Appellate Division Judge Clarkson Fisher Jr./photo by Carmen Natale

In the case of a "pay-and-go" consent judgment between a landlord and her previous tenants, an appellate court in a published decision affirmed a ruling that the landlord doesn't owe additional money to the tenants based on their claimed costs for lining the property's swimming pool.

The Appellate Division on Monday said it backed the trial court's rejection of the tenants' counterclaim for pool damages because it was based on a claim then known to the tenants, which they should have raised during the negotiations that led to the pay-and-go judgment.

In other words, they were too late.

"Defendants' failure to assert the pool claim on that earlier occasion barred their assertion of it once the pay-and-go judgment was entered," wrote Appellate Division Judge Clarkson Fisher Jr., who delivered the opinion on behalf of the panel, including Judges Allison Accurso and Robert Gilson.

The decision is "based on the fact that the parties reached an accord and satisfaction and that their claims in this second action could only be based on a breach of the pay-and-go judgment that memorialized their agreement," Fisher wrote.

The case was on appeal from Middlesex County Superior Court.

"I think it makes new law," John Robert Gorman of Lutz Shafranski Gorman & Mahoney in New Brunswick, who represents the tenants, said on Monday.

"Now, tenants on these pay-and-go agreements have to worry about any other claims they may have had against their landlord, and since most of them are pro se, my fear is that many—if not all of them—won't realize what they are giving up."

Andrew Ullrich of the Ullrich Law Firm in South Plainfield represented the landlord.

"My client is very pleased with the ruling and looks forward to putting this matter behind her," Ullrich said.

According to the Appellate Division's decision, after the death of plaintiff Marisol Raji's husband, she moved out of her Monroe Township home and, in June 2012, offered to sell it to friends—defendants Alfonso Saucedo and Yamiris Munoz.

To allow defendants time to secure financing, Raji claimed she agreed to lease the premises to them, with Saucedo and Munoz handling all costs associated with maintaining the property. The tenants remained there for five years, the court said.

Raji claimed she texted the defendants in August 2017 and questioned whether the pair could realistically close on the anticipated transaction by the end of 2017, but received no satisfactory response. The tenants paid November's rent of $2,456, but failed to pay the following December rent, according to the decision.

Raji filed a summary dispossess action in December 2017, but the parties quickly resolved their differences, according to the decision. And on Jan. 17, 2018, both sides consented to a pay-and-go judgment, which "memorialized [Raji's] entitlement to immediate possession and fixed the parties' financial obligations," the court said.

Saucedo and Munoz were to pay Raji a total of $7,368, and provided a schedule of payments, and as long as they complied with the payment schedule, they could remain in the premises, but not past March 31, 2018. If they remained, the judgment authorized Raji an issuance of a warrant to remove them, according to the decision.

Raji filed an action and claimed that the defendants failed to make the initial payment and were eventually locked out in June 2018.

Saucedo and Munoz filed a counterclaim, claiming unjust enrichment and seeking nearly $9,000 from Raji for costs they incurred in replacing a swimming pool liner in November 2016, and other related pool costs.

In an October 2018 trial, Saucedo testified that the parties agreed that the pool costs would be credited against the property's purchase price at the eventual closing, or would constitute an offset against any rent due, according to the decision. Raji countered that the defendants were obligated to replace the pool liner as part of maintaining the property under the lease.

Middlesex County Superior Court Judge J. Randall Corman rejected the defendants' counterclaim, which he said should have been asserted during the summary dispossess action as a setoff against the rent owed to Raji. Corman denied the defendants' motion for a new trial and said both parties had reached an accord and satisfaction under the pay-and-go judgment, and that all their rights and liabilities concerning the tenancy were then fixed, according to the decision.

Saucedo and Munoz appealed, arguing that Corman erroneously applied the entire-controversy doctrine, and that the Appellate Division should exercise original jurisdiction to enter judgment in their favor on the counterclaim.

"We reject this second argument out of hand," Fisher wrote in Monday's decision affirming Corman. "Appellate courts do not lightly exercise original jurisdiction, particularly in disputed circumstances like this, and particularly when the trial judge has already found defendants failed to offer credible evidence to support their counterclaim."

The panel also rejected the tenants' point on the entire-controversy doctrine. Citing case law, Fisher said the consent agreement provided "a mutual exchange of interests that fully discharges all claims, replacing them with the judgment's express terms."

"The implied covenant of good faith and fair dealing—which is imposed on all New Jersey contracts, Sons of Thunder v. Borden, 148 N.J. 396, 420 (1997)—obligated both sides to present all their tenancy claims when negotiating and ultimately agreeing on the terms of the pay-and-go judgment," Fisher wrote.