RENEE BENNETT VS. BOB MALONE (L-3443-17, BERGEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4090-18
RENEE BENNETT, ANDREA
CAPUANO, ARTHUR
CUMMING, MARY ANN
CUMMING, CATHERINE
FORINO, RONNIE
LICHTENSTEIN, HAL
LICHTENSTEIN, EDITH
MICALE, JOSEPH MICALE,
M.D., PETER NOONAN,
SUSANA SANCHEZ, ALICE
STOLER, CANDICE
TIMMERMAN, MARIE
TUTTLE and ALAN TUTTLE,
Individually and as members of
the Northgate Condominium
Association, Inc., and on behalf
of all other unit owners similarly
situated,
Plaintiffs-Appellants,
and
EDWARD BRERETON, JANET
BRERETON, CLARISSA
VALANTASSIS, MICHAEL
VALANTASSIS, and MARY E.
BRESLIN,
Plaintiffs,
v.
BOB MALONE, HENRY CENICOLA,
BOB DELGRANDE, PAUL GORDON,
DENNIS BRITO, BEN PEDATA, DON
OTTERSTEDT, in their capacity as
former members of the Board of
Directors and Officers of Northgate
Condominium Association, Inc., and
WILKIN MANAGEMENT GROUP,
INC.,
Defendants-Respondents.
_____________________________
Argued February 3, 2021 – Decided August 10, 2021
Before Judges Sumners, Geiger and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-3443-17.
Michael J. Breslin, Jr. argued the cause for appellants.
Charity A. Heidenthal argued the cause for respondent
Wilkin Management Group, Inc., (Zarwin Baum
DeVito Kaplan Schaer Toddy PC, attorneys; Charity A.
Heidenthal, on the brief).
Joao M. Sapata argued the cause for respondents the
Directors (Tango, Dickinson, Lorenzo, McDermott &
McGee, LLP, attorneys; Joao M. Sapata, on the brief).
PER CURIAM
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Plaintiffs, who are unit owners in the Northgate Condominium complex,
appeal from two orders: a March 5, 2019 order granting summary judgment in
favor of defendants Bob Malone, Henry Cenicola, Bob Delgrande, Paul Gordon,
Dennis Brito, Ben Pedata, and Don Otterstedt, the former Board of Directors
(the Directors) of Northgate Condominium Association, Inc. (the Association);
and an April 8, 2019 order granting summary judgment to defendant Wilkin
Management Group, Inc. (WMG), the former property manager. On appeal,
plaintiffs raise the following arguments with respect to the Directors:
POINT I
THE TRIAL COURT ERRED BY HOLDING
BECAUSE THERE WAS NO FRAUD, SELF-
DEALING, OR UNCONSCIONABILITY SHOWN
BY PLAINTIFFS, THE BUSINESS JUDGMENT
RULE WAS APPLICABLE IN THIS MATTER AND
INSULATED THE DIRECTOR DEFENDANTS
FROM LIABILITY.
POINT II
THE TRIAL COURT COMMITTED ERROR IN
RULING THAT PLAINTIFFS' MAY 16, 201[7],
COMPLAINT WAS FILED OUTSIDE THE
STATUTE OF LIMITATIONS AND HOLDING
THAT THE DISCOVERY RULE IS INAPPLICABLE
TO THIS CASE.
POINT III
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THE TRIAL COURT ERRED BY HOLDING THAT
DEFENDANTS ARE IMMUNE FROM SUIT BY
NORTHGATE'S EXCULPATORY CLAUSE IN ITS
BY-LAWS.
Plaintiffs raise the following arguments as to WMG:
POINT I
THE TRIAL COURT ERRED IN RULING
PLAINTIFFS' COMPLAINT MUST BE DISMISSED
WITH PREJUDICE ON THE DOCTRINE OF
MOOTNESS.
POINT II
THE TRIAL COURT ERRED IN HOLDING
PLAINTIFFS PRESENTED NO PROOFS FOR ANY
DAMAGES SUSTAINED BY NORTHGATE IN ITS
DERIVATIVE LAWSUIT.
POINT III
THE TRIAL COURT ERRED IN GRANTING
DEFENDANT [WMG] SUMMARY JUDGMENT ON
THE DOCTRINE OF UNCLEAN HANDS.
POINT IV
THE TRIAL COURT ERRED IN FINDING AS A
MATTER OF LAW THAT . . . PLAINTIFFS FAILED
TO DEMONSTRATE A BREACH OF DUTY ON THE
PART OF [WMG].
We agree that the motion judge may have erred in finding that the statute
of limitations barred plaintiffs' complaint. Notwithstanding, we affirm both
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orders substantially for the other reasons set forth in the judge's thoughtful and
thorough written opinions. We add only the following brief remarks.
In lieu of restating the record, we incorporate by reference the facts
described in our unpublished opinion, Breslin v. Northgate Condo. Ass'n, No.
A-3464-16 (App. Div. Nov. 30, 2018) (slip op. at 2-6), and state only the facts
that are of relevance to the issues now on appeal. Northgate is a condominium
complex located in Washington Township that was "established in 1984 by the
recording of the Master Deed in the Bergen County Clerk's Office in accordance
with the New Jersey Condominium Act, N.J.S.A. 46:8B-1 to -28." Id. at 2. The
Association "is the entity responsible for the administration of the
condominiums and is governed by its bylaws." Ibid. Each unit owner is a
member of the Association, which is managed by the Directors.
The bylaws provided the Directors with the following powers:
Section 3. GENERAL POWERS: The Board shall
have the powers granted to it by law, the Certificate of
Incorporation, the Master Deed, and these By-laws, in
addition to and not by way of limitation, it shall have
the following powers, herein granted or necessarily
implied, which it shall exercise in its sole discretion:
(a) Providing for operation, care, maintenance, repair,
alteration, replacement, cleaning, and sanitation of the
Common Elements.
....
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(i) The Board may employ, by contract or otherwise, a
manager, managing agent, superintendent, or
independent contractor to perform such duties and
services as the Board shall authorize, including but not
limited to the duties granted to the Board as set forth
herein. The Board may delegate to the manager,
managing agent, superintendent or independent
contractor such powers as may be necessary to carry out
the function of the Board. Said manager, managing
agent, superintendent, or independent contractor shall
be compensated upon such terms as the Board deems
necessary and proper.
....
(m) Employ professional counsel and to obtain advice
from persons, such as but not limited to landscape
architects, recreation experts, architects, planners,
biologists, lawyers and accountants.
The bylaws also included an exculpatory clause:
(a) Neither the Board as a body, nor any director
thereof, nor any officer of the Association, or any
delegees of them, shall be personally liable to any Unit
Owner in any respect for any action or lack of action
arising out of the execution of his office. Each Unit
Owner shall be bound by good faith actions of the
Board and officers of the Association, or their
[delegees], in the execution of the duties of said
directors and officers. Unless acting in bad faith,
neither the Board as a body, nor any director or officer
of the Association, nor any delegees of them[,] shall be
liable to any Unit Owner or other person for
misfeasance or malfeasance.
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(b) Each director and officer of the Association, and
their delegees[,] shall be indemnified by the
Association against the actual amount of net loss
including counsel fees, reasonably incurred by or
imposed upon him in connection with any action, suit
or proceeding to which he may be made a party by
reason of his being or having been a director or officer
of the Association . . . except as to matters as to which
he shall be finally found in such action to be liable for
gross negligence or willful misconduct.
WMG was the Association's former property manager, and its
responsibilities were set forth in a management agreement which provided in
part:
1.3 Governing Documents. WMG shall use its best
efforts to manage the affairs of the Association
based on requirements articulated by the Board of
Directors and as written in the Association's
governing documents. In the event of a conflict
between the direction of the Board of Directors and
the requirements of the Association's governing
documents, the Association's governing
documents shall control unless the Board of
Directors provides specific written instructions to
WMG superseding the terms and conditions of the
governing documents.
....
1.7 Significant Actions. Where the Board of Directors
determines that an action will require significant
Association funds or that an action will be a
significant impact to the common property of the
Association, including but not limited to seasonal
contracts, capital improvements and repairs, WMG
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shall make recommendations, including alternative
approaches, to the Board of Directors. The Board
of Directors shall make a determination on its
desired approach and WMG will carry out the
Board's decision.
....
2.4 Reserve Accounts. WMG shall assist the Board of
Directors in depositing, maintaining and
accounting for the Association's reserve funds, if
any. The Board of Directors may designate a
financial institution for the deposit of the
Association's reserve funds.
2.5 Disbursements. WMG shall examine invoice and
billing statements received by the Association for
services and supplies and other costs incurred by
the Association and cause such invoices and
statements to be paid from the funds of the
Association. WMG shall pay, from the funds of
the Association, all reasonable charges and
obligations incurred by WMG in the course of
providing services to the Association under this
Agreement. WMG is authorized to pay any
amounts owed to WMG by the Association under
this Agreement without prior notice.
....
2.7 Annual Budget. Prior to the end of each fiscal
year, WMG shall assist the Board of Directors in
the preparation of a budget showing anticipated
receipts and expenditures for the following fiscal
year. The Board of Directors acknowledge and
agree that the annual budget is the sole
responsibility of the Board of Directors.
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....
3.2 Agreements with Third Parties. The Board of
Directors in the name of the Association pursuant
to the Association's governing documents shall
execute all service and professional agreements for
the routine affairs of the Association. The Board
of Directors may request WMG's assistance in
preparing and negotiating the terms of such service
agreements with third party vendors. . . .
....
3.7 Support to Association's Counsel. When requested
by the Board of Directors and at a mutually agreed-
upon fee, WMG shall support the Association's
legal counsel in litigation, including appearances
at depositions and court proceedings.
On May 16, 2017, plaintiffs filed the present action in the Law Division.
Plaintiffs alleged that the Directors were negligent in depleting the Association's
reserved funds by incurring fees and costs to litigate a land use application
against a neighboring development, the Caliber project. Plaintiffs claimed that
WMG negligently and carelessly failed to exercise its duties under the
management agreement, which also resulted in the depletion of the Association's
reserve accounts. In July 2018, plaintiffs filed a verified amended complaint as
a derivative action, R. 4:32-3, and included several additional plaintiffs.
In February 2019, the Directors moved for summary judgment, which
plaintiffs opposed. Following oral argument, the motion judge granted the
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Directors' motion. He determined that plaintiffs' complaint was barred by the
two-year statute of limitations. The judge also found the Directors were
protected under both the business judgment rule and the exculpatory clause in
the bylaws. In concluding that the business judgment rule was applicable, he
explained:
In this matter, there is no evidence of fraud or
self-dealing. The funds raised through the assessments
imposed on the unit owners were used only for
litigation costs. At the same time, the unit owners
approved the opposition to the Caliber project, and
were aware of the assessments and the litigation.
Moreover, at the conclusion of the bench trial in the
Chancery Matter, Judge Toskos determined that
Northgate had the power to challenge the Caliber
project, and also had the option to pay for the litigation
fees and costs through a common assessment.
Plaintiffs claim that the [business judgment rule]
is inapplicable in the instance, despite admitting the
absence of fraud or self-dealing by [d]efendants.
Instead, [p]laintiffs argue that the [business judgment
rule] is inapplicable because Northgate failed to comply
with various provisions of the New Jersey
Condominium Act, the Real Property Full Disclosure
Act, and the [r]ules and [r]egulations of the Department
of Community Affairs. However, these arguments
were already made in the Chancery Matter before Judge
Toskos, who ultimately found them unconvincing in his
findings of fact and conclusions of law.
Therefore, as there was no fraud, self-dealing, or
unconscionability shown by [p]laintiffs, the [business
judgment rule] is applicable in this matter and insulates
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the individual Board members named as [d]efendants
from liability.
Thereafter, WMG moved for summary judgment, which plaintiffs
opposed. In granting WMG's motion, the motion judge determined that the
September 2018 resolution and vote approving the old Board's assessment and
to fund the legal settlement rendered plaintiffs' complaint moot. He also
concluded that there was no basis to conclude that WMG breached any duty to
plaintiffs. The judge found that "the financial affairs in terms of budgeting,
management, and the reserve funds were the sole and exclusive responsibility
of the Board," and that there was no evidence to controvert the "clear language
of the by-laws and the management agreement." He also noted that plaintiffs
presented no proofs regarding the damages resulting from WMG's conduct, and
that the allegation that the units at Northgate were depreciating was
"unsubstantiated." This appeal ensued.
We apply the same standard as the trial court in our review of appeals
from summary judgment determinations. Lee v. Brown, 232 N.J. 114, 126
(2018). "Summary judgment is appropriate 'when no genuine issue of material
fact is at issue and the moving party is entitled to a judgment as a matter of law.'"
Ibid. (quoting Steinberg v. Sahara Sam's Oasis, LLC, 226 N.J. 344, 366 (2016)).
We conduct a de novo review of the court's determination of legal issues, Ross
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v. Lowitz, 222 N.J. 494, 504 (2015), and "its 'application of legal principles to
such factual findings.'" Lee, 232 N.J. at 127 (quoting State v. Nantambu, 221
N.J. 390, 404 (2015)).
Under Rule 4:46-2(c), summary judgment is granted "if the pleadings,
depositions, answers to interrogatories and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
challenged and that the moving party is entitled to a judgment or order as a
matter of law." In applying the standard to our review of a summary judgment
determination, we "must view the facts in the light most favorable to the non -
moving party." Bauer v. Nesbitt, 198 N.J. 601, 604-05 n.1 (2009); see also Brill
v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
Notwithstanding plaintiffs' arguments to the contrary, we agree with the
motion judge that the exculpation clause insulates the Directors from liability
under these circumstances. Although "[e]xculpatory agreements have long been
disfavored in the law because they encourage a lack of care," Hojnowski v. Vans
Skate Park, 187 N.J. 323, 333 (2006), it is well-established that "a promise not
to sue for future damage caused by simple negligence may be valid." Kuzmiak
v. Brookchester, Inc., 33 N.J. Super. 575, 580 (App. Div. 1955). "Courts,
however, will not enforce an exculpatory clause if the party benefiting from
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exculpation is subject to a positive duty imposed by law or is imbued with a
public trust, or if exculpation of the party would adversely affect the public
interest." Chem. Bank of N.J. Nat'l Ass'n v. Bailey, 296 N.J. Super. 515, 527
(App. Div. 1997).
Here, the association's bylaws contain an exculpatory clause, authorized
by N.J.S.A. 17:12B-38.1, which reads in part that:
Neither the Board as a body, nor any director thereof,
nor any officer of the Association, or any delegees of
them, shall be personally liable to any Unit Owner in
any respect for any action or lack of action arising out
of the execution of his office. . . . Unless acting in bad
faith, neither the Board as a body, nor any director or
officer of the Association, nor any delegees of them
shall be liable to any Unit Owner or other person for
misfeasance or malfeasance.
The motion judge determined, and we agree, that
When considering the relevant sections of
Northgate's By-Laws . . . , it is clear that the terms are
unambiguous – the individual Board members and the
Board as a whole are not to be held liable in negligence
actions. Furthermore, [p]laintiffs set forth no
cognizable facts in their opposition papers alleging that
any of the unit owners agreed to the By-Laws
involuntarily, unintelligently, or without full
knowledge of the legal consequences of those sections.
Accordingly, [d]efendants are immune to a negligence
cause of action under the [exculpatory] cause of
Northgate's By-Laws.
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Plaintiff's claim against the Directors for breach of a fiduciary duty is
tantamount to a cause of action for negligence. See Triarsi v. BSC Grp. Servs.,
LLC, 422 N.J. Super. 104, 115 (App. Div. 2011). Therefore, and in the absence
of any basis to find that the exculpatory clause was unenforceable, 1 we conclude
that summary judgment was properly granted to the Directors.
In that same vein, we also agree with the motion judge that the Directors
were protected under the business judgment rule. It is well-established that
"decisions made by a condominium association board should be reviewed by a
court using the . . . business judgment rule." Alloco v. Ocean Beach & Bay Club,
456 N.J. Super. 124, 134 (App. Div. 2018) (quoting Walker v. Briarwood Condo
Ass'n, 274 N.J. Super. 422, 426 (App. Div. 1994)). Courts have adopted a "two-
prong test" under the business judgment rule: "(1) whether the Associations'
actions were authorized by statute or by its own bylaws or master deed, and if
so, (2) whether the action is fraudulent, self-dealing or unconscionable."
Owners of the Manor Homes of Whittingham v. Whittingham Homeowners
1
We discern nothing in the record to suggest that the exculpation clause at issue
is unenforceable. The provision does not adversely affect the public interest,
the unit owners are under no affirmative legal duty to act as board members, and
the case does not involve a public utility company or common carrier. Chem.
Bank of N.J. Nat'l Ass'n, 296 N.J. Super. at 527.
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Ass'n, Inc., 367 N.J. Super. 314, 322 (App. Div. 2004) (citing Chin v. Coventry
Square Condo., 270 N.J. Super. 323, 328-29 (App. Div. 1994)).
Here, it is undisputed that the association's by-laws authorized the Board
to retain engineers and legal counsel, N.J.S.A. 46:8B-14, as well as sue on behalf
of the association. N.J.S.A. 46:8B-15; see also Port Liberte II Condo. Ass'n v.
New Liberty Residential Urb. Renewal Co., LLC, 435 N.J. Super. 51, 62 (App.
Div. 2014) (citing Siller v. Hartz Mountain Assocs., 93 N.J. 370, 377-78 (1983)).
Thus, the Directors, with unit owner approval, had the express authority to retain
an engineer and legal counsel to challenge the Caliber project.
Furthermore, the record is bereft of evidence showing any basis to
conclude that the Directors' conduct was founded on fraud or self-dealing or is
otherwise unconscionable. 2 Because plaintiffs failed to overcome this
"rebuttable presumption," Maul v. Kirkman, 270 N.J. Super. 596, 614 (App.
Div. 1994), the complaint against the Directors was properly dismissed.
We likewise discern no basis to conclude that the motion judge erred in
granting summary judgment to WMG. There is no evidence in the record to
2
Plaintiffs contend that, because the Directors allegedly failed to comply with
the statutory notice requirements, there was no proper unit owner approval. We
conclude that this argument lacks sufficient merit to warrant discussion in a
written opinion. R. 2:11-3(e)(1)(E).
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suggest that WMG breached any duty as set forth in the management agreement.
As the motion judge correctly noted, the "financial affairs in terms of budgeting,
management, and the reserve funds were the sole and exclusive responsibility
of the Board members, not WMG." In any event, we also agree that the new
Board's approval of the special assessments to pay for the professionals' fees and
costs, as well as replenish the reserve account, renders their claims against
WMG moot. See Deutsche Bank Nat'l Tr. Co. v. Mitchell, 422 N.J. Super. 214,
221-22 (App. Div. 2011) ("We consider an issue moot when 'our decision sought
in a matter, when rendered, can have no practical effect on the existing
controversy.'" (quoting Greenfield v. N.J. Dep't of Corr., 382 N.J. Super. 254,
257-58 (App. Div. 2006))).
Affirmed.
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