NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-0501-24
JON MUSCO,
Plaintiff,
v.
SMGR HOLDINGS LLC, 107 LONERGAN HOLDINGS LLC, EAST JERSEY PROPERTIES LLC, LOAN FUNDER LLC, SERIES 23697, and MEISTER ABSTRACT CORP.,
Defendants/Third-Party Plaintiffs-Respondents,
MAHIR ALLAN, WOODROW HOLDINGS LLC, and MJS PORTFOLIO I, LLC,
Third-Party Defendants/ Fourth-Party Plaintiffs- Appellants,
SARA BLUMENBERG, ASHER BLUMENBERG, ISRAEL BLUMENBERG, SHLOIME GREEN, SCHMUEL MAYER ROTH, GREENLIGHT PROPERTIES, LLC, ISAAC HERNANDEZ, NATHAN KATZ, AARON BIEGELSISEN, and SAMUEL ROTH,
Fourth-Party Defendants- Respondents.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee of Fidelity & Guaranty Life Mortgage Trust 2018-1,
Intervenor.
Submitted November 17, 2025 – Decided February 9, 2026
Before Judges Walcott-Henderson and Bergman.
On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-000127-21.
Whiteman Law Group, LLC, attorneys for appellants MJS Portfolio I LLC, Woodrow Holdings LLC, and Mahir Allan (Brian L. Whiteman, on the brief).
Respondents have not filed a brief.
PER CURIAM
A-0501-24 2 This one-sided appeal involves disputes arising from the simultaneous
sale of seven rental investment properties located in Newark and Irvington in
2021. Plaintiffs 1 alleged the sale to defendants for the purchase price of $2.75
million was structured as a "double closing" with an initial payment of $1.8
million to be paid at the first closing, followed by a payment of the remaining
$950,000 at a second closing. Plaintiffs initiated a complaint alleging
defendants2 failed to attend a second closing or pay the $950,000 balance due,
leading to multiple claims, crossclaims, third and fourth-party claims between
the numerous parties and connected entities involved in the sale.
Plaintiffs appeal the trial court's order dismissing their claims against all
defendants pursuant to Rule 4:37-2(b) based on the equitable doctrine of unclean
hands. After our careful review of the record, we vacate the dismissal order and
remand for a new trial for the reasons expressed hereafter.
1 "Plaintiffs" collectively refer to Mahir Allan, MJS Portfolio I, LLC, ("MJS") and Woodrow Holdings LLC ("Woodrow"). 2 "Defendants" collectively refer to Shloime Green and associated entities SMGR Holdings LLC ("SMGR"), Greenlight Properties LLC ("Greenlight"), 107 Lonergan Holdings LLC ("Lonergan"), and Asher Blumenberg and his associated entity, East Jersey Properties LLC ("EJP"). A-0501-24 3 I.
Relevant Background Facts
The following facts were taken from the record providing all legitimate
favorable inferences to plaintiffs, the non-moving parties as required by Rule
4:37-2(b). In late 2016 through 2019, plaintiffs Mahir Allan and Jon Musco, in
their capacity as fifty percent members of Woodrow, acquired seven rental
investment properties in Newark and Irvington. The properties were held
collectively under MJS, which was owned solely by Woodrow. In early 2021,
MJS, through Allan, sought to sell all the properties for $2.75 million and
eventually negotiated the terms of a sale with defendant Shloime Green and his
company, Greenlight Properties, for a purchase price in that amount.
On May 5, 2021, Allan and Green entered into a written contract setting
the purchase price at $1.8 million, corresponding to the remaining mortgage
balance owed by MJS on the collective properties. During negotiations, at the
suggestion of Green, the parties agreed to structure the sale of the properties into
two transactions and to hold a "double closing" which would split the total
purchase price of $2.75 million due to MJS with $1.8 million to be paid at the
first closing, followed by a payment of the remaining $950,000 at a second
closing, which was to occur immediately following the first, where Greenlight,
A-0501-24 4 the buyer in the first closing, would "flip" or sell the property to a third-party
buyer, Lonergan. The record includes documents listing all seven MJS
properties on the two closing statements.
The title company, defendant Riverside Abstract, prepared separate but
linked files for the anticipated double closing, and also prepared draft settlement
statements for both transactions on June 8, 2021, showing the two separate
expected prices and prospective buyers. The buyer on the first closing statement
reflected SMGR3 Holdings instead of Greenlight and a sale price of $1.8 million.
The second proposed closing statement listed the seller as SMGR and buyer as
Lonergan for a price of $2.95 million. After reviewing the closing statements,
Allan texted Green requesting that the $950,000 payment due to plaintiffs be
shown in the second closing settlement documents and that his or MJS' name be
listed as a payee and that not listing his name on the closing statement was a
"big problem," and he was "not going to close [because] he 'need[s]
transparency.'" Green texted Allan that he would communicate with the title
company to list MJS as payee, but it was never completed or further
3 Shmuel Meyer Roth is the sole owner of SMGR and had an agreement with Green to use his entity as a "strawman" for a $10,000 payment. At some point between the first contract date of May 5, 2021 and the June 8 draft settlement statements, Greenlight assigned their contract to SMGR. A-0501-24 5 documented. Allan expected that the remaining $950,000 of the purchase price
would be distributed to MJS at the second closing between SMGR and
Lonergan.
At the time of the first closing on June 14, 2021, as a condition to approve
a wire disbursement, Allan requested additional written assurance that the
remaining $950,000 would be paid out to MJS after the second closing. In
response, Green prepared and both parties signed an agreement reciting that
Allan was entitled to all sums above $1.8 million in net proceeds, with a cap of
$2.75 million, and that such a sum would be paid after deducting all closing
costs and after closing with a prospective purchaser. The agreement used their
individual names, did not use the name of any entity, nor was it referenced in
the closing documents of either transaction.
The proceeds from the first closing were used to pay off MJS' mortgage,
including the principal balance plus prepayment penalty. MJS was required to
pay additional funds at the closing to satisfy all settlement charges. The title
and closing documents for this transaction, as well as tax certifications,
consistently reflected only the $1.8 million "sale price."
After the first closing, from June through August 2021, Allan attempted
to communicate with Green concerning the scheduling of the second closing and
A-0501-24 6 when MJS would receive the $950,000 balance it was owed. Eventually, Green
would stop responding and block Allan's number.
On August 11, 2021, without notice to plaintiffs, SMGR sold 4 the
properties to EJP5, an entity affiliated with the Blumenbergs.6 The purchase
price was $2,950,000, funded by a loan of approximately $2.1 million and
$950,000 tendered by the buyers. The seller's proceeds from this closing,
$1,435,367.15, were paid to entities associated with the Blumenbergs, per an
"oral joint venture agreement" between Green and Asher Blumenberg
concerning the properties. MJS never received any portion of the $950,000 it
claimed was owed from the second closing.
4 The properties were able to be sold notwithstanding a filed lis pendens because the title "rundown" ordered by defendant Meister Abstract (defendants chosen title company, which handled the second closing) had a date cut off of July 26, 2024, prior to the filing of the lis pendens. Therefore, Meister was determined to not have any liability because it had no actual notice and was dismissed from the action. 5 The second closing, initially listing Lonergan as the Buyer was modified as Green reported "[Lonergan] didn't have any money." 6 Sara Blumenberg (Asher Blumenberg's mother) is the sole owner of EJP. However, at trial, Green testified he expected himself, Asher Blumenberg, and Isaac Blumenberg (Asher's brother) to move forward each as 33% owners "off paper." A-0501-24 7 On July 21, 2021, plaintiff Musco filed a verified complaint against
several individuals and entities and on October 7, 2021, filed an amended
complaint adding additional party defendants. On February 25, 2022, defendant
Meister Abstract filed an answer to the amended verified complaint and asserted
crossclaims and a Third-Party complaint against Allan, Woodrow, and MJS.
On November 21, 2022, Allan, Woodrow, and MJS filed their answer to
the Third-Party complaint, which included a counterclaim, crossclaim, and a
Fourth-Party complaint against Sara Blumenberg, Asher Blumenberg, and other
individuals. Defendants Green, Roth, Greenlight, SMGR, and 107 Lonergan
filed answers to the Fourth-Party complaint on January 3, 2023. Plaintiff Musco
then filed a second amended verified complaint on February 28, 2023.
Defendants Blumenbergs and EJP filed answers to the second amended
complaint and to the Fourth-Party complaint and crossclaims on September 23,
2023, and November 24, 2023 respectively.
Trial commenced on May 2, 2024 and continued over May 7, May 9, May
29, June 17, June 18, July 30, and July 31, 2024. At the May 7 trial, the court
granted defendants' motion to dismiss first-party plaintiff Musco's case because
Musco had no individual standing to assert claims belonging to MJS since the
disputed agreements were with MJS. On July 31, 2024, at the conclusion of
A-0501-24 8 plaintiffs' case, defendants moved to dismiss plaintiffs' claims with prejudice
pursuant to Rule 4:37-2(b). The trial court heard arguments, raised the equitable
doctrine of unclean hands, and directed the parties to submit briefs on the
doctrine's application to the case. The record reflects this was a theory raised
for the first time by the court and was not part of defendants' motion or listed as
an affirmative defense or otherwise in their pleadings.
Trial Court Decision
After written submissions were filed addressing the doctrine of unclean
hands, the court entered an order on October 7, 2024, granting defendants'
motion for a directed verdict and dismissed all of plaintiff's remaining claims
with prejudice pursuant to Rule 4:37-2(b). The court found Allan, acting on
behalf of MJS, signed multiple documents under oath stating the sale price was
$1.8 million, the documents were relied upon by financial institutions and taxing
authorities, and there was no evidence in the record or closing documents of a
second closing at a higher sales price. The court found plaintiffs later attempted
to enforce a separate "side agreement" with Green that was executed after the
closing, which purportedly entitled them to the additional $950,000, but
determined this agreement lacked a legal foundation in light of the closing
records.
A-0501-24 9 Central to the court's reasoning was the doctrine of unclean hands. The
court noted that plaintiffs, specifically Allan, made false statements to both the
lender and the taxing authorities by representing the purchase price of $1.8
million was the full consideration paid, despite seeking to recover $2.75 million
in his complaint. The court determined that equity cannot be used to divide the
proceeds of a tainted or fraudulent transaction, nor allow any party to benefit
from their own wrongdoing. The court found that even if defendants may have
acted improperly, plaintiffs' conduct in misrepresenting the full purchase price
under oath and withholding material information barred them from any relief.
Ultimately, the court concluded permitting plaintiffs' claims to proceed
would make the court an instrument of injustice and undermine the principles of
equity and public policy. Plaintiffs' deliberate and repeated misrepresentations
invalidated their case, and the court dismissed their complaint with prejudice
and denied plaintiff of any remedy for the purported side agreement or the
alleged remaining purchase price.
On appeal, plaintiffs contend the trial court's decision was not supported
by the evidence at trial and was based on several factual inaccuracies. They also
claim the undisputed intent and agreement among all parties was for MJS to sell
seven properties for a total price of $2.75 million, broken into two simultaneous
A-0501-24 10 closings: one for $1.8 million and the next closing wherein the property would
be "flipped" for a price of $2.95 million where plaintiffs would be paid the
remaining $950,000. Plaintiffs maintain that although the first closing occurred
for $1.8 million, the second closing never took place and $950,000 is owed to
them. Plaintiffs argue the evidence they presented at trial—including the
testimony of Green—confirmed these facts and supported their claims. The
plaintiffs further assert the trial court erred by giving undue weight to the
manner in which the $950,000 contract was drafted, noting that it was
intentionally prepared by defendants in individual names under the guise it
would assist in their financing, but its true purpose was to inhibit enforcement
of the agreements. They also claim they had no part in nor any reasons to
structure the contract in that manner and were not trying to defraud any person
or entity.
Plaintiffs also contend the trial court misapplied the doctrine of unclean
hands both substantively and procedurally. They argue there were sufficient
disputed issues raised at trial that precluded a directed verdict being granted in
favor of defendants. They assert their conduct was not intentionally fraudulent
or deceptive, especially in relation to the sale structure and communications with
their lender, and that any alleged errors—such as not disclosing the second
A-0501-24 11 contract to the lender—were, at worst, innocent mistakes. Moreover, they
highlight defendants never asserted unclean hands as an affirmative defense in
their pleadings and that the alleged wrongdoing by MJS was not sufficiently
connected to the subject matter of the dispute (i.e., the unpaid purchase price)
to justify equitable relief being denied by directed verdict.
Plaintiffs further argue the trial court failed to address the comparative
culpability of the parties in its application of the doctrine. They contend the
evidence at trial demonstrates sufficient issues of fact that defendants
orchestrated a "double closing" and had a history of such schemes, using the
structure to minimize out-of-pocket expenses while intentionally planning not
to pay the second agreed-upon sum. They maintain sufficient evidence was
presented showing defendants engaged in fraud and civil conspiracy, and
application of the unclean hands doctrine in favor of such wrongdoers is contrary
to good conscience and settled equity principles. They also assert that even if
unclean hands were applicable, it only bars equitable relief, not legal remedies
such as contractual damages—yet the trial court dismissed all their claims
against all defendants with prejudice.
A-0501-24 12 II.
The standard applicable to a motion for a directed verdict is equivalent to
that for summary judgment. Frugis v. Bracigliano, 177 N.J. 250, 269-70 (2003).
The standards of Rule 4:37-2(b) require the court to deny such motions if
reasonable minds could differ after "accepting as true all the evidence which
supports the position of the party defending against the motion and according
him the benefit of all inferences which can be reasonably and legitimately
deduced therefrom . . . ." Smith v. Millville Rescue Squad, 225 N.J. 373, 397
(2016) (quoting Verdicchio v. Ricca, 179 N.J. 1, 30 (2004)). The court should
only grant the motions where no rational juror could find that the plaintiff made
a prima facie case of the cause of action. Ibid. We review de novo a trial
court's decision on these motions, applying the same standard as the trial
court. Ibid. The same standard applies on appeal. Samolyk v. Berthe, 251 N.J.
73, 78 (2022); Stewart v. N.J. Tpk. Auth./Garden State Parkway, 249 N.J. 642,
655 (2022).
We first address plaintiffs' contention the court erred in applying the
doctrine of unclean hands as its basis to grant defendants' Rule 4:37-2(b) motion.
Unclean hands is an equitable doctrine under which relief is denied "to one who
is a wrongdoer with respect to the subject matter in suit." Borough of Princeton
A-0501-24 13 v. Bd. of Chosen Freeholders, 169 N.J. 135, 158 (2001); see also A. Hollander
& Son v. Imperial Fur Blending Corp., 2 N.J. 235, 247 (1949). However, its
application "should not be used as punishment but to further the advancement
of right and justice." Pellitteri v. Pellitteri, 266 N.J. Super. 56, 65 (App. Div.
1993). It may bar "the special remedies of equity, [but] does not deny legal
rights," nor is it triggered by general misconduct unrelated to the act in question.
Capparelli v. Lopatin, 459 N.J. Super. 584, 612 (App. Div. 2019); Med. Fabrics
Co. v. D.C. McLintock Co., 12 N.J. Super. 177, 180 (App. Div. 1951).
Sua sponte invocation of the doctrine of unclean hands is permitted only
with clear evidence of serious misconduct, and in the interest of equity and
justice. Trautwein v. Bozzo, 39 N.J. Super. 267, 268 (App. Div. 1956).
The[] doctrine[] of unclean hands . . . [is] flexible in [its] application, turning largely on the circumstances involved in the 'total situation.' . . . [It] may turn, too, upon the relative innocence or culpability of the plaintiff and defendant, for the law may aid the one who is comparatively the more innocent.
[Untermann v. Untermann, 43 N.J. Super. 106, 109 (App. Div. 1956) (citations omitted).]
"It is the effect of the inequitable conduct on the total transaction which is
determinative whether the maxim shall or shall not be applied." Untermann v.
Untermann, 19 N.J. 507, 518 (1955).
A-0501-24 14 After our review of the record, we determine the trial court misapplied its
discretion in dismissing plaintiffs' claims based on the doctrine of unclean
hands. When reviewing the evidence presented in plaintiffs' case as true and
providing all favorable legitimate inferences therefrom as required by Rule
4:37-2, plaintiffs' evidence showing defendants committed wrongful acts in
order to defraud plaintiffs' monies due from the "second closing" required a
denial of defendants' motion. The court was required to take plaintiffs'
allegations as true, if supported by competent evidence.
Plaintiffs' evidence, including both Allan's and Green's testimony, when
provided all favorable inferences, shows Green and the other defendants
colluded to defraud plaintiffs of the $950,000 owed from the "second closing."
This evidence must be considered as true. Therefore, we conclude genuine
issues of material fact existed in the trial record at the close of plaintiffs' case
that all or some of the defendants were liable for plaintiffs' loss.
The court determined Allan's claim the sale price was "$2.75 million
[flied] in the face of his sworn statements directed to a lender and taxing
authorities that the sale price was $1.8 million" and that Allan made "brazen
misrepresentations under oath in the closing documents that the total sale price
for the properties was $1.8 million" to support the dismissal order. We differ
A-0501-24 15 regarding the weight given by the trial court surrounding Allan's actions in
support of its invocation of the doctrine of unclean hands against plaintiffs. We
conclude sufficient evidence existed in the record concerning defendants'
wrongdoing, which the trial court was required to consider before invoking the
doctrine of unclean hands against plaintiffs only. Even assuming the record
exhibited that plaintiffs committed some wrongdoing, it also contained
significant evidence of defendants' wrongdoing by colluding to defraud
plaintiffs of $950,000 from the "second closing." The record also reflect s that
defendants sold the property shortly after the first closing for $2.95 million with
a profit of approximately $1.1 million, a significant gain that supports plaintiffs'
assertions that the market value of the property was in line with the $2.8 million
dollar sales price alleged to have been agreed to by Green and his affiliated
entities.
When weighing the equities between the parties based solely on the
evidence before the court at the time of the motion, we conclude the court failed
to consider the "total situation" and the respective "culpability of the plaintiff
and defendant," because "the law may aid the one who is comparatively the more
innocent." Untermann, 43 N.J. Super. at 109. Sufficient evidence of defendants'
wrongful conduct, which was one of the bases of plaintiffs' complaint, was
A-0501-24 16 adequately shown under the auspices of Rule 4:37-2 and required a denial of
defendants' motion.
In addition, although we agree with the court's determination that it
"cannot be used to settle a score between wrongdoers," in this instance when
taking as true all the evidence supporting plaintiff's claims, and providing
plaintiffs the benefit of all inferences which can be reasonably and legitimately
deduced therefrom, we conclude the doctrine of unclean hands was
improvidently utilized by the court against plaintiffs. Under the liberal
standards accorded to the non-moving party under Rule 4:37-2, the evidence in
plaintiffs' case was sufficient to show that defendants defrauded plaintiffs out of
$950,000, thereby enriching themselves while plaintiffs were left in a deficit
position after satisfying the loan on the properties.
We further conclude that the sua sponte invocation of the doctrine of
unclean hands by the court failed to provide sufficient notice to plaintiffs,
denying them due process. The record reflects the unclean hands issue was not
raised in defendants' pleadings or at trial. Although after the court raised this
issue, we recognize it permitted briefing by the parties, we determine this
allowance was insufficient to provide plaintiffs sufficient notice and an
opportunity to present evidence to fairly address the issue.
A-0501-24 17 Due process requires "that a party in a judicial hearing receive 'notice
defining the issues and an adequate opportunity to prepare and respond.'" H.E.S.
v. J.C.S., 175 N.J. 309, 321 (2003) (quoting McKeown-Brand v. Trump Castle
Hotel & Casino, 132 N.J. 546, 559 (1993)). Without proper notice, "[t]here can
be no adequate preparation where the notice does not reasonably apprise the
party of the [claims], or where the issues litigated at the hearing differ
substantially from those outlined in the notice." Id. at 322 (quoting Nicoletta v.
N. Jersey Dist. Water Supply Comm'n, 77 N.J. 145, 162 (1978)).
Additionally, plaintiffs dispute the trial court's finding that their failure to
report the full purchase price to their lenders resulted in them obtaining a benefit
of a lesser pre-payment penalty. We determine plaintiffs were not provided
sufficient time to respond to the trial court's invocation of the unclean hands
doctrine and were not provided reasonable time to provide evidence through
documents or testimony from a representative of their lender showing they did
not obtain any significant benefit based on the alleged double closing structure.
We further determine the transfer tax payable for the additional $950,000
was not due at the time of the first closing. Therefore, Allan's explanation for
his signature on tax documents that the sale price was $1.8 million for transfer
tax purposes had sufficient plausibility and was required to be considered as true
A-0501-24 18 under Rule 4:37-2. His belief the transfer tax on the $950,000 sale would be
paid at the second closing was also plausible. The record also reflects the
absence of reasons concerning the failure to hold a N.J.R.E. 104 hearing
regarding the unclean hands issues. Accordingly, we conclude the court's failure
to provide plaintiffs sufficient notice and an adequate time to respond to its
invocation of the doctrine of unclean hands constitutes an abuse of discretion.
Because we conclude the court's concerns surrounding the wrongdoing
allegedly committed by a number of parties are valid, we leave to the court's
discretion, after hearing the evidence, whether to report any parties, individuals
or entities to the proper law enforcement, tax, or other authorities or agencies.
See State v. Brady, 452 N.J. Super. 143, 169 (App. Div. 2017). In Brady, Judge
Messano, writing for a unanimous court, stated:
In Sheridan v. Sheridan, 247 N.J. Super. 552, 565 (Ch. Div. 1990), while recognizing the absence of any controlling court rule or administrative directive, the [court] observed that most judges report "illegal or improper activities . . . because it is the right thing to do and because it is repugnant to their oath that judges sit mute in the face of acknowledged, demonstrated or potential wrongdoing." Notably, in Sheridan, the judge became aware of criminal wrongdoing during sworn testimony in a case over which he was presiding, i.e., while the judge was performing an official duty. Id. at 563.
[Ibid.]
A-0501-24 19 We are further constrained to remand for a new trial before a different
judge. See R.L. v. Voytac, 199 N.J. 285, 306 (2009) (holding when a "trial court
previously made credibility findings, [it is] deem[ed] [] appropriate that the
matter be assigned to a different trial court"). We direct the trial court to hold a
case management conference within thirty days from its receipt on remand to
determine if further discovery or other proceedings are necessary before a new
trial is held.
Vacated and remanded. We do not retain jurisdiction.
A-0501-24 20