.10 As noted above, however, the *468tenant’s continuing obligation under the survival clause is not for rent, since the lease has been terminated, but it is rather a contractual obligation to reimburse the landlord for its damages. Powell on Real Property, supra, § 231[1] at 330.53; Restatement (Second) of Property, supra, § 12.1, Reporter’s Note 7; C. McCormick, supra, 23 Mick.L.Rev. at 216-17. The reference in the survival clause to monthly payments does no more than establish the dates on which the tenant’s liability accrues; it does not define the nature of that liability.
As noted above, the equities in this case, wherever they lie, should not control the result. What should control are the fundamental and established principles of contract law that define the measure of damages based on the principle that the plaintiff be placed in as favorable a position as it would have enjoyed had the breach not occurred. Application of that principle, which is premised on fairness and equity, would suggest that the landlord is entitled to recover the full rent as originally reserved in the lease. To the extent that the defendants do not receive a credit for the total rent received by the landlord from October, 1981 to January, 1982, the landlord realizes a windfall and receives a benefit greater than that envisioned in his original bargain.
In my view, the majority has reached the wrong result in this case. It has done so by relying on the survival clause, a contractual remedy drafted by the landlord to overcome the restrictions imposed by property law on a landlord’s right to terminate a lease, relet, and recover damages — a right not recognized at common law. By construing the survival clause to create a claim for rent rather than damages, the majority ignores the history and language of the survival clause and *469perpetuates an unwarranted distinction, as to the measure of damages for breach, between leases and other contracts.
I would affirm the judgment of the Appellate Division.
For reversal — Chief Justice WILENTZ and Justices HANDLER, O’HERN and GARIBALDI — 4.
For affirmance — Justices CLIFFORD, POLLOCK and STEIN — 3.

 The lease agreement with Insulation contains 70 paragraphs and an addendum with 21 additional paragraphs. The record is silent as to when plaintiff began negotiations leading to this lease but it is reasonable to assume that negotiations commenced several weeks prior to August 20, 1981.

 The trial court found that the following elements comprised plaintiff's claim for damages:
Rent $17,846.64
Repairs 7,093.95
Cleaning 4,284.10
Utilities 507.22
Insurance 338.00
Interest 2,888.51
$32,958.42

 We observe that the elements of damages that constitute the amended judgment — the original judgment, attorney's fees and costs, and interest — do not equal precisely the amount of the amended judgment:
$19,636.14 Original judgment
11,290.76 Attorney’s fees and costs
753.53 Interest
$31,680.43

 Although not relevant to the analysis of the lease in this case, it is interesting to note that the landlord in its lease with Insulation, the new tenant, added the following language to the text of paragraph 25 of the original lease: "[I]n no event shall Tenant be entitled to any monthly excess where the monthly rent collected exceeds the rent reserved.”

In my view, the mitigation principles set forth in Sommer v. Kridel, supra, 74 N.J. 446, should apply with equal force to a commercial lease.

However, a landlord who has already invoked a tenant's liability under a survival clause could not unilaterally deprive that tenant of a credit based on the increased monthly rent paid by a successor tenant that has executed or is about to execute the new lease.

AIthough the majority opinion relies on the Waxman case to support its holding, ante at 445, the credit issue in that case was moot because the tenant was relieved of liability as of the date of the new lease.

 Of course, if the total new rent collected through the end of the original term exceeded the original tenant’s liability for rent and other damages, such *463excess would belong to the landlord. Whitcomb v. Brant, 90 N.J.L. 245 (E. & A. 1917).

The majority opinion relies on three other cases in support of its holding. In Schooley v. Wilker, 33 Ohio App. 462, 169 N.E. 829 (Ct.App. 1929), the leasehold premises were vacant for 3'/2 months. The court held that when the landlord took possession of the premises at the end of the 3‘/2 month period, it terminated the original tenant’s leasehold. Thus, the tenant’s maximum liability would be for rents accrued prior to the termination. Accordingly, the court determined that there was no basis for allowing the original tenant a credit based on the higher monthly rental received by the landlord upon reletting. There was no survival clause involved.
Similarly, in Trick v. Eckhouse, 82 Ind.App. 196, 145 N.E. 587 (App.Ct.1924), there was no survival clause and the claim asserted was limited to rent for the two months during which the building was vacant, with no contingent claim asserted against the tenant for damages based on the rent reserved during the remainder of the lease. Accordingly, the court held that the increased rental received from the successor tenant should not be credited to the defaulting tenant.
*467In D.H. Overmeyer Co. v. Blakely Floor Covering, Inc., 266 So.2d 925 (La.Ct. App.), cert. & writ denied, 263 La. 615, 268 So.2d 676 (1972), the court determined that the landlord had relet as the tenant’s agent but declined to allow a credit to the tenant for excess rent received from the new lessee. To the extent that the court adopted an agency theory but declined to credit the tenant with the excess rent, the case appears to be wrongly decided. More important, the landlord's claim did not depend on a survival clause.

 The majority opinion cites McCready v. Lindenborn, 172 N.Y. 400, 65 N.E. 208 (1902), for the proposition that language similar to that contained in the survival clause in this case creates a claim for “damages [that] would be measured by the rent lost monthly, not the total rent lost at the end of the lease term.” Ante at 441. The Appellate Division in McCready had held that the tenant’s failure to pay rent in December, 1894 conferred on the landlord an immediate cause of action for “breach of the lease as an entirety.” Id., at 408, 65 N.E. at 210. The lease was not due to expire until 1904 and the landlord had not relet the premises. The Court of Appeals construed the language relied on by the majority merely to limit the landlord’s cause of action to damages *468that had accrued (rent for December, 1894) and would not permit "a recovery of all the damages in advance." 172 N.Y. at 408, 65 N.E. at 210. The decision dealt only with the right of a landlord to accelerate a claim for damages after breach by the tenant and did not determine the measure of damages pursuant to the survival clause in that case.