March 27, 2008
NATHAN BROWN, PLAINTIFF-RESPONDENT,
MAGDI MOSAID, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, DC-7359-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 10, 2008
Before Judges S.L. Reisner and Baxter.
Defendant Magdi Mosaid appeals from a judgment in the amount of $4125 entered by the Special Civil Part on June 18, 2007, in favor of plaintiff Nathan Brown. We affirm.
Mosaid was a landlord. Nathan and his wife Meghan*fn1 were potential tenants looking for an apartment. On January 15, 2007, Mosaid arranged for the Browns to view an apartment for which he was asking $1650 per month in rent, plus a $2450 security deposit. According to Nathan Brown, the parties then negotiated a lease. Mosaid told the Browns that the existing tenants would move out by January 26 or 28 so that the Browns could start moving in early, although the lease commenced February 1. It was important to the Browns to be able to move in by February 1 because they had given notice to their current landlord.
As part of their agreement, the parties "went to the bank to set up the escrow account" in which Mosaid would place the security deposit. According to Nathan, the account was set up "as an escrow account with my name and his name as a security deposit at the bank." The parties agreed that Nathan would pay a portion of the security deposit in advance. He wrote out a check dated January 16, 2007 for $1650, which the parties deposited in the escrow account. After that date, the parties met again and Nathan gave defendant a post-dated check made payable to Mosaid for the first month's rent, plus a check dated January 26, 2007 for $825, representing the rest of the security deposit. The $825 check was made out to Nathan Brown "as it was to go in an escrow account for the security."
Nathan testified that when he called Mosaid on January 28, to arrange to get the keys to the apartment, defendant told him the tenants were "still here." He indicated that he had a dispute with the tenants and Nathan should not upset them by trying to get into the apartment early. On January 31, 2007, Nathan checked to see whether his escrow checks had cleared his personal bank account and whether the money was now in the escrow account. To his distress, Nathan discovered that Mosaid had signed Nathan's name on the $825 check and deposited it into Mosaid's personal bank account instead of into the escrow account. The Browns reported this to the police.
However, they also continued their efforts to move into the apartment. Nathan called Mosaid and arranged to meet him on the morning of February 1 at 8:30 to get the keys to the apartment. According to Nathan, when he called Mosaid again early on the morning of February 1 to confirm their meeting, Mosaid told him that he did not have the keys because "the people there aren't gone yet." Nathan also questioned Mosaid as to why "you put the check that was supposed to go into our security deposit into a personal account and . . . why did you write my name on the back to endorse it." At that point Mosaid became furious and "hung up on me." Eventually, after more phone calls, Mosaid agreed to meet the Browns at the apartment to give them the key. Nathan responded that he would "take the key from you" and "do a walk-through," but first "we're going to meet at the bank and we're going to get that $825 into the correct account. Then once that's settled, once the money end of it is settled, then I will accept the key from you." Mosaid agreed to meet Nathan at the bank at 3:30 that day, but failed to show up. Nathan called Mosaid from the bank, reminded him that his action in depositing the security in his own account was "not within the lease" and insisted that the money issue be straightened out. Mosaid told him to "call a lawyer" and hung up on him.
Meghan Brown confirmed that she and her husband had told Mosaid from the beginning that they needed to be in the apartment by February 1, and that they were not given access to the apartment on or after that date. She also testified that after her husband called Mosaid on February 1, she also called Mosaid, but he would not listen to what she had to say. She confirmed that the parties eventually agreed to meet at the bank at 3:30 "to make sure that [Mosaid] would transfer the money that was supposed to go into our security deposit account," and that Mosaid did not show up for the meeting. On cross-examination, Meghan also testified that her "concern was that the financial matters would be in order . . . before we took the key."
In his testimony, Mosaid agreed that on January 16, the parties opened a "landlord/tenant security account" in Nathan's name. On the same day they opened the account, Mosaid also gave Nathan the proposed lease to review. He agreed that Nathan gave him the three checks for the first months' rent and the security deposit. According to Mosaid, he arranged to meet Nathan at the apartment on February 1 at 9:00 a.m. to give him the key. When Nathan did not show up, Mosaid called him twice. Finally, Nathan said he "want[ed] to meet me by the bank at 3:30 because he want[ed] all his money, cash, now. He is not interested to move in the apartment anymore. . . . He gave me excuses. . . . He and his wife did not agree about a couple of things. I said again, you have a lease, you have to shape up to [abide by] your lease." When he did not hear from Nathan, Mosaid sent him a letter advising that he would apply the security deposit and rent check to the rent until the apartment was re-rented. Mosaid asserted a counterclaim for $850 for lost rent.
On cross-examination, Mosaid admitted that he deposited the $825 security deposit check into his personal bank account. He also agreed that the check bore a notation "rest of security." In response to the court's question, Mosaid asserted that he deposited the check into his personal account because if the check bounced it would have been returned to Nathan's old address and Mosaid "would never know that it [had] been returned back." He contended that he returned the money to the escrow account within a week after February 1. He admitted endorsing the $825 for deposit, but claimed he only signed his own name on the back. According to Mosaid, Nathan was angry that the existing tenant would not let him move into the apartment on January 28.
Mosaid admitted that he had a landlord-tenant action against the existing tenant, Carlos Ochoa. As part of that action, he signed a consent order with Ochoa that Ochoa would vacate the apartment by February 1. He then clarified that they "never had this agreement. [Ochoa] did not show up for . . . the trial . . . and he said he's going to be out." Thus, Mosaid admitted that he "got a default and a warrant [of removal]."*fn2 He claimed Ochoa moved out by February 1.
Immediately after the hearing, the trial judge placed an oral opinion on the record. He concluded that Mosaid had not committed fraud with respect to the $825 deposit check. "I'm satisfied that the defendant did sign his name on the back, deposit it into his own personal account, for a valid reason, that if it bounced it would be back to the old tenant and he did transfer it." However, the judge also concluded that neither party acted with malice. However, viewing the lease as a contract, he concluded that there was no meeting of the minds concerning the importance of placing the money in the escrow account. He concluded that "knowing full well that [the $825 check] was, all of a sudden, put into the personal account of the landlord" the plaintiff wanted to "get the finances straightened out" before he accepted the key and moved in. On the other hand "[t]he defendant's thoughts were, get the key, then we'll take care of the finances." The court then reasoned:
In view of the fact that security and/or rent is a condition [precedent] to shaking hands and making a contract, if the financial arrangements are not met and if the parties do not have a meeting of the mind[s] with the financial arrangements, then the events which the contract and/or lease state is to take place after that is certainly not [the subject of] a meeting of the minds.
The court concluded that "since there was no meeting of the minds, and in view of the fact that there was a discrepancy as to that check, whether or not it was to be deposited into the personal account as a guarantee that if it bounced, the defendant/landlord would be able to know about it. . . . This Court rules that . . . the contract, which is the lease, was not a meeting of the minds, and therefore, is null and void."
The court therefore ruled that plaintiff was entitled to the return of the rent and security deposit plus costs and that the $825 counterclaim would be dismissed.
On this appeal, defendant raises the following points for our consideration:
POINT I: A LEGALLY BINDING LEASE AGREEMENT EXISTED BETWEEN THE PARTIES.
A. There Was A Meeting Of The Minds Between The Parties In Formation Of The Agreement.
B. The Lease Agreement Was Clear And Parol Evidence That Was Considered Supports The Finding Of A Binding Contract Between The Parties.
POINT II: THE PLAINTIFF IS RESPONSIBLE FOR THE LOST PROFITS OF THE DEFENDANT AS A RESULT OF THE PLAINTIFF'S BREACH OF AGREEMENT.
Our review of the trial judge's factfinding is limited. "Findings by the trial judge are considered binding on appeal when supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). However, we engage in de novo review of the trial judge's legal conclusions. Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995).
Having reviewed the entire record, we affirm the judgment of the trial court. By its terms, the lease required the landlord to comply with the Rent Security Deposit Act, N.J.S.A. 46:8-19, including placing the security in a designated account and giving the tenant notice of the location of the account.*fn3
Moreover, the record is undisputed that the parties orally agreed to use a specific escrow account for the security deposit. This may be viewed as parol evidence as to the parties' construction of the lease, see Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 268 (2006), or as a separate agreement ancillary to the lease.
Either way, there is no dispute that the escrow account was in both parties' names, and the parties agreed that the entire security deposit would be placed in the escrow account. That is why Nathan wrote the $825 security check to himself - to ensure that it would be deposited in the escrow account. By contrast, he wrote out the rent check to Mosaid. When Mosaid, without advance notice to or consent from Nathan, deposited the $825 security deposit in his personal account, he breached the parties' oral agreement. He also breached the lease and the Tenant Security Deposit Act, which required the security deposit to be placed in a separate account. See N.J.S.A. 46:8-19.
We defer to the trial judge's factual finding that strict compliance with the escrow agreement was critically important to the Browns, although Mosaid felt free to treat it more loosely in order to protect his own financial interests. While one could characterize this as an absence of the meeting of the minds on a key aspect of the agreement, see Gross v. Yeskel, 100 N.J. Eq. 293, 294 (E. & A. 1926), it could also be analyzed in terms of breach of contract. Having discovered that their prospective landlord had begun the landlord-tenant relationship by breaching a critical term of their agreement, the Browns were legally justified in repudiating the lease. On either basis, the trial court's judgment for plaintiff and dismissal of the counterclaim must be affirmed.