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Onderdonk v. Presbyterian Homes of New Jersey Inc.

Decided: December 11, 1979.


On appeal from Superior Court, Chancery Division, Mercer County.

Lora, Antell and Pressler. The opinion of the court was delivered by Antell, J.A.D.


[171 NJSuper Page 532] Plaintiffs are residents of a total care retirement community known as Meadow Lakes in Hightstown, New Jersey, which is owned and operated by defendant Presbyterian Homes of New Jersey, Inc. ("Homes").*fn1 Relations between each plaintiff and Homes are governed by a contract entitled a Residence Agreement, and this action was brought on allegations of mismanagement, conspiracy, constitutional and statutory violations, insolvency and a multitude of contractual and fiduciary breaches. The complaint, filed by plaintiffs individually and as representatives of a class, sought declaratory and injunctive relief, the appointment of a receiver, damages and the imposition of a constructive trust. A number of these claims were withdrawn

and plaintiffs now appeal from a judgment of the Chancery Division which denied all but one of those remaining. Also before us is defendant's cross-appeal from the Chancery Division's award of $2,500 in damages to plaintiff Onderdonk based on a finding that defendant had wrongfully attempted to evict Onderdonk as a reprisal in violation of N.J.S.A. 2A:42-10.10.

We have the benefit of a comprehensive formal opinion by the trial judge containing detailed findings of fact.

Sometimes referred to as a "life care" contract, the Residence Agreement referred to above basically obligates defendant to provide living accommodations and services to the resident. Included among the services provided are utilities, furnishings, three meals a day (including a special diet when ordered by a staff physician), linens, towels, medical and hospital care, general maintenance and parking. The understanding with respect to medical and hospital attention is stated in considerable detail. The facilities of a 90-bed medical center form a part of the community and are open to residents and nonresidents alike.

The resident's financial obligations are stated in paragraph three of the agreement and require payment of a "capital fee", which may range from $15,000 to $59,000, depending upon the size and type of living accommodations, and payment of such monthly charge "as may from time to time be determined to be necessary by the Corporation [defendant]". The agreement is silent as to any obligation of Homes to provide an accounting or explanation of rate increases.

Provision for termination of the agreement is contained in paragraph six and may be exercised with or without cause at any time by the resident or Homes upon 120 days written notice. If termination occurs by reason of the resident's death, no portion of the capital fee is refunded. If brought about by either party for any reason other than death the capital fee is refunded less a sum equal to 2% thereof multiplied by the

number of full calendar months between the date of occupancy under the contract and the effective date of termination. If the right of termination is exercised by Homes without good cause stated in the written notice, refund is made either in accordance with the foregoing computation or in an amount equal to 50% of the capital fee, whichever is more.

The Residence Agreement consists of 7 1/2 printed pages with 23 separate paragraphs, on 8 1/2" X 11" pages, and is prepared in nontechnical, understandable language. The paragraphs are numbered, easily read, and each is introduced by a statement of its subject matter in large black print.

Occupancy of the apartments is limited to persons of the age of 60 or over. In 1965, when plaintiff Onderdonk signed his Residence Agreement, all but one of the residents was over age 75, and when the case was tried in the Chancery Division in June 1977 the average age of the class members was more than 80. Over half were former schoolteachers or housewives, and 60% of the class had average annual incomes of $5,000 or less.

In August 1974, when suit was instituted, Meadow Lakes was occupied by 376 residents. All were given notice of their right to elect to be excluded from the class represented by plaintiffs and 121 residents exercised that option. Since that time the composition of the class and the group of residents who elected to be excluded therefrom has been altered by deaths or departures from Meadow Lakes so that at the time of trial 192 residents still remained in the class and 98 remained of those who elected to be excluded.

The critical facts on which this inquiry focuses are those surrounding the experience of plaintiff Paul Onderdonk. He is a retired engineer who, along with his wife, executed a Residence Agreement on November 29, 1965 and took occupancy in February 1967. He paid a capital fee of $25,000 and agreed to make monthly payments of $430 with the ...

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