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Shin v. Bergenfield Senior Housing LLC


August 17, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-275-08.

Per curiam.


Submitted: August 3, 2010

Before Judges Axelrad and Espinosa.

Plaintiff Pastor Joseph Shin, individually and on behalf of an unincorporated association of senior citizen Korean-American tenants residing at 47 Legion Drive, Bergenfield (collectively referred to as "plaintiffs"), appeals from a judgment entered following a bench trial which awarded plaintiffs monetary damages, arguing they were entitled to additional monetary damages. We affirm.

There is a lengthy history in this case but we recite only the procedure and facts relevant to this appeal, pertaining to claims under the Security Deposit Act (SDA), N.J.S.A. 46:8-l9 to -50, and the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195. Plaintiffs are tenants in a senior-restricted residential condominium building in Bergenfield. They filed an amended complaint against defendants, hereinafter identified, as follows:

Fourth Count: A claim under the CFA, alleging "defendants engag[ed] in a systematic scheme and plan to defraud the plaintiffs [and to] convert[] [their] lease payments, security deposits and alleged 'operating expenses' to their own use and benefit . . . ."

Fifth Count: A claim under the SDA, alleging "defendants engaged in a systematic scheme and plan to defraud the plaintiffs and to convert their security deposits to their own use and benefit . . . ."

A four-day trial was conducted with the assistance of Korean interpreters. The following relevant testimony and evidence were adduced at trial. The subject building consists of ninety individual units. On January l6, 2008, Bergenfield Senior Housing, LLC ("BSH") entered into an agreement of sale with defendant, SM Global Group ("SM Global"), signed by its principal, defendant Shang Chong Kim ("Elder Kim"), and his wife, Munhui Pak ("Pak"), to purchase the eighty-eight unoccupied units in the building. An undated rider identifies the buyer as Elder Kim and is signed by him without any reference to the entity SM Global. An expedited closing was contemplated to occur on March 7, 2008. Among its terms, the agreement permitted the buyers to rent out the units pre-closing, but required they post a one and one-half months' rent security deposit with their attorney on each lease or sublease until closing of title, after which the deposits were to be released to the buyers.

Defendant John Kim ("Kim"), Elder Kim and Pak's son, evidently formed a management company with defendant Chung Hoon Shin ("Shin") known as A&O Healthcare ("A&O"). This company, under Shin's leadership, was to manage the property and handle the tenant applications, rent monies and security deposits. On February 15, 2008, a lease agreement was entered into between BSH (identified as landlord) and tenants identified as Elder Kim (listed as "Shang Kim, et als" on the lease), "Chong Kim," A&O, SM Global and Pak, effective from February 1, 2008 through June 7, 2008. Elder Kim and Shin signed as "tenants." A rider to the lease identifies BSH as lessor and as lessees, Elder Kim and Pak (Personal Guarantors), Shin, A&O and SM Global. The rider was signed on behalf of lessees, designated as "primary tenants," by Elder Kim and Shin. With regard to subtenant rental deposits, the rider contains similar language to the sales agreement, i.e., requiring the unit's security deposit to be held in escrow in buyers' attorney's trust account, and further required proof of the deposit to be given within five days of its receipt.

The buyers then entered into about eighty subleases with elderly members of the Korean-American community, mostly below market, allowing them to move in with the expectation the tenants would qualify for public assistance. The tenants were charged rent and a security deposit, of which BSH was aware. Unbeknownst to BSH, however, the tenants were also charged monthly "co-rent" and "co-security," representing additional rent of $100 to $300, based on the size of the units, to bring the actual rent closer to the market rate pending receipt of the rental subsidies and as a loan to A&O to help with the building operations, respectively. After a few months in their apartments, some of the tenants also loaned money to A&O for "operating expenses," again without BSH's knowledge. Ultimately, Shin misappropriated the tenants' rent and security deposits and placed them into the business account of A&O, then depleted the account. Shin also misappropriated the "co-rent," "co-security" and other loan payments received from the tenants, totaling about $190,000, which he deposited into his own bank account and used for personal expenses. The buyers did not close, and BSH declared a default, claimed the buyers' nonrefundable deposits and ousted the buyers and representatives from the premises.

Pursuant to an order to show cause filed by BSH, by order of March 24, 2008, SM Global, Elder Kim and Pak were, in part, compelled to provide BSH with copies of the leases and proof of the security deposits. This suit ensued by way of an initial complaint filed on or about July 30, 2008. Thereafter, BSH filed over seventy dispossess actions against the tenants, which were consolidated with this suit, and have since been resolved. The tenants remained in the building.

Following trial, Chancery Judge Robert P. Contillo issued a twenty-seven page written opinion filed on September 21, 2009, memorialized in an order and final judgment dated October 22, 2009. According to the court, the focus of the trial was about the leasing of the units to the Korean-American seniors, "the collection of security deposits and other monies from those tenants, the consumption and dissipation of all said monies, and the responsibilities of the various defendants for the consumption and dissipation of said monies."

In summary, the court dismissed all claims against Pak; entered judgment in favor of plaintiffs against defendants BSH, SM Global, A&O, Shin, Elder Kim and Kim in an amount equal to that which each had paid as a security deposit; permitted plaintiffs to take a credit against their monthly rental obligations to BSH in an amount equal to their security deposits plus interest, with BSH to then recoup those losses against the other defendants; dismissed all claims of plaintiff relating to extra-rental monies paid to defendants; entered judgment in plaintiffs' favor for the loan monies and interest against A&O and SM Global; and dismissed plaintiffs' claims for the loan monies against the individual defendants. In terms of monetary damages, final judgment was entered in the amounts of: (1) $25,559.09, representing the total of the tenants' security deposits, against BSH, SM Global, Elder Kim, Kim, A&O and Shin; (2) $190,844, representing the loan from the tenants referred to as "co-security" and "operating expenses" against SM Global and A&O; and (3) $9560 in favor of SM Global and A&O on their cross-claim against Shin. By order of December 4, 2009, the trial court denied the reconsideration motion filed by SM Global, A&O, the Kims and Pak.

Based on the testimony of the tenants, the court made the factual determination they were fully aware of the nature of all payments they made to the corporate defendants. It found: (1) SM Global was the agent of BSH with respect to the tenants' security deposits; (2) BSH, as owner of the building, was responsible for the security deposits pursuant to N.J.S.A. 46:8-l9; (3) BSH had a non-delegable duty to safeguard the deposits of its tenants; and (4) thus imposed liability on BSH. The damages assessed against BSH were the specified rental deposits under each sublease and not the side monies, loans or "co-deposits" that the other defendants received from the tenants. The court found the additional monies paid by the tenants as "co-rent" were paid as additional rent, and the tenants understood it to be non-refundable extra rent to temporarily bring the rent up to market monthly rates, not a security deposit or loan. It also found all loans advanced by the tenants were "willingly made . . . as a pre-closing, stop-gap measure, to allow the project to continue to operate, until such time as closing could be had, an eventuality that never occurred."

Judge Contillo further found the tenants willingly paid the extra rent and they suffered no damages as a result.*fn1 He did enter judgment against the corporate defendants for the loans, none of which were repaid. The judge expressly found, as opposed to the security deposit, there was "no comparable statutory basis for imposing liability on BSH for the tenants' loans to SM Global, and SM Global was in no way an agent of BSH when it solicited, accepted and then consumed the loans from the tenants." The judge made an express finding of good faith on BSH's part, stating:

BSH engaged in no fraud, or misrepresentation, or concealment, with respect to any aspect of this transaction. In fact, it did everything it possibly could to protect tenant security deposits, and to require SM Global and its agents to document and account for its tenant security deposits, something SM Global was contractually bound to do, but which it refused to do until court-ordered.

In contrast, the judge found A&O and SM Global received the tenant deposits and failed to properly segregate and invest them, or otherwise comply with the [SDA] . . . .

Rather, SM Global and A&O elected to spend those deposits. All the deposit monies paid by the tenants were consumed by SM Global and A&O.

Plaintiffs appealed from the judgment, arguing the facts and law of agency impose liability on BSH for violation of the SDA and CFA, and the court erred in failing to award plaintiffs double damages against all defendants for failing to return their security deposits pursuant to N.J.S.A. 46:8-21.1, and treble damages against all defendants pursuant to N.J.S.A. 56:8-19 for violation of the CFA. Specifically, plaintiffs contend when BSH initially terminated the tenants' leases and started an eviction action, that triggered the enhanced damages under the SDA. N.J.S.A. 46:8-21.1 provides, in pertinent part:

Within 30 days after the termination of the tenant's lease or licensee's agreement, the owner or lessee shall return . . . the [security deposit] plus the tenant's portion of the interest or earnings accumulated thereon, less any charges expended in accordance with the terms of a contract, lease, or agreement, to the tenant or licensee . . . .

In any action by a tenant . . . for the return of moneys due under this section, 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. [(Emphasis added).]

Plaintiffs alternatively argue that the court should have included the security deposit damages among treble CFA damages. Additionally, plaintiffs challenge the court's factual findings that the tenants were actively aware of the nature of their payments and loans, willingly made them, and were not damaged by any misrepresentation. They argue the record supported a finding of "unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact" by defendants, including BSH under an agency theory, warranting the imposition of treble damages under the CFA, N.J.S.A. 56:8-2 and -l9.

Based on our review of the record and applicable law, we are not persuaded by any of plaintiffs' arguments and affirm substantially for the reasons set forth by Judge Contillo in his comprehensive written opinion. We add the following brief comments.

It is axiomatic that our role in reviewing the factual findings made by a judge sitting without a jury is quite limited. Those findings will not be disturbed unless "they are so wholly insupportable as to result in a denial of justice."

Rova Farms Resort v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (l974) (citation and quotation marks omitted). As long as the findings are supported by "adequate, substantial and credible evidence," they are binding upon us. Id. at 484. "In this connection, credibility is generally for the fact-finder to determine," to whom we give substantial deference. Metuchen Sav. Bank v. Pierini, 377 N.J. Super. 154, 161 (App. Div. 2005).

Although Judge Contillo did not expressly address the SDA and CFA issues, he implicitly rejected them as without merit at the conclusion of his lengthy, detailed opinion, with the statement, "[a]ll claims not herein granted are denied, with prejudice." The enhanced damages under the SDA are inapplicable here as such fees are only permitted for an owner or lessee's failure to return a security deposit after the termination of a tenancy. All of the tenants who are part of the lawsuit continue to occupy their units. Where the tenants remain in occupancy, the remedy is to permit them to apply the amount of the alleged misappropriated security deposit to the rents, thereby obviating an owner's or lessee's obligation to return the security deposit under N.J.S.A. 46:8-21.1. See N.J.S.A. 46:8-l9(c) (stating that if the person receiving the security deposit fails to invest or properly deposit it, the tenant may request the security deposit and interest be applied on account of the rent or other payment due under the lease, and thereafter shall not be obligated to provide another security deposit). This was the exact remedy fashioned by the trial court when it provided in the final judgment:

ORDERED, that each tenant referenced in Exhibit A may, at each tenant's option, take a credit against his/her monthly rental obligation to BSH up to an amount equal to the [security deposit paid] plus interest

In accordance with N.J.S.A. 46:8-l9(c), the court also restrained BSH from "demanding the replenishment of any security deposit from the tenants." The court gave each plaintiff the alternative option of having BSH establish a security deposit account with interest. When the tenant moves out, he or she would be entitled to receive the respective security deposit, with interest, minus any damages, within thirty days. N.J.S.A. 46:8-21.1.

Plaintiffs contend the record supports a finding of a CFA violation and they should have been awarded treble damages because "monies were unlawfully exacted by Mr. Shin" and "[t]heir extortion and use was participated in by all -- not just SM Global and A&O Healthcare." This argument is without merit. We first note that plaintiffs fail to cite any portion of the trial transcript or documentary evidence at trial to support this bald allegation. Moreover, the record amply supports Judge Contillo's factual determinations, explained in detail with references to the transcript, regarding BSH's good faith actions taken in connection with the security deposits, its lack of knowledge of, involvement in and benefit from the actions of the other defendants. Additionally, after hearing and assessing the testimony of a number of plaintiffs, the trial judge concluded there was nothing deceptive or unlawful in the manner in which the monies were obtained from plaintiffs, specifically finding the tenants understood exactly what the "co-rent," "co-security" and loans were for and willingly paid them. Furthermore, the tenants were aware the rents they were asked to pay were "radically below market rental" and, consequently, the tenants "suffered not at all in this arrangement" of paying the extra rent.


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