DOCKET NO. A-5487-14T2
Michelle Skarbnik Kirmser, attorney for appellants Unity Bank and AJB Residential Enterprises, Inc. Hoagland, Longo, Moran, Dunst & Doukas, LLP, attorneys for respondents Siris Pharmaceuticals LLC, Joseph Benseev and 75 North 1, LLC (Richard J. Mirra, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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. Before Judges Alvarez and Manahan. On appeal from Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. DC-2076-14. Michelle Skarbnik Kirmser, attorney for appellants Unity Bank and AJB Residential Enterprises, Inc. Hoagland, Longo, Moran, Dunst & Doukas, LLP, attorneys for respondents Siris Pharmaceuticals LLC, Joseph Benseev and 75 North 1, LLC (Richard J. Mirra, of counsel and on the brief). PER CURIAM
Defendant/third-party plaintiff, AJB Residential Realty Enterprises, Inc. (AJB), appeals an order for judgment in favor of plaintiff, Siris Pharmaceuticals, LLC (Siris), in the amount of $7563.32. We affirm in part, reverse in part, and remand for further proceedings.
Siris has been a tenant at 75 North Street in Bloomsbury, New Jersey since 2001. Siris entered into lease agreement (lease) with the building's former owner, 75 North Holdings, LLC, (75 North Holdings) on December 19, 2007. The "Security Deposit" clause in the lease recited, in relevant part, "If the [l]andlord's interest in the [r]ental [s]pace is transferred[,] the [l]andlord shall turn over the [s]ecurity [d]eposit to the new [l]andlord."
Defendant/third-party plaintiff, Unity Bank (Unity), held a first mortgage on the property. In July 2009, 75 North Holdings defaulted on mortgage payments prompting Unity to file a complaint in foreclosure against 75 North Holdings. Upon Unity's request, Michael G. Cohan was appointed by court order as the rent receiver on behalf of 75 North Holdings to collect, demand, and receive the rents, issues, and profits of the property. The order also provided that Siris' security deposit was to be released from 75 North Holdings to Cohan.
In May 2010, Cohan and Siris executed a lease addenda modifying the lease term and amount of rent per month. The addenda stated that all other terms of the December 19, 2007 lease between Siris and 75 North Holdings remained in effect.
In October 2011, a writ of execution was issued in favor of Unity. The sheriff's deed, dated May 8, 2012, transferred title to the property in Unity's subsidiary, AJB. The property was then sold to third-party defendant Joseph Benseev's assignee, 75 North 1, LLC, (75 North 1) on February 28, 2014. In March 2014, Siris wrote to Unity requesting that the security deposit from the 2007 lease be forwarded to 75 North 1. Thereafter, in April 2014, Siris requested the security deposit be returned. Unity did not comply with either request.
Siris entered into a lease with 75 North 1 in July, 2014. Since Unity neither returned the original security deposit to Siris nor forwarded those funds to 75 North 1, Siris was required to pay a new security deposit.
Siris brought an action against Unity and AJB to compel the return of the $7563.32 security deposit. The matter was tried before a Law Division judge. Subsequent to a bench trial, the judge issued an oral decision which noted in pertinent part:
The security deposit was never forwarded. The law in this matter is fairly clear, albeit some confusing issues in the title. At the time of the foreclosure [Siris] was the tenant and [AJB] was the title holder and was, thus, subject to N.J.S.A. 46:8-20.
In summary, it is the obligation of the purchaser to obtain all security deposits plus accrued interest from the owner or lessee at the time of transfer. In addition, N.J.S.A. 46:8-21, the purchaser of a leased premises at a foreclosure sale is responsible for the proper investment of the security deposit giving all notices and paying interest thereon.
The purchaser at the foreclosure was [AJB]. They failed to deal with the security deposit as required by law. Therefore, judgment is entered in favor of [Siris] and against [AJB], a subsidiary of [Unity], in the amount of $7563.32 plus costs.
AJB raises the following points on appeal:
THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN ITS APPLICATION OF NEW JERSEY'S SECURITY DEPOSIT LAW, [N.J.S.A. 46:8-19], TO A NON-RESIDENTIAL TENANT.
THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN RULING IN FAVOR OF PLAINTIFF ON THE BASIS OF THE 2007 LEASE WHICH WAS TERMINATED UPON FORECLOSURE.
THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN DISMISSING THIRD[-]PARTY COMPLAINT OF DEFENDANT WHERE LIABILITY [AND] DAMAGES DETERMINED TO EXIST.
"The scope of appellate review of a trial court's fact-finding function is limited." Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting Cesare v. Cesare, 154 N.J. 394, 411 (1998)). The trial court's findings "are binding on appeal when supported by adequate, substantial, credible evidence." Ibid. (quoting Cesare, supra, 154 N.J. at 412). Such deference "is especially appropriate when the evidence is largely testimonial and involves questions of credibility." Ibid. (quoting Cesare, supra, 154 N.J. at 412). "The trial court's legal determinations, in contrast, are reviewed de novo." Sipko v. Koger, Inc., 214 N.J. 364, 379, (2013) (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
New Jersey's Security Deposit Act (SDA) requires a landlord to return the tenant's security deposit and interest accrued "[w]ithin 30 days after the termination of the tenant's lease . . . less any charges expended in accordance with the terms of [the] lease[.]" N.J.S.A. 46:8-21.1. If a landlord violates this requirement, the tenant may sue the landlord, and "the court upon finding for the tenant . . . shall award recovery of double the amount of said moneys, together with full costs of any action and, in the court's discretion, reasonable attorney's fees." Ibid. Interpretation of a statute generally begins by examining the commonsense meaning of the statute's actual words. State v. Gelman, 195 N.J. 475, 482 (2008). The SDA, by its express terms, applies to "all rental premises or units used for dwelling purposes" and has been found to not apply to commercial leases. See, e.g., Presberg v. Chelton Realty, Inc., 136 N.J. Super. 78, 84 (Passaic County Ct. 1975); N.J.S.A. 46:8-26.
Here, the judge's decision as to the responsible party for return of the security deposit was premised upon the SDA. The trial court held AJB liable for the return of Siris' security deposit based on N.J.S.A. 46:8-21, the provision of the SDA that requires a landlord return a security deposit notwithstanding that the matter in dispute involved a commercial lease. We conclude, therefore, that the premise for the judge's decision was erroneous.
Although we disagree with the court's reasoning, we agree that Siris was entitled to either the return of the security deposit or the application of the security deposit to its lease with 75 North 1. Siris' entitlement is grounded in the language of the lease, the addenda, and the order appointing Cohan as receiver.
As noted, the security deposit clause of the original lease stated that "[i]f the [l]andlord's interest in the [r]ental [s]pace is transferred[,] the [l]andlord shall turn over the [s]ecurity [d]eposit to the new [l]andlord." When Unity instituted foreclosure proceedings against 75 North Holdings, it sought and received the appointment of Cohan as rent receiver. Cohan was responsible by the order of appointment to collect Siris' security deposit from 75 North Holdings. Cohan, in his capacity as receiver, entered into a lease addenda with Siris. The addenda stated, in pertinent part that "[a]ll other provisions of the lease dated December 19, 2007, shall survive and be in effect" except the lease term and amount of rent per month. Thus the security deposit clause contained in the original lease placing the onus of transfer on the landlord remained in effect. Therefore, when the May 2012 sheriff's deed vested title of the property to Unity's subsidiary, AJB, Cohan was required to transfer Siris' security deposit to AJB; which for twenty-one months thereafter served in the capacity of landlord to Siris.
While we hold that Siris' entitlement to the return or the application of the security deposit is without question, the task of determining the responsible party for the return or application of the security deposit funds has been made difficult by the lack of a record relating to the security deposit's chain of custody. The record does not indicate whether the ordered transfer of the security deposit to Cohan from 75 North Holdings occurred or, if so, whether Cohan transferred the funds to AJB. Additionally, the record does not disclose where the funds were located despite Cohan's obligation to provide a reconciliation of the security deposit funds "including the depository where they were maintained." Given this shortcoming, we need not contemplate nor engage in conjecture as to who may bear responsibility for the security deposit. That determination will abide a plenary hearing before the trial court.
We note that Cohan is not a party to the underlying litigation. In reaching our determination regarding a remand, we express no opinion as to the liability of Cohan or as to the named defendants. --------
We vacate the judgment in favor of Siris as against AJB. We affirm the court's decision insofar as Siris' entitlement to the return or the application of the security deposit although on different grounds. See Isko v. Planning Bd. of Livingston, 51 N.J. 162, 175 (1968); Voellinger v. Dow, 420 N.J. Super. 480, 483 (App. Div.), certif. denied, 208 N.J. 599 (2011).
Finally, in light of the record relative to the lease and addenda, and AJB's role as landlord, we hold AJB's argument relative to the dismissal of the third-party complaint to be without merit.
We remand for a hearing consistent with this opinion. We do not retain jurisdiction.
Affirmed in part. Reversed in part, and remanded. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION