AYMAN ASAAD FARES ALHAGALY VS. MEGA PROPERTIES AT 100-104 ROMAINE AVENUE (L-4279-19, HUDSON COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: July 14, 2021
• Docket: A-4287-19
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4287-19

AYMAN ASAAD FARES ALHAGALY and SAFAA BEKHIT,

Plaintiffs-Appellants,

v.

MEGA PROPERTIES AT 100-104 ROMAINE AVENUE, L.L.C., and AVRAHAM FUCHS, a/k/a AVRI FUCHS,

Defendants-Respondents. ____________________________

Submitted March 9, 2021 – Decided July 14, 2021

Before Judges Fisher and Gummer.

On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4279-19.

Houston & Totaro, attorneys for appellants (Madeline L. Houston and Melissa J. Totaro, on the briefs).

John V. Salierno, attorney for respondents.

PER CURIAM Plaintiffs, who filed a complaint alleging their landlord, defendant Mega

Properties at 100-104 Romain Avenue, L.L.C. (Mega), had violated the New

Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -226 (CFA), by charging them

more than the maximum rent permitted by the Jersey City rent-control

ordinance, appeal an order granting defendants' cross-motion for summary

judgment and dismissing the complaint with prejudice, based on prior litigation

between the parties. Because the motion judge erred in granting summary

judgment based on a finding of accord and satisfaction in a summary-dispossess

consent order and estoppel by a rent-leveling administrator's determination, we

reverse.

On or about September 1, 2018, plaintiff Ayman Asaad Fares Alhagaly

signed a lease for and moved into one of Mega's apartments with his wife Safaa

Bekhit, and their children. Mega charged plaintiff a monthly rent of $1,500.

Eight months later, on May 21, 2019, Mega filed a complaint in the Law

Division, Special Civil Part, seeking a judgment of possession based on

plaintiff's failure to pay the May rent.

In response to the summary-dispossess complaint, plaintiff, who was

represented by counsel, raised a habitability defense, identifying at least fifteen

items that needed to be addressed, including an insect infestation, a

A-4287-19 2 malfunctioning toilet, and electrical fixtures needing repair. Plaintiff also filed

a complaint on June 6, 2019, with Jersey City's Department of Housing,

Economic Development, and Commerce, Division of Housing Preservation,

Office of Landlord Tenant Relations, seeking a rent reduction and alleging Mega

had charged rent in an amount exceeding the rent permitted by the City's rent-

control ordinance.

In a June 13, 2019 hearing in the summary-dispossess case, the parties

entered into a "mediation agreement," which provided Mega would complete all

repairs by June 29, 2019, and plaintiff would pay into court all rent due. Plaintiff

subsequently deposited $1,500 into court on June 13, July 31, and August 5,

2019, for a total of $4,500. A court-appointed inspector issued a report dated

July 13, 2019, finding Mega had not completed all of the repairs.

In the rent action, a rent-leveling administrator issued a preliminary

determination on July 17, 2019, finding the permitted rent for March 1, 2018, to

February 28, 2019, was $1,158.17 and beginning on March 1, 2019, was

$1,180.17. The administrator advised the parties if no objection was received

by August 5, 2019, plaintiff would be "entitled to a refund for the months that

the rent was overcharged." On August 6, 2019, the administrator issued a final

determination, repeating the prior rent findings; ordering Mega to refund

A-4287-19 3 plaintiff the excess rent he had paid; and setting an August 28, 2019 deadline to

appeal the final determination.

In the summary-dispossess case, the court on August 7, 2019, entered an

order requiring Mega to complete the remaining repairs by August 19, 2019, and

scheduled a hearing date. At the August 22, 2019 hearing, the parties entered

into a consent order in which they agreed Mega would receive $4,050 and

plaintiff would receive $450 of the funds plaintiff had deposited in court, even

though based on the rent-leveling administrator's determination, Mega had

overcharged plaintiff $3,969.96. They also agreed Mega would investigate and,

if necessary, repair a bathroom-ceiling leak by September 9, 2019. The parties

made no reference to the August 6, 2019 final determination, the requirement in

the final determination that Mega refund plaintiff the excess rent, or the release

of any other claims. The court issued an order releasing the funds plaintiff had

paid into court as set forth in the consent order.

In an October 2, 2019 "Notice to the Parties of Final Determination," the

City's Bureau of Rent Leveling confirmed neither party had appealed the final

determination, advised that the rent set forth in the final determination "is the

allowable rent" for plaintiff's apartment, and directed the parties to "adjust the

rent and refund/credit based on payments made and received."

A-4287-19 4 On November 5, 2019, plaintiffs filed a complaint 1 in the Law Division,

alleging that by charging plaintiffs more than the maximum rent permitted by

the Jersey City rent-control ordinance, Mega had engaged in "deceptive,

unconscionable and/or otherwise illegal acts" in violation of the CFA. Plaintiffs

asserted they had suffered an ascertainable loss and sought treble damages and

attorneys' fees and costs. In answering the complaint, Mega admitted it had "not

refunded any of [p]laintiff's rent payments," claiming it did not have "knowledge

and information sufficient to form a belief as to the legal rent."

After plaintiffs moved to suppress defendants' answers for failure to

provide discovery, defendants cross-moved for summary judgment. Claiming

plaintiffs' complaint was barred by the doctrines of res judicata and collateral

estoppel, defendants argued plaintiffs could have and should have litigated the

"legal issue of owed rent" in the summary-dispossess matter, which was based

on Mega's assertion plaintiff owed it rent; plaintiff acted in bad faith by not

raising the overcharge claim during negotiations in the summary-dispossess case

and in signing the consent order resolving that case without raising it; and

plaintiffs' claim was barred by the doctrine of accord and satisfaction because

1 Two days later, plaintiffs filed an amended complaint, adding as a defendant Avraham Fuchs, whom plaintiffs identified as an officer of Mega. A-4287-19 5 consent judgments in landlord-tenant court attempt to achieve a global

resolution of the parties' issues, barring the parties from raising any issues in

subsequent litigation. Plaintiffs opposed the cross-motion, arguing, among

other things, that their CFA claim was not barred: by res judicata because it

could not have been raised in the summary-dispossess action; by collateral

estoppel because Mega's violation of the rent-control ordinance was not litigated

in the summary-dispossess action; or by accord and satisfaction because in their

resolution of the summary-dispossess action, the parties did not manifest a clear

intent to reach a global settlement of issues between them.

After hearing oral argument, the motion judge granted the cross-motion

and dismissed the complaint with prejudice. In a written opinion, the motion

judge found plaintiffs' complaint was "barred by the doctrine of accord and

satisfaction as applied to the consent order" in the summary-dispossess action.

Relying on Raji v. Saucedo, 461 N.J. Super. 166 (App. Div. 2019), and the fact

that the overcharge issue had been adjudicated before the parties executed the

consent order, the motion judge concluded the parties had intended to reach a

global resolution of the issues between them with the consent order. The motion

judge also held that plaintiffs were collaterally estopped from pursuing their

CFA claim by the rent-leveling administrator's preliminary determination. The

A-4287-19 6 motion judge found "the issue to be precluded is Mega's overcharging of rent in

violation of" the rent-control ordinance and the rent-leveling administrator had

determined that issue, finding in plaintiff's favor. Characterizing this case as

plaintiffs' "third bite at the apple," the motion judge concluded it "would be

unfair and inconsistent with the [collateral estoppel] doctrine's objectives to

permit this claim to continue based on the totality of the circumstances simply

because [p]laintiffs want their shot at treble damages."

We review a trial court's summary-judgment ruling de novo, applying the

same standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346 (2017);

see also Nelson v. Elizabeth Bd. of Educ., 466 N.J. Super. 325, 336 (App. Div.

2021). We consider whether the evidence, when viewed in a light most

favorable to the non-moving party, raises genuinely disputed issues of material

fact sufficient to warrant resolution by the trier of fact, or whether the evidence

is so one-sided one party must prevail as a matter of law. Brill v. Guardian Life

Ins. Co. of Am., 142 N.J. 520, 540 (1995). A dispute of material fact is "genuine

only if, considering the burden of persuasion at trial, the evidence submi tted by

the parties on the motion, together with all legitimate inferences therefrom

favoring the non-moving party, would require submission of the issue to the trier

of fact." R. 4:46-2(c); see also Bhagat v. Bhagat, 217 N.J. 22, 38 (2014). We

A-4287-19 7 review a trial court's legal conclusions de novo. Clark v. Nenna, 465 N.J. Super.

505, 511 (App. Div. 2020).

Applying that standard, we conclude the motion judge erred in granting

summary judgment based on the doctrine of accord and satisfaction because a

genuine issue of material fact exists as to whether the parties intended with the

consent order in the summary-dispossess case "to reach a global resolution of

the issues between them," as the motion judge found. The motion judge also

erred in finding plaintiffs' CFA claim was estopped by the rent-leveling

administrator's determination.

We begin by noting "a summary dispossess action does not permit either

a landlord or tenant to plead a claim for damages." Raji, 461 N.J. Super. at 170;

see also Green v. Morgan Props., 215 N.J. 431, 449 (2013) (recognizing "no

money judgment can be awarded in the Landlord/Tenant Part"). The "only

judgment" entered in a "summary dispossess proceeding is a judgment for

possession of the premises," though "part of the court's findings [may] include

the amount of rent . . . that is due and owing," thereby "fix[ing] the amount that

the tenant may . . . pay . . . in order to prevent the eviction from taking place."

Green, 215 N.J. at 449; see also Hous. Auth. of Morristown v. Little, 135 N.J.

274, 280 (1994) (stating "[t]he only remedy that can be granted in a summary-

A-4287-19 8 dispossess proceeding is possession; no money damages may be awarded"). "By

confining itself to the landlord's right to possession, and fixing of the amount of

rent due to afford the tenant the opportunity to avoid eviction by its payment,

. . . the statutory summary dispossess device provides a quick disposition of the

landlord's claim for possession." Raji, 461 N.J. Super. at 170; see also Green,

215 N.J. at 447 (finding a purpose of the Anti-Eviction Act, N.J.S.A. 2A:18-

61.1, was to "protect[] landlords by providing an efficient and inexpensive way

to evict a tenant and regain possession of the leased premises when

appropriate"); Benjoray, Inc. v. Acad. House Child Dev. Center, 437 N.J. Super.

481, 486 (App. Div. 2014) (finding "[t]he summary dispossess statute, N.J.S.A.

2A:18-51 to -61, was designed to provide landlords with a swift and simple

method of obtaining possession").

In a summary-dispossess action based on nonpayment of rent, the claimed

amount of unpaid rent must actually be "legally owing." Housing Auth. of

Passaic v. Torres, 143 N.J. Super. 231, 236 (App. Div. 1976). An available

defense to a summary-dispossess action based on non-payment of rent is that the

rent is not legally owed; that defense may be supported by a decision of a

municipal rent-leveling board. Chau v. Cardillo, 250 N.J. Super. 378, 384 (App.

Div. 1990); see also 316 49 St. Assocs. Ltd. P'ship v Galvez, 269 N.J. Super.

A-4287-19 9 481, 488 (App. Div. 1994) (noting "[i]t is well settled that a landlord may not

charge rent in excess of that fixed by the applicable rent control ordinance").

Plaintiff defended the summary-dispossess case based on habitability and

never raised a defense based on the claimed unpaid rent not being legally owed

under a rent-control ordinance. Although plaintiff could have raised that

defense, he could not have filed a counterclaim or sought damages based on

Mega's purported CFA violation. See R. 6:3-4(a) ("[s]ummary actions between

landlord and tenant for the recovery of premises shall not be joined with any

other cause of action, nor shall a defendant in such proceedings file a

counterclaim or third-party complaint").

In finding plaintiff's complaint was barred by the doctrine of accord and

satisfaction based on the consent order entered in the summary-dispossess

action, the motion judge relied on Raji, 461 N.J. Super. 166. In Raji, the parties

resolved a summary-dispossess action based on nonpayment of rent by

consenting to a pay-and-go judgment pursuant to which the plaintiff was entitled

to immediate possession, but the defendants could remain in the premises for

ten weeks provided they made scheduled payments totaling $7,368 to the

plaintiff. Id. at 168-69. After the defendants failed to make the initial payment

and were locked out, the plaintiff filed an action for enforcement of the monetary

A-4287-19 10 aspects of the pay-and-go judgment; the defendants filed a counterclaim,

alleging unjust enrichment and seeking nearly $9,000 for having replaced a pool

liner and other costs. Id. at 169. Nothing in the case indicates the defendants

had made that claim previously or that the plaintiff was aware of that claim when

the parties entered into the pay-and-go judgment. At trial, the defendant testified

the parties understood the pool charges would be an offset against any rent due;

the plaintiff testified the lease agreement imposed on the defendant an obligation

to replace the pool liner or maintain the property. Ibid. Rejecting the

defendants' counterclaim, the trial judge found the plaintiff, not the defendant,

credible and held if the defendants had believed they were entitled to a set off,

they should have asserted that claim "as a set off against the rent plaintiff

claimed due during the summary dispossess action and at the time the pay-and-

go judgment was negotiated." Ibid. In denying a subsequent motion for a new

trial, the trial judge "iterated his view that the parties had reached an accord and

satisfaction, which was embodied in the pay-and-go judgment, and that all their

rights and liabilities concerning the tenancy were then fixed." Id. at 170. The

trial judge again noted his finding that the defendant was not credible. Ibid.

Based on that extensive record, we affirmed. Rejecting the defendants'

argument that the trial judge had dismissed their counterclaim based on a

A-4287-19 11 misapplication of the entire controversy doctrine, we concluded the parties had

"reached an accord and satisfaction and that their claims in this second action

could only be based on a breach of the pay-and-go judgment that memorialized

their agreement." Id. at 172. We were able to render that decision after the trial

judge had conducted a trial, heard the parties' testimony as to what they had

agreed, and rendered credibility determinations.

We don't have that record here. Having taken no testimony from the

parties as to what they had agreed and having made no credibility

determinations, the motion judge on summary judgment concluded the parties

"intended by [the consent] order to reach a global resolution." She made that

determination based solely on the language of the consent order, which said

nothing about the rent-leveling administrator's determination that Mega had

illegally overcharged rent, the directive requiring Mega to refund plaintiff the

excess rent, Mega's remaining time to appeal that determination, or any other

possible claim.

The motion judge faulted only plaintiff for not addressing the overcharge

claim during the negotiation of the consent order or in the language of the

consent order. But, unlike the plaintiff in Raji, Mega was equally aware of the

overcharge claim and had the same opportunity to address it in the negotiation

A-4287-19 12 of the consent order or in the language of the consent order. The implied

covenant of good faith and fair dealing applies to all parties to a contract, not

just one. Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997); Raji,

461 N.J. Super. at 171.

The motion judge applied our holdings about the Raji pay-and-go

judgment to the parties' consent judgment, finding "no material difference

between the two types of judgments." But there are material differences. A

pay-and-go judgment ends the parties' relationship. Accordingly, as we stated

in Raji,

when negotiating and consenting to a pay-and-go agreement, parties inherently intend to resolve all differences arising out of the tenancy and enter into what the law refers to as an accord and satisfaction: a mutual exchange of interests that fully discharges all claims, replacing them with the judgment's express terms.

[461 N.J. Super. at 171.]

Moreover, a pay-and-go judgment must be approved by the court pursuant to

Rule 6:6-4(a).

A "pay and go" settlement provides that although a judgment for possession is being entered, customarily on the day that the settlement is made, the tenant must nevertheless make some agreed-upon payment and must move out by an agreed-upon date. Pursuant to R. 6:6-4(a), these judgments for possession by consent

A-4287-19 13 must be approved by a judge in open court (unless the agreement is signed by an attorney representing the tenant, see R. 6:6-4(b)). The premise for approval by a judge is that the court must determine that the settlement is fair, and the premise for requiring approval in open court is so that the judge may question the parties to assist the judge in determining the fairness. At that inquiry, the judge may be advised that the tenant did not fully understand his/her rights and would not have entered into the settlement if the tenant had fully understood his/her rights, or that the settlement for some reason violates the public policy of the State.

[Franco v. Rivera, 379 N.J. Super. 273, 274 n.1 (Law Div. 2005).]

Here, the consent order was not a final resolution of the parties' landlord-

tenant relationship. Unlike the pay-and-go judgment in Raji, the consent order

did not give possession to the landlord and did not require plaintiff to vacate the

premises. Without the finality of a pay-and-go judgment, we cannot assume the

parties "inherently intend[ed] to resolve all differences arising out of the

tenancy." Raji, 461 N.J. Super. at 171. And without the protection of court

approval, we cannot be sure plaintiff knowingly waived his right to a refund of

the overpaid rent as ordered by the rent-leveling administrator or to assert a CFA

violation claim.

The "essential elements of accord and satisfaction" are: (1) "a bona fide

dispute as to the amount owed"; (2) "a clear manifestation of intent by the debtor

A-4287-19 14 to the creditor that payment is in satisfaction of the disputed amount"; (3)

"acceptance of satisfaction by the creditor." Loizeaux Builders Supply Co. v.

Donald B. Ludwig Co., 144 N.J. Super. 556, 564-65 (Law Div. 1976). "[A]n

accord and satisfaction requires a clear manifestation that both the debtor and

the creditor intend the payment to be in full satisfaction of the entire

indebtedness." Zeller v. Markson Rosenthal & Co., 299 N.J. Super. 461, 463

(App. Div. 1997). The consent order, on its face with nothing more, is not

sufficient to establish the required "clear manifestation" that plaintiff and Mega

intended for the resolution of the summary-dispossess action to resolve also the

illegal rent matter and any possible CFA claim. Without that "clear

manifestation," the motion judge erred in granting summary judgment based on

the accord-and-satisfaction doctrine.

The motion judge also erred in finding plaintiffs' CFA claim was

collaterally estopped by the rent-leveling administrator's preliminary

determination. The collateral-estoppel doctrine "bars relitigation of issues

previously litigated and determined adversely to the party against whom [it] is

asserted." Kortenhaus v. Eli Lilly & Co., 228 N.J. Super. 162, 164 (App. Div.

1988); see also Matter of Adoption of Amends. to N.J.A.C. 11:22-1.1, 459 N.J.

A-4287-19 15 Super. 32, 38-39 (App. Div. 2019). Collateral estoppel is established if five

essential elements are met:

(1) the issue to be precluded is identical to the issue decided in the prior proceeding . . . ; (2) the issue was actually litigated in the prior proceeding . . . ; (3) the court in the prior proceeding issued a final judgment on the merits . . . ; (4) the determination of the issue was essential to the prior judgment . . . ; and (5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding.

[In re Est. of Dawson, 136 N.J. 1, 20-21 (1994).]

See also Adelman v. BSI Fin. Servs., Inc., 453 N.J. Super. 31, 40 (App. Div.

2018).

Mega failed to establish those five essential elements in its summary-

judgment motion. The issue Mega seeks to preclude is not, as the motion judge

found, the rent-leveling administrator's finding Mega had overcharged plaintiff

rent, but whether the rent overcharge was a violation of the CFA. Whether Mega

violated the CFA by overcharging plaintiff rent is not identical to the issue

decided by the rent-leveling administrator – whether Mega violated Jersey City's

rent-control ordinance – and was not actually litigated before or decided by the

rent-leveling administrator. Thus, plaintiffs' CFA claim was not collaterally

estopped by the rent-leveling administrator's preliminary determination.

A-4287-19 16 Reversed and remanded for proceedings consistent with this opinion. We

do not retain jurisdiction.

A-4287-19 17