Opinion
DOCKET NO. A-3433-13T3
06-23-2015
S. JAY MIRMANESH AND LISA ANN MIRMANESH, INDIVIDUALLY AND DERIVATIVELY FOR WATERVIEW ESTATES CONDOMINIUM ASSOCIATION, INC., Plaintiffs-Appellants, v. STEVEN BRASSLETT, DAWN BRASSLETT, RALPH CALIRI, CHERYL CALIRI, MARION MACKINNON, WILLIAM MAGUIRE, and LOIS MAGUIRE, Defendants-Respondents.
Dennis A. Estis argued the cause for appellants (Greenbaum, Rowe, Smith & Davis, L.L.P., attorneys; Mr. Estis, of counsel; Mr. Estis and Emily A. Kaller, on the brief). Ned P. Rogovoy argued the cause for respondents.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Yannotti, Fasciale and Whipple. On appeal from Superior Court of New Jersey, Chancery Division, Cape May County, Docket No. C-005-12. Dennis A. Estis argued the cause for appellants (Greenbaum, Rowe, Smith & Davis, L.L.P., attorneys; Mr. Estis, of counsel; Mr. Estis and Emily A. Kaller, on the brief). Ned P. Rogovoy argued the cause for respondents. PER CURIAM
Plaintiffs S. Jay Mirmanesh and Lisa Ann Mirmanesh ("plaintiffs") appeal from an order entered by the Chancery Division on February 26, 2014, denying their request for reconsideration of an order entered on January 6, 2014, and an order entered by the Chancery Division on August 18, 2014, which concerns amendments to the Master Deed and By-laws of the Waterview Estates Condominium Association (the "Association"). We reverse and remand for further proceedings.
I.
Waterview Estates ("Waterview") consists of five, free-standing single-family dwellings, with a shared in-ground pool, surrounded by a deck and a dock with five boat slips, one for each unit owner. On June 24, 1999, the developer of Waterview filed the Master Deed and By-Laws with the Clerk for Cape May County. The Master Deed and By-Laws established the Association and govern its operation.
The Master Deed provides, among other things, that the Association shall "have the responsibility for the administration, operation and management" of the condominium, and that owners shall be members of the Association. The Master Deed also includes various restrictions upon the unit owners. Article 11 provides, in part, that no portion of the common elements shall be used for the storage or dumping of garbage or rubbish, and all trash, garbage and waste must be kept in containers within the garage of the unit. Exterior loudspeakers, other than portable radios or televisions, are not permitted on the exterior of any unit without the Board's permission. In addition, patio or lawn furniture may be placed on the decks of the common element appurtenant to a unit, but must be removed during the winter months.
The developer initially intended that Waterview would serve as his family's compound; however, beginning in 1999, the developer sold the units separately. In 1999, Cheryl Caliri, William and Lois Maguire (the "Maguires"), Steven and Dawn Brasslett (the "Brassletts), and Marion MacKinnon purchased units in the condominium. Plaintiffs purchased their unit in 2000.
Donald MacKinnon owned a unit with his wife Marion before he died. In addition, Ralph Caliri, who is married to Cheryl Caliri, resides in a unit but he is not an owner.
Disputes concerning the operation of the Association arose, including disagreements over the violations by certain unit owners of the aforementioned restrictions in the Master Deed. Plaintiffs claimed that the Brassletts were maintaining trash in an enclosure outside their unit, and had placed external speakers on the common elements. In addition, plaintiffs claimed that the Brassletts and Maguires had placed patio furniture in the common elements year-round.
In 2004, plaintiffs brought an action in the Chancery Division on their own behalf and on behalf of the Association, against defendants, claiming that they had been conducting the business of the Association in violation of the relevant provisions of the Master Deed and By-Laws. In addition, plaintiffs claimed that certain unit owners had violated restrictions in Article 11 of the Master Deed.
On December 9, 2005, the parties placed a settlement agreement on the record. Thereafter, they executed a written settlement agreement ("Agreement"), dated May 15, 2006. The Agreement stated that it was intended to resolve "any [and] all legal or equitable issues arising among and amongst [the] parties up to December 9, 2005."
The Agreement set forth a number of amendments to the By-Laws for the Association, governing membership and operation of the Association's Board of Trustees (the "Board"). In addition, paragraph 10 of the Agreement stated that "[a]ny and all current violations of the By-Laws shall be corrected within [sixty] days [of] December 9, 2005." The Agreement further provided that, "[e]ffective January 1, 2011[,] roofs and siding shall be deemed to become part of each individual [u]nit and will no longer be common elements."
On January 18, 2012, plaintiffs filed a complaint in the Chancery Division, alleging that defendants had not complied with the Agreement. Among other things, plaintiffs claimed that defendants had not corrected the violations of the restrictions in Article II of the Master Deed, as required by the Agreement. They alleged that the Board had voted to allow the Brassletts and the Maguires to have patio furniture in the common elements year round, so long as these unit owners paid a yearly fee of $50, in violation of the Agreement.
Plaintiffs also claimed that the Board had voted to authorize unit owners to maintain trash in enclosures outside their units, despite the terms of the Agreement and the restrictions in the Master Deed. Plaintiffs further alleged that defendants had not amended the Association's governing documents to remove the roof and siding on each unit from the definition of common elements, effective January 1, 2011, as required by the Agreement.
In addition, plaintiffs claimed they had been wrongfully excluded from participation in the governance of the Association. Plaintiffs sought the appointment of a receiver to control and operate the Association. They sought an injunction requiring defendants to comply with the Agreement. They also sought damages for breach of contract and tortious interference with the Agreement and the documents governing Waterview.
The case proceeded to trial, after which the judge rendered an oral decision on November 6, 2013. The judge found that plaintiffs and defendants had, in certain respects, violated the provisions of the Association's Master Deed and By-Laws. The judge determined that the provisions of the Agreement stating that, effective January 1, 2011, the roof and siding on the units would not be part of the common elements, violated the New Jersey Condominium Act (the "Condominium Act" or the "Act"), N.J.S.A. 46:8B-1 to -38. The judge found that the term of the Agreement requiring correction of the violations of the By-Laws was unenforceable because the violations pertained to the Master Deed, not the By-Laws.
The judge also determined that granting a license to the Brassletts and Maguires to maintain furniture in the common areas year-round was not a violation of the Agreement because the Agreement was ambiguous. Moreover, the provision of the Master Deed, which barred any change to the restrictions in Article 11 could not be enforced because it was contrary to the Condominium Act.
The judge noted that the outside loudspeakers had been removed and that issue was moot. The judge found that defendants were in violation of the restriction on having trash enclosures in the common areas, but that was subject to future amendments to the Master Deed.
The judge determined that plaintiffs were in violation of the condominium documents because they had unilaterally taken actions regarding the roof and siding of their unit, and because they had placed surveillance cameras on the exterior of their unit. The judge found no fraud, self-dealing or breach by defendants of any fiduciary duties. He refused to award damages to plaintiffs on their claims of breach of contract and tortious interference.
On appeal, plaintiffs continue to argue that the placement of surveillance cameras remains in dispute. We note, however, that the record indicates that the cameras were removed.
In addition, the judge determined that a receiver was necessary because the Association had come to a "deadlock" in its operations. The judge appointed a receiver "to take command" of the Association for a year. According to the judge, the receiver would have all of the authority previously vested in the Association.
Thereafter, the judge entered an order dated January 6, 2014, memorializing his findings of fact and conclusions of law. On January 27, 2014, plaintiffs filed a motion for reconsideration. The court considered the motion on February 20, 2014, and entered an order on February 26, 2014 denying the motion. Plaintiffs' filed their notice of appeal on April 7, 2014.
On June 5, 2014, the receiver filed a motion in the trial court seeking, among other things, authorization to amend the Master Deed and By-Laws. Plaintiffs opposed the motion and filed a cross-motion. On August 18, 2014, the judge entered an order, granting in part and denying in part the motion and cross-motion.
The judge found that the receiver had the authority to amend the Master Deed and By-Laws, but barred the receiver from recording those documents pending the outcome of this appeal. However, the judge noted that it "continues to be the position of the [c]ourt that the receiver has complete and exclusive authority to replace the existing Master Deed and By-Laws as the [r]eceiver deems appropriate."
On September 19, 2014, plaintiffs filed a motion seeking permission to file an amended notice of appeal, and to submit a supplemental brief regarding the August 18, 2014 order. On October 14, 2014, we granted the motion.
Plaintiffs first argue that the trial judge erred by refusing to enforce the Agreement. Plaintiffs maintain that the judge erred by finding that the provision of the Agreement requiring correction of the violations was ambiguous.
We note initially that "[o]ur review of a judge's findings of fact in a bench trial is limited." Mountain Hill, L.L.C. v. Twp. of Middletown, 399 N.J. Super. 486, 498 (App. Div. 2008). Accordingly, "'our appellate function is a limited one: we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant, and reasonably credible evidence as to offend the interests of justice[.]'" Ibid. (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974)). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts" need not be afforded deference. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
It is well established that New Jersey has a "strong public policy favoring settlement of litigation" through the enforcement of settlement agreements. Borough of Haledon v. Borough of N. Haledon, 358 N.J. Super. 289, 305 (App. Div. 2003) (citing Nolan v. Lee Ho, 120 N.J. 465, 472 (1990)). A settlement agreement "is a contract which, like all contracts, may be freely entered into and which a court, absent a demonstration of fraud or other compelling circumstances, should honor and enforce as it does other contracts." Ibid. (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 124-25 (App. Div.), certif. denied, 94 N.J. 600 (1983)).
Here, the trial judge determined that the agreement was ambiguous because the parties disagreed as to what it meant to cure the "violations," consisting of trash enclosures and furniture in the common elements. Although the parties knew what the violations were at the time they entered into the Agreement, the ambiguity, according to the trial judge, was whether the parties could authorize the conduct that constituted the violations through amendments to Article 11 of the Master Deed.
We are convinced, however, that the provision of the Agreement pertaining to the violation was not ambiguous. It clearly required defendants to correct any outstanding violations of the By-Laws within sixty days of December 9, 2005. The Agreement does not specify what those violations were. Nevertheless, the statements that some defendants made at the February 6, 2004 Board meeting make clear that defendants were well aware that the violations at issue were those regarding the patio furniture in the common elements, the trash enclosures located outside the units, and the outdoor speakers.
We note that the violations were of restrictions in the Master Deed, not the By-Laws. --------
The judge also stated that the Agreement was ambiguous because it did not indicate whether the violations could be cured by amendments to the Master Deed, but amendments would eliminate the restrictions, and allow the conduct constituting the violations to continue. Any such amendments would eviscerate the Agreement. Moreover, in the Agreement, defendants did not reserve the right to amend the Master Deed in this manner.
The judge further noted that Article 16 of the Master Deed provides that "the covenants and restrictions" in Article 11 shall have an initial term of forty years from the date the Master Deed is recorded in the Office of the County Clerk. The judge said that the Agreement was ambiguous because it was unclear whether the violations had to be corrected for the balance of this forty-year period.
The judge determined that the forty-year limitation on Master Deed amendments is unenforceable because such a limitation is not authorized by the Condominium Act. However, the judge erred in his interpretation of the Act. N.J.S.A. 46:8B-11 provides that "[t]he [M]aster [D]eed may be amended or supplemented in the manner set forth therein. . . ."
The judge notes that the statute allows a master deed to be amended at any time. However, N.J.S.A. 46:8B-11 permits the master deed to be amended at any time, except when a provision "therein" precludes an amendment. Here, the Master Deed specifically bars the adoption of an amendment prior to the expiration of the forty years specified in the Master Deed.
We therefore conclude that the judge erred in failing to enforce the provision of the Agreement which requires correction of all violations within sixty days of December 9, 2005. The judge erroneously determined that defendants could amend the Master Deed or otherwise authorize defendants to engage in conduct that constituted violations of the restrictions under Article 11 of the Master Deed.
III.
Plaintiffs further argue that the judge erred by refusing to enforce the provision of the Agreement stating that, effective January 1, 2011, the roofs and siding shall be deemed to become part of each individual unit and will no longer be common elements of the condominium. The judge determined that this provision was inconsistent with the Condominium Act.
The Condominium Act defines "common elements" as follows:
(i) the land described in the Master Deed;
(ii) as to any improvement, the foundations, structural and bearing parts, supports, main walls, roofs, basements, halls, corridors, lobbies, stairways, elevators, entrances, exits and other means of access, excluding any specifically reserved or limited to a particular unit or group of units;
(iii) yards, gardens, walkways, parking areas and driveways, excluding any specifically reserved or limited to a particular unit or group of units;
(iv) portions of the land or any improvement or appurtenance reserved exclusively for the management, operation or maintenance of the common elements or of the condominium property;
(v) installations of all central services and utilities;
(vi) all apparatus and installations existing or intended for common use;
(vii) all other elements of any improvement necessary or convenient to the existence, management, operation, maintenance and safety of the condominium property or normally in common use; and
(viii) such other elements and facilities as are designated in the [M]aster [D]eed as common elements.
[N. J.S.A. 46:8B-3d (emphasis added).]
Here, the Master Deed provided that common elements included the "roof shingles, siding and stain" on the individual units. However, the Act excludes from the definition any improvement that is "specifically reserved or limited to a particular unit or group of units." Thus, the Act did not preclude the parties from agreeing to amend the Master Deed to exclude particular improvements from the definition of "common element" where the improvements are reserved for or limited to a particular unit or group of units.
As stated previously, Waterview is comprised of five, separate detached single-family dwellings. The roofs and siding on each dwelling are improvements that are used exclusively as part of the individual units. The Condominium Act expressly permits a Master Deed to define such improvements as part of the individual units, rather than common elements of the condominium.
Thus, the Agreement did not call for an amendment to the Master Deed which violates the Act. See The Glen, Section I Condo. Ass'n v. June, 344 N.J. Super. 371, 378-79 (App. Div. 2001) (concluding that driveway and garage were not within common elements because they were reserved for exclusive use by specific unit and were part of that unit); Ellenheath Condo. Ass'n, Inc. v. Pearlman, 294 N.J. Super. 381, 384-85 (App. Div. 1996) (holding that underground fuel tank was part of individual unit rather than common element because it was reserved for use by that unit), certif. denied, 149 N.J. 33 (1997).
We therefore conclude that the trial judge erred by refusing to enforce the provision of the Agreement which requires that the roofs and siding of the individual, detached dwelling units be considered part of each respective unit as of January 1, 2011.
IV.
In their supplemental brief, plaintiffs argue that "[t]he Master Deed and By-Laws proposed by the [r]eceiver improperly [eliminate] provisions that were agreed upon by the parties in the Settlement Agreement[.]" According to plaintiffs, the proposed Master Deed and By-Laws eliminate the existing rotation of officers, "and instead provides for the election of the President and any other officer of the Association by a majority vote[.]"
Plaintiffs maintain that "[t]he trial court's order must be reversed to the extent it purports to allow the [r]eceiver to adopt a Master Deed and By-Laws contrary to the express terms of the Settlement Agreement." In response, defendants assert that the receiver "has the power to allow the Association to do equity."
Here, the receiver filed a motion in the trial court on June 5, 2014, after plaintiffs' notice of appeal was filed. The motion included a proposed "amended and restated master deed." The court's August 18, 2014 order states that "the proposed, revised Master Deed and By-Laws is stayed from recording pending the completion of the [a]ppellate proceedings."
However, the order states "that the [r]eceiver has complete and exclusive authority to replace the existing Master Deed and By-Laws as the [r]eceiver deems appropriate." The order also states that, "[i]n the event the Appellate Division finds the [r]eceiver does not have the complete and exclusive authority to replace the existing [c]ondominium documentation, the [r]eceiver shall comply with the [r]uling of the Appellate Division." The trial judge appointed the receiver pursuant to N.J.S.A. 14A:14-2(c).
N.J.S.A. 14A:14-4(1) provides that, upon appointment, "the receiver shall become vested with the title to all the property of the corporation, of every nature[.]" Furthermore, a receiver is authorized to
(a) take into his possession all the property of the corporation, including its books, records and papers;
(b) institute and defend actions by or on behalf of the corporation;
(c) sell, assign, convey or otherwise dispose of all or any part of the property of the corporation;
(d) settle or compromise with any debtor or creditor of the corporation, including any taxing authority;
(e) summon and examine under oath, which he may administer, or by affirmation, any persons concerning any matter pertaining to the receivership or to the corporation, its property and its transactions, and require such person to produce books, records, papers and other tangible things and to be examined thereon;
(f) take testimony within or without the State, and, if without the State, apply to courts of other jurisdictions for compulsory process to obtain the attendance of witnesses;
(g) continue the business of the corporation, and, to that end, enter into contracts, borrow money, pledge, mortgage or otherwise encumber the property of the corporation as security for the repayment of the receiver's loans;
(h) do all further acts as shall best fulfill the purposes of this chapter.
[N. J.S.A. 14A:14-5.]
Accordingly, the statute affords broad authority to a receiver to "continue the business of the corporation[.]" Ibid. Moreover, a receiver appointed pursuant to the statute acts in a fiduciary capacity and, as such, the receiver must "act consistently with the Condominium Act and its own governing documents and [ensure] that its actions be free of fraud, self-dealing, or unconscionability." See Kim v. Flagship Condo. Owners Ass'n, 327 N.J. Super. 544, 554 (App. Div.) (citations and internal quotation marks omitted), certif. denied, 164 N.J. 190 (2000). In addition, the receiver "must act reasonably and in good faith." Ibid. (citations and internal quotation marks omitted).
We vacate the court's August 18, 2014 order and remand for further consideration of that order. We do so for several reasons. When plaintiffs filed their notice of appeal, this court had jurisdiction of the case. R. 2:9-1(a). The trial court had continuing jurisdiction to enforce its judgments and orders, but the receiver's motion did not seek enforcement of any prior order in the case. Thus, the trial court did not have jurisdiction to enter the August 18, 2014 order. See Manalapan Realty, supra, 140 N.J. at 391-92.
Moreover, as the trial court recognized, any action taken by the receiver with regard to the Master Deed or By-Laws would be subject to this court's decision on plaintiff's appeal. We have determined that defendants are bound by the Agreement, and they may not amend the Master Deed and By-Laws to authorize actions that would otherwise violate the terms of the Agreement.
We reject defendant's contention that the receiver has authority to amend the Master Deed and By-Laws if those amendments are inconsistent with the Agreement. On remand, the court should determine whether the receiver's proposed amendments are inconsistent with the Agreement.
Reversed and remanded to the trial court for further proceedings in conformity with this opinion. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION