New Jersey’s Appellate Division Holds Tenants Who Entered Pay-and-Go Judgment Barred from Later Bringing Counterclaim Against Landlord Based on Events from Before the Judgment

In a decision approved for publication, the New Jersey Appellate Division recently held that tenants who entered into a pay-and-go consent judgment with their landlord were barred from bringing a counterclaim against the landlord in a subsequent proceeding because the claim should have been raised in the prior negotiations.  See Raji v. Saucedo, 2019 WL 4741165 (N.J. Super. Ct. App. Div. Sept. 30, 2019).  In the case, the plaintiff landlord rented a house to the defendant tenants.  After the tenants failed to pay rent in November 2017, the landlord brought a summary dispossess action.  The parties then entered into a pay-and-go consent judgment in January 2018 whereby the tenants agreed to pay a fixed amount to the landlord and vacate the leased premises before April 2018.  The tenants failed to make the required payments and the landlord locked them out.  The landlord then brought this action seeking monetary damages for the tenants’ missed payments under the judgment.  The tenants filed a counterclaim alleging they paid $9,000 to fix the pool at the leased premises in November 2016 and that the landlord was required to reimburse them for those costs.  The trial court dismissed the counterclaim, and the tenants appealed.

On appeal, the Court affirmed.  It found that, despite the tenants’ argument, the trial court’s dismissal of their counterclaim was not based on the entire controversy doctrine, but was based on the fact that the parties had reached an accord and satisfaction of their claims by entering into the pay-and-go judgment.  Although the Court agreed that parties are not permitted to assert claims for damages in summary dispossess actions, “when negotiating and consenting to a pay-and-go agreement, parties inherently intend to resolve all differences arising out of the tenancy and enter into what the law refers to as an accord and satisfaction: a mutual exchange of interests that fully discharges all claims, replacing them with the judgment’s express terms.”  Accordingly, this subsequent action was limited to claims arising from the pay-and-go judgment and any prior claims were barred.  “[E]ven though the nature of the summary dispossess action did not permit the filing of a counterclaim for monetary relief, defendants were obligated – when negotiating in good faith the pay-and-go judgment – to assert any claims they may have had against plaintiff arising from the tenancy.”

For a copy of the updated statute, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Anthony Lombardo at alombardo@riker.com.