Ryan v. Gina Marie, L.L.C., A-1342-09T3; Appellate Division; opinion by Wefing, P.J.A.D.; decided and approved for publication June 7, 2011. Before Judges Wefing, Baxter and Koblitz. On appeal from the Law Division, Hudson County, L-1290-08 and L-4484-08. DDS No. 27-2-2415 [22 pp.]

In 2005, defendant Gina Marie, L.L.C., purchased the apartment building in which plaintiff had resided since 1993. After defendant assumed ownership, plaintiff learned that from the time of her initial occupancy, her rent exceeded what was permissible under Hoboken’s rent-control ordinance.

Gina Marie had purchased the building from third-party defendant 608 Madison Street, L.L.C. (608). An addendum to the contract of sale between Gina Marie and 608 included a provision providing, among other things, that the buyer shall have 10 days from the end of attorney review to conduct its own diligence as to the legality of the rents and that the rents are taken by the buyer without any recourse against the seller from the date of closing forward.

Plaintiff filed a complaint in the Law Division against Gina Marie, seeking a refund of the excess rent she had paid during the course of her entire tenancy and damages under the Consumer Fraud Act. Plaintiff calculated that she had paid approximately $78,000 more in rent than she should have under the Hoboken ordinance. The board never made a formal calculation of the amount of the overpayment.

Ultimately, the trial court concluded that defendant Gina Marie was obligated for the total sum of overcharged rent that plaintiff had paid during her entire tenancy. Further, citing the sales contract language, it granted summary judgment to 608 on Gina Marie’s third-party complaint. The court also denied Gina Marie’s application to revive its claims against other prior owners. The trial court awarded treble damages under the consumer fraud statute, limiting the period to the time of Gina Marie’s ownership. Also under the consumer fraud statute, it awarded plaintiff counsel fees. It ultimately entered judgment against Gina Marie for $78,059.57 in excess rents, $27,225.52 in treble damages and counsel fees of $44,898.75, for a total judgment of $146,704.78.

Gina Marie appealed from that judgment and plaintiff cross-appealed.

Held: Where plaintiff’s rent exceeded what was permissible under Hoboken’s rent-control ordinance, defendant-landlord is not liable for the entire excess and the matter is remanded for further proceedings with respect to defendant’s contract claim against the prior owner and its third-party claims against others in the chain of title.

In an unpublished decision, Cardillo v. Hoboken Rent Leveling and Stabilization Bd. , the Appellate Division rejected the argument that rent belongs to the landlord who collected it and that he should not be held liable to refund overcharges collected by a prior landlord, noting that under the rent-control ordinance, the obligation to reimburse rests on “the landlord” and the board only had jurisdiction over the current landlord. The Appellate Division concluded the current landlord was liable for the entire amount but that he was entitled to proceed against his predecessor in title based on the indemnification clause in his contract. The trial court adopted that approach and held it had no authority to direct any reimbursement beyond Gina Marie. The appellate panel disagrees.

First, Cardillo is unpublished. Further, the prior owners in Cardillo had fully participated in the hearing conducted by the board, as well as the subsequent litigants. They had thus submitted themselves to the board’s jurisdiction. Further, the current landlord had purchased the building with full knowledge of plaintiff’s claim. That is not the situation in the present matter. Additionally, in Cardillo , following a hearing before the board, the board made a determination of an amount of rent that was due to be refunded or credited to the tenant, and the appellate panel was reviewing the final action of an administrative board. Here, on the other hand, the Hoboken board never made a determination that plaintiff was entitled to a particular sum, and the board was never called on to make a decision as to which person or entity was liable to plaintiff. Finally, here, the panel is uncertain as to how the absence of prior owners from the proceedings before the board can operate to limit Gina Marie’s right to pursue a third-party claim. To permit those landlords to retain those funds improperly collected would be to reward them for their disregard of the ordinance and its requirements.

With respect to plaintiff’s consumer fraud claims, the trial court properly followed Wozniak v. Pennella , which held a landlord’s violation of a municipality’s rent-control ordinance subjects the landlord to liability under the consumer fraud statute. Moreover, Gina Marie sought to collect from plaintiff a monthly rent greater than what it had calculated was permissible. Defendant’s actions were sufficient to trigger the Consumer Fraud Act. The trial court correctly recognized that the actions of Gina Marie could only be considered a proximate cause of plaintiff’s loss for the period of its ownership of the building, and properly limited treble damages to that period of time.

The appellate panel disagrees with the trial court’s analysis of the contractual provision in the sales contract, finding the clause cannot fairly be construed as an indemnification clause; and if it were so intended, the language lacks the clarity of intent required to be enforceable. Because the language is ambiguous, further proceedings are required to elucidate its meaning and the parties’ intent.

The panel reverses and remands to the trial court.

— By Debra McLoughlin

For appellant/cross-respondent Gina Marie, L.L.C. — Charles X. Gormally (Brach Eichler; Gormally and Sean A. Smith on the brief). For respondent/cross-appellant Amy Ryan — Cathy C. Cardillo. For respondent 608 Madison Street, L.L.C. — James J. Horan (Mautone & Horan).