Court Opinion

ID: 4431191
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:53:35.451143+00
Date Added: 2024-06-11T14:51:12.117472
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-3424-16T3

SIRIS PHARMACEUTICALS, LLC,

        Plaintiff-Respondent,

v.

UNITY BANK, and 75 NORTH
HOLDINGS, LLC,

        Defendants,

and

AJB RESIDENTIAL REALTY
ENTERPRISES, INC.

        Defendant/Third-Party
        Plaintiff-Appellant,

and

UNITY BANK

        Third-Party Plaintiff,

v.

JOSEPH BENSEEV and 75 NORTH 1,
LLC,

     Third-Party Defendants.
_____________________________________

              Submitted February 28, 2018 – Decided            June 14, 2018
           Before Judges Fuentes and Suter.

           On appeal from Superior Court of New Jersey,
           Law Division, Warren County, Docket No. DC-
           002076-14.

           Michelle S. Kirmser, attorney for appellants.

           Hoagland, Longo, Moran, Dunst & Doukas, LLP,
           attorneys for respondent (Richard J. Mirra,
           of counsel and on the brief).

PER CURIAM

     AJB Residential Realty Enterprises, Inc. (AJB) appeals the

March 9, 2017 judgment for $7563.32 entered against it in favor

of Siris Pharmaceuticals, LLC. (Siris).       We remanded the case in

2016 for a plenary hearing to determine who should reimburse Siris

for its security deposit.   See Siris Pharms., Inc. v. Unity Bank,

No. A-5487-14 (App. Div.    Nov. 30, 2016).    We affirm entry of the

trial court's judgment finding that AJB is responsible for the

payment.

     We recite the following from our 2016 decision to provide

context.

           Siris has been a tenant at 75 North Street in
           Bloomsbury, New Jersey since 2001.      Siris
           entered into [a] lease agreement (lease) with
           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."

                                  2                          A-3424-16T3
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, slip op. at 1-3.]

                      3                          A-3424-16T3
     In December 2014, Siris filed a complaint in the Special

Civil Part against Unity and AJB for the return of its $7563.32

security deposit.   Unity and AJB filed a third-party complaint

against Joseph Benseev and 75 North 1 LLC alleging that if they

are liable to Siris then under AJB's contract with Benseev, the

third-party defendants are liable to AJB. Following a bench trial,

a judgment was entered on June 30, 2015, in favor of Siris against

AJB for the amount of the security deposit in reliance on the

Security Deposit Act (SDA), N.J.S.A. 46:8-21.1.        Another order was

entered on July 9, 2015, that dismissed the third-party complaint

because "[i]t cannot be reasonably expected that 75 North 1, LLC

or Joseph Benseev obtained a security deposit that was mishandled."

     On appeal from those judgments, we held that "the premise for

the judge's decision was erroneous" because the SDA did not apply

to commercial leases.   Id. at 5.       We affirmed on different grounds

the trial court's decision 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."          Id. at 5-6.   Under the

order appointing Cohan as receiver, we held he was responsible to

collect Siris' security deposit from 75 North Holdings.                We

observed that the lease addenda he entered into with Siris provided

that provisions of the 2007 lease were to survive, including the

clause in the original lease that put the "onus of transfer" on

                                    4                           A-3424-16T3
the landlord. Id. at 7. Thus, we held "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."

Id. at 6.

     However, we also noted that "the lack of a record relating

to the security deposit's chain of custody" made difficult the

task of determining "the responsible party for the return or

application of the security deposit funds."    Id. at 7.   The record

did not indicate whether the funds were transferred to Cohan or

whether he transferred them to AJB.    It did not disclose where the

security deposits were held despite Cohan's obligation to provide

a reconciliation of those funds.       We reversed the judgment in

favor of Siris against AJB and remanded the issue of who should

reimburse Siris the security deposit for a plenary hearing.1

     Evidence presented at the second plenary hearing showed that

Siris paid its security deposit to 75 North Holdings, and that it

was not returned to Siris by the rent receiver, Unity or AJB.

Under Siris' lease with 75 North Holdings, the security deposit

could be comingled with other funds.   That lease provided that "if

1
   Cohan was not a party. Our opinion expressed no opinion about
the liability of Cohan or other defendants. We also found
without merit AJB's contention that its third-party complaint
should not have been dismissed against 75 North 1 LLC or Joseph
Benseev.

                                5                            A-3424-16T3
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

[n]ew [l]andlord."     When Cohan was appointed, his firm asked 75

North Holdings to turn over all operating accounts and security

deposits. He was not provided with any separately maintained

security deposits.    Cohan collected rents for over two years.   All

the rents that he collected were used in the operation of the

building.     Any surplus was to be paid to Unity, but there was no

surplus.    The rent receiver provided a final accounting in 2012.

It did not indicate that any security deposit was separately

maintained.

     When ABJ became the owner of the property after the sheriff's

sale, Siris paid it rent for two years.      Neither AJB nor Unity

asked Siris for additional funds for a security deposit.   ABJ sold

the property to 75 North 1 in 2014.   Siris' prior security deposit

was not transferred to 75 North 1 when AJB sold the property.

Siris entered into a new lease with 75 North 1 and paid it a new

security deposit.

     After the second plenary hearing, the trial court entered a

$7563.32 judgment against AJB in favor of Siris representing the

amount of Siris's security deposit.     The trial court found that

Siris was not asked to supply a new security deposit, Cohan's duty

as rent receiver was to hold Siris's security deposit, but that

                                  6                         A-3424-16T3
Siris paid a new deposit to the 75 North 1.            The court concluded

that "it is clear to the [c]ourt that AJB is responsible for

returning the security deposit to Siris" because it found "AJB was

the last defendant in possession of Siris' security deposit."

     On appeal, AJB contends the judgment was not supported by

substantial and credible evidence.           Cohan testified he did not

receive the security deposit or account for it.                He did not

transfer the security deposit to AJB or to Unity Bank.          Therefore,

because AJB never had possession of the security deposit and was

not "the last responsible party in possession," AJB contends it

is not responsible to return the security deposit to Siris.           Siris

argues that because AJB was the landlord it either had to collect

the security deposit from its predecessor or credit the amount to

Siris' lease.   Otherwise, AJB was unjustly enriched.

     We afford a deferential standard of review to the factual

findings of the trial court on appeal from a bench trial.               Rova

Farms Resort, Inc. v. Inv'rs Ins. Co., 65 N.J. 474, 483-84 (1974).

These findings will not be disturbed unless they are "so manifestly

unsupported by or inconsistent with the competent, relevant and

reasonably   credible   evidence   as   to    offend    the   interests   of

justice."    Id. at 484 (quoting Fagliarone v. Twp. of N. Bergen,

78 N.J. Super. 154, 155 (App. Div. 1963)).             However, our review

of a trial court's legal determinations is plenary.             D'Agostino

                                   7                               A-3424-16T3
v. Maldonado, 216 N.J. 168, 182 (2013) (citing Manalapan Realty,

L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

     We are satisfied there was sufficient evidence to support the

trial court's judgment against AJB.     There is no dispute that

Siris paid a security deposit of $7563.32 to 75 North Holdings.

Under the terms of the lease, the security deposit could be

comingled "by the[l]andlord with other monies."

     In our prior opinion, we held that the rent receiver was

responsible to collect the security deposit from 75 North Holdings.

He testified that his firm sent a certified letter to the debtor

requesting "things we need to do our job" which included "any

existing operating accounts they have, we need the proceeds of,

any security deposits they have . . . ."    Although there were no

separately maintained security deposits, his final accounting did

report operating income and expenses.      These were used for the

"expenses of management and care of the mortgaged premises." There

was no surplus remaining for AJB when it became owner of the

premises.

     AJB did not dispute testimony from Siris' comptroller that

Siris was asked to pay rent to AJB and did so for two years until

the property was sold to a new owner in 2014.   Although AJB never

demanded a new security deposit, it also was not disputed that

Siris' security deposit was comingled with the operating funds and

                                8                          A-3424-16T3
the operating funds were used to maintain the mortgaged premises.

We are satisfied, based on the commingling of the security deposit

with operating funds that benefited AJB, that the trial court was

correct to require AJB to repay Siris the security deposit of

$7563.32.

     Affirmed.

                                9                         A-3424-16T3