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Ramapo Brae Condominium Association, Inc. v. Bergen County Housing Authority

March 01, 2000

RAMAPO BRAE CONDOMINIUM ASSOCIATION, INC.; DIANE BENNETT; ZACHARY AND ANNE ALLEGRETTI; ILEEN CHANNER; JOSEPH AND LESLIE DE MEO; DOROTHY NATALE; PAUL AND LUCINE BAUMGART; HERMAT AND ROLA BARKHO; VOJTECH AND JUDY CERNY; FERMIN AND NANCY DIAZ; ALICE BOYD-WILLIAMS; RAJENDRA AND SURYA R. PATEL; DAVID AND NANCY VIOLETTE; JAMES AND DEBRA BURNETTE; HENRY AND SHOW-LING HO; THOMAS AND JANET HAMILL; ROBERT AND RHONDA SMITH; PETER AND MARY JANE DURANTE; HAROLD AND TAMMY BRENDEL; SCOTT AND LINDA GOODWIN; RAYMOND AND LAURA MCDONALD; STEVEN AND VERONICA MARINO; CARL AND JANICE ARNOLD; SANDRA BOYD; VICTOR AND KATHLEEN VELASQUEZ; DINESH AND BAHRTI SANGHVI; GLORIA MELENDEZ; ENRIQUE AND ALBA VITERY; GUILLERMO AND MARIA ESCOBAR; JO ANN WARGO; JOHN AND ROSE MARIE ADAMKOVICH; THOMAS AND NANCY VETTER; CHARLES AND DIANNE MC CREADY; STEVEN AND SHARLENE SCHERER; KAMPI AND TARA PRAGDAT; JIRINA MANCIC; AND ALBERT AND SARAH YIP,
PLAINTIFFS-APPELLANTS,
V.
BERGEN COUNTY HOUSING AUTHORITY; NORTH AMERICAN HOUSING CORPORATION; T.R. ARNOLD & ASSOCIATES; E.O. D'ALESSANDRO, INC., A/K/A E.O. D'ALESSANDRO GARDEN CENTER; TARQUINI & ELKIN/SOBOLTA, ARCHITECTS AND PLANNERS; RESIDENTIAL WARRANTY CORPORATION; MERCHANTS AND BUSINESS MEN'S INSURANCE COMPANY; TOWNSHIP OF MAHWAH,
DEFENDANTS-RESPONDENTS,
AND
HOUSING AUTHORITY OF BERGEN COUNTY,
DEFENDANT-RESPONDENT/THIRD- PARTY PLAINTIFF,
V.
MERIDIAN CONSTRUCTION COMPANY,
THIRD-PARTY DEFENDANT-RESPONDENT.



Before Judges Stern, Kestin and Wefing.

The opinion of the court was delivered by: Wefing, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: September 29, 1999

On appeal from the Superior Court of New Jersey, Law Division, Bergen County.

Plaintiffs appeal from two orders granting summary judgment to all defendants. After a careful review of the entire record and consideration of all the arguments advanced on appeal, we affirm in part, reverse in part and remand for further proceedings.

I.

Prior to setting forth the legal issues presented, ease of understanding requires that we identify the parties and their relationships to the present controversy. We shall identify them in the order in which they appear in the caption, which does not necessarily correlate with their involvement with this matter, either chronologically or substantively.

Plaintiff Ramapo Brae Condominium Association, Inc. (the Association) is responsible for the management and operation of the condominium development known as Ramapo Brae in Mahwah, New Jersey. The individual plaintiffs are unit owners within Ramapo Brae. Defendant Bergen County Housing Authority, more properly Housing Authority of Bergen County (the Authority), is a body corporate and politic. N.J.S.A. 40A:12A-17. The Authority's function is to provide assistance to those who need it to obtain safe, decent and affordable housing. In furtherance of that mission, the Authority developed Ramapo Brae. It is undisputed that the Authority acted as general contractor for that development.

Defendant North American Housing Corporation (North American) built the modular units used to construct the portion of the development at issue here. During the manufacturing process, North American utilized the services of defendant T.R. Arnold & Associates (T.R. Arnold) to inspect the units for purposes of quality control. Defendant E.O. D'Alessandro, Inc. (D'Alessandro) was hired by the Authority to perform landscaping work at the development. Defendant Tarquini-Elkin/Sobolta (Elkin/Sobolta) is a joint venture created for this project; it provided professional design services to the Authority. Elkin/Sobolta's original design was based upon stick-built construction. For reasons of cost, the Authority rejected stick-built construction in favor of modular construction. Defendant Residential Warranty Corporation (Residential Warranty) issued a ten-year limited warranty agreement to the Authority for this development. Defendant Merchants and Business Men's Insurance Company (Merchants Insurance) issued the insurance policy which backed Residential's warranty. The project is within the confines and jurisdiction of defendant Township of Mahwah (Mahwah). Although the complaint includes Mahwah in the caption, the body of the complaint does not seek relief against it. The Authority filed a third-party complaint against Meridian Construction Company (Meridian). *fn1 No other party asserted a claim for relief against Meridian.

Plaintiffs' complaint as amended contains thirty-one counts; four of these are directed toward fictitious defendants who were never identified. We are thus concerned with twenty-seven counts. Twelve are directed largely to the Authority; they allege breach of fiduciary duty; breach of the duty of loyalty in serving as both developer and managing agent of the development; economic duress; negligent design, manufacture and assemblage; negligent oversight of repairs; breach of contract; strict liability; breach of warranty; fraudulent misrepresentations; emotional distress; unjust enrichment; and a violation of 42 U.S.C. § 1983. North American is individually named in five counts. These allege, in turn, negligent construction; breach of contract; strict liability; breach of warranty; and fraudulent misrepresentation. Four counts name both the Authority and North American; they assert failure to disclose concealed material defects; consumer fraud; breach of the duty of good faith and fair dealing; and breach of the covenants of good faith and quiet enjoyment. Three counts are directed at Residential Warranty and Merchants Insurance; they allege breach of warranty, consumer fraud and seek a declaratory judgment of plaintiffs' rights against both defendants. T.R. Arnold, Elkin/Sobolta and D'Alessandro are named separately in one count each; plaintiffs assert negligent inspection against T.R. Arnold, professional negligence against Elkin/Sobolta and breach of contract and negligence (in one count) against D'Alessandro.

II.

The Authority owned land in Mahwah upon which it erected this development, which comprises eighty-nine condominium units. The Authority proposed to rent fifty-four of the units to qualified tenants and to sell the remaining thirty-five to purchasers who could meet certain specified financial criteria and would agree to certain financial restrictions in the event of resale. Those restrictions, which limited potential purchasers to those who also met financial criteria set by the Authority and correlated any increase in price to the Consumer Price Index, were contained both within the contract of sale and the master deed. Because the number of individuals interested in purchasing the units exceeded the number available, the Authority ultimately selected the initial owners through a lottery.

The master deed provided that the Authority would serve as the managing agent for the development in its initial stages. By 1991, when the unit owners had assumed control of the Association's board, the Authority's contract as managing agent was not renewed. In 1989, the project was completed and the individual plaintiffs purchased their units. According to plaintiffs, problems developed quickly. They have included within their appendix a series of letters, the earliest of which is dated May 1989, from unit owners to the Authority complaining of defects such as cracks in the walls, leaks, walls bowing, windows not working. The Authority made numerous service calls, correcting some but not all of the alleged defects.

When the problems persisted, the Association commenced this litigation in 1993. In 1994, the Association obtained an expert's report that the construction was "of poor quality and not in keeping with construction industry standards." The report identified a number of specific problems. According to the report, because of improper installation of the roof framing, some of the roofs were said to be in imminent danger of collapse. The report also noted that the modular units had been improperly anchored to one another; weight levels and stress were not evenly distributed among the two-story units.

Before proceeding to analyze the correctness of the trial court's orders, we must note that our review of this matter has been hampered by the failure of the parties and the trial court to identify those claims asserted by individual unit owners as opposed to those claims asserted by the Association and to identify when each of those claims arose. All-encompassing assertions and denial of fault are not conducive to precision in analysis. Neither have the parties identified those claims which relate to common elements, and thus may be properly brought by the Association, and which claims relate to damage to individual units, and thus must be brought by the unit owners. Siller v. Hartz Mountain Assoc., 93 N.J. 370, 380-82 (1983).

III.

A.

One of the fundamental issues to be addressed is whether any portion of plaintiffs' claims against the Authority are subject to the Tort Claims Act, N.J.S.A. 59:1-1 to 12-3. Housing authorities have been considered public entities for purposes of the tort claims statute. Bligen v. Jersey City Hous. Author., 131 N.J. 124, 131 (1993); English v. Newark Hous. Author., 138 N.J. Super. 425, 428-29 (App. Div. 1976). The Authority asserts it is entitled to immunity under various portions of the Act. *fn2 Other defendants claim derivative immunity. Vanchieri v. New Jersey Sports & Exposition Author., 104 N.J. 80 (1986).

Analysis of whether the Authority is entitled to assert defenses under the Tort Claims Act involves consideration whether the Authority, when it commenced this development and took upon itself the role of general contractor, lost the public entity defenses to which it would otherwise unquestionably be entitled. The question is not without difficulty; there is no clear law and there are strong countervailing policy considerations on both sides.

The Authority is a public entity and deals with public funds. An award of damages to these plaintiffs could well reduce the funds available to assist other individuals in need of housing assistance. Further, the Tort Claims Act contains a specific prohibition against imposing liability upon a public entity upon theories of strict liability, implied warranty or products liability. N.J.S.A. 59:9-2b. Such a clear declaration of policy by the legislature is not to be lightly disregarded.

In addition, we must be concerned about the potential ramifications of a decision abrogating immunity in such an instance. The Authority, in an attempt to provide affordable housing, acted in a manner that went beyond what might be considered a traditional role of merely renting apartments below market rates. By offering a portion of these units for sale, it attempted to provide an asset which would appreciate in value over time and thus provide an economic benefit to the unit owner that would presumably reduce the owner's future need for public housing assistance. Further, by constructing a development in which a portion of the units would be owner-occupied, it presumably sought to develop a site in which all would benefit by maintaining and improving the development. Imposing tort liability upon the Authority in such an instance could have the result of discouraging development of innovative and creative techniques to deal with a critical shortage of affordable housing.

Various courts have taken judicial notice of a shortage in New Jersey of decent affordable housing. County of Morris v. Riverview Condominium, Inc., 304 N.J. 322, 331 (App. Div. 1997); Samaritan Ctr. v. Englishtown, 294 N.J. Super. 437, 449 (Law Div. 1996). New Jersey is committed to meeting the state-wide need for decent, affordable housing. The Hills Dev. Co. v. Township of Bernards, 103 N.J. 1, 21 (1986); Southern Burlington County N.A.A.C.P. v. Township of Mt. Laurel, 92 N.J. 158 (1983). We should not craft our decisions in a manner that could impede attempts to alleviate that shortage.

We are also cognizant of the fact, however, that an individual who purchased a condominium from a private developer could have rights these plaintiffs would be denied if we were to conclude the Authority is entitled to assert public entity defenses. Our Supreme Court has, in certain instances, been reluctant to deprive an injured party of a cause of action against a public entity when the same party could have had a cause of action if the injury had occurred on private land. Bligen v. Hous. Author., supra, (defendant Housing Authority not entitled to Tort Claims Act immunity when resident slipped and fell on snow and ice in the parking lot).

On balance, we consider that the greater weight of the policy factors comes down on the side of permitting the Authority to invoke the protections of the Tort Claims Act. A ruling that the Authority lost its public entity defenses by undertaking the development would represent a significant departure from existing law. Courts should be cautious in sanctioning novel causes of action against public entities. Ayers v. Jackson Twp., 106 N.J. 557, 574-75 (1987); King by King v. Brown, 221 N.J. Super. 270, 276-277 (App. Div. ...


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