Port Liberte II Condominium Assoc., Inc. v. New Liberty Residential Urban Renewal Co., Llc. ( 2014 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2574-11T1
A-3129-11T1
PORT LIBERTE II CONDOMINIUM
ASSOCIATION, INC.,
Plaintiff-Appellant,
v.
NEW LIBERTY RESIDENTIAL URBAN
RENEWAL COMPANY, LLC, APPLIED
APPROVED FOR PUBLICATION
DEVELOPMENT COMPANY, APPLIED
PROPERTY MANAGEMENT CO., LLC, January 31, 2014
DAVID BARRY, ELIA BORELLI, and
BARBARA OIF STACK, APPELLATE DIVISION
Defendants,1
and
RELIABLE ROOFING CO.,
RELIABLE ROOFING MAINTENANCE, INC.,
SOUTH SHORE CONTRACTING,
DSJ CONSTRUCTION, INC.,
CARFARO ORNAMENTAL IRONWORKS, INC.,
A&F CONSTRUCTION, INC.,
SALEM MASONRY CO., INC.,
COFFEY BROTHERS, INC.,
1
These defendants had been the developers on the project. They
settled their dispute with plaintiff during the pendency of this
appeal and filed a stipulation of dismissal on June 18, 2013;
but, before that occurred, they had filed a responding brief and
a cross-appeal. Most of the other defendants joined the
responding brief. Accordingly, we considered the responding
brief on this appeal. The cross-appeal is dismissed as settled.
UNITED FIREPROOFING COMPANY, INC.,2
FRITZE KEYSPAN, LLC,
COMMUNITY MAINTENANCE, LLC,
BEYER BLINDER BELLE, LLP,
PATWOOD ROOFING,
QUALITY ALUMINUM and
VINYL INSTALLERS, QUALITY, INC.,
ENVIRONMENTAL COMFORT, INC.,
K&F MECHANICAL, LISA CONSTRUCTION,
TRUSS SYSTEMS, INC.,
D&K GYPSUM FLOORS, INC.,
TECHNICAL BUILDING STRUCTURES,
RAINBOW PAINTING, INC.,
ARCHITECTURAL CONSTRUCTION
ASSOCIATES, AGRIMAR F.
PEREIRA/GOIANO CARPENTRY, INC.,
BETTER HOMES CONSTRUCTION, INC.,
BOLA ELITE CONSTRUCTION, INC.,
BOLIVAR GUAMAN, BSB CONSTRUCTION,
INC., CARLOS P. MARTINS, GELSON
DESOUZA GOMES, HOLY-WOOD
CARPENTRY, INC., IRON
CONSTRUCTION, INC./IRON C. BORBA,
JOSE MOURA CONSTRUCTION CORP.,
JOSE H. DEMOURA, JOVANE S. MOURAO,
LUIS O. MACANCELA, LUIS SARMIENTO,
ROBERTO B. MINCHALA, MOURA
CONSTRUCTION CORP., OAKWOOD
CARPENTRY, INC., JUAN AGEITOS
D/B/A ORCA CONSTRUCTION, THOR
CONSTRUCTION CORP., GENA & SONS,
CORP. D/B/A GENA CONSTRUCTION
COMPANY, FMJ CONSTRUCTION,
KARPATEY MASONRY T/A BV MASONRY,
VANNWALL CONSTRUCTION CORP.,
JOAO BRAVADO, MESFAR A. DEANDRADE,
GILBERTO A. AGUILAR, JOSE S.
RAMOS, LUIS EUSEBIO, and
VINCENT J. BARONE,
Defendants-Respondents,
2
During this appeal, plaintiff reached a settlement with
defendant United Fireproofing Company, Inc., and a stipulation
of dismissal was filed on October 10, 2013.
2 A-2574-11T1
and
AJD CONSTRUCTION CO., INC.,
Defendant/Third-Party
Plaintiff-Respondent,
v.
SOUTH SHORE CONTRACTING,
DSJ CONSTRUCTION, INC.,
CARFARO ORNAMENTAL IRONWORKS,
A&F CONSTRUCTION, INC.,
SALEM MASONRY CO., INC., COFFEY
BROTHERS, INC., UNITED FIREPROOFING
COMPANY, INC., FRITZE KEYSPAN,
LLC,
Third-Party Defendants,
v.
BEST CONSTRUCTION CO., INC.,
Defendant/Third-Party
Plaintiff-Respondent,
v.
VANNWALL CONSTRUCTION CORP.,
GENA & SONS, CORP. d/b/a
GENA CONSTRUCTION COMPANY,
FMJ CONSTRUCTION,
KARPATEY MASONRY t/a
BV MASONRY and
POLMAX CONSTRUCTION,
Third-Party Defendants,
and
VANNWALL CONSTRUCTION CORP.,
Defendant/Third-Party
Defendant/Fourth-Party
Plaintiff-Respondent,
3 A-2574-11T1
v.
JOAO BRAVADO, MESFAR A. DEANDRADE,
GILBERTO A. AGUILAR, JOSE S.
RAMOS, LUIS EUSEBIO,
Fourth-Party Defendants,
and
E. ROBINSON GROUP, INC.,
Defendant/Third-Party
Plaintiff-Respondent,
v.
SENERGY, INC.,
Third-Party Defendant,
and
MINNO AND WASKOW ARCHITECTS
AND PLANNERS,
Defendant/Third-Party
Plaintiff,
v.
VINCENT J. BARONE,
Third-Party Defendant,
and
FIRE PROTECTION & MECHANICAL
ENGINEERING, INC.,
Defendant/Third-Party
Plaintiff,
v.
LIUTAS K. JURSKIS,
4 A-2574-11T1
Third-Party Defendant.
_________________________________________
PORT LIBERTE II CONDOMINIUM
ASSOCIATION, INC.,
Plaintiff-Appellant,
v.
NEW LIBERTY RESIDENTIAL URBAN
RENEWAL COMPANY, LLC, APPLIED
DEVELOPMENT COMPANY, APPLIED
PROPERTY MANAGEMENT CO., LLC,
DAVID BARRY, ELIA BORELLI,
BARBARA OIF STACK, and
MINNO AND WASKOW ARCHITECTS
AND PLANNERS,
Defendants,
and
AJD CONSTRUCTION CO., INC.,
COMMUNITY MAINTENANCE, LLC,
and BEYER BLINDER BELLE, LLP,
Defendants-Respondents.
______________________________
MINNO AND WASKO ARCHITECTS AND
PLANNERS,
Defendant/Third-Party
Plaintiff-Respondent,
v.
ASSOCIATED ENGINEERING CONSULTANTS,
Third-Party Defendant-
Respondent.
___________________________________________
5 A-2574-11T1
Argued November 19, 2013 – Decided January 21, 2014
Before Judges Reisner, Ostrer and Carroll.
On appeal from the Superior Court of New
Jersey, Law Division, Hudson County, Docket
Nos. L-1222-08 and L-3035-10.
John Randy Sawyer argued the cause for
appellant Port Liberte II Condominium
Association, Inc. in A-2574-11 and A-3129-11
(Stark & Stark, attorneys; Mr. Sawyer and
Gene Markin, of counsel and on the brief).
Stephen L. Petrillo argued the cause for
respondent AJD Construction Co., Inc. in A-
2574-11 and A-3129-11 (Marshall, Dennehey,
Warner, Coleman & Goggin, attorneys; Mr.
Petrillo and Walter F. Kawalec, III, on the
brief).
K&L Gates, LLP, attorneys for respondents
New Liberty Residential Urban Development
Company, Applied Property Management Co.,
LLC, David Barry, Elia Borelli, and Barbara
Oif Stack (the developers) in A-2574-11 and
A-3129-11 (Patrick J. Perrone, of counsel;
Loly G. Tor and Christopher J. Archer, on
the brief).
Winter & Winkler, attorneys for respondents
Moura Construction Corp. and Agrimar F.
Pereira t/a Goiano Carpentry, Inc. in A-
2574-11 join in the brief of respondent
developers.
Gebhardt & Kiefer, attorneys for respondent
DSJ Construction, Inc. in A-2574-11 join in
the brief of respondent developers.
Schoenfeld Moreland, attorneys for
respondent Luis O. Macancela in A-2574-11
join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
6 A-2574-11T1
Wade Clark Mulcahy, attorneys for respondent
Mesfar E. DeAndrade in A-2574-11 join in the
briefs of respondents AJD Construction Co.,
Inc. and the developers.
Decker & Magaw, attorneys for respondent
Oakwood Carpentry, Inc. in A-2574-11 join in
the briefs of respondents AJD Construction
Co., Inc. and the developers.
Fishman McIntyre, attorneys for respondent
E. Robinson Group, Inc. in A-2574-11 join in
the briefs of respondents AJD Construction
Co., Inc. and the developers.
Biancamano & Di Stefano, P.C., attorneys for
respondent A&F Construction, Inc. in A-2574-
11 join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
Joseph Carolan, attorneys for respondents
Reliable Roofing Maintenance, Inc. and
Architectural Construction Associates in A-
2574-11 join in the briefs of respondents
AJD Construction Co., Inc. and the
developers.
Milber Makris Plousadis & Seiden, LLP,
attorneys for respondents Bolivar Guaman and
Carlos P. Martins in A-2574-11 join in the
briefs of respondents AJD Construction Co.,
Inc. and the developers.
Bevan, Mosca, Giuditta & Zarillo, attorneys
for respondents Salem Masonry Co., Inc., and
Best Construction Company, Inc. in A-2574-11
and A-3129-11 join in the briefs of
respondents AJD Construction Co., Inc. and
the developers.
Morgan Melhuish Abrutyn, attorneys for
respondent Carfaro Ornamental Ironworks,
Inc. in A-2574-11 join in the briefs of
respondents AJD Construction Co., Inc. and
the developers.
7 A-2574-11T1
Budd Larner, attorneys for respondent Thor
Construction Corp. in A-2574-11 join in the
briefs of respondents AJD Construction Co.,
Inc. and the developers.
Rawle & Henderson, attorneys for respondent
Beyer Blinder Bell, LP in A-2574-11 join in
the briefs of respondents AJD Construction
Co., Inc. and the developers.
Mayfield, Turner, O'Mara & Donnelly,
attorneys for respondents Patwood Roofing,
the Reitze Company, and Gelson DeSouza Gomes
in A-2574-11 join in the briefs of
respondents AJD Construction Co., Inc. and
the developers.
Testa Heck Scrocca & Testa, attorneys for
respondent BSB Carpentry, Inc. in A-2574-11
join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
Leary, Bride, Tinker & Moran, attorneys for
respondent Quality Aluminum & Vinyl
Installers in A-2574-11 join in the briefs
of respondents AJD Construction Co., Inc.
and the developers.
Maloof, Lebowitz, Connahan & Oleske,
attorneys for respondent Coffey Brothers,
Inc. in A-2574-11 join in the briefs of
respondents AJD Construction Co., Inc. and
the developers.
McElroy, Deutsch, Mulvaney & Carpenter,
attorneys for respondent Gena Construction
Corp. in A-2574-11 join in the briefs of
respondents AJD Construction Co., Inc. and
the developers.
Gibbons P.C., attorneys for respondent
Jovane S. Mourao in A-2574-11 join in the
briefs of respondents AJD Construction Co.,
Inc. and the developers.
8 A-2574-11T1
Goldberg Segalla, attorneys for respondent
United Fireproofing Company, Inc. in A-2574-
11 join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
Bodell, Bove, Grace & Van Horn, attorneys
for respondent Karpatey Masonry in A-2574-11
join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
Braff, Harris & Sukoneck, attorneys for
respondent Holy-Wood Carpentry, Inc. in A-
2574-11 join in the briefs of respondents
AJD Construction Co., Inc. and the
developers.
Powell & Roman, attorneys for respondent
Juan Ageitos d/b/a Orca Construction in A-
2574-11 join in the briefs of respondents
AJD Construction Co., Inc. and the
developers.
Suarez & Suarez, attorneys for respondent
Minno and Wasko Architects in A-2574-11 and
A-3129-11 join in the briefs of respondents
AJD Construction Co., Inc. and the
developers.
Hack, Piro, O'Day, Merklinger, Wallace &
McKenna, attorneys for respondent Associated
Engineering Consultants, Inc. in A-3129-11
join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
Hoagland Longo Moran, Dunst & Doukas,
attorneys for respondent Fire Protection and
Mechanical, Inc. in A-2574-11 join in the
briefs of respondents AJD Construction Co.,
Inc. and the developers.
Hartmann Doherty Rosa Berman & Bulbulia,
LLC, attorneys for respondent Fritze
Keyspan, LLC in A-2574-11 join in the briefs
of respondents AJD Construction Co., Inc.
and the developers.
9 A-2574-11T1
Dwyer Connell & Lisbona, attorneys for
respondent FMJ Construction in A-2574-11
join in the briefs of respondents AJD
Construction Co., Inc. and the developers.
Gartner & Bloom, attorneys for respondent
South Shore Contracting in A-2574-11 join in
the briefs of respondents AJD Construction
Co., Inc. and the developers.
Faust Geotz Schenker & Blee, attorneys for
respondent Jose DeMoura in A-2574-11 join in
the briefs of respondents AJD Construction
Co., Inc. and the developers.
Respondent Senergy, Inc. in A-2574-11 has
not filed a brief.
Respondent Vincent J. Barone in A-2574-11
has not filed a brief.
Respondent Vannwall Construction Corp. in A-
2574-11 has not filed a brief.
The opinion of the court was delivered by
Susan L. Reisner, P.J.A.D.
In these two appeals, which we have consolidated for
purposes of this opinion, plaintiff Port Liberte II Condominium
Association (Association or plaintiff) appeals from orders dated
May 13, 2010 and September 29, 2010, denying its motion to amend
its complaint in Docket No. L-1222-08 and denying
reconsideration, and orders dated September 23, 2011, October
12, 2011, December 21, 2011, and January 20, 2012, granting
summary judgment dismissing its complaint in L-1222-08 and
Docket No. L-3035-10, and December 21, 2011, denying plaintiff's
10 A-2574-11T1
motion to reinstate the complaint in L-l222-08. For the reasons
that follow, we reverse the orders on appeal and remand these
cases to the Law Division for further proceedings consistent
with this opinion.
Despite the extensive record, the issues are limited: (1)
Did the trial court err as a matter of law in dismissing the
Association's complaints on the grounds that the Association did
not obtain the unit owners' approval to institute the
litigation, in violation of the Association's by-laws? and (2)
Did the trial court abuse its discretion in denying plaintiff's
motion to amend its complaint?
We conclude that, to the extent defendants had an interest
in ensuring that plaintiff was the proper party to pursue the
lawsuit, so as to avoid future litigation by dissenting unit
owners, defendants' interest was satisfied when, in 2009 and
2011, the unit owners voted to authorize the lawsuit. The trial
court misconstrued the by-laws - and disserved the unit owners'
interests - in holding that the owners could not ratify the
Association's action after the lawsuit was filed. Moreover,
despite their disingenuous expressions of concern for the
owners' financial interests, defendants have no standing to
enforce the unit owners' rights under the by-laws. Hence, we
conclude that the trial court erred in dismissing the lawsuit.
11 A-2574-11T1
We also find that the trial court mistakenly exercised its
discretion in denying the motion to amend the complaint, thereby
requiring the filing of a second lawsuit.
I
The pertinent facts are undisputed and can be stated
briefly for purposes of this appeal. The Association, a non-
profit corporation, is the owner, and has legal responsibility
for, the common elements at a 225-unit condominium development
in Jersey City. The development was completed in 2004.
According to the Association's complaint, during the transition
period, in which the developer was handing over control of the
development to the Association, the Association and its members
discovered a broad array of alleged construction defects in the
buildings including the common areas. After lengthy efforts to
negotiate a settlement, the Association filed suit in March 2008
against the developers, the general contractor (Applied
Development Corporation), and numerous subcontractors.
At the time the suit was filed, settlement efforts were
still ongoing, but the statute of limitations was about to
expire. According to plaintiff, due to the press of time, it
filed this lawsuit without obtaining the approval of the unit
owners, as required by Section 4.7C of the Association's by-
laws. That provision states that certain questions "must be
12 A-2574-11T1
decided by a vote of the Members at a special meeting called to
decide each specific issue respectively, after written notice of
the question has been forwarded to each Member." With
exceptions not relevant here, those questions include: "The
commencement of any litigation by the Board of Trustees."
After further negotiations with defendants proved
fruitless, the Association called a meeting of the unit owners
pursuant to Section 4.7C, to obtain their approval for the Board
of Trustees to pursue the litigation and to borrow money to fund
it. At the October 12, 2009 meeting, the unit owners present
voted 72 to 3 to obtain the loan and pursue the litigation.
Thereafter, no unit owner objected to the vote, sought to
intervene in the lawsuit, or otherwise legally questioned the
Association's authority to conduct the litigation pursuant to
the by-laws. The Association duly pursued the lawsuit, massive
amounts of discovery were taken, and the complaint was amended
several times.
In May 2011, defendants filed a summary judgment motion,
seeking to dismiss the complaint on the grounds that the
Association had not properly obtained the unit owners'
authorization before filing the lawsuit. Notwithstanding the
October 12, 2009 meeting and the 72-3 vote of the unit owners in
favor of pursuing the litigation, the trial judge granted the
13 A-2574-11T1
motion and dismissed the complaint. The court reasoned that,
absent pre-suit approval, the Association lacked standing to
file the lawsuit.3 On October 24, 2011, the Association held
another meeting of the unit owners, for the purpose of asking
them to ratify the filing of the litigation. The members
approved the ratification by a vote of 65 to 1. The Association
then moved to reinstate the complaint; the trial court denied
the motion on the grounds that lack of standing at the
commencement of the suit could not be cured.
Meanwhile, the court had denied plaintiff's motion to file
a fourth amended complaint adding claims concerning structural
defects in the common areas. As a result, in 2010, the
Association filed a separate lawsuit addressing those claims (L-
3035-10). That lawsuit was also the subject of the 2011
ratification vote by the unit owners. Despite the overwhelming
approval of the unit owners, the trial court dismissed that
second lawsuit in January 2012, on the grounds that the
Association lacked standing to file it. As a result of the
dismissal of both lawsuits, the unit owners faced what the
Association contended was an $18 million expense to repair
3
The court also found that the 2009 meeting notice was
insufficiently specific.
14 A-2574-11T1
construction defects in the common areas, without recourse
against the builders and other defendants.
II
We review a trial court's grant of summary judgment de
novo, using the Brill standard. Prudential Prop. and Cas. Ins.
Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif.
denied, 154 N.J. 608 (1998); Brill v. Guardian Life Ins. Co. of
Am., 142 N.J. 520, 540 (1995). We review a trial court's
decision to grant or deny a motion to amend the complaint for
abuse of discretion. See Kernan v. One Wash. Park Urban Renewal
Assocs., 154 N.J. 437, 457 (1998).
The Condominium Act (Act), N.J.S.A. 46:8B-1 to -38,
authorizes a condominium association to file suit against
builders and other third parties for damage to the common areas.
Siller v. Hartz Mtn. Assocs., 93 N.J. 370, 377-78 (1983); see
N.J.S.A. 46:8B-15. In fact, absent an association's wrongful
failure to file such a suit, the Act gives the association the
exclusive authority to file such lawsuits for damage to the
common areas. Siller, supra, 93 N.J. at 380. "A sensible
reading of the [Act] leads to the conclusion that such causes of
action belong exclusively to the association, which, unlike the
individual unit owner, may apply the funds recovered on behalf
of all the owners of the common elements." Id. at 381. When an
15 A-2574-11T1
association files suit for damages to the common areas, it may
assess the litigation costs proportionately against the unit
owners, as part of the common charges. Id. at 378 n.7.
In construing the Act, the Court noted the important policy
reasons for giving associations, rather than unit owners,
standing to sue under the Act:
Avoidance of a multiplicity of suits,
economic savings incident to one trial,
elimination of contradictory adjudications,
expedition in resolution of controversies,
accomplishment of repairs, and the positive
effect on judicial administration are
supportive policy reasons. Moreover, the
financial burden on an individual owner may
be so great and so disproportionate to his
potential recovery that he could not or
would not proceed with litigation.
[Id. at 379 (footnote omitted).]
If an association wrongly fails to act, or proceeds with
litigation wrongfully, a unit owner may file a derivative suit
against the association:
This is not to say that a unit owner may not
act on a common element claim upon the
association's failure to do so. In that
event the unit owner's claim should be
considered derivative in nature and the
association must be named as a party. Rule
4:32-5 would be applicable. That Rule
governs actions "brought to enforce a
secondary right on the part of one or more
shareholders in an association, incorporated
or unincorporated, because the association
refuses to enforce rights which may properly
be asserted by it."
16 A-2574-11T1
[Id. at 381.]
In rejecting a narrow construction of an association's
standing to sue for damage to the common elements, we have held
that:
The unique relationship between a
condominium association and a developer,
created by statute, allows an association to
step into the developer's shoes when control
is passed to the association. N.J.S.A.
46:8B-12.1a. "[T]he clear import, express
and implied, of the statutory scheme is that
the association may sue third parties for
damages to the common elements, collect the
funds when successful, and apply the
proceeds to repair the property." Siller v.
Hartz Mtn. Assocs., 93 N.J. 370, 377 (1983).
Under the Condominium Act, the association
"shall be responsible for the administration
and management of the condominium and
condominium property, including but not
limited to the conduct of all activities of
common interest to the unit owners."
N.J.S.A. 46:8B-12. "Whether or not
incorporated, the association shall be an
entity which shall act through its officers
and may enter into contracts, bring suit
and be sued." N.J.S.A. 46:8B-15(a). An
association "may assert tort claims
concerning the common elements and
facilities of the development as if the
claims were asserted directly by the unit
owners individually." N.J.S.A. 46:8B-16(a).
[Port Liberte Homeowners Ass'n v. Sordoni
Constr. Co., 393 N.J. Super. 492, 503 (App.
Div.), certif. denied, 192 N.J. 479 (2007).]
In Port Liberte v. Sordoni, we held that the trial court's
ruling - precluding the association from suing a contractor on
the grounds that the association lacked standing - was a
17 A-2574-11T1
miscarriage of justice and contrary to the purpose of the
Condominium Act.
To say that plaintiffs do not have standing
to sue Dryvit because PLP, the now-bankrupt
developer, was the party to whom the
misrepresentations were made and not
plaintiffs, produces an unjust result and
is contrary to the legislative scheme
permitting a condominium homeowners
association to institute suit to recover
damages to the common elements. N.J.S.A.
46:8B-14, -15(a), and -16(a).
[Id. at 501-02.]
We reach a similar conclusion here. Given that the
Association was legally responsible for the upkeep of the common
areas and was authorized by statute to sue for damage to those
areas, we conclude that the Association had standing to file the
lawsuit. See R. 4:26-1. In other words, it had a concrete
financial interest in the litigation, was genuinely adverse to
defendants, and was the only entity with statutory power to file
the complaint. See Siller, supra, 93 N.J. at 381; Belmont
Condo. Ass'n v. Geibel, 432 N.J. Super. 52 (App. Div.) (taking a
broad view of an association's standing to pursue claims
concerning the common areas), certif. denied, ___ N.J. ___
(2013); Spinnaker Condo. Corp. v. Zoning Bd. of Sea Isle City,
357 N.J. Super. 105, 110 (App. Div.) (reviewing general rules of
standing), certif. denied, 176 N.J. 280 (2003). However, under
the by-laws, the Association did not have legal authorization to
18 A-2574-11T1
file the lawsuit on the date the complaint was filed. See
N.J.S.A. 46:8B-15 (an association's powers are subject to the
by-laws). The question is whether the unit owners could remedy
that lack of authorization by voting to ratify the filing. We
conclude that they could.
We find it would be contrary to the purpose of the
Condominium Act, and to the spirit and purpose of the by-laws
themselves, for the court to deny the unit owners a chance to
ratify the litigation before dismissing it. As defendants
acknowledge, Section 4.7C of the by-laws was intended to protect
the unit owners' financial interests by requiring pre-approval
of possibly expensive litigation. However, the owners clearly
have an equally great - if not greater - financial interest in
recovering damages to repair the common areas, because otherwise
they will have to pay for the repairs themselves through
assessments. We will not enforce a statute or regulation in a
manner that would produce an absurd result, contrary to its
purpose. See Hubbard v. Reed, 168 N.J. 387, 392 (2001). Here,
it would be absurd to construe paragraph 4.7C in a way that
would strip the owners of a cause of action designed to recoup
19 A-2574-11T1
payment for construction defects, if they are willing to
authorize the litigation after it was filed.4
The concept of ratification is well understood and has
frequently been applied in situations where an entity has the
legal power to perform an act, so long as it follows the
required formalities. In Grimes v. City of East Orange, 288
N.J. Super. 275 (App. Div. 1996), we explained the difference
between an ultra vires act, which cannot be ratified, and an
intra vires act, which can be ratified:
Acts that are ultra vires are void and may
not be ratified, while intra vires acts may
be. An act is ultra vires if the
"municipality [was] utterly without
capacity" to perform the act. On the other
hand, an intra vires act is one that is
merely "voidable for want of authority."
Thus, where, for example, a contract is
entered into by "an unauthorized agency" but
the municipality has the power to enter into
such contracts, the contract may be later
ratified by the municipal body having the
power in the first instance to make the
contract. . . . This is the general rule
recognized throughout the country.
Applying the forgoing principles to
this case, we are satisfied that Harman's
invalid appointment to the position of Chief
of Police by the Commissioners was capable
of ratification. This is so because,
4
This case does not present the issue of whether unit owners
might have a cause of action against an association for
commencing litigation without prior authorization. As previously
noted, in this case, none of the unit owners pursued objections
to the litigation.
20 A-2574-11T1
although the Commissioners were unauthorized
to make the appointment, it was within the
power of the municipality to do so through
the act of the Mayor with confirmation by
the Council. As such, Harman's appointment
was simply voidable unless ratified.
[Id. at 279-80 (citations omitted).]
Ratification must be accomplished "'with the same
formalities required for the original exercise of power.'"
Ibid. (citation omitted). If so accomplished, the ratification
"'relates back to the date of the original action[.]'" Id. at
281 (citation omitted); see also Casamasino v. Jersey City, 158
N.J. 333, 345 (1999). We conclude that is precisely the
situation here, where the unit owners ratified the Association's
action in a formal vote and, by doing so, authorized the filing
of the lawsuit, nunc pro tunc. See City of Trenton v. Fowler-
Thorne Co., 57 N.J. Super. 196, 200 (App. Div. 1959) ("[A]n
action instituted by an agent without proper authorization from
the plaintiff will not, for that reason, be dismissed in the
face of subsequent ratification by the principal."), aff'd, 32
N.J. 256 (1960) (affirming specifically on the issue of
ratification).
We also agree with plaintiff that defendants had no
standing to enforce the by-laws. As noted, the evident purpose
of Section 4.7C was to protect the financial interests of the
unit owners against improvident legal expenses undertaken by the
21 A-2574-11T1
Association. Defendants, who are strangers to the relationship
between the Association and the unit owners, have no standing to
enforce the by-laws or to protect the owners' financial
interests. See Abbott v. Burke, 206 N.J. 332, 371 (2011)
(ordinarily a party may not file suit asserting the rights of
another); N.J.S.A. 46:8B-16(b) (providing that the association,
a unit owner, or a mortgage holder may file suit for failure to
comply with the by-laws). Further, because defendants'
interests were adverse to the unit owners, letting them enforce
the unit owners' interests would be akin to letting the
proverbial fox protect the interests of the chickens.
On this record, there is no dispute that the owners voted
twice to authorize this litigation. Those votes clearly
established that the Association was the only proper party to
pursue this lawsuit, see R. 4:26-1; Belmont, supra, 432 N.J.
Super. at 74, and satisfied any legitimate concern defendants
may have had about the possibility of duplicative future
litigation. That should have been the end of the issue.
Billig v. Buckingham Towers Condominium Association I, 287
N.J. Super. 551 (App. Div. 1996), on which defendants rely, does
not answer the question in this case. In Billig, we expressed
disapproval of a building manager filing a foreclosure suit
22 A-2574-11T1
against a unit owner, apparently without prior authorization by
the association. In that context we observed:
There are several other matters we are
constrained to address. First, is the issue
plaintiffs raise respecting the management
of the association and, more particularly,
the necessity for a formal resolution
authorizing litigation. Irrespective of the
precise form that authorization takes, we
think it evident that the decision to engage
in litigation, whether foreclosure or the
assertion of affirmative claims against a
unit owner or a third party, must be a
collective decision of the board.
Litigation ought to be a last resort, not a
first one. It is expensive, it is
burdensome, and when it involves a claim
against a unit owner, it may well be
counter-productive to the harmony and
commonality required for successful
community living. Clearly, before the unit
owners can be burdened with the financial
onus and other burdens of litigation, they
must be assured that their elected board has
made reasonable efforts otherwise to resolve
the dispute, that the members of the board,
with as full a briefing as possible, have
made a collective decision, and that the
decision is properly memorialized.
[Id. at 564.]
As is clear from the above-quoted language, Billig did not
address whether an association could obtain ratification, after
the fact, for a lawsuit initially filed without the required
authorization. Nothing in the opinion suggests it could not do
so, particularly in a case like this one, where the Association
filed the complaint but continued its settlement efforts, and
23 A-2574-11T1
did not pursue the litigation in earnest until the unit owners
had authorized it.5
Defendants' reliance on Deutsche Bank v. Mitchell, 422 N.J.
Super. 214 (App Div. 2011), which the trial court also cited, is
likewise unpersuasive. Mitchell held that a bank could not cure
an initial lack of standing in a foreclosure case by obtaining
an assignment of the mortgage and then filing an amended
complaint. Id. at 224-25. However, later foreclosure cases
have recognized appropriate remedies short of dismissal for
technical defects in foreclosure filings, particularly where
defendants delayed in raising those defenses. See U.S. Bank
Nat'l Ass'n v. Guillaume, 209 N.J. 449, 475-76 (2012); Russo,
supra, 429 N.J. Super. at 100-01; see also Bank of New York v.
Raftogianis, 418 N.J. Super. 323, 356 (Ch. Div. 2010) (stating
that dismissal for lack of standing, rather than allowing
plaintiff to cure, may be inappropriate where defendants delayed
in raising the issue).
5
Likewise, in the out-of-state cases defendants cite, the
associations did not obtain a ratification vote from the unit
owners. See Peninsula Prop. Owners Ass'n v. Crescent Res., LLC,
614 S.E.2d 351 (N.C. Ct. App.), appeal dismissed and disc.
review denied, 626 S.E.2d 648 (N.C. 2005); River Plaza
Homeowner's Ass'n v. Healey, 904 N.E.2d 1102 (Ill. App. Ct.
2009). Further, under North Carolina and Illinois law, standing
is jurisdictional, while under New Jersey law it is not. See
Deutsche Bank v. Russo, 429 N.J. Super. 91, 101-02 (App. Div.
2012).
24 A-2574-11T1
In this case, where defendants waited years to raise the
issue of plaintiff's authority to file the lawsuit, it is
particularly appropriate to permit plaintiff to obtain the
owners' ratification, instead of ordering dismissal.6 On this
record, if the court questioned the efficacy of the 2009 vote to
approve the litigation, the appropriate procedure would have
been to stay the lawsuit for a short period of time to permit a
re-vote, rather than dismissing the case. See Guillaume, supra,
209 N.J. at 477-78 (citing GE Capital Mortg. Servs., Inc. v.
Weisman, 339 N.J. Super. 590, 595 (Ch. Div. 2000)) (approving
remedies other than dismissal for violations of statutory pre-
filing requirements). Accordingly, we reverse the orders
dismissing the complaints in both cases.
[At the court's direction, the discussion of
issue (2) has been omitted from the
published version of the opinion].
Reversed and remanded.
6
In light of our holding on ratification, we need not address
plaintiff's argument that the by-law is invalid.
25 A-2574-11T1